Azazello1313 Posted October 25, 2011 Share Posted October 25, 2011 (edited) since yo mama is a fan of intermingling the two, I have to say I thought this was actually a pretty good read (written for a religious publication by a professor of economics) Edited October 25, 2011 by Azazello1313 Quote Link to comment Share on other sites More sharing options...
wirehairman Posted October 25, 2011 Share Posted October 25, 2011 Like most protests, the Occupy Wall Street folks are better at identifying something that is wrong than identifying a way forward that is right. But even if the protestors don't understand much about financial economics, they have a clear sense that something is wrong. That something, however, lies deeper than the behavior of a relative handful of Wall Street moguls. That something, I believe, is a sense of material entitlement that has crept into the American psyche. This sense of material entitlement has infected our personal choices, our politics, and our financial system. Spot on, IMO. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 25, 2011 Share Posted October 25, 2011 (edited) I'll suggest that the author is somewhat missing the point with this statement: The protestors would like to see the financiers thrown in jail. But because the institutions we asked our politicians to construct were so lax, even as the financiers lost billions of dollars for their clients and destabilized the world economy, few of them actually committed any crime for which they can be legally punished. I think the protestors' point would be that the financial industry has such a great political influence that politicians write the rules that the banks, etc. want rather than the rules that would be what normal people want. It's also not enough to say that the investment banks were creating instruments that were too complicated for even themselves to understand. That is letting them off way too easy. As for the subject of intermingling economics and ethics, I find it impossible to not intermingle them and I would consider any effort to separate them as naive at best. (This statement reflects my professional opinion as an economist--it is derived from my study of informal institutions (for which at least two economists have won Nobel Prizes.) Edited October 25, 2011 by wiegie Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 25, 2011 Share Posted October 25, 2011 I'll suggest that the author is somewhat missing the point with this statement: I think the protestors' point would be that the financial industry has such a great political influence that politicians write the rules that the banks, etc. want rather than the rules that would be what normal people want. Even more than this, it is the fact that the rules are written for the benefit of a few to the detriment of the many that is the overriding issue. Perfectly good rules that had stood us in good stead for decades e.g. Glass-Steagall were blown away at the behest of the already mega-wealthy for no-one's benefit but their own. It's also not enough to say that the investment banks were creating instruments that were too complicated for even themselves to understand. That is letting them off way too easy. Exactly - they deliberately created instruments they knew for certain would fail, sold them to clients, then bet against them. If that's not criminal, then we need to redefine criminal. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 25, 2011 Author Share Posted October 25, 2011 It's also not enough to say that the investment banks were creating instruments that were too complicated for even themselves to understand. That is letting them off way too easy. Exactly - they deliberately created instruments they knew for certain would fail, sold them to clients, then bet against them. If that's not criminal, then we need to redefine criminal. letting them off easy, perhaps, but isn't it true to some extent? most of "them" lost hugh sums of money by misapprehending the risk in their portfolios. everybody missed it, the only people who saw it coming were the people who ALWAYS see it coming (i.e. the extreme bear armaggeddon types). certainly all of "them" working at lehman didn't see it coming. we might say we wish they had lost even larger sums of money and not have been bailed out. but the fact that they themselves didn't even understand the risk in the instruments they were creating, selling, holding and buying would seem to be true beyond much dispute. ursa's rather fanciful re-imagining of events where "they" knew for certain assets would fail once again has no connection whatsoever to reality. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 25, 2011 Share Posted October 25, 2011 (edited) letting them off easy, perhaps, but isn't it true to some extent? most of "them" lost hugh sums of money by misapprehending the risk in their portfolios. everybody missed it, the only people who saw it coming were the people who ALWAYS see it coming (i.e. the extreme bear armaggeddon types). certainly all of "them" working at lehman didn't see it coming. we might say we wish they had lost even larger sums of money and not have been bailed out. but the fact that they themselves didn't even understand the risk in the instruments they were creating, selling, holding and buying would seem to be true beyond much dispute. ursa's rather fanciful re-imagining of events where "they" knew for certain assets would fail once again has no connection whatsoever to reality. Yes, in some cases they did not understand (or properly account for) risk--but that is not the end of it. Concerning Ursa's "fanciful re-imagining of events", I suggest you look up something called ABACUS. Edited October 25, 2011 by wiegie Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 25, 2011 Share Posted October 25, 2011 here's another one to take a look at: http://ftalphaville.ft.com/blog/2010/06/10...son-cdo-primer/ Quote Link to comment Share on other sites More sharing options...
