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).

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?"

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.

"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.

Miller's Law

The proper response when someone says, "My toaster is talking to me!" is "What is your toaster saying?", followed by very careful and attentive listening.

Heh. That's from an excerpt of Language in Emergency Medicine, by Suzette Elgin. Worth a look to me because, when we think about it, being responsive to dynamic changes in business puts us all in an ER time- and decision-frame. Good info is in short supply, tensions may be high, noise levels extreme and granularity off the charts. Now go fix it/them/us!

Speaking of orientation-enhancing gut checks, how about that affinity/adaptability thing?



Via the British Medical Journal, Dec 2004 and mo bloggy places

Take it easy. You're making us look bad.

Take it easy. You're making us look bad.

"We have to walk before we can run."

Overheard that nugget being used to flog a really smart person today.

Bullshit.

Infants have to walk before they run. But they only run if their parents let them; only if those parents remember that falling and getting a boo-boo is part of growth and ambition.

But "walk before we can run" gets used by 45-year olds overseeing 30-year olds all working for 75-year old companies. Not too many diapers in those boardrooms. Just plenty of "wubbies."

No, "We" don't run because those who can grant permission--encourage the running--prefer to walk. Walking is a higher percentage endeavor in their eyes. A lower exertion one, too. Running is not their ambition, exposure makes them anxious. Horizons make them squint.

Problem is, people are hard-wired to run. And to admire the fleet of foot. And to follow them. In business and evolution, running is a primary adaptation that allowed man to climb to the top of the heap. Running ahead too far has it's dangers certainly, but those are issues of direction and purpose, not speed--running just to run, to feel or look busy, not to get somewhere. Too bad Darwin proves the "walk before we run" business people wrong. Too bad, for all of us, that what "walk before we run" people really usually mean is: I prefer camouflage to speed. And average over ambition.

Run. As soon as you can walk. You'll encounter more numerous useful experiences. You won't get eaten as easily. And you'll like who you become.