subprime - it takes a cartoon to understand this stuff... | Forex Factory

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subprime - it takes a cartoon to understand this stuff...

  • #1
  • First Post: Feb 18, 2008 7:12pm Feb 18, 2008 7:12pm
check out this cartoon powerpoint, its a nice illustration of what goes on in the credit markets:

http://docs.google.com/TeamPresent?r...&skipauth=true

this is not only absolutely hilarious, but it also presents some very wise lessons for investors. as you guys have seen recently, i am a big fan of breaking down market mechanics into their simplest form to expose the mathematical truth of the instrument, market, order etc etc. there is no way to turn shit into value, as is perfectly illustrated in this cartoon. if you put shit in, you get shit out, there is no way around it LOL. many people get fooled when these wallstreet geniuses complicate simple matters, thats why we as prudent speculators must remain skeptics, and evaluate instruments on their most basic level.
Relax and be happy.
  • #2
  • Feb 18, 2008 7:21pm Feb 18, 2008 7:21pm
Very enlightening for me...and hilarious.
Thing that worries me now...will Australia head down this same path?
  • #3
  • Feb 18, 2008 7:25pm Feb 18, 2008 7:25pm
Thanks for posting that Merlin, I definitely got a good laugh out of it. Already forwarded it on to boot.

As you said, garbage in, garbage out. Some of this stuff really makes you scratch your head and ask, "Why are a lot of these people in charge of such important things when they're obviously stupid?"
Never underestimate the powers of the Force.
  • #4
  • Feb 18, 2008 7:26pm Feb 18, 2008 7:26pm
Quoting Antra
Very enlightening for me...and hilarious.
Thing that worries me now...will Australia head down this same path?
Actually, I've heard some reports that a bit of it is hitting Australia. It's already become a dent in Europe as well. The shockwaves are going to be felt worldwide on this one. Go USA! Lol
Never underestimate the powers of the Force.
  • #5
  • Feb 18, 2008 7:26pm Feb 18, 2008 7:26pm
rofl

"bad assumption my frigid Norwegian ass!"
  • #6
  • Feb 18, 2008 7:35pm Feb 18, 2008 7:35pm
Quoting The Jedi
Actually, I've heard some reports that a bit of it is hitting Australia. It's already become a dent in Europe as well.
this was my main prediction at the start of 2008....the rest of the world is about to go through exactly what happened in the US. lets remember that greenspan was leading the inflation fight 12 months before trichet!
Relax and be happy.
  • #7
  • Feb 18, 2008 7:43pm Feb 18, 2008 7:43pm
It is often said that if the US sneezes then Australia catches a cold.

I think you guys are right ...once upon a time it was hard to get a loan here and now they are being offered on the back of the Cornflakes box!!!
  • #8
  • Feb 18, 2008 7:56pm Feb 18, 2008 7:56pm
Quoting Antra
It is often said that if the US sneezes then Australia catches a cold.
so yeah, my idea is a bit cliche, but i think subprime will go one step further. finance is now a global operation... just a decade ago things were extremely different. these big banks are operating on a global scale and their ideas, techniques and schemes are spread like a global plauge. so im not so much saying that australia (or any other country) will be effected by the weak US economy, im more saying that the exact schemes that went on in the US credit market were employed by the world, its just that the US got exposed first. we have already seen this in recent news, and i think this is just the tip of the iceberg.
Relax and be happy.
  • #9
  • Feb 18, 2008 9:16pm Feb 18, 2008 9:16pm
Quoting merlin
so yeah, my idea is a bit cliche, but i think subprime will go one step further. finance is now a global operation... just a decade ago things were extremely different. these big banks are operating on a global scale and their ideas, techniques and schemes are spread like a global plauge. so im not so much saying that australia (or any other country) will be effected by the weak US economy, im more saying that the exact schemes that went on in the US credit market were employed by the world, its just that the US got exposed first. we have already seen this in recent news, and i think this is just the tip of the iceberg.
I think the furthering of the pain comes in the form of a certain little pill called foreign investment. We sold a huge number of those loan packages to foreign investors and they're starting to get hit with the blow-by and it's going to be a very stinging sensation for a while.
Never underestimate the powers of the Force.
  • #10
  • Feb 18, 2008 9:33pm Feb 18, 2008 9:33pm
Bad assumption my frigid Norwegian ass!



Quoting merlin
check out this cartoon powerpoint, its a nice illustration of what goes on in the credit markets:

http://docs.google.com/TeamPresent?r...&skipauth=true

this is not only absolutely hilarious, but it also presents some very wise lessons for investors. as you guys have seen recently, i am a big fan of breaking down market mechanics into their simplest form to expose the mathematical truth of the instrument, market, order etc etc. there is no way to turn shit into value, as is perfectly illustrated in this cartoon. if you put shit in, you get shit out, there is no way around it LOL. many people get fooled when these wallstreet geniuses complicate simple matters, thats why we as prudent speculators must remain skeptics, and evaluate instruments on their most basic level.
  • #11
  • Feb 18, 2008 9:55pm Feb 18, 2008 9:55pm
Quoting merlin
as you guys have seen recently, i am a big fan of breaking down market mechanics into their simplest form to expose the mathematical truth of the instrument, market, order etc etc. there is no way to turn shit into value, as is perfectly illustrated in this cartoon. if you put shit in, you get shit out, there is no way around it LOL. many people get fooled when these wallstreet geniuses complicate simple matters, thats why we as prudent speculators must remain skeptics, and evaluate instruments on their most basic level.
One of the things I always try to keep in mind is that economics is actually very simple. In order for people to live, we have to turn natural resources into useful stuff. But then we consume that stuff, or the stuff gets worn out or damaged by the environment from whence it came, so we have to make more stuff. The simplest economy is one dude on an island.

