Taleb says that it is all random and these guys are just lucky; but somehow the fact that this guy left in time to hit a DOUBLE in the last six months on $B’s of capital doesn’t seem lucky to me:
Paulson Hedge Fund Gained 40% in June as Bear, Braddock Sank
I think it was this quote that was the clincher:
“John Paulson, the firm’s president and portfolio manager…previously was a managing director at Bear Stearns”
Point and click and order. Soon I will be able to do all my Amazon shopping through my Wii or Tivo.
TiVo Users Can Get Amazon Movies From TV
A two-tiered economy…old burns. New blazes.
Finally the rating agencies are starting to wake up and smell the rotting carcasses
S&P May Cut $12 Billion of Subprime Mortgage Bonds
The market reacted with a knee jerk, and the abx-indices still don’t look that pretty:
ABX Historical Prices for the On-the-run Index
But the S&P announcement only relates to 2% of the outstanding and is of a better vintage than the worst of it (mostly 2005-06 junk). So this puts the lag at 18 mos…which could mean a long slow bleed. We shall see.
I saw a great performance by the Decemberists and the LA Philharmonic on Saturday night…the combination of lyrics and the orchestra created an almost film-like vibe as the words and sounds transformed into images.
And then the next night I saw this concept perfected in the absolutely beautiful film Once. The film broke my heart and made me dream at the same time.
It also made me realize again (for the billionth time) that creating something worth sharing in the world is far more valuable than coming up with some theory on the inverse of Beta to the Aleph Naught…
Anyway, if you haven’t you should absolutely see this movie.
The following has some scary statistics regarding the amount of outstanding ARM’s (Adjustable Rate Mortgages) that are already below the equity value of the assets they underwrote (estimated at ~$500B today):
Main reason I needed to post this was the following quote from the article:
“Every time I hear the phrase “Well Contained,” I am reminded of that amusing scene from “The Princess Bride:”
[Vizzini has just cut the rope The Dread Pirate Roberts is climbing up] Vizzini: HE DIDN’T FALL? INCONCEIVABLE. Inigo Montoya: You keep using that word. I do not think it means what you think it means.
“Well Contained”: They keep using that word. I do not think it means what they think it means . . .”
I can point my Wii remote at my television screen and watch you-tube videos. I can go into a virtual world in second life and have a second existence…and now Google is planning to transform telecomunications somehow…
Technology is much cooler than securitized lending:
Just as the botanist Goethe laid the groundwork for the Hegelian conception of the Aufhebung which analogizes well to Derrida’s “differance”, so this article nicely analogizes the environmental dissipation of toxicity to the inability of the finanicial markets to digest mortgage risk:
The Ecology of Toxic Mortgages
It is a nice english language translation of some of the concepts tossed about below.
As you head into the 4th of July holiday, remember to minimize your sun intake…you don’t want to be too greedy:
Poor Bear continues to take a beating for the rest of the industry in the headlines as the following article discusses the reality on the ground as Bear and others have started seizing properties through foreclosure at historical rates.
Bear Stearns Meets Possums in Georgia as Foreclosures Increase
The fact that some of these sales are taking place at half the purchase price of the homes, suggests that it may likely be more than just the unrated junk piece of the securitization that is getting wiped out…
But then again, maybe there is enough “diversification” to mitigate this effect. I wonder what Moody’s thinks.
This article starts to shed more light on why the rating agencies may be taking so long to downgrade the $000’s of B’s in CDO’s downstream from the subprime explosions. Because their original ratings are based on expectations of reality, it takes a change in reality (i.e. a home actually being sold through foreclosure for less than the value of the bond) for them to admit defeat. Otherwise any downgrade is just a further specualation on the future…
A weak and unconvincing argument (aren’t all ratings just expectations?), but at least there is some “logic” to it. Problem is this just delays the inevitable.
S&P, Moody’s Hide Rising Risk on $200 Billion of Mortgage Bonds
The one agency that seems to have acted: Fitch Ratings Downgrades 5 & Places 8 Countrywide ABS 2006-SPS1 Classes on Rating Watch Negative was also recently eliminated as a rating source for the Fed. Go figure.