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Plot Device
12-14-2010, 03:51 AM
So says Alex Jones the New York Times.

http://www.nytimes.com/2010/12/12/business/12advantage.html



A Secretive Banking Elite Rules Trading in Derivatives
By LOUISE STORY (http://topics.nytimes.com/top/reference/timestopics/people/s/louise_story/index.html?inline=nyt-per)

Published: December 11, 2010

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable and controversial fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Drawn from giants like JPMorgan Chase (http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org), Goldman Sachs (http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html?inline=nyt-org) and Morgan Stanley (http://topics.nytimes.com/top/news/business/companies/morgan_stanley/index.html?inline=nyt-org), the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.

The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available....




When I worked in high finance, I was repeatedly warned to stay away from derivatives. Now I can see why.




.

billythrilly7th
12-14-2010, 03:56 AM
Many periods of history have been given names.

I am naming this period "The Age of Paranoia."

Not sure when it a started or when it will end but we are fully entrenched in it right now. We seem to be peaking.

Nothing is as it seems. You are not in control of your life.

Be very afraid.

Plot Device
12-14-2010, 04:08 AM
Many periods of history have been given names.

I am naming this period "The Age of Paranoia."

Not sure when it a started or when it will end but we are fully entrenched in it right now. We seem to be peaking.

Nothing is as it seems. You are not in control of your life.

Be very afraid.


Billy, I have no idea how serious/unserious you are in this post, but what you say does seem very reasonable. (In short, you're being reasonable about unreasonableness.)

Back in the late 1970's, we began our first baby steps (via the personal computer and then the internet) into what has been called the Information Age. And it was believed that this would spell the end of ignorance forever and that the masses would all become impressively educated like never before.

But the result has instead been Information Overload, and it turns out that average people simply cannot handle/process that much information with skill, integrity, and accuracy. So we have become a society beset by the understandable delusion of our being well-informed, when in fact we are even more confused and misled than ever due to our not even realizing that we actually posess very little truth at all, only mountains of needless nonsense. And when we each fail to see our individual perceptions echoed uniformly in other medie outlets, we each cry "cover-up" and "conspiracy."

billythrilly7th
12-14-2010, 04:12 AM
That sounds like a reasonable explanation.

And I'm very serious.

Over the past few decades, we have become more and more suspicious and paranoid. Conspiracy theories about everything.

And it seems to be getting much much worse.

Even on his board over the past couple years.

It is The age of Paranoia.

Hallen
12-14-2010, 04:30 AM
I have to agree with both of you on both the information/paranoia thing.
Is there a group of bankers who meet to discuss the derivitives market? I'm sure there is. Do they keep their membership secret? Well, I doubt they publish meeting notes or schedules for obvious reasons, but if people really wanted to know, we could know. Are they a dark, evil group who stand to gain when everybody else loses? Possibly, but probably not. Derivatives are hecka confusing and weird, but they do have value. And who's to say who "controls" that market. Seems to me, they are instruments created by banks to protect themselves, so yeah, I would expect that they do control the market to a certain extent.

The scary thing that I see everywhere is either willful or unintentional misinformation. Obscuration of simple things to the point where everything is a conspiracy. What's a normal person to do? We can't all spend hours and hours researching these subjects and becoming knowledgeable about everything. We have to pick and choose. Unfortunately, often the synopsis we're given, like the above, is designed to inflame rather than inform. It may all be true, but is it real?

shawkins
12-14-2010, 04:33 AM
It does seem that about half the people with internet connections take it as a matter of course that conspiracies abound. Half of those are convinced that they've figured out what's ACTUALLY going on, and if only the sheeple would wake up to etc. It does get old.

Having said that, the story in PD's link doesn't strike me as particularly paranoid. There's a lot of money in derivatives and that market is very loosely regulated. I wouldn't be at all surprised if there was a certain amount of collusion. They might even chuckle and make steeples with their fingers whilst they collude.

billythrilly7th
12-14-2010, 04:45 AM
I have to agree with both of you on both the information/paranoia thing.
Is there a group of bankers who meet to discuss the derivitives market? I'm sure there is. Do they keep their membership secret? Well, I doubt they publish meeting notes or schedules for obvious reasons, but if people really wanted to know, we could know. Are they a dark, evil group who stand to gain when everybody else loses? Possibly, but probably not. Derivatives are hecka confusing and weird, but they do have value. And who's to say who "controls" that market. Seems to me, they are instruments created by banks to protect themselves, so yeah, I would expect that they do control the market to a certain extent.

The scary thing that I see everywhere is either willful or unintentional misinformation. Obscuration of simple things to the point where everything is a conspiracy. What's a normal person to do? We can't all spend hours and hours researching these subjects and becoming knowledgeable about everything. We have to pick and choose. Unfortunately, often the synopsis we're given, like the above, is designed to inflame rather than inform. It may all be true, but is it real?

