The Credit Rating agencies were NOT up to the task of properly assessing risk, but went ahead and did it anyhow. And did it wrong. In effect, they said 'don't worry, we can and are doing the ratings properly, and though it may not seem quite right, TRUST US, these instruments really ARE SAFE.' Well, not so fast...
I believe it was Moody's who first found a serious error in their risk-assessment model. Instead of fixing it, instead of publicizing the error (even to their mis-directed customers) they then keept it secret, and went on for near about a YEAR continuing to use the bad model. Untold customers bought ever more trashy derivatives (mainly tranches of Mortgage Backed Securities) that had been given AAA ratings by these supposed watchdogs, when a ZZZ rating was more appropriate. All the while, "Trust Us, Trust Us!"
These instruments are extrordinarily complex, and were kept opaque to the buyers through prospectuses of 20,000 pages in some cases. If your company is buying several of these a day, who is going to read and analyze each and every one? That's right, no one. Except, the Rating Agencies who are paid to read and analyze these for the benefit of others, like the buyers. They are supposed to be brain-trust-specialist... in that sort of thing. They failed miserably, would you not agree?
Mistakes are one thing, but cover-ups and failure to correct are criminal, to my way of thinking.
Yes, every bank could have hired enough genius analysts to dissect each of these things, duplicating the function of the Ratings Agencies, but my point is, is that realistic? Short Answer: No.
So the world went on happily buying AAA-rated "safe" instruments, and in the face of such demand, the financial producers went on happily constructing and selling them. Where did they get the loans to do so? From the mortgage lenders, who were in effect told, 'We'll buy all you can shove our way ! Don't worry if your borrower is a little weak, his loan will be packaged in such a way with so many other good loans with such financial protections built into the package, that we can still take all your mortgages, package them into AAA-rated MBSs, and sell the good parts easily."
All fine and dandy, except in reality the AAA ratings only applied to certain few Top Select slices of the bundle, and not the fat middle. These deserved a Junk rating, but were awarded AAA ratings instead. At first, this may have been unwitting, but after the ratings agency(ies) discovered their gross error, WHY did they not fix it immediately? WHY did they not tell anyone? Or did they, and it was hushed up? Somebody help me with this!
WHY did the Investment Banks go on at the height of the mortgage boom assuring all that "Oh yes, there may be some Junk slices of these MBSs, and there may be a few bad mortgages sprinkled in even the best of Tranches (some loans always go bad, after all), but the ones YOU are buying are AAA." If they believed the ratings agencies, who is at fault? If not, why did they sell the darn things as AAA-rated and safe? Would that not qualify as fraud? Is that not aiding in the peddling of poisoned rations? Is that not covering up for your customers, the MBS-makers, who pay you to assign ratings? Is there a confilct of interest here? Methinks MAYBE so. Someone should have an in-depth lookie-see, no?
And yet, we are not hearing about this in the news. There is apparently no one being held to account for this egregious behavior, if it is in fact true.
Has anyone else out there heard this? At the moment I cannot recall the [believed reliable] source where I got this juicy nugget, but maybe some of you can. A little help would be appreciated.
Of course, the time for blame may not be right now. Our world financial system is in great danger. Once it is stabilized, maybe that's the time. We must make sure these things are not fgorgotten as the responsible parties slink away with their multi-multi-millions in ill-gotten bonuses and other gains.
On Jan 16 03:50 PM User 338847 wrote:
> Are there identifiable 'bad guys' in this drama? Seems whoever invented > and promoted derivatives was the crack dealer, but it also seems > that every finanial institution was a happy and willing crack addict. > With trillions gone, who goes to jail? Who hangs? Bernie Madoff is > so far the only one with a target on his back, but there must be > hundreds of others ...
United States Oil (USO) On Jan 16: 29.86 0.32 (1.06%) U.S. OIL FUND ETF(NYSEArca: USO)
FUND SUMMARY The investment seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil. The fund is nondiversified.
