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HOOK
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Scholes´ solution: a Fresh start

March 9th, 2009, 11:37 am

According to Myron Scholes:The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.” More on http://www.bloomberg.com/apps/news?pid= ... JqgURAThis really sounds like a desperate person. I think he´s overeacting.
 
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Traden4Alpha
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Scholes´ solution: a Fresh start

March 9th, 2009, 12:33 pm

This solution carries three very large assumptions:1. That all parties are using mark-to-market with identical prices (i.e., optimistic pricing by both counterparties implies that closing the contract at the mid-point will damage both party's balance sheets.)2. That parties on the liability side have the ready cash to buy out the contract.3. That the contracts aren't being used for hedging purposes so that closing the contract doesn't leave a party exposed to other risks (e.g., bond defaults).I suspect all three assumptions are false for a significant number of contracts and counterparties
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Fermion
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Scholes´ solution: a Fresh start

March 9th, 2009, 4:17 pm

QuoteOriginally posted by: Traden4AlphaThis solution carries three very large assumptions:1. That all parties are using mark-to-market with identical prices (i.e., optimistic pricing by both counterparties implies that closing the contract at the mid-point will damage both party's balance sheets.)If the parties can't agree, then a regulator should step in. Gone is the time when anyone with half a grain of grey matter could trust bankers to be reasonable.Quote2. That parties on the liability side have the ready cash to buy out the contract.If they don't then either (a) they are insolvent and should be liquidated or (b) currently the gov is throwing good taxpayer money after bad. I would rather they loaned it (at a suitably high interest rate) for this purpose, taking over any bank that defaults on the loan.Quote3. That the contracts aren't being used for hedging purposes so that closing the contract doesn't leave a party exposed to other risks (e.g., bond defaults).Whatever happened to the idea that people accepted the risk when they made an investment? You could argue that this was an unanticipated risk, but in what way is that different to the unanticipated risk to a worker's pension of a stock market collapse due to banking fraud?
 
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Traden4Alpha
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Scholes´ solution: a Fresh start

March 9th, 2009, 7:27 pm

QuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4AlphaThis solution carries three very large assumptions:1. That all parties are using mark-to-market with identical prices (i.e., optimistic pricing by both counterparties implies that closing the contract at the mid-point will damage both party's balance sheets.)If the parties can't agree, then a regulator should step in. Gone is the time when anyone with half a grain of grey matter could trust bankers to be reasonable.But the disagreement on price is one of the central reasons for holding the position in first place. By basic logic, holders of long positions think these contracts are worth more than the market mid-point and holders of short positions think these contracts are worth less than the market mid-point. In mandating the market midpoint, the bid-ask spread is destroyed on the balance sheets because the long-holders get less for the asset than they thought they should and the short-holders are forced to pay more to clear the liability than they thought they should. (I'll not touch the issue that the mid-point is ill-defined if the market depth is asymmetric, undemocratic if only a fraction of participants have active bid/ask orders in the market, and gameable under any but retroactive terms.)The fundamental problem is that no one knows the true value of these instruments. All we have are a series of conflicting estimates and a series of plausible arguments for why each and every estimate is deeply flawed. All price estimates, including market prices, depend on assumptions which are never provably true for all time and during all economic conditions (especially the conditions du jour).QuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4Alpha2. That parties on the liability side have the ready cash to buy out the contract.If they don't then either (a) they are insolvent and should be liquidated or (b) currently the gov is throwing good taxpayer money after bad. I would rather they loaned it (at a suitably high interest rate) for this purpose, taking over any bank that defaults on the loan.Not true at all. Illiquidity does NOT imply insolvency. A company can easily have high quality, but illiquid, assets (e.g., factories and long-term contracts) that more than offset its liabilities and/or have high-probability cashflows that will ensure future repayment of all liabilities (e.g., see Amazon's corporate bonds). The unilateral changing of instrument contract terms could be very damaging to those who entered these contracts. What percentage of homeowners could survive a unilateral, contract-breaking demand for repayment of their mortgage? By your definition, nearly 100% of homeowners "are insolvent and should be liquidated." QuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4Alpha3. That the contracts aren't being used for hedging purposes so that closing the contract doesn't leave a party exposed to other risks (e.g., bond defaults).Whatever happened to the idea that people accepted the risk when they made an investment? You could argue that this was an unanticipated risk, but in what way is that different to the unanticipated risk to a worker's pension of a stock market collapse due to banking fraud?On this issue, we agree! The widespread use of hedging certainly fostered apathy toward risks and enabled the excessive use of leverage.The more risk that an entity thinks it has eliminated, the more (hidden) risks it has created. I find it interesting that one of the problems with US mortgages was in ARMs in which the banks transferred the interest-rate risks to the borrower and that one of the problems with Eastern European loans was that banks transferred the fx-rate risks to the borrower. In both cases, banks ended up with more risk (i.e., much higher default risks) when they thought they were getting less risk (i.e., through the transfer of i-rate and fx-rate risks to borrowers). Islamic finance anyone?
 
