Friday, 25 February 2011

Travel Insurance

There is no doubt that every people like to travel. The role of travel insurance is huge for those people who like travel. In travel insurance there are many incidents can happen such as general travel expenses, damage of baggage, cancellation, other health related claims and other critical aspects of your entire trip. So if you purchase the travel insurance then its good for you as it includes adequate coverage for lost or stolen baggage and it's contents. The rate of travel insurance depends on insurance coverage according to the expenses of the goods covered and the type of policy.

Tourism sector offers most of the travel insurance plans therefore you can purchase the travel insurance. There are also many insurance companies available from where you can purchase the travel insurance according to your plan.
In case of travel there are many unforeseen circumstances such as theft of baggage, theft of cash, cancellations of flight etc may occur during the trip but these problems can solve with the help of travel insurance.

Here are some examples of travel insurance which you can purchase like accidental, travel delay and termination, theft of baggage etc. There are certain medical evacuation insurance which helps in a situation where a visitor needs immediate service health emergency in a hospital as well as there are also many travel insurance companies that cover their medical, accidental death claims and unforeseen health emergencies.

Always keep in your mind that before purchase any travel insurance you should read all the terms and conditions. In this way can know all the information about the travel insurance which are going to apply.
We can't guess about the unforeseen circumstances in our life and if you are a frequent traveller or think about to travel then you should purchase a travel insurance.
Bon voyage.


Thursday, 17 February 2011

Solve Your debt by Debt Consolidation Company

Its very common that if we are to fall into debt then the life become so miser and on that time people feel very helpless. We know that its not easy to come out from the situation of debt and when every morning you will receive the debt related bills at your door then your headache will increase. If you are in debt and unable to pay your debt amount then it can take away your happiness of your life. If you are not paying the debt amount then your debt will get increase due to interest rate. And in this way you have to face a major problem with the big debt amount. Always try to pay your debt amount as soon as possible. But if your debt amount is big and you can not pay at a time then you should look for alternate option to solve your problem. In such a situation you can take the help from debt consolidation companies.

There are many debt consolidation companies who can help you to come out from the debt. So you should consult with the debt consolidation companies as they are very expert in this field. They have the proper knowledge and experience about the debt consolidation as well as they are very professional in this field. They have very good negotiation skills so they can consolidate your debt in nice way.

You can get the different options to solve your debt problem from debt consolidation companies. But you should select that option which is appropriate to you. You need to give all the details about your debt to the debt consolidation company like how much debt you have and how much you can pay etc. Debt consolidation company will contact with your lender on behalf of you and they will do the negotiation with them about your debt consolidation. In this way you can solve your debt problem with the help of debt consolidation company.
One thing keep in your mind that before approach to any debt consolidation company you should collect as much as possible information about that debt consolidation company. This is because there are many debt consolidation companies who are involve in scam.

Wednesday, 16 February 2011

America, Madoff, The New York Times

I will put you in a car in front of 1600 Pennsylvania Avenue and drive for an hour at the direction of your choice. Not particularly fast; about 60 or 65 miles per hour.

I will then stop in a small community and ask you to walk out and look around and talk to people.

You will not believe you are in “America” in the second decade of the 21st century. Not so much because of poverty, mind you, which reduced Bobby Kennedy to tears, but because of impossible, almost surreal ignorance; it will jolt you. “Folks” who think that the age of the earth is 3,000 years, who think New York is a foreign land, who have never – EVER – heard of California and who believe in a physical devil who would come and take you to hell, which they think is a few thousand feet below, above BP's Deepwater Horizon. Couples – men and women – who make the two hillbillies in Deliverance look like a pair of French intellectuals in a Left Bank cafe.

And it goes on and on, getting worse as you head to the West and away from the metropolitan areas. People who will not accept silver dollars because they have never seen one and do not believe it is for real.

Then, just when you are about to write off the country as a nighmarish post-Apocalyptic community of savage dim wits, it happens. You run into this “fella”, smack in the midst of hillbillies with rifles in the back of their trucks, who would tell you that right is right even if no one does it and wrong is wrong even if everyone does it. And his notion of wrong and right would be so right on the mark, as if formulated by Kant himself. And he would defend that belief with a zeal and conviction of a suicide bomber.

