No wonder derivatives are too complex to explain. You can’t explain god or faith based creationism to people who need empirical evidence. God, at least, can be a positive force for individual good when people follow the moral precepts God is credited with.
And the god-like sociopathic greedy narcissists who rely on derivatives to amass enormous riches from the fantasy gambling in casinos they own are not unlike faith healers going to the far reaches of this globe speaking in tongue to amaze prospective converts. Ernest Angley and Lloyd Blankfein are brothers of the same cloth; however, Lloyd’s cloth is an infinitely more sophisticated cut – to appeal to his geometrically more sophisticated followers. The basic difference is that Ernest wears a rat’s ass piece, while Lloyd prefers the blinding shine of his bald pate in the eyes of his mesmerized players/investors.
Financial markets trading in shares of stock are faith based, because no one knows if corporate news is real, or how badly numbers have been arranged – or massaged to produce profits in the short term at the expense of the long term, or obscured in the cracks of consolidated returns or hidden in off balance sheet dummy entities – or stashed off shore in the ever neutral Switzerland, the land of dictator money – from the Third Reich to the Columbian drugs lords. Everyone talks about the importance of “investor confidence.” But, at least a stock is a share of a company that does something tangible like making light bulbs, planes, jet engines or computers or software or in Madoff’s hedge fund.
When JP Morgan Chase lost (lost is the operative word) $10 Billion in their “synthetic portfolio of derivatives,” Jamie Dimon, the CEO of Chase and Fed Bank of New York Board Member, explained to David Gregory that he –could not explain a derivative. Is the derivative market like playing poker without chips and you don’t dare explain the chip is not real – or the SEC might find out the casino is a computer program composed of a complexity of algorithms (financial engineering on high) and unrequited greed. It seems the derivative market is merely malarky based on a vast amount of empirical evidence.
We know Congress does not take lying lightly. Look how it spent millions to determine if Barry Bonds lied about steroids; and consider how much time has been devoted to Benghazi and will continue to be as a plethora of committees are forming to get to the bottom of why it is difficult to control terrorism. Now that Republicans suddenly care about facts – when only weeks ago, en masse, they disregarded lots of facts by trying to lie their way into the White House – or decades ago, cover up lies to keep it, in the case of Nixon.
Let’s get the market makers under oath, and then find out what they don’t understand. They understand the 5th (not this one).
To date, there are no committees forming to investigate the Pinocchio Games although the casinos, ie, the markets trading derivatives contain $600 Trillion to $1.2 Quadrillion of the unexplained stuff. No one wants to investigate the Wall Street Godfathers or the CEOs who want to moderate entitlements and food stamps to bring down the deficit – when their greed can bring down the house. (And just might!) It is well known that Justice has not attempted to charge or indict one Godfather with fraud – no committe investigation? Not even, the always concerned for truth, Issa, who is away on the border looking for guns.
At least when someone buys the Brooklyn Bridge the buyer can see it and touch it. Which is more than can be seen and touched in the Pinocchio Games!
From more than 4 decades in the securities business; from the personal experience of owning an NASD Member Firm Broker Dealer (specializing only in real estate private placements) and on the SEC’s list of Broker Dealers to submit proposed rule changes to – I know why Dodd-Frank will not work and why Derivatives are unlawful. And I know why all the reasons for allowing derivatives of the Swap varitey and continuing markets for Swap liquidity are hollow lies, and so should you.
The primary reason apart from blowing up the world with so much financially leveraged marlaky, is that Derivatives do not provide any real capital formation contrary to all Greenspan’s lies to Congress. From How We Got Swindled:
chapter 10: “Too Complex to Explain” Financial Instruments: Derivatives, CDOs, CMOs, Swaps, and Rancid Tranches – Pools of Worse than Junk Bond Debt
By far the most significant event in finance during the past decade had been the extraordinary development and expansion of financial derivatives. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it – a process that has undoubtedly improved national productivity growth and standards of living.” Alan Greenspan, Chairman, Board of Governors of the US Federal Reserve System, April 2005, and Genius. Who was the recipient of lots of outside income as a consultant to Investment Banks and Mega Banks, and leader in the fight against regulations! Greenspan’s 2005 inscription in granite, like a commandment from God…” www.howwegotswindled.com
Derivatives (Credit Default Swaps are the most lethal) are not a derivative of any known value; unless some shard of value existed prior to slathering on 50 times or whateverrrr leverage. For example: if you own a house for $100,000,000 and your down payment is $1,000 – if the house goes down .01% in the price it could be sold for – nothing but accelerated losses from all the leverage; but if it goes up .05% you make a killing if you can sell it. The key is to be able to match sellers to buyers immediately, which is called a market, and being able to sell by giving an order to sell is called liquidity – the ability to get out when you want.
So what will be the outcome of an amount of derivatives approaching infinity? And why is risk at the level of a worldwide bubonic plague allowed to fester and fulminate infusing our entire globe with an untenable amount of financial risk that will be unlike anything before experienced by man unless it is brought under control and outlawed. Jesus Christ knows, we can’t drive a car without insurance, or afford flood insurance in a flood plain – so when the total risk exceeds the total world GNP by a multiple of 10 or more, then what.
The SEC’s mission is to protect the markets to provide stability, and the Fed mission is to regulate the Bank Holding Companies to provide stability as well as to control inflation with monetary policy. Both have a long history of not intervening when necessary, and controlling greed is an exponentially more profound problem than inflation.
One thing for sure – sand bags and mirrors will not stop the waters of a financial H Bomb, nor will an investigation of Benghazi.