Did anyone read the WSJ article on Geithner? His intervention is plainly ROBBING cautious investors (like Buffett and anyone that keeps cash on the sideline). It’s a shame. Be cautious, be reasonable, don’t overleverage… and you get none of the benefits because the fed comes in and does something stupid with taxpayer money!
You know, I was going to write that you should tone it down on those posts, but if that article says what you say it does, then I’m mad too. As a matter of public policy, it’s one thing if you show some mercy to dumb people, particularly if they were duped by the unscrupulous. It’s entirely another if you bring suffering to the sensible and actively eliminate any incentive to be responsible.
I have not read the article but being familiar with the situation I do not see how the NY Fed had any other choice. As analysts we should recognize the exposure that Bear Stearns had and what would happen to their counterparties had they gone down.
Brian, I disagree. As analysts we should respect the TRUE cost of capital, not the fed’s willingness to debase currency at our expense; just to backstop a bunch of reckless gamblers who didn’t know what they were doing. Capitalism would work better if the fed didn’t lend $30 billion to people who disregarded warnings and common sense. Bchadwick, you should be mad at the fed especially if you have cash on the sidelines! It’s a double whammy for you… you missed the opportunity to put the cash to work at bargain prices (because the fed stepped in to backstop the assets before they could fall to their true value) AND the fed’s cash comes at the direct expense of all savers since it is leads to inflation. Meanwhile inflation is 4+% and cash is earning 2% (thanks again, mr. bernanke) When the market is going up everyone says the “true value” is the price that the people will pay. When the assets are getting market down… it’s all of a sudden a liquidity crisis and we need to open the discount window so people can borrow at 2%!?!
Saying the Fed shouldn’t have done anything doesn’t fix the problem. I agree that there is a moral hazard in the Fed helping without fixing the underlying problem. What’s needed now is heavy reform of the mortgage industry. However, what’s pretty fvcking funny is you and John saying that banks and others shouldn’t take too much risk and let the market work itself out through efficient markets. Yet you completely ignore another deregulated market that is rapidly spinning out of control. http://www.cnn.com/2008/US/05/30/oil.market.enron/index.html
Virgin, I 100% agree with you. Trust me, there are plenty of people out there that still believe in capitalism and freedom.
Blaming the Fed for Wall St.'s greed is akin to blaming the gun for a murder. The gun, as well as the Fed, are tools. Those tools can be used effectively, nor not effectively. It’s not the tool’s fault for being used ineffectively. Who controls the tool? Congress. Who controls Congress? Whiny b!tches who complain about short-term problems like jobs or “ownership society” housing. If this country would wake the hell up and realize we don’t need a nanny state and recessions aren’t evil, we may have meaningful change. Wall St. is greedy and without effective counters they will manipulate society (and Congress) to fit their own agenda. People say an unregulated market is best, yet history has shown it isn’t. Adam Smith knew this a long time ago, yet people keep thinking that human greed will change. Now, that greed (and the global capital pool) has charged into the very little regulated derivatives market and is fvcking over society. They control the politicians using shell-game magic tricks, making people look over in another direction while they broom pole us (Hey, the gays can’t marry, flags can’t be burned…TERROR TERROR TERROR!!!). Even now, we could change this situation with oil, yet we cling to the stupid idea that regulation is bad. What’ll happen when the banks cry for more money after the derivatives are screwed? You complain about trying to corral the cows back into the barn, yet let the barn door stay wide open.
The Fed should act as a loan shark of last resort. “Oh you need a bailout? Ok we’re now taking ownership of half your company.” Then when the company has turned around they sell off their stake to recoup all/some of their bailout money.
