A month from now, $50 billion worth of adjustable rate mortgages will "reset" from the low interest rates at which they originated in October 2005 to much higher rates that will be due for the next 28 years. Hundreds of thousands of people are about to be hit with 30 to 40 percent increases in their monthly payments. Since house prices are falling and October's resets are just the first of many, a long wave of foreclosures seems inevitable.
A fifth of all subprime mortgages made in California since 2005 are headed for foreclosure.
Not surprisingly, Wall Street's seers are chalking down their projections for construction and house prices. Economists at JPMorgan, for instance, now expect the pace of new-home building to fall by a further 30%, while they expect average house prices to tumble between 7.5% and 15% by the end of 2008. Jan Hatzius, an economist at Goldman Sachs, thinks that house prices could drop by between 15% and 30% over the next few years.
Also, from Bloomberg via Marc Andreessen:
Suppose regulators decide to play hardball on how the financial community marks to market, imposing rules that outlaw the existing freewheeling approach to how over-the-counter derivatives are assayed.
Moreover, suppose those new decrees come just as much of the underlying collateral is so tarnished as to be almost worthless compared with its initial valuation.
The ensuing carnage in the balance sheets of every financial-services company in the world would dwarf the damage wrought in the securities industry by the subprime crisis so far.
Algorithmic trading in the U.S. futures industry is well past its infancy, with a host of tools available for use in a wide range of markets. Traders and vendors are now increasingly looking for ways to sharpen their edge, either by making their already fast trading engines interact with the market even more rapidly, or by tailoring their algorithms ever more closely to the specific characteristics of individual futures markets. In fact, there are signs that some traders are beginning to design algorithms that prey on other algorithms, or hide their presence from other algorithms behind a flurry of order messages never meant to be executed.
Well, not really. But maybe something like it. (One can hope ...)
Author and prominent IT security expert Winn Schwartau has formed a nonprofit organization to provide cybersecurity certification programs for end-users.
The nonprofit has satellite offices in Old Hickory, Tenn., Hong Kong and London.
Can someone please explain the logic of a certification program for "self employed end users"? (Who are they trying to impress?)
When the Anna Kournikova virus was spreading wildly in 2001, it infected millions of computers and clogged e-mail servers by offering a racy picture of the teen tennis star to unsuspecting e-mailers. Or, in some cases, not so unsuspecting.
"A big proportion of the infections we saw were coming from people who had actually gone out searching for the virus because they wanted to see Anna Kournikova," says David Perry, global director of education for Trend Micro. "We didn't see this happening two times. We saw it thousands of times."
Today, some security professionals say, enterprise computer users haven't gotten much savvier. Perry says he still sees as many as one in five virus infections coming from users who purposefully infect themselves out of curiosity, just one of the many practices that undermine information technology security with varying combinations of naiveté and carelessness. And as cyber-criminals become more sophisticated and networks more intricately connected, that human element leaves companies vulnerable to data leaks and intrusion in spite of billions spent on electronic
Afghanistan Opium Survey 2007: Executive Summary | United Nations
Topic: Business
6:41 am EDT, Aug 31, 2007
Opium cultivation in Afghanistan is no longer associated with poverty – quite the opposite.
It works like this: the rich buy political protection, so by default, eradication efforts (though hopelessly half-hearted) fall almost exclusively on the poor, who are forced to convert to "cash crops" for which they have neither the scale nor the technology to compete on the open market. Meanwhile, the sanctioned producers more than pick up the slack, and, having eliminated the local competition, reap outsize profits.
In 2007, Afghanistan cultivated 193,000 hectares of opium poppies, an increase of 17% over last year. The amount of Afghan land used for opium is now larger than the corresponding total for coca cultivation in Latin America (Colombia, Peru and Bolivia combined).
Favourable weather conditions produced opium yields (42.5 kg per hectare) higher than last year (37.0 kg/ha). As a result, in 2007 Afghanistan produced an extraordinary 8,200 tons of opium (34% more than in 2006), becoming practically the exclusive supplier of the world’s deadliest drug (93% of the global opiates market). Leaving aside 19th century China, that had a population at that time 15 times larger than today’s Afghanistan, no other country in the world has ever produced narcotics on such a deadly scale.
On aggregate, Afghanistan’s opium production has thus reached a frighteningly new level, twice the amount produced just two years ago.
They are the powerful, cerebral and offstage actors of Wall Street. They are the math geniuses of the quant funds.
Their complex and sophisticated mathematical models replace instinct. They try to turn historical trends into predictive science, using elegant mathematics seemingly above the comprehension of your average 401(k) participant or Wall Street fund manager.
Instead of veteran, market-savvy traders waving fistfuls of sell slips, the elite quant funds employ Nobel nerds with math PhDs, often divorced from the real world.
But the 387-point drop in the Dow Jones industrial average Aug. 9 and the continuing turmoil in the markets, in part attributed to massive sell-offs by the quant funds, have tarnished some of the quants' glimmering intellectual credentials and shown that, when push comes to shove, they can rush toward the exits as fast as a novice investor.
... The press-shy Simons would not comment for this article, and a Renaissance spokesman could not be reached for a comment.
When we look at this question of what explains future growth, it doesn't seem to be very closely tied to accumulation of things.
Most of humanity's wealth isn't made of physical stuff. It is intangible.
That encompasses raw labor; human capital, which includes the sum of a population's knowledge and skills; and the level of trust in a society and the quality of its formal and informal institutions.
Worldwide, "natural capital accounts for 5 percent of total wealth, produced capital for 18 percent, and intangible capital 77 percent."
Neither the followers of Adam Smith nor those of Karl Marx seem to be conscious of the prevalence and effect of wild randomness. They are too bathed in enlightenment-style cause-and-effect and cannot accept that skills and payoffs may have nothing to do with one another.
Random tinkering is the path to success. And fortunately, we are increasingly learning to practice it without knowing it--thanks to overconfident entrepreneurs, naive investors, greedy investment bankers, confused scientists and aggressive venture capitalists brought together by the free-market system.
We need more tinkering: Uninhibited, aggressive, proud tinkering. We need to make our own luck. We can be scared and worried about the future, or we can look at it as a collection of happy surprises that lie outside the path of our imagination.
The same people who've been saying for weeks that all was well are now the loudest in urging the Fed to reflate the bubble. These pleaders ignore two major risks.
The first is the "moral hazard" problem of rescuing Wall Street banks and hedge fund players that walked too far on the wild side during the boom. They made money then, and they need to absorb the losses now. Without enduring the discipline of losses, the offenders will go even further out on the risk curve next time.
The second problem is that a Fed reflation could lead to even more trouble if it causes a loss of confidence in the dollar.
Presencing is a social technology for collectively leading profound change. It is based on Theory U, which illuminates a blind spot in leadership and social experience: the source of the inner place from which leaders and systems operate.
About the book:
In a world burdened with too much information, we are occasionally blessed with a genuinely new idea about how to perceive, think about, and act on our overly complex world. Scharmer's Theory U model of how to open our mind, emotions, and will to moments of discovery and mutual understanding is profound and much needed.
Orthodox economics assumes that people know roughly what they are doing, that they are rational, and that rationality is unambiguous. But in financial markets, people often don’t know what they are doing. Recognising this helps to solve our puzzles.
Many hedge fund managers, for all their fancy jargon and maths PhDs, do what Nassim Nicholas Taleb accused them of in his book The Black Swan: they are just picking up pennies in front of a steamroller. And sometimes the steamroller accelerates.