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Fermion
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Scholes´ solution: a Fresh start

March 9th, 2009, 8:00 pm

Duplicate deleted.
Last edited by Fermion on March 8th, 2009, 11:00 pm, edited 1 time in total.
 
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Scholes´ solution: a Fresh start

March 9th, 2009, 8:15 pm

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4AlphaThis solution carries three very large assumptions:1. That all parties are using mark-to-market with identical prices (i.e., optimistic pricing by both counterparties implies that closing the contract at the mid-point will damage both party's balance sheets.)If the parties can't agree, then a regulator should step in. Gone is the time when anyone with half a grain of grey matter could trust bankers to be reasonable.But the disagreement on price is one of the central reasons for holding the position in first place. By basic logic, holders of long positions think these contracts are worth more than the market mid-point and holders of short positions think these contracts are worth less than the market mid-point. In mandating the market midpoint, the bid-ask spread is destroyed on the balance sheets because the long-holders get less for the asset than they thought they should and the short-holders are forced to pay more to clear the liability than they thought they should. (I'll not touch the issue that the mid-point is ill-defined if the market depth is asymmetric, undemocratic if only a fraction of participants have active bid/ask orders in the market, and gameable under any but retroactive terms.)So? We're past the time to imagine that capitalists markets are fair.QuoteThe fundamental problem is that no one knows the true value of these instruments. All we have are a series of conflicting estimates and a series of plausible arguments for why each and every estimate is deeply flawed. All price estimates, including market prices, depend on assumptions which are never provably true for all time and during all economic conditions (especially the conditions du jour).Who cares who thinks what the value of any piece of fraudulent capitalist crap is? I say, like Scholes, burn them anyhow.No one knows the "true value" of any asset in any circumstance. We need a mechanism to decide the exchange value, if an exchange is to take place. If the markets can't provide that mechanism, then we need something else. If it has to be an arbitrator or regulator, then fine. If the parties involved can't find someone to serve that role, then I'll volunteer.... QuoteQuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4Alpha2. That parties on the liability side have the ready cash to buy out the contract.If they don't then either (a) they are insolvent and should be liquidated or (b) currently the gov is throwing good taxpayer money after bad. I would rather they loaned it (at a suitably high interest rate) for this purpose, taking over any bank that defaults on the loan.Not true at all. Illiquidity does NOT imply insolvency. That's not what I said. I said either they are insolvent or the gov can loan them. You love these straw men....QuoteQuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4Alpha3. That the contracts aren't being used for hedging purposes so that closing the contract doesn't leave a party exposed to other risks (e.g., bond defaults).Whatever happened to the idea that people accepted the risk when they made an investment? You could argue that this was an unanticipated risk, but in what way is that different to the unanticipated risk to a worker's pension of a stock market collapse due to banking fraud?On this issue, we agree! Hooray!I'll add that bankers, at least, should anticipate the risk of banking fraud that necessitates regulator intervention. If they can't, who can?
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Traden4Alpha
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Scholes´ solution: a Fresh start

