Monday, Jul 23, 2007
At last! An explanation for the uneducated!
The Market Oracle: Trouble in Hedgefundistan: "Its gonna get a lot worse"
Mike Whitney explains in simple to understand language what he thinks of hedgfunds and why. He concludes with "The markets are now perfectly poised for a full-system breakdown. FDIC Chairman Sheila Bair expects a CDO time bomb. She summed it up like this: 'Its going to get worse before it gets better. How much worse, I don't know.'"
Great explanation for those of us who never studied all this stuff at Uni. What do you knowledeable guys think?
Posted by eyeore @ 06:49 AM (303 views) Add Comment
16 Comments
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1. denzil said...
Good read this one. Good find eyeore.
This is the one for the bears for this article and really paints a picture of financial armageddon.
I really liked this, "Serial bubble-maker Greenspan is to finance-capitalism what Wrigley is to chewing gum."
It's seem that the fudged inflation figures are an issue in the US too with, "Many analysts now calculate that inflation is running at roughly 13%" whilst on the other hand consumer rose last month by a whopping 12%.
Oh my gawd. Something has to pop or should I say go bang.
2. tyrellcorporation said...
SHITE! I wonder whether to move my Icesave cash into a big UK high-street bank. Any thoughts?
3. the bald man said...
If half of the analysis is correct then the fall out will be horrendous. Looks like someone will have to go cap in hand to the Chinese.
4. the bald man said...
I would suggest the use of excess leverage is the real source of the problems. Exactly the same in the housing market.
5. david20040_0 said...
Tyrell what is exactly wrong with Icesave? I thought they aere safe and opened an account.
6. tyrellcorporation said...
David... it just gives me the willies a bit when I read articles like this. Apparently Icelandic banks are heavily exposed to the carry trade AND hedge funds... they do after all make or export very little (apart from slightly mad pop-stars!).
7. royston said...
When the tide goes out this time, all boats are going to be beached - even lifeboats!
8. uncle tom said...
1) Interesting piece - typical American rant! Very hard to know exactly what to believe, but the risk of a major financial crash has to be taken very seriously now.
2) Steer well clear of Iceland - there's a lot of funny stuff going on there, thanks (I think) to lax scrutiny - the risk of a wipe-out for those who've invested is very real.
9. Algenon said...
Tyrell - bit like the UK then ... (re exports from Iceland!)
10. mrmickey said...
This is a good article but I find with the internet and the general media that were being bombarded by so much data and opinion it's difficult to know what to believe. I do think that nobody really knows what the hell is going on out there and if the global financial system does implode it will be smashed beyond repair as nobody knows how it really works in the first place.
11. dohousescrashinthewoods said...
Ok, this is coplete rant, bordering on the slightly nutty-professor-up-a-tree variety. It's a colourful caricature.. however, a caricature is designed to portray an (albeit exaggerated for fun) image of something real.
Looking behind the fun read (that vividly illustrates something about the world we're in) I see one very serious point:
Diversification of risk - the practice of selling risk around the markets so it is split up into lots of little pieces that can't bring down oe institution. It's been a sothing mantra for some time, but consider this - it doesn't alter "risk appetite".
What am I saying? quite simply this: that if you can diversify your risk down to 1%, but haven't changed your appetite, you'll take on 100 times as much risk - 10,000% in all.
Put another way, the soothing idea is that the muck gets spread thinly instead of piling up in one place, but if you spread it thinly, you have plenty of room in that "one place" to keep spreading. In the end, the whole area is covered to the same depth, instead of just one place. (Remember that potentially everyone is spreading it to each other)
That is the scenario in which I can see this article having horiffic validity.
12. david20040_0 said...
Tyrell two of the highest interest rates being offered in the UK at present are by non UK banks.
Icesave run by Landsbanki and ICICI of India.
ICICI does have a very small physical presence here.
Hisave are offering me 6.2% and ICICI are giving me 6.3%.
I left Halifax because they would only give me 5.05%.
Should I take my money out of these banks and put it in UK banks again?
13. uncle tom said...
David..
..Yes! you are chasing a tiny premium on returns without costing in the risk of losing everything..!
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