Rolling US Economy Into The Shitbin Thread

http://online.wsj.com/article/SB10001424052702303561504577495332947870736.html?mod=WSJ_hps_LEFTTopStories

Kinda lol mostly fuk

Bank of America Corp. BAC +3.42%thought it had a bargain four years ago when it paid $2.5 billion for tottering mortgage lender Countrywide Financial Corp. But the ill-fated decision has already cost the Charlotte, N.C., lender more than $40 billion in real-estate losses, legal expenses and settlements with state and federal agencies, according to people close to the bank.

"It is the worst deal in the history of American finance," said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte. "Hands down."

dudes were desperate to chip away at wells fargo mortgage division.. obviously this was not the right way to do it and I think almost anyone could have predicted such a thing would happen.. dummies.

Kind of reminds me of the famous $100 houses of Detroit...that required tens or hundreds of thousands of dollars of work/payment of fines/taxes etc.

http://bostonglobe.com/news/nation/2012/07/22/poverty-track-rise-highest-level-since/S6mOppYXf7NuFnmnJR20gJ/story.html

https://www.youtube.com/watch?feature=player_embedded&v=u8-d95SO_3g#!

unreal

P.S. I miss you tombot

also, the watermelon queen

http://www.businessweek.com/articles/2013-02-27/ben-bernanke-sean-duffy-and-the-watermelon-queen

but i thought prosperity trickled down?

https://www.youtube.com/watch?feature=player_embedded&v=QPKKQnijnsM

The history of all hitherto existing society is the history of class struggles.

That sounds like a sensible and justified policy to me. Not particularly lefty so much as an adjusted balance -- you want shareholder money, then let shareholders have more power.

This isn't going to end well...

https://www.youtube.com/watch?v=JGA_ZlZCljw

(wasn't sure if there was a Rolling China Economy Into The Shitbin thread)

tbf people have been saying 'any day now' since 2010 at least

tbf people said "any day now" for a couple years at least before our bust too

Bubbles develop their own momentum and internal logic, even when it is apparent to large numbers of observors that they are bubbles. Because of the dynamics of bubbles, even knowledgable investors will try to reap the last bit of profits from them, and often get burned for their greed when the damn thing explodes on them. The truly smart money harvests some of the big initial profits, then bails out long before the collapse, foregoing the last 40% of the rise.

I've seen at least two bona fide bubbles that I knew for what they were, long before they burst: dot-coms and US real estate. I have never ridden a bubble for fun and profit. Too much of a risk-averse weenie. btw, gold's big jump in the past few years I don't consider to be a bubble - at least not yet. It had some promise of that, but has stalled out below bubble status. Maybe too many investors are leery of it.

the Dollar rally is interesting

http://www.reuters.com/article/2013/03/08/us-markets-forex-idUSBRE91514J20130308

hooray

http://www.latimes.com/business/la-fi-fdic-settlements-20130311,0,3871291.story

Bubbles develop their own momentum and internal logic, even when it is apparent to large numbers of observors that they are bubbles. Because of the dynamics of bubbles, even knowledgable investors will try to reap the last bit of profits from them, and often get burned for their greed when the damn thing explodes on them. The truly smart money harvests some of the big initial profits, then bails out long before the collapse, foregoing the last 40% of the rise.

I've seen at least two bona fide bubbles that I knew for what they were, long before they burst: dot-coms and US real estate. I have never ridden a bubble for fun and profit. Too much of a risk-averse weenie. btw, gold's big jump in the past few years I don't consider to be a bubble - at least not yet. It had some promise of that, but has stalled out below bubble status. Maybe too many investors are leery of it.

― Aimless, Monday, 11 March 2013 04:22 (10 hours ago) Permalink

This is the result of a sort of assymetry in the market between long and short -- anyone can buy 100 shares of a stock and ride the bubble, but betting on the bust takes more sophistication, risk tolerance, and an ability to ride things out for a very long time. Irrational exuberance can last years and it's pretty hard to predict when things end. So even cynics often find it easier and more tempting to bet on the bubble than short it. This, of course, fuels the bubble.

