Sunday, September 14, 2008

The times

Just cannot stay away from the financial mess, it's so pervasive today. But, today's events relate to several issues, such as leverage, that have been discussed in this blog and in truth engineering.

For one, Reuters reports that Lehman has assets of $600B that are leveraged off of $30B of equity. The fact is that a 5% decline in asset value eats up the equity. So, then what have we? Froth!

The trouble is, folks, that everyone is wrapped up in this idiocy that seems to get credence that the players are from the top-notch schools and are supposedly of the highest caliber. Well, it's really an addiction that we've allowed to persist. And, a stable economy cannot rest upon this type of madness.

Too, Reuters reports a special trading session today to allow those whose derivatives involvement is shaky due to the pending Lehman failure to get themselves unburdened. Or, eat some known loss rather than face even more of a hole. Emergency, it says, indeed!!

All of this was preventable; a more sane set of practices is definitely possible.


01/18/2009 - We even need to look at why we need finance.

Modified: 01/18/2009

1 comment:

Anonymous said...

Probably because they don't have enough to do that is purposeful (too much time on their hands) or because they want to make more money (churning and other concepts apply) or because they can (yes, the modern age allows an unlimited amount of computational and mathematical modeling - without any real basis, though, folks), the financial types have come up with a smorgasbord of instruments, many of which are suspect: auction-rated securities, credit default swaps, triparty repos, ... The list goes on and on.

At the same time that this mess developed, the government has been lax in oversight. Why? Alan and now Ben have said that they don't want to squash the creativity. Huh? Someone is messing up our box (crapping, in other words), and we have to like it.

Too, Alan and Ben say, oh, live with it, just clean up the mess.

So, what we have is that the public, taxpayers, have to clean up the diapers of the financial set. Sheesh!! They are supposedly the cream of the crop. Hah!!!