Why are poker players so feted?

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LeTiss
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Well for starters BF are just using this as exposure. This will help increase the profile of their own Poker section, which is possibly faltering

Also, Poker has a TV audience, and it often makes for compelling viewing. Traders just sit in front of screens manipulating figures.

Perhaps someone should run a TV show, where professional traders sit around a table with their own screen. All of them start with £1000 and the winner is the one with most money after a 2 hour period of trading. Ultimately, the guys in the TV gantry could run a commentary as traders pinch money or prices from each other.

Until that happens, I think trading will be deemed geekish, lonely and a bit underhand
74.5
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to75ne wrote:
Ferru123 wrote:Someone with intellectual curiosity might enquire as to the difference between a sports trader and a financial trader. But IMHO, many people will hear the word 'trader', and the mental shutters will come down...

Jeff
excellent, reckon your bang on with that. as i said earlier perception would seem to be everything.
As far as I can determine and IMHO,the financial woes of the world weren't caused by financial traders.They just did they were told and traded.It was the fault of the greedy bast**d bankers that created the toxic financial instruments in the first place.They must have had the intelligence to understand that they were toxic,surely?If so,why create them in the first place?If they didn't have the intelligence,why the hell were they working in banking?

A more important question is: having created these toxic financial instruments,why were people falling over themselves to buy them?Didn't they realise that they were toxic?What were they doing with their brains at the time?

Another important question:At the time that these toxic financial instruments were being created the likes of Gordon Brown and Alan Greenspan (Head of the US Federal Reserve) were running things.Why didn't they regulate them?They had the powers.Where the hell were they and what the hell were they doing?

It beggars belief that Gordon Brown thought that he was a fit person to run the IMF.Who's was he kidding?No more BOOM AND BUST?The idiot presided over the biggest boom and bust in the history of the world.It was his so called 'light touch' on the City of London that contributed to all this.Idiot.
74.5
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to75ne
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74.5
i agree that financial traders had little to do with the mess the world finds itself in. in that they just buy and sell on behalf off others, they don't create the "products/assets/instruments they trade", they trade what is there to be traded. but they are a very important part of the financial sector, and hence tarred with the same brush. i did hint at this in an earlier post.
to75ne wrote: could say the same for poker players, but not financial traders. being a big part of the financial sector rightly or wrongly they have got the image that, that sector as a whole as earnt for itself.
I too believe it was created by greedy bankers, whether or not they had the intelligence to understand they were toxic or likely to become toxic is in my opinion irrelevant. They knew that no matter what they will always come out on top, they have no morals or scruples. Their sole purpose is the desire for more power and wealth. Greed for the sake of greed.

As for politicians at best they are short sighted and dumb, at worst short sighted, dumb, and in the pockets either directly or indirectly or other interests. It would be very alluring to people like bush, brown, blair. To have been convinced that the clever greedy people have created a way of making perpetual profits, no more boom and bust, forever a tap of flowing cash to pay for their wars, social policies etc. if its impossible for the tax stream that the city was producing to dry up, it would probably get bigger as the city made profit, then as some point in the future we will be able to sort out our national deficits.

I doubt if many financial traders believed boom and bust was done forever.
Iron
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I'm not sure derivatives were the cause of the financial crisis at all. My understanding is that the toxic debt derivatives were basically insurance policies. If those insurance policies hadn't been taken out, someone would still have had to pick up the tab when mortgages lent to people with little income weren't repaid, and the housing market had fallen to the extent that the banks were guaranteed a haircut when they foreclosed.

It's easy for people to point the finger of blame at the banks, but it takes too to tango, and people who bought houses they couldn't afford (possibly lying on their mortgage application form) are also to blame...

IMHO, what happened was a classic bubble - when people felt that economy was on a sustained upward trajectory, much of the public and the government both went crazy with their spending, aided and abetted by the banks, under the assumption that the boom would last forever...

Jeff
74.5
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Ferru123 wrote:I'm not sure derivatives were the cause of the financial crisis at all. My understanding is that the toxic debt derivatives were basically insurance policies. If those insurance policies hadn't been taken out, someone would still have had to pick up the tab when mortgages lent to people with little income weren't repaid, and the housing market had fallen to the extent that the banks were guaranteed a haircut when they foreclosed.Jeff
Ignoring the Sovereign debt issue caused by over-spending Governments,there were two types of toxic financial instruments: CDOs (Collateralized Debt Obligations) & CDSs (Credit Default Swaps).Each CDO contains hundred and sometimes thousands of mortgages,a proportion of which are sub-prime.Some even contain other collateralized assets.A CDO could cost millions or even billions of dollars.To finance their purchase,individuals/companies borrowed short-term money(3months).At the end of the 3-month period,the loan was simply extended through a revolving RCN(Revolving Credit Note).The cost of borrowing short-term money is cheap compared with the interest expected from the CDO.This difference in interest rates creates profit for the CDO purchaser provided people keep up their mortgage payments.When the credit crunch hit,CDO purchasers found it difficult to renew their RCNs.

