In the town of Mach people don't run, they walk wherever it is they're headed. I'm not sure where they live, but they appear from around the corner and find their way to the warmth of other human bodies. Young mothers with children and prams, older women who look like they have soldiered both wars stroll through the streets their wind beaten rosy faces peering out of scarves. Their bodies speak of patience. There are no tense knots in their limbs except from arthritis and it's a reminder of the infrequency with which I cross paths with this same lot in London during rush hour. And where are the brethren? They seem to be working either in garages or as carpenters with one eye on the job and one eye on the mountains. How can you resist reaching back in time on on the foothills of Snowdonia.
Something that I have come to realize is that you need time to write and time to blog. Blogging for me is best when there is no time pressure and then there is the time and space to reflect. So, here I am in the Tincan office near the Snowdonia National Park.
It is a clear, crisp autumn day. Rob had to practically drag me out of bed, because the B&B where we are spending three nights had the most comforable slay bed. I slept one of the more peaceful sleeps that I have slept in weeks. The absolute thick silence was as comforting as our blanket. I had arrived on the train in darkness and was unable to see much of my surroundings, so this morning when we wakened I asked Rob to open the drapes so that I could see what lay around us. The sky was still grey and overcast as the sun had not yet burned its way through, but eventually when we were having breakfast overlooking the green mountains speckled with white sheep and snow we got a glimpse of red autumn when the sun broke through.
It is a wonderful but simple pleasure to wake up to the beauty of green mountains, the feeling of clean air and the smell of leaves turning brittle. This afternoon and tomorrow we hope to make the best of the sun and stretch our legs in search of signs of land and King Arthur. After all, we are in Arthurian and Celtic territory as a banner at the local cafe affiliated with the centre for alternative technology pointed out. Tonight is new year for the Celts and a local celebration is being held in town hall; subtle reminders that these trees and mountains have been around a lot longer than me.
Last night I attended a lecture given by Rotman finance professor John Hall on the credit crunch. After all of the hysteria I thought it would be good to get my head around what actually transpired. Here are my notes:
The Credit Crunch: A brief overview:
There was a quantum difference in the US housing market prices from 2000 to 2006. During this period it became much easier to obtain mortgages and this fuelled the demand for homes and kept pushing prices up. The housing market and financial engineers created new products which would pull people into the US housing market. Products became much more imaginative and saw the introduction of various new products such as teaser rates which were extremely low in the first 2 to 3 years and then resumed their real rates for the ensuing 27-28. NINJAS (no income, no jobs, no assets) were able to aquire loans, and even liar loans were approved (people lying on their applications about income and job status). The constant need to bring in new buyers into the market was the only way to push up prices and this created an artificial bubble.
AAA rated tranches were popular with banks but eventually financial products backed by mortgages that were previously thought to be safe became much more risky. It is difficult to pin this on any one player for behaving irrationally. Asset Backed Securities worked until people began to default on their payments and the structure began to collapse. The repackaging of mezzanine tranches into senior tranches and the redesign of these financial products to negotiate a better rating with the rating agencies became part of the course. Financial engineers kept redesigning the structure until they achieved a AAA rating. Essentially the financial structuring of ABS CDOs was too aggressive. Mortgage lenders stopped worrying about the quality of the credit and were just focused on ratings. Another challenge is that structured products require an assmuption about correlation. Rating agencies had to make assumptions about correlation. And during stressed financial situations correlations are more likely to go wrong. Correlations are high on mortgage defaults (several US states experiencing mortgage defaults) during financially stressed times. There's also evidence that mortgage originators used lax lending standards because they knew the loans would be securitized. For a rebirth of securitization it's necessary to align the interests of originators and investors. In fact professor Hall would suggest that originators should keep some percentage of each tranche and Allan Greenspan suggests that securitisers should retain a meaningful part of the securities they issue. Another problem was that originators and investors were trading and buying within the same bank without exchanging full information. There is also the overall trend of short-term decision making on the part of originators/bankers. Perhaps bonuses should be based on longer-term performance (eg. 5 years) as short-term based bonuses influence decision-making (especially in the US in 2006). In general investors were relying on credit ratings and did not understand the products they were trading. These structured products are among the most complex credit derivatives that exist.One suggestion by professor Hall was that lawyers should provide software that is freely available to investors and researchers. Most financial institutions at the time of the housing bubble did not have models to value the tranches they traded. Without valuation models risk management is virtually impossible. And another problem is that during booms no one listens to risk managers. There needs to be a way to prevent this.
