Posted on 05/12/2012 10:44:24 AM PDT by SeekAndFind
It sounds like it was an "investment" in a derivative of derivatives. Nest that notion a few more times and we're really getting somewhere.
In the last 20 years Wall Street has moved away from an investment-led model, to a gambling-led model.
BOTTOM LINE: In the last 20 years Wall Street has moved away from an investment-led model, to a gambling-led model.
If you broke your trading book doubling or quadrupling down on derivatives and are sitting on top of a colossal mark-to-market loss, why not have the Fed step in and take it off your hands at a price floor in exchange for newly “printed” digital currency? That’s what the 2008 bailouts did.
Only one problem: eventually, this approach will destroy the currency. Would you want your wealth stored in dollars that Bernanke can just duplicate and pony up to the latest TBTF Martingale catastrophe artist? I thought not: that’s one reason why Eurasian creditor nations are all quickly and purposefully going about ditching the dollar for bilateral trade.
The bottom line for Wall Street is that either the bailouts will stop and anyone practising this crazy behaviour will end up bust — ending the moral hazard of adrenaline junkie coke-and-hookers traders and 21-year-old PhD-wielding quants playing the Martingale game risk free thanks to the Fed — or the Fed will destroy the currency. I don’t know how long that will take, but the fact that the dollar is effectively no longer the global reserve currency says everything I need to know about where we are going.
Forgot to add, the above observation was made by Tyler Durden of ZEROHEDGE:
http://www.zerohedge.com/news/double-or-nothing-how-wall-street-destroying-itself
But if Conservatives want to play along with Barney Frank, perhaps these billion dollar profits can be turned into trillions of dollar losses.
If this in fact the "theory" behind much of Wall Street, we are deeply and profoundly screwed. These guys are theoretical idiots.
Megaleverage bets with other people’s money.
What could be more fun?
If one can get out while still ahead, it's a "good thing" for the principal.
And a trader who blows more than a million dollars gets barred from ever working for a financial institution again, either directly or indirectly.
“These guys are theoretical idiots.”
Theoretical in this case should be criminal along with their congressional mobsters. This is a Bubba and Republican Congress mess. If I was running things there would be a lot of hitters working full time.
Trading anything that does not have intrinsic value should be banned. Trading vapor must stop. I don’t give a happy whatever if most of these geniuses loose their homes, jobs and whatever. Enough widows and orphans have made them rich.
911 taught me what value Congress put on these traders when we paid their families millions for their deaths when we treat the troops families like dirt. Vapor is worth more than Patriotism if you share with Congress.
I would also ban using computer for anything but taking and handling orders no buy sell programs. Enough of Vegas where the house always wins.
Glass Steagall must be reinstated!!!!!
“This is just a preview of coming attractions.”
One simple observation that adds a lot of heft to this is that a few billion here or there to JP Morgan would NOT have pushed them to a public mea culpa.
A good way to describe the derivatives market is the “elementary schoolyard” model.
During morning recess, the schoolboys took to betting their lunch money while pitching pennies. Some would win, and some would lose, but the payoffs were immediate.
Then one schoolboy, tired of losing his lunch money over and over again, tries the “double or nothing” gamut. He bets today’s lunch money, and *tomorrow’s* lunch money. And he wins the bet. So the other boys double down again, betting 4x lunch money. And he redoubles that to 8x lunch money.
Being in elementary school, they are soon betting tens and hundreds of thousands, then millions and billions and trillions of dollars (eventually they get to ‘infinity dollars’ and ‘infinity +1’ dollars, which turns it into a farce). Of course, none of them have that money, because their bets are based on previous bets only.
And this is a good description of the derivatives markets, excepting the ‘infinity’ plus bets (as well as laughing when they hit the sextillion dollars bets).
Because, in the final analysis, their derivative gambles are so utterly disconnected from reality that they are just dares and double dares. Yet, the zinger is, they actually expect *somebody* to make their bets “good”.
So at some point they try to ‘backtrack’ their money to reconnect it with real things of value. In the schoolyard this might amount to billion dollar marbles, but that breaks down quickly because marbles just can’t be worth that much.
The only real solution is for the ‘teacher’, in this case governments, to intervene and say that all such bets are null and void. Of course this will result in some derivatives trader bitterly throwing a tantrum and complaining that it is “not fair, because he owes me a billion, trillion, quadrillion dollars, and I want *my* money!!!”
“Tough”, the teacher has to say.
Don’t the Soros globalists/NWOs want to destroy the US dollar? I thought they wanted to eliminate the dollar so they can control the supply of money in America. Anyone hoarding cash for the coming collapse will be sitting on paper that’s worth about as much as confederate dollars were worth. That’s why people have been investing in guns, ammo, food stocks and of course, gold and silver.
I know, Fannie and Freddie have cost us hundreds of billions.
What's the net exposure?
That is what happens when a society that was formally western is culturally cleansed of it’s history, morals, ideals and values. All that matters now is self gain in the realm of materialism. We go third world. We are there.
What if you lose $100,000 on ten separate occasions?
What if you lose $1,000,000 one day and make $2,000,000 the next? Or make $2,000,000 today and lose $1,000,000 tomorrow?
What if all your losing positions in one day add up to $1 million but your P&L for the day is up $1 million?
True dat.
Unlikely to happen with The Goldman Sack backing both candidates (and likely p0wning a majority of Congress).
Yep. Phil Graham is going to burn in hell for that one.
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