O. My. God. Holy derivatives. Although not surprising given the vacuous, moral state of affairs of our financial underpinnings, America is planning to weaken further the integrity of our financial institutions by expanding its role as a veritable betting parlor. Not possible, you say? Listen up.
First, you must read this article by Steven Pearlstein in the Washington Post today …. and read it very carefully:
I was dumbfounded when I read this . Isn’t it enough that our great investment banking houses have securitized financial instruments such as derivatives, that nearly (and the possibility still very much exists because there have been no new regulations passed to curb derivative transactions) brought our nation to its greedy feet? As Pearlstein notes: of course these banks had no qualms about selling mortgages to unqualified people. The banks just lumped together all of these liens, good ones but mostly bad ones, into various pools of dung and sold them to even greedier entities looking to make a killing in the market. No attention was ever paid to the individual debts that made up these portfolios of crap.
Now Hollywood wants to securitize the earning potential of movies. Please, please tell me how this is any different from betting on who will win the Superbowl, where the next earthquake will hit and how strong a rating it will merit on the Richter Scale, how many children and of what gender Malia and Sascha Obama will have and finally, when a comet will crash into the earth?
The investment banking firm of Cantor Fitzgerald, one and the same as the company that had a major presence in the World Trade Center when it went down on 9/11 and who lost hundreds of employees, plans on jumping into the Hollywood futures market by peddling these hollow investment opportunities. Desperate times call for desperate measures.
America has turned its financial foundation, i.e. huge banking enterprises, into a casino. The worst part though, is that there will be a market for these instruments. As greedy as the bankers are, their customers complete the circle of avarice by purchasing these vehicles. We are part of a world guided by a dearth of morals, seeking only the ego-fulfilling high that an immediate windfall, or in this case, the hope of a windfall, can provide.
How on earth can our economic structure survive when the most basic building block is the riskiest? The concept of that good old “investment triangle” is based on the most secure investments filling up the larger, bottom third of investment strategy. If this portion of asset allocation is composed of the riskiest investments, there is no foundation. Our economic architecture then becomes a house of cards, ready to collapse at any moment.
The thought that fiduciary entities, whose primary instructions are to be prudent with their investor’s monies, will be buying these supposed “investment” vehicles, makes me sick. Pension funds, unions, charities, and individuals will no doubt be powerless to deny themselves the chance of higher returns. Peoples’ hard-earned money may very likely go down the drain, along with their retirement funds and general well-being. Just remember this: no more bailouts for stupid, greedy behavior whose dangers have been outlined at the outset. Enough is enough.
It is not like we haven’t been down this road already. But as I mentioned the other day, since America no longer makes any tangible goods (thanks to our infinite wisdom to send those tasks overseas where the labor is cheaper and, alas, the quality control practically nonexistent), we have had to design new “products” that can be sold. These creative products, like derivatives, are often empty shells, offering returns only for the companies that sell them.
We are certainly the United States. We are united in our stupidity and greed. The United States of Vegas. When will America wake up and smell the roses? Forewarned is forearmed.
A MUST-READ: THE FINANCIAL REFORM SPEECH THAT WE’VE BEEN WAITING FOR