This is being cross-posted to both the Toomre Capital Markets website and to Lars Toomre's personal website.

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Earlier this week, Lars Toomre broke up an LT post about Adding Images to Lars Toomre Website. Previously, buried at the bottom of that post, there was a hand-crafted HTML table summarizing what information currently was in Google Image Search for various combinations of site domain restrictions, safe search parameters and some typical search terms. That table is now presented in the LT post Sample Summary of Google Image Search Results and repeated here for easier reference.

The public presentation of these search results has already resulted in several stimulating conversations heading off in numerous different directions. Let me try to summarize some of the issues that have been raised thus far and the broad categories that they might be grouped into. Each of these categories probably will receive additional attention in the coming days. They include:

Over the past couple of months, there has been little posting here of original content. Instead, when not working on client engagements, much of the available time has been spent behind the scenes preparing to upgrade and further enhance first Lars Toomre's personal website [lars.toomre.com] and then in due course that of the business Toomre Capital Markets LLC ("TCM") [www.toomre.com]. Hopefully, soon there will be more time available to write here and share more ideas.

In the meantime, if the reader would like to gain further insight in what is coming, please free to read the blog entries on Lars Toomre's personal website here. All thoughts and comments are welcome.

IP address 95.108.240.252 maps to a spider computer hosted on the Yandex Enterprise Network. About every minute and a half or so, a spider process on that computer (still) attempts to retrieve yet another piece of content from the Toomre Capital Markets ("TCM") website. Many of the pages this spider requests either do not exist or are part of the no-follow rule section in the robots.txt file. This spider certainly is aggressive and ignores the rules that many other bots seem to respect.

A few months ago, after watching this particular malformed spider consume more five percent of the total hosting bandwidth used that month, we had had enough. Hence, some modifications were made to a custom Drupal module running on the TCM website concerning visitor information (including various bots) and what specific information was being sought. Now as a result, when this Yandex spider come looking for a page like "search/node/facebook", it somehow ends up redirected to a page from a third-party website.

One would think that the person(s) controlling the spider would get the message after some fifty thousand plus attempts to get information from the TCM website. Somehow a human user might wonder why attempts to retrieve information on structured finance products, risk management and/or MATLAB topics always results in a page full of "gay anal porn" or other similar material. Until then, the TCM website might well become a frequent referrer to certain pornographic websites.

Toomre Capital Markets LLC ("TCM") uses the open-source Content Management System ("CMS") system called Drupal to generate the web pages that are served up on this website. As part-time technology "geeks", we at TCM are big fans of the flexibility that this technology offers. That flexibility comes at a cost though. Whereas as some other popular CMS software like WordPress are much easier to use "right out of the box" so to speak, Drupal requires considerable effort in setting various parameters and even some programming to get a website to look and work as desired.

The current version of the TCM website has remained basically unchanged for the past two plus years. During the summer of 2010, we will be making some changes both to address the resolution of some long-known issues and to prepare for a move both to a new version of Drupal (Drupal 7) and the adoption of the HTML5 language. Hence, there may be some temporary hick-ups as these changes are incorporated into the production website.

If there are annoyances about the current presentation and/or operation of this website that bother the reader, please let us know. We will try to incorporate such changes before we are distracted by the upgrades to HTML5 and Drupal 7. Thanks!

Around 5 PM on Monday May 10th 2010, visitor traffic to the Toomre Capital Markets LLC ("TCM") website noticeably spiked. Many of the visitors first came to the post Possible Bankruptcy for Joe Gregory of Lehman Brothers before often continuing to other postings. The source of much of this increased traffic was tied to the micro blogging service twitter.

As Toomre Capital Markets LLC ("TCM") starts the fourth quarter of 2009, we are cognizant that our consulting business is once again in transition. As it is sometimes said, as one door closes, another door opens. We are just not quite sure which door (professionally at least) might be opening.

For much of the past two years during the on-going credit crunch, the TCM staff has been working extensively with a major participant in the Life Settlements sector. We have used various pieces of the MATLAB mathematical modeling language together with Microsoft SQL Server relational data bases and ActiveX technology to create the calculation code for their customized portfolio management application. The resulting code is rather advanced.

