NoboruWataya
Joined 5 years ago
Joined 5 years ago
This has nothing to do with inside information or insider trading, it is just "if your company is bad, maybe you should go work for a better company".
Also it reeks of AI.
There were a lot of factors that contributed to the 2008 crisis: adverse selection leading to low quality portfolios, mispriced assets, high leverage which magnified losses, lower-quality securities being held by investors who couldn't really afford to bear the losses on them, etc. But the fundamental concept of tranching is not actually that bad, even though every time people read about it they think it's the exact same as 2008. Banks have been tranching debt since long before 2008 and they have been tranching debt ever since. Not just mortgages either, but all kinds of debt.
> They sell down debt when they are worried about concentration, which is exactly what "approaching internal limits" means in plain English: too much of this bank's balance sheet is now one bet on one sector holding up.
Which is correct, but kind of weird because being confident in a credit and being worried about concentration are not really mutually exclusive things. You can be pretty confident in an investment but not want it to constitute a majority of your portfolio. (Bankers know that even very strong credits are never 100% guaranteed to pay out.)
Let's say I offered you the chance to pay $100 to get $120 back if at least one coin toss in five came up heads. That's a pretty good bet, right? But would you bet your house on it?
The longer answer is that banks generally have policies about how concentrated they can be in individual borrowers, industry sectors, geographies, etc. That is why you rarely see a single bank take all of a very large corporate loan. They syndicate it out.
Even if you invested in a company that ultimately became a winner, you'd need to be able to hold on to it throughout the correction. You put your savings in tech stocks, the tech sector undergoes a significant correction, the stocks dive, you get laid off because you also work in tech and now you have to liquidate your stocks to meet your obligations. (Or you just retire at the wrong time.)
There is some praise but it's mostly the same complaints that come up whenever Mozilla gets mentioned on HN, it's awful, I can't believe they've done this, millions wasted etc.
(It's approximately as hard for a layman user to sign up to a Mastodon instance as it is to sign up for X. The fact that most layman users don't do that is a separate issue.)