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Kasz216 on 17 December 2010
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richardhutnik said:
Kasz216 said:
richardhutnik said:
Kasz216 said:
ChichiriMuyo said:
Kasz216 said:

Heck, even if people know what the actual value of something is, they will STILL end up getting killed in a bubble.  See this episode from Nova "Mind over Money" on an experiment ran where people trade a stock on a fictional market that would go bankrupt in the end, and whose value continued to drop.  Well, it showed over and over, that there was a bubble.  The market had traders playing chicken with one another (it is in the end of the video, chapter 8):

http://video.pbs.org/video/1479100777/


Because there was VERY little risk of it happening.

If Calros Slim comes up to you and says "I have a contract here... if you pull out a coin and flip heads 20 times in a row you owe me 1 Trillion dollars.

If tails comes out just once... you get 1 Trillion dollars.

Who in their right mind is going to say no to that proposition?  It isn't greed that makes you do that... but common sense.

If you have a business, where employees, stockholders, investors, and people who save money at your institution (say a bank) and a single event could wipe you out, do you have it so you have no reserves to count on this?   

Getting hit with a meteor is a very little risk of happening.  Are you telling me that what happened with the financial meltdown was very rare, and that if you did the exact same things, with little oversight, bad quantitivative analysis resulting in flawed mathematical models, and misvaluation of risk, would most likely NOT happen again?

Watch the video, the last part.  What is seen there is bubbles continue to happen, and ruin a lot of people in the process.  It is built into markets.  If that is the case, then how is seen as "very little risk"?  The point is that there IS risk.  Do you think causing people who have their life saving somewhere, that is promised to be secure, losing everything, is a good thing?  If it happens to a large percentage of the population, then what?

The green factor here is going for a TRILLION dollars.  Do you need a TRILLION dollars?  Say the proposition was that you put up $10 in the same thing, if it doesn't happen, and then get a MILLION dollars if it works out.  Would that be greed?  How about $1000 and a BILLION.  If the $1000 would break a person if they lost it, why would that not be greed?

Another thing, in regards to reality, the way things are, you don't know the odds at all.  There isn't the pure coin flip.  There is odds that change and you don't know what they are.  In regards to Carlos Slim, that would be a bad bet, because he doesn't have a trillion dollars.  He couldn't pay.  I know in my case, I lost my 401K going for such a bet.  That was greed on my part. 


Do I need a trillion dollars?  No, does a company that employs that many people?   Yes.  Why would I keep doing this?  Because at the end of the day I'll be out ahead.

This would of never happened, so long as there wasn't a worldwide government bubble that popped at the same time.  Which there wouldn't of been without government prodding, heck even with the prodding the fact that it all happened at once was extremely unlikely.

Ask someone 5 years ago if the housing market could be down in every sector of the US at once, and any expert will tell you no. 

 

At the end of the day, even after the crash... the economy is ahead of where it was without derivitives