Sunday, September 02, 2007

Unsafe at Any Rating


Bloomberg:

Watching the rating cuts trickle out of the derivatives forest is akin to searching for elephant dung on a path to try and work out how many pachyderms are in the jungle. There's clearly a herd in there. And it's probably much bigger than the ordure you have seen so far would suggest.

Choice excerpt:
`The vehicles are not structured to forcibly liquidate assets in times of crisis,'' Moody's said.

The reason AAA instruments are historically safe is because they get reclassified CCC- before collapsing.

29 comments:

Akubi said...

Murst!

Rob Dawg said...

No sweet porn linky? Sniff.

Legion said...

Indeed! And if I hadn't had to make an emergency run to the can as soon as I got up (mexican food, don't ask) I would have been FIRST!

ha38349 said...

Interesting article.
What happens if the SEC discovers that different units of a single bank assign different values to identical securities?
and
And what happens if the SEC finds that banks marked the securities they owned at high prices, while attributing much lower values to identical securities offered by their hedge-fund clients as collateral?
seem like very interesting questions and I think a lot of investors are not going to like the answers.

Rob Dawg said...

Mistakes were made. The IBs some wacky financial instruments that didn't work. That's just a mistake. What is going on now are crimes of the highest order. Rather than admit and take losses the IBs are now lying, cheating and stealing to not cover it up no far worse to protect themselves at everyone elses' expense. They need to "mark to market" and now. Take the losses, get served the lawsuits, do the time. At this point I don't care if "everybody was doing it." We'll just build a bigger gallows on Wall Street.

Akubi said...

Sweet porn linky?
Well, Zillow Book's latest additions feature an angel and another hot ass in fishnets.

Ogg the Caveman said...

Akubi, you're back up to second in the Google results! Woohoo! Sweet!

Rob Dawg: Are there any investment vehicles that are reasonably safe at the moment? Where can a guy park his money during this period? I suppose there's always cash, but that's less attractive when your equivalent of the one dollar bill is a big stone disk with a hole in the middle.

Rob Dawg said...

Ogg,
I recommend fishnets. Lots of fishnets. Ummm yeah, they sure are earning my interest.

This is a time for mass preservation of capital and out of the money flyers in small amounts. Everbank can put you in insured foriegn denominated CDs. The Krone might work. My short duration laddered CDs are starting to reset to insanely low levels so this is one place I'm looking.

Commodities are not any fun. Gold is being liquidated to cover other losses. Corn whipsawed by ethanol and such. No place for the mice when the elephants are screwing each other.

I'm begining to believe the stock market will be a good place. Now, hold on. Put the club down. I mean after the correction. The US is still a manufacturing powerhouse, marketing savvy, tech. Lots of things. We just have some financial imbalances that need whackage. 2 weeks? Six? Soon and then fair value and protection from a falling dollar and dividends and a lot of these companies have lots of cash. Buy cash at a discount that comes in a container worth even more? What's not to like?

Ogg the Caveman said...

2-6 weeks? You're more optimistic than I would've expected.

Akubi said...

@Ogg,
I wonder if the Exxon babe in the Google #2 results for "hot ass in fishnets" is also the Stendhal enthusiast on the right at the bottom of Hot Ass in Fishnets Act VIII...

Lou Minatti said...

I'm begining to believe the stock market will be a good place. Now, hold on. Put the club down. I mean after the correction. The US is still a manufacturing powerhouse, marketing savvy, tech. Lots of things. We just have some financial imbalances that need whackage.

I think I know why you don't post on the BB anymore. :-)

It's morphed into a bizarre world of 1) Mad Max is just around the corner and we will be shooting each other for gasoline, 2) head for the hills and hide in a cave with your guns and whiskey, 3) America is finished, 4) Americans suck, 5) the grass is greener in New Zealand/Canada/anywhere else, 6) state X/city y sucks ass why would anyone live in that shithole, 7) Mexicans, Mexicans, Mexicans, 8) we don't manufacture anything.

I look at it this way. Don't like Bush? He'll be gone soon. Concerned about the economic consequences of the bubble? As a nation we've survived far worse.

The BB seems to have attracted those who believe there is no future for America.

Akubi said...

@LM,
Yeah, Bush is going like a Brazilian (hope he feels the pain).
Woohoo!

Akubi said...

@LM,
Speaking as an armchair historian..
As a nation
We (as in the U S of {current} Assholeness) have not _EVER_ created such an extraordinarily large pile of BS (financially, politically, ethically, any goddamn "ly" I can think of). Yeah, we've been through bigger wars, internationally and nationally, etc., but at this point I could swear “we ???” have nearly ruined this country.

A. The Saudis, Exxon Mobil or "something" stole the SOUL out of this COUNTRY for COMMERCIAL GAIN.

B. The supposed CITIZENS are too busy BUYING crap and eating SHIT that they don't bother getting their heads out of their fucking asses.

C. Busy with porn (or whatever else) to get by - insert self here.

Only reason why I remain in this POS country is that I believe in it (as an original concept/belief system).

Ogg the Caveman said...
This comment has been removed by the author.
Lou Minatti said...

We (as in the U S of {current} Assholeness) have not _EVER_ created such an extraordinarily large pile of BS (financially, politically, ethically, any goddamn "ly" I can think of). Yeah, we've been through bigger wars, internationally and nationally, etc., but at this point I could swear “we ???” have nearly ruined this country.

