{"id":197664,"date":"2008-01-18T16:59:00","date_gmt":"2008-01-18T21:59:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/01\/18\/to-err-is-human-but-it-requires-an-mba-to-create-total-clusterfu\/"},"modified":"2008-01-18T16:59:00","modified_gmt":"2008-01-18T21:59:00","slug":"to-err-is-human-but-it-requires-an-mba-to-create-total-clusterfu","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/01\/18\/to-err-is-human-but-it-requires-an-mba-to-create-total-clusterfu\/","title":{"rendered":"To Err Is Human, but It Requires an MBA To Create Total Clusterfu$% . . ."},"content":{"rendered":"<p>I probably should include this in my standard economics update, but Barry Ritholtz&#8217;s line (my title) is too good not to give top billing.<\/p>\n<p>He is talking about something called &#8220;<a href=\"http:\/\/bigpicture.typepad.com\/comments\/2008\/01\/counter-party-r.html\">Counter-Party Risk<\/a>&#8220;, which is the risk that an issuer might default on a payment or go into liquidation. Also known as counter party risk.<\/p>\n<p>Basically, he is continuing his ongoing riff on what will happen if <a href=\"http:\/\/40yrs.blogspot.com\/2007\/12\/monoliners-heading-for-crash.html\">monoline insurers go belly up<\/a>, as increasingly seems likely.<\/p>\n<p>He expects there to be a lot more &#8220;down&#8221; there, as do I.  There is a lot of leverage, out there.  For an MBA, it&#8217;s called leverage, for the rest of us, it&#8217;s called &#8220;being in debt up to our eyeballs&#8221;.<\/p>\n<p>In describing the monoliners, MR. Ritholtz is right:<\/p>\n<blockquote><p> That situation was obviously intolerable. So they brought in the financial engineers. Hey, we should be issuing insurance on Credit Default Swaps (CDS) &#8212; the premiums are much much bigger than boring old munis!<\/p>\n<p>Any time you hear words to that effect, you know you are dealing with an idiot of the highest magnitude. Those are the equivalent to &#8220;Give me a match, I want to see if there is any gas in the tank.&#8221;<\/p>\n<p>The monolines are not in trouble because Municipalities are defaulting on bond payments. (That&#8217;s waaaay in the future). The problem is they wrote insurance &#8212; taking in that fat premiums &#8212; without properly understanding the risk.<\/p>\n<p>&#8230;.<\/p>\n<p>I&#8217;ve said it before, and I&#8217;ll repeat it again: To err is human, but it requires an MBA to create total clusterfu#@ . . .<\/p><\/blockquote>\n<p>My analogy, <a href=\"http:\/\/40yrs.blogspot.com\/2008\/01\/are-brokers-and-financial-professionals.html\">that like those people on American Idol whose friends have told them that they can sing<\/a>. Is nowhere near as clear or as lyrical.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I probably should include this in my standard economics update, but Barry Ritholtz&#8217;s line (my title) is too good not to give top billing. He is talking about something called &#8220;Counter-Party Risk&#8220;, which is the risk that an issuer might default on a payment or go into liquidation. Also known as counter party risk. Basically, &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1261,973,1004],"tags":[],"class_list":["post-197664","post","type-post","status-publish","format-standard","hentry","category-bubble","category-economy","category-finance"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/197664"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=197664"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/197664\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=197664"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=197664"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=197664"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}