OTM. There are a lot of people (and machines) who are adept at riding the bubble for a very long time, not to mention that risk mitigation is pretty sophisticated.

And if there's always a nanny state to bail your bank out, who cares if there's a bubble anyway?

bubbles actually existed before nanny states bailed your bank out

^

finance should really just not exist imo

"gold's big jump in the past few years I don't consider to be a bubble - at least not yet. It had some promise of that, but has stalled out below bubble status. Maybe too many investors are leery of it."

eh. i don't think it'll necessarily massively lose value. it'll just flatten while everything else rises. that's typically how metals work.

there's also so little actual gold that it really couldn't become a bubble (there was the creation of a fair amount of paper gold with ETF shenanigans, but even that could really only go so far. it's not like subprime where you could have cdo^2 and etc. but you could also just give more loans.)

finance should really just not exist imo

― flopson, Monday, March 11, 2013 11:44 AM Bookmark Flag Post Permalink

while I understand the sentiment, I think you might not have fully thought through the implications of this

barter or death

i mean, like, finance finance obv

How one feels about finance depends on how eager one is to return to the era before writing was invented. There were rudimentary forms of money lending and insurance even before the first coins were minted. Basically, as soon as there were cities, there was finance. As for me, I am contented if finance is heavily regulated, but allowed to continue.

Wasn't there a silver bubble pretty recently that Soros and Carlos Slim made a killing on?

i mean, like, finance finance obv

― flopson, Monday, March 11, 2013 2:12 PM Bookmark Flag Post Permalink

don't really know what you mean by this, sorry

Really highly remunerated masons unfettered by any government who exist only to invent ways to steal pensions, start with those guys

I mean, the mattress business is crooked as hell, but I don't want to eliminate mattresses

anti-masonry now? i hardly think they're a political force these days...

If 70% of mattresses were being sold to other mattress dealers while magazines were printing sad stories of families huddled together on a threadbare 1984 futon because they couldn't find anyone to sell them a new bed I could understand people calling for an end to the entire bed industry, not just the bad bunks.

smh at clover's naivety, smdh

i do want to eliminate mattresses

At least in 29 there was still some money in mattresses

i mean, like, finance finance obv

― flopson, Monday, March 11, 2013 2:12 PM Bookmark Flag Post Permalink

don't really know what you mean by this, sorry

― space phwoar (Hurting 2), Monday, 11 March 2013 14:58 (Yesterday) Bookmark Flag Post Permalink

i had this smug prof who had all these clever heuristic arguments for why we need finance, like: ppl somewhere in the world have spare cash they want to invest in something profitable while somewhere else people have profitable projects but need finance to start them, therefore, we need finance. it's a seductive argument but most finance as it exists involves exchanging currencies & other assets six billion times a day & then periodically destroying the entire economy, erasing years of growth, wiping out pension funds etc. the model of finance we use to justify the existence of finance time & time again is not what is actually called finance in the world. i think some form of investment market should be allowed to exist, but it should be socialized and/or regulated beyond recognition

Maybe the internet + instant global communication will destroy finance.

Just productivity tbh

productive finance vs "hot money"

i mean, like, finance finance obv

― flopson, Monday, March 11, 2013 2:12 PM Bookmark Flag Post Permalink

don't really know what you mean by this, sorry

― space phwoar (Hurting 2), Monday, 11 March 2013 14:58 (Yesterday) Bookmark Flag Post Permalink

i had this smug prof who had all these clever heuristic arguments for why we need finance, like: ppl somewhere in the world have spare cash they want to invest in something profitable while somewhere else people have profitable projects but need finance to start them, therefore, we need finance. it's a seductive argument but most finance as it exists involves exchanging currencies & other assets six billion times a day & then periodically destroying the entire economy, erasing years of growth, wiping out pension funds etc. the model of finance we use to justify the existence of finance time & time again is not what is actually called finance in the world. i think some form of investment market should be allowed to exist, but it should be socialized and/or regulated beyond recognition

