patrick.net

Last I heard derivatives were touted as great tools to spread risk.

The risk is spreading alright.

There's some entertaining stuff in the story pointed to by the "Bass Shorted" link.

"When someone explained to me that it was a synthetic CDO that takes the other side of my trade, it took me a month to understand what the hell was going on.''

This guy vs. the charlatan Sadek? God I love it when guys Sadek have to eat dirt.

"and that guy has disappeared" LOL!

Great topic HARM! Perhaps ACA's 29% ownership by BSC explains why Santa didn't visit them this year!? ( Naughty little Bear Sterns!)

O.K, here we go. I got some brand new steps and some weight to lose!

Just as most of us had never heard of, or gave any further thought to now defunct, laughable subprime lenders like Sebring, Own-it and my favorite "QuickLoanFunding.com" we'll have a whole new cast of J.O's to lampoon. Warren B. gave out some stern warnings about the explosion of derivatives as early as '02 (but what the hell would HE know ).

Perhaps the problem was that he spoke in too vague a terms and should instead pointed to s-p-e-c-i-f-i-c J.O's?

"The risk is spreading alright" LOL!

Good one Bear. Kind of like "the containment is spreading" but w/ a fresh new twist. I like it!

“The risk is spreading alright” LOL!

Yet another reason for a bailout!

Oh just to clarify (and please feel free to correct me) when WB was quoted in interviews about his concern for the growth in the use of derivatives I think most of us just kind of assumed he was talking about.... options, futures, options on futures and so on.

Does anyone here recall thinking to themselves back in '02 this pertained to credit default swaps etc? I know I sure didn't.

What was it that Warren called "derivatives"? Oh yeah, I believe it was-"weapons of financial mass destruction".

DQ numbers for the Bay Area November are out.

http://dqnews.com/RRBay1207.shtm

Richmond,

Yeah, I believe he DID say that. :) I'll see what I can't dig up. Even though WB sold his long held SoCal beach home around the peak, he insisted it was more about fundamentals and portfolio management than out of fear of a housing bubble. I don't ever recall a direct comment connecting the HB w/ WOFMD's?

DQ: Bay Area home sales stuck at two-decade low; price picture mixed

Deep Freeze coming
http://www.dqnews.com/RRBay1207.shtm

oops, skibum beat me to it

Question: I am looking at foreclosure.com, there's a new tab called sheriff sale, what does it mean? Thanks.

Isn't that where the Sheriff executes the forelosure sale in the front yard?
I don't think they do that in CA. Real estate pros say it takes their business.
I could be wrong, but that rings a bell.

Man, I want to get myself one of them sheriff deals.

Question: I am looking at foreclosure.com, there’s a new tab called sheriff sale, what does it mean? Thanks.

Perhaps it means that the persons or occupants had already been hauled out by the sheriff.

Perhaps it means that the persons or occupants had already been hauled out by the sheriff.

I sure hope not, because half the fun of buying a foreclosure is being there in person to see the look on the previous fliptard occupants' faces' as they get hauled off. :twisted:

“The risk is spreading alright”

Like my middle-aged a$$ after another round of holiday binging.

In this example the Gov is the Lion, the RE-bailout is the Zebra, and we be the grass.

At least we are "renewable." ;)

Yes, Peter, but we also are the "poopees".

DQ: Bay Area home sales stuck at two-decade low; price picture mixed
Median price is up 1.5% year over year. Come on folks, remember, a rising median rasises all boats -- or something like that.
Paging Prince Prospero, you're wanted in the green room.

I don't know exactly what Warren Buffett had in mind as derivatives but if anything fits it's the whole CDO, CDS CLO markets. It's hard to tell what's in them, there's no standard method for valuing them, and there's no standard of accounting for that value. And yet, the numbers are counted as if they were cash on hand. Until the contract is ultimately settled both parties can book a profit. Money from thin air!

Warren Buffett on Derivatives:
http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf

Buffett's observations in the final paragraph are quite prescient in light of the current situation.

What's wrong with DQ ? Deep freeze and stuff. But fortunately, the indicators are moving in different directions.

Different than where they want to be. But all in their different ways pointing to the same direction.

Latest nominee for bleeding-heart media "victim" sob story of the year!:

http://www.reuters.com/news/video?videoId=73045

Just loved the whole "2nd generation illegal immigrant", "homeless renter" tent city thing --very Hooverville-ish. Got the MSM "American Dream/victim" boilerplate down pat. They even managed to fit in a quick stat on foreclosures without even once mentioning the possible reasons WHY these people were being foreclosed on!

Bravo, Reuters!

What is a 2nd generation illegal? Did their parents go outside of the country for childbirth just so that the kids can remain illegal?

DinOR :

I definitely was not aware of what CDO and related alphabet soup when I read about WB's comment about derivatives. Even now I am trying to wrap my mind around the figures being thrown. For example Mish's post about 681 Trillion being the size of derivatives. This is magnitudes bigger than the size of the global economy. Someday I might understand how the hell this can happen.

Another thing I noticed today on CR was also talked in the blogsphere long time ago. Now banks are afraid that the stigma of losing the home will no longer be there. Financially, it will be a smart move for many people to simply walk away. And it will become kind of fashionable as well.

It was long time ago that I remember someone (TxChick) saying "Broke is the new black".

Bush just signed into law a bailout bill aimed at removing taxes from debt forgiveness relating to foreclosure or refinancing. Let the flood gates open, now there is no incentive for hanging on to a house or any penalty for walking away from it.

