Hanley wrote: » Is the Gaussian stuff not just mainly focused on normal distribution or is there more to it?? Like is it just down the misinterpretation of the results contained therein?? Like not accounting for fat tails and the probability the sh!t will hit the fan quite frequently? I've always been a big fan of VAR. Such a brilliant concept. You have X% chance of losing no more than Y in a single day, BUT there's a chance you might lose an unquantified amount >Y too. It's another one of those systems that's nice in theory but can be crippling when you don't use a wide enough probability range.... As Merriweather et al found out at LTCM!!
itsallaboutheL wrote: » Thats just too far off topic!!!!
brianthebard wrote: » Are you the world's strongest accountant yet?
cardio,shoot me wrote: » next time i hear someone say powerlifters are dumb meat heads, i will quote this
Hanley wrote: » Hahahaha amazing. Just don't quote it to anyone who knows what they're talking about!
amacachi wrote: » Was hoping you'd say that. :P Isn't misuse of Gaussian stuff one of the main things being blamed for the current problems? Spent a year in college doin it, glad I quit now. :P
cardio,shoot me wrote: » Lads, GTFO take this to teh business forum, your making me feel retarded.
Hanley wrote: » It's funny, I was reading something from the NY Times a while back... the seeds of the collapse were sown a long time ago. Back in '97 the Clinton administration put pressure on Fannie Mae and Freddie Mac to relax the criteria by which they assessed and bought asset backed securities off banks (ie mortgages), so by becoming more liberal in what they bought, banks made riskier loans, passed the risk on to the FM's and the loans were subsquently bundled into marketable securities by them with AAA credit ratings because (afaik) they were essentially rubber stamped by the gov. They were sold to investors, CDS were used as insurance and everyone was happy. Then all of a sudden people start to default.... CDS were called in which had woefully underestimated the risk and resulting premium.... They couldn't pay.... and then the house of cards came tumbling down. And once the investment banks started to suffer it spiralled. At least that's my understanding of it from a very top level perspective. If anyone knows better or can correct anything I say, please do!!
the drifter wrote: » ya well ill take your Gaussian function and tell you that V/I is futile
brianthebard wrote: » That's the standard republican reasoning why the whole bubble happened. However it doesn't take account of the 11 times Bush allowed the Fed to cut interest rates to the lowest levels since the 60s. Under Clinton these had gone up after that relaxing of the criteria required to receive a loan.http://news.cnet.com/Fed-cuts-rates-ninth-time-this-year/2100-1017_3-273808.html Cheap credit imo fuelled the bubble much more than slightly lowered loan application criteria, especially if that was offset by increased interest rates post-97. Just some of my thoughts on the matter, by no means definitive.
Hanley wrote: » I dunno tbh.... From my reading of the Gaussian function it just deals with normal distribution? And the thing about normal distribution is that outliers and other "unlikely" events sit close to the end of the tails so there's only a minute chance of them happening (this would seem to be the common belief up to 18 months ago or so) But of course all these minute probabilities have suddenly become a reality on a mass scale. Throwing liberal amount of sh!t against a fast moving fan!! I think a big mistake that probably happened is that people didn't realise the correlation that existed between their positions. They thought they were diversified and hedged, but how can that be when markets pretty much totally collapses everything tumbles? Liek you can have you eggs in as many baskets as you like, but if there's a world wide earthquake you're still gonna end up with smashed eggs!! It's funny, I was reading something from the NY Times a while back... the seeds of the collapse were sown a long time ago. Back in '97 the Clinton administration put pressure on Fannie Mae and Freddie Mac to relax the criteria by which they assessed and bought asset backed securities off banks (ie mortgages), so by becoming more liberal in what they bought, banks made riskier loans, passed the risk on to the FM's and the loans were subsquently bundled into marketable securities by them with AAA credit ratings because (afaik) they were essentially rubber stamped by the gov. They were sold to investors, CDS were used as insurance and everyone was happy. Then all of a sudden people start to default.... CDS were called in which had woefully underestimated the risk and resulting premium.... They couldn't pay.... and then the house of cards came tumbling down. And once the investment banks started to suffer it spiralled. At least that's my understanding of it from a very top level perspective. If anyone knows better or can correct anything I say, please do!!
