mercoledì 28 aprile 2010

Due articoli sulla Grecia. Forse la responsabilità della crisi finanziaria è anche politica.

Vi segnalo due articoli su La Voce dedicata al probabile default greco. Nel primo di Paolo Manasse si esaminano i costi del salvataggio della Grecia. Il secondo articolo di Angelo Baglioni e Rony Hamaui
analizza l'esposizione delle banche europee al debito greco. 

Riproduco inoltre qui una tabella tratta dall'articolo di Manasse con la probabilità di default stimata su un orizzonte temporale di 5 anni per alcuni dei paesi più rischiosi. La Grecia è quasi al 40%, da cui la prima parte del titolo del post di oggi.

Tabella 1: Spread e Probabilità di Default Cumulate a 5 anni
Highest Default Probabilities
Entity NameMid SpreadCPD (%)
Dubai/Emirate of424.2225.61
Latvia, Republic of337.0021.00

Con un Op-Ed il New York Times oggi affronta le responsabilità politiche nella crisi finanziaria. Questo aspetto viene sottovalutato in molti commenti ed è in cima alla lista delle preoccupazioni di quanti non vedono di buon occhio interventi che allarghino troppo il potere delle agenzie governative. Un ottimo esempio in materia è il commento di questa settimana di Bill Dirlam, il fondatore del sito Decision Moose dedicato a una strategia di asset allocation tattica fondata sul momento. Il commento settimanale di Dirlam è una delle mie letture preferite della domenica sera: Dirlam lo descrive in questo modo

Commentary has been split out from the weekly Market Review. This is so the author's words do not sneak up on those who, despite a secret interest in growing their own investments, are annoyed by the author's pro-investor, pro-capital, anti-bureaucrat ranting on behalf of the broader investor class. Forewarned is forearmed.

Molto spesso non sono d'accordo con lui ma non lo trovo mai noioso. Con la sua autorizzazione vi riproduco sotto un estratto del commento di questa settimana, dedicato al tema dei derivati e della loro regolamentazione. Dirlam rilancia il tema della trasparenza nel mondo della finanza. Non se ne parla molto, e probabilmente la sua descrizione dell'attività degli analisti pre-1999 è un po' troppo addolcita dal tempo trascorso e dimentica le incredibili sciocchezze che vennero scritte proprio dagli analisti durante la bolla di internet per giustificare le valutazioni di certe IPOs. Tuttavia ho l'impressione che non abbia tutti i torti a sollevare la questione della trasparenza e della libertà dell'analisi.

That inside-the-beltway sausage factory down on Capitol Hill spent the week grinding up banks in the name of financial reform. As the financial industry is rife with sin, it makes fertile ground for holier-than-thou politicians looking to capitalize on the voting public's  pre-conceived notions about (and in many cases outright prejudice toward) Wall Street. It also gives pols the opportunity to shift the focus off government's central role in the whole mess.  Both parties are frantically seeking to use the banking crisis as a spring board to election success next fall. In typical fashion, however, they are doing this not by actually addressing the root causes of the crisis, but by populist posturing. (...)

Probably the dumbest idea being bandied about is the proposal to ban derivatives trading by the largest banks. (...) Two things need to be kept in mind. First of all, derivatives trading desks did not directly contribute to the banking crisis.  (...) Secondly, derivatives are everywhere (...) there are both good, safe, and useful tasks for derivatives,  and dangerous ones.

For example, you may recall reading here that among the most wicked derivatives in the last meltdown were Credit Default Swaps or CDS's.  These highly-leveraged little instruments allowed people to take out massive bets on whether a company would go belly up, and default on its debt. Of course, as more people started betting on default, it became harder for the company to borrow at reasonable rates. As their debt servicing costs went up, their likelihood of default increased, and so did the bets against them-- literally driving the company into default.  It was akin to taking out a life insurance policy on your neighbor and then slowly turning off the oxygen from his respirator.  (...)

Don't get me wrong. We need financial re-regulation. I've always held a pretty dim view of the way some  financial institutions conduct business. (...)

We can regulate all we want, but unless the culture of institutional greed (and yes, public envy, for they are both sins) miraculously changes, politicians will continue to exploit these human weaknesses, and we will be back in the same situation at some point down the road. Since the financial business never really changed, even after Christ drove the money changers out of the temple two thousand years ago,  I seriously doubt that this unholy Congress will be any more successful.

