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#Post#: 22170--------------------------------------------------
Η ΤΑΙΝΙΑ ΤΗΣ &
#917;ΒΔΟΜΑΔΑΣ
By: Gold Standard Date: April 28, 2016, 1:29 am
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[center][glow=black,2,300]ΤΙ ΕΣΤΙ
ΚΑΠΙΤΑΛΙΣΜ\
7;Σ[/glow]
[img
width=600]
HTML http://ia.media-imdb.com/images/M/MV5BMjM2MTQ2MzcxOF5BMl5BanBnXkFtZTgwNzE4NTUyNzE@._V1_UY1200_CR69,0,630,1200_AL_.jpg[/img]
[glow=black,2,300]ΤΟ
ΣΤΟΙΧΗΜΑ
ΤΟΥ
ΣΤΟΙΧΗΜΑΤΟ]
1;
Ω ΣΤΟΙΧΗΜΑ[/glow]
[spoiler]The Core of the Movie Distilled Into 10 Bullet Points
I am a firm believer that anyone who understands greed can
understand what precipitated the financial crisis of 2008. The
terminology erects a barrier to understanding, and the movie
really helped explain all those crazy acronyms. Even so, events
went by pretty fast and a few things were not made clear. As an
investor I was watching the whole drama unfold pretty closely.
The terms really are daunting, but at some point I realized what
the people were doing with all those new-fangled investment
vehicles. What they did is very simple actually. It's basically
Greed Gone Wild.
Here is a summary of the main thrust of the movie:
1) The home mortgage has historically been considered one of the
safest kind of loans because the collateral for the loan is
land. The building on the land is also considered good
collateral because it must be insured against disaster (like
fire) before the loan is made.
2) Traditionally, home mortgages represented a loan from the
neighborhood bank or Savings and Loan. The bank earned money on
the interest paid by the homeowner as the principal was being
paid off. Sometimes a bank would sell the mortgage to another
bank. This usually generated a small profit for the bank and
freed up the cash to make another loan.
3) In the late 70s a mailroom clerk turned vice-president at
Solomon Brothers, Lewis Ranieri, got the idea to pool a large
number of mortgages together and sell them as a single bond.
They called it a Mortgage Backed Security, or MBS.
4) A Mortgage Backed Security is an example of a financial
engineering process known as “securitization”. Securitization is
simply the act of grouping together a number of assets with
limited liquidity (how fast they can be bought or sold), and
turning them into an investment instrument (a security or bond)
that is traded daily on an open market with thousands of
participants. Another term that applies to Mortgage Backed
Securities is “derivative”. A derivative is a made up investment
instrument that is *derived* from something real (like a home
mortgage). Finally, the term “Tranche” simply refers to a
section or portion of the derivative, in this case an MBS. For
example you would have the AAA tranche of the bond, the BBB
tranche, and so on.
5) Mortgage Backed Securities became wildly popular because they
were deemed extremely safe investments. Institutions in the
business of rating securities (Moody’s, Standard and Poor’s,
Fitch) gave the MBSs one of four tiered investment grade ratings
(AAA, AA, A, BBB). Pension and retirement funds, which are
always seeking a way to get a safe return on the billions of
dollars they manage, LOVED the MBS. In fact, the MBS was so
beloved that there was more demand than supply.
6) The demand for Mortgage Backed Securities was so great it
caused lenders and mortgage brokers to think up creative ways to
make more home loans. A simple way to make more loans was to
reduce lending standards. This gave birth to the subprime loan.
The minimum credit score (FICO score) required to qualify for a
home loan was lowered. Minimum income level was lowered. The
minimum down payment was lowered. The result was a lot more
mortgages were created. And thus a lot more Mortgage Backed
Securities were created, satisfying the insatiable need of the
market. THE IMPORTANT THING TO NOTE HERE IS THAT THE BANK MAKING
THE LOAN DID NOT HAVE TO WORRY IF THE HOMEOWNER WAS GOING TO
MAKE THEIR PAYMENTS ON TIME, BECAUSE THE BANK IMMEDIATELY SOLD
THE MORTGAGE TO A FIRM THAT WAS POOLING THE MORTGAGES TOGETHER
AS MORTGAGE BACKED SECURITIES.
This is how the term “liar loan” came into being. It got to the
point where people were just making up numbers when they filled
out a loan application because the information was not being
verified. There was no reason to. The risk was being transferred
to someone else.
7) At some point enough people were late on their mortgage
payments that the average MBS containing the mortgages was under
threat of having its rating lowered, thus lowering the value of
the MBS. In order to cover this up the CDO was invented. The
Collateralized Debt Obligation is just a fancy term for
repackaging risky mortgages in such a way that the rating
agencies gave them an investment grade rating. THE IMPORTANT
THING TO NOTE IS THAT THE FRAUD SHOULD HAVE BEEN STOPPED HERE.
THE RATING AGENCIES PROSTITUTED THEMSELVES TO INSURE THAT THEIR
VERY LUCRATIVE INCOME STREAM FROM RATING ALL THE MBSs AND CDOs
WOULD CONTINUE. As the character Georgia who worked for Standard
& Poor’s responded when Mark Baum (Steve Carell) asked if the
firm had ever refused to rate a single bond at the % of AAA
requested, “If we don’t give them the ratings then they’ll got
to Moody’s, right down the block.”.
