Posted on 03/01/2006 10:27:06 AM PST by ex-Texan
I still say the GSE's are running the equivalent of a scam. Their business is supposed to be mortgage conduit. Instead they are giant hedge funds. Remember Orange County? It went bust owning the paper of FNMA FHLB which was embedded with ludicrous options held by the issuers. The buyer at OC was an idiot but the paper he was buying was toxic waste unless hedged to the hilt. Back then there were one or two accounts in the country that could properly hedge that stuff, but there were plenty of accounts buying it.
I had plenty of accounts that wouldn't touch but maybe 1 out of twenty of those deals.
The GSE's issue that stuff and buy mortgages. They are mammoth hedge funds that would come hat in hand to the taxpayer if they imploded. I also know that "brilliant" minds can create perfect "hedges". Long Term Capital Management. To believe Fan and Fred couldn't blow up is to believe that LTCM couldn't either.
This is exactly what I was talking about. Everything you think you know, you read in the newspapers. Well guess what: People who understand the financial markets rarely become reporters.
Bob Citron and LTCM both got themselves into trouble because of leverage, not the derivatives themselves.
Incidently, the guy I was talking about was former NY Jets quarterback Richard Todd. He worked for Bear Stearns out of Atlanta (which is why I thought of it). If you had called one of the guys you knew who actually worked on a trading floor, he could have told you this.
Your assertion that everything "I think I know" came from newspapers is typical presidio.
But if you think FNMA and Fred are some kind of genius organizations with little risk I beg to differ.
I do remember Richard Todd in the business. I don't really remember that he was in Atlanta and I certainly don't remember him as some sort of world beater at hanging CMO paper. But I wouldn't be privy to his production numbers anyway.
Bear Sterns was a commission house. We weren't. We thought we were ohhh so much better. LOL.
I wasn't at Bear Stearns either. I brought up Todd because he worked out of Atlanta. You only claimed to remember him after I brought him up. We can try this again if you like.
Let's do it differently. Describe a NERD.
Yes, there are many former athletes who have gone into finance. As a matter of fact, many of them become stockbrokers (or financial advisors if you like) because that is a profession that (interestingly) demands a minimum of product knowledge. Stockbrokers (or financial advisors) mostly need to be good BS artists. The name of the game is net new assets, as in "how much snake oil can you sell this month?" I have also worked with a former MLB player and a member of the 1980 olympic hockey team. Again, that wasn't the point. The point was not that athletes work in finance. The point was that anybody who was on the production side of the CMO market would have been aware of Richard Todd. There were maybe 100 CMO specialists in the world at the time, and only one of them was a former NFL quarterback. Can you tell me the name of Kidder's head CMO trader at the time? Morgan Stanley's?
I know we had at least 30 people in the firm who knew CMO's inside and out so your figure of 100 is off by a couple of hundred.
Not only that, by 1985 there were hundreds of accounts who also knew the product.
I don't remember their positions but at KP some of the players were Ed Cerello, Michael Carpenter - I think it was a guy name Mike(?) Vranos who managed the 12 billion of MBS that went a long way in burying KP.
I don't have any idea who was who at MS. I can only remember the names of about half the MBS traders at my firm.
Apparently also not familiar enough with the terminology to know that a specialist refers to a dedicated salesman. There are also traders, structurers and risk managers. Vranos did not blow up Kidder. Joe Jett did. What's the matter, you only started reading the "Heard On The Street" column recently?
Ah, tricked me with the word "specialist". Gotcha. If you knew what you were talking about you'd know the real story behind KP. I did have contacts there so I have an advantage. But I could easily have found out what happend from some of my accounts. Since you don't know much other than the names of your competitors it is understandable.
BTW, Joseph Jett's position was UNWOUND at a small profit. Vranos' postition was 12 billion and was not. As best I can remember PW took it over and gradually unwound it and let it mature.
NERD
BTW, Rubin bought Vranos' IO Inverse position and also unwound it at a profit. The problem was that Jett's losses and accounting indescretions had already made the papers and GE washed their hands of the whole deal. Paine Webber didn't have a legitimate CMO desk at the time (we'll get back to that in a second), so when they bought Kidder, they sold Vranos' book to Howie. Mike Levine was Bear's IO Inverse trader at the time. Vranos's problem was that he blew up Askin Capital with those IO Inverses, not that he was positioning them. Since that time, David Askin has actually interviewd with me for a job. So, yeah, I am sort of aware of the inside story.