This MATLAB-compiled code enables TCM's client to quickly price various individual life insurance policies and to help identify the risk/rewards in simultaneously managing several portfolios of such investments. It has moved the client away from the risks and confusion of large complicated Excel spreadsheets and onto a modern web-based platform. Alas, though, the heavy development work for that particular project is drawing to an end and we are now in the acceptance testing phase. There is unlikely to be any further enhancement work necessary until at least the code has been used in production for some time period.

Partly as a result, TCM has wondered where we should turn our attention to next. Should we turn to focusing our efforts on developing similar types of MATLAB-based code for other financial clients? Certainly there are many financial firms that enjoy the convenience and ease of data input into Excel spreadsheets. With time, though, many of these same spreadsheets become large, many times unwieldy and often contain inaccurate cell references in some of their formulae.

Depending upon the complexity of what information the spreadsheet is attempting to model, MATLAB often is an effective tool for tying together: the ease of that spreadsheet bring to data input and manipulation; easy access to data stored elsewhere in relational data bases; mathematical calculation of arrays (including good routines for various types of optimization); integration with tried and time tested C/C++ calculation libraries; and excellent visualization opportunities for understanding the results.

TCM is quite skilled in doing this advanced MATLAB development and integration work. (The reader might note the many posting on the TCM website about the term MATLAB and then appreciate why we receive so many visitors each day looking for information on such terms as ActiveX, Excel and MATLAB together.)

As we contemplated during the last few weeks which way to turn, Mathworks (the maker of the MATLAB product) contacted TCM about possibly working with a hedge of hedge funds that needed help with integrating some of their existing MATLAB models with their client-facing website. Could we help? It now appears that very shortly we will be starting an initial project focused on foreign-exchange investments.

Particularly in recent weeks, Toomre Capital Markets LLC ("TCM") has been extremely busy helping a client implement a custom financial application that is quite complex and truly a modern distributed system. The data, tools, work rules and analytics embedded within this new application are certainly cutting-edge and should help this client further extend their leadership in their particular sector of the financial markets. What is more, this new system should allow this client to truly take their business to the next level on a real-time basis with true Enterprise Risk Management.

TCM primarily assisted this client with some custom analytic code written in the MATLAB technical programming language that takes advantage of that specialized language's strengths with arrays and mathematical calculations as well as a quite powerful set of graphical user interface ("GUI") tools. Like the original Collateralized Mortgage Obligation ("CMO") code that Lars and Aldon wrote at Lehman Brothers more than twenty years ago, this new analytic code allows for the real-time pricing and sensitivity analysis of a relatively new type of cash flow that ultimately will be securitized should the securitization markets revive. The input variations to the analytic model are almost infinite and allow for the effective pricing of many variations of life insurance policies.

One of the noted strengths of the Toomre Capital Markets LLC team is helping our clients connect the hidden dots of financial information, risk management and structured finance modeling. We are especially good at uncovering and honing in on that crucial information or aspect of a financial model that is a key to value / risk determination. If the reader's organization needs some assistance in this area, with their financial models or specifically with detailed MATLAB financial modeling, please feel to contact us so that we might discuss your issues further. As the above client notes, TCM is particularly adept of dealing with those complex financial problems with lots of "hair balls."

During the past week, Toomre Capital Markets LLC ("TCM") has been working behind the scenes to upgrade the underlying software that is used to dynamically present web pages to the reader based on various criteria and preferences. The initial phase of this upgrade is now largely complete. As a result, the complete content of Toomre.com website again is now available and the website has changed its appearance.

Back on March 1st 2007, Toomre Capital Markets LLC ("TCM") created a post entitled Where is Value in Sub-Prime Mortgage Market? In recent days, UBS has announced a further write-down of $10 billion in sub-prime mortgages and CDO securities; London-based HSBC, Paris-based Societe Generale and Germany's WestLB have all rescued their sponsored SIVs either by taking them on to the balance sheet or providing credit lines that ensure that all of the outstanding senior commercial paper will be repaid; and MBIA has announced a $1 billion investment by Warburg Pincus LLC that for at least for a few weeks will help ensured that MBIA maintains its AAA credit enhancement rating. Late on Monday December 10th 2007, Washington Mutual, the United States' largest savings and loan by market value, declared that it was exiting the subprime mortgage business, eliminating another 3,150 jobs and raising some $2.5 billion dollars in additional capital through the issuance of convertible shares.

