Posts filed under “Philosophy”
Here is something that you may not think about often enough: Taking losses.
Its something that every rookie trader must learn to do — and all of the TBTF banks refuse to do. Even sovereign nations seem unwilling to accept this simple fact of financial life.
There will be losses. How you handle them determines your fortune, your fate and your future.
Seeing how people handle losses is revealing of their character and integrity. Hiding losses is what rogue traders do. Its also what rogue banks do, and apparently, rogue nations.
$2.3 Billion in losses hidden from UBS sights by a rogue trader is chicken feed. But ponder how many $100s of billions of dollars in mortgage losses are hidden from view? The real rogues are America’s largest banks, and their enablers in Congress. .
When the TBTF banks (via their purchased Congressman) forced the Financial Accounting Standards Board to pass a rule allowing them to hide their mortgage losses — FASB 157 — it showed the dishonest nature of these entities. It was revealing of the lack of integrity of all of the institutions involved — from Congress to the banks to FASB.
When Bear Stearns first began to wobble in 2007, the initial error in this era of bailouts was in rescuing their bondholders. Instead, in 2008, they should have been forced to take the loss.
Its the same for creditors of Citi, Bank of America et. al. — instead of rescue packages, their creditors should have had to take the loss.
Mortgage delinquencies growing? More and more defaults in the pipeline? We can extend & pretend, or we can take the loss.
Note that via the FDIC, some bank lenders did take the loss. Washington Mutual’s collapse led it to being bought by JPM. Wells Fargo picked up Wachovia. Other examples abound, In each case where losses were forced to be realized, we ended up with a healthier few banks, and no moral hazard.
Zombie banks get created when they do not take the loss.
Now we have the European crisis, wherein all of the parties involved refuse to (say it with me) take the loss.
Greek debt piling up? You can restructure, renegotiate, reneg, or you can take the loss. Portugal’s balance sheet a problem? Well, the ECB can kick the can down the road, or they can force lenders to take the loss.
The model for not taking the loss has to be Japan. Look at their stock market since 1989 and you will see the net result of not taking the loss. The Japanese have suffered through lost decades as a result of their refusal to take any write-downs, propping up their Keiretsu.
Until we purge the bad debt from the financial system, we will be stuck with a long and painful de-leveraging.
Please, won’t someone in Washington or Brussels or Tokyo understand the importance of this simple trading rule? Take The Loss already!
Last week, I lamented that the Bloomberg 50 was a disappointingly obvious list (the event was quite good, however). Following that (Meh!) complaint, I asked readers who was their most influential managers, thinkers, traders and strategists — who impacted their trading, thinking and investment process more than the rest of the chattering classes. For obvious…Read More
Persuasion is clearly a sort of demonstration, since we are most fully persuaded when we consider a thing to have been demonstrated Of the modes of persuasion furnished by the spoken word there are three kinds. Ethos: Persuasion is achieved by the speaker’s personal character when the speech is so spoken as to make us…Read More
In the Think Tank today, John Mauldin writes about Social Security, calling it a “Catastrophic Success.” John believes SS is a Ponzi scheme, and we disagree. He comes from a different country than I do — John lives in Texas, while I live on a small island off the East Coast of America — two completely…Read More
Conservatives and Liberals Agree: Unparalleled Levels of Inequality Is Killing Our Economy and Society Leading economists agree that rampant inequality leads to unstable economies and depressions, and makes the middle and lower classes poorer. While the stereotype is that liberals care about inequality and conservatives don’t, that is actually a myth. As Canada’s conservative National…Read More
This morning, I got to listen to a (too short) discussion with hedge fund manager Ray Dalio of Bridgewater Associates at the Bloomberg Market 50 Summit (video here). Ray Dalio is a fascinating guy . . . he has what some people describe as a very idiosyncratic approach, but I find it logical and intelligent….Read More
Yesterday, I lamented the missed opportunity of the Bloomberg 50, a predictable list featuring the usual suspects. It was your grandpa’s list. Let’s takes this up a notch — change the 5 categories of Meh! to something worthwhile, and see what sort of list you, dear readers, can help put together: Asset Managers Technicians/Analysts Researchers/Strategists…Read More
Hat tip Brainpicker
Speakers in order of appearance:
1. Lawrence Krauss, World-Renowned Physicist
2. Robert Coleman Richardson, Nobel Laureate in Physics
3. Richard Feynman, World-Renowned Physicist, Nobel Laureate in Physics
4. Simon Blackburn, Cambridge Professor of Philosophy
5. Colin Blakemore, World-Renowned Oxford Professor of Neuroscience
6. Steven Pinker, World-Renowned Harvard Professor of Psychology
7. Alan Guth, World-Renowned MIT Professor of Physics
8. Noam Chomsky, World-Renowned MIT Professor of Linguistics
9. Nicolaas Bloembergen, Nobel Laureate in Physics
10. Peter Atkins, World-Renowned Oxford Professor of Chemistry
11. Oliver Sacks, World-Renowned Neurologist, Columbia University
12. Lord Martin Rees, Astronomer Royal
13. Sir John Gurdon, Pioneering Developmental Biologist, Cambridge
14. Sir Bertrand Russell, World-Renowned Philosopher, Nobel Laureate
15. Stephen Hawking, World-Renowned Cambridge Theoretical Physicist
16. Riccardo Giacconi, Nobel Laureate in Physics
17. Ned Block, NYU Professor of Philosophy
18. Gerard ‘t Hooft, Nobel Laureate in Physics
19. Marcus du Sautoy, Oxford Professor of Mathematics
20. James Watson, Co-discoverer of DNA, Nobel Laureate
21. Colin McGinn, Professor of Philosophy, Miami University
22. Sir Patrick Bateson, Cambridge Professor of Ethology
23. Sir David Attenborough, World-Renowned Broadcaster and Naturalist
24. Martinus Veltman, Nobel Laureate in Physics
25. Pascal Boyer, Professor of Anthropology
26. Partha Dasgupta, Cambridge Professor of Economics
27. AC Grayling, Birkbeck Professor of Philosophy
28. Ivar Giaever, Nobel Laureate in Physics
29. John Searle, Berkeley Professor of Philosophy
30. Brian Cox, Particle Physicist (Large Hadron Collider, CERN)
31. Herbert Kroemer, Nobel Laureate in Physics
32. Rebecca Goldstein, Professor of Philosophy
33. Michael Tooley, Professor of Philosophy, Colorado
34. Sir Harold Kroto, Nobel Laureate in Chemistry
35. Leonard Susskind, Stanford Professor of Theoretical Physics
36. Quentin Skinner, Professor of History (Cambridge)
37. Theodor W. Hänsch, Nobel Laureate in Physics
38. Mark Balaguer, CSU Professor of Philosophy
39. Richard Ernst, Nobel Laureate in Chemistry
40. Alan Macfarlane, Cambridge Professor of Anthropology
41. Professor Neil deGrasse Tyson, Princeton Research Scientist
42. Douglas Osheroff, Nobel Laureate in Physics
43. Hubert Dreyfus, Berkeley Professor of Philosophy
44. Lord Colin Renfrew, World-Renowned Archaeologist, Cambridge
45. Carl Sagan, World-Renowned Astronomer
46. Peter Singer, World-Renowned Bioethicist, Princeton
47. Rudolph Marcus, Nobel Laureate in Chemistry
48. Robert Foley, Cambridge Professor of Human Evolution
49. Daniel Dennett, Tufts Professor of Philosophy
50. Steven Weinberg, Nobel Laureate in Physics