Friday, October 3, 2008

I am posting exchanges with the Shorting Guru:

This man introduced me to the Joy of Shorting back in the days. His record is impeccable. I think some of our recent discussion could benefit the readers of this blog should they want to be on the offensive or defensive part of the riot. You know where I stand :D

From MTGSPY
To Guru

I never forgot what people said, for example, Ben said in Harvard graduation speech last year: "We will not have a GD2 because I am a smart guy who studied and understand the cause of it." He might, I don't know, but it's fair to say he does and I won't argue with you. The problem is this: It's the wrong model.

The more correct dynamics is modeled in 1998 Indonesia/Thai/Russia issue, and for USA it's much closer to the Indonesia case. That's why my spines are tingling. This particular virus does look like flu when it's in fact ebola. The DNA for this strain can be read in:

http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18

And it's nothing new to me.



From Guru
To MTGSPY

I agree the GD is a bad model, but none of the crises you mentioned were accompanied by a strengthening of the crisis countries currency.Explain that one professor mtgspy...I don't think there is a good model, you just have to think thru each of the particulars, eg sector by sector and their interactions...


From MTGSPY
To Guru

Well the forward looking part of the model looks good; this is just like that LTV-driven prepayment speed we invented in 2005 that nobody liked until it happens.

"In New York's Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania's coal fields in 1875, when masked workmen exchanged gunfire with the "Coal and Iron Police," a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md."


From Guru
To MTGSPY

A 10 pct reduction in GDP in those days meant cutting out things like eggs/meat from your diet, buying no clothes that year...a 10 reduction now means buying 9 outfits instead of 10, making imported coffee at home instead of at sbux, drinking beer at home instead of at a bar. Its quite easy to cut the top 10 pct of consumption for about 80 pct of house holds now without any real effect on actual quality of life. The bottom 20 pcts 10 pct cut will be financed by increasing taxes on the top 5 pct.That's how we'll get back to a 10 pct savings rate, and it might even not involve an outright 10 pct contraction but relative to a 2 pct per year trend growth over 3-4 yrs.


(PS: Actually I was reading that last e-mail and laughed at this very level-headed, albeit very correct approach it's very naive. In my opinion someone would smash a molotov cocktail on the back of my head first before 10% spending cuts would be the average nationwide. Heh).

10 comments:

A said...

wow Spy, you do have a time machine

"From the issue dated October 17, 2008"

D said...

hahaha

I was explaining the fact that everything down to the drinks and food people consume has been levered up via credit cards.

There is nothing left to lever.

He's a private equity guy and he said that there's nothing that can be done for most of the companies now. We are looking (broad strokes) at going directly to bankers to partner with them as operational "expertise" to restructure their "future" assets. We take an upside equity stake while they assume 100% risk (existing creditor) because that's their only option.

:)

D said...

Also, he apparently never read the Great Gatsby...that was the template for the past 10 years of partying.

Anonymous said...

You have the picture wrong, no? If Asia is the new US and US is the new Europe, you should expect to see the US embrace socialism and hence have better social cohesion. Asia, on the other hand, is where the unrest will be, and where foreigners will be crucified.

gtt said...

so where you from spy?

MTGSPY said...

i am a white guy, please dont lynch me. heheheheh.

gtt said...

I used to have a GF from Moscow. No, not mail order ;) back in 98-99 she regularly would have stories of former friends of hers found brutally murdered bc they were jews. i wonder who the scapegoats will be here.

MTGSPY said...

whites?

D said...

LOL

there are a few hundred thousand financial "advisors" out there...that's a likely place to start.

Not that I wish that upon them, they are all just dumb, ignorant and in over their heads.

D said...

My first two votes are to target the accountants and litigation attorneys.