Gov Corzine, Show Us The Money

This series of events just points up the fact that neither Dodd-Frank, nor any other piece of legislation or regulation, has done much of anything to eliminate the perverse incentives that have existed for some time in the financial services industry.

A few decades ago, investment banks that undertook the greatest risks were generally organized as partnerships where guys were dissuaded from placing very large, risky bets -- since losing them might mean facing the inability to maintain a lifestyle involving possession of mansions, yachts, airplanes, etc. Not anymore! People can play high-stakes "heads I win, tails somebody else loses" games with other people's money, in some cases taxpayers' money.

Although I'm not familiar with the deal structure of Corzine's contract, I have little doubt that it offered him very large bonuses if he could show some flashy short-term earnings statements. That's sort of the way it usually works nowadays. Of course, the downside is that it incentivizes some folks to make bets they would never make with their own money. If the worst that can happen to you is that you get tossed out after losing a bunch of money, albeit after collecting a few million bucks of salary income, but you figure that you stand a fair chance of making ten times that (or more) in bonuses if you swing for the fence, you might take risks that seem insane to everyone else.

This was just an unusally risky way of playing the carry trade. Some institutions have been borrowing at near zero percent and buying safer longer-dated U.S. Treasuries, secure in the knowledge (especially if they deem themselves "TBTF") that Treasury and the Fed will backstop them against catastrophic portfolio losses in the event that long rates skyrocket. MF Global was obviously not TBTF, and Corzine probably thought a riskier strategy offered the best shot at a huge payday. Oops!

Of course, he obviously didn't figure that somewhere amid all the chaos, $1.2 billion would simply go missing from customer accounts. Extremely bizarre. But I doubt seriously that Corzine was involved in any nakedly criminal act involving misappropriation of funds, since by all acounts he is still a wealthy man, having made several hundred million dollars during his Goldman stint. After all, why would a wealthy man risk a prison term?

However, he certainly should have had a better handle on just what in the hell was going on at MF Global, whatever it was, and for that he has a lot to answer.

Why buy those bonds? That's obvious, how much do you get on your savings account?
0.9% per year? Isn't it a lot better to get 5 times that interest?
Like I said I would buy them if I was into more long term investing.
But my interest is more like 5% per week and not per year.

...But my interest is more like 5% per week and not per year. Originally Posted by waverunner234

Congratulations!

You are on track to become by far the wealthiest person in the world within just a few decades, even if you're starting with just a couple of dollars. Not even Buffett has ever been able to achieve sustained rates of return even remotely close to 5% per week.

Now you're just going to burst his pretty balloon with that cold dose of reality!

Congratulations!

You are on track to become by far the wealthiest person in the world within just a few decades, even if you're starting with just a couple of dollars. Not even Buffett has ever been able to achieve sustained rates of return even remotely close to 5% per week. Originally Posted by CaptainMidnight

I don't have decades and I don't do in stocks like Buffet

I don't have decades and I don't do in stocks like Buffet Originally Posted by waverunner234

Yeah, but you're not going to try to tell everyone you expect to achieve rates of return in the neighborhood of 5% per week, are you?

Unless, of course, you're like the compulsive gamblers who are in deep denial and simply toss out days when they've suffered painful losses, figuring they're "aberrations" and shouldn't be counted!

Yeah, but you're not going to try to tell everyone you expect to achieve rates of return in the neighborhood of 5% per week, are you?

Unless, of course, you're like the compulsive gamblers who are in deep denial and simply toss out days when they've suffered painful losses, figuring they're "aberrations" and shouldn't be counted! Originally Posted by CaptainMidnight

Look at today's stock market, S&P is up 1.6% in just 4 hours. Nasdaq up 1.78%
And that is one way, only up. And Euro Dollars are going up & down way more in 1 session.
Day traders trade up & down and yes 1% profit per day or 5% per week is very well possible.

Look at today's stock market, S&P is up 1.6% in just 4 hours. Nasdaq up 1.78%
And that is one way, only up. And Euro Dollars are going up & down way more in 1 session.
Day traders trade up & down and yes 1% profit per day or 5% per week is very well possible. Originally Posted by waverunner234

Of course it's possible in any given week, or maybe even over a period of a few weeks with some understanding of the market and a little luck. But anyone who expects to achieve returns of 5% per week with little risk, and on anything approaching a sustained basis, is seriously delusional.

But I've been doing markets and investments for almost four decades. Over that time, I've just about seen it all. You would simply be astonished by some of the claims I've heard, especially those made by various market "gurus" trying to sell "guaranteed" trading and investment strategies.

Of course it's possible in any given week, or maybe even over a period of a few weeks with some understanding of the market and a little luck. But anyone who expects to achieve returns of 5% per week with little risk, and on anything approaching a sustained basis, is seriously delusional.

But I've been doing markets and investments for almost four decades. Over that time, I've just about seen it all. You would simply be astonished by some of the claims I've heard, especially those made by various market "gurus" trying to sell "guaranteed" trading and investment strategies. Originally Posted by CaptainMidnight

Just finished the week. Shit, it was only 3.384%

Just finished the week. Shit, it was only 3.384% Originally Posted by waverunner234

Well, then, you better get with the program and start making some wiser decisions!

If all you can achieve is a paltry 3.38% weekly return, it will take quite a few more years for you to become a multibillionaire than it would if you achieved the 5% per week returns you claimed earlier.

Suddenly, the conservabots are interested in holding someone accountable for investment losses? You're all hypocritical mutants....

Well, then, you better get with the program and start making some wiser decisions!

If all you can achieve is a paltry 3.38% weekly return, it will take quite a few more years for you to become a multibillionaire than it would if you achieved the 5% per week returns you claimed earlier. Originally Posted by CaptainMidnight

Caused by the 2 day EZ summit. Stuff was not moving and when it finally started moving early this morning I was asleep and woke up just 1 hour too late.
Those asses in Europe wanted to start the weekend early.

Caused by the 2 day EZ summit. Stuff was not moving and when it finally started moving early this morning I was asleep and woke up just 1 hour too late.
Those asses in Europe wanted to start the weekend early. Originally Posted by waverunner234

Well, like they always say...if you snooze, you lose!

Well, like they always say...if you snooze, you lose! Originally Posted by CaptainMidnight

Right

Interesting article on the MF Global debacle by the author Den of Thieves:

http://www.nytimes.com/2011/12/10/bu...l?ref=business

BTW, good cartoon, waverunner. Spot on about the astonishing level of cluelessness on the part of far too many brokers!