It has EVERYTHING to do with credit vis a vis margins. So until you trade without margin I'd keep my lips sealed when criticizing other borrowers who employ leverage.
Actually, this is not necessarily true. The best example you can point to is the Tulip bubble, which when researched, had derivatives & options at the core of the issue, which exacerbated the greed mania. Another issue is that rarely does any book or account on it point to what happened to the wealth that changed hands. It did not just dissapear. Who left the country with it? That's where the really interesting details lie. Booms & bust, especially on a local level have happened for thousands of years. The history of the term "money changers" is something always worth researching. Those are the pre-cursors to the central bank concept. Uhm what? I never said nor will I ever say that. Margins were being contracted by the elite players at the same time, which started the collapse. Also, money supply charts speak volumes of how credit expansion & contraction does the trick. When it comes to 10% stock margins, the real question is why would brokerages offer such margins to just about anyone. Do you, at all, understand Level III assets and how they were used to make more leverage available? Re-read my post. Then try to understand exactly why giving out mortgages that would never be repaid was so profitable. Speculative buying was all over the nation, leaving out long degenerated areas like Detroit, Buffalo, Pittsburgs alone. But it is far from just Florida & Vegas, as much as you choose to believe otherwise. Frankly, it's obvious. You just don't get it. You do not even try to understand. I tried to give a summary of how the scheme worked. I thought it was simple enough. Does it get more complicated? Yes, because the structuring of AAA paper required cooperation from rating agencies, appraisers, realtors and mortgage brokers. But the scheme at the core is the same exact thing it has been for thousands of years. There is another way to try to open up your eyes. There was an article, relatively ignored by mass media (for good reasons), where an ex Wamu loan officer discussed a situation where he was instructed to approve loans that were an obvious default waiting to happen. Hmmm. Reminds me of the tech bubble where analysts were taking companies IPO that were an obvious bankruptcy case within 12 months. If they voiced their concerns, the MDs would just tell them to not worry about it. Now let's look at the current executives being labeled as incompetent & stupid & clueless. Why is it that they are walking away with millions upon millions while the nation is impoverished? Is it really just "faulty, misguided optimism in performance"? Or is it nothing more than a scam? I think it just depends on whether you want to see the truth or keep deluding yourself.
There is a big difference between having a margin account that will be liquidated by my broker before i go in the red. Then a household with 60,000 per annual income gets a loan for a 750,000 for a house, they have no hope of staying above water Don't you agree
Sure I agree but you were earlier making the point that cheap money fuels booms. Of course it does. What makes you think that low margin index futures weren't contributory to Dow 14,000? S&P futures came in 1982 and the market broke out for good just months later. Futures margins have been contributory to this mess-these "Level lll" assets that Anaconda wants to blame are most often spread against low margin ZN hence the why behind 40-1 leverage-don't kid yourself that leftest policy makers won't be targeting futures margins as a blame for volatility.
When I hear code words like "schemes" and "they" I lose interest. Any derivitive instrument can be invented but it takes investors to subscribe it. And those investment decisions are predicated by reasons far, far, far more complex than "the greedy banker made me do it".......
Are you fucking kidding me? Do yourself a favor and educate yourself, because you look like a fool right now. When you read mainstream financial publications, try not to ignore the commentary & articles which discuss how S&P and Moody's gave AAA ratings to "new" mortgage investment products which were pretty much guaranteed to default. The more you try to debate this, the more you show that you did not do your research behind what happened. I know people at the rating agencies who watched their bosses & higher ups push this nonsense with full knowledge. I know the bankers, appraisers & mortgage brokers who were in the middle of this mess. I've read the CDO documents that showed how they were structured. So maybe you need to get off your high horse and try to learn something, because from what I see, you don't know jack sh*t about this topic, as you continue showing. Seriously, you just don't get it, nor do you want to. You're living in denial, so whatever, enjoy the surprises over the next few years.
Except for trading Treasury futures since 1983 for both myself and for what was then the biggest bank in the world I don't know anything about institutional fixed income trading. It's not the duty of rating agencies to predict what segments of the economy will default down the line. They deal with facts in hand not speculation. Even if they did know the future and assigned a lower rating to crap-the crap would still find buyers who'd use the rationale "housing remains firm and these securities are 350bp over the Ten-Year. Let's load up." The same way buyers bought C and BAC and GM and GE the entire way down. The VIX is a rating agency of sorts on the index, eh? Was the VIX trading 70 when SPX was on the highs? More like 9. So in your view options traders were duping the investing public on risk premiums too......
You have a lot to learn. You do not even understand how ratings agencies function and their role in the industry. Comparing the VIX to credit ratings, just wow. What are you smoking? Do you even know that the pension & sovereign funds which bought the worthless paper cannot buy anything not rated A or above? Obviously not. It's amazing, truly amazing how in denial so many people are. I just give up. Good luck with the next few years, not that it will help you considering how clueless you choose to be.