13 April 2013
"There was no price ticker scrolling across our screens telling us what these bonds and derivatives we traded were worth. In fact, no one really knew what any of this stuff was worth. … What this meant, in its simplest form, is that these traders could buy bonds at the “market” price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered “sophisticated”) pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors, often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors" http://nickchirls.com/my-time-at-lehman
My comments:
>Why should retirement accounts get invested in anything but government bonds and index funds?
Here (somewhere near the end) Mr. Blank says that this is what got the silicon valley rolling. When pension funds were allowed to invest, control of the valley switched from the military to the VC funds Secret History of Silicon Valley
Probably another reason is that bonds and index funds do not yield enough to keep the pension funds going; people now live a longer life on average, so they need to pay more on each pension; so its all screwed up.
Everything is screwed up; now that probably that has something to do with the fact that energy prices & commodities are high; there is less energy to go round, so other creative means are found to create 'wealth'; these tricks increasingly have something to do with extracting something from pocket A and transferring it to pocket B.
(that's my comment here https://news.ycombinator.com/item?id=5542231 )
I also edited the wikipedia article on ZIRP (zero interest rate policy) lets see how long my change will stay :-) http://en.wikipedia.org/wiki/Zero_interest-rate_policy
Chris Modica and Warren Sulmasy find that the ZIRP policy follows from the need to refinance a high US budget deficit and from the need to recapitalize the worlds banking system in the wake of the Financial crisis of 2007–2008 ( Chris Modica, Warren Sulmasy. "Why the Federal Reserve Bank Has a Near Zero Interest Rate Policy," YAHOO! Finance http://finance.yahoo.com/news/why-federal-bank-near-zero-143000544.html )