I don't
pretend to be the smartest person in the room.
But I can
define "credit default swap" and it's kissing cousin "credit
derivative" in a single, one-syllable, word:
Bull.
When Wall
Street gets cute, it's time to lock up your piggy bank and keep your hands in
your pockets.
Why? Because Wall Street and the "too big to
fail" banks are practicing New Math.
You remember New Math??? Tom
Lehrer, an MIT math professor, wrote/sang a satiric ditty about it.
Mae West
had her own take on New Math. "One and one is two,
and two and two is four, and five will get you ten if you know how to work
it." (wink)
Honey, if
they can't make it work for themselves -- may I say $2 billion loss? -- how are
they gonna make it work for you?
They're not. You are the least
of their worries.
I find it
interesting how many times the word "bet" has been used recently in
the financial press describing the $2 billion loss. Bet? You bet on horses,
you bet in a casino. The truth is
finally out. Wall Street does not practice
an exact science. It bets. And then it hedges its bets. If you play blackjack, you know what that's
about. It's called "buying
insurance." Asking for a mulligan
if the bet goes sour. A do-over at
someone else's expense. Guess
what? You lose both times. First in the original investment (bet) if your money is at stake, and
secondly if you own stock in the insurance company that covered the bet.
I don't
think any of us want to keep our money under our mattresses, but it may be the
safest place. When Wall Street sings
its siren song, stick your fingers in your ears and sing along with Tom.
Penny
Pincher
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