See here for the introduction to the ZBI.
Just when I thought I might retire the ZBI, Congress decided to push us to the edge of the cliff/abyss/insanity again. So yay for that, I guess. I’m promoting Ignorance to the number one spot as the biggest factor in driving us all to living on roadkill and bathtub gin.
1. Populist rage and financial illiteracy amongst the populace, the populace’s representatives and the fourth estate. This is truly driving me nuts right now. The people, the people’s representatives and the people who explain stuff to the two former groups are (a) pig ignorant (b) wrong and (c) influencing other people. Oh lord. So let’s start with the People. Here’s how badly-informed the people are. (Actually the comments to that story are actually more depressing than the Stupid the data reports, which is remarkable. Oh, the apostrophe’s!) And then we have Congress, where some folks seem to think that you can say something isn’t a default and then it isn’t, on account of they are qualified large animal veterinarians or dentists and thus understand something about the international financial markets. I am a size 00 supermodel. (Damn, just saying it didn’t make it so, how does that not work?) See, Congressman CowDoctor, it is not you what decides whether something is a default, nor what will cause the markets to value Treasurys at some different price, nor what will determine whether or not said Treasurys continue to remain adequate collateral for major investment banks’ repo contracts which will determine whether we are going to have cascading margin calls all across the markets. What determines whether something is a default, in point of fact, is often a matter of contract law, made between private parties, and I’d think that you would respect that. But enough, you are qualified to pull baby cows out of mommy cows’ whatsits so who am I to judge? And then we have financial illiteracy promoted by the press. Oh, this is sad. I work in an area where legal research often consists of a Google search by some entrepreneur’s brother-in-law who is an immigration lawyer, so it is actually important that the financial press get it right now and then. But the NYT so totally mushed up a story on the JOBS Act that it was unrecognizable [even the correction to that one is wrong], and the WSJ published an interview on the JOBS Act that misstated the law without any factual corrections, so can the small biz folk trust the established media? And online, here’s a couple of right doozies, from the same source. In what is supposed to be “analysis,” a commentator counts the words in the Risk Factor section on the Twitter IPO S-1 and asks whether Twitter is more risky than Facebook’s IPO because it has more words in it. But it’s a good comparison because he has taken extraneous words like page numbers out! Where to start? Actually, that’s easy. Reading the words rather than counting them, that might be a really good place to start. And the same source asserts that Microsoft’s hidden problem is its “ancient board“: how can old farts understand how to sell to youngsters? Let’s ignore for the moment that the board is there for reasons of corporate governance, not sales, and that the people who do the selling are in the sales department. Let’s just ask “Yeah, and with only two women on the board, how can they hope to sell to lady people, either?” [Actually, good question...] Current rating for financial illiteracy as the biggest threat to life as we know it: eleven out of ten zombie cows and rising by the minute.
2. Bank provisioning. So the banks are recording humongous numbers for settlements, legal costs and oversight costs. But I STILL do not understand why some of the seemingly easiest lawsuits have never been brought. If you have an agreement that says Party A is responsible for making sure that Asset Pool X consists only of assets with the following attributes and it turns out that much of the stuff in the asset pool does not have anything like the attributes it’s supposed to have, there’s a cause of action against Party A, right? Right? [Sound of crickets...] Current rating: 10 zombie bears, 5 years out.
3. Europe. So Europe’s still essentially bust. In its chocolate-and-lace soaked heart, Europe still wants to impose the FTT. But it won’t work, also illegal, so at some point won’t they just give up and focus on proper banking union instead? Current rating: 5 zombie bears.
4. Actuaries and pensions. Current rating: 5 zombie bears.
5. Math/Algorithms. Current rating: somewhere between one and an infinite number of zombie bears; variable.
6. Hackers. Still the greatest threat to markets, according to DTCC. Current rating: 8 sleeping (?) zombie bears; stable.
7. Cross-border equity custody. Current rating: one lonely zombie bear.
8. Bitcoin or something like it. Haha, my friends at SecondMarket made an ETF in bitcoins, so bitcoins are now mainstream among the FinTech crowd. I am still not buying any. If you buy gold, you like to know where the gold mines are and have some idea of the metallurgic likelihood of gold in various areas. I am not qualified to know whether it is true that there is a limit on the number of bitcoins “mined” and I do not trust a fiat currency fiat-ed by someone who may or may not exist, or who may have a serial identity like the Dread Pirate Roberts. Plus, I do not need any drugs today, thank you. I am sticking to SPY like always. Current rating: two zombie bears; increased on account of now hipsters are going to invest in this thing.
9. Megabank’s Boring Transactions Division. Current rating: no zombie bears for now.
10. Commercial Real Estate. Current rating: no zombie bears; we are still pretending they aren’t there. And maybe they aren’t, but if that were the case, why is so much office space in my neck of the woods still vacant?