March 9th, 2009, 8:48 pm

QuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4AlphaThis solution carries three very large assumptions:1. That all parties are using mark-to-market with identical prices (i.e., optimistic pricing by both counterparties implies that closing the contract at the mid-point will damage both party's balance sheets.)If the parties can't agree, then a regulator should step in. Gone is the time when anyone with half a grain of grey matter could trust bankers to be reasonable.But the disagreement on price is one of the central reasons for holding the position in first place. By basic logic, holders of long positions think these contracts are worth more than the market mid-point and holders of short positions think these contracts are worth less than the market mid-point. In mandating the market midpoint, the bid-ask spread is destroyed on the balance sheets because the long-holders get less for the asset than they thought they should and the short-holders are forced to pay more to clear the liability than they thought they should. (I'll not touch the issue that the mid-point is ill-defined if the market depth is asymmetric, undemocratic if only a fraction of participants have active bid/ask orders in the market, and gameable under any but retroactive terms.)So? We're past the time to imagine that capitalists markets are fair.I suspect that you and I have divergent views on the fairness of capital markets, but that's beside the point. Damaging the balance sheets of the contract holders does seem germane. If burning these contracts induces more bankruptcies than letting the contracts sit, then should we really burn them?QuoteThe fundamental problem is that no one knows the true value of these instruments. All we have are a series of conflicting estimates and a series of plausible arguments for why each and every estimate is deeply flawed. All price estimates, including market prices, depend on assumptions which are never provably true for all time and during all economic conditions (especially the conditions du jour).Who cares who thinks what the value of any piece of fraudulent capitalist crap is? I say, like Scholes, burn them anyhow.Although clearing these contracts from the system seems like an emotionally satisfying response, it feels more like the behavior of a petulant 2-year-old. Me thinks that Scholes has a dismal understanding of finance and economics, Swedish committees notwithstanding. Given the dismal performance of LTCM and Platinum Grove Asset Management, I'd say that the empirical evidence is on my side.QuoteQuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4Alpha2. That parties on the liability side have the ready cash to buy out the contract.If they don't then either (a) they are insolvent and should be liquidated or (b) currently the gov is throwing good taxpayer money after bad. I would rather they loaned it (at a suitably high interest rate) for this purpose, taking over any bank that defaults on the loan.Not true at all. Illiquidity does NOT imply insolvency. That's not what I said. I said either they are insolvent or the gov can loan them. You love these straw men....And this merely compounds the problem -- replacing one liability (i.e., the derivative contract that the entity willingly undertook) with a higher-priced liability (i.e., a loan to cover the unfavorable unwinding price that the entity cannot refuse). Such a loan is a de facto tax on the stakeholders of the entity (e.g., the depositors, bondholders, shareholders, etc.) assuming the entity even survives its new burden of government-mandated debt. "We're the government and we're here to help."If the government wants to offer a voluntary program ("give me your poor, your tired, your huddled masses of toxic paper"), then I'm all for it. But breaking private contracts, seizing private assets, and the forced quartering of government loans seems unconstitutional and contrary to the rule of law to me (and unfair, too!).
 
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Scholes´ solution: a Fresh start

March 9th, 2009, 9:08 pm

QuoteOriginally posted by: Traden4Alpha If burning these contracts induces more bankruptcies than letting the contracts sit, then should we really burn them?Yes. Burning is a good way to clear out dead wood. Especially when it's full of parasitic beetles holding us to ransom.QuoteQuoteWho cares who thinks what the value of any piece of fraudulent capitalist crap is? I say, like Scholes, burn them anyhow.Although clearing these contracts from the system seems like an emotionally satisfying response, it feels more like the behavior of a petulant 2-year-old. Clearly a petulant two-year-old could make better decisions than the bankers who got us into this mess.QuoteMe thinks that Scholes has a dismal understanding of finance and economics, Swedish committees notwithstanding. Given the dismal performance of LTCM and Platinum Grove Asset Management, I'd say that the empirical evidence is on my side.Even he didn't generate the collective herd-like mess that the bankers have created. If his experience has finally given him a good basis for judging things, that's probably a good thing.QuoteQuoteOriginally posted by: FermionThat's not what I said. I said either they are insolvent or the gov can loan them. You love these straw men....And this merely compounds the problem -- replacing one liability (i.e., the derivative contract that the entity willingly undertook) with a higher-priced liability (i.e., a loan to cover the unfavorable unwinding price that the entity cannot refuse). Such a loan is a de facto tax on the stakeholders of the entity (e.g., the depositors, bondholders, shareholders, etc.) assuming the entity even survives its new burden of government-mandated debt. "We're the government and we're here to help."Fine. Let's tax the racketeering stakeholders then.QuoteIf the government wants to offer a voluntary program ("give me your poor, your tired, your huddled masses of toxic paper"), then I'm all for it. You mean like the present paying off of the racketeers' ransom?QuoteBut breaking private contracts, seizing private assets, and the forced quartering of government loans seems unconstitutional and contrary to the rule of law to me (and unfair, too!).And the rackets that got us into the mess? They were fine, I suppose? Extraordinary situations call for extraordinary measures. I'm quite willing to seize the ill-gotten gains of racketeers who are holding us to ransom.
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Traden4Alpha
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Scholes´ solution: a Fresh start

