Regarding Osinski, Toxic Assets, and Felix Salmon

In case you missed it, I recently wrote a piece for NY Magazine which was a follow-up to Michael Osinski’s piece on toxic assets. The gist of the article was that Osinski, who wrote the software that created many of these products, is now very bullish on these so-called toxic assets. I put together a list of various funds that would give investors pseudo exposure to mortgage backed securities and related products. I also expressly described how there is no “pure play” on what Osinski is doing and that most investors would find it impossible to replicate the strategy via their broker or discount broker. The article also expressly says that it is not financial advice and at no point implies that it is appropriate for any investor to try to replicate what a sophisticated investor like Osinski is doing.

Well, Felix Salmon at Reuters had some choice words for the piece and jumps to some elaborate, interesting and entirely misleading conclusions.

Unfortunately, I think Felix assumes I am providing some sort of financial advice (which the article clearly says it is not), believes these products perfectly replicate Oskinski’s strategy (which I clearly say they do not) and believes that I think toxic assets are appropriate for most investors (which is never said or even remotely implied in the article). Of course it is not financial advice. Of course Osinski, who says his friend is a guru, has better info and access to product than most. Of course these highly complex and sophisticated products aren’t appropriate for everyone. Why these facts even need to be conveyed, when they are so clearly stated, is beyond me.

On the bright side, Felix managed to use less than 600 words to post the most obvious of obvious facts….On the negative side, I just wasted 10 minutes of my life responding….

Comments

[nym:]

So why did you submit the article - to prove you're smarter than the rest of us?

Oct 15 09:32 PM

[The Pragmat...:]

I was asked to submit it.....I accepted. So crucify me.

Oct 15 09:54 PM

[The Pragmat...:]

The comment section on my site pretty much puts this one to rest, but if Felix wants to have the last word I'd be more than willing to let him post a comment on my site. pragcap.com/please-all...

Oct 16 03:23 AM

[gabe borens...:]

The toxic assets topic would have been a beneficial topic prior to the market implosion. have certainly issued enough warnings .
If investor believes in the economic recovery and a major economic/market rebound ,than "toxicity" of the toxic assets is less of an issue.The complexity of the product is just a garbage that was utilized to induce investors to buy these assets.
I still remember the bearish stock market /economic prognosis by one of the names mentioned.

Oct 16 05:31 AM

[a fat panda:]

Thanks for wasting 40 seconds of my life...

Oct 16 06:29 AM

[The Pragmat...:]

Trust me, it wasted a lot more of mine....


On Oct 16 06:29 AM a fat panda wrote:

> Thanks for wasting 40 seconds of my life...

Oct 16 11:03 AM

[newbietech:]

"So how can you consider joining Michael Osinski and invest in toxic assets?"
It is quite disingenous of you to say you are not offering investment advice.

Somewhere in your piece you write, "The best options for small investors are via the closed-end fund market and exchange-traded funds (ETFs)". So even though you deny it here I will take this to mean you are addressing 'most investors' since small investors are much larger in number than institutional and professional investors.

There is no point to writing your piece if it is not to point out how small investors can invest in something approaching the kind of investments that Osinski was talking about.

Felix's post is quite clear in saying that small investors should not even try. This is much more categorical than what you were saying and it's good advice.

Oct 16 04:54 PM

[The Pragmat...:]

If you think everything you read on the internet with regards to stocks is categorized as "financial advice" then you have another thing coming for you and your portfolio. That is just flat out undeniably wrong.

And if you think that a group of diversified growth and income funds as well as three of the most highly traded ETF's on Wall Street are dangerous, then I don't even know what to say....

Your comment essentially implies that anyone who bought XLF or Goldman Sachs after Warren Buffett got that sweetheart preferreds deal last year, should have never even bothered. That sort of trade is no different and your logic doesn't compute.

Sorry, but you're wrong.


On Oct 16 04:54 PM newbietech wrote:

> "So how can you consider joining Michael Osinski and invest in toxic
> assets?"
> It is quite disingenous of you to say you are not offering investment
> advice.
>
> Somewhere in your piece you write, "The best options for small investors
> are via the closed-end fund market and exchange-traded funds (ETFs)".
> So even though you deny it here I will take this to mean you are
> addressing 'most investors' since small investors are much larger
> in number than institutional and professional investors.
>
> There is no point to writing your piece if it is not to point out
> how small investors can invest in something approaching the kind
> of investments that Osinski was talking about.
>
> Felix's post is quite clear in saying that small investors should
> not even try. This is much more categorical than what you were saying
> and it's good advice.

Oct 16 07:05 PM