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Am I wrong?
This seems to be a perfectly reasonable use of derivatives - as a mitigation of short-term risk... That happened to fall apart, because the Fed stepped in, as an 'irrational' market actor.
Is anyone of the impression that houses should NOT be purchased by companies like Zillow, Redfin, and Berkshire Hathaway? After 2008, if the government had allowed the housing market to actually be a market, then we wouldn’t have the housing crisis of today. Instead, corporations with access to cheap money, spent billions to buy distressed houses on the cheap, and held it for a few years, until it became extra profit…
How is this not a market? If the market were "more free", the same issue would have still arisen, namely:
> corporations with access to cheap money, spent billions to buy distressed houses on the cheap
I have read this article five times, and I have come to the conclusion that I'm either an idiot, or there doesn't seem to be any impropriety on the side of the Fed, nor the mortgage holders. Am I wrong? This seems to be a perfectly reasonable use of derivatives - as a mitigation of short-term risk... That happened to fall apart, because the Fed stepped in, as an 'irrational' market actor.
Earlier quoted context omitted.
Well, we didn't actually have the collapse in 2008. It all got propped up in the vain hope that the banking sector would stop doing stupid risky things. Now we have the same choice. We can prop it all up again, in the vague hope that bankers will change their behaviour. Or we can let Wall St go to the wall. If we do prop it up, we have to know that we'll need to do that again in another 10 years, and again after that…
The only thing that would change the status quo would be personal responsibility to the criminals in charge, the actual persons, not a vague concept of "system". Those that rigged the game, that live luxurious lives beyond our dreams off bailouts that we paid in a crisis that caused suffering to billions of people. If those responsible got life sentences en masse for their crimes which probably killed far more people…
It's there for a reason, the same reason it's not stopping.
Unless there is a chance to beleive in representatives to truely represent the population, it's a dead game.
We will slowly turn to cryptocurencies and detach ourself from this non sense system of taxation and fiat decisions that are totally out of our control.
I have read this article five times, and I have come to the conclusion that I'm either an idiot, or there doesn't seem to be any impropriety on the side of the Fed, nor the mortgage holders. Am I wrong? This seems to be a perfectly reasonable use of derivatives - as a mitigation of short-term risk... That happened to fall apart, because the Fed stepped in, as an 'irrational' market actor.
I thought the article's point is that ordinarily lenders only hedge for short periods of time, but that because of the virus they are not closing the loans and the hedges are hanging out there. Am I wrong?
It's like an oil company shorting oil, to hedge the risk of the market moving against them, before they can sell their inventory.
The problem is that the fed is now buying every asset under the sun, and instead of their loan and their short being inversely correlated, they are now uncorrelated, which is killing them.
The equivalent would be the oil company's oil dropping in price... While the price of oil increases, this killing their short. This doesn't really happen in properly functioning markets, but markets currently have huge liquidity problems.
At least, that's what it sounds like.
Is anyone of the impression that houses should NOT be purchased by companies like Zillow, Redfin, and Berkshire Hathaway? After 2008, if the government had allowed the housing market to actually be a market, then we wouldn’t have the housing crisis of today. Instead, corporations with access to cheap money, spent billions to buy distressed houses on the cheap, and held it for a few years, until it became extra profit…
That is a market. What might improve matters for actual humans is a non-market solution of some kind of rationing. Max 1 per customer, locals preferred.
Except that the average person doesn't have the same access to financing as some minority of well connected entities to financing bodies. Access to cheap or even free lending. The fed prints more money than the economy actually creates.
It's a rigged market. That's why it doesn't work. Limiting properties would attenuate the problem, but it's just a bandade solution, and a few will again find loopholes to benefit.
Earlier quoted context omitted.
That is a market. What might improve matters for actual humans is a non-market solution of some kind of rationing. Max 1 per customer, locals preferred.
I think the market would be totally fine as is. Except that the average person doesn't have the same access to financing as some minority of well connected entities to financing bodies. Access to cheap or even free lending. The fed prints more money than the economy actually creates. It's a rigged market. That's why it doesn't work. Limiting properties would attenuate the problem, but it's just a bandade solution, an…
That's .. also a market. The institutions have substantially greater ability to pay back, and in the case of banks, capital requirements that reduce their credit risk. They don't have the same loss of income risks as a human. Nobody should expect a market to produce a fair outcome from an uneven initial distribution.
Is there any evidence that access to Fed capital is controlled by political connections on an institution by institution basis?
[0] https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...
Brokers hedged their position to reduce the risk of rate rises, and when the Fed came in and helped them out, they're now complaining they can't also claim from the hedge. That's like blaming firemen for putting out your house fire because you now can't claim as much from your insurance.
And some Brokers over-hedged. That's speculation and that's exactly what unsophisticated, under capitalized, unregulated (for this purpose) retail brokers are explicitly banned from doing. So again, what the fuck? They should get margin called all the way to bankruptcy!?
There are a long list of laws dating back centuries about not being able to insure property for more than it's worth. And that's what over hedging is in this case: betting against the very product you create. It needs to be banned. The people doing it need to be prosecuted, not offered sympathy.
Sure, why not, let's have the unemployment of 1929, the pandemic of 1918, and the collapse of an unsound financial sector à la 2008. It'll be swell.
Well, we didn't actually have the collapse in 2008. It all got propped up in the vain hope that the banking sector would stop doing stupid risky things. Now we have the same choice. We can prop it all up again, in the vague hope that bankers will change their behaviour. Or we can let Wall St go to the wall. If we do prop it up, we have to know that we'll need to do that again in another 10 years, and again after that…