And then you run into the second such person. And then the third, and fourth. And hundredth. They are everywhere. They are not the majority by a long shot. But they are a strong enough minority to have its presence noticed.

The point? You belittle the Americans at your own peril.

All this by way of circling back to today's Madoff story in the New York Times. The single quote, Madoff saying that the banks “had to know” of his fraud was splashed on the front pages of all papers and news sites in the country and beyond.

The idle statement, coming from a criminal serving a life sentence, has no value. It means nothing. It will have no effect on the outcome of the lawsuit that the Madoff trustee has filed against the banks. Everyone knows that, the Times editors included.

But they are playing a game. They know that banks are under attack for greed, wrecking the economy, etc. So they have decided this is a good time to soften them for a settlement. Wouldn't a few billion dollars to pay Madoff “victims” be a politically/public rationally nice thing to do, Mr. CEO?

That's what they are after. And they think no one realizes that.

Banks had to know? What about others, say, the “victims”? From the Wall Street Journal, Nov. 19, 2010, p. C1, under Former Madoff Employees Indicted. I report, you decide!
Ms. Bongiorno, 62 years old, who joined Mr. Madoff’s firm in 1968, allegedly used a computer program to create blank account statements and revise existing account statements, according to the criminal indictment.

She sometimes asked certain investors to return previously issued account statements so that she could alter them, reflecting trades that purportedly occurred before their accounts had been opened, the indictment said. She allegedly received specific instructions from clients about the amount of appreciations and gains they wanted to have in their accounts.
Read that last part again: She received specific instructions from clients about the amount of appreciations and gains they wanted to have in their accounts.

If I didn’t have more pressing matters! If I cared about, if I gave a damn about these crooks and criminals!

Sunday, 13 February 2011

High Frequency Trading and Flash Crash – 5: “Discretion to Delay Trades”

It is easier to gain insight into the theoretical principles of a system in its early stages of development. The early stages, whether of a natural, mechanical or social system, include only its defining features, those irreduciably minimum parts which are absolutely necessary for it to become what it is. As such, they are easy to spot and “tie” – through reverse engineering – to the principles that drive the system. As systems become more mature or more “advanced”, the layers of the later additions cover and obfuscate the essentials.

Thus, if you want to understand the principles of mechanical flight – powered, sustained, controlled – you’d have an easier time with a replica of the Wright Brothers’ plane or a 1920s crop duster than an Airbus A380. The latter has way too many components that are not essential or even related to mechanical flying. They get in the way of understanding what makes a machine airborne.

(I was told that within a few years German cars will have no hoods that drivers can open, which is just as well. Even today, under the hood of a BMW, for example, you only see sealed boxes with warning signs not to touch. So, while a layman could understand and thus, fix, a 1950s Ford, few drivers could make head or tail of a modern car, although the principles on which it moves are exactly the same as that of a Model T or even earlier: an engine produces power which is transferred to wheels which move the vehicle.)

The same applies to natural phenomena, which is why scientists constantly “go back” in time – whether through studying fossils, for example, or looking at the outer edges of the universe – in search of the earlier forms of their research subjects

And the same goes for social systems. High school students will hardly suspect it, but the reason we study history is to learn the past conditions that have shaped our societies. Only by knowing the past can we map the course of social development and locate our position in that process. To understand capitalism, for example, we have to go back to the time when the contours of this particular socio-economic system were being formed. Without that historical context, we could tell stories about the City hedge funds or HF traders – there was this “hedgie” who was so razor sharp and so eccentric and loved arts and only drank Opus One and etc – but we would understand nothing about the system.

(The logical equivalent of this “going back in time” is abstraction: peeling away the logical layers of a phenomenon to get back to its reason. “In the analysis of economic forms,” Marx wrote in the opening pages of Capital, “Neither microscopes nor chemical reagents are of use. The force of abstraction must replace both.”

