Markets
Yesterday's ringing rejection of sub 10,000 territory of the Dow seems likely, barring new "news", to be an intermediate term bottom. The bears found few US sellers lower and upon that miss, buyers - short covering and nibblers following this blog's recent moves ;) - ran the table.
Euro-fears still abound but what else is knew ... or different from what has already been experienced ? The world seems OK except for Korea. European companies can still make plenty of money selling goods in the US and in the emerging markets. Obviously the Euro is now dead for a decade as a reserve currency. That realization simply means that perception matches reality. This site exposed the delusion of the near-term idea of the Euro getting that status months ago.
Fears of the dollar losing its position in the world - so prevalent late last year - are now shown to be the silly blather that this site called them at the time.
Korea
Why is North Korea so bold now compared to a year ago ?
The answer is Barry's big mouth. Barry (aka Obama) changed US nuclear policy recently to state the US will not use nuclear weapons first. Sure, he added some qualifiers, but who believes those ? Not Kim Jong Il.
If North Korea attacks the South, Barry will have been the enabler.
Derivatives
A famous quote from T. S. Eliot is "We had the experience, but missed the meaning ... "
That seems likely coming true in the derivatives regulation fight in DC - at least it applies to Barney Frank. What makes a bank "Too Big to Fail " ? The answer is the counterparty risks. What are the biggest of those other than mostly overnight trades ? Derivatives.
Derivatives can persist for years and extend to all other financial institutions. Breaking that link is absolutely crucial to prevent one firm from dragging down the rest. Ring-fencing a bank's derivatives operations would do that. Barney the Boob wants to cut that part from the bill. That's simply foolish and exemplifies the T. S. Eliot quote.
Word of the Day
"Aporia" - noun [$10]
Aporia means 1. Rhetorical. an expression of doubt; 2. a doubtful matter; a perplexing difficulty.
Sentence: [T. S. Eliot quoted in "The Cambridge Companion of T. S. Eliot", page 48] "the old aporia of Authority v. Individual Judgement". That phrase uses aporia in the sense of "a perplexing difficulty". Fraternal Libertarianism resolves that aporia by limiting regulation and Authority to be used only on (not by) the ruling classes (aka the rich & powerful).
Showing posts with label derivatives. Show all posts
Showing posts with label derivatives. Show all posts
Wednesday, May 26, 2010
Monday, May 10, 2010
Unplug the Machines
The solution to avoid ANY more crack-ups in the markets is so simple and pure that, of course, the SEC and Congress will not do it. This potential for a disaster has been talked to death for almost 25 years since the crash of 1987.
Thursday's meltdown appears to have been purely machine driven as they took over the markets: trading algorithms, rapid-fire trading, program trades ... on and on. They moved so fast that no one had time to make rational decisions. And we all know that the "selling" was largely naked short selling by hedge funds and market makers. You know very well they did not have borrows in place. That famous "market maker" exception - that's the same fig leaf Goldman Sachs hides behind for a lot of its deceptive trades.
Sigh ... 25 years of building trouble and no one listens or does anything. That's the power of money. Wall Street and hedge fund money has bought the markets for their own playground. The seller ? The SEC, which dithers for years doing ... nothing.
The solution ?
Unplug the machines. Not permanently, as in stable markets they provide good liquidity benefits in stable or slowly drifting markets. Unplug them whenever stock has fallen (or risen) 2% or a major average has fallen (or risen) 2% from the prior day's close. Let people handle those trades. And enforce trading halts nationwide. And extend them to options and futures markets. AND to derivatives. AND "dark pools". Apply them to ALL broker-dealers for ANY trades.
I don't care if "market makers" have a tougher time. That's their problem. If they want to sell options and can't "hedge", just charge more for the risk.
I don't care if electronic exchanges have trouble and lose business. That's tough - they simply do not work fairly in rapid markets. Force all trades in fast, unstable markets onto the NYSE.
More: no short selling when a stock is down 2%. No naked shorts by ANYONE including market makers AND ETFs. And for ANY short sale not from the broker's in-house holdings, I think a borrow should be pre-arranged.