Missing the Obvious

Though changing human nature ain't gonna happen, we should at least attempt to address the obvious.  The most glaring problem-- indeed the root cause of the "Lost Decade" in American investing-- isn't even being discussed. It is quite simply a dearth of timely, accurate, believable investment information. Think about it: if you had a nickel for every time you've heard the word "opaque" or the phrase "lack of transparency" to describe an investment gone wrong over the past decade, you'd be sipping "Pain Killers" on a hundred-foot yacht at The Bitter End right now.

Markets work best when there is a free flow of information-- from multiple sources. To my knowledge, there is nothing in this latest 1300-page regulatory proposal to address our decade-long total systemic failure in that respect. (...)  As you may have heard, it is very fashionable among the political class to assert that "no one understands these derivatives". That is not entirely true, of course, but it might as well be. People who do understand them, however, are no longer allowed to monitor their creation and use. By law, oversight has been reserved for the truly clueless-- the politicians, the regulatory lawyers, and you and me.

It wasn't always like that. Up until the late '90's, professional industry analysts, experts in their field, could visit publicly traded companies and check out the operations. They could visit the shop floor, or the trading floor-- any division-- to double check on the story being spun by the company's top management . They were like investigative reporters, only they had MBA's, years of specialized experience in their sectors, pulled down six figure salaries, and they wrote about esoteric things like EBIDTA, free cash flow, leverage, and potential FASB irregularities.

In 1999, the SEC outlawed the analysts' investigative activities, and stipulated that henceforth all financial information for any publicly traded company would be provided on a fixed schedule by top management, and only by top management. It was tantamount to outlawing the neighborhood watch in the ghetto while handing out automatic weapons to the drug dealers.

The reasoning behind this bone-headed regulatory decision devolved from a misguided populist desire to give the little guy the same access to investment information that large institutions paid billions for. The late nineties, recall, were the heyday of the day trader. While the SEC did level the playing field. so to speak, it did so by reducing institutions' ability to get at the real story-- not by increasing the small investor's access to institutional information.

Poking the institutional investors' eyes out proved just as devastating for the little guy if not more so. Though day trading was at a peak in 1999, the number of "little guys" invested in pensions, IRA and 401k mutual funds and other institutionally managed investment vehicles far surpassed individual stock traders. But in confusing a five-year bull market with their own brilliance as market players, day traders became the loudest and most demanding voice. They got their way, and it was everyone's undoing.

With no one peeking in through the blinds, creative accounting became the rage in many corporate suites. Within a year, we had Enron, MCI Worldcom-- and a whole string of lesser accounting frauds that bilked investors out of billions. That raft of fraud led to Sarbanes-Oxley, a massive regulation reiterating  that fraud was indeed illegal and adding hundreds of billions in regulatory costs to industry (costs which have been dutifully passed along to us).

One salaried SEC attorney overseeing a hundred corporations, will never be as informative (or as productive a deterrent to management foolishness) as having five or six industry experts per company-- all with a vested financial interest-- going after the truth. Had there been private analysts poking around at the divisional level at Enron, Worldcom, Lehman, AIG, et al, those crises may have been averted. At the very least, they would have been caught at an earlier less devastating stage. Same with the firms trading in sub-prime derivatives. Anyone visiting a bond trading floor in 2005 would have heard traders joking outright about the quality of the stuff that came across their desks and marveling that people were actually buying it.

The bond traders knew about sub-prime early on, but the ratings agencies, and the SEC remained in the dark. Not surprising since, unlike private analysts, who can actually help a company's stock price with a good report, government regulators and ratings agencies are at best viewed as a neutral and at worst as a negative. Employees are always instructed to cooperate, but not necessarily to facilitate. The relationship with private analysts, however was much less formal. More information was shared.

I'm a big fan of the little guy. And I admit I can be a bit of a flamer when it comes to regulation of any kind. But we need to bring back the neighborhood watch before we lose another decade to "lack of transparency".  The day traders are mostly gone now-- feeling permanently stupid after two mega-bear markets. Everyone knows now that we all live or die by the amount of transparency in any given situation. More is better. Since institutions can afford to pay for it, and since it behooves them to share it, why shouldn't they be allowed to search for it?  We would all be better off.

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