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I like to call a spade a spade.
If a person gambles at the Genting Casino in Malaysia or at the Sand Dunes in Las Vegas, he is a gambler regardless of his stature in life and or his qualifications – those that have a long list of alphabets e.g. PhD, MBA, Msc, Bsc etc.
But there is a class of gamblers that deserve our utter contempt and derision because they have applied their god-given skills to gambling and to advising the casinos, specifically the global derivative casino instead of more productive endeavours.
The most abhorrent of this class of gamblers are the Nobel Laureates in economics, these scumbags who have been responsible in creating various risks models that enabled their partners in crime – the fat cats in Wall Street, City of London and elsewhere – to defraud pension funds, municipals and retail investors through derivative trading of esoteric financial products.
They have also defrauded central banks and sovereign wealth funds, but I have no pity for these central banks and their political masters because they have been thoroughly corrupted by the trillion-dollar derivative casino.
Their arrogance is such that they consider themselves infallible and that their so-called mathematical models in determining and forecasting volatility and risks will beat the odds and reap billion-dollar rewards for those who place their faith in their arrogance.
These Nobel Laureates in economics who indulge in the global derivative casino are an essential part of the Global Shadow Money-Lenders and in the last ten years spawn a global financial empire valued at US$565 Trillion!
However, this gigantic Ponzi scheme has collapsed and we are now witnessing its ultimate destruction.
Like wars, the resulting impact thus far on the global economy has been devastating – the global financial tsunami has destroyed national economies, caused millions to lose their homes, their jobs and families. For the poor who are living on a mere US$2 a day, the sharp escalation in essential food items has caused untold misery, disease and starvation.
But these Nobel Laureates are not too overtly concerned. They have enriched themselves in the billions, even though the various funds under their management have collapsed and have wiped out investors who were foolish enough to believe in their infallibility!
It is interesting and most telling that almost all recent Nobel Laureates in economics are involved in one way or another in creating models that analyses volatility and risks across a broad spectrum of financial activities.
However, it can be said without any fear of contradiction that most of these volatility / risks models have been applied to the global derivative casino.
Two models deserve mention because they loom large in the derivative casino. One is the Black-Scholes model and the other, the ARCH model (Autoregressive Conditional Heteroskedasticity). The former is the brainchild of Nobel Laureates Myron Scholes and Robert Merton and the late Fisher Black which is a formula for option pricing. The latter is the “discovery” of Nobel Laureate Robert F. Engle III.
Such models have enabled derivative gamblers to come up “financial engineered products” such as the volatility swap which is essentially a forward contract on the future realized volatility of a given underlying asset. Volatility swaps allow investors (the glorified name of a gambler at the derivative casino) to trade the volatility of an asset directly, not unlike a trade of a price index.
The closest analogy I can use is that of “Suicide poker”. This is where players agree to gamble on five cards, with each player having one card face-up and the next four cards given out face-down. Bets are placed with each round and when all the 5 cards are given out, the 4 face-down cards are then opened to determine who has the best combination.
A sucker’s game!
Exploiting their so-called expertise in forecasting odds, Myron Scholes and Robert Merton and their partners in crime – John Meriwether, a former vice chairman of Solomon Brothers, David Mullins, a former vice chairman of the Board of Governors of the Federal Reserve System and Eric Rosenfeld from the Harvard University – founded the infamous LTCM hedge fund which collapsed in 1998. The demise of LTCM almost triggered a global banking collapse. Greenspan came to its rescue by pumping billions into the hedge fund.
Shod of all economics rhetoric, the LTCM strategy was explained in simple terms by Myron Scholes as follows:
“LTCM would make money by being a vacuum sucking up nickels that no one else could see.”
No doubt the model had many fanciful equations, but in essence, the LTCM way of making money was the power of leverage. And LTCM was operating with a leverage ratio of 30. This means that with a capital of US$1 million, they can borrow US$30 million. LTCM raised billions in capital. Just imagine the financial war chest when leveraged 30 times!
After the collapse of LTCM, Myron Scholes went on to establish the US$5.8 billion hedge fund, Platinum Asset Grove Management. A new generation of suckers fell for its academic credentials. Today, these suckers are crying and bleeding. The fund in November 2008 closed its doors and disallowed investors from withdrawing their monies!
The irony of this blue-ribbon investment strategy which is based on the model’s ability to forecast risks is its total failure to forecast the biggest risks of all time – the systemic collapse of the global banking system. The ultimate risk, a black swan event!
Nobel Laureates like Myron Scholes and Robert Merton must be denounced and punished – life-imprisonment no less for their crimes. The same goes for the other Nobel Laureates who unashamedly lend their credentials to the global derivative casino hucksters and cheats!
While more than a billion people are below the poverty line and cry out for food aid, these so-called economists would rather employ their expertise in aid of casino operators and fraudulent bankers than to engage in productive endeavours to rid the world of poverty and pestilence.
Shame, shame on these Nobel Laureates, financial prostitutes for the Global Shadow Money-Lending System! |