That is why I began the HFT and flash crash series with a historical and historical background. Looking at HFT as is, it is difficult to see what is wrong with the practice. So, many trades are now being executed very quickly; instead of thousands of trades a minute, we now have millions. So what? Don’t they cancel out one another? And how exactly does that bring about a crash – or flash crash? Those were in fact the questions a commentator asked in Part 4 of the series.

Following the course of the development of trading in the stock exchange allowed us to see how speculative capital managed, over time and through various means to:

i) Reduce the bid/asked spread
ii) Increase the trading volume
iii) Increase volatility
iv) Break the monopoly of exchanges and specialist on order execution

These developments are sold to the public as benefiting “all the investors”; who doesn't benefit from a reduction in the bid/asked spreads?

But any benefits to the public, to the extent that they are real, are incidental. These changes are brought about not to benefit society at large but in consequences of the operation of speculative capital. They set the stage for further onslaught of speculative capital on markets.

Speculative capital, though, still remains unsatisfied. Not everything it wants and demands is achieved as a by-product of its operation. So, direct, human intervention also becomes in order.

The nature of such rule changes to the working of the stock exchanges are too technical to be noticed and appreciated even by those who follow the events.

Fortunately, like an anthropologist discovering an intact 30,000-year human fossil, I came upon this Financial Times news story (Nov. 1, 2010) about the Istanbul Stock Exchange that had all the critical elements in one place. The story was about the changes the ISE had adopted to make itself appealing to speculative capital – a replay of the Turkey's EU membership process on a small scale. It said:
Turkey's main bourse, the Istanbul Stock Exchange, is set to become the latest to open up to the rapid electronic trading practices that are sweeping the world’s markets with plans to ease access to foreign investors.

Brokers planning to take advantage of the moves said the change, effective from Monday, would open Turkish equity markets to algorithmic trading and attract quantitative investors.

The ISE will begin reducing tick size, the increments by which prices can move up or down, for stocks and exchange-traded funds, in a step likely to appeal to high-frequency traders.

Other changes, which took effect in October, allow traders, for a nominal fee, to cancel or reduce orders midsession – crucial to deploying algorithms making “passive” trades.
A third change the ISE has made means the identity of buyers and sellers will no longer be disclosed until the next session, a move some brokers see as a loss of transparency but others as a level of anonymity normal on European exchanges.
Overseas brokers had previously held back from trading in Turkey because “lots of the discretion built into algo trading US and European stock wasn’t available,” said Rob Boardman, Europe managing director of broker Investment Technology Group. “If a machine wanted to delay trading for a while, it couldn’t.”

If a machine wanted to delay trading for a while, it couldn't. Now, it can. This, FT calls “discretion”, i.e., freedom, that US and European stock exchanges offered but the ISE did not. Until now. Turkey, too, is emerging.

Mark that sentence. Therein lies everything you need to know about HFT and flash crash.

And I just realized that I would need more than 5 parts before I am done with the series!

Friday, 11 February 2011

Happy Home Loan

It is not possible for human being to live without a home. Every family needs a home where they can live because home is a refuge for every human being where people can live. Every people want their own home in their own name. But if you want to build your own home then its not easy as you need lot of money to build a home. If you're thinking that's going to take time to save the money to build the house, then you should think about the home loan option. If you really want to complete your dream then home loan can help you a lot. The home loan will provide the money you need in order to build a house.

There are many banks and financial institutions who issue the home loan but in home loan you have to give the guarantee to bank that you have the ability to repay the loan amount. You should always give the correct information to the lender like your financial situation, any pending improvements to your financial situation. The bank officer would like to know about your current status, income and other economic conditions to ensure that you can repay the loan amount. If you can fulfill all the eligibility for home loan of bank then bank have no problem to issue the home loan for you.

There is a profit of bank to issue home loan for you. So, bank issue the home loan to those people who fulfill all the eligibility of home loan. Bank gains profit by interest rate from the home loan. So, its mean that you have to repay the amount of home loan with interest rate to the bank. If you can't repay the amount of home loan on time then interest rate on the loan amount will increase and you have to pay more.

If you have decided that you would like to take home loan then you should contact with experts on home loans. Because experts can give the good and correct idea about the home loans.  

