Big Five Most Vulnerable to Derivatives [View article]
What in the world would motivate banks to create more than $1 quadrillion in derivatives? Was it a desire to be of service to society?
I think not. If the fees and commissions derived from the creation and sale of these financial instruments was only 0.1%, the result for the banks' income cash flow is $1 trillion. In the final analysis I would expect that the amount the banks could skim out of these flim flams would be more than that, possibly much more.
For a few trillion dollars they had no problem ignoring the possible imbalances being introduced to the financial system. So what if there was damage. These perps would be long gone from the scene before the damage became evident, living off their millions in bonuses paid for just a few years of "great performance". This performance was valued for the amount of income produced for the bank each quarter. It was not valued for what the activities contributed to the long-term capital structure of their bank.
I'm sure someone will come forward to defend the usefulness of derivatives for sharing risk. The problem I still raise is that when the at-risk value of derivatives exceeds the underlying value of the assets on which they are based, derivatives are amplifying risk. Until we can get a handle on how much is actually at risk we can not truly have an understanding of what damage derivatives can do to the financial system.
The thinking seems to be that C is only 40% owned by the U.S. government and therefore still poses a risk because it is not under sovereign control. AIG is 89% government owned and is therefore no risk unless the U.S. fails.
In my articles during the past summer I considered both C and AIG failed concerns and therefore under government receivership. The case of C can still be debated; with AIG there is no debate.
How were these prices determined? I assume there is a record of transactions somewhere? If so, what volume of transactions have taken place recently and on what dates?
Wall Street Breakfast: Must-Know News [View article]
tom 1234 - - -
Why is Apple down? Try valuation. Expected 2008 earnings are $5.20; 5 year expected annual growth rate 24%; high volatility (Beta = 2.88). If I assign 5% annual growth starting in six years and continuing forever, fair value today for AAPL is $44.
By the way, I own Apple. However, I do put short position hedges on that holding at every pullback. The potential for Apple to double keeps me an owner. The potential for Apple to go down 50-75% keeps me guarded.
Wall Street Breakfast: Must-Know News [View article]
I think Jersey has overstated the potential for disaster from the coming election. I think there is enough intelligence in the spheres of influence for all three candidates to prevent disaster. Just as I think campaign posturing by McCain which, if implemented would continue to trash the dollar, will not be significantly implemented if he is elected, I don't expect growth destroying tax changes and trade policies from either Obama or Clinton if one of them is elected. Much of campaign rhetoric is simply "trash talk".
Big Five Most Vulnerable to Derivatives [View article]
I think not. If the fees and commissions derived from the creation and sale of these financial instruments was only 0.1%, the result for the banks' income cash flow is $1 trillion. In the final analysis I would expect that the amount the banks could skim out of these flim flams would be more than that, possibly much more.
For a few trillion dollars they had no problem ignoring the possible imbalances being introduced to the financial system. So what if there was damage. These perps would be long gone from the scene before the damage became evident, living off their millions in bonuses paid for just a few years of "great performance". This performance was valued for the amount of income produced for the bank each quarter. It was not valued for what the activities contributed to the long-term capital structure of their bank.
I'm sure someone will come forward to defend the usefulness of derivatives for sharing risk. The problem I still raise is that when the at-risk value of derivatives exceeds the underlying value of the assets on which they are based, derivatives are amplifying risk. Until we can get a handle on how much is actually at risk we can not truly have an understanding of what damage derivatives can do to the financial system.
The FSB's Big, Bad 30 [View article]
The thinking seems to be that C is only 40% owned by the U.S. government and therefore still poses a risk because it is not under sovereign control. AIG is 89% government owned and is therefore no risk unless the U.S. fails.
In my articles during the past summer I considered both C and AIG failed concerns and therefore under government receivership. The case of C can still be debated; with AIG there is no debate.
Financial Company Default Risk [View article]
Wall Street Breakfast: Must-Know News [View article]
Why is Apple down? Try valuation. Expected 2008 earnings are $5.20; 5 year expected annual growth rate 24%; high volatility (Beta = 2.88). If I assign 5% annual growth starting in six years and continuing forever, fair value today for AAPL is $44.
By the way, I own Apple. However, I do put short position hedges on that holding at every pullback. The potential for Apple to double keeps me an owner. The potential for Apple to go down 50-75% keeps me guarded.
Wall Street Breakfast: Must-Know News [View article]
Much of campaign rhetoric is simply "trash talk".