John, thank you again for the expanded info. Now I understand what brought
about the housing bust. Sadly, we don't seem to have "leaders" in our
country to do what needs to be done. Obama has brought "Chicago style"
politics to Washington which has nearly destroyed the infrastructure there.
Though not a Mac subject, I am glad you shared it nonetheless.
Nora
On Sunday, May 26, 2013, John Robinson wrote:
> Nora,
>
> It's a cord of many threads, we had a major problem in this country with
> the politicians saying that we needed to move everyone into home ownership
> even if they couldn't afford it. If that was the only part of the meltdown
> we would have had some pain but not what the world ended up going through
> (think the Savings and Loan Crisis of the late 80's and early 90's). The
> S&L crisis caused pain in localized areas, the government had to step in
> and help but it was NOTHING like what happened in 2008 & 2009.
>
> The difference were the CDO's, CDS's and Speed bots. (every one of these
> completed by Quants)
>
> The CDO's were the combining of thousands of home loans into a package
> with so many "tranches" that each offering ("tranch") in the unit
> represented so many loans in the AAA class then additional loans were
> included with ratings all the way down to the Subprime to complete the
> security that would be sold to the public, state municipality retirement
> funds, mutual funds, etc.
>
> This allowed Moody's, Standard & Poor's, and Fitch rating agencies to
> bless the offering with a rating almost as pure as a Federal Fund T bill.
> In reality the rating agencies had NO idea what was in this mess, the
> quants were figuring it all out.
>
> Then the industry began offering CDS's or an insurance policy on these CDO
> instruments, these could be purchased for around 1% of the value of the
> obligation, dirt cheap.
>
> Some folks began studying what these CDO's really were & realized there
> was a monumental problem, they began purchasing CDS's by the trainload.
> This game went on for several years but when the Subprime began to crack
> it was finally realized by all that it was a rouse and then the quants
> programs using the speed bot trading (millions of shares traded in
> nanoseconds) and we had a meltdown overnight.
>
> There was a horrific contagion problem, Goldman Sachs alone had over a *
> MILLION* counter-party transactions. When Buffett bought General Re
> there were a *quarter million counter-party transactions *which he
> unwound immediately. The same with Merrill, Morgan Stanley, Lehman, AGI,
> Bear Stearns, Royal Bank Of Scotland, Deutsche Bank, and on and on and on
> this went around the globe.
>
> When it began to unwind *the possibilities of what would happen if these
> CDS transactions could not be honored were unimaginable*, The government
> had to step in to prop up the system, few of us realize just how close we
> came to a true financial holocaust. The shotgun marriages were just that,
> the Treasury, under Hank Paulson, TOLD the firms what had to be done, the
> only major mistake was the letting Lehman go down, that was more of a shock
> to the system than Paulson, Bernanke or Tim Geithner (Tim at that time was
> head of the New York Fed & involved every step of the way in the 30 or 72
> hr. marathons with no sleep) had any idea would affect the markets so
> severely.
>
> I personally feel that Paulson had it in for Richard Fuld (the head of
> Lehman) as Paulson had previously been the head of Goldman and I think
> there was bad blood between the two, maybe not, but the government saved
> everybody of any importance by buying the toxic assets or arranging
> marriages and handing out money like candy...... EXCEPT Lehman.
>
> Anyway, it was the perfect storm all created by guys known as quants that
> thought they had it all figured out, each step, every segment was their
> brainchild and the world was their oyster.
>
> I know there are as many political solutions to this as there are people
> but I for one would not have wanted to see what life would be like *now*and
> for for decades to come if this wasn't underpinned by the
> powers......now we have another problem that no quant will be able to
> solve, it will be solved by utilizing the energy solutions we have within
> our country....this will get us out of the humongous debt we have if we can
> only get our leaders to see the small light still giving us hope.
>
> I know, this isn't exactly MAC stuff but Harry ask a great question and it
> really involves a large answer if you understand how important Quantitative
> Analysts (Quants) have become in our everyday lives.
>
> John
>
>
>
> On May 26, 2013, at 11:02 AM, Nora Probasco wrote:
>
> Thanks for the summation, John! Let's hope the circuit breakers work!
>
> Nora
>
> On Saturday, May 25, 2013, John Robinson wrote:
>
> Some of the most brilliant mathematical folks on the planet, similar to
> Lee.
>
> They are often referred to as the guys that helped bring the meltdown to
> our financial system. Today as I worked in the yard I finished one book
> and began (for the second time) a book about "The Quants"....by Scott
> Patterson. I find it intriguing, utterly fascinating and bewildering as
> well that there are people this smart.....but wrong about their models that
> they felt were so impervious.....they can't quantify the human element and
> that was their downfall, once it began it was a feeding frenzy that fed
> upon one computer model after another.
>
> Since then they have put in circuit breakers to hopefully give the
> machines a wink that the route is over and it's time to move the other
> direction. It seems to have really helped and maybe the whiz kids have
> also changed the way their programs work....we won't know until the next
> time.
>
> John
>
>
> On May 24, 2013, at 4:52 PM, Harry Jacobson-Beyer wrote:
>
> What are quants.
> On May 24, 2013, at 11:59 AM, Jonathan Fletcher <[email protected]>
> wrote:
>
> On May 24, 2013, at 11:33 AM, Lee Larson <[email protected]> wrote:
>
> Rand has a database. I wonder with whom he shares it.
>
>
> Politics has become all about databases. Surely you remember all the
> stories about how the quants won Obama the last election?
>
> You'll never again even be able to file as a candidate for an office
> without an underground bunker full of database mathemeticians calling the
> shots.
>
> j.
>
>
>
> --
> Jonathan Fletcher
> FileMaker 9/10/11/12 Certified Developer
>
> Fletcher Data Consulting
> [email protected]
> http://www.fletcherdata.com
> 502-509-7137
>
> Kentuckiana's FileMaker Developers Group
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>
>
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