8) People like Michael Burry (Christian Bale), Jared Vennett
(Ryan Gosling), and team Charlie Geller & Jamie Shipley figured
out how shaky the MBSs and CDOs were. Burry in particular saw an
upward adjustment on the interest rate on Adjustable Mortgage
Rate (ARM) loans coming. He foresaw that the resulting higher
monthly premiums would cause defaults on the mortgages. Burry
and the others coaxed banks into insuring the MBSs. The industry
term for insuring securities is Credit Default Swap or CDS. This
is not a very intuitive phrase but think of it like this: If
there was a *default* then the CDS holder gets to *swap* the bad
paper for cash. The banks thought that Burry and his ilk were
insane to make a bet on an event that had not occurred in recent
memory, but they took the money anyway (after all, they are
banks).
9) Even with relaxed lending standards creating record numbers
of mortgages to feed the MBS pool, the market place demanded
even more of these super safe investment vehicles. Too much
demand. Too little supply. So this time the problem of
insufficient supply was solved by creating a CDO of a CDO. They
called it a synthetic CDO. The synthetic CDO was simply a side
bet on a CDO. If the CDO made money the synthetic made money.
10) Recall that Burry and the others had made their own side
bets on MBSs. The side bet these guys made however wasn’t that
these securities would be successful, but rather that they would
fail. THE BIG SHORT. The investors in MBS, CDO and synthetic CDO
made money from the interest homeowners were paying on their
mortgage. Conversely the holders of Credit Default Swaps made
money when the homeowners stopped making payments. The twist was
that the banks that held the failed mortgage bonds were often
the same banks that had to pay out on the CDS protection to
insure against such losses. Ha. Ha. Ha.
Except the joke was on the American taxpayer as most of the
banks got a get-out-of-bankruptcy-free card. As the whole fiasco
reached a crescendo, all the financial institutions holding the
failed derivatives tried to sell them off to other unsuspecting
institutions (as opposed to doing the right thing and taking
their losses). It was a like a game of hot potato. But someone
had to end up holding the bag. At some point everyone wised up
and was in a panic to buy insurance on the MBSs and CDOs they
still held. That bid the price of the credit default swaps held
Burry, Baum, Jamie and the others through the roof. But even the
CDSs were at risk because many of the firms that were to pay out
if the CDSs were triggered were busy going insolvent from
subprime related losses. Before the bailout came it was looking
more like musical chairs, only with no seats left for anyone in
the game. Burry and the others appeared to be getting out just
in time. That is why near the end of the film Vinnie was begging
Mark Baum to sell his CDSs. In short order the swaps were
expected to be worthless. As it happens a few firms such as
Lehman Brothers, Bear Sterns, Countrywide Mortgage and some
others were allowed to fail. Hundreds of others like Goldman
Sachs, JP Morgan Chase, Morgan Stanley, Wells Fargo, and Bank of
America were saved from bankruptcy, by you and me.
Epilogue: The twists and turns in this real life story, like so
many Hollywood movies, seem to never end. At the end of the day
The Big Short postulates that the banks knew all along that a
taxpayer bailout was their ace-in-the-hole. And yet even after
this particular movie ends the twists and turns continue. The
widespread fraud that Mark Baum spoke of in the debate with the
“famous bullish investor” continues. I would suggest you google
the “Dodd–Frank Wall Street Reform and Consumer Protection Act”.
This law, passed in response the events depicted in The Big
Short, actually does exactly the opposite of what its name
states. The new ace-in-the-hole the banks have the next time
this happens is far scarier. Please educate yourself and take
what precautions you can.[/spoiler]
[/center]
#Post#: 23276--------------------------------------------------
Re: Η ΤΑΙΝΙΑ ΤΗ]
1; ΕΒΔΟΜΑΔΑΣ: NIGHT
CRAWLER
By: Gold Standard Date: June 1, 2016, 9:55 pm
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[center][glow=black,2,300]ΜΙΑ
ΓΕΥΣΗ
ΠΙΝΟΣΕΤΙΣΜ\
7;Υ[/glow]
[img
width=600]
HTML http://www.dvdsreleasedates.com/covers/nightcrawler-dvd-cover-71.jpg[/img]
[glow=black,2,300]ΓΙΑ ΤΟ
ΤΟΥ ΤΙ
ΣΗΜΑΙΝΕΙ
ΣΤΗΝ ΠΡΑΞΗ
ΙΔΙΩΤΙΚΗ
ΕΠΙΧΕΙΡΗΜΑ]
2;ΙΚΟΤΗΤΑ[/glow]
[spoiler]Ultimately, "Nightcrawler" juggles two tricky but
immersing features with its material, simultaneously giving us a
look into a grimy and often dirty gig as somebody who is
essentially a voyeur into the most vulnerable time of the people
he meets and posing frightening commentary on contemporary news.
The nightcrawler is not looking to help or to provide
encouragement; he's there to get his shots and move on, hoping
to turn as large of a profit as he can. We see Los Angeles in
the light of what could be classifiable as a contemporary film
noir, in dark, sometimes shadowy-photography and dingy
environments that reveal an ugliness to a city that is normally
captured as very beautiful and ideal in terms of climate.
www.imdb.com/title/tt2872718[/spoiler]
[/center]
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