Saturday, August 04, 2007

LTCM is really getting back at the Bear

 Me, I'm looking at GKA-GKE for some Bond ETFs.  Fed's gotta make money too.

July 20 (Bloomberg) -- Federal Reserve Bank of St. Louis President William Poole said investors who lost money buying subprime mortgage-linked securities got what they deserved.

Source: Worldwide

Apparently between $50 - $100 BILLION is a "fairly significant" number in Bernanke speak.   Somehow I think he's right, since Kuwait's GDP is just a bit shy of $100B.  Perhaps "fairly significant" is too strong?

Apparently 15 million people losing their homes is a "slight decline" in the housing market.  I guess that's only a 5% loss in financial terms, if there's 301 million people in the US.  But just like derivatives, the people that lose their homes will send repercussions onto the rest of the population.  Guess this would be a good time to rent out property.

Apparently 20 million people have lost their homes in Asia over the last two months due to flooding.  That's probably less than 5% of the total population.  Sound like something you would bet on in the markets?

"The feeling I have today is that of watching a very slow motion train wreck," wrote Jeremy Grantham, chairman of GMO LLC, which manages about $150 billion in assets.

That doesn't really instill a whole lot of confidence in me.  As my flight instructor, a French Canadian Air Force pilot, told me while we were flying last month, "If we crash, make sure you aim for ze trees and not ze water.  Ze water, it  is like concrete.  In ze trees, we will probably jus' get knocked out and maybe break some arms.  And somebodee will come looking for us, eventuallee."

Glad I'm not afraid of flying.

"Some observers have viewed the large expansion of hedge funds as a rising danger to financial stability, requiring additional regulation and Fed readiness to intervene. I myself believe the dangers of systemic problems from hedge fund failures are vastly overrated. The hedge fund industry is indeed large but it is also highly diverse and competitive. Many and perhaps most of the large positions taken by individual firms have other hedge funds on the opposite side of the transactions. I trust normal market mechanisms to handle any problems that might arise."

Bill Poole, November 16, 2006.

Sounds to me like a father telling his drowning son to "swim, idiot!" instead of tossing him a life preserver, or getting his feet wet.

In the words of the Fed, "Bear Stearns, bite me."

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