Wednesday, 9 February 2011

Funny in Finance

Today, I chortled while reading the Financial Times. I want to share the story with you because it is funny. Not shaking-your-head funny but real, ha-ha funny.

An outlet by the name of the World Sugar Committee called high frequency traders in the sugar market 'parasitic'. “Sugar body blames ‘parasitic’ computer traders for volatility” was the heading.

No, the World Sugar Committee is not a spoof from a Woody Allen movie or a remake of The Airplane! And no, it is not a communist organization in North Korea. It is, according to the FT, “an advisory group [whose] members include some of the largest trading houses, hedge funds, brokerages, producers and refiners”.

So the hedge funds, the locusts, are calling the HF traders parasites!

That is amusing. Now comes the funny part. In a strongly worded letter to the ICE Futures US exchange, the WSC president complained that “the presence of new high-frequency speculative funds only serves to enrich themselves at the expense of traditional market users.” He added that the rise in volatility was “causing difficulties for members of the real sugar community.”

The man thinks that hedge funds, brokerage houses and large refiners comprise the “real” “sugar community”. Isn’t that sweet!

In the previous posts on HFT, I pointed out, but did not emphasize – because all adults should know that – how ruthlessly and viciously the positions of power and privilege are defended. So there is this small “sugar community” of hedge funds, large brokerage houses and larger refiners having a nice gig and then come along these HF traders, “ruining” the game for everyone.



Rumi tells the story of the ink which claims to be the “writer” of the lines on the paper. The pen points out that ink is only a tool and that it is the real writer. The hand corrects them both, stating it is the real writer. The brain makes the case that it is the real writer. Rumi comments that beyond the silly exchanges, the real writer -- he means God -- remains hidden.

So hedge funds call the HF traders parasites. Germans call hedge funds locusts. Beyond them all stand speculative capital that mercilessly arbitrages out the prices, market after market, until it reaches a dead end – pursued wildly by all the “players”, from hedge funds to high-frequency traders.

I will have more on this point in the final part of HFT and flash crash.

Monday, 7 February 2011

Summers in Winter

I have a full plate of things I have to do, on top of which stands Vol. 4 of Speculative Capital whose completion is getting more pressing with each passing day. So, I ignore the uninterrupted stream of drivel that passes for economic discourse in the press and media. But when I read the (brilliant) Larry Summers’ last interview with the New York Times this past Wednesday, I decided it merited a brief comment for educational purposes. When it comes to highlighting the barrenness of thought and intellectual rot in the government and academia, old Larry can be counted on to deliver.

Here is the opening paragraph from the interview:
The peripatetic Larry Summers is once again back at Harvard, teaching a class on American economic policy with Martin Feldstein and Jeff Liebman – two other prominent former government economists – and reacquainting himself with the joys of free speech now that he is no longer President Obama’s director of National Economic Council, President’s Clinton’s treasury secretary or Harvard’s 27th president. What better time, then, than winter to check in with the lion?
Ok, now I get it. So in the past 30 or so years, loquacious Larry could not really talk and write because he was hampered by the constraints of high offices which he had sought. He had to hold his tongue, you see, (which he never did), in consideration of loyalty and higher good.

Now, though, here he is, free at last, having shaken off the shackles of higher calling. The time then for this lion to break the dams of manly silence has come. What mysterious workings of economic laws will he reveal?
The key to higher employment, he said, is increasing the demand for the goods and services produced by American companies. “You don’t hire more waiters unless the waiters you have in your restaurants have more work than they can handle,” he said. “There is a continuing shortage of demand, and that’s the root cause of unemployment. It’s the root cause of low capacity utilization … What you need to do is have more output with more people, and the way you have more output with more people is you need people who want to buy that output, and that’s why it comes back to demand”.
Let’s see now; how does one take this?

First, note his example of the waiter. If there were such a thing as an economic Freudian slip, this would be it! In discussing employment and job openings, the brilliant economist does not give – because it does not occur to him to give – the example of an assembly line worker or, say, a programmer. Those jobs are gone the way of the American Buffalo. There is nothing Walmart sells that is not produced in China, and Larry Summers knows that. What is more, he has seen the breakdown of the Labor Department’s employment statistics. Newly created jobs in the U.S. are mostly in the service areas: waiters, home care nurses, barmen and alike. Hence his clinical language on “increasing the demand for the goods and services produced by American companies”, because “shortage of demand is the root cause of unemployment,” he says.