I read the enron article. How can a dark pool influence the market? The fact is if I’m an E&P and I’m able & willing, I can sell futures for my oil production to offset the speculative buyers. As long as entities like that(sellers) have ACCESS to the market, even if it’s through an unregulated “dark pool”, then we have a legit market. If traders see a mismatch between the “dark pools” and the regulated markets… they’ll figure out a way to make arbitrage profits.
virginCFAhooker Wrote: ------------------------------------------------------- > I read the enron article. How can a dark pool > influence the market? The fact is if I’m an E&P > and I’m able & willing, I can sell futures for my > oil production to offset the speculative buyers. > As long as entities like that(sellers) have ACCESS > to the market, even if it’s through an unregulated > “dark pool”, then we have a legit market. If > traders see a mismatch between the “dark pools” > and the regulated markets… they’ll figure out a > way to make arbitrage profits. Same way they influenced the housing market, ever increasing valuations lead to ever increasing valuations, with no tie to fundamentals. It’s a never-ending circle jerk. People would have thought that housing would have balance too. I am going to laugh my ass off when this market crashes and banks need another bailout, yet you miss the massively obvious problem that you’re causing the thing you hate so much. Tis OK though, keep the blinders on.
spierce, How exactly would traders be manipulating oil prices through dark markets?
OK I’ve tried but I just can’t see the connection between suggesting that the Fed is behaving irresponsibly and off-market oil trading. It’s pretty amazing that we regulate futures markets and somehow that has lead people to think that unregulated energy trading is nefarious. That’s bizarre. The comparison between trading oil and trading stocks in the article is bizarre (mostly because equity has value only if there exists enough disclosure to know things like how many shares there are and oil gets value because, oh yeah, I refine it and burn it). How much energy has always been traded with forward contracts, swaps, etc. (ans: lots and lots)? Is coal trading nefarious? How about Interbank currency markets? Which markets are those that any finance professional would say are evil? Edit: I think to be a Fed official you should have to do a few rounds in the octagon. At least we’d get rid of sissies that way.
Syd_RE Wrote: ------------------------------------------------------- > spierce, > How exactly would traders be manipulating oil > prices through dark markets? Because they can take unlimited positions with ever increasing upwards valuations. Since there is no limit to the number of possible contracts and the intricate web of taking on risk and laying it off can create infinite permutations, there’s really no way of balancing the futures market against fundamentals. Many say that futures won’t affect the physicals market. However, if there’s an ever increasing interest to raise prices, as more people enter the market they WILL raise prices, then there’ll never be a return to “norms” based upon fundamentals. However, since there’s an infinite amount of possible “demand”, you get small supply against an infinite demand. This will cause further price escalation. Add to that that these instruments are very lightly regulated and provide massive leverage, as well as being relatively cheap, aren’t heavily taxed, you get a huge ability to make a ton of money. Companies do this crap all of the time to people. Take a look at Bechtel and Columbia. How about Enron and the western US? Even if it’s not outright manipulation, it’s the ability to take advantage of loopholes that cause problems. What’s funny is when this collapses people are going to be standing around saying “We never thought it would collapse” and the same old people will be bitching “The Fed shouldn’t bail these people out, they knew the risks”. However, you can’t claim that they knew this risks when, yourself, didn’t even know the risks. Fools will sit around now claiming nothing is wrong and “efficient markets” this or “economic theory” that, but when it comes down to it, this crap is broken. Everybody denies they can be burned with this crap. It just amazes me to see CFA candidates or actual charterholders bitching about the Fed when they, themselves, are part of the problem. http://www.latimes.com/business/la-fi-oilprice30-2008may30,0,4595533.story
Completely silly. It’s really too bad that sometimes volatility hits prices in ways we don’t like and sometimes markets may even cause volatility. Do you have something interesting to say about this or do you just think that you can call people fools because perhaps they don’t know that people can get burned by energy risk? Is there anybody here who doesn’t know that energy vol can cause people to get burned? The stupidest person who has ever been on AF knows that.
Completely silly. It’s really too bad that sometimes volatility hits prices in ways we don’t like and sometimes markets may even cause volatility. Do you have something interesting to say about this or do you just think that you can call people fools because perhaps they don’t know that people can get burned by energy risk? Is there anybody here who doesn’t know that energy vol can cause people to get burned? The stupidest person who has ever been on AF knows that.
