Boiler Room: The Official Stock Market Discussion

Futuristic Eskimo

Futuristic Eskimo

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MrSinnister said:
True, but all you're setting up is multiple lines of dominoes flowing through and from the biggest banks. If one fails, because of being market neutral means you gamble on one failing, while countering with one doing well, constantly; then the contagion flows in far more directions and smaller banks can't deleverage that quickly. When they do, they fail more banks and those failures go to a bigger bank quicker.

We've seen how this played out before in 2008, and set up the exact same scenario, hoping banks have learned their lesson this time. 8 years is a long time to cook, and forger things, when you're risky, leveraged, self regulating, salary frozen bit still get bonuses on risky ventures, and profiting both ways. We'll see.
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The single name CDS space is about half as large as it was in 08, so the market isn't nearly as risky as it used to be. A bank selling a CDS will hedge that transaction, no matter the size, to avoid that exposure. The issue is with the counterparty credit risk associated with those transactions. This has been a major focus of risk management recently, so things are trending in the right direction here.

My point is that they aren't anywhere near as risky/leveraged as they were in 08. When you look at a Citigroup for example, before the collapse, they were at something like 30x, while now its more like 10x. If they were as self-regulating and risk-seeking as you are implying, they would have been making much more money in the past 5 years.

That's my take on it anyway. There is a lot of ant-bank sentiment going around, and rightly so, but regulations these days in the US are much tighter.

But yea, if Deutsche went down, things could easily get very ugly. Agreed there. Don't think the Germans would ever let that happen though:yeshrug:
 
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MrSinnister

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You make a good point @Futuristic Eskimo. My point is there's still more derivative action than over 4 times the global GDP. If a big bank failed forst, and all chickens came home to roost at same time, we have NO IDEA how bad it can get and how quickly it can. Also, there were a few riots in European nations, and a lot of fallout pain we didn't have to feel, in 2008. There is no appetite to save the system this time, because we didn't get any opportunity to enjoy their resurgence the last time, while most European nations immediately hit austerity.

All that being said, I hope these self-regulating banks know what they're doing. Being in the market, with options, and seeing their games, I don't think so.
 
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Since Betterment is all etfs, and that's where most of my money is, i thknk im going to eliminate etfs aside from vnq and bnd from my robinhood account and just focus on individual stocks.

Thoughts:patrice:
 
ADevilYouKhow

ADevilYouKhow

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Domingo Halliburton

Domingo Halliburton

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