On the other hand, the quant models are usually complacent and fill only one line of the spectrum. Many angels will fall because all of them bet in the past that (a) real estate always goes up, and (b) low risk-premium environment will stay here forever.

http://inflationusa.blogspot.com/search/label/SP%20500

Several months to wait, although.

Keep up the good work.

Thanks

-have no access to a last-resort-lender;
-have high leverage.

And who funds these funds:
-investment banks.
With what collateral:
-subprime paper perhaps?

So who will be stuck with this paper and bad loans, if hedge funds fail: investment banks.

But it seems to me, the fraud and professional incompetence surrounding this entire affair is mind-boggling to say the least.

I’ve got to ask. How can some of these so-called mortgage banking professionals be so confident in projecting the future depth and scope of what remains ahead as far as booking the present value of estimated defaults? Isn’t it a little late in they game for them to demonstrate their extraordinary mastery of the credit markets?

Or to put it another way, just how much confidence do they think “john q. public” should place in the rating agencies’, bond insurers’, and mortgage bankers’ opinions and projections of future defaults, in light of our current crisis?

This goes ditto for the regulators and auditors too.

Hmmm!

Aren’t these folks the same dangerously dimwitted dudes that downgraded Pfizer to AA and kept Ambac at AAA despite Pfizer pristine balance sheet and Ambac unmitigated disaster? Hmmmm?

Banks don’t want to lend to each other because they can’t know for certain how toxic are their holdings but S&P does know? Far out man!

And the “market” choose to believe these clowns?

That is indeed very good news. Time to short the hell of the market part II.

S&P also did a great job of calling Enron’s top and bottom and they continue to have a fine track record for playing these bets which are based on models that remain as valuable as discarded lotto stubs. Three cheers for S&P and the very best of luck on this call, even though it seems a few hundred billion short of reality!! Hi hip hooray!

I’ll rejigger the post, although their earlier $265 billion estimate was for banks, although they thought it would be distributed more among the smaller banks.

Losses to insurers and believe it or not, hedge fund, are also losses to intermediation capacity. Hedge funds have been the second-biggest writers of CDS. Lack of protection writers is the big reason that market is out of whack. And if the monolines are damaged badly enough (which I believe is a certainty), it will lead to further losses at the big banks.