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Link: index: naked capitalism skip to main | skip to sidebar naked capitalism [ Subscribe | Blogroll | Topics | Archives | Videos | Contributors | Site Statistics | Search ] [IMG] Recent Items * Links 7/28/11 - 07/28/2011 - Yves Smith * Orwell Watch: Banks Put a Happy Face on Demolishing Foreclosed Homes - 07/28/2011 - Yves Smith * Cash Flow Discounting Leads to "Astronomically" Large Mistakes Over the Long Term - 07/28/2011 - Yves Smith * Clueless New Zealand Ministry of Economic Development Provides Regulatory Cover to Bogus Financial Companies - 07/27/2011 - Richard Smith * Has S&P Become Our Rupert Murdoch? - 07/27/2011 - Yves Smith Wednesday, July 27, 2011 Links 7/28/11 [IMG] Read the Rest... Topics: Links Email This Post Email This Post Posted by Yves Smith at 5:03 am 11 Comments >> Links to this post Orwell Watch: Banks Put a Happy Face on Demolishing Foreclosed Homes n the through the looking glass world of reality according to banks, tearing down foreclosed houses is a good thing. Really. The spin that Bank of America is using to justify the notion of bulldozing buildings is that the houses in question are worth bupkis, say $10,000 or less. There's a wee omission in their discussion. Many if not most of the houses in question have fallen in value because the bank failed to maintain them on behalf of investors Read the Rest... Topics: Banana republic, Banking industry, Credit markets, moral hazard, Politics, Real estate, Social policy, Social values Email This Post Email This Post Posted by Yves Smith at 4:05 am 9 Comments >> Links to this post Cash Flow Discounting Leads to "Astronomically" Large Mistakes Over the Long Term Your humble blogger is a vocal opponent of placing undue faith in single metrics and methodologies, like placing a lot of weight in total cholesterol as a measure of heart disease risk. One of the most troubling examples is the totemic status of discounted cash flow based analyses. It's a weird defect of human wiring that reducing a story about the future to a spreadsheet and then discounting the resulting cash flows (which means you are now layering a second story, about what you think reasonable investment returns will be over that time period) is treated as having a solidity and weight that simply is not there, a reality of its own that manages to take precedence over the murky future it is meant to help understand. An article by physicist Marc Buchanan in Bloomberg gives a layperson's summary of an important paper by Yale economist John Geanakoplos, and Doyne Farmer, a physicist at the Santa Fe Institute. It shows that the conventional use of discounted cash flow models over long time periods, as is often the case when discussing environmental impacts, is fatally flawed. Read the Rest... Topics: Doomsday scenarios, Dubious statistics, Environment, Risk and risk management, Science and the scientific method, The dismal science Email This Post Email This Post Posted by Yves Smith at 3:04 am 9 Comments >> Links to this post Clueless New Zealand Ministry of Economic Development Provides Regulatory Cover to Bogus Financial Companies ...which is not good news for honest New Zealand investors trying to do a due diligence exercise; nor for the New Zealand Ministry of Economic Development's reputation, if it has one... Read the Rest... Topics: Banking industry, Curiousities, Legal, Regulations and regulators, Technology and innovation Email This Post Email This Post Posted by Richard Smith at 5:19 pm 24 Comments >> Links to this post Has S&P Become Our Rupert Murdoch? Until recently, no one in the UK dared cross Rupert Murdoch thanks to his influence on the political process.And although Murdoch is going down the same path in the US, of using political power to increase his economic power, the rating agencies seem to have easily trumped him on this one. Jane Hamsher chronicles the brazen way in which Standard & Poor's is throwing its weight around in the budget negotiations: Read the Rest... Topics: Banana republic, Credit markets, Legal, Politics, Regulations and regulators Email This Post Email This Post Posted by Yves Smith at 1:25 pm 43 Comments >> Links to this post Links 7/27/11 [IMG] Read the Rest... Topics: Links Email This Post Email This Post Posted by Yves Smith at 4:50 am 72 Comments >> Links to this post Efforts to Pretend "50 State" Attorney General Deal Moving Forward Looking More Desperate For months, it has looked as if Iowa state attorney general Tom Miller and the Department of Justice has been effectively negotiating on behalf of the banks to try to secure a broad settlement to give the banks a talking point and create the perception that the mortgage mess is on the mend. In fact, it would not stop the train wreck in local courts, since a deal would not restrict the rights of borrowers. However, getting the AGs out of the equation would still be of benefit to the banks, since their investigations typically unearth information that assist private litigants. But we have long thought that the settlement talks have been a weird PR exercise, in that if the talks were perceived to be getting momentum, they'd actually get momentum. Read the Rest... Topics: Banana republic, Banking industry, Credit markets, Legal, Politics, Real estate Email This Post Email This Post Posted by Yves Smith at 4:21 am 20 Comments >> Links to this post Victor Shih on the Risk of Capital Fleeing China We've written about Victor Shih's work on Chinese banks and wealthy households. He argues that the Chinese financial system and economy are at risk if enough capital moves overseas. While the release of this video is coming at a juncture when the US and Europe seem to be engaged in a beauty contest between Cinderella's stepsisters, Chinese business have been making aggressive investments in other economies as well, such as agricultural land in Africa, so it's worth remembering that advanced economies are far from the only targets for offshore funds. This video gives a short, high level overview of his provocative thesis. Enjoy! Read the Rest... Topics: China, Doomsday scenarios, Globalization, The dismal science Email This Post Email This Post Posted by Yves Smith at 1:30 am 12 Comments >> Links to this post Quelle Surprise! Banks Don't Want to be in IRA Business if They Can't Treat Customers as Stuffees If you doubt the public need to be protected from their local