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Margin Call - The Movie


SharperDingaan
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I watched it last week but thought it was odd.

 

The storyline leads us to believe that nobody had any idea what was about to happen because they blindly followed a risk management model that turned out to be flawed.

 

Then they need a rocket scientist (literally) to inform them of what might happen if there is a 25% decline on $7 trillion in assets?

 

 

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The risk model referred to was Value at Risk (VaR). Under normal conditions (& normal curve distribution), there is a 95% probability that your maximum one-day trading loss will not exceed $X, 19 times out of 20. Model accuracy is determined by back testing the models daily prediction over the last 200 trading days & validating how many times the actual one day loss exceeded the models prediction. If there were more than 10 failures (5%) over the period, or a cluster of failures over a short timeframe (movie premise), your risk model doesn't work - & you're in deep shite.

 

VaR is used to determine a banks required regulatory capital at month end. The accuracy of the banks VaR model, and its month-end BS (inflated intra-month by MBS securtization) are material determinants in how much capital is required. As all banks use the same VaR calculation, it was only a matter of time untill competitors also realized the problem (movie premise) & fire-sold risky assets the same as our movie bank did.

 

The evil side of VaR is the 5% chance the loss will be so large that you cant even quantify it, 1 time out of 20. Because the model breaks down under extended periods of extreme volatility, when a Black Swan (rocket scientists 25% nortgage valuation decline) shows up - you have to hope that you have enough other liquid assets, & willing buyers, to be able to recover your capital. As there will be no bank unless there is sufficient capital, the bank is willing to sell at extreme loss.

 

Given Eurolands banking problem, & that the risks of VaR have long been espouced amongst risk managers, the movie has resonance. Given that the content will pass over most heads, it also has cachet.

 

SD

 

 

 

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SharperDingaan, I will entertain you by pointing to the main banking culprit who experienced the largesse of winning purses by hook or crook as well as their lobbying power, influence and control to restore capital to their coffers however they see fit, and not even broaching upon Warren Buffett's capital injection during the period of "Margin Call." 

 

So Hark!, Maties!, let's look to current events a great deal closer in order to get our heads around the GIANT VAMPIRE SQUID attempting to squeeze the last drop of blood out of our earth's resources as they continue to operate with impunity upon the world's political and economic systems!

 

http://www.wallstreetinsightsandindictments.com/2011/12/those-new-e-u-fiscal-rules-arent-so-new/

 

 

Here’s a Riddle for You

 

See if you can find the common denominator in the following string of seemingly disconnected connections:

 

You knew that Jon Corzine was formerly co-CEO of Goldman Sachs, right? Did you know that Corzine got the top job at MF Global because his good buddy, billionaire J. Christopher Flowers, head of J.C. Flowers & Co., was a big investor in MF Global and wanted him on board? How do they know each other? Flowers, of course, worked at Goldman Sachs before hanging out his own shingle.

 

Then shortly after taking the helm at MF Global, Corzine, in an effort to amp up the company’s status, managed to have the firm named as one of only 20 “primary dealers” authorized to trade directly with the Federal Reserve Bank of New York’s trading desk. Who makes the decision about who becomes a primary dealer? There are some protocols of course, but ultimately the decision falls on the President and CEO of the Fed’s New York bank. That would be William C. Dudley, the former Goldman Sachs chief economist until 2007.

 

You’re going to hear about CFTC regulation 1.25, if you haven’t already.

 

You see, 1.25 has to do with allowing firms like MF Global to invest customer assets in foreign government bonds. But the CFTC realized that was a bad idea and were in the process of changing the regulation to NOT allow purchases of foreign sovereign debts. Only, the change never happened. It got “delayed” by the chairman of the CFTC, who supposedly got lobbied hard by Corzine to not implement the new rules. Who is the chairman of the CFTC? That would be Gary Gensler, who, oddly enough, worked for Jon Corzine when he labored for 18 years at, guess where… Goldman Sachs.

 

I’m not going to take this too far by speculating that Corzine was betting on things turning around in Europe, maybe partly because another Goldman alum, Mario Draghi, recently became the head of the ECB. The ECB, if I’m not mistaken, has something to do with Europe’s finances. But I could be wrong.

 

So, did you figure it out? The common denominator is the usual suspect: Goldman Sachs cronyism. That’s one hell of a fraternity.

 

There are other Goldmanites in the Corzine web. But, alas, I’m getting tired of picking on poor, poor pitiful Goldman Sachs… NOT.

 

Okay, last but not least, good old House Majority Leader Eric Cantor called in Rep. Spencer Bachus, he of insider trading fame, and quite by chance also the Chairman of the House Financial Services Committee, that’s thankfully looking into that whole silly Congressional insider-trading thing, and told him not to do anything.

 

It seems that Mr. Cantor wants to just take it slow and not rush to judgment on the whole affair.

 

Try chewing on that for a while without getting sick to your stomach.

 

Shah

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SD, you are a very smart man, as I have always gleaned from your posts.