yo mama Posted October 25, 2011 Share Posted October 25, 2011 since yo mama is a fan of intermingling the two, I have to say I thought this was actually a pretty good read (written for a religious publication by a professor of economics) That's what not what I said, but I'm unsurprised by your intellectual dishonestly. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 25, 2011 Author Share Posted October 25, 2011 Concerning Ursa's "fanciful re-imagining of events", I suggest you look up something called ABACUS. you mean the thing where the SEC is pursuing fraud charges? that would seem to be a poor example getting away scot free. and as far as I can tell, that is something that was created once the housing bubble had already popped to try and take advantage of the decline they, at that point, saw as inevitable. it really has nothing to do with the question of whether the financial instruments which led up to the financial crisis became so complicated their creators didn't understand them. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 25, 2011 Author Share Posted October 25, 2011 That's what not what I said, but I'm unsurprised by your intellectual dishonestly. huh? it was just a segue, not an attack. please get over yourself. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 25, 2011 Share Posted October 25, 2011 you mean the thing where the SEC is pursuing fraud charges? that would seem to be a poor example getting away scot free. it might be a poor example of getting away scot free, but it is a perfect example to show that you were full of sh|t when you made the comment "ursa's rather fanciful re-imagining of events where "they" knew for certain assets would fail once again has no connection whatsoever to reality." Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 25, 2011 Author Share Posted October 25, 2011 it might be a poor example of getting away scot free, but it is a perfect example to show that you were full of sh|t when you made the comment "ursa's rather fanciful re-imagining of events where "they" knew for certain assets would fail once again has no connection whatsoever to reality." I believe ursa was speaking in a more general sense, where the perpetrators faced no consequences, and a more relevant time frame . I certainly never said or implied that no fraud ever took place. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 26, 2011 Author Share Posted October 26, 2011 more ethics and economics, I do have to agree with the overall tenor of this piece. this country is very much in a materialist malaise. and it's equally true from the top 1% on down to the bottom. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 26, 2011 Share Posted October 26, 2011 Serious question - how much of this dishonesty and "greed" is driven from outside? Something I saw this morning made me think about this yet again. 3M, headquartered here in the Twin Cities, failed to reach Wall Street analyst expectations even though 3M did record a profit. The share price instantly dropped 6.5% even though, again, the company recorded a decent profit. This is seen over and over again. Some anonymous jerk on Wall Street sets an expectation and if it isn't hit, the company is punished way out of proportion to it's so-called failure. Isn't this "system" an encouragement to cut corners, only take note of the short term and do whatever it takes to get there? Doesn't it also encourage extreme volatility instead of the pursuit of steady growth? Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 26, 2011 Share Posted October 26, 2011 Serious question - how much of this dishonesty and "greed" is driven from outside? Something I saw this morning made me think about this yet again. 3M, headquartered here in the Twin Cities, failed to reach Wall Street analyst expectations even though 3M did record a profit. The share price instantly dropped 6.5% even though, again, the company recorded a decent profit. This is seen over and over again. Some anonymous jerk on Wall Street sets an expectation and if it isn't hit, the company is punished way out of proportion to it's so-called failure. Isn't this "system" an encouragement to cut corners, only take note of the short term and do whatever it takes to get there? Doesn't it also encourage extreme volatility instead of the pursuit of steady growth? its not punished way out of proportion ... short term volatility is a function of the market. with the exception of '05 to '10, 3Ms stock has gone up for every 5 year period since 1980. THIS is steady growth. take out the blip in 09 and this is a pretty nice story, let alone paying out a 2+% dividend. the system works just fine provided the company delivers over time ... Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 27, 2011 Share Posted October 27, 2011 its not punished way out of proportion ... short term volatility is a function of the market. with the exception of '05 to '10, 3Ms stock has gone up for every 5 year period since 1980. THIS is steady growth. take out the blip in 09 and this is a pretty nice story, let alone paying out a 2+% dividend. the system works just fine provided the company delivers over time ... None of this answers the point I was making but I'm getting used to that by now. Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 27, 2011 Share Posted October 27, 2011 None of this answers the point I was making but I'm getting used to that by now. your point was that the system encourages extreme volatility instead of the pursuit of steady growth. i showed you how you were wrong as 3M has provided steady growth in the system for over 20 years. you then respond i'm not addressing the point. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted October 27, 2011 Share Posted October 27, 2011 your point was that the system encourages extreme volatility instead of the pursuit of steady growth. i showed you how you were wrong as 3M has provided steady growth in the system for over 20 years. you then respond i'm not addressing the point. No, my point was the system encourages dishonesty and ruthlessness through the setting of unreasonable expectations by anonymous jerks who just make chit up and produce nothing. And if you think a 6.5% immediate drop in share price for a company that by your own statement has delivered for years and still made a profit is reasonable, then I guess you don't question anything. Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 27, 2011 Share Posted October 27, 2011 No, my point was the system encourages dishonesty and ruthlessness through the setting of unreasonable expectations by anonymous jerks who just make chit up and produce nothing. And if you think a 6.5% immediate drop in share price for a company that by your own statement has delivered for years and still made a profit is reasonable, then I guess you don't question anything. no, i do not concern myself with one day movements if i believe in the company. this is just noise. if the fundamentals are still strong, no reason to be alarmed. if the market has a decent day, it will probably immediately bounce back. do people play short term games? yes. that's the nature of an open market. there are plenty of regulations to attack any foul play. Quote Link to comment Share on other sites More sharing options...
SEC=UGA Posted October 27, 2011 Share Posted October 27, 2011 No, my point was the system encourages dishonesty and ruthlessness through the setting of unreasonable expectations by anonymous jerks who just make chit up and produce nothing. And if you think a 6.5% immediate drop in share price for a company that by your own statement has delivered for years and still made a profit is reasonable, then I guess you don't question anything. CEOs make a lot of money to keep those jerks at bay and stock prices high. It must be one of the most stressful jobs in the world, being in charge of a billion dollar company with tens of thousands of employees' well being dependent upon your decisions. These guys really ought to make more money considering the amount of responsibility on their shoulders. Think about it, one mistake and they could potentially ruin thousands, upon thousands of lives. Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 27, 2011 Share Posted October 27, 2011 3M up 3% so far today ... oh the horror! Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 27, 2011 Share Posted October 27, 2011 3M up 3% so far today ... oh the horror! ton, I think this actually plays into what Ursa was saying. Was there really such a change in fundamentals yesterday that the stock price dropped by 6.5% followed by another change in fundamentals overnight/this morning that caused the correct value of the stock to go back up by 3%? Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted October 27, 2011 Author Share Posted October 27, 2011 yeah! let's outlawfluctuations in stock price! because information and expectations always change slowly. the bassturds Quote Link to comment Share on other sites More sharing options...
tonorator Posted October 27, 2011 Share Posted October 27, 2011 ton, I think this actually plays into what Ursa was saying. Was there really such a change in fundamentals yesterday that the stock price dropped by 6.5% followed by another change in fundamentals overnight/this morning that caused the correct value of the stock to go back up by 3%? no, there was not. but ... so what? welcome to the stock market, where short term volatility exists. am i really explaining this to an economist?!? do people try to play this short term volatility? yes. some win, some lose. it is a dangerous game. are companies held to strict disclosure laws and requirements to share their financial position? yes. we have plenty of data as investors to make decisions. are the analysts doing their job to try and provide another layer of information to help investors? yes. are we all adults and able to make our own decisions with how we invest our money? yes. is there impropriety, dishonesty, misleading, non-complete-total-honesty, etc. etc. out there in the analyst community? sure, but those who do not provide good information over time end up out of work. do they try to create hype to influence/move the market? they may try, but again, good luck. you take the good with the bad in any system and in this one, the good far outweighs the bad. Quote Link to comment Share on other sites More sharing options...
wiegie Posted October 27, 2011 Share Posted October 27, 2011 yeah! let's outlawfluctuations in stock price! yes, that is exactly what people are calling for three cheers to you for simplifying things so clearly Quote Link to comment Share on other sites More sharing options...
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