biomedlives

CDS: Toxic Product or Toxic Investors?

"...limit their use to those who understand them and use them appropriately." AIG surely qualifies as an organization that understands CDSs, but that circumstance didn't prevent it from using them for inappropriate, off-the-deep-end speculation. I still believe that attaching each CDS to a bond, as municipal bond insurance does, is an approach worth investigating. At least, it would limiit the size of the market and the potential consequences of another AIG-like implosion.

I don't see CDSs as particularly useful financial innovations, so I wouldn't miss them if they disappeared from the scene.

Where the Meltdown Began (According to Jamie Dimon)

The idea that the current financial crisis is primarily the fault of Fannie, Freddie, the Community Reinvestment Act and mark-to-market accounting has certainly become popular lately. I agree that Fannie and Freddie are flawed institutions, and I believe and that Barney Frank and other Democrats deserve considerable blame for the flaws. Let’s remember, however, that the Republicans had six years of controlling congress and eight years of the Bush presidency to correct the excesses of F & F.
From your April 11th entry in your OpenIT strategies blog, I conclude that you believe that the troubles of regulated banks and the relatively good health of unregulated hedge funds indicates that less regulation, not more, is the means to prevent future crises. This belief fails to consider the contributions to the current crisis from AIG’s credit default swaps, the unsound mortgages that mortgage brokers delivered for securitization, and other financial instruments subject to little or no regulation.
I absolutely agree that we must move away from rescuing business institutions that are “too big to fail”. It’s not clear to me, however, that there is a non-regulatory mechanism for assuring that institutions of this size won’t come into being. For some time, the mantra of the free market has been that increasing the size of institutions makes them more efficient and better able to compete in global markets.

Let's Hurt the American Financial Services Industry

If there's a brain drain from the financial services industry, we may have fewer "innovations" like CDSs, subprime mortgages, and CD squared securities in the future. That situation would suit me.

Our Taxes Are Going Up

In my view, the capitalist, free market, little or no regulation crowd drove the economy over a cliff during the last eight years (with a Republican in the White House, remember) and then turned to the government to pick up the pieces.


On Apr 10 03:08 AM Reardon Steel wrote:

