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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Jan 26, 2010 9:54 pm GMT    Post subject: Reply with quote

Thanks for throwing me a bone. I have had three and a half years of good memories in the place so unless the market really plummets, I can write it off to some degree.

To whoever has got me reading Paul Volker, it is funny how he at the same time embodies the range of posters in this topic.

http://online.wsj.com/article/SB10001424052748704825504574586330960597134.html

Also google the Statement of Paul A. Volcker before the Joint Economic Committee February 26, 2009.

never mind, I found it...

http://www.house.gov/jec/news/2009/Volcker%20testimony%202-26-09%20(2).pdf

This is a must read.
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mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Wed Jan 27, 2010 1:39 am GMT    Post subject: Reply with quote

john p wrote:

FYI, Renting and MPR, I was going on Obama rants because this was a critical decision for me and deciding if we were going to have inflation or deflation was huge and it was all up to how Obama was going to play his cards. I was mad because he was a politician and he was head faking left and right and who the hell knew what he was going to do. I had a lot riding on this decision and I just wanted to have a President who was honest and consistent.


Well I think lots of people, including some of the most famous economists
disagreed about which was the greater risk.

As for being honest and consistent I think that essentially political suicide.
That's just the way politics works. I dont think Obama is any worse than
anyone else in this regard.

Yes it sucks that you bought in 2006 and now we all have to pay for
what was essentially a systemic conspiracy by the originators/ratings
agencies/banks. (What I mean by this is not so much that they were
conspiring but that the system produced on its own the functional
equivalent of a conspiracy).

But its just lazy to blame this on government - expect perhaps on a lack
of regulation. Although market crises and meltdowns are no surprise
to those who actually study such things - they have a long history -
this crisis ought to present an existential threat to the theory that
markets are always efficient. To defend this the right is constructing
an absurd narrative that makes government, the CRA etc responsible.
Well this is just a joke for anyone who understands what happened.
I mean I could construct a narrative which showed my grandmother
was responsible but you wouldn't have to dig into the details to see
that this was absurd.

Similarly its lazy to vote for a guy just because he looks fresh and drives
a truck when his party is dedicated to screwing you - you've said enough
about your economic situation to make it clear that you are one of the
people they have been and would like to screw.

I've lived in several western democracies. All had parties whose policies
I disliked, but only in the US do you find people voting so blatantly
against their own economic self interest.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jan 27, 2010 2:38 am GMT    Post subject: Reply with quote

I'll let you call me dumb or misguided, but I'm really trying to make a good call and do a lot of research so I don't think I"m lazy... If you have any articles that you could send me links to my mind is open and I'd appreciate it.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Wed Jan 27, 2010 3:06 am GMT    Post subject: Reply with quote

Renting in Mass wrote:

On the bright side, you still would have been screwed if you didn't buy and kept your money in the bank while waiting for prices to return to normal. There was no winning path for responsible, rational people.


The only way for the john p generation of buyers not to be screwed would be to either not have had the bubble in the first place or push it off to the next generation. Certainly the first is the preferable scenario but the second isn't any more moral, though I don't blame him for wanting it. I agree about those who got second hand benefits, which is largely the baby boomer generation who will be retiring soon. They were the wealthiest in American history even without the bubble. Once they retire I don't think it's going to stop. They are going to fight for their share of the government pension (social security, medicare, etc), knowing full well that they are taking from the future benefits that current workers are saving into the fund for. Inflation is our only defense, short of renigging the deals that they made for us.
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mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Wed Jan 27, 2010 3:10 am GMT    Post subject: Reply with quote

john p wrote:
I'll let you call me dumb or misguided, but I'm really trying to make a good call and do a lot of research so I don't think I"m lazy... If you have any articles that you could send me links to my mind is open and I'd appreciate it.


Fine, read any of the many recent books on the financial crisis.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Wed Jan 27, 2010 3:18 am GMT    Post subject: Reply with quote

john p wrote:
To whoever has got me reading Paul Volker, it is funny how he at the same time embodies the range of posters in this topic.