But, again, that's not the point. The point was that you are not now, nor were you ever in a position to know about the inner workings of Fanniemae or Freddie Mac. Which brings us back to Paine Webber. Paine Webber didn't have a desk that could place a billion dollars with of CMO derivatives, because they were a retail shop. CMOs are not a retail product. So, you'll understand if I find it sort of hard to believe that a former innovator in the CMO market has decided to throw away that expertise and take a job as a retail stock broker selling IRAs and managed accounts to gradma and grandpa. At Goldman a guy your age would have been a partner at this point.
Why would I want to stay in the CMO business when I could make more money working for myself doing something much more fun, not have to fly to NYC every three weeks and not have to sweat bonuses every year? Besides, I don't have to puff myself up and try to impress WS partners with who I know.
I worried about my accounts and what they were doing. That's what I got paid to do.
I was in that business a long time and I never met anyone as obsessed with the competition as you seem to be. It makes me leery of your background.
Sounds like your background consist of reading "Liar's Poker".
All:
Pres knows more than the WSJ!!!
Pres knows that Fannie and Freddie have pristine balance sheets. Pres certainly knows more than I do about their balance sheets because he said so.
If you want to know more pres is handling inquiries through the National Enquirer.
Are you seriously going to tell me with a straight face that there are not problems with F and F? If you are then your claims of experience on Wall Street are fiction.
You don't have a clue about the inner workings of either. But you certainly have an opinioin too don't you? Well Mr smart guy, when are you going to define a NERD for us all? While you're at it explain inverse floaters and busted PAC's . How about B shares? Or are you so one dimensional that you don't know what they are?
I've been corresponding with a fake. Sorry pres, you aren't worth the time.
If you want some investment advice:
Don't invest with pres. He'll want to know who you know and then he'll claim you aren't who you say you are.
Then he won't respond to you for two days while he is googling to find out what you are talking about.
I was waiting for you to bring that book up. Actually, I was 18 when it came out. I was more interested in keg parties and smoking pot at the time. I know Rubin Ranieri and Merriweather. I also met the author once at a party, but I have not read the book. From what I've heard, it is filled with misconceptions about what really goes on on a trading floor. My suspicion is that when you were working your lame back office gig that book came out, and you used it to construct this fantasy for yourself. It would explain how you get some of the details close to right with many impossibly wrong. And, incidently, my Wall St career began a few years later. To my knowledge, Vranos Levine and Askin are not mentioned in it.
And, from where I'm standing, it is you who seems to need to puff yourself up quite a bit. You have been doing it nonstop on this thread. Let's be very clear here: The only reason I am even involved with you is because you claimed to have some privledged knowledge into the inner workings at the GSEs. Any time someone talks about GSEs and they use the magic word ("derivatives") my BS detector goes off. Personally, the only claim I ever make about them is that financial reporters have no idea what they are talking about. Anybody who hangs out on FR should be familiar with this character trait in reporters. So, no I'm not really interested in building myself up. From the beginning I have been trying to establish whether you were indeed talking out of your ass. And thus far you have only reinforced that opinion. FWIW, I have many friends who are financial advisors. I have no problem with that profession. But the idea that someone who was intimately involved with CMOs to become one just doesn't pass the smell test. Face it: You have no inside knowledge of the GSE. Thus, you ARE talking out of your ass.
LOL, NERDs, busted PAC's and inverse floaters? What did you do, borrow someone's Fabozzi book? If you still have it up, and you want to play THIS game, why don't you tell me which of the three has the most convexity in an upwardly accelerating PSA vector enviornment?
Incidently, IO inverses are a type of inverse floaters doctor.
I also know the kind of trash paper that the GSE's peddle. NO one in their right mind, who actually understands the stuff, could think that the asset side of those liabilities is anything buy toxic waste.
LOL.
You never answered my question. Stick that in your Bloomberg and stress it.
Again, my point is that the editorialists for the Wall Street Journal also have no idea what they are talking about. The fact that they refer to plain vanilla MBS as "derivatives" (which they technically are) is a sure sign of this. People who are familiar with the MBS and CMO markets speak of mortgages and "mortgage derivatives."
Which, again, was my point. I am not going to get into the points of individual esoteric products because that's the easiest way to fake knowledge. All you need is a single research report.
Case and point: What can you tell me about cashflow floaters? (hint: They were instrumental in unwinding the Kidder position). I made a point of NOT dropping names. I mentioned a few public figures who anyone who was in the market would be familiar with. You weren't.
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