> It's about time they did go up and not a moment to soon. For far
> to long we in America have greeily hoarded the earnings from our
> labor at the expense of the global community and worthy government
> investments into corporate bailouts, education, healthcare and the
> environment. Furthermore we have shortchanged the courageous politicians,
> bureucrats and other selfless public servants out of purely selffish
> greed forcing them to rely on the charity of the very business enterprizes
> they oversee for a mere 35% tax on thier obseen profits. Had Senator's
> Chris Dodd and Kent Conrad not been forced to rely on a meager 200k
> per year salary, platinum health care coverage from our awful healthcare
> system and defined benifit pensions ensuring they receive these "benefits"
> for life they wouldn't have had to rely on sweetheart deals from
> Countrywide Inc. for supplemental income. These poor fellows had
> to get VIP loans as part of the "Friends of Angelo" program sponsered
> by the CEO himself. Senator Dodd was able to save 80K on his loans
> to help him with the upkeep of his personal residence and a small
> summer cottage in Ireland he is burdened with footing the bill for
> while Sen. Conrad's savings helped finance his purchase of personal
> real estate investments to supplement his income during his golden
> years. For these mere table scraps they worked on the Senate Banking
> Commitee that Sen Dodd chairs to write the legislation to have the
> taxpayers take billions of dollars of toxic assets of of Countrywides
> books, saving the corporation and investing in our childeren's future
> for fractions of a cent in return. Senator Dodd later lead a courageous
> battle to get back the outrageous AIG bonuses authorized by the legislation
> he slipped into the stimulus bill by himself at the behest of the
> Obama administration. Such munificifance, such valor and so great
> is the dignity of Senator Dodd he chose not to identify the individual
> administration official who requested that he do this, rather he
> chose to share the noteriety for this with the whole administration
> so it to could bask in the glow of his humanitarian deeds. Senator
> Dodd is not the exception to the rule among his fellow public servants
> in the Senate he is the rule among his Democrat colleagues as well
> as a number of Republicans often persecuted for excepting the kindness
> of grateful lobbyists like Sen Stevens was. Sadly there are not
> more Republicans like him to boost thier party to the level of true
> greatness that the Democrat party has attained which is why they
> received the vast majority of the political contributions from AIG
> and Bernard Maddof. Who better to be the litmus test for Political
> greatness than the two diverse, independent, and strikingly similar
> entities such as AIG and a man "in the know" like Bernie Maddof was
> for so long. Give Bernie 25-50 Billion dollars to invest for his
> clients that turns out not to exist and they call it a swindle, ripoff,
> and Pondsi scheme endemic in our greedy capitalist system. Give
> 50+ trillion dollars to the Chris Dodds, Nancy Pelosis, Barneys Franks,
> Ted Kennedys and Barak Obama's of the political class that doesen't
> exist either and it is called Social Security and Medicare. If the
> Christ like charity of these great and powerful champions of the
> people can turn dog poop into diamonds while making the Bernie Maddofs
> of the world look like pikers than does that not prove that a raise
> in pay is in order? As sure as every change in the climate and weather
> is more proof of global warming it does. How much did that economic
> dolt GW Bush get paid to run up half a trillion dollars in debt over
> 8 years of profilgate spending that he left for his predesseor to
> deal with? Since Obama and a solidly controlled Democrat Congress
> has managed to add 2 trillion in short term debt and 10 trillion
> in debt by 2019 in just a few months shouldn't they make twenty times
> more for being twenty times the success GWB was? Fairness demands
> that they should.
>
> Corporate taxes should be raised to 99.99% while individual tax rates
> should have a floor of 90% for working families and 100% for the
> rich making over 15K a year to ensure everyone pays thier fair share.
> An 98.9% windfall asset tax should be put in place for anyone greedy
> enough to have 250K in assets or more who is not currently a Democratic
> politician or bureaucrat serving the people who should be exempted
> from any such tax the same way that Congress is exempt from paying
> Social security taxes. They'll be in charge of investing all of
> this new tax revenue into the same wonderful places they put the
> social security trust fund and each make 10 millions a year and be
> granted certain land and title as they see fit to reward themselves
> with. It's time to rid ourselves of the failed ideas of the past
> such as liberty, freedom and inalienable rights granted by our antiquated
> irrelevant Constitution and embrace the hope and change that shall
> be meeted out according to waht Obama's Tele-prompter tells him to
> say. Where free markets and capitalism have failed us the brilliant
> new political wisdom of Obama, called Marxism shall lead us to the
> promised land. He has proved himself an intellectual giant with
> his economic wizardry of spending more than can ever be borrowed
> or taxed by our Government and making up the difference by printing
> all the extra money needed to pay the difference. Not even the Economic
> titan that is Paul Krugman had devised such a brilliant scheme as
> this, despite coming close with his Solomonic articles and books.
> If this was the Lord of the Rings than Obama is Gandalf, Krugman
> is Grima Wormtongue, Sen. Harry reid is Sauraman, and Nancy Pelosi
> is the Witch king of the Nazgul. As for all of the people responsible
> for empowering such awesome leaders of our nation, they are all a
> bunch of Golems, lusting after hope and change or the precious who
> deserve thier just reward they have coming them for their tenacious
> pursuit of this brave new world they have delivered us unto. Should
> thier reign of power persist much longer it is certain that like
> thier name sake, Golem they to will eventually get the precious they
> so relentlessly pursue. Thanks guys and in the mean time we can
> look forward to paying higher taxes in the form of higher energy
> costs, tax increases, inflation, great healthcare like they have
> in Cuba, and all the other pleasures that hope and change shall be
> delivering to us soon. Thank God for Stalinists, Fascists, and the
> loads of malcontent morons that are the Democrat Party rank &
> file that empower them out of compassion and for the children to
> destroy America the true evil empire.

Why It's Better to Bail Out Borrowers than Banks

I have no sympathy for bank shareholders ( or bondholders, for that matter). It was a good ride while it lasted, but a lot of them would have been complete toast in the end without the TARP investments.


On Apr 11 02:22 PM E Nuff Sed wrote:

> The bail out (seekingalpha.com/symbo...) money is not free.
> The banks are paying a 5% - 8% dividend to the government who had
> just printed a lot of "free money" to liquidate/dilute the shareholders.
>
> I suspect when the dust settles in a few years the government and
> the tax payers will come out ahead and they would have saved the
> system as well. This is what happened in the 90's with the S&L's.
>

'The Age of the Unthinkable' - Why Life May Not Return to Normal

I agree with Newman, Ramo, and the other comments that we'll reach some new reality that's impossible to discern right now. It won't be like the past, however.

G-20 on Protectionism: A Cause for Optimism?

"We see that states with great research universities created high value jobs that more than made up for the losses to the economy of the manufacturing shift --- but this took a lot of time, and caused a lot of pain." Are there statistics that confirm this statement?



