Ashish S

Biggest Winners and Losers Since the 5/19 Top

Financials are still really volatile and risky because not many people know what is going on and there are not too many signs things are over. Meanwhile, the market decline has made growth stocks like technology and health care more attractive. I think a good play is to buy volatility during periods of rallies in the market -- especially for financials.

A Bank Led, Bank Insurer Bailout?!

Just to give you an idea of how fragile the rating agencies models really are .. let me give you an example. Back when I was structuring CDOs, we'd have a portfolio of 100 credits we'd run through S&P's or Moody's model. It would then spit out the level of subordination needed to achieve a certain rating. Now, in most cases, one would assume that if you downgrade one of the input ratings, the level of subordination would be higher to account for the increased risk. But all that was behind these "models" was a simple Monte Carlo simulation that used the exact same seed every time -- meaning you could game the models to give you a LOWER subordination when downgrading a credit!!! This means you could achieve a higher rating by having a worse portfolio, all else being equal!

This is the same model investors have relied on for billions upon billions of dollars of investments!