Tuesday, December 25, 2007

Tranche and truth

The financial types like to be creative in ways that move money between different pockets. The year-end festivities rely on such movement happening consistently. This year though, reality has caused fewer pockets to balloon than we saw in 2006.

One such scheme is the 'tranche' which essentially looks to add value to certain parts of an asset while hoping that the diminishing of value in other parts is kept to the future. We'll look at this more closely.

Oh, Lord, how do we escape such machinations that have so many holes?

And, yes, the rewards go to those who accept the risk (yet, one would think that more effort would go into getting a better calibration than we've seen). One would think that any scheme like this is not unlike spinning a top (another bane - that old magic called spin) which cannot stay in motion forever (let's count the ways that this can fail). It is not that risk is bad; the problem is assessing the thing appropriately. Oh, we'll look at the many games there, to boot.

One wonders if such types of thinking haven't infiltrated project management. Well, they have in the sense that earned value is still an art wishing to become more substantial.


12/05/2011 -- It's interesting how idiotic the supposedly smart can be. The real issue: the failings of an idiot have a small influence; the failings of the 'real idiots' has wide impact (and, in so many ways). Somehow, we muddle through.

05/25/2011 -- Lemons problem, dark pools, ... Oh, so much to look at!

04/03/2011 -- Tis tranche and trash.

11/22/2010 -- Tranching, under the guise of securitization? Silly games.

11/04/2010 -- Big Ben is still putting us at risk and trashing the savers. This topic will be given more attention under the context of proper capitalism.

08/18/2009 -- As promised, FEDaerated is here. Ah, the tranche, a perpetual motion machine, indeed.

07/23/2009 -- After the bust and the rebound, toxic assets are still a problem due to tranche realities.

06/17/2009 -- A fresh look will be needed, especially at things like securitization.

12/18/2008 -- Have we seen anything more silly or more representative of fairy dusting in the great realms of financial engineering? It makes leveraging look to be quite reasonable.

11/20/2008 -- Boon and bust, the way of fairy dust.

08/19/08 -- As things unwind from the recent craziness, some analysis can be thoughtful.

05/27/08 -- We must really look at how this is getting something from nothing which we know from physics is not a mature notion. Except, there may be some delta out of the junk status that is reasonable; however how could one get AAA except for perhaps some minor aspect?

05/20/08 -- When I first read about this technique, supposedly thought of by highly intelligent minds, I thought 'Huh?". Of course, something from nothing is what the wizardry of the computer has been reinforcing on many fronts.

Further study has only increased the bafflement at the problems. Thankfully, others are looking at this type of thing, to boot.

Modified: 12/05/2011

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