March 9th, 2009, 10:22 pm

QuoteOriginally posted by: FermionQuoteBut breaking private contracts, seizing private assets, and the forced quartering of government loans seems unconstitutional and contrary to the rule of law to me (and unfair, too!).And the rackets that got us into the mess? They were fine, I suppose? Extraordinary situations call for extraordinary measures. I'm quite willing to seize the ill-gotten gains of racketeers who are holding us to ransom.Funny how you seem so much more willing to give up the rule of law than I am. So much for constitutions, eh?This crisis is so much simpler than your racketeer-infested corrupted-capitalist conspiracy theories. The taxpayers borrowed too much money (with the complete encouragement of the Fed, no less) and now the taxpayers must pay it back. Follow the money and you'll find that the vast majority of it ended up in the pockets of borrowers who then binged on McMansions, SUVs, Subzero refrigerators, SBUX lattes, and plasma TVs.And because the taxpayers borrowed that money from the banks, it's no surprise that we need to pay the banks back. (Of course, the reality is that bailing out the banks is just a bailout of the taxpayers, too. The USA can either prevent depositor and pension losses with bailout now or it can spend whole lot more money on FDIC seizures and boosts to social security to cover all that lost pension money). Yes, the banks look like the greater fools in all this because the banks were left holding the bag (or the housekeys) when the real estate bubble popped, but I'd wager that the vast majority of Americans directly or indirectly profited from this "racket."
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Scholes´ solution: a Fresh start

March 9th, 2009, 11:19 pm

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteBut breaking private contracts, seizing private assets, and the forced quartering of government loans seems unconstitutional and contrary to the rule of law to me (and unfair, too!).And the rackets that got us into the mess? They were fine, I suppose? Extraordinary situations call for extraordinary measures. I'm quite willing to seize the ill-gotten gains of racketeers who are holding us to ransom.Funny how you seem so much more willing to give up the rule of law than I am. So much for constitutions, eh?This crisis is so much simpler than your racketeer-infested corrupted-capitalist conspiracy theories. The taxpayers borrowed too much money (with the complete encouragement of the Fed, no less) and now the taxpayers must pay it back. Follow the money and you'll find that the vast majority of it ended up in the pockets of borrowers who then binged on McMansions, SUVs, Subzero refrigerators, SBUX lattes, and plasma TVs.And because the taxpayers borrowed that money from the banks, it's no surprise that we need to pay the banks back. (Of course, the reality is that bailing out the banks is just a bailout of the taxpayers, too. The USA can either prevent depositor and pension losses with bailout now or it can spend whole lot more money on FDIC seizures and boosts to social security to cover all that lost pension money). Yes, the banks look like the greater fools in all this because the banks were left holding the bag (or the housekeys) when the real estate bubble popped, but I'd wager that the vast majority of Americans directly or indirectly profited from this "racket."So, according to you, there was no fictional (i.e. fraudulent) accounting such as "mark-to-whatever-number-I think-of", no risky gambling with other people's money, no bonusses for risky gambling with other people's money (and losing it), no manipulation of ratings, no secret deals to execute fraud in OTC markets and no inducement to get people into debt in anticipation of the current outburst of loan-sharking (25% rates on credit cards when the fed rate is < 1%? Continually changing rules for missed payments? "Balance Transfer" fees of 3% with no cap for people who need to consolidate their debt?) . It was all the greedy consumer/taxpayers fault, eh? Are you kidding me?
 
