Thursday, November 6, 2008

The Bet That Blew Up Wall Street!... from 60 Minutes

New-age Bucketshops... the Financial Weapons of Mass destruction!

I have to say 60 minutes got it right AGAIN on Sunday night.

A few weeks ago I published a video-blog on "Wall Street's Shadow Market" about the bundling and selling of mortgages and the so-called insurance that was used to assure investors they were safe.

This last Sunday they did a follow-up story titled "The Bet that Blew Up Wall Street". Many of my real estate colleagues, fellow bloggers and customers appreciated the explanations provided. This new peice was on what can best be described as the "side bets" about whether a companies stock price will go up or down, also known as a credit derivative or credit default swap because these bets could be made without actually owning the stock, similar to betting on a football game.

The housing boom and economic downturn that followed has been blamed on just about everyone, from the consumers to those in the real estate and mortgage industries. The shift seems to know be shifting to Congress, Wall Street, the SEC and even former President Bill Clinton for his downsizing of government and goal of expanding home-ownership.

Their is no reason whay a national foreclosure rate of 6% is having such a devastating effect on the economy when 94% of homeowners are making their monthly mortgage payments. The downfall of these large financial institutions was because they made so many side bets they didn't keep track of or save the money for that they had to pay out on the insurance policy (side bets) that had been made on everything from stocks, to mortgage defaults, to the decline of Wall Streets solvency. Just Today CNBC reiterated that out of 80 million mortgages less than 6 million were behind or not paying their mortgage. I know the numbers don't add up but NOT everyone has a mortgage!

So, where did all the money go? ...It was paid out to the super-rich that had made some of these bets and exacerbated the downturn while destroying some of the largest institutions on Wall Street and triggered payoffs that made these bettors "fantastically richer" at the expense of these institutions, their shareholders, and nearly everyone whether they were invested in Wall Street or not. The video below is the single best explanations of where all the money went and why we should have known better. These explanations serve to inform us about what has going on below the surface of Wall Street and the Federal Government and why more government oversight is needed. These side bets effected everything from shareholders to employees of every company that has been adversely affected by the slowing economy, job lay-offs. Yet the speculation continues and is likely the cause of the ballooning and plummeting gas prices. Just today Volkswagen increased by more than $100 per share, up 86% in a single day while at the same time the DOW finished up almost 900 point which was the largest one-day gain in history!
The video below & article on is aptly titled The Bet that Blew Up Wall Street:

See my previous video blog Wall Street's Shadow Market

You can also see my other blog for additional articles Here

Garren Grup, REALTOR®, GRI...

Noteworthy Results in Naples, Bonita Springs, Estero & Fort Myers!

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