No more ETFs backed by derivatives. And get rid of the ones that exist now. The markets should be brought back to REALITY from the phantom zone.
Travel
I spent a few days in my hometown last week. What a fine place to live ! Uh .. that is, if one has a good job. Unemployment is very high and I'd guess "underemployment" is stunning. A cousin had me over for a BBQ - ahhhh ... the pleasures of burgers, baked beans and beer ! And a taco salad for multicultural diversity.
And then ... Big Al had a BBQ and produced a culinary masterpiece: grilled spam burgers with cheese. Mon dieu ... c'est magnifique !!!
Actions
Krypto has many buy orders for me, as does Sky. I will do them sometime today, likely not at the open as futures indicate a huge up day on the news of the Euro-EU stabilization package. Krypto wants me to sell TIPs, and cash and buy European, Emerging market and US. Sky wants me to re-buy some resource stocks (these will be one or all of BHP, FCX and CLF).
By the way, I closed Fido Fund as a separate fund and now put those stocks in the Sky Fund, run by my fine herding dog, Sky, as directed by whistle commands from Mrs. B.
More ... Sky placed 6th and 7th in the weekend's sheep herding trials in northern New Hampshire. This was Mrs. B's (near) debut as a handler and she did very well, of course. Krypto was a bit of a goofball, but she's a beginner.
Book of the Week
The Grass Crown, by Colleen McCullough is the follow-on book to The First Man in Rome. This very fine historical novel combines good writing with solid research to produce an engaging and enjoyable story of the rise of Sulla to power in Rome. And it puts "meat" onto the dry historical accounts of the 100 years destruction of the Roman Republic. By who ? Easy ... the rich and powerful in the Senate did it by their lust for money and power. Too few had old fashioned integrity or any sense of fairness.
The Grass Crown is superb - if you are interested in Rome, read it.
Word of the Day
"Retradition" - noun [$1000] (rare)
Retradition means the action of handing back.
Sentence: Financial markets need the retradition of ALL trading in fast or unstable markets back to the NYSE where humans can stop the machines from causing disasters.
Thursday's meltdown appears to have been purely machine driven as they took over the markets: trading algorithms, rapid-fire trading, program trades ... on and on. They moved so fast that no one had time to make rational decisions. And we all know that the "selling" was largely naked short selling by hedge funds and market makers. You know very well they did not have borrows in place. That famous "market maker" exception - that's the same fig leaf Goldman Sachs hides behind for a lot of its deceptive trades.
Sigh ... 25 years of building trouble and no one listens or does anything. That's the power of money. Wall Street and hedge fund money has bought the markets for their own playground. The seller ? The SEC, which dithers for years doing ... nothing.
The solution ?
Unplug the machines. Not permanently, as in stable markets they provide good liquidity benefits in stable or slowly drifting markets. Unplug them whenever stock has fallen (or risen) 2% or a major average has fallen (or risen) 2% from the prior day's close. Let people handle those trades. And enforce trading halts nationwide. And extend them to options and futures markets. AND to derivatives. AND "dark pools". Apply them to ALL broker-dealers for ANY trades.
I don't care if "market makers" have a tougher time. That's their problem. If they want to sell options and can't "hedge", just charge more for the risk.
I don't care if electronic exchanges have trouble and lose business. That's tough - they simply do not work fairly in rapid markets. Force all trades in fast, unstable markets onto the NYSE.
More: no short selling when a stock is down 2%. No naked shorts by ANYONE including market makers AND ETFs. And for ANY short sale not from the broker's in-house holdings, I think a borrow should be pre-arranged.
No more ETFs backed by derivatives. And get rid of the ones that exist now. The markets should be brought back to REALITY from the phantom zone.
Travel
I spent a few days in my hometown last week. What a fine place to live ! Uh .. that is, if one has a good job. Unemployment is very high and I'd guess "underemployment" is stunning. A cousin had me over for a BBQ - ahhhh ... the pleasures of burgers, baked beans and beer ! And a taco salad for multicultural diversity.
And then ... Big Al had a BBQ and produced a culinary masterpiece: grilled spam burgers with cheese. Mon dieu ... c'est magnifique !!!