But is it? Is shortage of demand the root cause of unemployment?

Only in the same way that gravity could be said to be the “root cause” of all plane crashes. You can see this abuse of the root cause in Larry’s circumlocution: You have unemployment because you have low capacity utilization because people cannot buy because they are unemployed. So you have to produce more with more people, so more people will buy more products and then they will be employed.

Got it?

The same day that Larry’s interview was published, the largest U.S. drug company, Pfizer, was in the news. Ian Read, the company’s new CEO, had announced the closing of a well-known research center in the UK with a loss of up to 2,400 jobs. Stock analysts loved the move. The company’s stock jumped 5 percent. "Just what the doctor ordered," wrote Jefferies in a research note. The “Lex” columnist of the Financial Times explained the meaning of all that, and, in doing so, knowingly or not, he also explained the real root cause of unemployment in the West as few economists could:

The more than 2,000 employees of Pfizer’s research facility in Sandwich, England, who helped develop Viagra and other blockbuster drugs, can be forgiven for feeling deflated. They and thousands more employees worldwide – along with patients awaiting breakthroughs in therapeutic areas that have been deemed commercially unpromising … – are losers in a reshuffling of priorities by the world’s largest drugmaker.

The move by incoming chief Ian Read is not so much a radical shift as an intensification of the past five year’s strategy. During that time Pfizer returned about $45bn in cash to shareholders while continuing headcount-shredding mergers … Now it will cut an additional $2bn from planned research and development spending to return the savings, and then some, to owners.

Already having one of the highest dividend yields in the S&P 500, Pfizer will add $5bn to an existing $4bn share buy-back plans. The move pleased Mr Read’s most important constituency – shares rallied after the announcement.
There you have it. The company lays off people, shuts down research centers and severely curtails research – research being a drug company's long term survival insurance policy – and returns the resulting savings to investors. Wall Street loves it. Finance capital triumphs yet again to the detriment of research and production.

And Pfizer is only one of the thousands of companies, all following the same script.

The brilliant economist looks at the economic landscape and sees none of that. What do you offer then, by way of advice and solution, if you do not see, much less understand, what is taking place before your eyes? Why, you deliver drivel:
Summers said there are numerous ways to stimulate this demand: by increasing exports; by encouraging companies to make new investments earlier than they otherwise would; by investing in the nation’s infrastructure; by encouraging people to consume more; and by substituting new technology for older technology. “I got three PC’s in my basement, but I still want an iPad,” he said by way of example.
He wants to increase exports – just like that. Which products, to which countries, he does not say.

And he wants Americans to consume more: more fat people eating more Big Macs; more maxed out, foreclosed consumers buying more electronics gadgets. It is advice for curing economic ills you would hear from a Miss America contestant.

The other day, Nick Clegg was explaining the UK coalition government’s economic plans. “We are determined,” he said, “to foster a new model of economic growth, and a new economy – one built on enterprise and investment.” To that end, he added, he would seek advice from business leaders and “economic experts.”

Larry Summers is one of the most sought-after economic experts. May the Lord deliver the British people from them.

A lion in winter? I say an ass for all seasons – and for good reasons.

Saturday, 5 February 2011

The Ratings Charade Continues: A CLO Investigation, Part II

To bring you up to speed on this exciting melodrama:

Last time I showed you why CLO (collateralized loan obligation) ratings are almost certainly a scam, and why Mr. Ratings Guy from Standard & Poor's should know as much. It was (I hope) a math-lite and entertaining trip through the bowels of high-finance complexity, Wall Street style.

Of course I reached the end of the rather long post with more questions than answers. Why does this ratings scam exist in the first place? Who benefits? Who loses? In today's conclusion, we'll look at the not-so-surprising answers. Center stage in this discussion will be the misrated AAA tranche. It's the largest CLO piece by far, a good 70 percent or so of the overall fund -- and, as you're about to find out, that's no accident.

