[BITList] not betting - hedging

[CT's]

hugh

this is the "beauty' of capitalism as practised in the USA by all who can..................................
amusing the to me is that the little guy [generally republican] thinks that by thinking he is heading for the big time with the big boys, that the big boys won't rip him off. he fails to understand that he is the perfect prey of the sharks!
I have a number of republican friends who defend capitalism as pushed by republicans, and who have been caught up in the something-for-nothing schemes - and have lost their money big time. 
they are nice people - they just grin and bear it, but can't stand the thought of helping people worse off than themselves - that is socialism.
personally, I am very happy to hear of people who dabbled in the stock market - and lost out big. serves them right for being so foolish/greedy as to try and outsmart the wall street piranhas.
regretably the american regulators were literally bribed into doing nothing about these schemes during the bush debacle. it is only now they are starting to wake up.
needless to say republicans are doing everything possible to stop any changes to the laws governing banks and wall street - being bribed by banks and wall street [as they were bribed with healthcare reform]
all 41 republican senators have just informed Obama they are dead set against anything that curbs the banks and wall street at the expense of profit - and will vote against any effort to change the system.
it is totally irrelevant to them that the people who voted for them [their constituents] were the very people who lost their big or small fortunes in these financial 'instruments'.
greed, money and self aggrandizement are now the gods of the country. few seem to care that this is a recipe for disaster - these people have no concern for these unites states. as you say - God help us all.

ct

ProPublica / NPR / This American Life report 
According to reports by ProPublica/National Public Radio/This American Life that came out in early April 2010, Magnetar "sponsored" mortgage-backed collateralized debt obligations by agreeing to buy the worst tranche (portion) of the CDO, the "equity tranche". The reports claim that Magnetar then shorted (bet against) those CDOs by buying credit default swaps that insured the CDOs. If the CDOs failed, Magnetar would get back many times its initial investment in the equity tranche by receiving the insurance payoff.[2][4]

The reports also claim that Magnetar tried to influence the managers of the CDOs it was instrumental in creating, to buy certain risky bonds that would increase the risk of those CDOs failing. It also claims that Magnetar CDOs 'defaulted' at a significantly higher rate than similar CDOs. They also claim that the CDO market would have 'cooled off' in late 2005 if Magnetar had not entered the market, and that this would have resulted in the financial crisis being less severe. [2][15][16]

Magnetar disputes many of the claims in the story, and ProPublica/TAL listed those disputes in the story and on the ProPublica website. Magnetar says, among other things, that it was not betting, it was hedging, that most of its hedges were against non-Magnetar CDOs, and that it was not making CDOs that were "built to fail" on purpose. It also claims that its strategy was not based on a downturn in the housing market (ie. it did not bet that mortgage-backed CDOs would default). It detailed many of its objections in a letter and list of responses to ProPublica, which are linked to on ProPublica's website.[6][7][3]

In a response to the ProPublica reporters, Magnetar claimed that "the questions we received from you [the ProPublica reporters] last week, and the assertions reflected in those questions, reflect significant inaccuracies or misunderstandings regarding aspects of Magnetar's investment strategy".[7]


From: HUGH 
Sent: Sunday, April 18, 2010 2:01 AM
To: bitlist at lists.bcn.mythic-beasts.com 
Subject: Re: [BITList] Goldman CDO case could be tip of iceberg


Colin,

Betting, backing - this is horse racing?  So the financial health of the world is determined by rich clowns getting even richer by throwing loaded dice.  A viable firm making a profit and employing 1,000 people can be trashed and left valueless, if that fits their betting scheme?  Good on the American regulators - I only wish our lot had a tenth of their balls.

Beautiful sunsets from here, but no dust coming down.  I laid a sheet of plastic out the other night and found not a speck on it next morning.  Who do I complain to?  Still, we have TV debates to console us.  I read (I'd sooner have my appendix taken out while awake than watch anything to do with the forthcoming election) a winner emerged from among the three "contestants" at the first debate : Gordon Brown, David Cameron and Nick Clegg - Prime Minister and prospective PMs.  Most photogenic or made less mistakes?  Who knows how politicians are judged nowadays.  I draw a veil over Gordon Broon, heir to Tony Blair, Iraq, and all that.  I saw an out take of a recent interview with Cameron - the same smooth, reasonable, fluent, well scrubbed Cameron we are offered on TV.  He lost the head at being asked a question his aides had clearly not prepared him for.  He complained, flannelled, whined, aggressively accused, obfuscated, and at no point came anywhere near offering an answer.  He seemed terrified at the prospect of anything he said being construed as an answer. The question?  What was his take on the current minor controversy over the right of homosexuals to get rooms in boarding houses.  Of Nick Clegg, all I'll say is that he thinks Edinburgh has a shipbuilding industry, and he wants to be PM of the UK.  God help us all - no matter who gets in (and it'll be one of the three), we're doomed.

Hugh.


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