Ultimately most people knew the subprime mortgage bubble would burst but not how bad the ramifications would be. And now what we are seeing is the contagion effect between financial institutions no longer trusting each other and unwilling to lend to each other.
Sarah Silverman is funny, sometimes obnoxious but always deliberately so.
Sarah Palin is funny because she's scary. Also funny when interpreted by Tina Fey. Not so funny as VP and really not funny as potential US president.
What you call a terrorist calls you a terrorist right back.
On Female Role Models:
Role models are subjective. Hillary Clinton fills those shoes for some of us, and not for others. Tina Fey in spades for those of us who know that perfection is not what it's cracked up to be, and that having a sense of humour is priceless.
Sarah Palin is NOT, I repeat NOT, a role model for those of us who believe in evolution, the right to choose, and that US republicans are out of touch and driven singularly by dollars.
Over and Out. It's up to you voters in the US to finish the job.
The black morning breaks to the clatter of foxes.
She squealing in fear,
he humming with the certainty of the here and now.
When all is done and done,
does he make excuses about the busy day ahead,
or does he wait until she falls asleep to leave.
Worse, does he sleep quietly through the night by her side hinting at stunted promise.
Or is it a pact.
I'll bring you misery but stability, he tells her flicking his whiskers.
And she, she howls at his darkness,
because the alternative is nothing.
I could not write you
instead you came:
I did not know you
and yet I did,
a mother's songbird
of love and gain.
There she goes crossing the ocean, airborn fish skimming the water's edge. She leaves no trail in the sky, the air moves then settles back into its previous state. Along the way she carries oceans and countries like shiny pennies in her bottomless pockets. Beyond the edge of reason anything is possible.
I remember a few years ago working on the formidable Nike account with a small boutique advertising agency in Toronto Canada. The president of said agency had just seen my latest version of a client presentation for hockey, and he looked over at me quite seriously and asked, 'Francesca, where is the orgasm?'. Luckily I wasn't drinking or eating anything as I would have choked, at the time it struck me as the type of think you would only hear an ad exec utter aloud in the company of others. Brother, I remember thinking to myself, what am I doing here. I don't do orgasms or titillation during presentations. I just present the core ideas.
It is somewhat ironic to find myself today working within the foresight unit of a large engineering and design company, and to some extent be relied on to deliver against this same expectation. An engineer, let alone an English one, would never ask you point-blank to deliver an orgasm in your presentation, but they might replace such shock-factor words with 'buzz' or excitement, maybe even inspiration.
So while I would like to distance myself from the advertising community I left behind, I have to admit I am still peddling some of the same tricks. The mystique of what we do remains important to promote with our clients. To some extent clients don't want to believe they are only buying a steel bridge in Kansas, what they want to buy is a vital connection between the small farming communities and the thriving metropolis to the north.
There is a decidedly very gloomy tone to London these days. And I don't think it is just the usual grey weather. This week's newspapers are laced with the stench of financial crisis and Bush pleading for a substantial $700 billion bail-out. I am starting to wonder whether I should pack up and head to Cuba for those adventurous years I never lived out in my twenties.
I have never been as interested in the inner workings of banking institutions as I am now, which must make me a pretty typical Joe. The past two weeks have driven me to the business dailies trying to piece together what exactly a credit crisis means. My ability to recognize patterns is somewhat curtailed in this area, however from the little I have been able to understand is the fact that the current meltdown is not just the fault of greedy bankers (as much as we might relish the idea of hanging them by their suspenders from London Bridge and/or Brooklyn Bridge), our present financial turmoil is the responsibility of central bankers who took their eyes off of regulation and to a large extent allowed what we are experiencing to happen. Another piece that I have uncovered is that changes in the supply of money and credit have been the main driver of economic cycles and booms and busts. To a large extent, it is mistakes in monetary policy which have driven every major recession in 20th and 21st centuries.
I am not sure that understanding or knowing any of this relieves the current states of stress we are all undergoing, and that I am certainly feeling. As I travelled to work on the bus today, I could hear a Carribean accent explaining to his mate that Bush was begging for a bail-out when the Americans have all of the money they need in their pockets. The tone was not one of sympathy but of can-you-believe-the-hootzpah that Bush would expect to be saved by global bystanders struggling to feed their own families.