Saturday, February 05, 2011

Irish eyes ain't smilin'

During the peak of the financial crises a couple of years ago,
when it seemed possible that the entire banking system could unravel,
I was in Bucharest for a week. I was having lunch with some Romanians
and they were asking me what was going on in the USA, their pensions
were in AIG. I gave a "I'm sure everything will be fine" that I didn't
believe and felt glad that I had wired some money to Europe the week
before, I thought the dollar was going to continue sliding.

I apparently suck at financial analysis because I had sent the money
at the peak of pessimism at 1.55 eurusd, then sent most of it back at
the peak of european fear last year at 1.25. Doh. (not even doh with
exclamation point, just doh.

Someone who doesn't suck at financial analysis is Michael Lewis from
Vanity Fair. I wanted to buy his book 'the big short' in houston last
year, but I was already burdened down like juan valdez' mule and couldn't
take a hardback book with me. A lot of content from that book is online,
including the story of AIG's trading group as told to Mr Lewis by insiders.

It was good that we didn't let the Romanian's lose their pensions, but
they could have done it without making The Goldman Sachs whole, or providing
a windfall to a guy that was betting against the housing ponzi scheme
instead of screaming about the problem from the rooftops. His story
is told in The Big Short and in a really excellent excerpt we get most
of the story in "Betting on the Blind Side"

That guy Dr Burry is a genius and he deserves to get paid, but very few people
put the whole problem together like he did, and certainly no one in
the government figured it out. (I could see it was a bubble, I knew
that the mortgages were being sold off as bonds from reading 'Liar's
Poker', but I had never heard about CDS' and CDO's before 2008)
Hopefully next time someone sees Armageddon coming down the pike, they
won't just buy CDS's against meteor strikes. ("so if a 100 m tall wave
washes us away, you have to pay $2MM? I'm rich bitches. But don't tell
anyone if they don't buy my newsletter.")

I also like ML's article on the Irish disaster where the government guaranteed a bunch of bankster money, putting the irish people on the hook for a few year's worth of tax revenue instead of just dumping the bondholder's
overboard like the more sensible Icelanders did.

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