Money is just a convenient way to keep track of the goods and services we each produce, so it becomes easier to trade those things amongst each other. People who say that "nothing backs our money" don't quite get it. Look around. All the houses, cars, telephone poles, asphalt streets, Nintendo GameBoys, bottles of Orange Crush and my new hat is what actually backs the money. Money is backed by stuff. That stuff doesn't have to be shiny and heavy.

If you loan me $100, you're assuming that I will somehow create at least $100 worth of value somewhere in the world which will allow me to pay you back. When the creditors of the world loan a hundred billion dollars to a group of borrowers, the creditors SHOULD be basing that decision on the belief that those borrowers will be able to create at least a hundred billion dollars worth of new goods and services in the world during the loan period.

But they F'ed up.

  • #12
  • Feb 18, 2008 10:48pm Feb 18, 2008 10:48pm
This cartoons are amazing!

And the reveal way clearer the aweful truth behind this mortgage crisis... and inspires us to think how deep this can still go...

Unfortunately that Fed and "special groups" designed to stop financial crisis made the panic TEMPORARYLY disappear...

but...

when the sh!#$ hits the fan again... the mess is gonna be EVEN worse...

i just hope when that happens to be short on carry trades with the biggest lots i could have ever imagine...

LOL (not so funny....)

iiivb
  • #13
  • Feb 19, 2008 7:47am Feb 19, 2008 7:47am
"Blow me"

That was the killer


Nice piece Merlin
  • #14
  • Feb 19, 2008 8:15am Feb 19, 2008 8:15am
I finally got my posting rights back!
I've been dyin' to say that cesarnc.

Yeah, that accountant was the best bit for me too!
Carpe Divitiae
  • #15
  • Feb 19, 2008 11:24am Feb 19, 2008 11:24am
Quoting cesarnc
Nice piece Merlin
i knew you would appriciate that one cesar
Relax and be happy.
  • #16
  • Feb 19, 2008 11:29am Feb 19, 2008 11:29am
Quoting capitalist88
In order for people to live, we have to turn natural resources into useful stuff. But then we consume that stuff, or the stuff gets worn out or damaged by the environment from whence it came, so we have to make more stuff. The simplest economy is one dude on an island.


if that aint breaking it down to the simplest form, i dont know what is

where did you learn your economics? we must have had the same teacher because on most of your posts i find myself saying "amen!".

Quoting capitalist88
But they F'ed up.
Relax and be happy.
  • #17
  • Feb 19, 2008 4:34pm Feb 19, 2008 4:34pm
Quoting merlin


if that aint breaking it down to the simplest form, i dont know what is

where did you learn your economics? we must have had the same teacher because on most of your posts i find myself saying "amen!".
I had a good teacher in high school named Mr. Stevens who defined economics simply as "The science of choice." I didn't appreciate his wisdom until many years later. At Northeastern my econ teacher wasn't so hot but the textbook was excellent when it came to illustrating concepts in everyday terms.

Ayn Rand and Victor Sparandeo are huge influences. There have also been some weird learning influences, classes I had to create at Fidelity, economic models I've tried to build, and even an online game called "SOL" I used to play all taught me something valuable, especially how important it is to simplify concepts down to their root essence.
  • #18
  • Feb 20, 2008 10:05am Feb 20, 2008 10:05am
have you read greenspans book yet? unbeknownst to me, he was a good friends with ayn rand and he talks a lot about their relationship in the book. i personally think it was more than just friends, but i wont turn this thread into a gossip mag on you guys
Relax and be happy.
  • #19
  • Feb 20, 2008 10:29am Feb 20, 2008 10:29am
Yea that sounds like the kind of economics teacher my friend had as well, who always echoes this stuff back to me when I bring up these topics..

Already saw the cartoon a while ago, was wondering whether to post it myself..

Dunno, am I the only one getting a bit tired of the whole "irresponsible big people screw up, the little ones merrily get ... let's just say stepped over"?

http://www.portfolio.com/views/colum...nks?print=true

I know there are 'sound'macro reasons for this; the contagion keyword etc pp and that you can't just let an economy blow up 'to uphold a principle', but, I mean, come on..
All rather sad.
Especially that as the same time that the government lending has been super-cheapened to get liquidity back, the 'end-user' has been faced with CC interest increases, new and entertaining bank access fees, etc pp..
Quite frankly and to put it bluntly: it's disgusting.
Trust price. Know yourself.
  • #20
  • Feb 20, 2008 10:52am Feb 20, 2008 10:52am
..oh shit ..no icon to show that someone die of laugh here..piece of cartoon.
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