What I hate about Obama, Bush, and their cronies is their overemphasis on maintaining the status quo. Obama says our health care system isn't perfect but it's what we've got. Paulson and Geitner threw money at Wall St because they were afraid if there was change it wouldn't be good. We've elected panzis to office who, like Americans, are always looking for the easy solutions, afraid to take risks that lead to something better.

Why can't we rewrite all of healthcare? Why can't we rip up the banking system and rebuild it from the ground up? There's certainly a lot of worse solutions but there's also better ones and with our foresight I'd like to think that we'd find them. That's how we got the current systems, which have worked great for years.

In AI terminology, these people prefer "Greedy" improvements, where you only take steps forwards, over "Hill Climbing", where you take steps backwards so that you can take more forwards. Having a lot of professional experience with both, I can tell you that hill climbing is significantly more effective at solving problems than greedy.

I like Volckner because he has a backbone and that's an extremely rare quality today. You can see that in Paulson. As CEO of Goldman Sachs, he has had to bet the ranch on a regular basis I'm sure and then double and triple down those bets. Then he enters politics and he won't even step up to the table to play.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Wed Jan 27, 2010 7:21 am GMT    Post subject: Reply with quote

It's Official, Asian-American Students Work Way Harder To Become More Educated Than Everyone Else

Evidence for my point that America has become dependent on foreign talent.
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Xenos



Joined: 24 Jun 2009
Posts: 31
Location: Western Mass

PostPosted: Wed Jan 27, 2010 8:03 am GMT    Post subject: Reply with quote

[quote="Renting in Mass"][quote]

On the bright side, you still would have been screwed if you didn't buy and kept your money in the bank while waiting for prices to return to normal. There was no winning path for responsible, rational people.[/quote]

This is an important observation. There are some very smart engineers and financeers on this board, and I fear they have fallen into the trap of expecting that markets tend to be efficient and that virtue would be likely to be rewarded.

Around late 2004 I came to the conclusion that my Anthropology and Archaeology education had the most relevance to the decisions I would have to make. These amount to simple rules, like:
-It sucks to be you when the Huns roll into town;
-Pay the damn taxes when Tamurlane demands them;
-Don't get between the Scots-Irish settlers and the farmland they want;
-Switching from hunting and gathering to farming is hell on the teeth;
-Those peaceful Mayans knew all about thoracic anatomy for all the wrong reasons, so watch out for mathematicians with a thing for flowers and obsidian knives.

In short, every so often there is massive structural change, and it is never fair or very predictable. The people who thrive are the ones who do not live by the old culture or follow the new culture, but those who can be mobile keep their family together and find a niche or a spot to survive. Out of every three generations one gets screwed and accepts a life of relative poverty while the lineage adjusts and sacrifices for the next two generations. Looks like we get to be that generation.
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CL
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PostPosted: Wed Jan 27, 2010 1:13 pm GMT    Post subject: Reply with quote

re balor123 - Asian students are more hard working, not because they are Asian, but because a lot of them are second generation immigrants, who see first hand in their parents how, simply by having the opportunity and by working very hard, can totally transform one's life for better. Malcolm Gladwell book "Outlier" has an excellent chapter on this topic (for the second generation Jews immigrants). Plus taking more AP class means a faster and shorter college education, which means a lot less tuition which is vital for many Asian family finance.

I myself was born in Asia and my family burnt a significant amount of saving to afford me to go to one of the top college in US. I admit I locked myself up in library all night long so I can bump up my GPA from 3.7 to 3.9. Is it necessary? Of course not. But you typically work hard when you got a chip on your shoulder.
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Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Wed Jan 27, 2010 2:47 pm GMT    Post subject: Reply with quote

Quote:
I myself was born in Asia and my family burnt a significant amount of saving to afford me to go to one of the top college in US. I admit I locked myself up in library all night long so I can bump up my GPA from 3.7 to 3.9. Is it necessary? Of course not. But you typically work hard when you got a chip on your shoulder.


Folks, there's a difference between the 'studier', who makes the honors' marks, vs the one who tries to make it in the real world. If real world success was simply about being an exam 'gunner', then many of my science and engineering pals would be millionaires today.