On Jan 17 08:08 PM rver19261@earthlink.ne... Louis wrote:
> Please, some one explain USO and if it is not a stock, how do you > follow it............Louis
Exclusive Interview with Jim Rogers: Inflation Is Coming [View article]
Regarding the part of your comment "but at least we are dealing with what should be the bed rock fundamentals for growth (i.e. population). Not so these other three", just what should we take that to mean? Please expand/ explain, as US demographics (population. growth) are nothing to write home about, with the coming of '1.5 worker to support 1 baby-boom retiree', or something close to that ratio (admittedly Japan has it even worse; what about the others?) Could you give us the honor of further explanation please?
On Jan 17 01:10 PM kg wrote:
> Inflation = M*V, while M is growing V is cratering. M is easy enough > to track and manipulate; however, no one but no one knows what is > going to happen with V nor how long V will stay crushed and contracting. > > > No doubt China will take its place, it already has, in the leading > nations of the world but you rarely see any negative press on China > either. Russia, Japan and China in that order have the world's largest > demographic problems to deal with in the next 50 years that will > have huge negative systemic consequences for all three countries. > Ours pale by comparison. We've got some serious budget problems to > deal with in the next 10 years or so, but at least we are dealing > with what should be the bed rock fundamentals for growth (i.e. population). > Not so these other three...of note, this is one reason why comparing > the US with Japan is a limited analogy at best.
Exclusive Interview with Jim Rogers: Inflation Is Coming [View article]
R.Jensen, how true; please explain stagflation as in 1970's USA? (Slumping economy + raging inflation) Thanks!
On Jan 16 03:25 PM R JENSEN wrote:
> "As you’ve said many times, the US government is printing a lot of > money right now, when do you think inflation will come around and > bite us?" > > Inflation is when the government prints money. So it has already > happened. Rising prices is the effect. Rising prices is not inflation. > Rising prices is the effect of inflation. > > So the proper statement of the question is "when do you think rising > prices will come around and bite us?"
Barclays: Crushed [View article]
However, one stands out in particular.
The Credit Rating agencies were NOT up to the task of properly assessing risk, but went ahead and did it anyhow. And did it wrong. In effect, they said 'don't worry, we can and are doing the ratings properly, and though it may not seem quite right, TRUST US, these instruments really ARE SAFE.' Well, not so fast...
I believe it was Moody's who first found a serious error in their risk-assessment model. Instead of fixing it, instead of publicizing the error (even to their mis-directed customers) they then keept it secret, and went on for near about a YEAR continuing to use the bad model. Untold customers bought ever more trashy derivatives (mainly tranches of Mortgage Backed Securities) that had been given AAA ratings by these supposed watchdogs, when a ZZZ rating was more appropriate. All the while, "Trust Us, Trust Us!"
These instruments are extrordinarily complex, and were kept opaque to the buyers through prospectuses of 20,000 pages in some cases. If your company is buying several of these a day, who is going to read and analyze each and every one? That's right, no one. Except, the Rating Agencies who are paid to read and analyze these for the benefit of others, like the buyers. They are supposed to be brain-trust-specialist... in that sort of thing. They failed miserably, would you not agree?
Mistakes are one thing, but cover-ups and failure to correct are criminal, to my way of thinking.
Yes, every bank could have hired enough genius analysts to dissect each of these things, duplicating the function of the Ratings Agencies, but my point is, is that realistic? Short Answer: No.
So the world went on happily buying AAA-rated "safe" instruments, and in the face of such demand, the financial producers went on happily constructing and selling them. Where did they get the loans to do so? From the mortgage lenders, who were in effect told, 'We'll buy all you can shove our way ! Don't worry if your borrower is a little weak, his loan will be packaged in such a way with so many other good loans with such financial protections built into the package, that we can still take all your mortgages, package them into AAA-rated MBSs, and sell the good parts easily."