Actions
Krypto has many buy orders for me, as does Sky. I will do them sometime today, likely not at the open as futures indicate a huge up day on the news of the Euro-EU stabilization package. Krypto wants me to sell TIPs, and cash and buy European, Emerging market and US. Sky wants me to re-buy some resource stocks (these will be one or all of BHP, FCX and CLF).
By the way, I closed Fido Fund as a separate fund and now put those stocks in the Sky Fund, run by my fine herding dog, Sky, as directed by whistle commands from Mrs. B.
More ... Sky placed 6th and 7th in the weekend's sheep herding trials in northern New Hampshire. This was Mrs. B's (near) debut as a handler and she did very well, of course. Krypto was a bit of a goofball, but she's a beginner.
Book of the Week
The Grass Crown, by Colleen McCullough is the follow-on book to The First Man in Rome. This very fine historical novel combines good writing with solid research to produce an engaging and enjoyable story of the rise of Sulla to power in Rome. And it puts "meat" onto the dry historical accounts of the 100 years destruction of the Roman Republic. By who ? Easy ... the rich and powerful in the Senate did it by their lust for money and power. Too few had old fashioned integrity or any sense of fairness.
The Grass Crown is superb - if you are interested in Rome, read it.
Word of the Day
"Retradition" - noun [$1000] (rare)
Retradition means the action of handing back.
Sentence: Financial markets need the retradition of ALL trading in fast or unstable markets back to the NYSE where humans can stop the machines from causing disasters.
Monday, July 27, 2009
Common People vs. Ruling Class ?
Reading history broadly, I've been struck by how many great empires and nations were slowly destroyed or debilitated by the growth in power of the aristocracy (aka ruling class) at the expense of the common people. The most stable and prosperous nations have a strong class of common people and a strong central government, but a relatively weak aristocracy. As the aristocracy grows in wealth and power, the government and people become weaker and eventually the government falls either internally or from outside enemies.
The various aggressive employee job actions in France last month were indicative of a trend towards the common people trying to get a better deal from the bosses. Today news arrived of similar, but more aggressive and violent actions happening in China
FT: “The privatisation of a state steel group has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their company, according to a Hong Kong rights group.
The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state companies in industries targeted for consolidation.”
I’ve been reading “Babbitt” by Sinclair Lewis, which has a chapter describing how the people and George Babbitt react to a large, multi-industry employee action in moderate-sized city which is the setting for the book. These industrial actions in France and China are a bit reminiscent of the strikes and other job actions of the early 1920s and 1930s. I’m wondering how far this trend will go.
Russia continue to evolve and solidify its gangocracy.
FT: “A Moscow court has freed on bail Semyon Mogilevich, a suspected organised crime boss who is wanted by the FBI for alleged racketeering and fraud, 18 months after his arrest by armed commandos in Moscow on charges of tax fraud, the Financial Times has learnt. ... The release of the [man], who [was] arrested in January 2008, is unusual for Russian courts where suspects are often held in pre-trial detention long beyond the legal expiry date of one year. Another high-profile prisoner, Mikhail Khodorkovsky, the former Yukos tycoon, has spent 2½ years in detention since a second set of charges were brought against him in February 2007, while the court case continues. ... Mr Mogilevich had been living freely in Moscow until the January 2008 arrest despite being on the FBI’s most wanted list since 2003. Robert Mueller, the US bureau’s chief, had accused him in a 2005 speech of setting up “a powerful organised crime ring” that “engaged in drug and weapons trafficking, prostitution and money laundering”. Mr Mogilevich has denied any wrongdoing. “
You can see his photo in the walls of your post office or local police station.
Russia criminals with likely government nods kill dissidents and human rights activists worldwide, just like the Mafia tries to silence those who break omerta.
Did We See Another Portfolio Insurance Debacle in September 2008 ?
