Insiderman

Credit Default Swaps: The Show Isn't Over

Maybe part of the answer would be to require derivatives trades to match up, much like short sales are supposed to (within 13 days, anyway), with the underlying. Let's say there is one share left after all the puts and shorts are taken into consideration. Why does it somehow make sense to let someone buy/sell a put for 100 shares, 99 of which are already "net" gone?
I guess one of the big reason options models don't work all that well is that they fail to address demand/supply constraints.

Why Lehman Wasn't Saved

I find it interesting that WM is even included in the discussion. Lehman bought and sold securities with underestimated or indeterminate risk, as the result of everything from GSE backing to originator misrepresentation. WM has loans that they made and better understand the risk of failure for these securities. They have reserved for the losses, have plenty of capital (almost 8% relative to a 6% "good" level), and in spite of blog postings to the contrary, don't appear to be seeking a buyer.

At the very worst, WaMu investors have a really good basis for lawsuits if new CEO Fishman's statements to date are just smoke. And he is no dummy, so I'm guessing he knows what he's talking about.

Most of WM's problem appears to be option ARMs, most of which have about two more years to reset, and many of which are in the process of renegotiation rather than going bad. About 6% of $52 billion in option ARMs appear to be non-performing.

One move that WOULD push non-performance is the prospect that the Federal government will bail out non-performing homeowners. Talk about moral hazard! (But, then, we take care of medical care for illegal aliens and drug abusers that can't pay their own freight.)

Two Fight Back - Cramer's Mad Money (9/11/08)

WaMu says they have capital. Cramer says they don't. Which one do you believe?

I believe the possibility of WaMu doing a "Bad Bank" much like Lehman is doing by separating their Commercial business and CMBS.

Cramer is an idiot with an occasional good idea and a tight stop loss for all his bad ones.

Financials Bailouts, Tempur-Pedic and Wine

Update... I meant FNMA was an offshoot of the Great Depression.

Financials Bailouts, Tempur-Pedic and Wine

You don't think a GM failure would splash red wine on a few mattresses?

The first problem is that the value of GM's (and other companies') assets should fall to their true value. These companies long ago stopped trying to access their customers' value propositions. These companies are fixated on trying to play nice with government so that they can get contracts and perks. Therefore, the value of their assets as currently deployed is about $0, and the market is trying to represent this.

The second big problem is that government has big contracts and perks and legislation to reward or punish these companies.

Government screwed up the economy enough to create the Great Depression, they screwed up the economy enough to create the mortgage meltdown of the 80s (and FNMA and FHLMC are offshoots of this crisis), and they screwed up this economy by increasing support through GSEs for low-income and minority loans.

What the hell is wrong with renting, anyway. Bush just wanted to show how much minority home ownership increased under his administration and allowed Andrew Cuomo as HUD Secretary to mess up the FREE functioning of these mortgage markets.

Free markets work every time they are tried, and government's true role should be to ensure transparency and keep the big guys from beating up on the small guys and taking their things. Unfortunately, the big guys have figured out they can enlist government in keeping the small guys out of markets. Small guys are then allowed to fail while big guys continuously find their way back to the government teat.