Based on the recent TCM posts about the perils of reaching for yield and some the enormous losses various financial institutions are taking from their subprime and CDO security activities, a couple of investors have asked Lars Toomre to go back and update his thoughts on that Where is Value in Sub-Prime Mortgage Market? post. Hence, a few hours ahead of the release of Lehman Brothers 4th quarter 2007 earnings release, here goes:

Clearly, Lehman Brothers was wrong back in late February arguing that the sell-off in the ABX index was way overdone. From their historically very tight levels around the start of 2007, the risk premiums for all types of credit investments have dramatically increased. For all practical purposes, the mortgage sector has virtually stopped trading and those risk premiums are now more of a "pick 'em" variety.

So where is value from here? As Lars has preached in many different conversations and written comments, the trade-off from going from a liquid to an illiquid position requires a very significant yield pick-up and recognition that one must be able to live with the illiquid investment for five years or more. Given that criteria, most, if not all, mortgage investments are still not trading cheaply enough to justify going illiquid. Hence, Lars Toomre would recommend that interested institutions remain more in a seller mode than an acquisition mode when considering structured mortgage investments.

As The Wall Street Journal reminded investors, home prices will need to fall about 30 percent to restore their historic relationship to inflation, rents and incomes. Hence, Toomre Capital Markets LLC would urge that investors avoid the mortgage sector for at least another six months as housing prices continue to decline. Whether the popping of the housing bubble will take five or six years as Jim Rogers has argued remains to be seen.

However, clearly the full effects of cheap and easy mortgage credit are not fully reflected in mortgage security valuations. Make a point of following just how badly home equity loans, Pay Option ARMs, other intermediate and hybrid ARMs and the Alt-A security sector will decline in the coming months. While there no doubt will be periodic spikes as people perceive the housing market is bottoming, remember that a 30% price decline is going to turn almost all of these mortgage types into "upside down" positions with borrowers having negative equity in their homes.

An interesting question is just how prevalent the "jingle mail" phenomena will become. Also, remember that the housing price bubble is beginning to deflate during a period of relatively healthy employment. Just imagine how bad the delinquency and default statistics would be if the United States economy were to enter a "normal" recession.

As before, thoughts and comments are most welcome.

As some readers are aware, Toomre Capital Markets LLC ("TCM") is one of the few Capital Markets consultancies with considerable experience in one arcane sector of the securitization markets called insurance-linked securities. Lars Toomre was originally retained in 1997 by what is now known as Munich Re America, Inc. to help that subsidiary of Munich Re thrash out what strategies to pursue in the convergence of the capital markets and more traditional insurance markets driven by fortuitous loss. Partly as a result of that initial strategy work, American Re Financial Products was established to pursue three major initiatives:

• Finite reinsurance (now much discredited after the abuses exposed by the AIG/General Re finite reinsurance abuse scandal)
• Reinsurance of credit enhancement mono-line insurance companies and other credit enhancement opportunities primarily originating from world-wide project finance needs (now shut down due to Munich Re's downgrade from AAA to A in 2001), and
• Creation of American Re Capital Markets to create, underwrite and trade in various insurance-related opportunities such as future film production securitizations, weather derivatives, insurance-linked securities, guarantees of index total rates of return, insurance swaps, the hedging of Enterprise Risk Management exposures and the secondary trading of various property and casualty, health and life insurance policies (now part of Munich Re Capital Markets operation in New York City).

