Posts filed under “Really, really bad calls”

Revisiting “The Obama Economy”

The rhetoric you use to make your point says a lot about a) the strength of your argument; 2) you personally.

There is no better example of this then some of the OpEds about the current and past Presidents. They are rife with bad logic, political animus, and sheer partisanship. I don’t care id they are trashing George W. Bush or Barack H. Obama, they can be revealing about their writer.

The issue isn’t whether they are right or wrong; Hell, I’m wrong all the time. It is whether they are an honest broker of information — or deceptive weasels.

For example, on March 3, 2009 — 1 year ago — the WSJ OPEd blamed the market collapse on the newly elected President. They argued that the Dow was issuing a referendum on Obama:

“As the Dow keeps dropping, the President is running out of people to blame. As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama’s policies have become part of the economy’s problem.”

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Since that column, the Dow has rallied near 70%. Surely, if Obama was to blame for the Dow’s collapse during his first 5 weeks in office, then he most certainly must deserves an equal amount of credit for the Dow’s stupendous performance a year later?!? Somehow, the WSJ has never got around to giving a parallel credit equal to the blame they doled out.

Of course, blaming any President for a market rally or fall is a mug’s game. Market’s go up and down due to many factors; President’s have far less control over the economy than is widely believed.

Draw your own conclusions about this WSJ OpEd writer and their moral fiber.

Whenever you find an article or OpEd that is unusually strident or one-sided or misleading, cut & paste it into a calendar program . Diary it for an extended period of time. You may find it quite amusing to go back and reread a year or so later. I suggest you do it with whatever paper or pundit (or blog) you prefer.

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Source:
The Obama Economy
WSJ OpEd
MARCH 3, 2009
http://online.wsj.com/article/SB123604419092515347.html

Category: Financial Press, Really, really bad calls, Weblogs

CNBC Shoutfest

Its as if Charlie Gasparino never left: Be sure to see the discussion — more of a yelling match — of Predatory Lending on CNBC. My issue isn’t the opinions of the various parties, its the unchecked ignorance that takes arrogant pride in ignoring facts. Its borderline unwatchable. Kudos to Janet Tavakoli for politely explaining…Read More

Category: Financial Press, Really, really bad calls, Television

Harry Markopolos, the Madoff whistleblower whose new book, No One Would Listen is out tomorrow, had a brief interview in the Sunday NYT magazine. This quote leapt out at me: > Q: Where did you learn about finance? A: You don’t learn much in grad school. Half the formulas they teach you are false. It’s…Read More

Category: Really, really bad calls

Treasury Looks to Mandate Foreclosure Abatements, Mortgage Mods

One of the most disappointing policy initiatives of the Administration to date has been the expensive and ineffective attempts to fight foreclosures at all costs. The net impact of this is to artificially prop up home prices and reduce the number of real estate transactions. In the high foreclosures regions (California, South Florida, Arizona, Las…Read More

Category: Credit, Legal, Politics, Really, really bad calls

Deficit Hawks Want New (or double dip) Recession

One of the oddest things to come out of the entire credit crisis, recession and muddling recovery has been the sudden re-emergence of deficit hawks. While a few honest deficit hawks are out there — the Peterson Institute is a good example of a group looking at long term structural issues, not immediate fiscal concerns…Read More

Category: Economy, Really, really bad calls, Taxes and Policy

Officer Barbrady on Ayn Rand

How LOL is this: South Park Studios via Objectless Observations

Category: Humor, Really, really bad calls, Television, Weekend

Dynamite Prize in Economics

I love this: The Dynamite Prize in Economics is to be awarded to the three economists who contributed most to enabling the Global Financial Collapse (GFC), or more figuratively, to the three economists who contributed most to blowing up the global economy. Here’s the short list: Fischer Black and Myron Scholes Eugene Fama Milton Friedman…Read More

Category: Economy, Really, really bad calls

Causation Analysis: What “But Fors” Caused the Crisis ?

They’re back!

The usual crowd of ne’er-do-wells are seeking to divert attention from their own roles in the crisis, and shift blame elsewhere. These people make up a big chunk of the Its All Fannie’s Fault! crew. By muddying the waters, they hope to avoid retribution for their own roles in what occurred.  As the mid-term election approaches, we should expect to hear more from this crowd.

The reality of crisis causation is far more complex and nuanced. Looking at the many factors that independently contributed to the collapse, and prioritizing them by degree of causation is not easy. A sophisticated approach is required to separate the prime and secondary factors.

Rather, than just repeat my list of factors what were the causal factors, today I want to try a different approach. Let’s do a “Causation Analysis” of the biggest factors to see if we can determine not just the various elements that contributed to the credit collapse, but which factors actually caused it to occur and what merely exacerbated the collapse, making it worse.

Understand that this is a theoretical discussion based on counter-factuals — what is likely to have occurred if various elements leading up to the crisis were different. We are trying to discern the differences between primary and secondary factors, separating the causes from the exacerbators.

Whenever someone asserts as a cause an event or force relative to a particular outcome, you should always ask: “Is this a “BUT FOR cause of that outcome?” In terms of a specific result or outcome, “But for” this factor, how would the outcome have changed? Would the result have been the same or different?

My top 3 list of crisis “BUT FORs” are:

1) Ultra low rates;
2) Unregulated, non bank, subprime lenders;
3) Ratings agencies slapping AAA on junk paper.

Why are these “But Fors?” But for these things occurring, the crisis would not have happened:

-If it wasn’t for ultra low rates, the housing boom would likely have been much more modest; further, bond managers would not have been scrambling for yield, and searching for alternative products to low yielding Treasuries;

-If it wasn’t for the sub-prime lenders, the credit bubble would not have inflated; further, millions of unqualified borrowers would not have been able to purchase homes they could not afford;

-If it wasn’t for the ratings agency fraud, the enormous market for this high yielding junk paper — mislabeled as AAA — would not have existed; further, the primary purchasers were firms that were only permitted to buy investment grade bonds. No A+ or better rating, no sale.

Hence, these factors are huge causative elements — BUT FOR them, there is no boom and bust, no crisis and collapse. Bond managers could not have owned all of these securitized sub-prime mortgages; the credit default swap market would have been much smaller, perhaps 1/10 its size; Sovereign wealth funds around the world could not have purchased all this bad paper; Iceland does not collapse. That is these are the big 3 — why I label them the prime cause of the crisis.

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Category: Bailouts, Real Estate, Really, really bad calls, Regulation

The Original Wave of RE Securitizations

Great piece in Friday’s Times by Floyd Norris on an earlier boom and bust in securitized mortgages: The 1920s and 30s! “Real estate securitization was one of the great innovations in finance in the last quarter-century. In an unprecedented way, it allowed vast sums of money to go into the real estate market from people…Read More

Category: Derivatives, Real Estate, Really, really bad calls

WSJ Jumps the Shark

The politicalization of the WSJ has moved to a new and more risky phase. The paper is now in danger of being a money loser — not for its investors (tho that has already happened), but for those traders who read its content. It used to be that articles on the Market or specific companies…Read More

Category: Financial Press, Politics, Really, really bad calls