#OccupyWallstreet

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halik

Lifer
Oct 10, 2000
25,696
1
0
The claims of bilateral netting working flawlessly exists only in academia. Please see how AIG required a bailout to gather some empirical evidence to see that notional derivative exposure actually does matter.

AIGs downfall had very little to do with notional exposure, but rather that there was no real framework and oversight for consistent pricing those instruments and their risk across the counter parties. Basel 3 is addressing those shortcomings.

But you do hit on more fundamental point - all risk management does it make sure you don't blow up to a certain point. Ie you can withstand an event with p=1/10000, but anything over that will blow you up.... that has some profound regulatory ramifications when it comes to systematically important institutions and how that risk should be priced in to their operation.

<- Last job was quantitative risk management and vauation
 

bfdd

Lifer
Feb 3, 2007
13,312
1
0
I understand that. I'm just wondering what the dollar amount is on these things. 75 trillion seems high of course but who the fuck knows with the pillaging the banks did.

left out all the printing the Fed did. wasn't there something like 8 trillion dollars printed over the last couple years?
 

Ninjahedge

Diamond Member
Mar 2, 2005
4,149
1
91
Then I believe the anger should be directed at "the people", not executive boards. "The people" need to change, not the executives. And "occupying" is not the right path in my view.

That never works.

You never insult those you are trying to garner support from.


If you do, that only works in Disney Fliks and the movie Meatballs.
 

Ninjahedge

Diamond Member
Mar 2, 2005
4,149
1
91
That's the view of alot of people. And that is why nothing will change. Sure there's a recession going on. But alot of people haven't noticed any differences in their lives.

A frog will not notice the water changing temp if you put it in cold and slowly heat it up.

We are frogs....
 

JSt0rm

Lifer
Sep 5, 2000
27,399
3,947
126
So nobody knows the number of the dervitives BOA intends to dump on the tax payer? So how do we know it isn't something astronomical?
 

Bowfinger

Lifer
Nov 17, 2002
15,776
392
126
Nutter sources? Once again, I get my news from the Google News aggregator, I do not listen to talk radio (other than NPR, on occasion), and I do not watch Fox News.

Not everyone fits into your us vs. them world of partisan absolutes...
Fair enough, yet the stories and examples you cite almost invariably come from the right-wing fringe. At a minimum, you seem to self-select the same kinds of crap Spidey wallows in.

My point is your statements about what average Americans are seeing and thinking simply do not match the message coming from the mainstream media. You ignore this in favor of a highly biased viewpoint generally associated with the fringe right.


[ ... ]Sorry, I don't pay attention or give much credence to CNN, Fox News, or any other major media outlet...
Which is why you cannot speak for typical Americans. They do.


I disagree with you that anti-Capitalism is not anti-American.

The two go hand-in-hand -- always have, always will -- just ask any former citizen of the old Soviet Union.
I think one can pretty objectively state as fact that the two are different. Where is Capitalism mentioned in the Constitution, for example? Nonetheless, we can just agree to disagree. It's a moot point. I am not anti-Capitalism, nor is OWS as a whole.


You are correct, however, that OWS must try to distance itself from such filth. I just don't see that happening right now...
I don't either yet, and that's a problem. I hope they speak up today, or they will be allowing the fringe to undermine their message and their broad support.
An update. At least for those average Americans who watch the NBC Nightly News, what they saw was on interview with an OWS protestor who was helping to clean up the damage in Oakland. She was one of many protestors cleaning up. She condemned the vandalism and made a big point of saying "they do not represent Occupy Oakland", nor any of the other groups aligned with OWS. I hope other OWS representatives in other interviews keep that message consistent.

NBC also twice made a point of calling the troublemakers a "small crowd of vandals" and called it "a sour ending for ... a peaceful day." They showed an Oakland PD spokesman referring to the vandals as "anarchists and provocateurs". Unfortunately, NBC also showed the "Death to Capitalism" banner, though it was in the background.

So, that's one example of what mainstream America is seeing.
 

JSt0rm

Lifer
Sep 5, 2000
27,399
3,947
126
Of course they are placing people in the crowds to do these things. Its like with the healthcare overhaul and all those people at the congress meeting in their home districts screaming and yelling - payed shills.
 

halik

Lifer
Oct 10, 2000
25,696
1
0
So nobody knows the number of the dervitives BOA intends to dump on the tax payer? So how do we know it isn't something astronomical?

It's in their 10K/10Q filings - regulators, investors and general public can all look it up if they'd like.

http://services.corporate-ir.net/SEC.Enhanced/SecCapsule.aspx?c=71595&fid=7832043

Edit:
http://www.sec.gov/Archives/edgar/d...011x10q.htm#s79A3CF956FBB1ED8FCA3CD89A1ABEC1C

Here ya go,
the $80T figure is even more retarded given this footnote:
"1) Represents the total contract/notional amount of derivative assets and liabilities outstanding."

If you count up the notional on the longs and shorts, you'll end up with a really big scary number.

