By Bill Gross
(Fortune Magazine) -- During times of market turmoil it helps to simplify and talk basics -- explain things to the public and even yourself in terms of what can be easily understood.
Goodness knows, it's not a piece of cake for anyone over 40 these days to understand the maze of financial structures that now appears to be unwinding. They were created by youthful financial engineers trained to exploit cheap money and leverage, who showed no fear and who have, until the past few weeks, never known the sting of the market's lash.
Those looking for clues to the extent of the spreading fungus should understand that there really is no comprehensive data to allow anyone to know how many subprimes actually rest in individual institutional portfolios.
Regulators have been absent from the game, and information release has been left in the hands of individual institutions, some of which have compounded the uncertainty with comments about volatile market conditions unequaled during the lifetime of their careers.
Also many institutions, including pension funds and insurance companies, argue that accounting rules allow them to mark subprime derivatives at cost. Default exposure, therefore, can hibernate for many months before its true value is revealed to investors and, importantly, to other lenders.
The significance of proper disclosure is, in effect, the key to the current crisis.
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