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What if they gave a panic and nobody came.


ubuy2wron
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As A child of the 60's I remember the antiwar poster hanging on many colledge dorm room walls. What if the gave a war and nobody came. As a value investor I am hard wired to be a contrarian. The simple fact that no one is panicking  makes me feel that I should be. ::)

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My networth feels like there is a panic lol. Death by a thousand paper cuts due to Euroland and Debt ceiling, earnings should have created a great rally inmo. I am down across the board over the last 5 weeks, but its been chipped at each day little by little.....

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For the last week or so I feel like this has been a slow-motion crisis accompanied by a slow motion market decline.  Ironically, I kind of like the fact that my "networth" has been going down lately, since stuff is getting cheaper.  Should be only a few more days of "uncertainty."  I like the probability breakdown in this post:

 

http://ftalphaville.ft.com/blog/2011/07/28/637266/buiter-on-the-1-chance-the-us-gets-it-right/

 

And I like the AAA chart in this post. 

 

http://ftalphaville.ft.com/blog/2011/07/15/623881/the-aaa-bubble/

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For the last week or so I feel like this has been a slow-motion crisis accompanied by a slow motion market decline.  Ironically, I kind of like the fact that my "networth" has been going down lately, since stuff is getting cheaper.  Should be only a few more days of "uncertainty."  I like the probability breakdown in this post:

 

http://ftalphaville.ft.com/blog/2011/07/28/637266/buiter-on-the-1-chance-the-us-gets-it-right/

 

And I like the AAA chart in this post. 

 

http://ftalphaville.ft.com/blog/2011/07/15/623881/the-aaa-bubble/

About 2 1/2 years ago I posted here that the wall street and the rating agencies had tried to turn inherently very risky securities into AAA  govt paper through financial engineering and all of that risk was now being assumed by the govt. through bailouts and Tarp and was there fore turning govt securities into much more risky investments. The mkt for US treasuries has acted perfectly logicaly there is a extremly small chance that the US will not pay interest when due nor is there any reason to expect that they can not pay principal on maturity it would take a reduction in the debt ceiling for that to be a measurable risk. I believe that modern financial engineering is at the core of our current dilemna. The mkt playing hot potato with risk through CDS and like instruments has caused the explosion in credit. Billions of highly complex financial instruments are being created daily by the financial services industry they are generaly harmless but almost all have imbeded tail risks counterparty risk etc. that the purchaser who is invariably sold the instrument(they are never bought) can not determine.The mkt by and large does a pretty good job of

pricing risk sub-prime borrowers for example pay extremely high interest rates for unsecured loans. It is when risk is hidden or at least not readily transparent that risk generaly gets mis priced. In another thread there was a discussion of balance sheet items of BAC the amount was definately material but the composition was unknown by any one outside of the bank or at least any one commenting here which is a pretty informed crowd. My point is that Buffett is right they are instruments of mass destruction because fundamentaly they allow risk to be mis priced

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