What is a 2nd generation illegal? Did their parents go outside of the country for childbirth just so that the kids can remain illegal?

:lol: I was mainly referring to her parent's (likely) status, but yeah, point taken.

Q for all you Aussies, Kiwis, Canadians, Brits & other nationalities out there: Do children of illegal immigrants get automatic residency/citizenship in your country too?

Q for all you Aussies, Kiwis, Canadians, Brits & other nationalities out there: Do children of illegal immigrants get automatic residency/citizenship in your country too?

Brits: No. Mother must be settled at the time of birth.

Ha ha, and the latest boomer folly, it turns out that those fine art TV auctions were selling fake paintings. Hope none of you guys paid $3,000 for one of those fake $90,000 Salvador Dalis. God what is it with these people?

Ok, I know the boomers used to ditch economics class because it was teaching evil concepts or you just wanted to smoke pot. In either case, if something is worth $90,000 in a normal market you are not going to just pick it up for $3,000 on a nationally telivised auction. It is just a reocurring theme with these people, it is charged on a credit card, so it is like the money doesn't demand the same care.

Aparantly this fraud was 6 billion dollars a year. Who cares though? It is just debt.

Malcolm, I couldn't believe that Bush actually signed "Don't 1099, Bro" into law, so I had to check the AP feed myself. Maybe I shoud consider a temporary change in career to "short sale specialist". I have to admit it becomes a no brainer for the seller -- at least before it was challenging: jingle mail (ruined credit but no tax consequences) or short sale (keep credit but pay IRS for debt forgiveness). Oh well, I'm sure there's enough people with seconds to make life interesting. Actually this is an area where a savy "short sale specialist" could come in handy: how to divide the debt foregiveness so that the first and second lien holders find it acceptable (get the second to accept pennies on the dollar as they get zip if foreclosed).

And it will become kind of fashionable as well.
Especially if you were being "held hostage" by the bank with an ARM reset and can now rent for 1/3 the price. What's not to like...

Malcolm, I couldn’t believe that Bush actually signed “Don’t 1099, Bro” into law, so I had to check the AP feed myself. Maybe I shoud consider a temporary change in career to “short sale specia1ist”. I have to admit it becomes a no brainer for the seller — at least before it was challenging: jingle mail (ruined credit but no tax consequences) or short sale (keep credit but pay IRS for debt forgiveness). Oh well, I’m sure there’s enough people with seconds to make life interesting. Actually this is an area where a savy “short sale specia1ist” could come in handy: how to divide the debt foregiveness so that the first and second lien holders find it acceptable (get the second to accept pennies on the dollar as they get zip if foreclosed).

And it will become kind of fashionable as well.
Especia1ly if you were being “held hostage” by the bank with an ARM reset and can now rent an equivalent house (on the same block) for 1/3 the price. You come off looking like a genius...

While I have a different strategy, I totally agree that now there is nothing to stop a mass exodus of sellers. On principle I don't believe a non recourse loan should ever carry a tax liability for debt forgiveness but without understanding specifics it seems like this law lets everyone, including the cash out people, walk away. Taking cash out and not paying it back should always be viewed as debt forgiveness, there is absolutely no reason to not tax that income. Evidently in this country we tax the shit out of hard work but larsony is now a tax shelter.

Canada is the only other country than US that recognizes citizenship by birth.

EU plugged the hole years ago, with Ireland being the last. I think Ireland closed the loophole a couple of years ago because I read something about illegal immigrants rushing to Ireland to give birth before the deadline to acquire an EU passport for their kids.

Oz plugged the hole in the 90s. At least one parent has to be a PR in order for the kid to be born as an Aussie.

Canada and us are the only fools standing.

At least one parent has to be a Puerto Rican in order for the kid to be born as an Aussie?

Weird.

IMO they should be citizens. The term natural born citizen only has the criteria of birth in this country. Also, since the constitution is being cited, one of the rights afforded is that no person shall answer for the crimes of another. I haven't seen anyone assert a point based in law or even morally cohesive as to why someone born in a country is not automatically a citizen.

stuckinBA:

about those bloggers having more incite than bankers, investors, economists...

The much deeper problem is nothing new, it's just showing up in what seems like a new place to you (and really, it's not that new of a place. Remember the real estate bubble that popped in 1990? Tech bubble? Enron? Arthur Burns-authored inflation? Different bubbles, same kinds of elite bankers, investors, economists...)

all those elite business schools either dumbed them down or trained them very well in malfeasance, probably it was a little bit of both.

There's someone who posts on here that graduated from Haas who shares a lot of insight, and it's clear from what he shares that he learned that stuff in the school of the Real World. Not Haas.

OO:

I'm really getting sick and tired of being punished for being a citizen by beeing obliged for jury duty in a county where one in four is not a citizen.

I have said so during the jury selection when the defendant was a Mexican, in order to get excused.

Malcolm says: The term natural born citizen only has the criteria of birth in this country. Also, since the constitution is being cited, one of the rights afforded is that no person shall answer for the crimes of another. I haven’t seen anyone assert a point based in law or even morally cohesive as to why someone born in a country is not automatically a citizen.

What about the reverse? An illegal immigrant can effectively have their crime forgiven by birthing a child on U.S. soil. The child is a citizen, and since they are too young to care for themselves, their parent(s) get to stay. Such a low standard for citizenship encourages people to break the law. And they aren't doing it just for the kid's benefit---they are breaking the law for their own benefit, too.