and I was just posting what I had heard in the hopes of getting confirmation WRT RE
talked to a friend of a friend who works on bonds and confirmed that SPEs were used just like creation and annihilation operators (in math/physics) to tweak those kinds of financial vehicles on a banks balance sheet
don’t know what else to say, other than still seeking answers to lots of interesting questions[/quote]
SPE’s exist. They are not proof, in fact, they’re not even evidence of any shadow inventory. They don’t get assets (or liabilities) of any banks’ balance sheet. Shadow inventory was a myth 8 years ago. It was a myth 6 years ago. It was a myth 4 years ago. It is still a myth.[/quote]
the white paper was written a few year ago so what I was trying to verify is the mechanism(s) like SPEs by which shadow RE could exist
the significance of pondering old headline “news” like shadow RE is its knock on effects in the grand scheme of things and calls into question how accurate are various economic models
[quote] Economists often use computer models to try to understand the economy. Planet Money checks back in on a model it used a few years ago to predict what would happen with unemployment.
[quote] OUR MACHINES NOW HAVE KNOWLEDGE WE’LL NEVER UNDERSTAND
We are increasingly relying on machines that derive conclusions from models that they themselves have created, models that are often beyond human comprehension, models that “think” about the world differently than we do.
But this comes with a price. This infusion of alien intelligence is bringing into question the assumptions embedded in our long Western tradition. We thought knowledge was about finding the order hidden in the chaos. We thought it was about simplifying the world. It looks like we were wrong. Knowing the world may require giving up on understanding it.
basically as I look at things trying to model the complexity of the real world isn’t a trivial problem, and my takeaway looking into the topic is, too many models used for forecasting should NOT BE TRUSTED, for example there was just news about a stress test
[quote] Big banks make it through stress tests, investors await cash release
Test results released Thursday by the Federal Reserve show that the 34 institutions under scrutiny have enough capital to make it through the two scenarios regulators posed — one akin to the financial crisis and another entailing a shallower downturn.
recall last time central bankers missed issues related to derivatives (i.e. “the big short”) and mentioned there was no problem w/ RE prior to the crisis (sound familiar???)
[quote] Another financial crisis ‘in our lifetimes’ unlikely, Yellen says
Federal Reserve Chair Janet Yellen said Tuesday that she believes banking regulators have made enough improvements to the financial system that the world will not experience another financial crisis “in our lifetimes.”
Addressing an audience at the British Academy in London on Tuesday, Yellen said the banking reforms put in place in recent years have made the financial system much safer. She said regulators are doing a better job of watching for the type of systemic risks that struck the global economy in 2008, bringing on the worst global downturn in seven decades.
“Would I say there will never, ever be another financial crisis?” Yellen asked. “You know probably that would be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes and I don’t believe it will be.”
I have to wonder if relied upon models considered bank deposits are given junior status to derivatives (i.e. a “bail-in”), and the fact I’ve read there is only billions in FDIC insurance vs trillions in derivatives
so personally think its important to ponder various aspects like SPEs and stuff like shadow RE because doing so will give me a better chance of surviving the next bearish market which involves “shadow” entities (interacting w/ other parts of the system)
PS FWIW still see public pension portfolio mismanagement like here in SD is an unappreciated “risk” issue that is akin to a part of a fractal pattern
[quote] Contributions to public pension plans have increased in recent years, but their unfunded liabilities have increased more, according to an analysis by the Society of Actuaries released Wednesday.