Well said.

kuwisdelu
12-14-2010, 04:48 AM
No one controls derivatives. They depend only on the original function.

Certainly, you can get a non-differentiable function or a try to take the derivative at a point where a function is non-differentiable, but that doesn't mean you get to choose what the derivative is: it just doesn't exist.

Now integrals... I suppose you can control those, definite integrals anyway, by choosing your limits of integration. Or, for an indefinite integral, I guess you can control by deciding on your value of C.

I didn't even know there was a market for derivatives. I can take one whenever I want, assuming it exists. Unless they're trying to tell people they can provide derivatives for non-differentiable functions? That would just be criminal, and there's no way they should be able to stay in business. Or are they selling software to compute derivatives? Because I'm fine with Maple or Mathematica, and I hardly think bankers are going to be better programmers.

Zoombie
12-14-2010, 04:58 AM
I won't argue that information overload is a big deal. I mean, there's a LOT of information out there.

But it's better to have a load of uncontrolled crap with veins of truth than narrow bands of controlled crap.

Torgo
12-14-2010, 05:00 AM
No one controls derivatives. They depend only on the original function.

Certainly, you can get a non-differentiable function or a try to take the derivative at a point where a function is non-differentiable, but that doesn't mean you get to choose what the derivative is: it just doesn't exist.

Now integrals... I suppose you can control those, definite integrals anyway, by choosing your limits of integration. Or, for an indefinite integral, I guess you can control by deciding on your value of C.

I didn't even know there was a market for derivatives. I can take one whenever I want, assuming it exists. Unless they're trying to tell people they can provide derivatives for non-differentiable functions? That would just be criminal, and there's no way they should be able to stay in business. Or are they selling software to compute derivatives? Because I'm fine with Maple or Mathematica, and I hardly think bankers are going to be better programmers.

Did you know pi isn't even irrational? The Bilderberg group meets every year to add a few more digits on the end.

Gravity
12-14-2010, 05:07 AM
No one controls derivatives. They depend only on the original function.

Certainly, you can get a non-differentiable function or a try to take the derivative at a point where a function is non-differentiable, but that doesn't mean you get to choose what the derivative is: it just doesn't exist.

Now integrals... I suppose you can control those, definite integrals anyway, by choosing your limits of integration. Or, for an indefinite integral, I guess you can control by deciding on your value of C.

I didn't even know there was a market for derivatives. I can take one whenever I want, assuming it exists. Unless they're trying to tell people they can provide derivatives for non-differentiable functions? That would just be criminal, and there's no way they should be able to stay in business. Or are they selling software to compute derivatives? Because I'm fine with Maple or Mathematica, and I hardly think bankers are going to be better programmers.

Mister ku, don't you know it's rude to type in tongues? :tongue

Seriously, this is confusing stuff, especially to those of us who are mathmatically-challenged (read: the dumbass contingent). In other words I, for one, welcome our derivative overlords. May they be merciful.

whacko
12-14-2010, 05:08 AM
I am naming this period "The Age of Paranoia."


I name this period Too Much Information.

At the risk of sounding like Dan Brown:

Fact:

People get rich.

Most of us don't.

Fact:

It doesn't make you a bad person.

It's nobody else's fault. You made the decisions.

And fact:

I'm fat and drunk.

Which, at the moment, is brilliant.:D

Regards

Whacko

billythrilly7th
12-14-2010, 05:09 AM
I name this period Too Much Information.

At the risk of sounding like Dan Brown:

Fact:

People get rich.

Most of us don't.

Fact:

It doesn't make you a bad person.

It's nobody else's fault. You made the decisions.

And fact:

I'm fat and drunk.

Which, at the moment, is brilliant.:D

Regards

Whacko

Best.post.ever

kuwisdelu
12-14-2010, 05:31 AM
Did you know pi isn't even irrational? The Bilderberg group meets every year to add a few more digits on the end.

No, but my state once tried to legislate that pi=3.2 (http://en.wikipedia.org/wiki/Indiana_Pi_Bill).

Mister ku, don't you know it's rude to type in tongues? :tongue

Seriously, this is confusing stuff, especially to those of us who are mathmatically-challenged (read: the dumbass contingent). In other words I, for one, welcome our derivative overlords. May they be merciful.

Actually, everything I wrote makes complete sense to me. The financial crap? It's all gibberish as far as I'm concerned.

whacko
12-14-2010, 05:52 AM
Best.post.ever

I question the grammar but you're so right.:D

shawkins
12-14-2010, 06:43 AM
Mister ku, don't you know it's rude to type in tongues?

I've got $5.00 that says he wants to stop but can't help himself. It sounds link finals week in math land.

