Requiring 50% margin to be posted across the board isn’t feasible, unless you want to royally screw some things up/people over.
For example, the futures contract for corn at the CME is for 5000 bushels of corn (contract specs). Corn is currently trading at ~$6.00/bushel. The initial margin required by the CME for the contract is $2363. For a farmer to hedge $30,000 worth of crops, he only needs to put up ~8%. Requiring 50% would hugely impact farmers’ ability to hedge and possibly prevent them from hedging in the futures markets at all.
The futures market occupies an odd place for me–I think there is or ought to be a fundamental difference between a security that ultimately represents actual goods and one that represents ownership interest (stock, equity) or debt owed.
In the case of the farmer, ultimately he’s got a high chance of physically having the corn when the harvest rolls around, and if the corn crop suffers a serious failure there’s actual physical damage to the economy in addition to the economic damage from the market going to shit. So I’m willing to accept him being able to back his market transactions at least partially in expected future value of his corn crop rather than cash.
Shit, it’s been about five or six things in between.
More seriously, a technical discussion about what methods of securities trading are ethical, unethical, and/or criminally stupid eventually HAS to be a part of any discussion concerning the further regulation of Wall Street and the 1%.
SOMEONE on the OWS side has to be getting hip deep in the technical details of what constitutes right and wrong with regard to methods of wealth accumulation, ne?
If no one is doing so, then the movement is as intellectually bankrupt as the retard wing of the right has been trying to claim. Fortunately, I am part of the 99% and actually know more or less what I’m talking about when I’m not tweaking Scylla’s nose.
Let’s review your acumen of just the last few pages:
You think the Fed Bank Survey is an invalid indicator of credit demand.
You think stocks and bonds depreciate but physical property does not.
You think margin for stocks and bonds is bad, but you are ok with commodities because they are more… tangible.
I know you claim to have gone through a business school, but I find that difficult to believe. Typically Financial Accounting is required to familiarize yourself minimally with basic concepts, and frankly you don’t have the knowledge you should have from even this minimal exposure.
Several other dopers who have some financial expertise have been through this thread and I know they are having a difficult time communicating simply because it’s difficult to communicate with someone who pretends to be an expert but knows next to nothing.
For example, we’ve been dancing around commodities with you because it’s difficult to explain just how backwards you have things without getting you all pissy.
One can speculate, and buy and sell corn that won’t be planted until years from now with no intention or ability to make good on delivery, which nobody aside from a very few institutions (if anybody) will ever do. There is hardly a more notional less concrete market.
It is this very speculative nature of this market that allows people on the other side to hedge their positions and sell you fuel oil or flour, or whatever else at reasonable and consistent prices and keep the flow of goods and inventory moving.
This, in fact, is the nature of most if not all highly speculative markets. They filter the risk from those who don’t want it, or can’t afford it. A bread baker does not need to spend his time chasing after next year’s supply of flour and wondering if he can get it at a price that lets him fulfill his contracts while making a fair profit. That’s why he uses the commoditties markets to lock in his price.
The speculators, those that take high risk, make that possible. Most times it works pretty well.
I think, (correctly!) that it’s subjective, and that there’s a potential conflict of interest. Strike one!
Strike two! I think physical property has INTRINSIC VALUE, which stocks and bonds do not.
I am okay with allowing a commodity PRODUCER to back his purchases against expected future production instead of cash. That doesn’t translate to thinking commodities futures are tangible, and given the way I phrased it I can’t even think how you might believe I meant that.
So maybe before you lecture ME about business school, you should hit up some remedial reading comprehension.
Of course, I’m sitting here having a serious discussion with the High Financier, which is my first mistake.
Look, fucker, I’m telling you fucknozzles how to fix the system–stop treating it like a goddamn slot machine and then whimpering about “oh god, how could we have EVER forseen MARKET RISK?” One can speculate, but that one is a complete asshole for doing it if they’re betting with none of their own money down, or on things happening years in the future.
God, people wonder why the market is so fucked up.
I sat through the bullshit classes on Finance. Nine credit hours wasted–if I would have spent it on poker tutoring it would have involved the same amount of stupid risk-taking on artificial bets and at least I’d’ve had some fun.
Seeing as the questions asked are factual and verifiable, no.
Forgive me. I go by what you said not by what you thought.
Anyway, this altered thesis wrong, too. Not all physical property has intrinsic value, waste, for example, and many stocks and bonds do. I’m not sure how you are using the term “intrinsic value” but clearly you think physical propert has it. Since stocks and bonds can be backed or represent interests in physical propert they must also have it.
Perhaps it Was the words you used. You said commodities represented “tangible goods,”. Since that is what you said, that is what I thought you meant. Anyway, what you are saying now makes no sense. Who is your producer supposed o sell to?
Foolish me, quoting you and assuming you meant what you wrote.
Seeing as you have no clue whatsoever about what you are talking about, yes, arguing with me is a mistake.
