From the ‘Follow this Link’ Department
I wanted to share a great blog post that’s been making the rounds. Rortybomb, a financial engineer from San Francisco posted an interesting spreadsheet. Hunting through the stress test results, he found a chart on page 6 with ‘Baseline’ and ‘More Advanced’ numbers. Since that’s enough to do a linear extrapolation (of course, with two data points that probably isn’t the most accurate way to do it… see his background post) allowing you to set your own estimate for worst case unemployment numbers. Better than the back of a napkin!
What to Do
The ‘More Advanced’ numbers are supposed to be low probability. The current test used 10.3% unemployment (U-3) as the adverse scenario. Currently, unemployment has risen to 9.4%. It seems likely 10.3% is within reach… Using the estimated numbers for losses, you can enter your own ‘More Advanced’ estimate! Enter your estimate to a U-3 10% probability number, and take a look at what you get. The post is located here. Go enter some numbers and see a rough estimate of future capital infusions needed!