Monthly Archives: May 2010

Was AIG Chronically Underreserved in its P&C Lines? (Part II)

I read every email sent to me, and every comment  written at my blog.  But much as I would like to, I can’t answer them all.  One comment to my last piece on this topic questioned the validity of accrual entries in insurance accounting.  I would like to say that the standards for GAAP reserve […]

Place Political Limits on Overly Compliant Central Banks

In theory I agree that Central Banks should be free from political influence.  In practice, I don’t.  Why?  Central Banks regularly cave into political influence.  They are quick to loosen, and slow to tighten.  They are happy to let asset bubbles develop, because that is not what they are employed to handle. The truth is, […]

What are Credit Ratings For?

Why do we have credit ratings?  What are the main reasons they exist? To provide profits to those that rate credit. To provide credit standards for regulators and creditors (shame on you, do your homework) that can’t judge credit risk. To allow debtors to easily issue debt; simplifying the pricing decisions of creditors. Providing quantitative […]

The Rules, Part XV

What if securitization allows the economy to expand more rapidly than it would at a price of volatility, when intermediaries would prove useful? Sometimes securitization and tranching creates securities for which there is no native home. As the life insurance industry shrinks, it will be hard to find buyers for subordinated structured product. Securitization is […]

The Rules, Part XIV & Thoughts on Maiden Lane LLC, Part 1

Prepayment and default are dual to each other.  The less likely is default, the more likely is prepayment, and vice-versa. In a pool of loans, the critical distinction is the likelihood of loans to prepay or default.  Just because prepayment has been high, does not mean the remainder won’t default under stress. I don’t have […]

How I Minimize Taxes on my Stock Investing

One thing that I do differently than most investors is the concept of rebalancing.  I buy and sell positions to maintain their weights in the portfolio, within a 20% band around the intended weight.  As I wrote about it at RealMoney: The two smaller purchases were done for a different reason than the other trades. […]