Reading the gloating of variable annuity promoters over the weekend, I realized that part of the huge wave of selling that hit the markets in September 2008 might have been from selling by variable annuity managers. They had sold billions of such variable annuities promising fixed minimum annual gains and a percentage of stock market gains from the date of sale. Looking at charts, one can see that the rough average “minimum” market average guaranteed was around S&P 1200-1300. So those managers would have had to hit the sell buttons for stocks and derivatives, either directly or via their Wall Street brokers who sold them derivatives that matched their guarantee structure.
Perhaps that partly explains the “air-pocket” from S&P 1200 to S&P 950 ? It was eerily similar to the waves of selling in September and October 1987.
This is another reason to regulate strongly ALL derivatives.
Actions
I turn 55 soon, so am re-evaluating my Krypto Fund asset allocations. One should do this every 3-5 few years to make sure one is not over weighted in equities compared to your retirement cash flow needs.
I'll probably be selling some US equities and moving the moving the money to TIPs, but nothing is certain yet.
The press says analysts now expect the S&P 500 earn about $75 for 2010. Hmmm, it was suggested last month by a normally erudite commentor that I was delusional for thinking 2010 earnings could hit $80 in 2010. The numbers are moving my way. Putting a cap of 15x on that $80 forward earnings gives me my year end optimistic target of S&P 1200.
Unfortunately, Obama is trying to do a lot of things that will likely create stagnation after a return to normalcy in 2010. So gains past S&P 1200 might be hard. This era is sure looking like a 1970s redux. If so, stagnation and inflation are coming. If Obama does not reappoint Ben, I fear that will happen.
Word of the Day
"Bodeful" - adjective [$10]
"Bode" - verb, transitive [$10]
Bodeful means ominous.
Bode means 1. portend, foretell; 2. foresee, foretell (evil).
Sentence: Numerous Obama efforts collectively are bodeful for US economic growth beyond a simple return to normalcy.
Le Mot de la Semaine
"Penser" - verb, regular -er conjugation
Penser means to think. For "to think about something", use penser à. To ask an opinion of something, use penser de.
La Phrase: Je pense, donc je suis.
Sentence: I think, therefore I am. This is a famous expression of Descartes which was the basis for his philosophy that was a crucial part of the 17th century movement from Scholasticism and reliance on religion and received authority to using reason and empiricism.
This week I plan to express this concept in all five languages that I am studying, viz., French, German, Italian, Polish and Spanish.
The various aggressive employee job actions in France last month were indicative of a trend towards the common people trying to get a better deal from the bosses. Today news arrived of similar, but more aggressive and violent actions happening in China
FT: “The privatisation of a state steel group has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their company, according to a Hong Kong rights group.
The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state companies in industries targeted for consolidation.”
I’ve been reading “Babbitt” by Sinclair Lewis, which has a chapter describing how the people and George Babbitt react to a large, multi-industry employee action in moderate-sized city which is the setting for the book. These industrial actions in France and China are a bit reminiscent of the strikes and other job actions of the early 1920s and 1930s. I’m wondering how far this trend will go.
Russia continue to evolve and solidify its gangocracy.
FT: “A Moscow court has freed on bail Semyon Mogilevich, a suspected organised crime boss who is wanted by the FBI for alleged racketeering and fraud, 18 months after his arrest by armed commandos in Moscow on charges of tax fraud, the Financial Times has learnt. ... The release of the [man], who [was] arrested in January 2008, is unusual for Russian courts where suspects are often held in pre-trial detention long beyond the legal expiry date of one year. Another high-profile prisoner, Mikhail Khodorkovsky, the former Yukos tycoon, has spent 2½ years in detention since a second set of charges were brought against him in February 2007, while the court case continues. ... Mr Mogilevich had been living freely in Moscow until the January 2008 arrest despite being on the FBI’s most wanted list since 2003. Robert Mueller, the US bureau’s chief, had accused him in a 2005 speech of setting up “a powerful organised crime ring” that “engaged in drug and weapons trafficking, prostitution and money laundering”. Mr Mogilevich has denied any wrongdoing. “
You can see his photo in the walls of your post office or local police station.
Russia criminals with likely government nods kill dissidents and human rights activists worldwide, just like the Mafia tries to silence those who break omerta.
Did We See Another Portfolio Insurance Debacle in September 2008 ?
