What you are missing about speculation is that it isn't zero sum between two parties. It's negative sum for the buyer and seller, positive sum for the middle men doing the trades and giving advice, and often either, sometimes both, the buyer and seller capital is arms length investment.

Sure there is a fiduciary responsibility, but all that really means is you can't obviously work in your own interests. Recommending trades and making commission doesn't fall under this.

Risk is complicated, and yes there would have been someone in the organisations who totally understood the risk that is entirely uncontroversial,

I assume you are referring to the housing crises, but that is just one instance, derivatives continue to be sold.

If Banks could not freeroll, they would listen to that person a lot more instead of just buying into the groupthink of this is fine. Being to big to fail means you can ignore risk and that ignoring will take many forms.

The banking system did not nearly collapse due to commissions.

Sure in total there is some negative sum due to transaction frictions, but that in no way constitutes systemic risk in the way one party being unable to meet their exposure does.

read something a while back from some lehmann quant bigwig who said their models suggested that what happened was a 9 sigma event, ie something which happens approx once every 10 trillion years

is possible he was lying to try to cover his own arse. but if not then some very smart people made some very large ****ups in this area

or possibly we just got super unlucky

They were told it was a 9 sigma event by the same economists who devised the instruments in the first place.

Who could have thought that trying to mathematically model human behaviour could go horribly wrong?

Corbyn seems to have walked out of the meeting with opposition parties because Umunna was there. This from the man who doesn't seem to have an issue sitting with terrorists of various nationalities etc.

Genuinely don't understand how many of you have warm feelings towards this racist, Stalinist clown who in addition to being incompetent is by his actions a vindictive, unpleasant man.

Well, there is a clue in the name

You may think it's uncontroversial but I've no idea why because it isn't true.

There would often be a real expert who will try to point out that the risks aren't known. They will also be try to point out that the valuation of the risks claimed by others is deeply flawed. These people are not generally welcome when some huge bubble is growing and profits are being made hand over foot for years on end.

Or they know the model risk is not the same as the real risk.

Which every expert knows of course.

Maybe Corbyn has more important matters to attend to?

Ahmed’s BBQ won Kebab Van of the Year at the British Kebab Awards last night, with the prize presented by none other than the Labour Party leader Jeremy Corbyn, who gave a speech at the event.

https://www.oxfordstudent.com/2019/0...jeremy-corbyn/

The current structure of payments rewards money being constantly in movement, new products being created to facilitate this regardless of their actual value to society or the investor, and traders who should be trusted advisers act as salesmen for investment vehicles maximising their commission.

Everyone was getting rich of mortgage backed derivatives in the noughts. Except the buyers, of course.

Sure a lot of people got high on their own supply but it takes a whole load of people being asleep at the wheel (to give the most generous interpretation) for the 07/08 crash to happen and it was entirely predictable - because people did predict it and no one wanted to hear about this.

Between revolving door regulators, ratings agencies incentivised to give the highest ratings to dog**** and traders who didnt know or didnt care what they were selling to clients, plus the investment banks who created the dog**** in the first place, there was a conveyor belt of fraud designed to move the wealth of society into the pockets of a small number of the criminalest guys in the room.

Then they got caught out by their own greed and stupidity colliding, got a public bailout and pushed 40-50% of that bailout into their own pockets

Its worse than that. They dont even try to model human behaviour.

It is why most economics is less scientifically valid than flat earther youtube content; the flat earthers actually do experiments, economists dont believe experiments are possible or valuable because human behaviour is very difficult to formularise. So they dont even try.

Then we make billion and trillion dollar decisions based on what they state.

The point that is gooing whoosh is that if you know a bail out it a high probability, that is the risk, the bail out determines perspective/appetite to risk, not the instrument itself.

So however much one or several individuals knew the risk of the instrument itself was, this knowledge was trumped by the knowledge of bail out.

If you know that if **** blows up you are 100% going bust then you are going to pay a lot more attention and put a lot more effort into understanding the risk in the instrument. You will be inherently more cautious.

But yes my original statement is non controversial, its a matter of public record that most if not all major I banks (and minor ones) had individuals warning that collateresed housing debt was much riskier and dangerous than was generally perceived.

Your whole perspective is ignoring the fact that many of the traders selling MBD were working for organisations that were holding MBD.


Also of course plenty of buyers of MBD will have made money off them.

Obviously not everyone who bought a MNB held it over to 2008.

Its holding it in 2008 and not being able to meet the obligation because the underlying asset is garbage that causes the problem.

but that's not your original statement at all. Knowing it's riskier is not the same as knowing the risk.

A huge part of the problem wasn't ignoring the known risk (because they didn't the risk). It was ignoring the fact they couldn't evaluate the risk because it was too difficult.

They were complex but the risks were no way close to as complex and unknowable as you are making out. Its true of some instruments, but collaterised mortgage debt instruments are not relatively that complex.

Its why rational actors who put the time in where able to make a fortune shorting such instruments.

How complex they are is arguable but in any case it's simply a mistake to think that understanding the instrument means the risk is remotely well understood.

In general it's a mistake to assume the winners were more rational but in this particular case I don't think it applies at all. Understanding the risk means understanding the chance the product will perform badly. The short sellers didn't short that risk. They were effectively shorting products that were already performing far worse than expected but hadn't been commensurately marked down in value. Even so they took on the not insignificant risk of being forced to take loses before the products were ever marked down in value.

https://www.independent.co.uk/news/u...32026.html?amp

Again, the Home Office is by far the most corrupt racist institution in the country. Here they had a brown person applying for asylum, applied their policy of finding any reason possible to deny claims and landed on this.

On its face of it I don't even understand how it is functionally a reason to ban an asylum claim, it's just a way to twist their words so it can be called false and then reject the application by default as far as I can tell.

Of course they took on risk, any investement is a risk.

The point is they took the time to make a contrarian position and by being able to understanding the instrument and value thereby and its relative position in the market, and from being informed and understanding such they took what they perceived to be an EV position.

Which would have been nigh on impossible if the the instruments and understanding the risk/value of the instruments was even close to as complex as you describe. Shorting the instrument being even more complex than just taking a hold/long position.

Nothing was stoping other actors doing the same, it was not the complexity, they could have just done the due diligence the shorters did, it was a magical faith in housing always goes up so however ****ty the asset, does not matter default is covered by asset price increase.

Youre better than Sun propaganda.

Well, maybe.

lol Jezbollah