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CautiousInvestor
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With advanced degrees in both economics and finance, I place great deal of importance upon macreconomic developments and fundamental analyses of industries and individual companies In typical markets, I seek out investment themes which offer compelling reasons to invest in a group of like... More
  • ACORN Update II
    Because MSM continues to provide political cover for the whitehouse, it's hard to get a firm grip on what happening to ACORN, our publicly funded neighborhood housing scandal. Thanks to the investigative and reporting efforts of Fox, we have revealed this malignant parasite for what it is and I believe both the house and senate are working on bills to curtail any and all federal funding to this criminal organization. To the extent this is true, it may wipe out ACORN and prevent it from disturbing elections scheduled for 2012 by engaging in voter fraud.
    Sep 18 11:19 AM | Link | Comment!
  • CNBC Viewership: Plunging (ZH)
    CNBC continues to bleed vierwers. Whereas the last time we provided an update of CNBC's vierewship as measured by Nielsen, the GE subsidiary was down 28% YoY, the September decline is even more pronounced: at a 37% decline in total viewers and a 26% decline in the 25-54 demographic. We are, however, confident that the company will take appropriate measures to address the growing lack of interest of the general public in its content by continuing to provide hard hitting, probing and objective reporting (on issues such as pornogprahy) day after day.
    Sep 18 11:10 AM | Link | 3 Comments
  • Autopsy of AIG: Financial Products Division Cause of Death

    It was the activities of the Financial Products division within AIG that brought the company down. Courtesy of the Big Picture:


    Hedge Fund: AIG FP was essentially a derivative writing quasi-hedge fund within AIG. They were essentially a writer of highly leveraged, naked options. Indeed, their $3 trillion is leveraged bets was simply unconscionable.

    Lehman Did Not Kill AIG: Even if Lehman Brothers was saved, AIG would still have had enormous exposure — over $3 trillion dollars! — and carried tremendous risk. They had huge, leveraged exposure to mortgages, especially credit default swaps written against sub-prime mortgages. The housing collapse was going to do in AIG, regardless of whether Lehman was rescued or not.

    Exempt: Thanks to the CFMA, these derivatives were exempt from ALL regulation and ALL supervision — There was no oversight from an exchange, no listing of derivative trades, no disclosures of risk, no transparency, no counter-party information. Most damaging of all, these derivatives required zero reserves in case of a claim. No other traded financial instruments receive this special treatment;

    No Reserves Required: If AIG was forced to maintain reserves, they would not have been able to write $3 trillion dollars in derivatives, while maintaining the assumption/delusion that they would never ever have to pay on any of them.  The “Free lunch” fees on this was $3 billion. Even a 5% reserve requirement would have meant having to pony up $150 billion dollars;

    No Supervision: FP benefited from being part of a highly regulated, triple AAA rated Insurance business. However, the derivative exemption prevented any of the usual state insurance supervisors from requiring normal disclosures, reserves, etc.;

    Only a Few Employees Did In AIG: The firm had over 86,000 employees, but the FP division was a mere 400 people.

    Sep 16 9:13 PM | Link | 1 Comment
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