Reading the gloating of variable annuity promoters over the weekend, I realized that part of the huge wave of selling that hit the markets in September 2008 might have been from selling by variable annuity managers. They had sold billions of such variable annuities promising fixed minimum annual gains and a percentage of stock market gains from the date of sale. Looking at charts, one can see that the rough average “minimum” market average guaranteed was around S&P 1200-1300. So those managers would have had to hit the sell buttons for stocks and derivatives, either directly or via their Wall Street brokers who sold them derivatives that matched their guarantee structure.
Perhaps that partly explains the “air-pocket” from S&P 1200 to S&P 950 ? It was eerily similar to the waves of selling in September and October 1987.
This is another reason to regulate strongly ALL derivatives.
Actions
I turn 55 soon, so am re-evaluating my Krypto Fund asset allocations. One should do this every 3-5 few years to make sure one is not over weighted in equities compared to your retirement cash flow needs.
I'll probably be selling some US equities and moving the moving the money to TIPs, but nothing is certain yet.
The press says analysts now expect the S&P 500 earn about $75 for 2010. Hmmm, it was suggested last month by a normally erudite commentor that I was delusional for thinking 2010 earnings could hit $80 in 2010. The numbers are moving my way. Putting a cap of 15x on that $80 forward earnings gives me my year end optimistic target of S&P 1200.
Unfortunately, Obama is trying to do a lot of things that will likely create stagnation after a return to normalcy in 2010. So gains past S&P 1200 might be hard. This era is sure looking like a 1970s redux. If so, stagnation and inflation are coming. If Obama does not reappoint Ben, I fear that will happen.
Word of the Day
"Bodeful" - adjective [$10]
"Bode" - verb, transitive [$10]
Bodeful means ominous.
Bode means 1. portend, foretell; 2. foresee, foretell (evil).
Sentence: Numerous Obama efforts collectively are bodeful for US economic growth beyond a simple return to normalcy.
Le Mot de la Semaine
"Penser" - verb, regular -er conjugation
Penser means to think. For "to think about something", use penser à. To ask an opinion of something, use penser de.
La Phrase: Je pense, donc je suis.
Sentence: I think, therefore I am. This is a famous expression of Descartes which was the basis for his philosophy that was a crucial part of the 17th century movement from Scholasticism and reliance on religion and received authority to using reason and empiricism.
This week I plan to express this concept in all five languages that I am studying, viz., French, German, Italian, Polish and Spanish.
Wednesday, March 4, 2009
The Looting ... more
More stories of the looting of corporations seems to arise daily. And if one applies some simple logic, a lot more can be inferred. They - the ruling classes - all wanted "to dip their biscuit in that gravy while it was still hot".
Quiz: What fine movie and actor are the source of that quote ?
Some examples ...
Bernanke - "“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” he said. “There was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company.” The crisis at AIG stemmed from its activities in the market for credit default swaps – derivatives that function as debt insurance.
We now know that Lehman Bros, Bear Stearns and Merrill Lynch were the same - huge hedge funds attached to other stable businesses. As we know is Goldman Sachs.
Stock options: a way to loot the stockholders and give pay for no work. Holders made huge profits from simple market fluctuations and excessive risk is encouraged.
Stock buybacks: a way to prop up the value of stock options and reward the SELLERS of corporate stocks, at the expense of the long term holders.
Private equity: just a fancy name for leveraged buyout, where excessive debt is taken on, workers lose jobs and the corporation is looted of assets.
All those traders on Wall Street wanted to get paid like hedge fund managers. So they took on idiotic risks. The whole hedge fund industry - in the US and Europe - is just full of non-productive speculation, trading funds, worthless management running "fund of funds" and feeder funds, etc.
Europe seems more aware of the abuses of hedge funds than the US: (FT) "Paris has recently proposed clampdowns on hedge funds and bankers’ bonuses, in both cases using the threat of tougher capital requirements as a way of reducing what it believes to be excessive risk-taking."
Let's regulate hedge funds as investment companies, get rid of all derivatives, require much more collateral for currency trading, and a lot more that I can't think of now. And somehow the stockholders must be given real power to control upper management pay. Europe seems way ahead in that, perhaps by social custom.
