Wednesday, October 24, 2007

Damages are Contained -- to Earth

I was watching "Damages" season finale last night on my Circuses box (slingbox).

For those that haven't seen it, it's about a big class action lawsuit carried out on a shady businessman (think Enron) who got out of his stock with inside information before the SEC announced an investigation into shady accounting. This, of course, is being carried out by an even shadier lawyer.

It was funny, because I know they filmed this in the spirit of Enron (and probably worldcom, tyco, etc etc), but they things they were saying sounded earily familiar.

He was being investigated for "hiding debts in offshore entities made to hold bad debts off the balance sheet" and "booking income in the present period based on expected income." (cash flows that were future hopes rather than present realities).

I know alot of you are thinking "Yeah, Enron", but look at our current lending environment.

You've got banks creating SIVs...(not sieve) to hold bad assets off their current balance sheets -- otherwise they'd have to pony up more in the way of reserves for the banking regulators.

AND you've got option ARM writers booking the increase in mortgage principal that payers are adding to their loans by paying the minimum as REVENUE. In other words, in some bizarre twist of logic and GAAP reason, they are booking money with the lowest probability of ever bein repaid as revenue in the current period.


I mean, I know we are a stoopid people...after all, if you couldn't see shades of Vietnam -- especially in the rhetoric before it all started -- you were blinder than the cataract encrusted pooch that resides here.

but, C'MON for crap sakes....Enron only blew up like 6 years ago and the trial of the principals JUST FINISHED.....ridiculous.

In other news, I was going to run a really tasteless headline like, "Suprise, So Cal RE is ON FIRE"...or "RED HOT"...or pick your other tasteless joke. Just heard my cousin and his family barely got out of their house with their fact he was hospitalized.....

They'll be able to return to the house in a day or two to see if anything made it, but as of now, from what I hear, they have their pajamas and each other (and that's it).

Good luck to them, and the prayers of Golden Lotus and I are with them and all the other leftcoasters caught in the blaze.


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