[IWE] Tin Foil Hats At The Ready

[D. Scott Katzer]

Hi Ashton,

Ashton Brown wrote:
> One wonders what [Roubini's] Subscriber material includes, eh?

I subscribed yesterday.  It's free, but they do ask for a lot of 
information (name, address, phone number, occupation, industry).  We'll 
see how it goes.  I don't know how the free stuff compares to the paid 
subscription, yet.

> /And if this toxic waste is worth pennies on the dollar now, what will 
> it be worth when our economy finally comes down under the weight of our 
> rabid profligacy, rampaging fraud, rampant speculation, raving lunatic 
> leverage and roaring, outrageous deficits? You guessed it. A big fat 
> goose egg. You will eat the whole thing - guaranteed./

On thing that I think will save us from total collapse is the fact that 
we've sent trillions of dollars over seas.  The people, countries, and 
companies that own those dollars don't want them to disappear, so they 
will eventually spend them on real things.  Of course, in doing so, 
they'll take them out of whatever they're in now (T Bonds?) and buy 
something in or from the USA.  So, I think the dollar will be under 
increasing pressure, but more of those dollars should come home and help 
reduce the depth of the recession.  At least I hope that'll happen 
fairly quickly...

> Credit Default Swaps: invented by a physicist! {double ugh} who switched 
> to finance ~ '93 (unclear if this actual Worthy talked to Ira.)

S/He must have been have been a theorist.  :-/  It's hard not to blame 
him/her though.  New toys, fancy mathematics and models, LOTs of money, 
who in that situation could resist?

Of course, ultimately, it's management's fault.  Even if they won't or 
can't understand the details, they have to be able to apply a sanity 
check: 1) What happens when the housing market slows down or declines - 
as it will?  2) How do we value these things?  3) What's our leverage? 
4) How do we get out quickly if we need to?

But no, they saw the fees and they took on faith that they were 
reasonably safe (after all, the securities were slices of mortgages, not 
mortgages themselves.  They had to be less risky than mortgages because 
..., right?)  Common sense, and Law 0 of Economics says that if the 
reward is large, then the risk is as well.

Thanks for the links and the summary!

> So when shall Canada close its borders to all not accompanied by a 
> sufficiency of Au ingots?

But Box let us know that Canada lets poor native people die in hospital 
waiting rooms, so their system must be horrible.  :-<  ( 
http://www.cbc.ca/canada/manitoba/story/2008/09/24/sinclair-death.html )

Canada's been a wonderful place when I've visited.  But I'm not thinking 
about moving, myself.

I'm hopeful that the psychology of the markets will change for the 
better after the election.  The Republican brand seems to be collapsing 
- there's even realistic talk of the Democrats having a chance for 60 or 
more votes in the Senate.

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/03/AR2008100303699_pf.html

We've got another debate coming up this week.  I wonder what new crisis 
will pop-up...  :-(  Once the uncertainty of the national government is 
resolved, I think things will start settling down.  Stagflation, anyone? 
  :-(

Cheers,
Scott.