Non Olet

Nov 8

“As a quick summary, and this is a broad based statement, but I am going with it: If a lien is shown to be “fraudulent”, that lien is effectively worthless. That means a secured creditor would now be an unsecured creditor. This is important because now instead of getting a piece of the pie after the secured lenders get paid off, everyone gets their fair share […] Say a company has $100M in assets. This company also has $100M in debt secured against those assets and $100M of unsecured debt. With a simple bankruptcy waterfall we see that the secured lenders will get 100% of their claim ($100M of assets / $100M of secured debt) and unsecured creditors will get 0% of their claim ($0M of remaining assets / $100M of unsecured claims). ¶ Now lets say those liens are worthless. The $100M of assets would now be split between $200M of unsecured claims ($100M voided secured debt + $100M of unsecured debt) with a recovery of 50 cents on the dollar for each. With liens, unsecured lenders are getting donuts. Without the liens, they are getting 50 cents on the dollar back.” Distressed Debt Investing: Fraudulent Conveyance

Nov 6

“Now maybe I am just hopelessly out of touch, or perhaps more accurately, the Fed has created such a ridiculously favorable environment for banks and traders that if you are moderately competent, making money is like shooting fish in a barrel. But a winning streak this consistent looks like a rigged game. Is this just, ahem, “information advantages”? Greater ease in pushing markets around that have fewer players? Just a function of those monstrously wide bid-asked spreads? I’m curious for a sanity check from people closer to the action.” Yves Smith in Mirabile Dictu! Goldman Lost Money Only One Day in Last Quarter « naked capitalism (via quotingthecrisis)

“KGNS, TV 8, Laredo, carried a brief report today that US Immigrations and Customs Enforcement agents found 28 illegal immigrants locked in the trailer of tractor trailer whose driver was attempting to smuggle them into the US from Mexico via I 35. This kind of operation used to be reported regularly in 2007 and early 2008, before the onset of the recession. The technique and the number of illegals in a single trailer indicate the human traders have concluded that the US recession is about over.” http://nightwatch.afcea.org/NightWatch_20091105.htm

“Those who favored the amendment saw it differently. They were simply out to help small businesses, which would be burdened by having to report on whether they maintained acceptable financial controls, and to have auditors check on whether those controls did work. ¶ They also suggested that more foreign companies would list their securities in the United States if they were spared that onerous requirement. No one seems to have asked if investors really would benefit from making it easier to invest in companies that fear such an audit.”

High and Low Finance - Goodbye to the Accounting Reforms of 2002 - NYTimes.com

[Notice how he gives the appearance of fairness by stating the opponents’ case, but then never revisits it? Notice how the only reason why a foreign company would not want to be subject to the provisions of SOX is “fear”? Notice how he never says anything about what SOX actually entails, just what it was intended to do? Notice how he offers no metrics whatsoever as to whether it has done so? This is a first-class example of something, but it sure as hell isn’t journalism.]

Nov 5

“A market where everything is rising is not an efficient market: it’s a market which is failing to do its job of allocating capital efficiently to where it can be put to best use, and away from areas where it can cause big problems.” Felix Salmon » Blog Archive » The roots of the coming crash | Blogs |

“Nouriel’s analysis is quite compelling, given the way the carry trade works. In its most harmless form, people borrow at low rates in a funding currency and then invest the proceeds in a higher-yielding target currency. When that trade starts becoming crowded, the flow of money into the target currency causes that currency to rise, which makes the carry trade even more profitable — you not only pocket the spread between the two interest rates, but you also get a capital gain on the fx trade. ¶ But this carry trade is even stronger still: not only are the target currencies rising, but the funding currency — the dollar — is falling. Players are making money on three different legs at once, and that means they can start investing not only in foreign currencies and local interest rates, but rather in a whole panoply of other asset classes, including commodities, energy, junk bonds, even equities. These assets might not yield much, but they don’t need to, if the funding currency is falling fast […]” Felix Salmon » Blog Archive » The roots of the coming crash | Blogs |

Nov 4

tiffehr:

The Recession and the ‘Paradox of Thrift’ - Economix

While it is conceivable that a few percentage points’ decline in consumption could cause a many-fold reduction in work hours, it seems more likely that the reduced consumer spending was mainly a reaction to layoffs and hours cuts. The roots of this recession go a lot deeper than the paradox of thrift.

Nov 2

“You know what would be really useful, is having a group of ambitious and forward looking venture capitalists allocating high risk funds and seeding smart startups with a couple hundred k as matching funds for whatever they can raise from angels. Even $100k or $200k would go a long way, and any [d]ecent entrepreneur can leverage the promise of matching funds to excite the angel community and get some traction. Hell, why isn’t there any stimulus money allocated for seeding technology companies anyway? How many jobs did cash for clunkers create? Think about a $3B injection into high-tech startups… Look at what we did with the Internet. Techpreneurs know how to create a lot of jobs, fast, and high paying ones to boot. Not only that, but we can innovate faster and better than the large corporations that are slow and heavy with bureaucracy. You want better methods to get into space? More efficient and clean transportation? Alternative energy sources? Ways to completely revolutionize media, education, medicine, training, and entertainment? Support the high-tech startup community.”

Venture Capital and Augmented Reality - Home - From the mind of Robert Rice

[Aren’t these high-tech startup types all supposed to be libertarians?]

“I wonder what’ll happen to our civilization when people realize that financiers don’t really do very much for the privilege of mishandling all the money. They work extremely hard, don’t get me wrong — they just don’t allocate funds very effectively. Societies top-heavy with financiers are in visible, physical decline — empty houses, unhealthy populations, decaying bridges, hollowed-out industries, that sort of thing. ¶ You’d think there’d be at least a few nonfinancial guys with tons of money who would look at the financial system and think, “Jeez, anybody could do a better job than THAT.” ¶ Maybe these canny tech investors exist already, and they’re all Chinese engineers at the top of the Communist Party.” The top 12 things he heard from VCs when pitching Augmented Reality | Beyond The Beyond

“Fitzgerald did not agree with Chicago School market theory, which is to say, he did not believe that more sellers means more competition, which means lower prices. Fitzgerald thought that if you had more sellers they simply raised prices to whatever they needed to survive. He wrote that Great Neck “became the most expensive [town] in the world” because the gold rush had lured “too many food purveyors for the population.” The purveyors all had loans to pay off, and could only survive “by selling things at two or three times the prices in the city 15 miles away.” Great Neck was so close to New York City that visitors were both an expense and an interruption. He noted that many “weary New Yorkers” made a habit of spending their weekends “at the Fitzgerald house in the country.” The American Scholar » Living on $500,000 a Year » Print

Non Olet

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