Archive for November 2008

Central banks like credit swaps,

November 24, 2008

because they can monitor market participants’ beliefs about credit worthiness.

Oh oh: UPDATE 1-U.S. Treasury CDS hit record wides-CMA DataVision | Markets | Markets News | Reuters

NEW YORK, Nov 24 (Reuters) – The spread or risk premium on
10-year U.S. Treasury credit default swaps hit record wide
levels on Monday, prompted by worries about how the cost of
rescuing banks and carmakers would affect U.S.
creditworthiness, CMA DataVision said.

Here is what I learned this week-

November 21, 2008

there are about 52 million mortgages in the US. About 3 million are not paying. Any government scheme that allows people to write down mortgages that gives the 49 million people who are paying incentive to default early is going to be expensive. But any other scheme will annoy those 49 million people too. What to do? What to do?

Eeeck.

mathmatical sciene as beauty, eh

November 21, 2008

Beauty Is Truth In Mathematical Intuition: First Empirical Evidence

Here is the upside of the subprime mess

November 15, 2008

Maybe we can get more of these lenders…
How the subprime good guys give home loans to poor people, strengthen communities, and still make a profit. – By Daniel Gross – Slate Magazine

In a ‘free market’ such lenders would be much more important. And notice that they are for-profit entities.  Such lenders need to use soft data and judgement as much as hard data to make their loans.  There is now evidence that other lenders making subprime loans that were securitized substituted hard data for soft data in making their decisions.  A bad idea, to say the least.

Yesterday,

November 13, 2008

I became a citizen.

My wife made the best comment on the financial crisis I have heard in a while.  NPR told us that the Treasury wants the banks to start making profitable loans.  Her comment was: Why don’t the banks want to make them anyway?

Gulp.

November 12, 2008

Lobbyists Swarm the Treasury for Piece of Bailout Pie – NYTimes.com

Sensible investment advice.

November 12, 2008

Is Now the Time to Buy Stocks? – WSJ.com
Especially

The average person must end up holding the stocks and bonds that are out there. Therefore, you should only ever buy, sell or rebalance if you’re different than the average person. We all like to think we’re smarter than average, but at least half of us are deluded, so that’s a dangerous way to invest.