Word: problem
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...rating of risk" and the lack of "liquidity" in the markets, what they are really talking about are gauges, however crude, of ignorance - and of fear based on ignorance. In the unfolding financial story of the year - the bursting of the global economy's credit bubble - "the biggest problem is we don't know what we don't know," says Khiem Do, head of Asian Multi Asset investing at Barings Asset Management in Hong Kong...
...core of this is, as Barings' Khiem says, a lack of information. It all started as a problem that seemed both predictable and containable: U.S. borrowers with bad credit history started (surprise, surprise!) defaulting on their mortgages. But that meant trouble for more than just the mortgage company or the bank that made the loan originally. Since the 1980s, individual mortgages have been packaged into bundles (so-called mortgage-backed securities) and resold to investors. Soon after came so-called derivatives, exceedingly complex investments that often trade based on the relationship between two or more underlying markets - mortgage-backed securities...
...problem is, now that this market has collapsed, figuring out who owns all this worthless paper. Think that's easy? Two weeks ago, no less than the CEO of BNP Paribas, the big French bank, said, in effect, no worries, folks. Its exposure to this stuff was, as he put it, "negligible." Yet last week, BNP had to shut down three of its own investment funds because of its exposure to investments linked to the subprime debacle. When the CEO doesn't know, that is the very definition of "not knowing what we don't know...
...stink worldwide, and it’s a pretty broken system in a lot of the world,” Fisman said. “What we’re trying to do is throw out an idea that is not in most discussions about how to fix the problem; not to say that this the final answer, but to at least stimulate debate about what types of mechanisms may or may not work...
...reason this might be an important area for research,” Scadden said, “is that if you wanted to create a tissue for transplant, then you avoid the problem of rejection...