Lars Toomre ended up joining Munich Re to help establish American Re Capital Markets where he focused on weather derivatives, enterprise risk management and other odd-ball initiatives with "hair on them". One of the odd-ball type of requests that periodically would come across the Capital Markets desk concerned "What would Munich Re want to pay for a particular insurance policy (or sometimes portfolio of insurance policies) in the secondary market?" Some of these requests concerned structured settlements, some concerned viatical insurance and some were marketed as "life settlements". Generally, the insurance broker was looking for a better price than what the leading aggregators of the day (generally JG Wentworth or General Re Financial Products) were willing to pay. The type of policy and details within caused the valuations from various sources to often vary considerably.

Some people have asked why bother with all the complications of acquiring a portfolio of life insurance policies in the secondary market or a diversified portfolio of P&C risks? In short, the answer is that the returns from such diversified portfolios do not correlate with the returns from more traditional investment sectors such as equity, fixed-income, currencies or commodities. Hence, some of the smartest diversified investment companies (like Berkshire Hathaway, PIMCO, Citadel Investments and Greenlight Capital) have made some very significant allocations to insurance, insurance derivatives and insurance-linked securities, particularly because of how this sector risk increases their risk-adjusted returns (as calculated by such measures as the Sharpe Ratio).

On Monday, November 26th 2007, The Wall Street Journal published a front-page article entitled An Insurance Man Builds A Lively Business in Death written by Liam Pleven and Rachel Emma Silverman. This article describes in quite some detail how life settlement contracts are acquired and some of the pratfalls of dealing with retail clientele that have primary life insurers and regulators warily circling this rapidly expanding industry.

As many readers of the Toomre Capital Markets LLC ("TCM") blog may already be aware, the next Hedge Fund Executive Forum Series event entitled Real-Time Decisions & Risk Reduction: Technologies that Reduce Latency and Sharpen Business Intelligence to Drive Results will be held in New York City on Thursday November 29th 2007 and then repeated in Stamford, CT on Tuesday December 4th. Lars Toomre will be one of the speakers at this event. Both Aldon Hynes and Lars Toomre hope that you will be able to join the Incremax and Toomre Capital Markets team at either of these venues.

These Hedge Fund Executive Forum Series events are designed to help key investment decision makers quickly get beyond buzz words and learn which strategic technologies and solutions will help drive the best results from every aspect of their organization -- the front, middle and back-offices as well as client service functions. Designed for investment managers with more than $500 million in assets under management ("AUM"), the focus of this particular event will be on data, input/output ("I/O") and how "push vs. pull" can be implemented.

The key challenge this forum event will address is how to create better real-time decision opportunities that result from first transforming fast-moving data into information and then into knowledge that ultimately adds to economic value. Some of the key solutions and technologies from Advent Software, AMD, Cisco, Microsoft, Reuters and Streambase Systems will be highlighted for further discussion.

Please circle the appropriate date on your calendar and plan on attending. Advanced registration is required and can be completed at this web link. Aldon Hynes and Lars Toomre look forward to speaking with you directly on the 29th or 4th. Hopefully, we will see you then. Please feel free to contact TCM directly if you have any questions or comments.

Sometimes it helps to search for certain key phrases among the many news sources that are indexed by the Google News search service. A search for the term "Lars Toomre" on Friday October 12th 2007 reveals that Mr. Toomre was quoted by eFinancialNews in an October 1st 2007 story entitled Dow Jones’ News Feed Makes Headlines.

The morning of Thursday, July 26th began with a front page story in The Wall Street Journal entitled Banks Delay Sale of Chrysler Debt As Market Stalls. Written by reporters Dennis K.

Maybe Toomre Capital Markets LLC ("TCM") is a bit naïve. After all, who really will miss a fifty or two? Fifty Billion or Hundred Billion in losses, that is? Maybe the reader can pay this structured finance bill due to sub-prime and Collateralized Debt Obligations ("CDOs") valuation mark-downs from his or her wallet, but the Toomre Capital Market's wallet is likely to be more than a few dollars short on this monsterous tab!!

Toomre Capital Markets LLC ("TCM") provides advisory services to firms either directly engaged in the capital markets or providing technology solutions and services to the financial services industry. Our specialties include applying emerging technology and innovative financial engineering, structured finance and risk management ideas to the broad field of financial services and Enterprise Risk Management ("ERM").