Hiring managers don't huddle around, and act like near eastern or east Asian parents, whispering to each other, 'Wow, isn't it great that Timmy's won the Math Olympiad or Janie's a Westinghouse Award winner or Rob's a World Memorizing Champ?". No, hiring managers want folks from their clubhouse with the ability to play the game. That's how the Peter Principle works in the real world.

What the 'gunner' has is the ability to get into a healthcare, patent law, or some other licensed profession (perhaps, also actuary) where taking exams insures one a job of some sort. And that's about it. If the field is protected by the rituals of exam taking, then it's a good place for the academic types. Otherwise, you're better off learning how to gamble (see Hedge Fund/Prop Trading career), sell a product (see Sales VP), or some other business type of nuance like public relations.
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CL
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PostPosted: Wed Jan 27, 2010 3:09 pm GMT    Post subject: Reply with quote

Boston ITer - very true. What I do observe, however, is that the best predictor of one future success, in whatever profession, is his/her ability to delay gratification, swallow the pain, in order to achieve the goal he/she set out to do. Of course, if the gunner knows how to take exam ONLY and nothing else, then yes, the only profession for "gunner" will be exam protected/exam related profession.

What I think, however, is "gunner" being exam expert is not really because they love exams or naturally good at it, but because they have the ability to take the pain, put in the hours to achieve their goals. It can be exams, but can also be playing piano/guitar, writing novels, even home economics like sewing clothes. If their goals is finding a good entry level jobs, they will work their butt off for that. Just another manifestation of the drive and pain-taking ability. My first job after college is in an Wall Street investment bank, then moved to a major asset management company. Over the years, college students found my profile in alumni website attractive and asked for advice and connections, being very proactive in the process. Guess who are those college students? Gunners, primarily from Asia as well.

Just my 2 cents, and my apologies for being off-track.
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Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Wed Jan 27, 2010 3:30 pm GMT    Post subject: Reply with quote

Quote:
If their goals is finding a good entry level jobs, they will work their butt off for that. Just another manifestation of the drive and pain-taking ability


Sure, I very much remember those days. During my first 'real' job, I worked nearly every weekend to advance my skills and be able to make lateral moves into other areas, which required 3 or more years of experience. And yeah, having the right parachute out of college is essential, esp in today's contracting economy.

The problem, however, is that point in time, 7 years into the future, where I see more and more useless people, being promoted for cronyism and Peter Principle reasons. That's when it inverts itself and becomes a slap in the face.


Quote:
My first job after college is in an Wall Street investment bank, then moved to a major asset management company.


And that's great, you're in the right area to be able to continue your success, however, at some point in time, where do the normal abilities max out? In other words, the point where hard work results in diminishing returns.

Here's an example... there are prop trader run, "managed" futures accounts, which can make their clients 100%+ per year. These traders aren't necessarily the ones who got the A+ or Olympiad medal in Organic Chemistry but are very shrewd at money management, with pivots and fractal patterns, and make a killing trading. Well, as asset managers, provided they have the right sales staff to prevent a capital flight from anxious clients, they're in a much more powerful position than a hard worker, who'd worked 80 hrs per week as an analyst, doing spreadsheets and risk assessments for the partners at their IB firms.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jan 27, 2010 3:54 pm GMT    Post subject: Reply with quote

MPR:

I just reread the Statement of Paul A. Volcker before the Joint Economic Committee February 26, 2009 where he explains the financial crisis. Keep in mind, this guy is the "lion" that everyone seems to be lining up behind, including Obama.

He offers 4 basic reasons:

Quote:
1. My first point is to emphasize an essential longerterm
reality.

The present crisis grew out a serious and
unsustainable imbalance in the United States and world
economies. Specifically, over recent years, until the
outset of the recession, Americans spent more than our
country produced or was capable of producing at full
employment. That spending, reflected in exceptionally high
levels of consumption generally and in housing in
particular, was made possible by a high level of imports, a
collapse in personal savings, and large trade and current
account deficits. The consequence was the nation became
dependent on borrowing abroad hundreds of billions of
dollars a year.....

