The complexity Mantra

[xtronics]

This mantra about the complexity is misleading. If the complexity causes an opaque equity, its value should be rated lower. What happened instead is the rating agencies didn't do due diligence. They should have discounted any derivative product that was new - just for being new and not having a track record. Next, they should have researched it and if they couldn't see it as solid - willing to risk their reputation etc - they should not have rated it as AAA.

If I ask someone to invest in a company and he asked to see the books - and instead of providing the investor with something that could be traditionally audited, I give him confusing paper that was so complex that it wasn't clear - said investor should run away and hide.

The auditors are the rating agencies, not the SEC as is somehow assumed by the public. If they committed fraud - and it appears they have - they should be sued out of existence and new rating agencies should fill the void. What is wrong, is non of this is happening - until it does, it opens the door to ever more government and socialism.

I could be wrong, but socialism causes malinvestment which reduces the tax base which leads to printing money and inflation. I think there has been a heap of malinvestment.

[metalman]

Re: The complexity Mantra

This mantra about the complexity is misleading. If the complexity causes an opaque equity, its value should be rated lower. What happened instead is the rating agencies didn't do due diligence. They should have discounted any derivative product that was new - just for being new and not having a track record. Next, they should have researched it and if they couldn't see it as solid - willing to risk their reputation etc - they should not have rated it as AAA.

If I ask someone to invest in a company and he asked to see the books - and instead of providing the investor with something that could be traditionally audited, I give him confusing paper that was so complex that it wasn't clear - said investor should run away and hide.

The auditors are the rating agencies, not the SEC as is somehow assumed by the public. If they committed fraud - and it appears they have - they should be sued out of existence and new rating agencies should fill the void. What is wrong, is non of this is happening - until it does, it opens the door to ever more government and socialism.

I could be wrong, but socialism causes malinvestment which reduces the tax base which leads to printing money and inflation. I think there has been a heap of malinvestment.

the corrupt accountants that lied about the dot com company's books were allowed to go out of business. why not the corrupt ratings agencies?

why not the rotten banks and insurance co.?

then we'll have new, better banks and ratings agencies.

[Nervous Drake]

Re: The complexity Mantra

.

[xtronics]

Re: The complexity Mantra

.... he was doing all of the derivatives work. I asked him, "Do you actually understand what you are doing?" And he said, "Enough to get by."

I can tell you right now, he didn't understand shit. ...

That was pretty much how I understand what happened. To do an honest accounting, you would really have to do a major discount any value on something that 9 out of ten trained in the field really don't understand. There can be no real market if the valuation is opaque - thus they should be close to worthless.

The complexity was just a way to hide the leveraging. I don't think this mess was an 'honest mistake'.