It is truly astonishing to watch how determined the economics orthodoxy is to defend its inexcusable, economy-wrecking performance in the runup to the financial crisis. Most people who preside over disasters, say from a boating accident or the failure of a venture, spend considerable amounts of time in review of what happened and self-recrimination. Yet […]
Read more...A fund manager who will go unnamed mentioned to me that he is putting clients into bank stocks because they are trading at or below book value. Now of course, individual stocks can and do always outperform the outlook for their sector, so there are no doubt particular banks whose stocks are cheap right now. […]
Read more...This post first appeared on August 27, 2007 Recently, we’ve noticed a new theme among economics writers: Extreme Measures. Commentators have looked toward the end of the road we are on and fear it leads to a precipice. Hence the calls for radical course correction. Paul Krugman and Bill Gross of Pimco, each of whom […]
Read more...It’s striking how the media overseas is much more receptive to the message of ECONNED than our home grown outlets are. Hope you enjoy this interview from New Zealand! Go here to listen.
Read more...This post first appeared on August 24, 2007 This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. […]
Read more...By Satyajit Das, a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2010, FT-Prentice Hall). In his “Ode on a Grecian Urn”, the English Romantic poet John Keats declared that “beauty is truth, truth beauty”. In derivatives, its seems transactions may be […]
Read more...As we’ve noted on this blog, the Administration efforts to punish so-called strategic defaulters seem hopelessly misguided. First, it’s well nigh impossible to tell with simple screens who really could afford their house longer term (ie people who default suddenly, as opposed to wobble in and out of being current on their mortgage before folding, […]
Read more...One of our regular contributors chatted with a reporter at a major financial media outlet who was frustrated that management was not willing to let him dig into open mysteries from the global financial crisis. Fortunately, the Financial Times takes a broader view, and Gillian Tett today focused on a recent IMF report that describes […]
Read more...The Fed seems to be exhibiting a pretty bad case of “if all you have is a hammer, every problem looks like a nail” syndrome, particularly when it has (or perhaps more accurately, had) other tools at its disposal. In case you somehow missed it, global markets got a bad case of deflation heebie jeebies […]
Read more...Wow, the efforts to find and discredit strategic defaulters and other types of mortgage borrower reprobates appear to be picking up steam at the New York Times. Let’s be clear: there are not doubt more than a few people who bought more house than they could afford who had out of control spending habits. But […]
Read more...This post first appeared on August 21, 2007 A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those […]
Read more...The latest stunt from the Obama Administration on the housing front is a peculiar bit of theatrics at the margin. As Bloomberg reports: The Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas. The Department […]
Read more...Bloomberg tells us: The Federal Reserve’s decision to buy Treasuries and keep interest rates low will support “risk assets” without bringing down unemployment, said Anthony Crescenzi at Pacific Investment Management Co. “Low volatility tends to be good for the interest-rate climate,” said Crescenzi, who is based in Newport Beach, California at Pimco, manager of the […]
Read more...By Yves Smith and Tom Adams, an attorney and former monoline executive Update and correction 4:45 PM: We owe an apology to readers and to Louise Story of the New York Times, for an apparent error in our analysis. We have been informed that, remarkably, there were two separate Pyxis vehicles which were issued in […]
Read more...As discussed in ECONNED and on this blog, clearinghouses are not a solution to the systemic risk posed by credit default swaps, since there is no way to have a CDS counterparty post adequate margin and have the product be viable (to put it more simply, adequate margin make CDS uneconomic). So for CDS, the […]
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