Posts Tagged ‘derivatives’

#Derivatives are Getting a Makeover but are Still Financial WMDs

Posted: August 14, 2014 in Excess and Algorithms
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by @anarchyroll
8/14/2014

Can a nuclear bomb be repackaged and sold as anything other than a weapon of mass destruction?

Countries that have the bomb, like the United States, claim they can be used as weapons of peace. Peace via the threat of destroying the world hanging over the head of anyone who dares to cross the boss.

Derivatives were at the core of the financial collapse of the global economy in 2008. Warren Buffet; America’s greatest living investor, has publicly stated he stays far away from them. With those two unremovable stains, it is no wonder why JP Morgan and Goldman Sachs are trying to rebrand derivatives.

Derivatives are the tool or instrument most used by big banks and hedge funds that turns Wall Street and the finance sector of the American economy into a casino on steroids. Until derivatives are regulated (they are completely unregulated presently) then Wall Street will, like a degenerate gambler, continue rolling the dice as often as possible, at the highest stakes possible.

Using money to make money has been described as The American Way by many CEO’s who have taken their respective companies public. If that is an acceptable definition of The American Way, then there is nothing more patriotic than using derivatives to make money.

One of the many problems with derivatives is that it uses nothing real, tangible that can be held and felt in the real world. The only thing a derivative is used for, is to make money in the finance sector. The finance sector of any economy is meant to help build wealth for the masses. Derivatives are a tool used by finance sector insiders, for finance sector insiders. Derivatives are purposefully complex and confusing, in many cases beyond any verbal explanation.

Attempting to rebrand derivatives under the umbrella of Alternative Mutual Funds, shows exactly why the finance sector of America’s economy needs to be strictly and tightly regulated this side of the 2008 collapse. They know how dangerous and damaging derivatives have been in the past, and rather than allow transparency and regulation, Wall Street is trying to sweep them under a rug, and try to tell people that the rug is a self-sustaining money tree.

 

Why is #WarrenBuffet Staying Away from #CMBS & #Derivatives?

Posted: July 26, 2014 in Excess and Algorithms
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by @anarchyroll
7/26/2014

If you don’t know who Warren Buffett is, all you need to know is that he’s the greatest living investor in the history of the American stock market(s). In the world of finance he’s the Michael Jordan, Muhammad Ali, Wayne Gretzky, and Babe Ruth. He is the man and has nothing resembling an equal.

Warren Buffett has also become the conscience of the finance sector the American economy.

This is evidenced by his refusal to put his wealth of wealth into commercial securities and derivatives. Whereas all other big banks, hedge funds, and trading houses can’t get enough of either.

In a recent issues of TIME magazine, Buffett called all commercial securities “weapons of mass destruction.”

Commercial mortgage-backed securities (CMBS) and derivatives were two primary instruments in the 2008 global economic meltdown, the worst economic collapse since The Great Depression.

Warren Buffett invests the old-fashioned way, when investing was investing. CMBS and derivatives are the tools that have turned Wall Street into a casino on steroids. CMBS and derivatives are the dice, the global economy is the table, the chips that big banks and hedge funds are playing with are the liquid assets of the global economy. Are the craps and gambling metaphors coming across clearly enough?

After all of the pain and devastation that derivatives trading has done to the global economy, there is certainly a strong case to be made that they should be done away with completely. But in the spirit of baby steps and pragmatism, how about we start with at least putting some kind, any kind of regulation on derivatives trading?

If commercial securities and derivatives aren’t good enough for the greatest living investor in America, perhaps it is best that we all steer clear of them. If someone with literally billions of dollars to burn doesn’t want to touch them, why would any person dependent on a robust 401k to be able to retire at 65 want their limited assets intertwined with the same investment instruments that collapsed the global economy barely a half decade ago?