Greece

[parsley]

Responsible financial leaders do not require an
inquisitive media to highlight a potential problem
to the public, in order for their own responsible
scrutiny, risk management, questioning, and
underwriting to trigger.

US banks did not do their job. The banks are still
not doing their job. ..............thus earning an
Irresponsibility label where irresponsibility is due.
Pars

[cottonpicken]

I can't wait to hear what Mr.Bass has to say.He could
seriously lose billions of dollars.

I always thought the bond market mess would give
commodities the liquidity they need but i didn't think
it would happen like this,i thought people would get
sick of watching their purchasing power erode.

Think of all this monstrous debt out there-that
someone owns-and now they can't believe their
insurance on "it" or "it" is safe.

[cottonpicken]

This is going to be interesting.

Rock and hard spot.

If cds is triggered 5 of the biggest banks go down,taking
down god knows what.

if cds is not triggered,those banks make off like bandits,but
somebody is holding the bag.

So many financial institutions will face HUGE right downs on
assets they thought were hedged,but those institutions are
so leveraged they will be insolvent.

Then,which has already started to happened,confidence will
be lost,man o man interesting times.

[bduke]

Parsley.... Brooksley's concerns were.. in 1995... for a non material, new era
method of managing risk ... at that time.

She was too early to resonate with the Regulators because there was so few
deals being consummated.

Remember that interest rates were not predicted to be so low for so long.

My point is where was her warning in 2005? Perhaps she did try to alert the
regulators and markets but wasn't deemed credible..

Regarding the banks not doing their job... I agree.

The changing of regulations in 1979 to allow US Schedule A Banks to do
proprietary trading has changed the focus of banking.

Now the "Volcker Rule" is being discussed to revert back to old style regs.

However, recognize that the politicians are counting on banks to help their
countries survive.

Bank of America purchased Countrywide Mortgages in 2008 for $4.1 billion
in stock and has been in duck soup since.

The deal was "encouraged" by politicians.

Hindsight can be more accurate, but of little benefit... especially when
circumstances change.

Your frustration is certainly warranted... IMHO.

Cheers... Bill

[bduke]

Cottonpicken... IMHO .. You have it analyzed.

Although it isn't only investment Banks which sell derivatives.

Some Corps specialize in OTC deals... a few that survived 2008.

Haircuts are inevitable... and will likely include a few scalpings.

I would bet that the US banks survive, and the bond holders
including European Banks will be hurting.

I expect French and Italian Banks will need some propping up.

British banks will be relatively unscathed from Greece etc... they
have their own issues in GB.

BTW the London Financial business is 17% of GB's GDP.

Interesting times indeed.

I could be wrong.

Cheers... Bill

[cottonpicken]

bduke,one analogy i always think of is a combine
compared to the global financial system.

So many moving parts relying on each other,for the
big system to move forward.

And if there is one little short in one insignificant
wire.....

[rockpile]

This is all very interesting, but the really important
question is 'How many angels can sit on the head of a
pin at once?'
Everyone take a deep breath and relax, and wait.

[bduke]

Cottonpicken... I agree with your analogy.

Problems in this era are as complicated as electrical/computer combine
errors.... and very costly to fix, and also costly time wise.

One little glitch can hold up progress, and hammers and crescent
wrenches become only frustration relievers when thrown..... without
fixing!

Rockpile... Waiting may be effective for some.

However if we can figure out better positions economically,
we can capture some value.

Opportunities lost are not easily measured... but are real.

Cheers... Bill

[rockpile]

Good points Bill, but have you ever observed a
coyote hunt? They are incredibly patient creatures
and very successful predators. What's happening
now is not that novel. In about 83 or 84 you could
buy a house in Calgary for 1 dollar and likely get a
reduced interest rate on assuming the outstanding
mortgage. Banks receive zero value on stagnant
assets. They need to dispose of them asap. Greece
announced today that they renegotiated their
highest rated bonds (50% of total) to lower rates
and longer term paybacks. Buys time there, which is
the best anyone could hope for.
Finally, and what I see as really important, is that
NA firms have been hoarding huge amounts of cash
reserves which eventually will get pregnant and
want to go somewhere. And hopefully it will trend
to support a vibrant middle class with 1.6 children,
two cars, a home, big screen tv, etc, etc. And the
wheels will continue to turn.
Some of the speculation here reminds me of 1999
when upon the arrival of Jan 1, 2000, all computers
would crash and anarchy would break out. I actually
know some people who were so convinced they
became survivalists, stocked guns, ammo and dried
food. And as we know, that was a big fluff.
Finally, if I recall, I heard many say the global
financial network would collapse overnight when
the Russians defaulted. Does anyone even
remember the date?

[bduke]

Rockpile... I remember the eighties too well. Loan interest rates soared to the mid
twenty per cents.

If our fiscal policy reduces inflation with interest rates, we could easily have house
values drop drastically again... especially if the economy heats up.

Regarding firms hoarding cash. Agreed ... they are holding trillions.

However, US banks are retaining cash for capital reserves i.e. new Basel III
requirements and because they are still writing down mortgages and sovereign
debt.

Other corporations are building savings for opportunities, increasing their
dividends, buying back their own shares and purchasing other firms.

I realize that cash tends to become impatient, but world events are countering
this tendency.

You asked about the expectation of Russian defalcation triggering a global
financial crisis.

I expect you are relating to 1998, when Russia had been at war with the
Chechnya.

In 1998 there was negligible global trading compared to 2008. The derivative
market mushroomed because of such low interest rates for so long.

Cash was indeed looking for better returns.. especially Insurance companies and
Investment Banks.

Insurance companies have monthly cash requirements to be paid,and they are
regulated to have a broadly based investment portfolio.

Low interest rates are very poor contributors to guaranteed payouts.

When Lehmans went down, the US Treasury Secretary, the Federal Reserve, and
the SEC were unprepared for the run on liquidity... globally.

We are in a new paradigm. Computer trading and banking is seamless and
timeless. Funds can transfer billions in a nano second... and they do.

Finally... being patient like coyotes doesn't mean they stand still.

Cheers... Bill

[rockpile]

Thanks Bill, good analysis.

[cottonpicken]

Ya it would have taken a real genius to take 18%
yields in the eighties,lol.

And real genius to take 18% yields in gold the past
decade,lol.

[bduke]

Cottonpicken... a big difference whether we are lenders or borrowers.

Can you imagine the current home mortgages paying 18% fixed 5 year rates?

I think a few would be in default!

Agree not much genius in receiving these returns.

I have seen 15 year guaranteed annuities paying 18%.

Made for happy retirees.

Hard on business expansion and farm financing.

It's an ill wind that doesn't blow some good.

Cheers... Bill