August 10, 2007
Lounsbury on Credit Crashes & MENA
I shall readily confess that while I can make some claim to accidental prescience with respect to the great Hedge Fund popping, in my attention to explosions and hedge funds, I do not truly feel I know more than your average financial fool. Which is to say, who the bloody fuck knows where this credit business is going. Nor whether the hidden iceberg of derivatives and all their black-box models will rip open the guts of a big money centre bank or not; i.e. is that just-so-tale of derivatives spreading risk around so no-one has a deadly exposure right, or merely just-so...
That aside, presuming that this moment is a nice little slap up-side the financial markets head, and the real economy is not effected, it's a good moment to squeeze out some insanity and get people thinking about risk more reasonably (as well as realising the fancy hedge fund 'hedging' is mostly a load of bollocks and luck).
Both those abstractions aside, a question in comments about my thoughts on the impact on MENA. Well, my instinct is that some portion of capital that previously was looking for emerging markets return will pull back. But then, the blow up is occurring in fancy-schmancy financial alchemy land (US of A), not in emerging markets, so... to what degree is more rational risk pricing going to effect looking at them. Dunno. But there is lots of Gulf liquidity sloshing about.
And the Gulf is likely to continue to be shy of investing too much money in the West - above all the US of A - due to idiocies like the abdication of sovereign policy to private citizen class action suits full of speculation and NY style law-suit as pure rent-extraction / extortion.
Of course "activists" (that is wild eyed idiots) think this is all good, giving the little man justice or some such slobbering populist nonsense long on feeling and short on cold hard factual analysis.
As such, I think that presuming none of the big money centre institutions has inadvertantly gutted itself on expsosure to its own dodgey products, then the storm will pass and MENA and related markets, e.g. Africa will actually chug along fairly well on good fundamentals -but better (i.e. more rationally) priced.
Of course whether my personal sweetheart deal with its insane leveraging survives is another matter. Well, I guess the straight fees are okay. The carry will be better if it doesn't explode, but that's of merely personal interest.
Posted by The Lounsbury at August 10, 2007 05:01 PM
Filed Under: Biz - Private in MENA
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Apropos of not a whole lot, some truly priceless gems:
Posted by: pantom at August 12, 2007 01:53 AM
With everybody talking about credit crisis and the impact on equity buy out deals and hedge funds I can't but wonder who let the US 'subprime' market grow to that extent to begin with?
How the fuck was all that happy teaser rate lending to dodgy borrowers not regulated - which led to foreclosures in the first place?
Posted by: nick at August 13, 2007 03:37 PM
The market let the market grow.
What else would you expect? As for US domestic mortgage brokering regulations, I believe that varies from state to state, but regardless the main focus of bank regulation is on bank risk. Insofar as the banks were off-loading the risk, all looked good.
Consumer protection agencies and the like may have dropped the ball, but that is not obvious as a true statement for all of the US, whatever the anecdotes.
Posted by: The Lounsbury at August 13, 2007 04:49 PM