mob bosses banks, their latest hissy fit is an admission that they can't make what they deem to be enough profits unless they take advantage of their customers. This object lesson is IRAs. Bloomberg reports that if brokerage firms who manage IRAs were required to act as a fiduciary, as in put their customers' interests first, many would exit the business. Read the Rest... Topics: Banana republic, Banking industry, Credit markets, Investment management, Regulations and regulators, The destruction of the middle class Email This Post Email This Post Posted by Yves Smith at 12:50 am 22 Comments >> Links to this post Michael Hudson: Mr. Obama's Scare Tactics to Get Democrats to Vote for His Republican Wall Street Plan By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College You know that the debt kerfuffle is as staged as melodramatically as a World Wrestling Federation exhibition when Mr. Obama makes the blatantly empty threat that if Congress does not "tackle the tough challenges of entitlement and tax reform," there won't be money to pay Social Security checks next month. In his debt speech last night (July 25), he threatened that if "we default, we would not have enough money to pay all of our bills - bills that include monthly Social Security checks, veterans' benefits, and the government contracts we've signed with thousands of businesses." This is not remotely true. But it has become the scare theme for over a week now. Read the Rest... Topics: Banana republic, Banking industry, Credit markets, Guest Post, Legal, Notices, Politics, Real estate, Regulations and regulators, The destruction of the middle class Email This Post Email This Post Posted by Yves Smith at 11:50 am 155 Comments >> Links to this post Links 7/26/11 [IMG] Read the Rest... Topics: Links Email This Post Email This Post Posted by Yves Smith at 4:57 am 70 Comments >> Links to this post Massachusetts Attorney General Signals Likelihood of Nixing "50 State" Mortgage Settlement The market-moving stories, namely the US debt ceiling drama and the rolling Greek/Eurozone mess, are crowding out anything other than tragedies (the Norway bombing, Chinese train wrecks) and good old fashioned high profile prurient interest (DSK and the Murdochs). Let's briefly cover an important development in the US mortgage saga. I'm told that the Department of Justice is putting the thumbscrews on state attorneys general to sign a mortgage settlement deal this week. Read the Rest... Topics: Banana republic, Banking industry, Credit markets, Legal, Politics, Real estate Email This Post Email This Post Posted by Yves Smith at 4:46 am 22 Comments >> Links to this post Marshall Auerback: Worse Than Hoover By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives. It's actually a bit over the top and unfair to compare Barack Obama with Herbert Hoover - unfair that is, to the memory of Herbert Hoover. The received image of the latter is the dour, technocrat who looked on with indifference while the country went to pieces. This is actually an exaggeration. As Kevin Baker convincingly argued in his Harper's Magazine piece, "Barack Hoover Obama", President Hoover did try to organize national, voluntary efforts to hire the unemployed, provide charity, and sought to create a private banking pool. When these efforts collapsed or fell short, he started a dozen Home Loan Discount Banks to help individuals refinance their mortgages and save their homes. Indeed, the Reconstruction Finance Corporation, which became famous for its exploits under FDR and Jesse Jones, was actually created by Hoover. Often tarred with the liquidationist philosophy of his Treasury Secretary, the establishment of the RFC was, as Baker suggested, "a direct rebuttal to Andrew Mellon's prescription of creative destruction. Rather than liquidating banks, railroads, and agricultural cooperatives, the RFC would lend them money to stay afloat." Hoover's tragedy lay in the fact that whilst he recognized the deficiencies of the prevailing neo-classical laissez-faire nostrums of his day, he could not ultimately break with them and accept that the economic tenets which he had grown up with were deficient in terms of dealing with the huge unemployment challenges posed by the Great Depression. Read the Rest... Topics: Banking industry, Credit markets, Free markets and their discontents, Guest Post, Politics, Social policy, Social values, The dismal science Email This Post Email This Post Posted by Yves Smith at 2:19 am 110 Comments >> Links to this post David Apgar: If You're Out after Three Strikes, What Happens after Three Lies? By David Apgar, the founder of ApgarPartners LLC, a firm that helps companies and development organizations learn by treating goals as assumptions to be tested by performance results. He blogs at www.relevancegap.blogspot.com. Speaker Boehner made three points in his surprisingly combative reply to President Obama on debt ceiling legislation Monday night. Readers of this blog can help determine whether, as I believe, all three were lies despite the seriousness of the impasse on federal authority to continue borrowing. Read the Rest... Topics: Banana republic, Doomsday scenarios, Economic fundamentals, Macroeconomic policy, Politics, Social policy, Social values, The destruction of the middle class Email This Post Email This Post Posted by Yves Smith at 2:05 am 23 Comments >> Links to this post Canary in the Treasury Coal Mine: Chicago Merc Increases Collateral Haircuts for Treasuries and Foreign Sovereign Debt We had thought the authorities and the banks (no doubt with winks and nods from the Fed) would work to make sure that haircuts on collateral were maintained while the Washington game of debt ceiling chicken played itself out. Either the Merc (more formally, the Chicago Mercantile Exchange) wasn't on the distribution list or it decided not to play ball. < Read the Rest... Topics: Banking industry, Credit markets, Derivatives, Doomsday scenarios, Federal Reserve, Hedge funds, Investment management, Regulations and regulators, Risk and risk management Email This Post Email This Post Posted by Yves Smith at 1:10 am 5 Comments >> Links to this post << Older Entries Subscribe to: Posts (Atom) | Subscribe | Blogroll | Topics | Archives | Videos | Contributors | Search | Tip Jar Donation Amount: _____________________ (Currency: USD) [ ] Order Econned! 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