OK, I've been saying this over and over and over and over and over again for the past four years. No one, including sophisticated investors, trust or understand what the largest financial institutions are doing with the assets listed on their books. It's all smoke & mirrors which has created an atmosphere of blissful market ignorance, again.
This should come as no surprise to those who have read my book, The Myth of the Free Market, or follow what I write here.
Specifically at the beginning of Chapter Twelve I explained how supposedly sophisticated financial players have been in the dark about what the biggest banking and investing institutions have created with debt and other derivative "investment" instruments.
For those of you who don't have the money or time to get my book you're in luck. Last February I posted the discussion from my book on to my blog - "In the I Told You So Department" - where it has become one of my most popular posts (currently #3 in this week's "Hot Posts").
Making the same point that I discuss in my book (and on my blog) is The Atlantic's Frank Partnoy and Jesse Eisinger. In a blistering report on what's on the books of our largest banks - "What's Inside America's Banks?" - Partnoy and Eisinger make it clear that banks are securing a good deal of their income from derivative bets that could bring the whole house of cards down, again.
There's so much more to this story (like the money dumps that keep the whole thing going).
Unfortunately, most of America - and especially those in our Congress - don't have the tools to understand what's happening in our financial markets (still). It's one of the reasons that I'm having my Introduction to American Politics class read Barry Ritholtz's Bailout Nation. Like the Partnoy and Eisinger piece from The Atlantic, it helps us all understand why another market collapse is inevitable.
For those of you interested in a quick (but hardly complete) review of Partnoy and Eisinger's Atlantic article you can check out this Huffington Post piece. If you're really interested in what's happening click on the links above, or read Ritholtz' (or my) book.
- Mark
UPDATE: Here's a venture capitalist saying pretty pretty much the same thing about our out of control derivative market(s).
This should come as no surprise to those who have read my book, The Myth of the Free Market, or follow what I write here.
Specifically at the beginning of Chapter Twelve I explained how supposedly sophisticated financial players have been in the dark about what the biggest banking and investing institutions have created with debt and other derivative "investment" instruments.
For those of you who don't have the money or time to get my book you're in luck. Last February I posted the discussion from my book on to my blog - "In the I Told You So Department" - where it has become one of my most popular posts (currently #3 in this week's "Hot Posts").
Making the same point that I discuss in my book (and on my blog) is The Atlantic's Frank Partnoy and Jesse Eisinger. In a blistering report on what's on the books of our largest banks - "What's Inside America's Banks?" - Partnoy and Eisinger make it clear that banks are securing a good deal of their income from derivative bets that could bring the whole house of cards down, again.
There's so much more to this story (like the money dumps that keep the whole thing going).
Unfortunately, most of America - and especially those in our Congress - don't have the tools to understand what's happening in our financial markets (still). It's one of the reasons that I'm having my Introduction to American Politics class read Barry Ritholtz's Bailout Nation. Like the Partnoy and Eisinger piece from The Atlantic, it helps us all understand why another market collapse is inevitable.
For those of you interested in a quick (but hardly complete) review of Partnoy and Eisinger's Atlantic article you can check out this Huffington Post piece. If you're really interested in what's happening click on the links above, or read Ritholtz' (or my) book.
- Mark
UPDATE: Here's a venture capitalist saying pretty pretty much the same thing about our out of control derivative market(s).
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