Leveraging toward the exit

Moral: Wherein we report that leveraging is on the increase and that the WSJ says that Ben is mapping out his long overdue exit.

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• Leveraging? Yes, it's like looking for perpetual motion, from a finance sense. "Something from nothing" is another way to characterize this. Actually, there is a better way. If you gambled with your lunch money, and lost, what would you eat? Of course, you could double your money. But, if you lost, would you go steal from some other person, would you beg for someone to share their lunch, or do any of the number of things that are not very much flattering to your person? What does this have to do with leveraging? Well, one lesson, supposedly, from the big crash of the 1920/30s, was to not let people borrow money in order to buy stock. Somehow we lost that. Why (about hedge funds, below)? Margin operations are of the same ilk (the nose knows) even if the big boys do this on a regular basis (did we not have to bail out the idiots?).
• Exiting? Yes, taking off the training wheels, finally or at last (when?, we don't know -- see about the tease, below). But, we have asked Ben to do this (unwind) many times; he does not know about savers (see Slaps in the face), evidently.

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The chart has been published before. This recent one (Note: I had to scan in the paper version) was in the WSJ, recently. Note that peaks in the margin curve seem to go along with market peaks.

WSJ 05/10/2013

Aside: Before someone raises the idiocy of causal connections, please consider that, as in any modern analysis, we are looking for things that relate. Trying to go toward "cause-effect" is error-ful, many times. You will not find such searches here.

So, what we see, based upon these three drops that ought to be vivid in everyone's minds, is that the market peaks get (post note on 5/14/2013 -- notice, if you would, that I didn't use "cause") ordinary people to do stupid things. You see, the graph does not show what the big guys are doing (as in, those whose pockets fill no matter which way things go -- and, as we've seen, those to whom the government loves to push out big bucks).

Again, these peaks show the euphoric glow that goes along with what the media has been saying (and say every time there's a peak) as they go gaga about the 15K DOW (Chimera, remember?). Yes, DOW 25K is imminent? Now the behavior that we're talking here does occur with the big guys, but they do it all the time (the lesson, hedge funds are for the rich; ponzis are for the poor).

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WSJ on-line 05/11/2013

This image is from the on-line version of the WSJ (wsj.com) and requires a subscription to be read. Now, only seeing a few words can be like a tease. But, Ben's little group even thinking of this means something. However, they have been discussing this for a long time (just not so that we can see, okay?).

Why can't they see that they're stifling adulthood with their continued emphasis that we need training wheels? At the same time, why do they keep trashing the lives of people like the retirees?

Ben's focus on the risky types of financials is troublesome. I can show him lots of alternatives.

Aside: Too, I'll show him that we ought to have a sandbox for those boys (and girls) who want to play risky. Have fun, people, in your little playground. Leave the world to the adults (by the way, whom are these?).

I wonder what side of Ben's mouth comes this; he has stressed many times that the training wheels will stay on until he says to take them off (until hell freezes over, it seems to the savers). He got his 15K DOW. What else does he need?

Remarks:

06/22/2013 -- So, how many traded their paper gain (chimera) to solid debt with the downturn? Okay, forget the size of the loser set, how much went from illusory gain (backed by a promise to pay later) to real debt that has to be paid with blood and guts? Wait! Some of those doing the margin calls, and ilk, have some way to weasel (not disparaging the grand animal) out, not doubt.

06/11/2013 -- CDOs and tranching, once again.

05/22/2013 -- Need to look at the cosmology of business (Remarks this day).

05/14/2013 -- All of the talking heads as saying to get into the market (as in, equity). Oh yes. It's that a sign, to boot, of approaching peaks. My response? Please, let Ben give savers, and those who would prefer a small, steady gain, a better interest rate. What he is doing is wrong on so many counts, as the future will tell us. Meanwhile, though, we doddering, older folks will have to bear up with those idiots.

05/11/2013 -- One type of leverage was the idiocy called the tranche. There are many others. Like said before, leveraging, in and of itself, is not bad. Think of it this way: many times, a leverage (multiplied even) is smart work (all sorts of examples). In finance, leveraging has no real basis, hence it de-evolves to froth (Minsky's work). In terms of JERKS (as in, higher-order derivatives but applicable to those who run after pretty balloons), there are all sorts of conditions required to support the higher-order. Finance is bonkers from the get-go. Why? It descends real quick to dealing with the more base aspects of people (and, I'm not talking greed, necessarily). Ah, the computer has us screwed when the idiots think that they look like geniuses just because they can form nicely hone graphics based upon an interminable set of numbers (not necessarily sufficient to support the higher-order). One guy wrote out names, and means, from an advanced statistical book and said: knowing this makes me smart enough to not make mistakes (ah, remember the risk handlers? -- think back to 2007 and before - if you don't remember, don't worry, as we can survey/analyze that realm in depth ex post facto).

Modified: 06/22/2013