King of the Birds, Lord of the Skies
Gather ye rose buds while ye may, old time is still a flying;
and this same rose that you see today, tomorrow will be dying.
CarpeDiem: Seize the Day!
- Dead Poets Society
Friday, August 24, 2007
7 Iron
This is probably the only moment where you get to see EagleBoy up, close & personal. So, how's my swing?
Express Rather than Impress
Learn to express rather than impress. Expressing evokes a me too attitude while impressing evokes a so what attitude.
- E James Rohn
- E James Rohn
Thursday, August 23, 2007
Normal Reaction
One day when the teacher walked to the black board, she noticed someone handwritten the word 'penis' in tiny small letters. She turned around, scanned the class looking for the guilty face. Finding none, she quickly erased it, and began her class.
The next day she went into the room, and she saw, in larger letters, the word 'penis' again on the black board. Again, she looked around in vain for the culprit, but found none, so she proceeded with the day's lesson.
Every morning, for about a week, she went into the classroom and found the same word written on the board, each day's word larger than the previous day's word. Finally, one day, she walked in, expecting to be greeted by the same word on the board, but instead, found the words,
"The more you rub it, the bigger it gets!"
The next day she went into the room, and she saw, in larger letters, the word 'penis' again on the black board. Again, she looked around in vain for the culprit, but found none, so she proceeded with the day's lesson.
Every morning, for about a week, she went into the classroom and found the same word written on the board, each day's word larger than the previous day's word. Finally, one day, she walked in, expecting to be greeted by the same word on the board, but instead, found the words,
"The more you rub it, the bigger it gets!"
The Subprime Situation Report II
As I mentioned earlier, the coming reset of outstanding mortgages will definitely put tremendous pressure on the overall US economy and the financial markets all around the world. Justification for this madness was the dispersal of risk. What do I mean by that?
As you will have probably read elsewhere, these loans were sliced and diced and repackaged and sold as mortgage-backed bonds. They were rated by Moody’s and Standard & Poor’s, often as high as AAA. These CDOs, as they are called, were then sold to investors such as hedge funds. These toxic investments are now spread throughout the world causing immeasurable contamination. But that's not all. What has made the whole situation so much worse is the excessive leverage!
Leverages are everywhere. To give an example of this, the Goldman Sachs funds that have been in great difficulty were leveraged by a factor of eight to ten times and therein lies the rub. Goldman Sachs, who deny bailing the fund out, have nonetheless injected $2 billion of their own money and persuaded outsiders to contribute a further billion, in so doing, have reduced the gearing to 3.5 times – still very rich!
What astounds us is that so many of the participants have been surprised at what has happened. They have the brightest brains and the most modern of computer systems. These computer systems were mentioned in a recent article in the Financial Times by GillianTett and Anuj Gangahar; they said that Goldman Sachs, renowned as one of the savviest players on Wall Street, had to admit that their flagship global equity fund lost over 30% of its value in just one week because of problems with its trading strategies created by computer models. In particular, the computers had failed to foresee recent market movements to such a degree that they labelled them a “25 – standard deviation event”; something that only happens once every 100,000 years or more, yet very recently several occurred on consecutive days!
The conclusion one must draw is that in some fashion or another this extraordinarily, but predictable, chain of events that could only end in disaster are like alchemy, transformed when fed into complicated mathematical equations and crunched by computers to a one in 100,000 years or more probability of collapse. The fact that these computer programs have control over such huge amounts of money should send shivers through the system and bring a smile to Nassim Taleb’s face. Who is he?
Nassim Taleb makes a living out of betting on such rare events. He is famous for his books “Fooled by Randomness” and subsequently “The Black Swan”. He uses the symbolic “black swan” as an example of a rare event and explains that just because you haven’t seen a black swan doesn’t mean that one does not exist, as indeed they do!
So, don't say I never say okay. Prepare to meet Ms Black Swan...soon.
As you will have probably read elsewhere, these loans were sliced and diced and repackaged and sold as mortgage-backed bonds. They were rated by Moody’s and Standard & Poor’s, often as high as AAA. These CDOs, as they are called, were then sold to investors such as hedge funds. These toxic investments are now spread throughout the world causing immeasurable contamination. But that's not all. What has made the whole situation so much worse is the excessive leverage!
Leverages are everywhere. To give an example of this, the Goldman Sachs funds that have been in great difficulty were leveraged by a factor of eight to ten times and therein lies the rub. Goldman Sachs, who deny bailing the fund out, have nonetheless injected $2 billion of their own money and persuaded outsiders to contribute a further billion, in so doing, have reduced the gearing to 3.5 times – still very rich!
What astounds us is that so many of the participants have been surprised at what has happened. They have the brightest brains and the most modern of computer systems. These computer systems were mentioned in a recent article in the Financial Times by GillianTett and Anuj Gangahar; they said that Goldman Sachs, renowned as one of the savviest players on Wall Street, had to admit that their flagship global equity fund lost over 30% of its value in just one week because of problems with its trading strategies created by computer models. In particular, the computers had failed to foresee recent market movements to such a degree that they labelled them a “25 – standard deviation event”; something that only happens once every 100,000 years or more, yet very recently several occurred on consecutive days!
