http://dumbagent.com Ceteris Paribus... Somewhat Thu, 09 Sep 2010 10:40:25 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 © ocean@dumbagent.com () ocean@dumbagent.com() Economics and Finance 1440 Economics, Finance, Theory, Education, Markets, Investing, Econ, Mathematics Audio posts of Dumbagent.com: Portal for discussion of Economics and Finance, Economic and Financial Theory, and related subjects. ocean@dumbagent.com No no http://profile.ak.facebook.com/object2/1473/41/n41758870112_312.jpg http://dumbagent.com 144 144 http://dumbagent.com/the-proud-parents/ http://dumbagent.com/the-proud-parents/#comments Mon, 23 Aug 2010 10:49:48 +0000 Anonymous http://dumbagent.com/?p=2091 http://dumbagent.com/the-proud-parents/feed/ 0 http://dumbagent.com/calling-all-writers/ http://dumbagent.com/calling-all-writers/#comments Tue, 06 Jul 2010 12:39:03 +0000 Ocean http://dumbagent.com/?p=1924 http://dumbagent.com/calling-all-writers/feed/ 0 http://dumbagent.com/welcome-to-the-blog-carnival/ http://dumbagent.com/welcome-to-the-blog-carnival/#comments Thu, 17 Sep 2009 09:56:02 +0000 Ocean http://dumbagent.com/?p=1246 http://dumbagent.com/welcome-to-the-blog-carnival/feed/ 1 http://dumbagent.com/made-in-japan-not-for-japan/ http://dumbagent.com/made-in-japan-not-for-japan/#comments Thu, 26 Feb 2009 09:55:46 +0000 Ocean http://dumbagent.com/?p=890 http://dumbagent.com/made-in-japan-not-for-japan/feed/ 5 http://dumbagent.com/how-to-save-general-motors-by-uncle-bear/ http://dumbagent.com/how-to-save-general-motors-by-uncle-bear/#comments Tue, 17 Feb 2009 09:55:45 +0000 Ocean http://dumbagent.com/?p=876 http://dumbagent.com/how-to-save-general-motors-by-uncle-bear/feed/ 0 http://dumbagent.com/an-e-mail-from-uncle-scam/ http://dumbagent.com/an-e-mail-from-uncle-scam/#comments Thu, 25 Sep 2008 09:55:12 +0000 Ocean http://dumbagent.com/?p=505 http://dumbagent.com/an-e-mail-from-uncle-scam/feed/ 2 http://dumbagent.com/when-to-go-back-to-school/ http://dumbagent.com/when-to-go-back-to-school/#comments Fri, 11 Jul 2008 09:55:45 +0000 Ocean http://dumbagent.com/?p=242 http://dumbagent.com/when-to-go-back-to-school/feed/ 1 http://dumbagent.com/the-case-for-gold-part-2/ http://dumbagent.com/the-case-for-gold-part-2/#comments Mon, 16 Jun 2008 09:55:42 +0000 Andy http://dumbagent.com/?p=228 http://dumbagent.com/the-case-for-gold-part-2/feed/ 0 http://dumbagent.com/letter-from-a-concerned-reader/ http://dumbagent.com/letter-from-a-concerned-reader/#comments Sat, 23 Feb 2008 04:22:48 +0000 Anonymous http://dumbagent.com/2008/02/22/letter-from-a-concerned-reader/ http://dumbagent.com/letter-from-a-concerned-reader/feed/ 2 4:26 I was hoping you and/or your readers and contributors might be able to shed some light on the current credit market conditions. The sum of ... I was hoping you and/or your readers and contributors might be able to shed some light on the current credit market conditions. The sum of what I know is that sometime in the spring of last year, investors began to notice that a particular segment of the credit community was not it's usual healthy self but these same investors were slow to act. Part of the sluggishness might be explained by the unwillingness to accept the inherent trade-off. Investors were unwilling to give up the returns from investments in various asset and mortgage backed securities and collateralized debt and mortgage obligations in all their various flavors by continuing to purchase and hold the securities. Meanwhile headlines continued to speak of liquidity and the endless chase for yield, in stock repurchases, m#38;a, leveraged buyouts, transactions in commercial real estate and landmark properties, etc. So long as this continued, there was no immediate rush to recognize the true risks involved. As the summer approached, the appetite for risk waned. The turn in the credit currents didn't seem to be caused by a single event or cause-- neither high oil and commodity prices, the wars in Iraq and Afghanistan, softening of residential property market, nor the weakness in the dollar. Some financial news media, however, repeatedly reported on the high cost, often adjustable-rate mortgages (generically called subprime) that many people had, the risks that these borrowers had also taken, and partly on how the mortgages were underwritten and holders of the securities. So long as the liquidity was free flowing, the risk of a spike in interest rates was not apparent or immediately tangible. Homeowners with those mortgages assumed that refinancing options were readily available, if only they chose to go that route. Somewhere along the line, the models used to price the various exotic securities stopped working. Where once the principal challenges of the cash flow models used to underwrite subprime mortgages were prepayments and refinancings, banks and other suppliers of the prior liquidity realized that default and foreclosure were more pressing modelling risks. There also came the recognition that the exotic securities were on their books and the books of many others. The ratings agencies began to act with the release of numerous reports on the underwriting of the high cost mortgages. Investors began to realize that they were somehow exposed but could not quite place where the exposure was nor quantify the amount. We're now in a situation where a couple hundred billion or so in wealth has disappeared from the books of banks and investment funds, with the lost equity value of property owned by homeowners with subprime mortgages perhaps also totaling in the hundreds of billions. The credit crunch/squeeze/illiquidity is affecting fairly obscure areas of finance like bond insurers who guaranteed payments on the various exotic securities and tax-exempt issuers of debt whose bonds are also insured by the same bond insurers. Once the dust settles, there may be only one or two bond insurers left with AAA/Aaa ratings, affecting the market values of investments of millions of investors. In the fall/winter of last year, there were ideas floated that might have isolated the impacts of subprime mortgages. Among the more noteworthy include the structured investment vehicle bailout fund and proposals to overhaul the mortgage underwriting and regulatory processes. Months have past, however, without any real changes aimed at limiting the subprime effects on the wider economy, except for the Fed which has lowered the funds rate by 225 basis points. It's not obvious if these actions have enabled distressed homeowners to refinance out of high cost mortgages. It might be futile if the hope is that the cuts will prevent a general decline or correction in residential property values nationwide. For now, it seems to be the faster, cheaper and cleaner approach than government-backed Letters/Contributions ocean@dumbagent.com no No