 

However, this term, "good," which you choose to use with Goldman or others derived in the business world be they banking, oil services or jet engines, can't be good if their absolute intent is "evil" only for the sake of "profit" at all costs no matter whom is being harmed and/or being left holding the bag during the process, can it?   

 

How long would men be able to endure such tyranny in their local communities if they were subject to such treatment according to theft of property in the name of "protection"? Is this a loaded question when referring to local thugs as part of Italian, Russian, or Chinese mafias who shake down local businesses? The weak men will turn the other cheek, won't they, and pass those costs on to his consumers?

 

The tables have turned after so many decades of bottom up corruption, though, haven't they? The Robber Barons from top down, have now made it more difficult for their type of shakedowns to occur with electronic banking and a more cashless society, while giving themselves almost exclusive authority to recycle their corruption from top down instead. The same poor souls are always left holding the bag, however. It's the masses in the middle, isn't it?

 

And, during the history of these incessant shakedowns from both directions, some of the criminal elements have evolved into the higher class by converting their illicit gains into legal businesses. 

 

At some point, good men must stand up against such evil, regardless of which facet of their lives evil is rearing its UGLY HEAD. This usually comes from men who are not afraid to die.   

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Oh, I didn't knew it took so long til the actual release. I had already seen the movie at the start of this year, about 10 or 11 months ago at a packed press and industry screening,... and had the pleasure to walk with Kevin Spacey and Jeremy Irons over the carpet,... but it will be more revealing to see what a average audience makes of it, because financial crisis stories aren’t exactly the kind of thing the paying public is going to run to see at the end of the week.

 

I just looked into the box office data, seems it's not very popular to the main stream audience.

http://www.imdb.com/title/tt1615147/business

 

Anyway I shouldn't be up and posting here,... having catched the cold... *sighs.

 

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SharperDingaan, I will entertain you by pointing to the main banking culprit who experienced the largesse of winning purses by hook or crook as well as their lobbying power, influence and control to restore capital to their coffers however they see fit, and not even broaching upon Warren Buffett's capital injection during the period of "Margin Call." 

 

So Hark!, Maties!, let's look to current events a great deal closer in order to get our heads around the GIANT VAMPIRE SQUID attempting to squeeze the last drop of blood out of our earth's resources as they continue to operate with impunity upon the world's political and economic systems!

 

http://www.wallstreetinsightsandindictments.com/2011/12/those-new-e-u-fiscal-rules-arent-so-new/

 

 

Here’s a Riddle for You

 

See if you can find the common denominator in the following string of seemingly disconnected connections:

 

You knew that Jon Corzine was formerly co-CEO of Goldman Sachs, right? Did you know that Corzine got the top job at MF Global because his good buddy, billionaire J. Christopher Flowers, head of J.C. Flowers & Co., was a big investor in MF Global and wanted him on board? How do they know each other? Flowers, of course, worked at Goldman Sachs before hanging out his own shingle.

 

Then shortly after taking the helm at MF Global, Corzine, in an effort to amp up the company’s status, managed to have the firm named as one of only 20 “primary dealers” authorized to trade directly with the Federal Reserve Bank of New York’s trading desk. Who makes the decision about who becomes a primary dealer? There are some protocols of course, but ultimately the decision falls on the President and CEO of the Fed’s New York bank. That would be William C. Dudley, the former Goldman Sachs chief economist until 2007.

 

You’re going to hear about CFTC regulation 1.25, if you haven’t already.

 

You see, 1.25 has to do with allowing firms like MF Global to invest customer assets in foreign government bonds. But the CFTC realized that was a bad idea and were in the process of changing the regulation to NOT allow purchases of foreign sovereign debts. Only, the change never happened. It got “delayed” by the chairman of the CFTC, who supposedly got lobbied hard by Corzine to not implement the new rules. Who is the chairman of the CFTC? That would be Gary Gensler, who, oddly enough, worked for Jon Corzine when he labored for 18 years at, guess where… Goldman Sachs.

 

I’m not going to take this too far by speculating that Corzine was betting on things turning around in Europe, maybe partly because another Goldman alum, Mario Draghi, recently became the head of the ECB. The ECB, if I’m not mistaken, has something to do with Europe’s finances. But I could be wrong.

 

So, did you figure it out? The common denominator is the usual suspect: Goldman Sachs cronyism. That’s one hell of a fraternity.

 

There are other Goldmanites in the Corzine web. But, alas, I’m getting tired of picking on poor, poor pitiful Goldman Sachs… NOT.

 

Okay, last but not least, good old House Majority Leader Eric Cantor called in Rep. Spencer Bachus, he of insider trading fame, and quite by chance also the Chairman of the House Financial Services Committee, that’s thankfully looking into that whole silly Congressional insider-trading thing, and told him not to do anything.

 

It seems that Mr. Cantor wants to just take it slow and not rush to judgment on the whole affair.

 

Try chewing on that for a while without getting sick to your stomach.

 

Shah

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