CSNbbs

Subject: Derivative Markets 101


Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such,can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities
are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the federal government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now do you understand?

(06-11-2009 06:21 AM)oldmangrizz Wrote: [ -> ]Subject: Derivative Markets 101


Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such,can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities
are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the federal government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now do you understand?

This is a great explanation of the deriative markets for sub-prime mortgage loans. I wish the government would explain this in plain English is what happened when Countrywide, Citibank, Fannie Mae and the numerous other banks did their transactions. More transparancy in the financial markets, and less accounting and legal terminology in their financial statements would help explain it better, although I wonder how much do the investors reading it look it over too closely.

(06-11-2009 06:21 AM)oldmangrizz Wrote: [ -> ]Subject: Derivative Markets 101


Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such,can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities
are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the federal government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now do you understand?

That is a fantastic explanation. Good job! I already understood it due to my husband being a financial guy but this was a very concise picture of what has gone on in the financial markets. Thanks!!!!

Oldmangrizz I'm a little disappointed that you didn't have any sex or naked women in this article. You're slipping man. Get your sH!t together . Next time I'm reporting you the board of directors of the PF.

Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I understood all this several years ago. To this day I still think Fannie, Freddie, HUD, and all FHLBanks rest should not have been bailed out and let the chips fall where they may.

Oh, I believe the federal gov owes me a chevy too....and that mess isn't just a union problem.
Full disclosure- I did buy GM on 06/02/09 and sold it on 06/09/09.
Ya got to do what ya got to do.
Just saying.........

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

(06-11-2009 09:03 AM)TigerRichard Wrote: [ -> ]Oldmangrizz I'm a little disappointed that you didn't have any sex or naked women in this article. You're slipping man. Get your sH!t together . Next time I'm reporting you the board of directors of the PF.

I forgot to add that it was a topless bar in the airport area.

The name Ruby Begonia do ring a bell though.

(06-11-2009 12:31 PM)KRB Wrote: [ -> ]The name Ruby Begonia do ring a bell though.

Overton Square Area

Odd pets. Snakes, birds, fish. They had a huge boa in the window pretty cool to be there during feeding time.
White rabbits disappeared so quick it was like magic!

(06-11-2009 11:18 AM)oldmangrizz Wrote: [ -> ]

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

Yeah, I suppose that I could blame it on my English teachers, but I feel obligated to point out this stuff. You had a minor gaffe. The newspapers these days (especially the CA) have numerous mistakes in spelling, grammar, etc. and I feel just as responsible to call their hand on it.

(06-11-2009 01:12 PM)TigerRichard Wrote: [ -> ]

(06-11-2009 12:31 PM)KRB Wrote: [ -> ]The name Ruby Begonia do ring a bell though.

Overton Square Area

Odd pets. Snakes, birds, fish. They had a huge boa in the window pretty cool to be there during feeding time.
White rabbits disappeared so quick it was like magic!

Actually , I was thinking about the old Amos and Andy show. but any Ruby Begonia will do. Cause Sapphire her momma be out there.

(06-11-2009 01:17 PM)covingtontiger Wrote: [ -> ]

(06-11-2009 11:18 AM)oldmangrizz Wrote: [ -> ]

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

Yeah, I suppose that I could blame it on my English teachers, but I feel obligated to point out this stuff. You had a minor gaffe. The newspapers these days (especially the CA) have numerous mistakes in spelling, grammar, etc. and I feel just as responsible to call their hand on it.

I have that compulsion, too. It's probably because I scored 300 points lower on my math SAT portion than my English, which I blew the roof off of. (Never end a sentence with a preposition.) In other words, I can't add two and two.
There is no excuse for the CA. Your mother gets a free pass, bless her heart.

I had forgotten Ruby Begonia was in Amos and Andy. Let's take a roll call. Who watched Amos and Andy?

(06-11-2009 01:17 PM)covingtontiger Wrote: [ -> ]

(06-11-2009 11:18 AM)oldmangrizz Wrote: [ -> ]

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

Yeah, I suppose that I could blame it on my English teachers, but I feel obligated to point out this stuff. You had a minor gaffe. The newspapers these days (especially the CA) have numerous mistakes in spelling, grammar, etc. and I feel just as responsible to call their hand on it.

I can't help myself. That kind of stuff bugs me all the time. I see typos in the newspaper and even in the local TV news and it drives me up the wall. One of my big pet peeves: "Premier" instead of "Premiere" when a television show is going to debut. I was watching the MLB channel earlier in the week and there in an animated graphic that looked like a million bucks was the phrase "Inside Pitch: Series Premier Thursday at 8PM". ARRRRGGHH!

(06-11-2009 06:50 PM)alterego2 Wrote: [ -> ]

(06-11-2009 01:17 PM)covingtontiger Wrote: [ -> ]

(06-11-2009 11:18 AM)oldmangrizz Wrote: [ -> ]

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

Yeah, I suppose that I could blame it on my English teachers, but I feel obligated to point out this stuff. You had a minor gaffe. The newspapers these days (especially the CA) have numerous mistakes in spelling, grammar, etc. and I feel just as responsible to call their hand on it.

I have that compulsion, too. It's probably because I scored 300 points lower on my math SAT portion than my English, which I blew the roof off of. (Never end a sentence with a preposition.) In other words, I can't add two and two.
There is no excuse for the CA. Your mother gets a free pass, bless her heart.

I had forgotten Ruby Begonia was in Amos and Andy. Let's take a roll call. Who watched Amos and Andy?

Da Kingfish did.

(06-11-2009 06:21 AM)oldmangrizz Wrote: [ -> ]Subject: Derivative Markets 101


Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such,can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities
are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the federal government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now do you understand?

Heidi did not come up with this marketing plan on her own. She was forced into it by laws passed by the government "encouraging" her to serve unemployed drinkers and making it easy for the local community activist organization to go into her bar and disrupt her business if she did not increase her percentage of business to unemployed drinkers.

(06-12-2009 08:17 AM)SouthavenTiger Wrote: [ -> ]

(06-11-2009 06:50 PM)alterego2 Wrote: [ -> ]

(06-11-2009 01:17 PM)covingtontiger Wrote: [ -> ]

(06-11-2009 11:18 AM)oldmangrizz Wrote: [ -> ]

(06-11-2009 10:57 AM)HHammerhead Wrote: [ -> ]

(06-11-2009 09:56 AM)covingtontiger Wrote: [ -> ]Do this get your attention?

Reminds me of the line from the Amos and Andy show:
"Do the name Ruby Begonia strike a familiar note?".

I think you meant to say "Does".

I thought the same thing. The bad grammar in the header got my attention.

I didn't understand the explanation. I just copied it from an email my 87 year old mother sent me. I put the subject line in on purpose as written just to see who would be the first prichard to call me out on my grammar.

Yeah, I suppose that I could blame it on my English teachers, but I feel obligated to point out this stuff. You had a minor gaffe. The newspapers these days (especially the CA) have numerous mistakes in spelling, grammar, etc. and I feel just as responsible to call their hand on it.

I have that compulsion, too. It's probably because I scored 300 points lower on my math SAT portion than my English, which I blew the roof off of. (Never end a sentence with a preposition.) In other words, I can't add two and two.
There is no excuse for the CA. Your mother gets a free pass, bless her heart.

I had forgotten Ruby Begonia was in Amos and Andy. Let's take a roll call. Who watched Amos and Andy?

Da Kingfish did.

Ruby Begonia in Homewood, Alabama