JoeyDVivre Wrote: ------------------------------------------------------- > Completely silly. It’s really too bad that > sometimes volatility hits prices in ways we don’t > like and sometimes markets may even cause > volatility. Do you have something interesting to > say about this or do you just think that you can > call people fools because perhaps they don’t know > that people can get burned by energy risk? Is > there anybody here who doesn’t know that energy > vol can cause people to get burned? The stupidest > person who has ever been on AF knows that. I know it as well…but can also cause few people to get very very rich 
JoeyDVivre Wrote: ------------------------------------------------------- > Completely silly. It’s really too bad that > sometimes volatility hits prices in ways we don’t > like and sometimes markets may even cause > volatility. Do you have something interesting to > say about this or do you just think that you can > call people fools because perhaps they don’t know > that people can get burned by energy risk? Is > there anybody here who doesn’t know that energy > vol can cause people to get burned? The stupidest > person who has ever been on AF knows that. LOL, too bad this isn’t just about investors getting burned by volatility. If you haven’t been outside lately it’s sucking hundreds of billions from the world economy and concentrating it into the hands of the few.
spierce Wrote: ------------------------------------------------------- > Syd_RE Wrote: > -------------------------------------------------- > ----- > > spierce, > > How exactly would traders be manipulating oil > > prices through dark markets? > > > Because they can take unlimited positions with > ever increasing upwards valuations. Since there > is no limit to the number of possible contracts > and the intricate web of taking on risk and laying > it off can create infinite permutations, there’s > really no way of balancing the futures market > against fundamentals. > > Many say that futures won’t affect the physicals > market. However, if there’s an ever increasing > interest to raise prices, as more people enter the > market they WILL raise prices, then there’ll never > be a return to “norms” based upon fundamentals. > > However, since there’s an infinite amount of > possible “demand”, you get small supply against an > infinite demand. This will cause further price > escalation. > > Add to that that these instruments are very > lightly regulated and provide massive leverage, as > well as being relatively cheap, aren’t heavily > taxed, you get a huge ability to make a ton of > money. > > Companies do this crap all of the time to people. > Take a look at Bechtel and Columbia. How about > Enron and the western US? Even if it’s not > outright manipulation, it’s the ability to take > advantage of loopholes that cause problems. > > What’s funny is when this collapses people are > going to be standing around saying “We never > thought it would collapse” and the same old people > will be bitching “The Fed shouldn’t bail these > people out, they knew the risks”. However, you > can’t claim that they knew this risks when, > yourself, didn’t even know the risks. Fools will > sit around now claiming nothing is wrong and > “efficient markets” this or “economic theory” > that, but when it comes down to it, this crap is > broken. > > Everybody denies they can be burned with this > crap. It just amazes me to see CFA candidates or > actual charterholders bitching about the Fed when > they, themselves, are part of the problem. > > http://www.latimes.com/business/la-fi-oilprice30-2 > 008may30,0,4595533.story Which line in their mentions consumers? Is that the problem you are worried about? So do you have some better solution than markets for setting prices for consumers? It’s really simple for consumers to get oil prices down- they just have to stop consuming so much. I have only seen the barest beginnings of that.
JoeyDVivre Wrote: ------------------------------------------------------- > Which line in their mentions consumers? Is that > the problem you are worried about? So do you have > some better solution than markets for setting > prices for consumers? It’s really simple for > consumers to get oil prices down- they just have > to stop consuming so much. I have only seen the > barest beginnings of that. Really, does this get any more humorous? This has nothing to do with consumption. Are you telling me that oil raising more than 50% in 4 months when no fundamentals have changed makes this “normal” and about consumers? This is no more of an efficient market operating correctly than the tech bust, housing, tulip bulbs (which, ironically, was caused by FUTURES CONTRACTS), or Enron manipulating the market. This is the fundamental problem with finance people. They cling so heavily to finance theory and “efficient markets” that they completely ignore the other factors that contribute to prices, human greed. This is why analyst models are almost always wrong and why we continually have this problem in the finance markets. Especially with the massive amount of deregulation that has occurred recently. Finance doesn’t exist in a vacuum whereby it’s impervious to inefficiency. It’s readily apparent there is a massive amount of inefficiency going on right now. Yet people like you continually ignore it. You only perpetuate the cycle. The real problem is, you then blame the culprit on the wrong people. After the Fed tries to clean up this mess people like you will justify the next one, until the Fed has to clean that one up. Then you’ll be apoplectic that the “sissy” fed dared bail out the badass mongoloid non-“Sissies” who cling to idiocy in the face of obvious evidence.
at the end of the day is about money…“big” people dont care if the market will go burst or if customers will fell the pain…they just care to fill they pocket as fast as they can. Corporation power…this is how it is called.