Sunday, October 16, 2011

Derivative hysteria!

A Texas out fit made out like bandits buying all the derivatives on certain mortgages that were not performing and they would then have to pay massive amounts to the lenders. Except that they also paid off the mortgages!!!!!

Derivatives are a way of expanding the amounts that can be bet and still call it finance, investment and get some sucker to lend money on it.

There are ways of making and losing money and these merely expanded the market. Many will net off and many winners will find the paper linked to a bankrupt entity! This is where the big boys find out that they have been suckered, big time!

Some pension funds may find out their investments might have been better off on a horse, any horse! At least they would have stood a chance of a payoff!

1 comment:

Anon said...

Very useful explanation.

- Aangirfan