I'm not an expert, but do you really need to be when banks are gambling with our money, keeping the profits, and asking tax payers to subsidize the losses?

Too Big to Fail is a classic.

https://www.washingtonpost.com/...693b38637_story.html

I am no expert either but from reading TBTF I am not sure that those running the banks entirely understood exactly what they were doing.

Which, I know, is shocking

am reading Flash Boys -- excellent -- how one firm tried to overcome the innate disadvantage to small investors created by dark pools and high speed trading.

there was no incentive to the major players -- banks, exchanges, HST firms -- to expose how badly the market was rigged, they just worked harder to game it more

I read that

It's interesting. History just continually repeats itself

Tulips. Bubble bursts. More regulation. All forget. Happens again.

Last time mortgages

This time they are doing the same thing with Corp debt, personal debt and auto loans.

Flash boys was interesting more because of how they beat the market. Not through developing new financial instruments

The basic problem is that regulators can not keep pace with those in the finance sector

That was an interesting article. I just don't understand how our government, companies and individuals can continue carrying so much debt. It feels like a house cards and the wind is getting ready to blow.

Read Boomerang next. Just a continuation of the shit show.

I read that

Next on list are;

Smartest guys in the room

The quants

The greatest trade ever

When genius failed

Barbarians at the gate

I am becoming more convinced that 2006 was just a warm up an we are ill equipped to deal with another crisis be it consumer debt, Corp debt, auto loans or the euro

Smartest guys in the room is amazing. Insane actually

Also watch Margin Call if you haven’t already.

Lots of good suggestions here.


Barbarians at the gate is very interesting.

I would also suggest:

Liar's Poker (first Michael Lewis book). Covers the real origin of this current financial non-sense which was junk bond corporate takeovers in the 80s. This is where the moral decay that we keep seeing recycled with different assets originated.

I always toss in "Bonfire of the Vanities" if you want to pull this thread. It's all fiction, but it captures the ethos. I think it is a masterwork and is a great companion piece with Liar's poker.

Another book, that I think offers the real answer is "The Panic of 1907" This was pre-Fed and this crisis is often cited as one of the original arguments for the Fed, but I think that's all wrong. The 1907 panic was basically solved by JL Morgan's clout. He strong armed all the banks into taking responsibility, bailing themselves out and letting a few of their own fail. He literally told all the banks, come to my office, we are going to sit down and work this out and if you were straight you were accommodated. This solution to this (self-created) crisis was institutional leadership in the private sector holding themselves responsible. In this situation you didn't need a Fed, the industry took care of themselves, because they knew if they didn't there were done.
It's sad to see someone like Jamie Dimon as the face of the JP Morgan name today and the Fed basically being used a tax payer funded means to bail out irresponsible banks. The real JP Morgan would be sick.

Euro is an interesting one, I have been thinking for years that it is fundamentally flawed and at some point will either fall apart or lead to a level of economic and fiscal unification (Aka Germany running everybody's economy for them) that would be unacceptable. The flip side though is that the determination amongst Euro politicians to make it work, and their willingness to fudge it, is remarkable and it does seem they can keep that plate spinning through some crises that I thought would already have sunk it by now. I think it's a certainty that the euro will not survive forever in its current form, but I wouldn't want to bet as to a timeframe for it to collapse or change.

Auto loans and unsecured personal credit seems like a problem but surely can't be on the scale of the mortgage problem in 2008? Auto loans are relatively short term loans taken out on assets with known heavy depreciation, can't be anything like the exposure on homes which are much bigger, longer term and based on an underlying (and false) assumption of ever rising prices.

Corporate loans I don't know much about, other than that in the UK at least it seems very difficult for small businesses to get one, and there has been a lot of criticism of the banks for not lending enough (which they argue is a direct consequence of Basel rules and stress testing). My personal experience of corporates is that with low interest rates and lousy rates of return on so many assets, there's a lot of venture capital and private equity money sloshing around and looking for a home, and it's much easier to get cash that way than from the bank.

Read the first 2 not the third which i will look at

Was also looking at Lord's of finance

From the earlier period

I think a difference between then and 2006 was the banks could not solve it themselves

They were leveraged 30 to 1 or more in some cases and AIG had more than 1trn at risk with 12 banks

It was game over. It's fascinating.

Euro. What happens to southern Europe in the next global downturn? I think it's game over for the euro but as you say. I don't know when. The one thing i am reasonably confident of is that Italy or Spain are not going to become the new lower rhein just to stay in

https://www.google.co.uk/...ay.com/amp/101774626

What happens to all this personal debt if interest rates start heading up?

I think the previous article was making the point that if companies are borrowing to pay dividends not to invest its probably not good news

Correct. A lot of the people in risk management genuinely believed they had come up with a better mousetrap. It was a classic case of not being able to see the "forest through the trees".

When Genius Failed is about LTCM which my family has some tangential history with. One of my grandfather's old partners from Carroll McEntee & McGinley, James McEntee, was brought on to deal with fixed income trading. My grandfather pulled his investment from LTCM relatively early relying only on the age-old wisdom of "if it seems too good to be true it probably is."

Bingo, especially with regards to corporate debt and auto loans. WRT auto loans, you now have both record payments and record duration. That's a formula for eventually having record losses.



It is and it will. A huge number of companies are basically debt-zombies. By conventional measurements, many companies trading at rather high valuations have negative shareholder equity. But why let facts ruin a good story? You're starting to hear analysts say how accounting metrics are out of date and that instead "revenue is the new profit" and other creative ways to assign value to companies that don't have positive free cash flow.

Even a company like Netflix is basically a debt zombie but equity investors don't realize it yet (look at their cash flow... they loose money on every customer but it's ok because they make it up in volume /sarc).

Didn't worldcom effectively try to build its value on just continually expanding and, Well, that went well

Enron, companies in companies

All tried to developing a new way of accounting to make themselves seem more profitable than they really were

I suspect tesla is similar

LTCM is breathtakingly

I am half way through TBTF and got distracted by the greatest trade, straight to hell and now when genius failed

Everything about LTCM is staggering

The real returns on total capital were tiny as most of it was leverage. The arrogance of the principles and their infallibility (in their minds), the hero worship of the lenders..........

The fail out that it was just a trade gone bad. It's amazing

When I was a senior in high school(god, 20+ years ago) my stepmother got me a job working for the brokerage firm she worked at as a clerk in the mail room. I worked my way up to new account entry, order entry, and payment processing. Eventually I transferred to the office where I went to college before they eventually sold the company and closed that office.

the most important lesson I learned was that the majority of brokers did not have a clue about basic financial analysis. They got their list from corporate on what to sell at any given time or they followed the leads/research of the one or 2 brokers who could analyze the market. I learned from very young that these guys were only good salesmen, and nothing more. Just a bunch of lemmings, that would follow each other from one bubble to the next.