2. Secondly, I turn to the problem in financial
markets.

The rising debt, particularly mortgage credit, was
facilitated and extended by the modern alchemy of financial
engineering. Mathematic techniques that have developed in
an effort to diffuse and limit risk turned out in practice
to magnify and obscure risks, partly because, in all their
complexity and opacity, transparency was lost. Risk
management failed. At the same time, highly aggressive
compensation practices encouraged risk taking in the face
of misunderstood and sometimes almost incomprehensible debt
instruments.....

3. As the financial crisis evolved, weaknesses in
accounting, credit rating agencies and other market
practices were exposed.

“Fair value” accounting rules were inconsistently
applied and have contributed to downward spiraling
valuations in illiquid markets. Credit rating agencies
failed to analyze collective debt obligations with
sufficient vigor. Clearance, settlement and collateral
arrangements for obscure derivative contracts created
uncertainty and need clarification.
These are all highly technical issues, not readily
dealt with by legislation. They do need to be resolved as
part of a comprehensive reform process.

4. More directly of governmental concern are the
lapses in financial regulation and supervision that
permitted institutional weaknesses to fester, failed to
identify exceptional risks and deal adequately with
conflicts of interest, and did not expose large personal
scandals after warnings.


Now you accused me of being lazy for my positions (implying that government is responsible), do you think that Paul Volker is lazy as well? Look how many times he mentions government.....

Let's take point one: He's saying that we have huge imbalances with world markets (globalization), then he says that individuals went on a spending spree and spent more money that they could afford and more than we could produce. Volker is talking about PERSONAL RESPONSIBLITY. This is what I refer to when I say that our individual constitution is weakening. Leaders need to tell people to behave responsibly and not create scapegoats and lead them along with the delusion that they can continue to spend and rack up debt like they have.

His second point gets to the creation of "modern alchemy of financial engineering". This goes to my point about Lawrence Summers. I'm going to cite a left wing blog so that you are more inclined to believe it:

http://www.huffingtonpost.com/arianna-huffington/larry-summers-brilliant-m_b_178956.html


from above:

Quote:
As Treasury Secretary under Clinton, Summers played an important role in convincing Congress in 1999 to pass the Gramm-Leach-Bliley Act, which repealed key portions of the Glass-Steagall Act and allowed commercial banks to get into the mortgage-backed securities and collateralized debt obligations game. The measure also created an oversight disaster, with supervision of banking conglomerates split among a host of different government agencies -- agencies that often failed to let each other know what they were doing and what they were uncovering.

At the signing of the bill, Summers hailed it as "a major step forward to the 21st Century."

Summers also backed Phil Gramm's other financial time bomb, the Commodity Futures Modernization Act, which allowed financial derivatives to be traded without any oversight or regulation. So it was on his watch that the credit-default swaps warhead that has blown up our economy was launched.


It was government that created the wild west environment. GOVERNMENT.

Let's look at his third point: Credit Rating Agencies were weak and failed to analyze risk with sufficient vigor. "These are highly technical issues, not readily dealt with by legislation...."

http://en.wikipedia.org/wiki/Credit_rating_agency

So basically, Government didn't protect us through regulating the Credit Rating Agencies and allowed them to be structured in a conflict of interest situation. And you wonder why people don't trust government?

Fourth point:

Quote:
4. More directly of governmental concern are the
lapses in financial regulation and supervision that
permitted institutional weaknesses to fester, failed to
identify exceptional risks and deal adequately with
conflicts of interest, and did not expose large personal
scandals after warnings.


So MPR, every point I've made regarding globalization, the Commodities Futures Modernization Act (Lawrence Summers), emphasis on pressuring individual responsiblity, and government being asleep at the switch (debating professional baseball in the weeks before the tsunami of adjustable rate mortgage resets, which caused the credit event in the credit default swaps back in September 0Cool HAS BEEN FUCKING SPOT ON.

I was nice and gave you a chance to offer any data to counter any of my and quite frankly Volker's assessment. Your answer is a smug "read any book on the financial meltdown..." crap.