Seriously, this is confusing stuff, especially to those of us who are mathmatically-challenged (read: the dumbass contingent). In other words I, for one, welcome our derivative overlords. May they be merciful.

I'm not an expert, but I've been reading up on derivatives since the meltdown. In a lot of ways they're like life insurance. You're basically betting on whether a product is going to go up or down in price. The insurance company AIG was essentially betting that the housing market was stable when they sold insurance policies (a.k.a. credit default swaps) on various mortgage backed bonds. A very few people bet that the market for mortgage bonds would collapse by buying that insurance from AIG (Dr. Michael Burry (http://www.gurufocus.com/news.php?id=107220)).

The main difference between derivatives and life insurance is that it's illegal to buy life insurance on people you don't have some sort of family or business connection with. So, like, you can't take out a life insurance policy on a celebrity with terminal cancer or whatever. With derivatives you can bet on anything (like a housing market collapse) regardless of whether or not you have a personal interest in its value rising or falling. All you need is someone to take the other side of the bet.

That was what killed AIG. They were selling insurance that mortgage bonds wouldn't fail. They were charging pennies per year on, say, $1000 of insurance. They didn't really evaluate what the chances were of the mortgage bonds failing, they just used historical data as a guide. In this case, the historical data turned out to be misleading. The bonds died in record numbers. AIG lost their bet, big time. A very few other people won equally big.

There's a well-researched and readable book on the subject called The Big Short.

kuwisdelu
12-14-2010, 07:04 AM
I've got $5.00 that says he wants to stop but can't help himself. It sounds link finals week in math land.

Well, yes and no. I'd kill for something as simple as a calc final. ;)

Diana Hignutt
12-14-2010, 04:16 PM
Yes. There are conspiracies. Of course there are. Most are run of the mil average conspiracies dealong with market leveraging, etc. Some, are corruption conspiracies. There are all kinds of collusion and conspiracies. Of course there are.

It doesn't mean that all conspiracies are tied together in some grand conspiracy.

Now, to address Billy's Age of Paranoia. IF people aren't vigilant constantly, those little conspiracies will keep adding up. For example Bank of America recently was fined $137 million for trillions of dollars of fraud. No one is going to jail. They, I've been told, are not only too big to fail, but are too big to have to obey the law. Fraud, when regular people do it, has a penalty of triple damages. No conspiracy there. No, sir.

Business is in it for themselves. The politicians are in it for themselves. They get together to help each others interests. Who are the losers?

No, there's no such thing as conspiracy.

Priene
12-14-2010, 04:53 PM
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices. - Adam Smith.

Diana Hignutt
12-14-2010, 05:03 PM
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices. - Adam Smith.

Luckily, no one cracks down on the illegal collusion in the free world...

because we'd need more prisons...really nice ones.

Hallen
12-14-2010, 10:44 PM
Yes. There are conspiracies. Of course there are. Most are run of the mil average conspiracies dealong with market leveraging, etc. Some, are corruption conspiracies. There are all kinds of collusion and conspiracies. Of course there are.

It doesn't mean that all conspiracies are tied together in some grand conspiracy.

Now, to address Billy's Age of Paranoia. IF people aren't vigilant constantly, those little conspiracies will keep adding up. For example Bank of America recently was fined $137 million for trillions of dollars of fraud. No one is going to jail. They, I've been told, are not only too big to fail, but are too big to have to obey the law. Fraud, when regular people do it, has a penalty of triple damages. No conspiracy there. No, sir.

Business is in it for themselves. The politicians are in it for themselves. They get together to help each others interests. Who are the losers?

No, there's no such thing as conspiracy.

Nobody is going to jail, yet.
But, this is simply a fine example of the "tip of the iceberg" syndrome. What is the underlying reason for BoA coming forward and admitting to the fraud? What is the exact nature of the fraud? Were all executives at BoA aware of the actions of it's people? How much extra money did they make off of that fraud? Were the people involved the ones making the money or was it the company? Was the activity they were doing perfectly legal right up to the point where a new interpretation of the rules was published?

The anti-trust and SEC controlled "laws" in this country are some of the most vague and vapid mandates that exist. Their enforcement is capricious and random. Often, companies won't even know they are breaking rules since the rules are a matter of interpretation by whomever happens to be in power at that time. Many of these rules are simply in place to give the government the power to extricate money from business at will. Which forces the companies to play ball with the government which gives rise to the "they get together to help each others interests" thing you mention. It is a vicious circle.

But, the main point here, for the purposes of this thread, is the example you give, and the articles I read on it, were as full of holes, innuendos and implications as they were at providing facts. There is no way we can know what really was going on or even if it was all that bad from the information provided. We're just left with the feeling that the big, mean bank was ripping off innocent people. Maybe that's what happened, but it is most likely much more complicated than that.