How does this trading speculation exist ? Derivatives let them do it without adequate capital or regulation. Get rid of derivatives. The capital markets worked fine for the real economy before derivatives were created.
Get rid of derivatives. Get rid of executive stock options. Get rid of stock buybacks. Get rid of excessive executive pay.
Observations
The price of copper seems to be breaking out up from a long base. It may be a feint, or ...
China's PMI was reported to be over 50, as I just heard on Blabberg. Perhaps they have real consumer demand. I also note that Chinese stock prices seem perky, too.
Word of the Day
"Interdict" - noun and verb [$10]
Interdict means (noun) 1. an authoritative prohibition; 2. (church) a sentence debarring person, or esp. a place, from ecclesiastical functions and privileges; (verb) to issue or promulgate an interdict.
Sentence: Governments around the world need to interdict derivatives from the financial system.
Le Mot du Jour
"Bourde" - noun, feminine.
Une Bourde means a blunder, slip, mistake.
La Phrase: Hier matin, l'homme du bunker à fait une bourde dans la phrase pour son mot du jour. Il l'à corrigé plus tard.
Sentence: Yesterday morning, Bunkerman made a blunder in the sentence for his word of the day. He fixed it later.
Quiz: What fine movie and actor are the source of that quote ?
Some examples ...
Bernanke - "“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” he said. “There was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company.” The crisis at AIG stemmed from its activities in the market for credit default swaps – derivatives that function as debt insurance.
We now know that Lehman Bros, Bear Stearns and Merrill Lynch were the same - huge hedge funds attached to other stable businesses. As we know is Goldman Sachs.
Stock options: a way to loot the stockholders and give pay for no work. Holders made huge profits from simple market fluctuations and excessive risk is encouraged.
Stock buybacks: a way to prop up the value of stock options and reward the SELLERS of corporate stocks, at the expense of the long term holders.
Private equity: just a fancy name for leveraged buyout, where excessive debt is taken on, workers lose jobs and the corporation is looted of assets.
All those traders on Wall Street wanted to get paid like hedge fund managers. So they took on idiotic risks. The whole hedge fund industry - in the US and Europe - is just full of non-productive speculation, trading funds, worthless management running "fund of funds" and feeder funds, etc.
Europe seems more aware of the abuses of hedge funds than the US: (FT) "Paris has recently proposed clampdowns on hedge funds and bankers’ bonuses, in both cases using the threat of tougher capital requirements as a way of reducing what it believes to be excessive risk-taking."
Let's regulate hedge funds as investment companies, get rid of all derivatives, require much more collateral for currency trading, and a lot more that I can't think of now. And somehow the stockholders must be given real power to control upper management pay. Europe seems way ahead in that, perhaps by social custom.
How does this trading speculation exist ? Derivatives let them do it without adequate capital or regulation. Get rid of derivatives. The capital markets worked fine for the real economy before derivatives were created.
Get rid of derivatives. Get rid of executive stock options. Get rid of stock buybacks. Get rid of excessive executive pay.
Observations
The price of copper seems to be breaking out up from a long base. It may be a feint, or ...
China's PMI was reported to be over 50, as I just heard on Blabberg. Perhaps they have real consumer demand. I also note that Chinese stock prices seem perky, too.
Word of the Day
"Interdict" - noun and verb [$10]
Interdict means (noun) 1. an authoritative prohibition; 2. (church) a sentence debarring person, or esp. a place, from ecclesiastical functions and privileges; (verb) to issue or promulgate an interdict.
Sentence: Governments around the world need to interdict derivatives from the financial system.
Le Mot du Jour
"Bourde" - noun, feminine.
Une Bourde means a blunder, slip, mistake.
La Phrase: Hier matin, l'homme du bunker à fait une bourde dans la phrase pour son mot du jour. Il l'à corrigé plus tard.
Sentence: Yesterday morning, Bunkerman made a blunder in the sentence for his word of the day. He fixed it later.