On Apr 04 06:13 PM CaptainJJack wrote:

> You do not need to hypothesize about how free trade does or does
> not work, over time. All you need do is look at the US. While there
> are limits to this analogy, especially in the area of taxes and incentives,
> I think it is a useful one.
>
> The US is the largest economy in history, and WITHIN its borders,
> there is virtually free trade. So, let's think about how that has
> turned out, over the years.
>
> We see that over time, lower value manufacturing shifted from the
> North to the South. Even car assembly plants (foreign, mostly), have
> centered in the mid south, but other manufacturing, like weaving
> and clothing moved down.
>
> We see that states with great research universities created high
> value jobs that more than made up for the losses to the economy of
> the manufacturing shift --- but this took a lot of time, and caused
> a lot of pain.
>
> Think about all the efforts to stop a plant closing or a merger because
> of the effect on the local economy. But, think also about how new
> capital flowed to technology and innovation in new and different
> areas of the country.
>
> The US benefited from the "Globilization", writ small, and the huge
> winners as well as losers and ghost towns predict fairly well, I
> think, the future of globalization brought to a world scale.
>
> But, politically, it is impossible for a country to become a sustained
> loser, and the easiest solution is to "keep what you have". Political
> stability is traded for the chance to win in the world markets<br/>
>
> So, it is not surprising that politicians hedge their words promoting
> free trade because, in the end, it is a promise they may not be able
> to keep.

Atlas Pipeline Makes Progress in Deleveraging the Company

I'd be interested to know if it's possible to figure out how the two sales will affect the book value and the EPS at APL.

Jobless America

I suspect a lot of those 3 million jobs created paid lower wages and provided fewer benefits than jobs lost in the same period That's creative destruction for you.


On Apr 03 11:20 AM CautiousInvestor wrote:

> What I find interesting in mining today's data is a certain asymmetry
> between employment gains and employment losses.
>
> Under the Bush administration we added about 3 million jobs under
> his eight year tenure. During this recession, though, we have lost
> about 5 million jobs in 15 months.
>
> In looking at a future in which there is no housing bubble and China
> is not readying for the Olympics, this is ominous.

G-20 on Protectionism: A Cause for Optimism?

Some questions for the free trade enthusiasts:

- If free trade is such a good thing for the US, why have we had such a huge trade deficit for years?

- If other nations refuse to enact stimulus programs, should the US run a huge budget deficit in order to pull the whole world out of the economic ditch?

- Without jobs for Americans, how will we pay the additional debt resulting from the budget deficit?

- Isn't the dispute over Mexican truckers really about whether the wages of American teamsters will go down to approximately those of Mexican truck drivers or not?

- Is there ever a case where protecting a domestic industry, say solar energy, makes sense?

The Cost of a Global Empire

I meant
" ...considerably hamper our ability to make the world conform to our whims."

On Apr 01 02:06 PM biomedlives wrote:

> Economic powerhouse?? Our massive debts to other nations, which
> continue to build on account of our trade deficit, considerably hamper
> our ability to conform to our whims.

The Cost of a Global Empire

Economic powerhouse?? Our massive debts to other nations, which continue to build on account of our trade deficit, considerably hamper our ability to conform to our whims.


On Mar 31 02:26 PM Cetin Hakimoglu wrote:

> America has always been a militant, domineering nation, but that's
> also why America is an economic powerhouse with great influence in
> global economic matters. We can make the world conform to our whims,
> instead of the other way around. In exchange, Americans enjoy an
> unparalleled security and standard of living.

Why I Prefer Excel Maritime to DryShips

I agree. DSX was smart to suspend its dividend early.


On Apr 01 09:05 AM oldfolkdancer wrote:

> Diana Shipping- DSX -is best of the breed. We are in an era where
> the strong will survive and the weak won't

Choosing American Job Creation Over Environmental Protection

"...their incompetence over the last decade.." Remember that we had a Republican president for the last eight years and a Republican-controlled congress for six of the eight.


On Apr 01 07:08 AM atlasman wrote:

> "The pressing question is really whether the Democratic Party saves
> or destroys the American economy. The climate change bill may answer
> that question."
>
> Obama answered your question by placing cap and trade/tax in his
> budget. The question remaining is does the republicans have the
> guts and ability to stop him from the continued destruction of the
> American economy. Watching their incompetence over the last decade
> leads me to believe the answer there is no.

Why We Still Need Securitization

If securitization continues, I hope to see two changes:

- Originators of mortgages should retain a significant piece of every one they securitize (a recommendation Stiglitz made last year). That way, they'll have an incentive to ensure that the mortgages have a reasonable shot at performing over the long term. Otherwise, they do best when they churn out the maximum number, without regard to quality.

- Every pool should hold only mortgages, not tranches of other pools. CDO squared securities are too opaque, and untangling ownership is impossible in times like the current crisis.