Matrix Blog

Wall Street, Financial Services

[Mandatory Reading (Please)] The Giant Pool Of Money

May 12, 2008 | 12:16 pm | Podcasts |


One of the biggest podcast downloads on iTunes is This American Life by Chicago Public Radio hosted by Ira Glass. It’s an hour long program that is diverse and interesting. The May 9th broadcast was particularly interesting to me called: The Giant Pool of Money.

It is a simple narrative on a complex subject and how the last five years evolved from a housing boom to housing crisis.


  • $70 Trillion Dollars
  • boiler rooms
  • keeping up with the competition
  • thirst for high returns
  • NINA loans
  • subprime investors
  • from tending bar to buying mortgage pools
  • Wall Street
  • 2% default rates actually 50% default rates
  • Very smart people using the wrong data to manage risk.

I listened to it twice just because it is rare to hear a complex topic that is presented so clearly.

Intelligence beat common sense to a pulp.

Listen to the episode.

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The Real Storm On The Horizon Is Rita, Not Inflation

September 22, 2005 | 7:30 am | |

As noted in the [Investor’s Soapbox submitted by Lehman Brothers yesterday [Barron’s Online],]( inflation fears may be overblown:

Even though oil prices are still very high, the mere fact that prices have become less volatile and, by extension, less surprising, is contributing to the recent simultaneous increase in oil and S&P 500 prices. There are three other contributing factors are also at work.

First, the current combination of oil prices, monetary policy, and fiscal policy is collectively not tight enough to cause a recession.

Second, in the face of rising energy costs, corporate profitability has been more resilient than initially expected.

Third, despite high energy prices and some pass-through, broad-based measures of core inflation are not apt to accelerate to dangerous levels.

Indeed, the leading indicators of inflation point to low but positive levels of core inflation in the months ahead, just as they did a couple of years ago when many investors were worried about deflation.

One of the pass-throughs besides oil prices include building materials. Builders may get squeezed because they expect to have [a limited ability to pass through higher costs to the consumer who they feel are nearing peak levels of affordability [REJ].](

Despite the recent actions by the Fed, the [bond market rose yesterday [WSJ]](,,SB112734916539448081,00.html), concerned that we are headed for an economic slowdown, influenced by Katrina and further damage by Rita. Rising bond prices would hold down long-term (including mortgage) rates.

In other words, the weakened economy does not allow producers to pass through all their increased costs to the consumer. The bond market views the price volatility of fuel and building materials as a drag on the economy, which could dampen the inflation-risk. However, the Fed does not agree.

[Redux: 11’s the Charm?: The Fed Raises Rate To 3.75% [Matrix]](

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Wondering Aloud: Its All About Leverage

September 13, 2005 | 11:02 pm |

Appraiser John Philip Mason writes in:

I can’t help but wonder if the stock market will do better if the real estate market cools off.

It’s easy to understand why people are investing greater sums of money in a real estate market with double digit returns, while the DJIA and other indexes have been pretty flat for the past few years. Especially when you consider that most securities can only be purchased with up to a 50% margin (if at all), but some real estate deals are being financed at up to 100%.


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