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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (16891)	4/11/2007 11:31:17 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 217860

TJ, I was discussing today hedge funds, counterparties, banks, IMF, management, shareholders and the mega$trillion whirling pixelation of bonds stacked on shares stacked on options counterpartied to futures, back-managed to risk analyzers in a veritable galaxy of financial relativity theory and what might go wrong and why should it. When one examines various financial incentives within that galaxy, not everyone is acting in unison to create financial nirvana. Shareholders want profits, managers want profits for themselves. The worst that can happen to managers who run the banks and other financial institutions into the ground through misfortune in the financial outcomes is to be fired. If they make a lot of money in the meantime, they don't have to pay it back. So, for example, if there are big profits to be made in bonuses from lots of sub prime mortgages which might or might not be repaid over the next decade or two, then the managers worried about their incomes over the next year or three don't have much incentive to worry about the risks to the shareholders and mortgagors, counter-parties and stack of financial relativity theory piled on the backs of J6P who wouldn't know a trade deficit if he fell over it. If lots of financial institutions are doing dopey things simultaneously, harmonics of MADness can be built into financial systems which only go into collapse mode when the final straw lands on the camel's back, sending the oscillation into failure mode. If failure happens, the managers walk away with their previous incomes and get another job if there's anything left standing. There is no point in their company being the odd one out. They'll miss out on the financial rewards and their company will be left standing, maybe. But maybe not. There is no incentive to miss out on the rewards then be out on the street anyway, along with the real evil-doers. One might as well be evil too. Admittedly I don't know whether there are such failure mechanisms built into financial systems, or clever financial institutions which are lying in wait for such events and which will be their big pay day. But my experience is that people do dopey things and clean up the huge mess afterwards. Such as leaving the cockpit doors open for AlQ to walk through with box cutters. AFTER the mess, aviation security went ridiculous. There won't be another hijacking because passengers will go nuts and risk their lives en masse to overcome hijackers, who won't have access to the cockpit anyway. Meanwhile, it's a lot of fun for everybody. So far, so good. The USA is well into the second year of housing repricing and Oz is well down the track too. NZers are still thinking they are getting rich from the housing bubble while young people are getting huge mortgages from Japanese housewives who simply see NZ$ and interest rates on the leader board so throw umpty$billion at 7% instead of 0% at home. The Japanese housewives wouldn't know a trade deficit if they fell over it either. Especially in english, in New Zealand. You can place a large bet against the NZ$ in favour of yen. Our son's house in Rangataua is now worth seven times what it was 4 years ago, priced in yen. But the Japanese who rented it to go snowboarding are not coming in such droves because of the high NZ$. Perhaps it all makes sense, but I don't see how. Mqurice