EG:
If I bet you $1T that sun will go up tomorrow and you bet me $1T that sun will go up tomorrow, do we both have $2T of bets outstanding? What will happen tomorrow, regardless of what the sun does?
 
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spidey07

No Lifer
Aug 4, 2000
65,469
5
76
An update. At least for those average Americans who watch the NBC Nightly News, what they saw was on interview with an OWS protestor who was helping to clean up the damage in Oakland. She was one of many protestors cleaning up. She condemned the vandalism and made a big point of saying "they do not represent Occupy Oakland", nor any of the other groups aligned with OWS. I hope other OWS representatives in other interviews keep that message consistent.

NBC also twice made a point of calling the troublemakers a "small crowd of vandals" and called it "a sour ending for ... a peaceful day." They showed an Oakland PD spokesman referring to the vandals as "anarchists and provocateurs". Unfortunately, NBC also showed the "Death to Capitalism" banner, though it was in the background.

So, that's one example of what mainstream America is seeing.

Nutter source, therefore invalid.
 

momeNt

Diamond Member
Jan 26, 2011
9,290
352
126
Well as for the whether or not "Occupy Wall Street" has changed the conversation.

On my drive home today I was listening to the radio and this CBS was promoting their Thursday night sitcom lineup they said to "Occupy your couch", all this to the song "Hail to the Chief" (for those that don't know that's the presidential theme song).

So get off the street, get on the couch, and love your country! From your friendly neighborhood network - CBS.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
AIGs downfall had very little to do with notional exposure, but rather that there was no real framework and oversight for consistent pricing those instruments and their risk across the counter parties. Basel 3 is addressing those shortcomings.

But you do hit on more fundamental point - all risk management does it make sure you don't blow up to a certain point. Ie you can withstand an event with p=1/10000, but anything over that will blow you up.... that has some profound regulatory ramifications when it comes to systematically important institutions and how that risk should be priced in to their operation.

<- Last job was quantitative risk management and vauation

That sounds peachy, except that there's a difference between perception and reality, and a difference between mitigating risk and the creation of systemic risk. The notion that honest risk pricing can occur wrt deals doomed to failure is an absurdity, as well. A mortgage pool stuffed with no-doc teaser rate ARM's in a highly inflated market is just such an instrument, even though Li's gaussian cupola would probably tell us differently.

http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all

At some point or another, we need to limit risk by systematically important institutions, and the obvious answer is to first understand what risks are necessary and what risks are not in a functional system & regulatory environment. We also need to eliminate the profit potential in conflict of interest dealings. I'd offer that synthetic OTC derivatives introduce unnecessary risk and potential conflicts of interest that we would better do without. They lack an important element- insurable interest. Neither party has an insurable interest in the underlying asset, because neither party owns that asset. It's pure gambling at very, very high stakes., often with other people's money. So when that blow up threshold is crossed, as it was in the collapse of the ownership society, total risk is much higher, and the whole system blows up, which is simply unacceptable.

The reason such products exist at all is because the middlemen, the bankers, obtain enormous transactional fees in separating the two parties, and often gamble themselves in the process. It's also fed by too much hot money chasing too few returns, rather than being invested in productive enterprise. Extreme concentrations of wealth and income create that situation, and run counter to the whole idea of stability in an axiomatic sort of way. When winning big satisfies only the lust of greed & power while losing big affects one's lifestyle not at all, then enormous risks will be taken, and calculations justifying them will be found. It's the nature of greed.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
Nutter source, therefore invalid.

Oh, please. It's not what you want to hear, so it therefore must be rejected, right? Lallalalalallaaa... Spidey finds comfort in the bunker o' denial, as usual.

Google "occupy Oakland cleanup" for a lot more of the same.
 

halik

Lifer
Oct 10, 2000
25,696
1
0
That sounds peachy, except that there's a difference between perception and reality, and a difference between mitigating risk and the creation of systemic risk. The notion that honest risk pricing can occur wrt deals doomed to failure is an absurdity, as well. A mortgage pool stuffed with no-doc teaser rate ARM's in a highly inflated market is just such an instrument, even though Li's gaussian cupola would probably tell us differently.

http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all

At some point or another, we need to limit risk by systematically important institutions, and the obvious answer is to first understand what risks are necessary and what risks are not in a functional system & regulatory environment. We also need to eliminate the profit potential in conflict of interest dealings. I'd offer that synthetic OTC derivatives introduce unnecessary risk and potential conflicts of interest that we would better do without. They lack an important element- insurable interest. Neither party has an insurable interest in the underlying asset, because neither party owns that asset. It's pure gambling at very, very high stakes., often with other people's money. So when that blow up threshold is crossed, as it was in the collapse of the ownership society, total risk is much higher, and the whole system blows up, which is simply unacceptable.