So why does Mr. Ratings Guy turn a blind eye to ratings that, deep in the pit of his stomach, he knows can't be correct?

Remember Upton Sinclair's little gem of wisdom:
It is difficult to get a man to understand something when his salary depends on his not understanding it.
Structured finance (e.g., CLOs) is very lucrative for ratings agencies. Even if you're the Jim Carrey character in "Dumb and Dumber," you can rate U.S. Treasuries with your eyes closed. Can you say "AAA"? With a bit more work, you can rate investment-grade bonds and loans. But once you dip into junk-rated and structured finance stuff -- ah, that's where it gets complicated. And complicated = higher fees.

So S&P gets paid more to rate CLOs. If the company started to challenge specific CLOs -- if it dared to say, "You know, these ratings don't make sense for this CLO" and began to push back against investment banks, one of two things would happen. (1) The bank, realizing its screwy models had been sussed out, would not structure more CLOs. (2) The irritated bank, which is paying the ratings firm, would simply find another ratings patsy -- Moody's? -- to play along with the bogus rankings for a big fee check.

Either way, it's clear what happens to S&P: It loses a rather fat revenue stream.

Now, why does the investment bank want to structure these things in the first place? This is pretty easy to answer too. Fees, fees, fees, fees. Underwriting fees for CLOs run to 1.75 percent, compared with an average of 0.4 percent for investment-grade bonds, according to Bloomberg News data.

Okay, that explains what's going on on the supply side. But it takes at least two to play in the markets. What's the incentive for the investor to buy misrated CLOs? Is the investor just the naive fool here, hoovering up misrated junk that will later plunge in value, leading him finally to clap a hand against his forehead and exclaim, "Oh, what a terrible mistake I have made!"

Probably not. At least not anymore. Recall that well-worn saying, "Fool me once, shame on you, fool me twice, shame on me."

There was a lot of complex, securitized crapola that cratered during the financial crisis (and has since recovered in value to some degree, but not to the degree that its initial AAA ratings would suggest is proper). So investors got caught playing with the effluvia from the sewer pipe and got burned. Are they really as stupid as they once were?

Nope. In fact, just return to my first post and look at what the tranches of a CLO pay these days. The "AAA" piece that, pre-credit crisis, would have paid 25 basis points plus the Libor rate, now yields 160 to 170 basis points plus Libor. Big, big difference. For those who aren't finance geeks, here's what that means in actual interest rates: three-month Libor is about 0.3 percent, so the CLO buyer who in 2006 would have accepted 0.55 percent as initial interest (assuming today's Libor) now insists on more than three times as much, or as much as 2 percent.

Last time we proved the ratings are an illusion, a clever chimera ... so let's say today's investor, being smarter about these CLOs, knows the game too. What does the 2 percent imply about the true rating? Well, you'd have to skip down S&P's ratings scale a bit to find the "true" rating, based on what investors are willing to pay. And that happens to be about six or seven rungs below the professed rating: much closer to "junk" level than AAA.

This is essentially what the investor is saying to the investment bank selling this stuff: "Sure, I'll take some of that 'AAA.' I know the market is just irrationally frightened of CLOs right now -- (nudge, nudge, wink, wink). I know that I'm getting real AAA at a great price, just because this asset class is out of favor because of the lingering taint from the financial crisis that has unfairly tarred securitized products! (nudge, nudge, wink, wink)."

Inside the investor is thinking: "Yeah, AAA my ass."

Now you may be wondering: What's the incentive for an investor to do this? What's the point of going along with this charade? And this is where things get interesting. There are a number of good reasons to play along with the fake "AAA" ratings:

1. You can use the AAA ratings to burnish your investment results. Say you manage a money market fund that can buy only AAA securities. You can sneak some pseudo AAA into your portfolio and goose your returns. How? Because it's rated AAA, but it pays about 165 basis points more than Libor, or more than three times ordinary AAA. So you'll look like a genius, outperforming your peers, until this junk explodes in your hands (and that could take a while -- remember, it's still probably investment grade, just a good deal lower than AAA).

