A lot of my friends speak to me about the current market mayhem and the feeling they seem to have is it is wrong for tax payers money to be used to bail out the excesses of a few 'rich spoilt bankers - let them fry in hell'. yes I am one of that creed of bankers, those arrogant self professed 'masters of universe' as Thomas Wolfe put it.... but hear me out...
what did these bankers do which has brought the great market to its knees? a simple concept called leveraging....using 26 bn dollars as in the case of Lehman to create a balance sheet of ~400 Bn...thats the beauty of the system and this is not the forum to explain what was happening...
Just that, remember when these same bankers were driving up prices of that corner plot (directly by investing or indirectly by giving money to that builder to build his land bank) we didnt hear too many cribs from people who flipped that apartment they bought during construction for a 50% return in 12 months....or when these banks needed backend support on research and spawned a few 100 of KPO's in India creating jobs or giving those great IT companies large amount of business....remember financial services probably has the largest trickle down effect after pure manufacturing in terms of ancillary jobs created.... so lots of wealth was created...
and where did this wealth come from : the main investors in all this were supposed to be hedge funds and sophisticated investors who knew what they were getting into (different point that I dont think anyone knew what the heck was happening) and ofcourse those pension funds - again with well paid fund managers...so hopefully some wealth got shifted in this process..... a lot of it got destroyed but was it all created by this swell of financial engineering....
so dust to dust is what has happened....and as it is said great fortunes are made in the ruins of financial markets and realized in bull runs....so keep investing.... dont listen to the experts on TV, do your research or else just buy an index fund...and while you are it, spare a thought to all those people who lost jobs, lost pots of money....a fool and his money part ways, but it still hurts to be a fool...
and yes, when we were back in school, Lehman, Bear, Merrill were the ones we dreamt about....great institutions having been through 100+ years seen the great depression, the meltdown, the dot com crash....gone...RIP
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