[quoteLook, fucker, I’m telling you fucknozzles how to fix the system–stop treating it like a goddamn slot machine and then whimpering about “oh god, how could we have EVER forseen MARKET RISK?” One can speculate, but that one is a complete asshole for doing it if they’re betting with none of their own money down, or on things happening years in the future.
God, people wonder why the market is so fucked up.[/quote]
So far you haven’t had an idea that was capable of withstanding even the most cursory examination. You’ve offered nothing workable, and actually very little that even parses intelligibly.
I still don’t believe you. What “bullshit” classes on finance did you take? What were their names? Did you take Financial accounting?
Senior Loan Officer **Opinion **Survey on Bank Lending Practices, the one you linked. Opinion survey. Opinions are not facts.
Let’s just see. “The difference, in my view, between buying a house and buying a security with a loan is that, barring natural disaster, no matter how much cash value the house loses it is still intrinsically a physical asset (even if it burns down, one still has the land), while a security can depreciate to zero.”
I have a nice collection, from some of my relatives, of stocks in companies that no longer exist. Value zero. If the company dies, the stock dies too. By contrast, “barring natural disaster”, my land remains land with topsoil and access to roads and utilities, and as such cannot be worth nothing.
“ultimately represent tangible goods”. At the end of a commodities contract, someone gets the corn.
I recognize it’s possible to sell a commodities future when you have no means of procuring the good in question, and no intention of doing so–preferring instead to buy a corresponding future from someone else. This is bullshit.
As for who my producer is supposed to sell to? End users. That’s pretty easy. Speculators on this year. Whatever. At the point you’re selling futures in crops whose seeds don’t exist yet, you are playing a casino game, not a market.
Unless you think in convoluted knots like some asshole financier, in which it makes sense to sell corn you don’t have and hope like hell some guy might have some for you to buy at a lower price.
As I said, learn to read, Lord High Financier. Care to step on your own dick again?
This is pretty typical. You don’t get past the title. The survey collects factual and verifiable information as well as opinion.
Physical assets depreciate to zero over time as an accounting function. What you are referring to is “fair value depreciation” or loss of value. Despite what you claim physical assets lose value to and can drop to zero, or lower. And, since stocks can represent ownership in physical assets even if what you are saying was true you’d still be wrong since securities can posess the exact same properties.
Untrue. Land can incur liabilities in excess of fair market value, I.E. cleaning up of pollution, mandated improvements through zoning changes, etc etc.
That stoks can go to zero is no argument since land can, too.
I keep waiting for you to say something that is actually true.
Very rarely. Never with quite a few. nymex crude is uncollectable for example. So no. While it’s possible for collection on some contracts, more accurately the positions are simply closed out with matching contracts.
That’s it? That’s your refutation? Why pray tell is it bullshit?
Untrue. Perhaps I have a contract to supply coats two years from now at a set price. I will need cotton, and to ensure I make a fair profit I need to lock in the price, so I buy a future on a crop that has not been planted. Contrary to going to a casino, I have become more conservative.
By “thinking in knots” Im assuming you mean the ability to add more than single digit numbers and such, a skill, that lacking,you distrust.
You would have thought that random chance would have given you an accurate statement at some point in the last few posts.
Look, jackass. The parts of the survey you cited (loan demand) ARE opinions.
I understand how depreciation works, too, I’m in goddamn IT. The fact remains, even if my computers have a theoretical accounting value of zero because we depreciate them over four years, I can still resell them for a reasonable fraction of their purchase price or get many more useful years of work out of them. Accounting value is a polite fiction, and something having a value of “zero” because it has accounting liens on it or has been depreciated doesn’t make it valueless.
As for uncollectable commodity contracts? You can call a tail a leg all you want, but a contract with no commodities involved is just a sophisticated gambling game–except one that fucks with actual markets for actual items.
As for two-year futures contracts, that’s just another example of refusing to account for market risk–you’re a few good hurricanes away from having nothing but an expensive piece of paper. “That won’t ever happen, because…” Uh huh.
As for untruth, you’re the one who can’t tell “fact” from “opinion”, and your industry is the one that pretends that not trading any commodities is trading commodities.
This is why OWS exists, in a nutshell. Because your industry is a shitpile of failure and gambling, and only survives because they use their gambling wins to pay off the government to not destroy them, and in fact save them when they die. And you defend it’s monstrous, addled layers of complexity and leverage as “adding numbers together”.
So, if in one quarter a bank has applicants for 30mm in commercial loans, and the next month they have applicants for 45mm, than when they say loan demand has increased they are making an opinion, and therefore the data is not valid? Now you are just being obstinate. Oh, and what is this “conflict of interest” you are nattering about? You just can’t say the words, you know? You have to explain why the bankers are invented to fill out a faithless survey.
If you understand, why were you using the term backwards?
So you are changing your mind again? These contracts that you thought are no longer ok because they are not redeemable for hard assets?
