Post Tagged with: "mortgage-backed securities"
Don’t Fight the Last War: Lessons from the Battlefields of Risk Management
Our brains are not calibrated to deal with the unexpected. Most of us believe we are good risk managers but in reality we are not. Most of us trust that risk can always be quantified and expressed through some fancy modelling whereas, often, it cannot. The world is not normal, yet universities continue to teach our young students the wisdom of Markowitz and Sharpe which brought us modern portfolio theory and, more specifically, the capital asset pricing model. Garbage In, Garbage Out, as they say. One of the fundamental assumptions behind modern portfolio theory is that asset returns are normally distributed random variables. The return profile of US equities fairly closely matches that of a normal distribution with the exception of large negative returns. They have come about more frequently than one would or should expect
[Premium] Daily commentary: On QE3
This one’s short today as I am running out of time. I posted earlier regarding Bill Gross’ comments about the Fed doing a mortgage-backed QE3. There’s nothing fundamentally off about this call. But we really aren’t there yet as it is wholly dependent on the US economy
Bill Gross on his expectations for QE3 and more
The following transcript and video is courtesy of Bloomberg TV where Bill Gross spoke to Margaret Brennan today, telling her that he thinks the Fed will go Qe3, but that it will shift to mortgage backed securities when Operation Twist ends in June. He doesn’t limit his commentary to the Fed and QE3. There’s a lot more here. Enjoy
[Premium] Daily Commentary: Net Capital Rules and the Credit Crisis
This daily commentary is a bronze-level post for Pro subscribers. Two articles worth reading on the 2004 change in net capital rules for investment banks are highlighted in today’s links
Chris Whalen has serious questions about the Fed’s stress tests
I love Chris Whalen’s bank industry analysis. I featured his CNBC commentary yesterday. Today is his commentary from last night’s Capital Account
Fannie Putting Dubious Loans Back to BofA, So BofA Will Stick Them to Freddie Instead
It looks like someone at Fannie woke up and realized that any case of a guarantor voiding a policy was prima facie evidence that BofA had breached a rep and warranty about loan quality. Look at the examples: inflated appraisals and incomes
The SEC’s Day in Court
Judge Jed S. Rakoff of the United States District Courts of the Southern District of New York struck a blow against the Securities and Exchange Commission and in support of the “public interest.” The Securities and Exchange Commission had asked the Court to approve a Consent Judgment between Citigroup and the S.E.C. Judge Rakoff (cutting to the chase) wrote he could not do so
Why Nobody Went to Jail During the Credit Crisis
The following is a transcript of an interview with Financial Sense Newshour, a free financial/market broadcast hosted by money manager Jim Puplava on the week’s market action, interviews with financial experts, and Jim’s personal perspective on the markets/economy
The FHFA Complaints and Control Fraud
The FHFA complaints lose explanatory power and persuasiveness because they ignore compensation and accounting. It pays to understand accounting control fraud
Will ARMs de-stabilise the covered bond mortgage system?
Ed asked me to comment on hidden contingent sovereign liabilities of Danish mortgage bonds given the most recent Absolute Return Letter
FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac
The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent misrepresentation
A Credible Solution to America’s Mortgage Crisis
The adoption of the Constitution of the Kingdom of Denmark Act in 1849 provided the first regulatory framework and Danish mortgage financing has ever since been tightly regulated, ensuring an entirely unblemished track record with not a single default to report in over 210 years. Even in 1813, when the Kingdom of Denmark defaulted, the mortgage bond system survived intact. Even more impressively, the combined loss ratio for all Danish mortgage credit institutions (MCIs) has never exceeded 1% in any one year[7] – a number most other countries can only dream of