I find myself thinking more and more about dominoes these days. Not the pizza, but the kind that you play with. As a kid, I use to love to set them up and knock them down. Why? I’m not sure.
The pizza on the other hand, well… it‘s not much. In fact, it’s run of the mill, if you ask me.
It’s the conveyor belt that makes it so ordinary. That, plus the sauce, and the cheese. It’s nothing like the pie that we used to get from the guy that looked just like the Frito Bandito would if he was covered in flour.
Now that guy really knew how to make a pie. If my kids only knew.
As for other kind of dominoes the debt markets are absolutely full of them . And anybody that is holding anything that can be remotely connected to mortgages these days must be thinking about dominoes even more than I am.
Unfortunately, that is a whole lot of people these days in places that you wouldn’t have thought of.
One of them was highlighted in yet another great story on the brewing problem in Bloomberg. If you don’t understand structured investment vehicles you should read it.
From the story entitled Public School Funds Hit by SIV Debts Hidden in Investment Pools :
"Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida’s Jefferson County school board, that means the $2.7 million of taxpayer funds he’s placed in the state’s Local Government Investment Pool is earning more on this October day than it would get in a money market fund.
“We’re such a small school district,” Wilson, 55, says. “We don’t have the time or staff for professional money management. They have lots of investment advisers. It’s risk free and easy.”
It may be easy, but it’s not risk free. What Wilson didn’t know in October — and what thousands of municipal finance managers like him across the country still haven’t been told — is that state-run pools have parked taxpayers’ money in some of the most confusing, opaque and illiquid debt investments ever devised.
These include so-called structured investment vehicles, or SIVs, which are among the subprime mortgage debt-filled contrivances that have blown up at the biggest banks in the world."
"Jefferson County’s Wilson says he still trusts the Florida pool managers and will keep the school’s money in the fund. “I really hope this isn’t any worse than we know today,” he said after the Nov. 14 meeting. “If something happened to that investment, our county would be devastated.”
It’s those same SIVs that would devastate Hal Wilson’s county that are one (there are many more) of the dominoes that I’m worried about. Because when they fall, the rest of the dominoes are coming down with them.