How financial crises are like earthquakes

June 10, 2009

They both seem to follow a mathematical relationship called a “power law” where you have lots of small events trailing off into infrequent but much bigger events, according to a McKinsey study. (So don’t assume stability, look into the deep past not recent history, look for early warning signs and study complex systems. ) Now this is a great chart from the McKinsey study:

power-curve

4 comments

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People are talking about the $58B conversion for C…but C only has 74B in preferred shares. $45 B are tarp funds. so that leaves $29B that would be non-tarp pref shares. C also has a limit on the number of public pref., trups and e-trups shares to be converted of $20.5B…the USG will convert $25B…that is 45.5B. If you look at C’s balance sheet in November they had 27B in pref…by December it was 70B and they added 4B by q109 for a total of $74B. Also all of the non-usg pref. are reduced by different factors that reduce the $ amount converted into shares. I believe C will convert 20.5B in public, trups and e-trups and 20.5B in USG pref…leaving…about 30B in pref. shares outstanding. C only needs 33B…not $41B or $58B…the stress test only required $33B…so how does everyone keep getting to $58B…the math does not work.

Posted by Jeff | Report as abusive

why can’t someone buy CNB colonial bank in AL. like FORTRESS FIG or KKR

Posted by pete iodice | Report as abusive

ON CAN FAMILY DOLLAR HAVE A HIGHER STOCK PRICE THEN GE?

Posted by pete iodice | Report as abusive

The actual Stock Market top (where we are now) has been zigzagging too much.
But the charts warn that any time soon comes the plunge DOWNWARDS.

Schpekulant Suggestions:
1.Keep your money in a safe place. Examples?
Cash
Low-expense Bond mutual funds
Investment-grade bonds
Short and long term Government Bonds
2.Resist temptation to buy stocks just because they look very cheap.
3.Wait. (For many traders and investors this is the most difficult)

Remember you have been warned……….

Remember also that this is just a suggestion, everyone is responsible for his own
investment decisions…. YOU have to take care of your own money.

Chaim Kimelblat aka Schpekulant@gmail.com
Listen with your Brain

Posted by Chaim Kimelblat | Report as abusive