Two Weesk Of Linsk
October 8, 2013 11 Comments
London Whale trading scandal legacy is requirement banks disclose their exposure details. I’m skeptical that ‘transparency’ as such is the solution (if there is a problem). Quick, it’s early 2012 in Alternative-Universe-With-Full-Bank-Transparency and you pick up the ‘Full Positions Of All The Banks’ section of the paper and read that JP Morgan has, oh, -$20mm dv01 exposure to IG9 10y. Ok, so what? Is that bad? Good? Do you sell their stock – or buy buy buy? All depends on whether you like that trade. (Some people evidently did!) So tell me, what was a priori wrong with that trade? If we can’t say in advance, then how does this lead to healthy pressure on JP Morgan exactly? We only know – or think we know – that it was a bad trade with hindsight. What made it a bad trade? Because it went against them. How/why did it go against them? Because they got squeezed. Squeezed by who? Squeezed by hedge funds leaking the position to their friends at Bloomberg News, thus publicizing the position – thereby making it, one might say, transparent – leading to (what I was the first & still only to identify as) a baptists-bootleggers dynamic. That’s why JP Morgan lost money on that trade. If that hadn’t happened, I’m pretty sure the trade would have actually just made them money over the longer term and we wouldn’t be talking about this. If you add that up you’ll see that in a way, ‘transparency’ in the form of everyone learning about a bank’s positioning was the problem, not the solution. So, more secrecy then!? Just saying.
Calculated Risk on Mortgages, Eminent domain and Richmond
Inflation is correlated with laughter at Fed meetings
The extrapolation fallacy in popular TV – if smart is good then GENIUS must be excellent
Ritholtz’s ideas for Investing Around ObamaCare.
Someone left a PhD program and wrote one of those self-important open letters, about how academics sucks.
Boudreaux explains how data on ‘health care costs’ can be misleading and leave things out. I’m looking at you, all the people who do cross-country comparisons and insist that ‘all other countries’ (=all Western countries, or something) do it cheaper.
No, the Fall of Lehman Didn’t Cause the Financial Crisis. Am I really linking favorably to not one but two Ritholtz posts here? It would seem so.
Kid Dynamite is (one of) the guy(s) getting screwed by ACA. What’s puzzling is why he ever thought there was a snowball’s chance in hell that he wouldn’t be (if that’s what he thought). I’m not saying he falls into this category, but there do seem to be a lot of people who assumed Obamacare would help them based on absolutely nothing. “It’s some sort of National Health Care Thing™, and Obama’s a nice lanky caring guy with a (D) after his name, so whatever the details exactly, it’ll totally help me!” thought a lot of people who are and always were intended to get screwed over from the get-go. I don’t get it. And a lot of those people are supposedly part of the ‘reality-based community’ too.
Ten states where Obamacare wipes out existing health care plans. Here’s what’s really perverse. Step 1: ACA gets people kicked off their health plans. Step 2: Those people, facing fines and not being insured otherwise, basically have to (not by choice) try their luck on the
exchange website. Step 3: They get a least-bad quote and press OK. Step 4: Lefties go “Look how many have signed up for Obamacare! They love it! And you want to repeal it Rethugs? I guess you want those people go to without insurance!” Utter BS all around. On one level, it’s functioning as a protection racket.
The Lion goes to diversity training. Lists some silver linings.
Seth Roberts on failed predictions in finance and climate
Cockblocked by Redistribution. Seems to work against my sex-based theory of politics according to which the motive of socialists is to get easy sex. Or at least, it indicates that their strategy has backfired.
I’m not sure there’s such a thing as ‘settled law’ or why everyone’s suddenly speaking as if there is (ok scratch that, I know why people are doing that), but even if there is, here’s a good argument as to why Obamacare ain’t it.
Unintended consequences of ‘green energy’ programs. Unintended, perhaps, but entirely predictable.
How the Debt Ceiling Will be Resolved. Can neither endorse nor refute that scenario.
Four Reasons Debt Ceiling Breach Means Default. Actually, almost none of those are reasons that a debt ceiling breach means default. One of them is ‘it’s illegal’ (so?). Another one boils down to saying that it would mean having to juggle cashflows and balances around (as if they don’t do this on a regular basis). Sigh. I’m getting tired of this; can I just say Yglesias doesn’t know what he’s talking about & move on? Oh wait, not before I comment on this:
Yes, bondholders would still get their money. But nobody in the future could seriously treat U.S. government debt as a risk-free information-insensitive asset. It would become just another speculative play whose odds of working out would depend on your assessment of the ups and downs of American politics.
Hmm. “Yes, bondholders would still get their money”?? – the article just imploded. And forgive me but why is it automatically supposed to be a good thing to have people treat U.S. government debt as ‘risk-free information-insensitive assets’? What would be so horrible about buyers of this asset, like buyers of any other, having to evaluate for themselves the risk-reward? It’s never been more clear that some commentators just mean something very different by ‘default’ than, well, what the word actually means.