Finally, it's Friday...
First off, a very happy birthday to aflamingstar !! May it be filled with rainbows and unicorns, and such.
The sky looks really crazy right now. The clouds are all swirly. I wish i had my camera because it totally reminded me of Ghostbusters. I've already spent way too much time trying to track down the screenshot from the scene I'm thinking of, but it's not un-like this shot minus the sunsetting part, obviously. This one pretty much captures it. I had no idea how many pictures are taken that remind people of Ghostbusters. That's pretty awesome.
Last night was my first night bowling since I got back from Las Vegas(Vegas pictures/recap to come next week). I have to say that the American Meat Institute emerged victorious in fairly epic fashion. Slim Jim and The Gristle stepped up to eek out 5 points and make a push for first place. The team did not a thing more than was absolutely needed for victory. An example of this being the 10th frame of the first game where The Gristle needed 19 pins to seal the victory and threw a: strike - gutter - nine.
Lastly, I found two really cool videos that explain this whole financial meltdown that has wiped out 2 trillion dollars from the market in the last year and, finally, this week qualifies as a 'crash'. From October 2nd to October 9th the market has fallen 22%. To put that in perspective, the crash in 1929 was 23% over 2 days and Black Monday in 1987 was 22.6% in one day. Neither of these crashes include the total bear market downturn. The market is down 39% from one year ago. That's a lot of retirements set back. So, the first video is in regard to collaterized debt obligations, CDOs, which are what all of these "mortgage backed securities" are that are becoming such a popular topic as of late.
You can watch this video on www.livejournal.com
Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.
The second video is about credit default swaps which has exasperated the whole thing. CDSs are basically insurance policies that are not governed by insurance regulation so anyone can offer them, and everyone did, from banks to insurance companies. Insurance companies are regulated such that they have to have a certain level of assets to back up their policies so if a tornado hits, they aren't going to leave the homeowner with nothing but a smashed house if the company can't afford the disaster. Well, CDSs are insurance policies that are called 'swaps' instead(swapping the risk). Not classified as insurance so there's no pesky asset requirement and no one really knows how big the market for these are, but some estimate it to be $50-60 trillion. Take a moment to wrap your head around that number and consider that the entire market cap for publicly traded companies in the world topped out around $57 trillion. So, call me cynical, but explain to me how this $0.7 trillion bailout is planning to accomplish anything.
You can watch this video on www.livejournal.com
At the root of this problem are people who don't belong owning a home that own a home and until they get out, housing won't turn around and this problem cannot be fixed until housing turns around. I don't see how any "bailout" is worth anything unless the entire focus is to get worthy homeowners to start buying homes. I'm not sure if that means relaxing FASB Rule 157, which requires firms to value their assets at current values, to allow banks to start selling some conforming loans or if that's only inviting trouble, but that should be our focus. A google search of FASB Rule 157 yielded this post from last November. An excerpt below:
Relatedly, and not to get all obscure and accounting geek-ish, but it's hard not to wonder if FASB Rule 157, which comes into force this Thursday, will turn out to be the fire that lights the final fuse here. While it's laudable and all to force transparency and push market pricing, when everyone is forced to find a market price for illiquid instruments simultaneously during a credit crisis the result is a regulation-imposed death-spiral, with devastating implications all around.