Monday, February 9, 2009
Mind Numbing Complexity
Over the weekend I pulled a description of the CMBX index and its associated derivatives from the Internet. "CMBX" stands for commercial mortgage backed securities index. Although I am no novice to structured securities, I was quite surprised at the mind-numbing complexity. The list of parties and acronyms runs on and on: CDS, PAUG, Floating Rate Payer, Fixed Rate Payer, Total Return Swap, Synthetic CMBS ...
"As in the CDX and ABX indices, all administrative issues for the CMBX are handled by Markit(R), who publishes various information including index comparison and price data."
So the black box is run by another black box. No one really knows what's going on.
Who in their rational mind plays in this game ? Like the ultra short ETFs, these are simply trader vehicles to gamble and loot money from the customers, who are fooled à la Madoff into thinking they are part of a great money machine.
The entire financial intermediary industry (banks, insurance companies, pension funds, investment banks, investment companies, mutual funds, etc.) should be prohibited from participating. Warren Buffet was right - these are weapons of mass destruction being handled by testosterone-laden jocks on trading floors. Get rid of it all.
The Solution to the Problem of the Banks
Profits.
Providing structures for the banks to make profits will attract private capital and the banking sector will be revitalized. Perhaps Geitner's ideas about guarantees could work, if banks or private capital can borrow from the Fed at around 0% and buy the "toxic" assets with some kind of wrap guarantee from the Treasury. That would get them out of the system, as the Brady Bonds did in the early 1980s for Third World loans in default.
More
I see Lloyd Blankfein, head of the super beefer Goldman Sachs, reads this blog. From his writings in FT today: "In this vein, all pools of capital that depend on the smooth functioning of the financial system and are large enough to be a burden on it in a crisis should be subject to some degree of regulation."
That means hedge funds.
Word of the Day
"Baneful" - adjective [$10] from the file
Baneful means 1. poisonous; 2. productive of destruction or woe.
Sentence: Baneful financial product derivatives have contributed immensely to the credit market turmoil as too much money became tied to them.
Le Mot du Jour
"Envenimer" - verb; regular 'er' conjugation.
Envenimer means (transitive) to make septic, to poison, to inflame, to aggravate.
La Phrase: Les produits dérivés enveniment les établissements financiers.
Sentence: Derivatives poison financial institutions.
"As in the CDX and ABX indices, all administrative issues for the CMBX are handled by Markit(R), who publishes various information including index comparison and price data."
So the black box is run by another black box. No one really knows what's going on.
Who in their rational mind plays in this game ? Like the ultra short ETFs, these are simply trader vehicles to gamble and loot money from the customers, who are fooled à la Madoff into thinking they are part of a great money machine.
The entire financial intermediary industry (banks, insurance companies, pension funds, investment banks, investment companies, mutual funds, etc.) should be prohibited from participating. Warren Buffet was right - these are weapons of mass destruction being handled by testosterone-laden jocks on trading floors. Get rid of it all.
The Solution to the Problem of the Banks
Profits.
Providing structures for the banks to make profits will attract private capital and the banking sector will be revitalized. Perhaps Geitner's ideas about guarantees could work, if banks or private capital can borrow from the Fed at around 0% and buy the "toxic" assets with some kind of wrap guarantee from the Treasury. That would get them out of the system, as the Brady Bonds did in the early 1980s for Third World loans in default.
More
I see Lloyd Blankfein, head of the super beefer Goldman Sachs, reads this blog. From his writings in FT today: "In this vein, all pools of capital that depend on the smooth functioning of the financial system and are large enough to be a burden on it in a crisis should be subject to some degree of regulation."
That means hedge funds.
Word of the Day
"Baneful" - adjective [$10] from the file
Baneful means 1. poisonous; 2. productive of destruction or woe.
Sentence: Baneful financial product derivatives have contributed immensely to the credit market turmoil as too much money became tied to them.
Le Mot du Jour
"Envenimer" - verb; regular 'er' conjugation.
Envenimer means (transitive) to make septic, to poison, to inflame, to aggravate.
La Phrase: Les produits dérivés enveniment les établissements financiers.
Sentence: Derivatives poison financial institutions.
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