Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com

Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com
Reasonable debate to have. In my book BICs 4 Derivatives Volume I : Theory
(Chapter VIII, pp 192-195), I argued for a central counterparty organization as counterparty of reference on all trades which guarantees the payment of contractual agreements on both sides of a transaction.

The systemic risk overseeing entity should act as central counterparty of reference on all trades whose default may pose a systemic risk or act as a regulator and guarantor of last resort to private entities (exchanges, clearing houses,...) who play such a role.

As a guarantor of last resort, this entity may be best within FDIC; As guarantor of credibility through the power to print money, this entity may be best within the Central Bank authority. What is most important in my view is that its function be articulated as proposed above.

TALF Is Reworked After Investors Balk - WSJ.com

TALF Is Reworked After Investors Balk - WSJ.com

This subsidized lending program just looks like major league subsidy to the securities industry with layers of transaction costs that incentivize people to trade in potentially irrational way with cheap money and are likely to contribute to TARP assets price inflation . Why not just do market making as I have repeatedly suggested?

The key mistake here is that policy makers seem to confuse
- incentivizing trade on securities with high economic impact which should be the mission of the government here and would lead to a more rational underwriting industry practices going forward
vs
- encouraging the potential reckless issuance of new securities which may in fact perpetuate the practices that led to this mess.

John Stewart Vs. Jim Cramer

The Daily Show with Jon Stewart | Stewart vs. Cramer:
A few thoughts:

1) "Is collective responsibility an alibi?"

This topic of my high school philosophy dissertation exam seems to me like something that out to be debated or revisited here. All the culprits in the present crisis seem to think collective responsibility is an alibi. I differ.

How at the very least about a journalistic or governmental effort to search and single out the heroes?


2) "It is much easier for a man to fail conventionally than to stand against the crowd and speak the truth" John Maynard Keynes

The usual expectation is that the one(s) who stood against the crowd and spoke the truth at great cost to themselves would reap the benefits when convention fails.

Painful as it was to watch for Mr. Cramer, I suspect he is still going to be having his show and make even more money "head he wins, tail you loose".


I have spent a decade on BICs, and BICs would have helped and can still help get out of this... And here am I, just as pitiful, out of the public sight and out of the public mind.

Where is the morality of all of this?

3) Is it time to debunk the Financial Investment Equity Risk Premium Fallacy
which says over the long term stocks outperform bonds?

(1976 Ibbotson Brinson) .See also:
http://www.dailyspeculations.com/scholarly/LongTermStockReturns.html
http://corporate.morningstar.com/ib/documents/MethodologyDocuments/IBBAssociates/IntnlRiskPremium.pdf
How about saying "Lies, damned lies, and statistics"

I bet that buying government I-Bond (inflation bonds) would yield a better return net of management fees and taxes than the large majority of index funds.
But saying that would destroy the entire financial advisory industry. So let's keep it quiet....

4) Finance and Economics is a complex and serious business that must be handled with nuance, intellectual sophistication that can sound very boring to simply minded persons; by attempting to be simplistic and entertaining to attract huge audiences, CNBC & Cramer dig for themselves huge holes in which they ultimately fall

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Stewart clip evidence against Cramer:


CARLY SIMON - YOU'RE SO VAIN referred to by stewart in the interview

Charlie Rose - A conversation with Timothy Geithner, U.S. Treasury Secretary

Charlie Rose - A conversation with Timothy Geithner, U.S. Treasury Secretary
In this interview he made a lot of sense. His enunciation of principles is coherent; however the actual tools to effect those principles, while not entirely unacceptable are not always the most effective I would think of.

"Ars sine scientia nihil est"

For example, when he is talking about doing the private public partnership to unclog tarp assets . They are going to lend money to private investors so that the can go and buy tarp assets. The contention I have repeatedly made is: why would this be better than setting up a market making operation on those assets traded at a refined level of granularity?

Mathematical Model and the Mortgage Mess - NYTimes.com

Mathematical Model and the Mortgage Mess - NYTimes.com

Yes, BICs 4 Derivatives Volume I : Theory chapter IX pp 203-232, showed that this was faulty and proposed the coherent alternative. When will you wake up people? when?
I cry a river over this. I cry a river over this....

As I have described at length in other writings(See this or this ), this crisis was a failure of the existing mathematical modeling framework at describing the real world dynamics of underlyings. Therefore the corresponding hedging and risk management strategies failed to represent reality and this fact becomes most obvious at times of crisis. One of the reasons for this development is the over-representation of former physicist at the highest levels of "quantdom" who have forced the adoption of a framework coming from another world. But "It ain't physics". It just ain't.
And I cry a river over this. I just cry a river over this....

Saturday Night Live - Geithner Cold Open - Video - NBC.com

Dear Mr. Secretary Geithner,
Please , read this:

Fair Value Pricing, Government Market Making and TARP

How to Value Illiquid Toxic Assets clogging up the banking system

Please, please, please

CNBC Gives Financial Advice | The Daily Show | Comedy Central

CNBC Gives Financial Advice | The Daily Show | Comedy Central
Enjoy, Enjoy Enjoy.

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day