|
|
 |
|
They
don’t make crisis like they use to
As I was sitting back in my chair contemplating
my decision to go long the week before the Dow fell 5% I thought about prior crisis. Weren’t things so much clearer
then? Markets fell sharply in a short period, it was clear that you had lost a fortune, and you just found a ledge to peer
over while contemplating the meaning of money, and the benefits of living without it. Now no one even knows when a crisis
is started let alone finished. Now its all about libor spreads, monolines and complex derivatives. Now there are people you
can employ solely to convince that in fact you haven’t lost money, that there’s just a temporary lack of irrational
exuberance in the market. Now you have to have a PHD just to realise that really you don’t understand what’s going
on. Insurers insure banks and the bonds they trade and when both fail the tax payer bails out everything that even considered
moving to Wall Street. Now regulators employ thousands to justify why they don’t regulate.
And as I sit here in the perpetual light of a Scandinavian summer I wonder what is going to become of our markets.
We could invent perfect markets where nobody ever loses, they just don’t get their money back. We could invent perfect
banks which never go bust despite losing (or rather not getting back) more money than they could ever possibly own. We’ve
moved into a world that is ever more sophisticated about deceiving itself. Now
you can borrow beyond bankruptcy, no one is responsible we just keep passing debt around. From tax payer to bank and then
back to taxpayer. The trick is to move it so quickly that no one ever sees it stop.
We are a more advanced nation, we are now too sophisticated for suicide. I only wish that was progress.
|
|
|
A Crisis of repeats
One of the beauties of the current nine
month crisis, at least if you’re a journalist, is the recurring nature of so many its themes. It allows one to roll
out a slightly reworded version of the same article again and again. Here at SATFIN we believe this is dishonest. We roll
out a completely unchanged version of the articles. This week it is the recurring themes of bank writedowns and monolines.
Just to ensure you’re not getting bored out there, oil hikes and related inflation fears have been overlaid on these
recurring motifs to give them a very different feel to previous times. Where before there had been shock, where before there
had been disbelief and panic now there is resignation and fear.
Monolines are bond insurers as explained in Finance Explained section. There is an obvious way in which banks would
be affected by monolines. If they hold bonds that are insured by monolines, a monoline going bust will lower the value of
those bonds (it won’t be worthless as the original issuer may, and probably will, pay). But that is a relatively small
part of the banks exposure. In one of those bizarre quirks that the current crisis throws up the monolines provided special
insurance to the banks on their CDO of subprime exposures. Why did they do this? The simple answer is that they thought they
would make money from it, and as insurance fees from municipal bonds stopped growing the mnonolines were desperate for other
income growth. Still it seems an odd move, insuring basic municipal bonds is one thing, insuring what are effectively highly
geared derivatives is substantially different. There are two reasons they could have done this, one is that they were stupid
enough to believe they understood the instruments, or alternately they were stupid enough to believe that they should do the
business without understanding them.
All this has been known for a while. What is causing concern about monolines currently, and hence banks indirectly
is GICS. GICS are guaranteed insurance contracts, whereby the monoline would guarantee returns on a deposit. It would invest
the deposit and keep any excess returns. Of course a lot of what they invested in was subprime mortgage backed securities,
because in general you can never have too much of that. These GICS may now have to be paid out on causing a number of problems
for a variety of monolines.
Write Down Retrospective
|
|
|
|
|
|
|
Aliens
cause spike in oil price
Satfin has been showed confidential documentation
that proves that the current turmoil in the oil market is being caused by extraterrestrials. Oil prices recently reached $139
before falling back and there has been much debate about the causes of the price movements. Speculators, demand, supply and
potential war in the Middle
East have all been blamed, but we can exclusively reveal that it is in fact aliens. It is believed that the move
is the first in series designed to cause economic turmoil on earth. Some people further believe that this will be followed
by an invasion of the planet. Long term high oil prices have a knock on effect to higher food and transportation prices as
well more repetitive news broadcasts.
“People have a very unsophisticated view
of aliens. They think they are all like Rambo, coming in and slaughtering masses of beings with high tech guns. But we now
suspect the reality is much different” said Professor Jack Simmons head of Alien invasion research at Oxford University. “Aliens are worried about collateral damage and destroying infrastructure that could be used post
invasion just like the rest of us. So we suspect that with they superior economic knowledge they will look to weaken the planet
first using economic attacks.” It is believed that originally they had planned to start a sub prime crisis, but did
not get the plan into action before we created our own.
“I guess you have to look at the bright
side” said a man coming out of the pub at lunch time. “Being ruled by aliens can’t be any worse that what
we’ve got now.”
Finance Explained explains Tranching
Doom-Laden explores the risk and consequences of monolines
|
|
|
|
|
|
|
These pages are updated weekly
Regulators, they're better than nothing...well almost
|
|
|
|