You do realize that dollars, as a fiat currency posess the same property and aren’t redeemable for anything. They simply represent value. If this is your objection than I guess you are also against currencies too.
Actually that is exactly why you would buy the contract. If the crop is destroyed and you have a contract for a now scarce commodity that contracts value will offset the increased cost in purchasing said commodity. A hedge.
So you are saying we should abandon currency and go back to a barter economy?
You do know that that is what you are saying since what you fund objectionable about said contracts is the defining characteristic of fiat currency.
I think it exists because there are some really stupid and ignorant people (which is always a deadly combination,) spouting simplistic answers to complex questions.
Btw, I’ll ask for a third time. You claim to have gone to business school. I find this dubious, so I ask what was your curriculum? Did you take Financial accounting?
Your autocorrect makes you incomprehensible sometimes. Learn to use your damn device.
I presume that bankers are asked to fill it out because otherwise we’d HAVE no information. I likewise presume that when you ask a guy an opinion about his industry, he has every incentive to skew it as far as he can in the direction that makes his life better.
Because I’m pissed off, and I don’t actually care about responding to you when you get into High Financier mode.
You are certainly too precious for words. My currency doesn’t specify anything redeemable for anything. A commodities future specifies what commodity, what grade, etc.
Until there is so little of the commodity that it becomes musical cotton chairs.
Fiat currency doesn’t pretend to be something it is not. Fiat currency isn’t an invented thing that exists solely to gamble with other peoples’ livelihood.
You know, I’m going to sum up the problem with your discussions in this thread and with basically your entire industry.
There is a moral element to financial transactions. Speculation is exactly equivalent to gambling, and it’s immoral to do it with someone else’s money and no plan to pay them back. Mis-rating bonds is immoral. Fraudulent mortgage applications and fraudulent foreclosures are immoral.
Operations Management. I had two semesters of Financial Accounting, and it was enough to put me off of your entire industry for life between the curriculum and the assholes teaching it. From my perspective, I work in a highly complex field, but all that complexity has a reason to exist that improves overall productivity, whereas finance seemed like structure upon structure that exists to enable people to lie about their financial status for tax purposes (and dress it up in terms like “Revenue Recognition Schedule”) or make money hand-over-fist for the people who thought up the complexity.
Yeahh, I got that you “presumed” there was a conflict of interest from your previous post. What I am asking is what that conflict is. How does a banker benefit by lying and skewing it? How does it make his life better to fill it out faithlessly?
If you are going to take on all of the analyst community and the US government and claim that this survey is invalid, you need to be a little bit more specific as to why, kapische?
I see that you’ve given up the “it’s subjective” objection when it was pointed out to you that the bulk of the questions are objective, so at least we have one step in the right direction.
So when you get pissed off get stupid and ignorant. Got it.
How come you are pissed off all the time?
No. No. No. You are not paying attention. Like your currency, the Nymex crude contract is not redeemable for anything. Like your currency it simply represents value.
The Nymex or any other commodity contract isn’t pretending to be anything that it’s not. The only confusion here is that these contracts are not what you think they were. That’s your ignorance and stupidity, and you can hardly blame the commodity contracts for your incompetance.
And, Fiat currency is an invented thing. Your suggesting otherwise is one of the most fundamentally stupid things I’ve heard. How do you actually turn your brain off enough to type something like that?
The world awaits.
Fraud is immoral? That is your wisdom? Wow. Thank God we have you to reveal this sacred truth. Did that take you a long time to figure out?
What will you tell me next? Heat is hot? Water is wet? The mind boggles at the possibilities.
You’re not really operating at a very sophisticated level.
If you had two whole semesters, how come you don’t understand the most basic shit? Did you fail? Maybe you should have paid attention.
Yeah, “from your perspective,” I’m sure it really is complex, like tic tac toe and other imponderables.
The key line above is “seems.”
To a dog, I’m sure that a wheel “seems” like a magical and imponderable miracle. Similarly, you’ve shown that you can’t grasp simple concepts like leverage, fiat currency, or even a basic commodity contract without confused and angry. Your greatest insight has been to suggest that perhaps fraud is not good.
Pretty soon you are going to tell me that your momma told you life is like a box of chocolates.
I’ve seen fifth-graders able to handle sentence structure better than you.
Case in point, I said “fiat currency isn’t an invented thing…” and you jumped on that, apparently completely unable to read the clause immediately afterwards that modified “invented thing”.
Also, I got an A- in both finance classes, the latter of which I simply didn’t bother to show up for but just read the book (in about twenty minutes, then sold it back) and picked the answers that seemed most likely to be a bullshitty way to make more money for some financier somewhere.
You don’t seem to understand I’m accusing large swaths of your entire discipline of being worthless and fraudulent.
That’s fine–large swathes of mine are as well.
The difference is, if I ever met a spammer, I’d beat him bloody. You’d probably shake the hand of the guy who thought to bundle subprime mortgages into larger instruments and rate the whole thing AAA.