I love seeing the face of a bully when they realize that they have greatly underestimated me. I doubt you even know what you stand for MPR. You most likely resent anyone who you know has told you the truth because it reminds you that you were fooled by someone else.

Cite anything specific that counters any of my points.




[/quote]
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jan 27, 2010 5:02 pm GMT    Post subject: Reply with quote

Here was the ticking time bomb - the adjustable rate mortgages.

http://thefloat.typepad.com/the_float/images/2007/10/22/2008_mortgage_resets_3.jpg

Look in around the September 08 time frame and notice the spike in resets.

Now many of these adjustable rates tied to the LIBOR were set in 2005 to be reset in 2008. Note the spike in the LIBOR from 2005 to 2008

http://forexautomaton.com/research/63-time-evolution-of-forex-inefficiencies/539-chfjpy-qbipolar-disorderq-history?start=2

And when we needed our leaders to get ahead of the issues (the biggest economic storm that gave us the worst economy since the Great Depression), they were arguing about Major League Baseball.

http://townhall.com/columnists/MikeGallagher/2008/02/15/congress_should_worry_about_its_own_business_not_baseballs

Paul Volkers opinion of government (Lazy Paul according to MPR):

http://www.creditwritedowns.com/2010/01/volcker-i-wasnt-persuasive-enough-for-obama-to-heed-my-economic-advice.html

from above:

Quote:
Q: You feel strongly that the financial system has gotten out of whack. Do you think the American political process is capable of fixing it?

A: The American political process is about as broken as the financial system. Therefore, one has to be a bit skeptical. Just to give you one little example, one unrelated to the financial crisis. Here we are on Dec. 29, almost a year after the Inauguration, and there is no Under Secretary of the Treasury. That should be an important position. How can we run a government in the middle of a financial crisis without doing the ordinary, garden-variety administrative work of filling the relevant agencies? The Treasury is an outstanding example of a broken system, but it’s not the only one.


And some think with this track record, we should let them control Health Care.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jan 27, 2010 6:25 pm GMT    Post subject: Reply with quote

Here is another reason to trust government:

http://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htm

from above:

Quote:
Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.


scroll over the tabs on the upper left (Public Gain Private Pain) and try not to ralph on your computer screen.

Average salarys:

Federal Public employee - $71,206
State and Local Government - $54,101
Private Sector - $40,331

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2010/01/27/income_angst_not_for_public_employees/


According to this NY Times article, most union members are now working for the Government

http://www.nytimes.com/2010/01/23/business/23labor.html

http://www.cato.org/pubs/tbb/tbb-59.pdf

After the Unions ate through the private sector, they are now infested in the government.

http://www.freerepublic.com/focus/news/2250143/posts

after seeing how big the medicare and medicaid is in the big picture, Health Care is already unsustainable; adding more people to the program will increase costs unless there is a huge effort to reduce costs. The current health care bill does not address cost cutting measures enough to get this to sustainable levels.

http://www.americanprogress.org/issues/2009/02/entitlement_brief.html

What I'm saying is that our current viewpoint is a complete delusion. Just like how unions repelled industry and went looking for a new host in the taxpayer via working in the government, we forget that our nation was built by people who fought wars and died, people who built our nation who didn't have health care or flat screen t.v.'s. Today, we have people with 3rd world skills expecting to have a Wii, a PlayStation 3, a flat screen t.v., an IPod with all their favorite songs, free health care, no taxes etc. etc. Think about the bathtub analogy. Most of today's citizens barely contribute to the cost of government, so they're not adding to the bathtub, but they are draining it like no tomorrow. To get elected today you don't ask "Ask not what your country can do for you ask what you can do for your country", you create a scapegoat and tell the masses that they are entitled more and more and shouldn't be asked to contribute.

Capitalism is attracted to profit and if people want too much and aren't willing to work for what they want, they will send the spoils of capitalism to other nations that are. So if we blow the opportunity of capitalism, a system that rewards hard work and aligns with freedom whereas it doesn't have to matter where you were born, you have a chance to make it if you work hard; what is left? If we can't compete in capitalism what is the next choice? We will be forced to become predators. The end game is War.
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