Diana Hignutt
12-14-2010, 11:52 PM
Nobody is going to jail, yet.
But, this is simply a fine example of the "tip of the iceberg" syndrome. What is the underlying reason for BoA coming forward and admitting to the fraud? What is the exact nature of the fraud? Were all executives at BoA aware of the actions of it's people? How much extra money did they make off of that fraud? Were the people involved the ones making the money or was it the company? Was the activity they were doing perfectly legal right up to the point where a new interpretation of the rules was published?

The anti-trust and SEC controlled "laws" in this country are some of the most vague and vapid mandates that exist. Their enforcement is capricious and random. Often, companies won't even know they are breaking rules since the rules are a matter of interpretation by whomever happens to be in power at that time. Many of these rules are simply in place to give the government the power to extricate money from business at will. Which forces the companies to play ball with the government which gives rise to the "they get together to help each others interests" thing you mention. It is a vicious circle.

But, the main point here, for the purposes of this thread, is the example you give, and the articles I read on it, were as full of holes, innuendos and implications as they were at providing facts. There is no way we can know what really was going on or even if it was all that bad from the information provided. We're just left with the feeling that the big, mean bank was ripping off innocent people. Maybe that's what happened, but it is most likely much more complicated than that.

http://www.marketwatch.com/story/bank-of-america-settles-muni-market-fraud-charges-2010-12-07

billythrilly7th
12-15-2010, 04:16 AM
Conspiracy theorists never tie everything up into an actual story to explain what's or what happened.

They just throw out a bunch of loose, unrelated incidents, "facts", half truths, inuendos,etc and then have no idea what any of it means, who actually did what, etc.

"9/11 was an inside job!"

1. There were no security guards on duty at the Pentagon.
2. The Bin Laden family went into hiding at the Saudi kings palace three days before the attack.
3. President Bush ordered his laundry to be done the day before the attack and apparently asked for enough to be done so he had clothes for 3 weeks as if he knew he woukd be leaving.
4. No Jewish people went to work on Wall Street that day.

"see?""

No....I don't see.

Tell me what the hell happened.

Tie it together....

On April 3rd, 1999, the Saudi king met with George H W Bush. There is a recording of that meeting in which they discussed the Bin Laden family and a way to stop them from hurting both countries....etc....

On December 12, 2000, .....bla bla bla...

On August 12 th, condoleeza rice flew to Jerusalem and met with their prime minister and according to documents obtained discussed "the september attack" and what it would mean for the middle east..

Etc etc...

That's the thing about conspiracy theorists and why no one takes them serious.

They are essentially gossipers.

Very little factual back up and they can never tie everything together in a court of law type of summation.

They just throw a bunch if crap against the wall and hope something will stick.

Hallen
12-16-2010, 11:59 PM
http://www.marketwatch.com/story/bank-of-america-settles-muni-market-fraud-charges-2010-12-07

And your point? That the practice is questionable from an ethical position is obvious, but was it illegal before now? Was it maybe implied to be illegal, but not enforced before?

"Columbia Law School Professor John Coffee said he expects there will be more settlements between commercial and investment banks and regulators over municipal bid rigging in the not-to-distant future. He also argued that the settlements-to-come could be more extreme. He noted that these bidding agent often have close ties to local officials who are responsible for selecting banks as underwriters of bond offerings"

Basically, he's saying that much of this was driven by government fraud. To get the monkey off of the government's back, it's now enforcing things differently and basically allowing the banks to pay a kickback in order to continue to do business and thereby also accepting responsibility for something that was driven by government corruption.

An analogy:

Pro basketball rules are fairly clear. Traveling is an infraction where the player with the ball takes more than 1 and 1/2 steps without dribbling the ball. There are sub rules here also which state that once a pivot foot is established, it cannot be changed.

In practice, players are allowed two full steps, and sometimes 2.5 steps without being called on the infraction. This application of the rules is extremely consistent. Players are also allowed to change their pivot foot once without being called on it. Just watch any game for 30 seconds and it will be obvious this is how the rules are applied. (I'm not exaggerating here at all, btw, this is the way it really is. Pro basketball is the WWF of the sports world. It's a joke.)

Now, imagine if the referees start calling the infractions stringently for ONE of the teams. It's unfair. But wait, they're just calling the infractions based on the rules, so what's the problem? That team is breaking the rules, they should have the infraction called on them. Did the rules change? No they didn't. If you review the calls, were they fair? Of course they were, it's according to the rules. But do you see the duplicity here?

The situation with this latest gamut of charges against banks is EXACTLY the same (in some cases). Sometimes the facts don't tell the whole story. So not only do we have to watch out for the hype, we have to understand how things really work.