Sunday Musings: Market Dislocations

A few months ago, I reviewed one of my favorite books titled “Why Business People Speak Like Idiots.”

I was reminded of that as I read the latest (I think) Subprime mortgage fallout article in which B of A announced that 4th quarter results will be hurt by continued “market dislocations.” While the bank did not provide an estimate of how large this impact might be, they at least were able to identify the culprit for their potential problems by name.

In their SEC filing, they further stated that “we expect these significant dislocations in the CDO (Collateralized Debt Obligations) market to continue, and it is unclear what impacts these dislocations will have on other markets in which we operate or maintain positions.”

Translation: We are losing money big time, but we don’t know how to stop the bleeding nor do we know much about the current value of the CDOs. However, we are sure that we can blame it on something called “market dislocations.”

As the Subprime pig make its rounds and affects more and more financial institutions, you are bound to hear more of these newly created terms designed to project an aura of control and sophistication, yet it is nothing more than epidemic bull.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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