Is there an equivalent

Discussion in 'Economy' started by Mr.Fitnah, Dec 28, 2010.

  1. Mr.Fitnah
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    Mr.Fitnah Dreamcrusher

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    in the market of bundled munibonds
    like they bundled bad mortgages ?

    What happens when that goes south ?
     
  2. Baruch Menachem
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    Baruch Menachem '

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    Bundled mortgages were sold as if they were treasuries, and had high ratings until folks discovered you couldn't price them like treasuries.

    I think pools of munis are marketed as Junk.
     
  3. william the wie
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    william the wie Gold Member

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    Munis are currently crashing under threat of default or bankruptcy.
     
  4. loosecannon
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    loosecannon Senior Member

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    yeah, mortgages were securitized and guaranteed making them AAA quality assets.
     
  5. william the wie
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    william the wie Gold Member

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    Yeah Moskowitz's (sp?) portfolio theory and the efficient market theory have been getting bitchslapped by the law of unintended consequences for the past 30 years. When Millkin, Raneiri and Fink were pioneering securitization they could count on originators overstating risk, then it became correctly stating and finally just before they were all fired understating risk by originators and ratings agencies led to the S&L crisis. If diversification can, and if risk is properly assessed it actually can, reduce market risk from 10% yield to 7.5% or less yield and that leaves somebody getting a 2.5+% economic return for nothing and maybe even their chicks for free. Then everybody starts bidding close to 7.5% for the junk bonds and still get 0-2.5% for the securitization, which leads to bad outcomes.
     
  6. Mr.Fitnah
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    Mr.Fitnah Dreamcrusher

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    Well the munibond bailout is going to break the system.
    Nearly every city ...state is under pressure from unions .
    It aint going to be pretty.
     
  7. william the wie
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    william the wie Gold Member

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    No but state defaults and municipal bankruptcies are nothing new. NY and NYC have flirted with insolvency at least three times in the last 120 years going back to Cleaveland's hard money policy of 1893-7, the panic of 1907 and the 1970s bailout. MS and AR are still in default on bond issues from the 1800s. It does happen and it has happened many times before.
     
  8. midcan5
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    midcan5 liberal / progressive

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    The fault is with the actuaries and regulators. American economic thought is premised on constant growth, and that just isn't going to happen in a global economy.


    'Alabama Town’s Failed Pension Is a Warning' By Michael Cooper And Mary Williams Walsh

    'Prichard, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.' http://www.nytimes.com/2010/12/23/business/23prichard.html


    "Impossibility statements are the very foundation of science. It is impossible to: travel faster than the speed of light; create or destroy matter-energy; build a perpetual motion machine, etc. By respecting impossibility theorems we avoid wasting resources on projects that are bound to fail. Therefore economists should be very interested in impossibility theorems, especially the one to be demonstrated here, namely that it is impossible for the world economy to grow its way out of poverty and environmental degradation. In other words, sustainable growth is impossible." Herman E. Daly / Kenneth N. Townsend

    [ame]http://www.amazon.com/Valuing-Earth-Economics-Ecology-Ethics/dp/0262540681/ref=sr_1_1?s=books&ie=UTF8[/ame]
     
    Last edited: Dec 29, 2010

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