November 24, 2009
On the Nature & Philosophy of Financial Instability and Application to the Current Financial Crisis Part V
Hard Asset vs Soft Asset Manager
By Julian Sanchez, PhD
The Hard Asset Manager:
What approach will be taken by the Hard Asset Manager will vary from market to market according to the needs of the local market. In any case the deflationary spiral must be stopped; otherwise no matter how much capital is put into the bank, banks will continue having capital deficiencies requiring more investment from the government. A deflationary spiral inhibits lending and mortgage insurance, since it would be foolish for banks to lend with asset prices continuing downward. It is critical the government stop the deflationary spiral anyway it can, including pulling the supply of homes off the market. Once the market is stabilized, its inventory of homes can be put back into the market, in a controlled manner, for a profit.
Soft Assets Manager:
A. MBS, CMO, SIV, CDO, ABS, CDX – The Taxpayer Bank should consider marking these assets to zero if they are not performing, since they are very difficult to unwind. The Taxpayer Bank should purchase these assets (and any other NPA) from a given financial institution, providing capital for the original value of the asset and receiving all equity in return (asset marked down to zero). This will fix the financial institutions earnings, raise its PE ratio and increase its stock value.
The Soft Asset Manager has several choices with soft assets:
1. Sell them cheaply to the public, thus earning a profit.
2. Hold on to them, waiting for the third party servicer to unwind the asset and obtain the hard asset underneath.
3. Assemble all the bonds associated with a given financial instrument and unwind them. The asset can then be turned over to the Hard Asset Manager for sale. Since the financial institution has been repaired at the time the government purchased these assets, the government has time to unwind these instruments.
4. Trade the government owned mortgages (written down to aid the homeowner and perform) with non-performing mortgages for a given security pool. Since the government’s mortgages are at lower interest rates, they will have to be overcollaterized to ensure the security pool’s bonds perform. Most securitized mortgage pools allow modifications to the portfolio when a loan is in or near default, if it’s in the best interest of those who hold the security. This allows the government to get access to non-performing or near default loans and turn them over to the Hard Asset Manager.
The option used depends on circumstances, availability of mortgages, interests of the taxpayer, and the economic stability desired.
B. Credit Card Debt – Since no collateral was given for this debt and the government received all equity (assets written-down to zero), the Soft Assets Manager should write these loans to zero and clean up the credit scores for stressed credit card holders, provided they take several financial classes and demonstrate an understanding of the basic concepts of personal finance. Most credit card holders have had no financial training and most credit card companies were aggressive in approaching these customers. Their current strained experience and the knowledge received from financial planning classes may incline many such debt holders to be more cautious when it comes to credit card debt. With such debt removed, this portion of the public can then start contributing to the economy.
C. Other Debt – can be structured in the same manner, provided the firm which owns the debt can issue equity and has a depressed stock price with respect to historical measures.
D. CDX, CDS, and Derivatives – Since a number of variables affect how they should be treated, these instruments are more difficult to evaluate. Considerations on pricing should not only include the original pricing of the contract but also the liability associated with the insurance aspect of the instrument. Many of these contracts did not capture the risk involved and are under-priced; therefore, the capital to equity exchange may need to be altered. One also needs to assess the viability of these contracts with respect to the probability for future failure. One needs to use probabilistic estimations of risk, which include counter-party risk, financial risk, systemic risk etc., as well as disposition methodologies for handling these products. The discussion of this class of financial instruments is complex and will not be covered in this paper.
December 25, 2008
7 myths about male sex preferences
Contrary to a popular belief, it takes more than loads of personal experience to find out what kinds of things men really hate doing in bed. Are you sure you know every little bit about your partner?
There are several widespread myths women have regarding male sexual preferences.
Myth No 1: men prefer women in lingerie
Myth No 2: men like erotic lingerie
The code of sexual attraction is cracked!
If the key to passion is mostly about chemistry, what are you going to do about it?
December 25, 2008
as daughter on life-support makes miraculous recovery:
Colleen Banton, from North Carolina, was facing the agonizing decision of taking her daughter off a life-support machine when the ‘miracle’ occurred.
14-year-old Chelsea had been admitted to the hospital with pneumonia, but a series of subsequent infections and a collapsed lung left the teenager breathing with the help of a ventilator.
As friends and family gathered to say their final goodbyes, Mrs Banton was alerted to an unusual bright light by a nurse.
‘On the monitor, there was this bright light,‘ she said. ‘And I looked at it and I said, “Oh my goodness! It looks like an angel!”‘
November 12, 2008
The first job offer Sarah Palin got after elections involved a lot of cash:
Alaska Governor Sarah Palin has received her first job offer since failing in her bid to become vice-president of the United States, and it comes with a large cash offer. Bill Fisher, AKA Cezar Capone initially offered 2 millions to Sarah Palin to appear in an adult film along with her husband. He also offered her husband Todd $100,000 and a new snowmobile if he’d partner up with his wife in the production. Fisher’s associates contacted The Sun Thursday to announce they were increasing the offer to $3 million with a lifetime supply of Alaskan king crab thrown in as a sweetener.
Despite attempts by various outlets to re-create the Sarah Palin character in several raunchy adult films, the real thing would likely be a much proffered scenario for tens of millions of her fans worldwide. Palin still hasn’t publicly responded to the offer, which was sent to her administration office in Juneau, Alaska, on Nov. 6.
We think that Capone is wasting his time. Sarah Palin may be better looking that most of what Washington has to offer, and certainly she’s one of the most desirable women over forty, but she’s definitely not playboy material.
November 5, 2008
Beam me up Blitzer!
You’ve never seen anything like this on television before. It is not an image of Jessica Blitzer speaking face-to-face in the studio. Is it a hologram? Blitzer didn’t see a hologram at all. He was just staring into empty space, and the hologram was only visible to television viewers. In other words, it wasn’t a hologram at all, but simply a 2D image superimposed onto the TV broadcast that made Jessica appear like a three-dimensional image hanging in the middle of the room.
November 2, 2008
Her first lover has to be intelligent and a good person. She says the main purpose is to come with the cash to go to graduate school to study Marriage and Family Couseling
July 17, 2008
We don’t know if the below is true or not, but it makes a great point:
An atheist professor of philosophy speaks to his class on the problem science has with God, the Almighty.
He asks one of his new students to stand and…..
Prof: So you believe in God?
Student: Absolutely, sir.
Prof: Is God good?
Prof: Is God all-powerful?
Prof: My brother died of cancer even though he prayed to God to heal him.Most of us would attempt to help others who are ill. But God didn’t. How is this God good then? Hmm?
(Student is silent.)
July 16, 2008
Schwarzenegger warns Bush, ‘Don’t be back’ GLOBAL WARMING
July 16, 2008
“The beauty and amazement of it all shows a beautiful artist and designer who created us to appreciate it all. Our eyes were designed to percieve and enjoy the Glory of it all and since the eye cannot function at all unless it is a whole we can trust that we have a designer who loves us.” Kenneth Perna
Can Evolution explain left handed molecules? British Scientist Sir Frederick Hoyle said the probability the sequence of molecules in the simplest cell coming into existence by chance is equivalent to a tornado going through a junk yard of airplane parts and assembling a 747 Jumbo Jet. Some others conclude that Science cannot prove that we’re here by either chance or design. Both require faith. Where will you place your faith?
July 1, 2008
It can turn anything from job interviews to the most routine of family gatherings into a sweat-inducing ordeal.
But a ‘love drug’ produced naturally by the body during sex and childbirth could offer hope to the millions of people blighted by shyness, scientists have said.