The reason such products exist at all is because the middlemen, the bankers, obtain enormous transactional fees in separating the two parties, and often gamble themselves in the process. It's also fed by too much hot money chasing too few returns, rather than being invested in productive enterprise. Extreme concentrations of wealth and income create that situation, and run counter to the whole idea of stability in an axiomatic sort of way. When winning big satisfies only the lust of greed & power while losing big affects one's lifestyle not at all, then enormous risks will be taken, and calculations justifying them will be found. It's the nature of greed.

Correlations going to 1 during crisis is hardly a new a concept and gaussian and other copulas had little to do with that in general. You are talking bout a period where stress cases for real estate- backed securities were based on 5&#37; decline of value, since we really didn't see any periods of that aside from the great depression. NINJA loads didn't really matter, since the collateral was appreciating.

Models are only as good as the assumptions that go in them, which is why regulator nowadays have you defend you models to them.
 

actuarial

Platinum Member
Jan 22, 2009
2,814
0
71
EG:
If I bet you $1T that sun will go up tomorrow and you bet me $1T that sun will go up tomorrow, do we both have $2T of bets outstanding? What will happen tomorrow, regardless of what the sun does?

While that's accurate, it's not really the situation.

It's more like I bet $1T that the sun will come up tomorrow with Person A, and then bet $1T it won't come up with Person B. It sounds okay, unless the sun does come up and Person A can't pay up, but I still owe Person B that $1T. That's counterparty risk.

Obviously that's way too simplified, as the amounts are smaller and it's spread over a large number of companies, but the principle still holds.

Of course, being the market maker AIG should have made money no matter what the circumstance (as opposed to breaking even), short of the counterparty risk that certain bets aren't paid because a company goes out of business.

Counterparty risk is really hard to value, and I imagine that there was never any kind of sufficient data to show what the cascading effect would be in a significant economic downturn.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
Correlations going to 1 during crisis is hardly a new a concept and gaussian and other copulas had little to do with that in general. You are talking bout a period where stress cases for real estate- backed securities were based on 5% decline of value, since we really didn't see any periods of that aside from the great depression. NINJA loads didn't really matter, since the collateral was appreciating.

Models are only as good as the assumptions that go in them, which is why regulator nowadays have you defend you models to them.

Pure hackery. What would lead any sane person to think that this wouldn't end badly, other than people making enormous sums off it?

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

Somewhere around 2003 at the latest the notion that a mere 5% decline was the worst case scenario became an absurdity. It's not like income exploded along with home prices, at all, or that an enormous % of lending wasn't carried out on the basis of sub-sub prime standards under deceptive terms. Hell- price declines in the previous 2 lesser cycles exceeded 10%, without the explosive upwards impetus of "financial innovation".
 

halik

Lifer
Oct 10, 2000
25,696
1
0
While that's accurate, it's not really the situation.

It's more like I bet $1T that the sun will come up tomorrow with Person A, and then bet $1T it won't come up with Person B. It sounds okay, unless the sun does come up and Person A can't pay up, but I still owe Person B that $1T. That's counterparty risk.

Obviously that's way too simplified, as the amounts are smaller and it's spread over a large number of companies, but the principle still holds.

Of course, being the market maker AIG should have made money no matter what the circumstance (as opposed to breaking even), short of the counterparty risk that certain bets aren't paid because a company goes out of business.

Counterparty risk is really hard to value, and I imagine that there was never any kind of sufficient data to show what the cascading effect would be in a significant economic downturn.

I was trying to point out the error in adding up notional on your long and short sides to end up with the headline $75T number. If you look at the BAC 10-Q, that's what happened.

The only way scenario under which the number would be relevant is if none of the swaps offset each other and the underlying goes to zero or infinity depending on whether bac is long short and this all happens at the same time. That or one side (long or short) goes to infiniti/zero and all the offsetting counterparts default, again all at the same time.
 
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JSt0rm

Lifer
Sep 5, 2000
27,399
3,947
126
i appreciate all of you talking about this but I find it interesting no one can come up with a number.
 

halik

Lifer
Oct 10, 2000
25,696
1
0
Pure hackery. What would lead any sane person to think that this wouldn't end badly, other than people making enormous sums off it?

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

Somewhere around 2003 at the latest the notion that a mere 5% decline was the worst case scenario became an absurdity. It's not like income exploded along with home prices, at all, or that an enormous % of lending wasn't carried out on the basis of sub-sub prime standards under deceptive terms. Hell- price declines in the previous 2 lesser cycles exceeded 10%, without the explosive upwards impetus of "financial innovation".

Hindsight is 20/20, very few people saw the correction coming and virtually no one saw the magnitude of it. Even Bob Shiller's forecasts didn't come near what ended up happening.

"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
-Barney Frank, NYT, 2003
 

halik

Lifer
Oct 10, 2000
25,696
1
0
i appreciate all of you talking about this but I find it interesting no one can come up with a number.

Dude I gave you a table full of numbers.

Here's CDS they own:
bought $116.6B
wrote $12.3B
$128.9

Here's CDS owe:
Bought $11.6B
Wrote $111.9B
$123.5

Net $5.4B CDS asset (money coming in)
 
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