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Post by jeffolie on Aug 6, 2007 17:45:37 GMT -6
Over-reliance on technology and overconfidence in the prowess of academics helped foster a near blind dependence on dubious data and inadequate models. These were, in turn, transformed into the seemingly unshakeable foundations of multi-billion dollar investment decisions. Greed, complacency, and fraud followed, and as the flow of money circled around, many of the original assumptions are turning out to be dicier still. In the real estate, for example, what many once believed was the gold standard of collateral has lost its luster. For strapped commuters living in an age of digital money, it seems that automobile loan and credit card payments now have greater priority than the monthly mortgage bill. With the lax standards of recent years leaving many borrowers with little skin in game, is it really all that surprising? Regardless, now that the man-made monstrosity has emerged from dormancy with a destructive, self-perpetuating momentum, it's too late, of course, to go back and try to repair the mistakes of the past. All we can do now is batten down the hatches and steel ourselves for a powerful and rapidly expanding global threat: the revenge of Frankenstein finance. www.financialsense.com/editorials/panzner/2007/0806.html
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Post by unlawflcombatnt on Aug 7, 2007 3:36:17 GMT -6
Over-reliance on technology and overconfidence in the prowess of academics helped foster a near blind dependence on dubious data and inadequate models. These were, in turn, transformed into the seemingly unshakeable foundations of multi-billion dollar investment decisions. Greed, complacency, and fraud followed, and as the flow of money circled around, many of the original assumptions are turning out to be dicier still. It appears that these investment decisions were really based on knowingly dubious data and knowingly inadequate models. While defaults were escalating on subprime mortgages, the rating agencies continued to use models with a lower default rate. Furthermore, even if they had factored in the current default rate, they assumed subprimes were a much smaller portion of the market, making any collapse a much smaller event. These were changes from the historic norm that the rating agencies and the "modelers" knew were happening, but falsely claimed they were unaware of.
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Post by beachbumbob on Aug 7, 2007 5:14:24 GMT -6
Over-reliance on technology and overconfidence in the prowess of academics helped foster a near blind dependence on dubious data and inadequate models. These were, in turn, transformed into the seemingly unshakeable foundations of multi-billion dollar investment decisions. Greed, complacency, and fraud followed, and as the flow of money circled around, many of the original assumptions are turning out to be dicier still. It appears that these investment decisions were really based on knowingly dubious data and knowingly inadequate models. While defaults were escalating on subprime mortgages, the rating agencies continued to use models with a lower default rate. Furthermore, even if they had factored in the current default rate, they assumed subprimes were a much smaller portion of the market, making any collapse a much smaller event. These were changes from the historic norm that the rating agencies and the "modelers" knew were happening, but falsely claimed they were unaware of. the fact that moody's and SP clearly stated they "do not undertake due diligence" in rating bonds and stuff should be of no great surprise when its all hocus-pocus I'll take my fee system. Lets not forget enron, SPE's and the bs line of its too complicated to figure out how enron made money....if its that difficult, then there is something amiss if rating agencies can say, hey we aint responsible for what/how we rate, what is the purpose except to create bs??
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