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Traden4Alpha
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Scholes´ solution: a Fresh start

March 10th, 2009, 12:06 am

QuoteOriginally posted by: FermionQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteBut breaking private contracts, seizing private assets, and the forced quartering of government loans seems unconstitutional and contrary to the rule of law to me (and unfair, too!).And the rackets that got us into the mess? They were fine, I suppose? Extraordinary situations call for extraordinary measures. I'm quite willing to seize the ill-gotten gains of racketeers who are holding us to ransom.Funny how you seem so much more willing to give up the rule of law than I am. So much for constitutions, eh?This crisis is so much simpler than your racketeer-infested corrupted-capitalist conspiracy theories. The taxpayers borrowed too much money (with the complete encouragement of the Fed, no less) and now the taxpayers must pay it back. Follow the money and you'll find that the vast majority of it ended up in the pockets of borrowers who then binged on McMansions, SUVs, Subzero refrigerators, SBUX lattes, and plasma TVs.And because the taxpayers borrowed that money from the banks, it's no surprise that we need to pay the banks back. (Of course, the reality is that bailing out the banks is just a bailout of the taxpayers, too. The USA can either prevent depositor and pension losses with bailout now or it can spend whole lot more money on FDIC seizures and boosts to social security to cover all that lost pension money). Yes, the banks look like the greater fools in all this because the banks were left holding the bag (or the housekeys) when the real estate bubble popped, but I'd wager that the vast majority of Americans directly or indirectly profited from this "racket."So, according to you, there was no fictional (i.e. fraudulent) accounting such as "mark-to-whatever-number-I think-of", no risky gambling with other people's money, no bonusses for risky gambling with other people's money (and losing it), no manipulation of ratings, no secret deals to execute fraud in OTC markets and no inducement to get people into debt in anticipation of the current outburst of loan-sharking (25% rates on credit cards when the fed rate is < 1%? Continually changing rules for missed payments? "Balance Transfer" fees of 3% with no cap for people who need to consolidate their debt?) . It was all the greedy consumer/taxpayers fault, eh? Are you kidding me?You are absolutely right about financial industry shenanigans but you fail see the true breadth of the guilt. Everyone who got a mortgage with less than 20% down was committing "risky gambling with other people's money." Everyone who played the cash-out refi game was collecting "bonusses for risky gambling with other people's money (and losing it)." Everyone who sold a house with 20% CAGR was committing fraud. In fact, one could argue that most of the real estate transactions from 2002 to 2007 were accomplished by fraud on the part of the buyer (risking other people's money), the seller (fraudulent asset pricing), and the entire retinue of real estate minions (including the banks) that collect the crumbs when ever a plot of land is passed about.Sure, a few contrarians (folks such as Roubini, myself and yourself included) knew that the real estate boom would end in tears (and knew the dotcom era would end in tears, and knew the Japanese real estate bubble would end in tears, and .....). But no one wants to listen to a Gloomy Gus when the economy is booming and the punchbowl is overflowing with the spirits of good times. Just drink the spiked Koolaid and repeat: "This time, it's different. This time, asset X can appreciate forever and ever, and we'll all be rich!" Perhaps the Illuminati, Masons, or parasitic beetles have engineered every bubble since the Turks gave tulips to the Dutch -- are financial bubbles an Islamic plot? -- but I think the answer is far far simpler. Everyone, especially the "little guy" taxpayers, wants to get rich quick. And if that means willful ignorance of the nature of debt and the unsustainability of economic trends, then so be it because "everybody is doing it."P.S.: As for "(25% rates on credit cards when the fed rate is < 1%? Continually changing rules for missed payments? "Balance Transfer" fees of 3% with no cap for people who need to consolidate their debt?)", I'd wager that P(Default|"needs to consolidate their debt") is extremely high, as is P(Default|"transfers balance"). In fact, the credit card companies could well be considered irresponsible for NOT charging high enough rates because the card companies are "risking other people's money."
Last edited by Traden4Alpha on March 9th, 2009, 11:00 pm, edited 1 time in total.
 
