tag:blogger.com,1999:blog-27697009.post5403950019342621806..comments2024-02-29T03:21:35.007-08:00Comments on The Great Depression of 2006 : Risk Has Left the BuildingJim in San Marcoshttp://www.blogger.com/profile/09435296419912935381noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-27697009.post-84862781190002303382010-04-28T07:16:30.556-07:002010-04-28T07:16:30.556-07:00Hi Frakrak
When I was saying that risk had left t...Hi Frakrak<br /><br />When I was saying that risk had left the building, I meant that the interest rates being charged for risky bonds was not figured into the actual interest rate. Greece's junk bonds were trading at 6% not 20%. Investors were buying insurance to cover the difference between the real spread. If we get rid of the insurance options, interest rates would reflect the true quality of the underlying debt. Crap is still crap, but you wouldn't be able to make money on the very obvious side bets.<br /><br />What I am suggesting, if the swaps and other forms of insurance were eliminated, interest rates might reflect the true risk.<br /><br />As you suggest when reality hits the fan, it will get messy<br /><br />Take care.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-82921618559965637202010-04-28T06:35:52.774-07:002010-04-28T06:35:52.774-07:00Hi Anon 1:20
I agree. In this case, AIG wrote a w...Hi Anon 1:20<br /><br />I agree. In this case, AIG wrote a whole bunch of policies on home loans and they ran out of money to pay claims. As long as the markets were going up this was added profit.<br /><br />I too wonder why they were bailed out. I can see bailing out a life insurance company, but not the local race track.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-87278436648195578582010-04-28T02:35:51.233-07:002010-04-28T02:35:51.233-07:00Jim I wonder why risk has left the building? There...Jim I wonder why risk has left the building? There’s nothing new under the sun, when it comes to making a buck, it has all been done before (reference to your last paragraph)! Just repeal, pair back the safety on legislation, dust off the book of tricks, and act two begins, same c@#p different century! <br /><br />It’s like someone hitting the “reset” button, every couple of decades, or musical chairs (the ones not seated comfortably when the music stops get a stint overseas fighting a war, or something similar), by the way I am hoping I get to keep sitting on my “assets” for a little longer!!<br /><br />Having what would amount to a financially challenged understanding of this, are you saying without assessing risk properly (?) in the underwriting of some of these deals, who would? <br /><br />How would an underwriter assess risk with some of the deals? Especially when they involve billions? And when a lot of underwriting happened right at the top of the curve? You would have to put some of these immense losses down to some very bad luck, something totally out of left field, for example a housing bubble imploding etc! Not that your housing market looked anything like imploding at the time right!<br />cheersfrakrakhttps://www.blogger.com/profile/10110027067402980842noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-28259719309874709882010-04-28T01:20:17.567-07:002010-04-28T01:20:17.567-07:00Jim,
I don't have a problem with a company th...Jim,<br /><br />I don't have a problem with a company that wants to sell insurance on anything as long as that company is not insured with my tax dollars. I still have no idea as to why AIG was bailed out. Did they have some sort of tacit agreement with the US beforehand?<br /><br />Risk I don't see ever leaving the building...it goes somewhere. If an insuance company want's to take on that risk, let them. Again that goes with the caveat that no one should step in and save them if they insured something they shouldn't have.<br /><br />I have no stocks, I don't know enough to invest. It is my opinion that most people are like me and should not have been in the market to begin with.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-11135057588770755572010-04-27T20:46:47.277-07:002010-04-27T20:46:47.277-07:00Good article. Perhaps people have some other thing...Good article. Perhaps people have some other things on their mind and choose not to focus on insurance.<br /> One idea would be to have a "Financial Open forum" post and see what everyone's thinking about.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-11047025153696239262010-04-27T19:50:47.674-07:002010-04-27T19:50:47.674-07:00Hi Rob
You're right, the lack of comments, ki...Hi Rob<br /><br />You're right, the lack of comments, kind of made me take a second look at what I wrote. Maybe it was the picture of Ben and Tim. It didn't quite fit, but I threw it in for humor.<br /><br />They've rated Greece's bonds as junk which is a start. It doesn't help the country much. It's ripe for a dictatorship.<br /><br />I have read similar thoughts on Democracy and the masses voting themselves entitlements. It has some truth to it, but I think that the way you destroy Democracy is when you destroy the savings of the middle class. The poor cannot afford idealistic political views.<br /><br />The taxes the rich and the middle class pay are to protect their wealth from confiscation by the poor. Our Democracy went through its greatest challenge during the Great Depression. The middle class had been trashed.<br /><br />The thing not realized this time around, is that we borrowed an awful lot of this money from foreigners. They are going to feel a lot more pain than we do.<br /><br />I think we are rapidly approaching reality and I don't think it will be as bad as I have projected it to be. A pessimist is never disappointed, only pleasantly surprised.<br /><br />Thank you for making a noise in the forest, I know that I am not alone. Take care.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.com