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#511
12-09-2018, 03:11 PM
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I'm not saying that people haven't worked hard and taken risks throughout US history; they absolutely have. But I am saying that the myth that rugged individualism is the foundation of American innovation and prosperity is just that: a myth. We're a settler-colonial nation whose citizens have always depended on the federal government to connect them and protect them. I have no idea where cheese fits in—unless we're talking about government-surplus cheese. 
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#512
12-10-2018, 09:16 AM
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Last edited by Davist; 12-10-2018 at 09:31 AM.
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#513
12-10-2018, 12:31 PM
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1. Little regulatory oversight- remember Republicans were big believers in regulatory light that market forces would prevent any excess 2. Fannie, Freddie being favorite democratic vehicles to push out lending to everyone 3. Rating agencies that did not necessarily understand the product and were incentivized to give high ratings for fees 4. The old adage, as long as everyone is getting paid, no one wants to squeal. EVeryone on the sell side and services providers were raking it in with issuance. When a mortgage pool was comprised of 40% NINJA Loans (No income, No jobs, No assets, you know liar loans) and yet the rating agencies gave 80% of the pool a AAA rating, you have a huge disconnect. But subprime was just part of the problem, the real problem is regulators did not know how risk was distributed throughout the system and which entities held what assets. (Again, regulatory light) So when Hank P thought the market was prepared for a Lehman filing, he had no idea who the counterparties were, and he underestimated how irrational the risk was in the system and how it would be transmitted across asset classes. Last edited by verticaldoug; 12-10-2018 at 12:35 PM.
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#514
12-10-2018, 12:49 PM
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The sub-prime issue was known ahead of time but few thought it would be as bad as it turned out to be. I recall reading an article in The Economist about the issue of bad leverage in the sub-prime mortgage market in the spring of 2007.
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Last edited by jet sanchez; 12-10-2018 at 12:51 PM.
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#515
12-10-2018, 02:07 PM
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Greenspan has proven particularly unique in re-writing the historical narrative to suit his appearance fees.
He was right there when Clinton pushed FNMA/FHLMC into expanding credit. Quote:
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#516
12-11-2018, 03:09 AM
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When Lehman went bankrupt, it wasn't a company, it was holding company with multiple legal entities. This is the fundamental mistake Hank P and Ben B made which let the genie out of the bottle. One big unexpected consequence was Lehman swept excess cash out of Lehman Brothers International at close of business on Fridays and deposited it in the US Broker Dealer for the weekend. When Lehman filed, that cash was trapped in the US, and Lehman Brothers International became an unsecured creditor. The problem was that money belonged to hedgefunds and other funds who were prime broker clients of Lehman Brothers International. So Monday, these funds became unsecured creditors to Lehman Brothers International in London. Since many need to raise cash to replace hedges, risk or whatever, they had to force liquidations from other holdings which were held at other prime brokers. Force sellings begets more forced margin selling. Another unexpected consequence is many global derivatives desks were run out of London. As a consequnce all the interbank counterparties who had swaps etc with Lehman as a counterparty, or a Lehman Client as a counterparty, were unsecured and forced to rehedge or liquidate the derivatives contracts. This particularly hit the Russian market hard since Lehman was a big provider of financing and hedging for Russians. Asset swaps for convertible bond books poof, index link swaps on equity markets poof and so and so.... This is how the subprime genie escaped and became connected to stock markets, bonds markets, commodity markets and other banks. . . If they had dealt with Lehman, you'd still have had a subprime problem, but not necessarily a global financial markets problem. I guess on a positive, it did expose Madoff. As Warren B says, when the tide goes out, you find out who is swimming naked. Last edited by verticaldoug; 12-11-2018 at 03:55 AM.
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#519
12-14-2018, 06:03 PM
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#520
12-17-2018, 02:01 PM
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Welp...
Sure seems like we are in correction territory but what do I know?
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#521
12-17-2018, 02:39 PM
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Here is to hoping that it is just a correction
 On hindsight, it seems obvious that the market which was first driven by artificially low interests, then sped up even further by corporate tax cuts, was unsustainable. It will be interesting to see where things shake up, especially with forecasts of future global economic slowdown. Days of 7-8% annualized real returns (dividends reinvested) may very well be over; personally, we now do our planning based on 4-5%... The market was great for folks like my in-laws, who just cashed out (annuities, etc.) and retired after 10 years of investing heavily in it. Maybe we will get lucky and catch a similar 10-year wave before our retirement, but I am not holding my breath  Quote:
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#522
12-17-2018, 02:43 PM
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__________________
Jeder geschlossene Raum ist ein Sarg.
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| Tags |
| economy, freemoneyhouse, game stop, i like this stock, stonks, wealth |
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