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Scholes´ solution: a Fresh start

March 10th, 2009, 7:52 am

QuoteOriginally posted by: Traden4AlphaSure, a few contrarians (folks such as Roubini, myself and yourself included) knew that the real estate boom would end in tears (and knew the dotcom era would end in tears, and knew the Japanese real estate bubble would end in tears, and .....). But no one wants to listen to a Gloomy Gus when the economy is booming and the punchbowl is overflowing with the spirits of good times. Just drink the spiked Koolaid and repeat: "This time, it's different. This time, asset X can appreciate forever and ever, and we'll all be rich!" Perhaps the Illuminati, Masons, or parasitic beetles have engineered every bubble since the Turks gave tulips to the Dutch -- are financial bubbles an Islamic plot? -- but I think the answer is far far simpler. Everyone, especially the "little guy" taxpayers, wants to get rich quick. And if that means willful ignorance of the nature of debt and the unsustainability of economic trends, then so be it because "everybody is doing it."Indeed the economy is little more than a distributed ponzi scheme that causes people to do marginally useful stuff as a side effect. The ubiquitous idea that economic growth is the society's only goal is wrong and dangerous.
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Scholes´ solution: a Fresh start

March 10th, 2009, 10:45 am

This seems irresponsible in a very relevant sense. Surely the whole point is that no one in finance should be engaging in potentially damaging actions that they can't estimate the consequences of? Which seems like an accurate description of this "solution". At least standing back and not intervening forces the market to find it's own bottom. Additionally this solution feels a bit assymetrical in terms of who gets punished. The more valid a trade, the more it's going to hurt being forced to settle it prematurely.
 
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Fermion
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Scholes´ solution: a Fresh start

March 10th, 2009, 5:23 pm

QuoteOriginally posted by: Traden4AlphaYou are absolutely right about financial industry shenanigans but you fail see the true breadth of the guilt. Everyone who got a mortgage with less than 20% down was committing "risky gambling with other people's money." Everyone who played the cash-out refi game was collecting "bonusses for risky gambling with other people's money (and losing it)." Everyone who sold a house with 20% CAGR was committing fraud. In fact, one could argue that most of the real estate transactions from 2002 to 2007 were accomplished by fraud on the part of the buyer (risking other people's money), the seller (fraudulent asset pricing), and the entire retinue of real estate minions (including the banks) that collect the crumbs when ever a plot of land is passed about.Sure, a few contrarians (folks such as Roubini, myself and yourself included) knew that the real estate boom would end in tears (and knew the dotcom era would end in tears, and knew the Japanese real estate bubble would end in tears, and .....). But no one wants to listen to a Gloomy Gus when the economy is booming and the punchbowl is overflowing with the spirits of good times. Just drink the spiked Koolaid and repeat: "This time, it's different. This time, asset X can appreciate forever and ever, and we'll all be rich!" Perhaps the Illuminati, Masons, or parasitic beetles have engineered every bubble since the Turks gave tulips to the Dutch -- are financial bubbles an Islamic plot? -- but I think the answer is far far simpler. Everyone, especially the "little guy" taxpayers, wants to get rich quick. And if that means willful ignorance of the nature of debt and the unsustainability of economic trends, then so be it because "everybody is doing it."So you agree with me that, as dvse says, capitalism is a giant Ponzi scheme. But you never seem to draw the conclusion that something needs to change.As regards conspiracies engineering bubbles, that's another straw man you've thrown up before. No conspiracy is necessary. Parasites just have to know that they can operate with reckless regard for the consequences to the body they are feeding on because they get to take the profits (food) and the rest of us get to pay the costs (disease).
 
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Fermion
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Scholes´ solution: a Fresh start

March 10th, 2009, 6:59 pm

QuoteOriginally posted by: AashThis seems irresponsible in a very relevant sense. Surely the whole point is that no one in finance should be engaging in potentially damaging actions that they can't estimate the consequences of?A little late to start thinking about that isn't it?QuoteWhich seems like an accurate description of this "solution". At least standing back and not intervening forces the market to find it's own bottom.When is "not intervening" not itself an intervention to support a particular status quo that created the problem? QuoteAdditionally this solution feels a bit assymetrical in terms of who gets punished.??? That's the nature of markets. Are you at all concerned for the pensions that were crushed by Wall Steet's gamblers?QuoteThe more valid a trade, the more it's going to hurt being forced to settle it prematurely.Define "valid". If a trade was taken without regard for possible market values, that was a risk taken by the parties concerned and the consequences should fall on them, not the rest of the community.
Last edited by Fermion on March 9th, 2009, 11:00 pm, edited 1 time in total.