I haven't ruined the country and neither have you.

Go look at Wikipedia and see how bad things were in the 1970s. I was a mere sprog at the time, but the tales from that era are astounding. The City of New York... BANKRUPT. Double-digit inflation, double-digit interest rates, unemployment approaching 10%. Disco. Fondue parties. Shag carpet. Gas lines. Starland Vocal Band won the Grammy.

Let's keep the current situation in perspective.

Akubi said...

Fondue parties involving supposed adults partaking in nonsense and Neil Diamond (horrid!) and you’re left wondering how the F you landed here, but feel somewhat relieved thanks to School House Rock, breakfast cereal, Wagner and Atari.
I’m currently hoping to get some sweet passive income as a Pjur spokesman. Check out my Pjur porn concept.

Bill said...

1970s were worse, but who remembers them?

Not the current crop of financial whiz-kids.

I'd argue we haven't seen a real recession since Reagan's first term.

Legion said...

@OGG

Well you sure as hell shouldn't park your money in GOLD coins or stock of goldmines. That would be mongoloidian...

Legion said...

by the way...I'm on linux now, I've got my computer triple booted in WinXp, Win Vista, and Linux ubuntu

Ogg the Caveman said...

@ Legion:

I know of a guy who tried the gold mine thing. Didn't work out too well for him, although the last I heard was that he was holding onto the stock in the hope that good things are coming™.

Son of Brock Landers said...

@ rob dawg
You are the first blogger to actually recommend a place to invest or put money right now instead of just crying that the sky is falling. I am doing something similar where I have cash piling up, and some Canadian CDs (they call them GICs) for currency hedging.

@board
some of you are absolutely right that the 70s were worse and that we have not seen a true rcession since Reagan's 1st term. humans just have short term memories and always want to consider their experiences as the worst, best, most enlightened, most dangerous, fill in the blank superlative. we do this in everything. A lot of people bitch about the war, yet thre is no draft to pluck their kids out of the home & we are not rationing food, metals, etc. We've lost sense of what true dire circumstances, sacrifice, and pain is.

The Sun will rise, water is wet and women have secrets.

Akubi said...

I would say we have a far more complicated INTERNATIONAL economic mess on our hands than the '70's and there's only so long the U.S. can sustain this BS economic simulacra that anyone will buy.
In other news, as far as wet water and women I've posted a new angel porn fetish series on Zillow Book that isn't quite so blurry (different angel)..

Legion said...

@Ogg

That's the moron I was referring to:-)

With his luck, he'll sell the shares just before it zooms into the stratosphere.

Ogg the Caveman said...

@ Legion

It's a good thing he's no longer blogging. Then we'd have to endure a post about how he was right all along and he'd be making sweet passive income if the haterz hadn't foiled his plans.

Legion said...

"he'd be making sweet passive income if the haterz hadn't foiled his plans."

Doesn't that sound like it came from one of those Scooby Doo cartoons?

"And I would have gotten away with it too if it weren't for those meddling haters!"

That was one of his biggest problems, he refused to see that the PROBLEM was himself, instead he would rather blame everybody else..haters were responsible for Google click fraud, his bad press, him not being able to get a job with Duane, him leaving for australia, his marriage ending, his inability to make money off his blog....blah blah blah.

Lou Minatti said...

Snowflake can get a job working offshore in the Gulf of Mexico. DISHWASHERS make 60k, 2 weeks on, 2 weeks off, 12-hour shifts.

bluto said...

If the crap hits the fan, it's probably worth considering a couple of the currencies that will be the beneficiaries of a carry trade unwind (low interest rate currencies like the Yen and Franc)rather than the beneficiaries of the carry trade as it stands currently (high interest rate currencies).

Peripheral Visionary said...

@Ogg: "Are there any investment vehicles that are reasonably safe at the moment?"

No. The problem is that the system was inundated with such a ridiculous amount of liquidity that *everything* increased in "value", and now that the liquidity is vanishing, everything is at risk.

The safe(st) bets at the moment are government securities and highly-rated corporate debt in foreign currencies, especially the Euro and the Yen. Unfortunately, it's difficult for regular American investors to get our hands on those kinds of securities.

And "international bond" funds won't do the trick--take a look at the holdings breakdowns, and there it is, the asterisk about up to 10% of the fund being in high-yield dollar-denominated securities. Unless it's specifically designated as a government securities fund, virtually every bond fund has some residential securities junk on its books, and I'm not aware of any international government-only bond funds.

I'm leaning toward going with the next-best bet, which is Treasuries. Obviously, there's a very big dollar risk exposure, but, well, if you're American you've already got that in all of your other assets. The yields are better than what they were, risk is low, and they rally every time the market drops. And ask yourself, who would you rather have the U.S. government owe money to, you, or a bank from the Pacific Rim?

Peripheral Visionary said...

With respect to Prosper, I realize that 90% of it is debt addicts who need a fix and most of the rest is scams, but it may be worth watching.

Banks could get to the point where they won't lend money unless Bill Gates is co-signing, so Prosper may see more lending requests from people who need money for a start-up business. You'd have to familiarize yourself with bank lending practices, the potential viability of a business venture, the quality of the business plan as posted, the competency of the new business owners, etc.

I wouldn't lend money to someone who's just in credit trouble, though, that's simply asking for your money to disappear. Nor would I go anywhere near any business venture with real estate in the description (or with no description, which usually means real estate.)