Update: Ah, the perils of working too quickly! I meant to check out investing requirements for money market managers because I feared -- and I was right -- that my example doesn't work because they can't buy certain AAA products. It turns out money market funds must contain investments with a maximum weighted average maturity of 60 days. (A lot of structuring does spin out tranches with special A-1 or P-1 ratings that are of this shorter, desired maturity, but I don't think any CLOs do.) However, the idea still holds for other AAA-only fund managers: They can use pseudo-AAA from a CLO to burnish their results. A relevant fund for such a strategy might look more like one of these (note: the funds on this Web page invest in "AAA-rated fixed-income products" so I'm not sure if "structured fixed-income products" could qualify for the portfolio, but clearly if they could, the money manager will quickly jump to the head of the class, using pseudo-AAA from a CLO as "performance steroids," if you will.)

2. Certain entities, such as insurance companies and pension funds, have limits on what they can invest in. They can buy only AAA, or a certain percentage of their investments must be rated AAA. So these "AAA" (wink, wink) CLO tranches fit that criterion. This then becomes a neat little way to do an end run around an investing mandate that seems too restrictive to them, especially when they are under pressure to achieve higher returns (pension funds).

3. AAA securities are very useful in the huge "repo" market, where they are used to secure overnight loans, sometimes being rolled over continually. While AAA CLOs may be subject to higher haircuts (or discounts) than say a AAA Treasury, they still may find an important role once again in the repo market.

4. The new Basel III rules are coming, the new Basel III rules are coming! They are intended to make sure that a bank has enough capital to withstand shocks. These rules determine capital adequacy based partly on -- surprise! -- ratings of assets a bank holds. So having a bunch of misrated AAA on its books will help a bank heap on the risk again and plump up profits.

From Minyanville (my bold):
In the afterglow of yesterday’s “hugely oversubscribed” bond issue by the European Financial Stability Facility, (the “EFSF”), EFSF CEO Klaus Regling noted that demand was growing for AAA-rated assets “spurred by Basel III capital rules."
From Bloomberg (my bold):
Three years after collateralized debt obligations (note: a CLO is a type of CDO) helped trigger the worst financial crisis in 70 years, Wall Street’s math wizards are exploring how to use them to deflect rules intended to prevent the next crisis.
Credit Suisse Group AG traders are testing a risk model that may help them reduce capital charges imposed by the Basel Committee on Banking Supervision on derivative products.
Claudio Albanese, a quantitative economist who is advising the lender on the plan, says it could also help banks to limit one of their biggest risks by allowing them to offload through a CDO the risk that one of their trading partners, or counterparties, defaults. Critics say such CDOs could trigger a new crisis.
Albanese’s plan shows how banks are likely to try and mitigate rules that impose higher capital requirements on their operations and threaten profit ...
Okay, a cynic might say after reading up to this point, so what? Investment banks make out like bandits, the ratings firms get their cut, and everyone enjoys goosed returns and higher leverage. Why should I care?

For one, the existence of this ratings scam has the potential to create a distortionary effect in the market. It hasn't yet -- CLO issuance has dropped off a cliff since the glory days of several years ago -- but if the CLO machine cranks up again, suddenly there will be greater investor appetite for the securitizations. Now what's the hamburger that needs to go into the CLO meat grinder to produce these sweet patties of higher-than-normal yield? Leveraged loans. And who takes out leveraged loans? Private-equity firms. And why do they? To engineer sometimes-destabilizing takeovers that load up companies with debt.

So we encourage distortionary economic activity, higher leverage, more debt ... though in the short run, all this will give us a little meth-type boost in prices of stocks and other assets, and investors will feel a little richer, and we'll buy a few more big-screen TVs, and take a few more Acapulco vacations, and exult about how it's great we survived that bad ol' financial crisis ...

Now for the $64,000 question, the one that really matters.

Who's on the hook when all this collapses?

When CLOs go belly up, and massive wealth is destroyed, and credit freezes, and money market funds are about to break the buck once more, and we gnash our teeth and scream, "How can this be happening again?!?" and Jamie Dimon tells us not to worry because we go through financial crises every five years or so, so just take a pill and chill and stop standing on his bonus check?

