Investment Banking Explained

[El Cajone]

Young Chuck moved to Texas and bought a donkey from a farmer for $100.

The farmer agreed to deliver the donkey the next day.

The next day the farmer drove up and said, 'Sorry Chuck, but I have some bad news, the donkey died.'

Chuck replied, 'Well, then just give me my money back.'

The farmer said, 'Can't do that. I went and spent it already.'

Chuck said, 'OK, then, just bring me the dead donkey.'

The farmer asked, 'Whatcha gonna do with a dead donkey?

Chuck said, 'I'm going to raffle him off.'

The farmer said 'You can't raffle off a dead donkey!'

Chuck said, 'Sure I can. I just won't tell anybody he's dead.'

A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.'

The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck now works for AIG where he's about to get a huge bonus!

 

[Flere-Imsaho]

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.'
The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck now works for AIG where he's about to get a huge bonus!

LOL.

This reminds me of one of the Dutch broadcast network.

If there is a movie then in the commercial break the network asks you some trivial multiple-choice question on the movie in which you are invited so SMS you answer to them, and if you have the answer correct than you can win some price.

I think they make a huge profit in this. Their airtime is at cost, they get a load of SMS in which they profit on the telecom cost and then they have to give away some dumb price.

- Flere.

 

[gregory]

Once upon a time a man appeared in a village and announced to the villagers that he would buy monkeys for $10 each.

The villagers, seeing that there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort. He next announced that he would now buy monkeys at $20 each. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so scarce it was an effort to even find a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50 each! However, since he had to go to the city on some business, his assistant would buy on his behalf.

In the absence of the man, the assistant told the villagers: " Look at all these monkeys in the big cage that the man has already collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."

The villagers rounded up all their savings and bought all the monkeys for 700 billion dollars.

They never saw the man or his assistant again, only lots and lots of monkeys!

Now you have a better understanding of how the WALL STREET BAILOUT PLAN WILL WORK!

 

[Rolavine]

I'm not an economist but the reality of the situation that has created this recession is far funnier than most humor about it.

You see, after 9/11 the fed lowered interest rates to lower than the rate of inflation.

The money that would normally go into these T bills started looking for another safe return.

Some of the low interest money from the fed went to the banks who said 'we need someplace safe to put this stuff and make something on it'.

So all that money started to go to housing and real estate because after all that is a safe investment?

It took no time at all to loan this money to legitmate parties, however there was still capacity.

So they started lending to risks and making an empire of people getting rich on writing and packaging paper.

They bundled these mortages into large securities.

These got good ratings from the agencies because of bribes and manipulations of that system.

Still the money was resistant, so they came up with insurance for these bonds called credit default swaps (CDRs).

The Government went along with these CDRs requiring no set asides or provisions for paying based on the argument that the risks would

be knitted into a huge number of financial institutions, so in the event they had to be paid, money would just move around and in the end

the players would be in about the same provision as they were at the start.

The junk bonds sold with the CDR's.

So other parties said, 'say can be just buy CDRs without actually holding the bonds'.

And they said sure, and sold more CDRs, so the bond market was actually insured for about 6 times what it was actually worth!

And everything went fine except that housing became unaffordable as this manipulated market went nuts with all players having a

vested interest in buying and selling, and the middle class said 'how wealthty am I', but this was BS wealth as these poor bastards still

needed someplace to live.

And then the manipulated, overpriced crap hit the fan and Lehman Brothers fell, and AIG was dumb enough to be holding lots of Lehman CDRs

(yes this is the basis for that big bonus we just paid, aren't we clever we made AIG lots of money by not knitting!).

And then the govt had to act, why?, because if not these CDRs would completly destroy the economy for the next ten thousand years (ok I might be

slightly over the top here by a few months).

The best joke is about Hank Paluson who was Bush's last treasury secretary.

Hank came out of Goldman where as CEO he produced the worst of all of these bonds, based on risky 2nd mortages, you know that extra loan they

were giving to minimum wage earners so they could borrow the 20% in order to get the 80% loan, in order to move in to the $500,000 house?

Hank left Goldman in late 2006 when the handwriting was on the wall to take up position as a 'public servant'.

Of course because he had to divest himself from Goldman he was allowed to take out his 600 million bucks without paying any taxes at all!

And then as Treasury SEC he was given the first 350 billion of the bailout money to prop up the economy as he saw fit.

And he put about half of it into AIG.

I don't see how any joke could come close to this level of hubris, irresponsibilty, or absurdity.

Oh, except maybe the one about how none of these 'movers and shakers' are under arrest, that is pretty funny.