Hanley wrote: » Heh.... I never realised the Republican's used that argument! Lowering interest rates definitely was a major contributing factor... like who can resist cheap credit?? It's just a case of supply and demand really imo.... People can afford to spend more (thanks Mr. Bank Manager), more demand = increased prices. Demand outstrips supply.... prices climb further. Eventually supply catches up, but only when people have no jobs and can't borrow money any more!! You're left with an oversupply, prices plummet... I honestly think if banks had been more prudent a lot of this wouldn't have happend, but the fees and profits to be made on mortgages, business loans and particularly derivative trades were just too good to resist. And if one bank did resist another wouldn't.... the prudent bank sees their share price suffer... public don't realise the potential pit falls and the prudent bank is forced to go to the dark side. Like there's no reason for a small bank in Ireland to have a rapidly escalating share price. The "best" way of valuing a company is to discount present value of all it's future cash flows, so the only reason for a huge spike in share price is if the future earning potential increases, and lets face it, banks aren't exactly a revolutionary or innovative business. They shouldn't strictly be seeing massive increases in profits year on year unless the profits are being made in an unsustainable manner. It's just like Tulip Mania (funny read, look it up if ya haven't heard of it!!)... The price goes up because everyone's dying to get their hands on something that they perceive to be of great value, and as more people get on the bandwagon the price climbs further, then people realise they were wrong and the thing they valued so highly (say property in Ireland) is worth only a fraction of the price they paid. Some cop on sooner than others and rush to liquidate, supply jumps and again, price falls!! Not even really addressing you on this Brian, just thinking outloud!!
brianthebard wrote: » I think you're correct. Its my opinion that capitalism is terminally predisposed to boom bust cycles of this type. There were contributing factors like deregulation and cheap credit, but bubbles are inflated and burst as part of natural business life, something to be expected (by some at least). Its pretty irrational imo.
brianthebard wrote: » Have either of you accountants come across Kondratieff cycles? I dunno if they're just something sociologists picked up on cause they're easy to understand or whether they are taught across disciplines. I found it interesting anyways...http://www.kwaves.com/kond_overview.htm
amacachi wrote: » Did you do economics in school? That's one of the first things we did, it's all about cycles etc. Just had a quick look at that site (got maths in the morning and I've done 3 days of studying for it after being out of school 2 years so I've to tip on) and it's accurate to a certain extent, but it looks at things too long-term IMO. In the table it ignores the booms and busts within those cycles. Without government interference I think that the boom and bust cycles would be a lot closer together than they historically were, thanks to better communication etc., but it's all hypothetical and even if something's an accepted economic theory, I don't accept it as fact. :P I was against Obama's stimulus plan, yes, I was hoping for armageddon:P, but it looks to be working. If it doesn't though we're going to probably be a lot worse off than if the economy had been left to collapse.
brianthebard wrote: » No I did English and History, now I'm doing a multidisciplinary MA. Not meaning to be rude but the point of Kondratieff waves is that they are very long term. I'm not sure it necessarily ignores boom busts within a cycle, its just an attempt at a bigger picture. Tbh I don't think its totally accepted/mainstream-I agree that you shouldn't accept it as fact. Just found it an interesting theory that doesn't get much attention. Good luck in the exams.
cardio,shoot me wrote: »
FunkZ wrote: » I was afraid to post last night
amacachi wrote: » 25+1=24. That's correct yeah? I didn't make a stupid mistake did I?:(
Hanley wrote: » That's right. And 2+2 does in fact equal 5. It's a case of synergy really :D
Will be stickified if public demand calls for it!!!
