GUILLERMO WECHSLER

The big short

Here there is a great map about Michael Lewis book. Short investment has become a great game after the invention of CDSs. First, it has produce enormous value to the private investors that have played the game, and second, it has made a great contribution to transparency, performance and market organization. The Big Short has been a good reading to me.

USA Banking performance: Credit quality improving?

Credit quality has been improving for a few quarters in a row -however, USA mortgages are not expected to improve anywhere soon-. CFOs' of some banks are "optimistic" about their assets quality... while they may be more nervous about new regulations and "de-intermediation" -reduction of people willing to use their services-... so, the optimism looks shallow. There are no interesting proposals coming from bankers about restructuring financial services industry... except consolidation, and that pathway drives to the wrong place: criminal complacency and legalized unethical compensations  "... don't worry, we are too big to fail".

The emergence and collaps of a market: CDO/Collateralized Debt Obligation

... or sub-prime mortgage credits (triple-B-rated) packaged in bonds (triple-B-rated), and then packaged in CDOs (triple-A-rated... the magic leap)... that may also become components of new CDOs (triple-A-rated)... against which mortgage default swaps were issued... swaps that became the exclusive component of the synthetic CDOs (triple-A-rated)... then Mr Wing Chaw - and many, many others- advising institutional investors (big pocket, risk averse, only triple-A-rated assets) to buy them... a systemic failure in making risks assessment.