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Wall Street Breakfast: Must-Know News

Here's a link that explains derivatives in plain english:
cbsnews.com/stories/20...

Wall Street Breakfast: Must-Know News

I paid 25% down on my house and bought within my means.

I pay my mortgage and my bills and save what I can. Who's going to "rescue" me from the bailout?

Do not believe for one second that this is caused by the evil sub-prime borrower. There is a root cause for all of this and it is DEREGULATION, which like it or not is a Republican mantra. There is however, enough blame to go around.

The thing they are just now starting to talk about that has the Big Boyz soiling themselves are "Derivatives." These are "complex financial instruments" created out of smoke and mirrors by WALL STREET.

You need to know these things. Derivatives have ZERO underlying assets. They have a notional "value" of tens of TRILLIONS or HUNDREDS of trillions of dollars. Nobody knows for sure because they were completly UNREGULATED and they are opaque as MUD.

It wasn't the collapse of the Securities backed by sub prime mortgages (bad as that was) that brought down Banks and AIG, it was the failure by said intitutions to reserve enough capital to pay off if these "side bets" went bad. Nobody knows how much or who holds the liability but ALL the financial institutions, some insurance companies, and most all the hedge funds have a MOUNTAIN of this toxic garbage swept under the rug. That is the "counterparty risk" everyone keeps yacking about.

THIS is what has banks hoarding cash and eying each other with distrust.

Even if you take the lowest estimate of 50 trillion (or 50 thousand billion) you can see that the "bailout" of $700 billion is like trying to bail out the ocean with a soup spoon.

If you take the higher estimates of hundreds of trillions, you are talking about more than the entire annual GDP of the entire freaking planet!

Lest you think I exagerate, look at Iceland. Ponder on the fact that some nations in Europe have guaranteed all deposits in their banks, to the tune of 3 times their annual GDP.

Either we let the institutions and the investors who took the risks fail and go bankrupt or we bankrupt the whole planet.

Inflation Could Cure Our Economic Ills

Wow! Inflate our way out of this crisis, yeah, that's the answer.

It worked so well for Zimbabwe we should try it here.

Everybody, google "Derivatives" right now.

It is the derivatives that have the Big Boyz soiling themselves.

There are a few things you need to understand. They have ZERO underlying real assets. They have a notional "value" of HUNDREDS OF TRILLIONS OF DOLLARS or more than the annual GDP of the entire freaking planet. They had absolutely NO regulation and are transparent as MUD.

Nobody knows how much or who holds the liability. This is the "counter party risk" every one keeps yacking about. ALL the financial institutions have a mountain of this toxic crap swept under the carpet. This is what has them hoarding cash and eying each other with mistrust.

The harsh reality is this: Either the institutions and investors who took the risk go bankrupt or the whole world does.

Lest you think I exagerate, think Iceland or ponder the fact that some European governments have guaranteed bank deposits that in some cases exceed three times their annual GDP.

The $700 billion bailout is essentially an attempt to bail out the ocean with a soup spoon.

Banning Shorts Works in Fancy Restaurants, Not the Marketplace

Maybe instead of protecting the Financials from short sellers we should protect the companies that have a smaller pool of stocks. Those are the truely vulnerable companies that hedge funds can aggressively short and do real undeserved damage to.