Dylan Ratigan | Greedy Bastards Favorite Financial Innovation: The Swaps Market (Part - News and Current Events | futures io social day trading
futures io futures trading


Dylan Ratigan | Greedy Bastards Favorite Financial Innovation: The Swaps Market (Part
Updated: Views / Replies:441 / 0
Created: by Quick Summary Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Dylan Ratigan | Greedy Bastards Favorite Financial Innovation: The Swaps Market (Part

  #1 (permalink)
Quick Summary
Dylan Ratigan | Greedy Bastards Favorite Financial Innovation: The Swaps Market (Part

Below is an interview I did this week as part of the Greedy Bastards series with Dylan Ratigan. Enjoy -- Chris

Welcome to another episode of Greedy Bastards Antidote — a podcast series that zeroes in on “Greedy Bastardism” in our country, and highlights the people out there who are finding the “Antidotes.” Dylan will be talking to the heroes and the visionaries out there on the front lines of education, health care, the environment, trade, taxes, finance and government, all of whom are finding solutions to America’s biggest challenges — and doing it creatively and fearlessly.

This week, we’re focusing on the swaps market — not only to learn exactly what credit default swaps are, but why they’re one of the favorite financial products of Greedy Bastards. This is the one market that betrays every fundamental principal of American values — it is not transparent, it does not require collateral if you’re a AAA rated bank, and you can sell insurance globally on credit. This incentivizes clients to buy them by offering lower interest rates (and who doesn’t want that?)

To help define exactly what “swaps” are, we got to talk to someone who knows them inside and out — Christoper Whalen of Institutional Risk Analytics and author of the book Inflated: How Money and Debt Built the American Dream. You can chat with him on Twitter @rcwhalen.

What is a credit default swap? Here’s how Dylan explains it: “The credit default swap literally has that equivalency in which AAA rated financial institutions sell insurance, so to speak, on credit—they allow you to reduce your interest rates, they allow companies and countries and individuals to benefit from, in the short term, reduced borrowing costs because of the insurance that was purchased in the swap, as they like to call it.” These are not transparent, because they are not traded on any public exchange. Lack of transparency means that no one, exactly, knows where the risk is or how much risk there is.

Why do Greedy Bastards love swaps? Dylan explains it this way. “The genius of the Greedy Bastards maneuvering in the swaps market is the following: After collecting the revenue for all the insurance that you’re selling and all the credit and debt of the world—by the way, the more debt there is, the more insurance you can sell—when the insurance claims come from default on that credit, you don’t have to pay a penny because you, my friend, are too big to fail,” says Dylan. “This is a market that has been created to basically protect the profitability of these banks that could be put on exchange but the barrier to doing it is the threat to their profits and the ability to do that is from money and politics.”

What’s an example of how a credit default swap functions? Chris Whalen provides this example:

When JPMorgan does a credit default swap with a customer, they keep the collateral. There is no separate trust company that is part of the exchange that holds all the money the way you do in a good poker game.

So nobody knows if it’s fully collateralized or not because they’re trusting JPMorgan to operate their business in a prudential way. Until we had the minor reforms of Dodd-Frank and the Corrigan Group before that, the dealers weren’t posting any margin with one another. It was all naked. And so the first thing that Corrigan did when he started getting people focused on this was to force the dealers to require minimum margins from one another. That was the problem. The systemic risk was actually among the big dealers. They dealt with that somewhat but look at Dodd-Frank, they didn’t touch the bilateral relationship between the client the dealer bank.

So if I am the customer, and I’m dealing with JPMorgan, I can’t go to any other bank because all these contracts are bespoked, they’re all different. I can’t get another bank to net me out, so that’s the problem. On an exchange, all contracts are fungible—I want to go long, I want to go short, whatever it is, I do my trade, I don’t even know who the other counterparty is because I’m dealing with the exchange.

Swaps were just a new way for banks to generate income, even as they became less and less relevant: “As the U.S. economy and especially Wall Street and the banks were less and less focused on funding and financing real economic activity jobs, factories, commerce, the rise of the ersatz virtual world of credit faults swaps and over-the-counter derivatives, all of these gray markets—that are unregulated, that are not traded on exchanges, that have no transparency—were really a way for banks to generate income because they could no longer make their money on the real economy,” says Chris. “And the Fed encouraged this. If you go back to the ‘80s, the LDC debt crises when a lot of the big U.S. banks like Citi almost failed, they realized that between technology, innovation, deregulation of markets, the profitability of the old banking business, at least as far as big banks were concerned, was ebbing. So the solution, if you will, was for the Fed to encourage things like Basel II, this whole global regulatory mirage that we have, and at the same time they said, “Oh, it’s okay for you to create off balance sheet entities, it is okay for you to trade these derivatives that are not at all regulated or subject to disclosure,” and the banks have done exactly that,” he explains.

What is the “Antidote” to this form of Greedy Bastardism? You want to have an exchange traded product, you want to have full public disclosure of all trading every day so we can see all prices for all trades, and you want to require physical delivery of the underlying asset,” says Chris. “In other words, you own a bond, a loan, it could be commercial paper, even a vendor. Let’s say you are big vendor and you have credit exposure with a bank and you want to hedge it. That would be okay, you could deliver the accounts receivable for your insurance payment. That’s what we need. It’s to re-link this derivative market with the real world. And then we’ve got something,” he explains.

For the full conversation, check out the transcript below:

http://www.dylanratigan.com/2011/12/05/greedy-bastards-favorite-financial-innovation-the-swaps-market/

- Meg Robertson is a digital producer for DylanRatigan.com.





More on ZeroHedge...

Reply to share your thoughts on this current event.


Reply



futures io > > > > Dylan Ratigan | Greedy Bastards Favorite Financial Innovation: The Swaps Market (Part

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Market psychology - part 2 gain247 Psychology and Money Management 2 October 27th, 2011 12:02 PM
Webinar: Market Profile Part II fiki The Elite Circle 54 September 26th, 2011 03:17 AM
Market Profile Webinar Part 3? philipp Traders Hideout 3 September 5th, 2011 04:04 PM
US Futures Regulator Begins Overhaul of Swaps Market Quick Summary News and Current Events 0 October 1st, 2010 05:20 AM
BMT Webinar: Market Profile Part I Big Mike The Elite Circle 134 April 18th, 2010 05:24 PM


All times are GMT -4. The time now is 05:16 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-13 in 0.06 seconds with 19 queries on phoenix via your IP 54.92.194.75