Credit Markets: "Complexity" is French for "I got mine."
Remember the old saw about the Chinese symbol for crisis being a hybrid of the icons for Danger and Opportunity?

It's bullshit borne of some business consultant looking for a profound-sounding moment or 'take-away."
Likewise, the Securitization of Debt and it's hoary babysitter, Hedge Funds, have little to do with Fiduciary Responsibility mated with Risk Management and everything to do with a different, old combo thing that gets us into trouble: Boredom and Greed. And it's yet another example of the search for feeling boost of Hyperrealism because the actual realism thing seems so damn stodgy what with it not having CGI and a crescendo-building soundtrack by Celtic waifs or chanting Monks or, by Nickleback.
Damn, I'm such a cynic. Too many boardrooms. But Tanta, of Calculated Risk, ain't buying it either.
Wharton on the Future of Securitization:
"The lurking concept here is 'leverage.' You want to make the big bucks investing in MBS? You leverage them. That's where those CDOs came from. A whole lot of this complexity is driven by the 'need' to goose the yield, not by some essential opacity of the underlying credits or the failure of originators to retain residuals--which, in fact, they actually did quite a bit of in there. The complexity came in because you can't get a tranche paying 12% out of a bunch of loans that pay 8% unless you create complex cash-flow structures hedged by complex rate swaps leading to re-securitization of tranches in new vehicles (parts of the MBS become CDOs, for instance).One of my favorite clients wants me to believe this (Credit Swaps, SIVs, Bear Stearns, the whole thing) is about liquidity. No, it's about runaway human nature fire-walled from accountability by over-complicated jargon and 'cleverness,' and practiced by people who love to tell other people they just don't understand complex systems.
So are all the rest of you convinced that market participants are going to give up on the chase for mo' better yield without regulation?"
"Complexity" is, too often, French for I don't really understand it myself, but it helps me make a buck and it hasn't hurt my interests yet, so we'll worry about it later.
Why do I get so animated about this shit? Because me and mine, we're the clean-up crew once the "pros from Dover" get done self-actualizing themselves into others' oblivion. Yes, we try to fix the damage. And we get paid something for it. But I much prefer the other side of our business, where we deal in hope, humility and curiosity and opportunity. Because it's a sorry day when a Child Protective Services worker hopes for more customers.
Labels: Economics, good and evil, hyper-realism, moonshots and tsunamis, orientation, Silly overpaid grown-ups



