Credit Default Swaps - They just might bring down the House of Cards - Page 6 - Mercedes-Benz Forum

View Poll Results: Credit Default Swaps
I understand them fully. Scary huh. 2 20.00%
I have a vague idea what they're talking about 3 30.00%
Can we see some pics of boobs and cars now plz? 6 60.00%
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post #51 of 54 (permalink) Old 02-20-2008, 05:38 PM
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So.... Were you called "McBull" before 2006?
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Good question!
I've been McBear since 68. My economics have always been macro rather than micro so I have always been somewhat less than impressed with Dow gyrations, plus or minus.

But my global jumps into EWZ and SSE suggest that I am anything but a bear. I only "beared up" on the US market over the past few years as the US Economy showed severe strains in several sectors.

But, in reality, calling a tanking economy a tanking economy is not a "bear" response, it just means that I read the tea leaves different than some. Since I am not micro oriented I don't get distracted by market churn so some of the things that makes folks like Kudlow say that everything is sunshine don't hit my radar. It is just a different focus, not better or worse.

I called the housing industry back in 2006 based on foreclosure rates, default rates, number of houses on the market, how long they were listed and the staggering rise of the subprime issue. Also, from anecdotal evidence of flipping, abstract mortgage models such as zero principle and rising ARM issues in a flat economy. It helped that my masters thesis was on credit modeling.

The call on the rest of the financial sector was an extrapolation of the SupPrime mess as everyone had so intertwined and leveraged their debt instruments. That is not a call that requires either bull or bear mentality, just understanding fundamentals.

McBear,
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Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
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post #52 of 54 (permalink) Old 02-20-2008, 06:02 PM Thread Starter
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...calling a tanking economy a tanking economy is not a "bear" response, it just means that I read the tea leaves different than some. Since I am not micro oriented I don't get distracted by market churn so some of the things that makes folks like Kudlow say that everything is sunshine don't hit my radar. It is just a different focus, not better or worse.

I called the housing industry back in 2006 based on foreclosure rates, default rates, number of houses on the market, how long they were listed and the staggering rise of the subprime issue. Also, from anecdotal evidence of flipping, abstract mortgage models such as zero principle and rising ARM issues in a flat economy. It helped that my masters thesis was on credit modeling.

The call on the rest of the financial sector was an extrapolation of the SupPrime mess as everyone had so intertwined and leveraged their debt instruments. That is not a call that requires either bull or bear mentality, just understanding fundamentals.
All very sensible of course. And even the subprime spinout was widely discussed in the financial media as long ago as early 2005. You'd have to have stuck your head in the sand to have missed it. Of course, believing it is another matter, one requiring judgment.
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post #53 of 54 (permalink) Old 02-20-2008, 06:14 PM
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All very sensible of course. And even the subprime spinout was widely discussed in the financial media as long ago as early 2005. You'd have to have stuck your head in the sand to have missed it. Of course, believing it is another matter, one requiring judgment.
2005 is when I first started hearing the drums really beating on SubPrime. It was also the same time I was seeing folks that I had been working with to get their finances squared up bring in shiny new refi mortgages. I knew their income, outgo and all the ratios yet they were getting refinanced and bumped as if they were making 2X their income. That was what really got me digging into it.

We casually say that "they knew what they were signing" and "they had to sign 12 times" and "it's their fault...". I watched several families that had a combined education of 9th grade get pulled into these loans. They had NO IDEA what they were committed to. They just knew that their hospital bills went away and their credit card balance went to zero. The concept of ARM or floats or bridge was as alien to them as me trying to understand neurosurgery on the fly.

Most lost their houses. Only redeeming value is the three lending institutions that raided that part of Appalachia were closed and their officers are now in Federal prison for fraud. I helped with that part.

McBear,
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post #54 of 54 (permalink) Old 02-20-2008, 06:20 PM Thread Starter
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We casually say that "they knew what they were signing" and "they had to sign 12 times" and "it's their fault...". I watched several families that had a combined education of 9th grade get pulled into these loans. They had NO IDEA what they were committed to. They just knew that their hospital bills went away and their credit card balance went to zero. The concept of ARM or floats or bridge was as alien to them as me trying to understand neurosurgery on the fly.
Mind-blowing and yet all-too-credible. OTOH, I throw my hands up at the complexity of the IRS code each and every single year, yet I still file and pay my taxes

WTG on the prosecutions. There's some justice left after all.
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