The conclusion one must draw is that in some fashion or another this extraordinarily, but predictable, chain of events that could only end in disaster are like alchemy, transformed when fed into complicated mathematical equations and crunched by computers to a one in 100,000 years or more probability of collapse. The fact that these computer programs have control over such huge amounts of money should send shivers through the system and bring a smile to Nassim Taleb’s face. Who is he?
Nassim Taleb makes a living out of betting on such rare events. He is famous for his books “Fooled by Randomness” and subsequently “The Black Swan”. He uses the symbolic “black swan” as an example of a rare event and explains that just because you haven’t seen a black swan doesn’t mean that one does not exist, as indeed they do!
So, don't say I never say okay. Prepare to meet Ms Black Swan...soon.
黑色幽默 - 周杰伦
歌曲：黑色幽默
歌手：周杰伦
专辑：the one
难过是因为闷了很久
是因为想了太多
是心理起了作用
你说苦笑常常陪着你
在一起有点勉强
该不该现在休了我
不想太多
我想一定是我
听错弄错搞错拜托
我想是你的脑袋有问题
随便说说
其实我早已经
猜透看透不想多说
只是我怕眼泪撑不住
不懂你的黑色幽默
想通却又再考倒我
说散你想很久了吧
我不想拆穿你
当作是你开的玩笑
想通却又再考倒我
说散你想很久了吧
败给你的黑色幽默
我的认真败给
黑色幽默
歌手：周杰伦
专辑：the one
难过是因为闷了很久
是因为想了太多
是心理起了作用
你说苦笑常常陪着你
在一起有点勉强
该不该现在休了我
不想太多
我想一定是我
听错弄错搞错拜托
我想是你的脑袋有问题
随便说说
其实我早已经
猜透看透不想多说
只是我怕眼泪撑不住
不懂你的黑色幽默
想通却又再考倒我
说散你想很久了吧
我不想拆穿你
当作是你开的玩笑
想通却又再考倒我
说散你想很久了吧
败给你的黑色幽默
我的认真败给
黑色幽默
Wednesday, August 22, 2007
The Subprime Situation Report
Six months ago at about the time the housing market in America peaked, we learned that subprime mortgages represented 13% of the total of their mortgage stock – quite incredible!
Financial institutions knowingly lent, at artificially “low start” rates of interest, 100% mortgages to people with bad credit records; not checking on anything, accepting the word of the applicant about income and all other financial matters. Given the figures quoted above, they did this on a massive scale. This would be understandable if it was the result of rogue bankers but it was not. It was a deliberate thought through business plan!
The rates of interest initially charged for many of these loans were not the correct rates but “teaser” rates - in other words, a lower rate of interest, well below the market, was charged with the unpaid amount accumulating to the debt. At a certain predetermined date, these mortgages are reset from when the full payment has to be made, not just on the original loan but also the accumulated amount of any unpaid interest.
The fact that these loans were unaffordable in the first place and even more unaffordable following the resetting, should come as no surprise. Huge numbers of these loans are still scheduled to be reset over the next few months which must lead to massive additional delinquencies. Listed below are figures indicating the size of the potential fold-up, starting from the current month of August and the numbers are billions! If you want to know why the market is running extra scared, one reason is the knowledge of this huge poisonous cloud hanging over it. Here we go:
August 2007 - US$52bn
September - US$58bn
October - US$55 bn
November - US$52bn
December - US$58bn
January 2008 - US$80bn
February - US$88bn
March - US$110bn
April - US$92bn
May - US$76bn
June - US$75bn
July - US$50bn
I suggest we adhere to a well-trusted motto from our good-old scout friend: "Be Prepared"!
Financial institutions knowingly lent, at artificially “low start” rates of interest, 100% mortgages to people with bad credit records; not checking on anything, accepting the word of the applicant about income and all other financial matters. Given the figures quoted above, they did this on a massive scale. This would be understandable if it was the result of rogue bankers but it was not. It was a deliberate thought through business plan!
The rates of interest initially charged for many of these loans were not the correct rates but “teaser” rates - in other words, a lower rate of interest, well below the market, was charged with the unpaid amount accumulating to the debt. At a certain predetermined date, these mortgages are reset from when the full payment has to be made, not just on the original loan but also the accumulated amount of any unpaid interest.
The fact that these loans were unaffordable in the first place and even more unaffordable following the resetting, should come as no surprise. Huge numbers of these loans are still scheduled to be reset over the next few months which must lead to massive additional delinquencies. Listed below are figures indicating the size of the potential fold-up, starting from the current month of August and the numbers are billions! If you want to know why the market is running extra scared, one reason is the knowledge of this huge poisonous cloud hanging over it. Here we go:
August 2007 - US$52bn
September - US$58bn
October - US$55 bn
November - US$52bn
December - US$58bn
January 2008 - US$80bn
February - US$88bn
March - US$110bn
April - US$92bn
May - US$76bn
June - US$75bn
July - US$50bn
I suggest we adhere to a well-trusted motto from our good-old scout friend: "Be Prepared"!
Words
Your own words are the bricks and mortar of the dreams you want to realize. Your words are the greatest power you have. The words you choose and the use establish the life you experience.
Sonia Croquette
Sonia Croquette
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