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« Wall St. Meltdown: A Musical History of 2007 | Main | Getting beyond the Rhetoric »

February 25, 2008



Venn --

Thanks. It is nice to know that some readers see it as I try to present it.

My focus groups say that I should go for style and humor. I try on occasion, but the world does not always "get it." My son calls it "Dad humor" with an obligatory laugh.



I do not find your writing style to be smug and it's academic in style rather than pedantic.

And Jeff if you ever are pedantic, one hour in the Skinner Box for you.


Anonymous - The fact that the insurance commissioners were in frequent contact with the ratings agencies was public knowledge. They also were not procrastinating. It is a difficult problem with a lot of players whose interests are not completely in alignment.

I will also agree that at the moment--the very moment--the 14% borrowing was going on, the companies did not deserve AAA ratings. The view of some -- including all of the bearish pundits and a few CNBC commentators -- is that the rating agencies were not doing their job.

In fact, the ratings agencies and the insurance commissioners do not define their jobs the way CNBC and the bears want them to. As you suggest, they are looking at a broader public interest.

What I am trying to persuade you and others to do is to look at how these institutions actually behave. Use that for your investment decision making. Your opinion (or mine) of what they SHOULD do will not matter.

In short, I am trying to describe the methodology of a professional social scientist who is a behaviorist. I do not mean to come off as "smug" or pedantic, but it is difficult to describe these concepts in the breezy tones favored by some bloggers.

I appreciate your comment -- no doubt shared by many --- and I'll try to say it better in the book version!



Bill aka NO DooDahs!

typical web customer of financial punditry ...


No genuine AAA-rated company needs to borrow money at 14%. This is a rate-to-make-believe whitewash. There may well be higher public policy considerations, other than the mere economic merits, that dictate this outcome, and if they can actually pull it off in the long run, well hats off to them. Sometimes, paradoxically, procrastinating in recognizing or dealing with a problem turns out to be the right thing to do.

The trouble is, rather than acknowledging any of the above, you seem to be taking the position of "see, there wasn't any problem here after all"... and a tad smugly at that.

Or, who knows, perhaps there's more to the story. Perhaps the rating agencies were tipped off in advance that some government bailout or loan guarantees will be forthcoming, especially for the muni part of the split-up companies. I guess we'll soon see.

Bill aka NO DooDahs!

Eh, I'm not a fan of the WSU anyway.

Allow me to expand and clarify my previous comments with an analogy. The market for online financial punditry isn't monolithic – no market is. So it is with the market for produce. Huh?

Most of what sells, by the pound or by the dollar, are staples of the produce world, like bananas, iceberg lettuce, tomatoes, and yellow onions. Some stores get high or low quality staples, that's just how it is. Some customers judge which stores to go to by the amount of traffic they get, because those customers think it's an indication of quality. Some customers buy brand names for the same reason, i.e. frequent certain stores, without knowing that the source of the produce varies inside stores of the same chain. A store that sells extremely high quality produce, or exotic produce, limits its customer base accordingly, and may have to educate its customers ~ "hey, how exactly do you COOK a plantain?" Etc.

Some customers are attracted to a store by its chain's reputation for quality, such as the blog/comment-linker on the WSU, or perhaps with blogging networks that Forbes and others are trying to build.

Some marketers aim for the lowest common denominator, such as GM staple produce that transports well and keeps longer, but is less tasty and arguably not very good for customers.

Those that market the healthiest, freshest produce, and the widest variety of new and unfamiliar tastes, will attract very few customers, but those they attract will likely be dedicated ones, who have some skill at selecting and preparing tasty dishes with their produce purchases.


Bill -- I hope you are wrong! What should be the role of the MSM blog? Should it not be something different from the many thousands who just start writing?

When someone is a salaried professional journalist, writing for a major media source, the expectations of the average reader will be much different. My clients who read David treat it just like reading the WSJ. They figure that the sources and overall approach is consistent with a high journalistic standard.

It is much different from Barry's recent explanation of blogging -- that bloggers should be opinionated, gonzo-economics, etc.

My understanding of the major media blogs is that they are extensions of the mainstream effort, albeit faster and more agile.

Thanks for making this point. Maybe I am wrong about the raison d'etre for these blogs.


Bill aka NO DooDahs!

The web customer for financial punditry is bearish, and wants to hear consistent, repeated calls for recessions and economic collapse, wants to hear about the potential for rapidly falling stock prices, and wants to hear about "what's wrong" in the markets. Mish and his like deliver on that regard. I think David does make a judgment about his sources, and chooses the likes of Mish because they are popular.

David Merkel

The guarantors are a complex situation, and I have tried to be nuanced on it. It doesn't make for the best headlines or the most links, traffic, etc., but it is the honest way to go.

The regulators will do all that they can to keep the operating insurers alive; the holding companies are another matter. I could see this one going either way, and personally, I don't think that anyone has enough data to come up with the right answer here -- certainly not those "outside the wall," and even those "inside the wall" are probably scratching their heads over what the likely losses will be, because they are still evolving, and will depend on things that no one can today forecast with accuracy, like, how much will residential and commercial real estate prices fall over the next few years in nominal terms?

Anyway, keep it up, Jeff. Good post.

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