That would be you. And me. That's right. Joe Taxpayers. A bailout will be orchestrated, overt or covert, and we'll all shoulder the burden.

Perhaps Ben Bernanke will do a slow-bleed of seniors and savers by infusing liquidity, rescuing the large and foolish banks (and other too-big-to-fail pieces of the financial infrastructure).

Just remember: It all starts with a misratings scam your Congress, snugly in the pockets of the banking lobby, never bothered to fix ... ;)

Friday, 4 February 2011

Elimination of credit card debt

Today credit card is very common and each city is using the credit card. But you should always keep in mind that if you are not using the credit card according to your financial situation then you can be in credit card debt.
Credit cards are very convenience for the people because if you have credit card then you don't need to carry your money all time. You can purchase almost everything by credit card that is why the alternative name of credit card is plastic money.
Whenever you are buying something by credit card then you don't need to pay anything but at the end of the month you will receive a bill for credit card. This credit card bill include all the charges of those things which you have bought by credit card and with some service charge of credit card.
If your credit card bill is very much high and you can not afford that much of amount to pay your bill then you will face a big problem. As there would be a deadline for credit card bill and within that deadline time the credit card customer has to pay their bill. If you did not pay the credit card bill then your amount of credit card bill will get increase due to interest rate and finally you will enter in the major problem of credit card debt. This credit card debt can become more dangerous and sometime people think about the filing bankruptcy. This is not a good solution because you can solve your credit card debt with other way.

One of the good alternative is credit card debt settlement. There are many companies for the settlement of credit card debt. You should consult with good credit card debt settlement company. They can give you proper ideas about the settlement because they have all knowledge in this area. These consultants are very professional and they have very good negotiation skills. When you will get the correct solution on your credit card debt then you won't think about the filing bankruptcy.
In debt settlement process you can reduce your debt as well as you will get more time. Because you can pay your credit card debt by installments as well.

Its not an easy job to remove your credit card debt unless you are not serious about the problem of credit card debt. If your situation like in credit card debt then you should manage your financial situation and consult with a good credit card debt settlement company. 

Wednesday, 2 February 2011

The Report of the Financial Crisis Inquiry Commission

The 500 odd page report that the Financial Crisis Inquiry Commission released last week pointed to “widespread failures in financial regulation, dramatic breakdowns in corporate governance, excessive borrowing and risk-taking by households and Wall Street, policy makers who were ill prepared for the crisis and systemic breaches in accountability and ethics in all levels”. It concluded that the crisis was “avoidable”,

Mainstream media gave the report a cold shoulder. The Financial Times wrote that like The Murder on the Orient Express, the report was saying that “everyone did it”.

But what would have been the alternative? To look for a culprit or a “smoking gun”? That, too, the Commission did – and with a vengeance. “They didn’t find a smoking gun but it wasn’t for a lack of trying. The chairman devoted too much of the staff’s time and energy looking for that smoking gun,” a Republican member of the Commission told the FT.

A calamity that paralyzed the financial institutions in two continents and affected many other countries in the periphery could not be due to a single cause or a smoking gun. This was evident in the dissenting report of a right wing commissioner who blamed Fannie Mae and Freddie Mac and, by extension, the government, for the crisis. Read his report and conclusion (p. 533) and compare it with my three-part posts on the destruction of Fannie and Freddie to see how a doctrinaire systematically falsifies the past events.

What the commissioners as a group failed to understand is that a crisis that shaped the conduct of many diverse parties, from rating agencies to Wall Street bankers and from regulators to fund managers, had to have an underlying cause that transcended the individual players. How else to explain those groups going “bad” at the same time.

The “cause”, we know, is speculative capital whose modus operandi in terms of bringing about the crisis I detailed in the 10-part post starting here.

But to see that, the Commissioners had to go beyond the live actors testifying before them to a philosophical abstraction that they could not see or touch. They had neither the ideological bent nor the intellectual horsepower for going that far. Thus, the conclusion was preordained. It was all they could do.

Otherwise, in terms of depth and breadth of the evidence and the chronology of events leading to the crisis, the report is second to none. I plan to use it extensively in my future writings.