CDSs are derivatives.They are 'insurance policies'. They have been around for decades.In the early part of this millennium,they were small beer in that the value in circulation was low - so low in fact that they were totally unregulated.A CDS transfers the credit exposure of a CDO between parties.The buyer of a CDS receives credit protection in the event of a CDO failure from the seller of the CDS. By doing this, the risk of default is transferred from the CDO holder to the CDS seller. With the explosion in CDOs,the number and value of CDSs also exploded and caught the financial regulation authorities off-guard.Because of the volume explosion in CDSs they became tradeable.Because CDSs were unregulated,they weren't traded on an exchange and therefore transparency became a major issue.This meant that the seller of a CDS didn't necessarily need to have the funds to pay out on a claim in the even of a CDO failure in order to sell a CDS.This mean't that a CDO owner may not necessarily be insured in the event of his CDO failure even though he'd purchased a CDS.

This,however, wasn't the major issue caused by CDSs. The cost of a CDS is only a small proportion of that of a CDO(4%).This meant that the value of toxic loans in circulation was magnified by a factor of 25.Such was the explosion in CDSs that in 2008 one small office of a USA financial services company,based in Mayfair,issued CDSs to the value of 67% of the world's total GDP.

CDSs weren't the cause of the credit crunch but sure as hell it made the problem 25 times worse.
74.5
Iron
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Hi 74.5

Let's say a Bank A foolishly decides to give mortgages to 100,000 people who are on the minimum wage (the CEO of the bank reads the Daily Express, and mistakenly believes that house prices are soaring, so thinks it's a low-risk decision!).

Bank A can either keep the risk (and the reward) in-house, or sell CDOs and CDSs to Bank B and Finance House C.

Assuming all three financial institutions fall into the 'too big to fail' category, is the potential damage to the economy not the same either way?

Jeff
74.5
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Joined: Tue Feb 14, 2012 9:43 am

Ferru123 wrote:Hi 74.5

Let's say a Bank A foolishly decides to give mortgages to 100,000 people who are on the minimum wage (the CEO of the bank reads the Daily Express, and mistakenly believes that house prices are soaring, so thinks it's a low-risk decision!).

Bank A can either keep the risk (and the reward) in-house, or sell CDOs and CDSs to Bank B and Finance House C.

Assuming all three financial institutions fall into the 'too big to fail' category, is the potential damage to the economy not the same either way?Jeff
Before CDOs came into being,a lender retained a mortgage.If the borrower failed to keep up with the repayments,the lender suffered financially unless the house had equity.In this case,the lender could repossess the house and sell it to recover their losses.If the house was in negative equity, the lender lost financially.Lenders were therefore cautious and only gave mortgages to those that they thought were credit worthy.When CDOs came into being,lenders had no need to be cautious any more because they could lend to any and everyone because the mortgages that they sold would be sold on to financial organisations. Therefore,if a borrower went into default,it didn't matter to the mortgage provider because they,having sold the mortgage on,would not suffer financially.As a result,lenders acted irresponsibly because they lent to borrowers who couldn't afford the repayments.These became known as sub-prime mortgages.

Once a financial organisation (eg. Lehman's and Bear Stearns) had purchased mortgages, the plan was to group them into CDOs in such a way that each CDO contained a large proportion of prime and a small proportion of sub-prime mortgages.In this way,if the sub-prime mortgages went sour, much of the value of the CDO was retained.So much for plans.There were just too many sub-prime and too few prime mortgages to allow the plan to be executed.The result was that when the sub-prime fiasco hit,CDOs plummeted because most contained too many sub-prime mortgages for their value to be retained.

What made matters worse was that many of the CDSs that were created to insure the CDOs in the event of their failure had been traded and were held by organisations /individuals that didn't understand how toxic the CDOs were and/or didn't have the funds to cover the CDO losses.The reason why the toxicity of the CDOs wasn't recognised was because they had been (erroneously) rated by Fitch, Moody's or Standard & Poor's as 'AAA'. They had rated the CDOs so highly because a)they weren't able to determine their true rating because of their (deliberate?) complexity and b)they were being paid by the CDO creators to rate them 'AAA' (conflict of interest?).

The real issue here is that if the initial mortgage lender retains the mortgage,it is in their own interests to lend responsibly.Once CDOs came into being,they could sell their mortgages to a third-party and no longer needed to act as a responsible lender.

Even if house prices had continued to soar,the brown stuff would eventually have hit the fan because too many mortgages were sold to too many people that couldn't afford the repayments.The only reason that they could afford the repayments initially was because the requirement for a deposit was waived and the first year's repayments were deeply discounted.In the second year,the repayments rose dramatically.Because they couldn't afford the increase,their homes were repossessed and placed back on the market.This large influx of homes hitting the market depressed prices and the rest is,as they say,history.

Basically,CDOs allowed lenders to de-couple themselves from borrowers and when this happens you get irresponsible lending.

Who's to blame?Is it the greedy bankers for lending irresponsibly,greedy people for borrowing irresponsibly,the regulators for not imposing the necessary financial controls,the credit rating agencies for rating CDOs and CDSs as 'AAA' rather than 'Junk' status,the companies that created the CDOs and CDSs or all of them?One thing is for sure.It wasn't the fault of traders (financial or otherwise).
74.5
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