All fine and dandy, except in reality the AAA ratings only applied to certain few Top Select slices of the bundle, and not the fat middle. These deserved a Junk rating, but were awarded AAA ratings instead. At first, this may have been unwitting, but after the ratings agency(ies) discovered their gross error, WHY did they not fix it immediately? WHY did they not tell anyone? Or did they, and it was hushed up? Somebody help me with this!
WHY did the Investment Banks go on at the height of the mortgage boom assuring all that "Oh yes, there may be some Junk slices of these MBSs, and there may be a few bad mortgages sprinkled in even the best of Tranches (some loans always go bad, after all), but the ones YOU are buying are AAA." If they believed the ratings agencies, who is at fault? If not, why did they sell the darn things as AAA-rated and safe? Would that not qualify as fraud? Is that not aiding in the peddling of poisoned rations? Is that not covering up for your customers, the MBS-makers, who pay you to assign ratings? Is there a confilct of interest here? Methinks MAYBE so. Someone should have an in-depth lookie-see, no?
And yet, we are not hearing about this in the news. There is apparently no one being held to account for this egregious behavior, if it is in fact true.
Has anyone else out there heard this? At the moment I cannot recall the [believed reliable] source where I got this juicy nugget, but maybe some of you can. A little help would be appreciated.
Of course, the time for blame may not be right now. Our world financial system is in great danger. Once it is stabilized, maybe that's the time. We must make sure these things are not fgorgotten as the responsible parties slink away with their multi-multi-millions in ill-gotten bonuses and other gains.
On Jan 16 03:50 PM User 338847 wrote:
> Are there identifiable 'bad guys' in this drama? Seems whoever invented
> and promoted derivatives was the crack dealer, but it also seems
> that every finanial institution was a happy and willing crack addict.
> With trillions gone, who goes to jail? Who hangs? Bernie Madoff is
> so far the only one with a target on his back, but there must be
> hundreds of others ...
Seven Ways to Play Both Oil Scenarios [View article]
I did, at Yahoo finance:
finance.yahoo.com/q?s=...
It's an ETF (EXchange Traded Fund)
United States Oil (USO) On Jan 16: 29.86 0.32 (1.06%)
U.S. OIL FUND ETF(NYSEArca: USO)
FUND SUMMARY
The investment seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil. The fund is nondiversified.
On Jan 17 08:08 PM rver19261@earthlink.ne... Louis wrote:
> Please, some one explain USO and if it is not a stock, how do you
> follow it............Louis
Exclusive Interview with Jim Rogers: Inflation Is Coming [View article]
On Jan 17 01:10 PM kg wrote:
> Inflation = M*V, while M is growing V is cratering. M is easy enough
> to track and manipulate; however, no one but no one knows what is
> going to happen with V nor how long V will stay crushed and contracting.
>
>
> No doubt China will take its place, it already has, in the leading
> nations of the world but you rarely see any negative press on China
> either. Russia, Japan and China in that order have the world's largest
> demographic problems to deal with in the next 50 years that will
> have huge negative systemic consequences for all three countries.
> Ours pale by comparison. We've got some serious budget problems to
> deal with in the next 10 years or so, but at least we are dealing
> with what should be the bed rock fundamentals for growth (i.e. population).
> Not so these other three...of note, this is one reason why comparing
> the US with Japan is a limited analogy at best.
Exclusive Interview with Jim Rogers: Inflation Is Coming [View article]
Thanks!
On Jan 16 03:25 PM R JENSEN wrote:
> "As you’ve said many times, the US government is printing a lot of
> money right now, when do you think inflation will come around and
> bite us?"
>
> Inflation is when the government prints money. So it has already
> happened. Rising prices is the effect. Rising prices is not inflation.
> Rising prices is the effect of inflation.
>
> So the proper statement of the question is "when do you think rising
> prices will come around and bite us?"