I hope these links work. You can find them easy enough by googling RDU airport interest rate swaps if they don’t.

My local airport’s before and after on an interest rate swap with Lehman. Not a meltdown because the swaps were underwater, but an interesting illustration of the situation visa vi the interest rate swap market versus the default swap market.

This same airport got hammered by the auction rate bond implosion. They didn’t mention it, but I suspect their 2004 hedging didn’t work very well (basis risk).

http://www.bizjournals.com/triangle/stories/2004/12/13/story5.html

http://triangle.bizjournals.com/triangle/stories/2008/11/03/story11.html

If you have a million monkeys making predictions about what will happen in the future, one will say the world is going to end. Then when things get scary everyone will think that monkey was a genius. But soon it will become apparent that he was a monkey. Elaine Garzarelli was the monkey of 1987. Roubini is trying to avoid for as long as possible being revealed as the monkey of 2008. He is counting on the fact that in a few months he will be able to say "I told you so" by pointing to one version of his predictions, while the other version will be forgotten.

There is an anecdote about a guy who put out an investment newsletter. I don't remember the specifics but say he sent out 100,000 free copies with a prediction about which way the market would go, and 100,000 copies with the opposite prediction. A month goes by and one of his two initial batches is proven correct. He drops the other batch from his mailing list, divides the remaining people into two piles, and sends half of them one prediction and half the opposite. You see where this goes. After a few iterations, some subset of people somewhere have seen a series of 100% accurate predictions and they conclude the con artist is a genius.

That's Roubini now. Relying on the fact that 3 months from now his incorrect predictions will be forgotten or that he can continue to cover for them by saying give it more time or that he can point to enough hedging words in his language: "I never said the S&P WOULD go to 600, I said it COULD, and it still might (or might not)". He will be especially fortunate if there is more bad news because negative predictions will stick in people's memories right now better than others.

He's a charlatan.

Even Roubini must realize all this helicopter money will have it’s day.

There are other theories as well…

Thanks. Roubini has been waffling of late. After the mid-October measures, he said the risk of a systemic meltdown was averted and we’d just have a really bad recession, then just before the next meltdown, he went on what a reader called Defcon One, about as alarmed as he has ever been, and then backed off again. Wonder why the shifting back and forth (or maybe, since the latest drops down happened around the time of his hyper alert, he decided he’d better tone it down a tad?).

Of course, we were having a run on emerging market economies and the Fed and IMF did implement new programs in the last couple of days….

This is a huge story. Thanks for flagging it. I’m from the Central Valley, and this problem has been coming for some time. What will the trade-off be between Agribusiness and Cities concerning water?

Also, the Central Valley is very GOP. This could effect politics in California.

In any case, the Central Valley’s farming production is a very important issue. Danger ahead.

Don the libertarian Democrat

http://www.ft.com/cms/s/0/b29f1794-a6b3-11dd-95be-000077b07658.html