― flopson, Tuesday, March 12, 2013 5:27 PM Bookmark Flag Post Permalink

The "growth" and "pension funds" you refer to are themselves inherently dependent on finance. I wouldn't argue with you if you called our financial system severely bloated or broken, but I'm also not clear on what a "socialized" investment market would constitute (although I guess we already have semi-socialized financing tools like the fannie-backed 30-year mortgage). The argument your professor made doesn't strike me as smug at all -- it's a description of what the finance industry is supposed to be, a big marketplace between investors and people/businesses/etc who need investment. For all the sexy, evil stuff that's in the news all the time, there's a lot of boring stuff integral to our economy as well. If you were to say "a lot of the activity of the finance industry is useless, if not counterproductive" I would agree. I don't know what the percent is though, and even today I doubt it's the majority.

I mean a huge percentage of financial activity is still "the model of finance we use to justify the existence of finance time & time again" -- mortgages, business loans, bond issues, institutional investment, etc. Even trading in currencies, commodities, stocks, etc. serves a useful function although it's arguable how much of it is really necessary to that function (probably less than we have now).

I mean a huge percentage of financial activity is still "the model of finance we use to justify the existence of finance time & time again" -- mortgages, business loans, bond issues, institutional investment, etc

Directly "productive" financial activity like you describe amounts to about 30%, according to Bloomberg. There's a grey area in the amount of the other 70% that goes to make profits that could somehow affect/support the 30%, but even then most of the rest is casino-esque fucking about.

word

i think a lot of ppl make the mistake "finance exists, therefore it must be serving some function" but u can't just jump to that conclusion. it's counterintuitive because you would think all that money & all these people are actually doing something, or at least that "a huge percentage" are... but, yeah, that's just not really true & even finance bros know it

it's an obvious point but i feel like i must point out that you're not defining your terms. you're saying "finance" and you seem to be talking about one thing (i.e., making short-term investments in risky "assets", making bets on bets, etc), but finance is a much larger concept than that.

yeah, i realize i'm being pretty crude... but like, all the discussion about financial regulation since the crisis has been such feeble stuff about capital requirements, how big is too big... no one is really questioning whether finance as it exists should be radically changed, it's just these little tweaks. i think there's a disconnect between the kind of proposals for reform being made & the models we use to justify the existence of finance. as it exists i think it's a destructive institution & a critical source of inequality (this book does a pretty good job making some connections bw financialization & inequality http://www.oup.com/us/catalog/general/subject/Economics/MacroeconomicTheory/?view=usa&ci=9780199855650) and no one is really addressing that

Finance is largely based on the difference between the value of money right now and the value at some future time. Finance is a hedge on the future, that is all.

Directly "productive" financial activity like you describe amounts to about 30%, according to Bloomberg. There's a grey area in the amount of the other 70% that goes to make profits that could somehow affect/support the 30%, but even then most of the rest is casino-esque fucking about.

― stet, Tuesday, March 12, 2013 7:20 PM Bookmark Flag Post Permalink

Would kind of like to read that Bloomberg article, if you can find it.

I think that, for example, having an active stock market with regular trading, while not "productive" does support the productive role that raising equity capital plays. But you only need so much trading to have a liquid market, and we obviously have way more than we need especially with high-frequency.

I also think it's unquestionable that the increasing role of finance has a strong relationship to increasing inequality, where so much wealth today is built on elaborate forms of arbitrage and skimming, as it were.

I saw an article in the past 6 months (I think) that showed wealth distribution in the US, minus the finance "industry"...I don't remember if this included shadowy elements of "finance" such as "life insurance" and all the various feeder industries that prop up that category. I'm looking at you, finance-related lawyers.

Elaborate arbitrage is kind of frightening, mostly because it is intellectually above the heads of most people (as is high frequency trading that is dominated by the algorithms and the quants that write them). On a simplistic level, it's merely playing the spreads just like any other gamble. But because modern, machine-based arbitrage is so complicated (and often lucrative), it has an insider feel to it and a lot of exclusivity. Consider the new fiber optic cable linking Europe, just so that HFT can grind down by the microsecond...