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Nadeem
Veteran Investor
Joined: 11 Jul 2004
Posts: 639
Cash Points ££ 13955.74
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 Posted: Sun Jan 07, 2007 2:03 am Post subject: Quantum finance and the scramble for gold |
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If you can't spot the patsy, then it must be you, says Adrian Ash. Get ready for the next raft of post-Crash regulations...
Only in finance do the losers get to write history. The government then prints their memoirs in the statute books, while a new volume of folly and greed is begun.
Witness Barnard's Act of 1734. It sought "to prevent the infamous practice of stock-jobbing" that had peaked and exploded with the South Sea Bubble of 1720. Investors had long since fled Change Alley, however, and gone back to trading government bonds instead.
Come 1934, and the Securities Exchange Act tried to protect US investors from the Great Crash of five years before. It guaranteed liquidity to investors who were already broke. And in 2002, Sarbannes-Oxley set new standards for US corporate accounting, stock options and boardroom ethics.
Enron and Worldcom could never happen again, not least because they had already happened. But the US government started fighting the last war regardless, banning cavalry charges and fixed bayonets as the arms race went nuclear.
By the time Ebbers and Lay were trying to raise bail, Wall Street and the City had already moved on, massing asset-backed bonds and deploying collateralized debt obligations. Production of interest-rate swaps went into over-drive, and crack squads of investment bankers began planning leveraged buy-out deals to make Iwo Jiwa look like a picnic.
Let's call it "Quantum Finance" for now, with a nod and a wink to Quantum Physics of course. No doubt the historians will come up with a better name in good time. But the financial science is just as complex as theoretical physics, based on the fact that "energy is not continuous but comes in small and discrete units," as one definition puts it. "The movement of these particles is inherently random. It is physically impossible to know both the position and the momentum of a particle at the same time...[and] the atomic world is nothing like the world we live in."
Just like today's financial markets, in other words – a random, unknowable and unreal world of atom-sized yields.*
Quantum Finance – the science of making money appear out of nowhere – is too complex for all but the very brightest young guns to grasp. Yet it underpins the entire financial universe today. The very fabric of money, mortgages and markets has come to rely on concepts and con-tricks not even the sales desks can follow. And Quantum Finance in its higher forms remains unregulated of course, which is just as it should be. For by the time the SEC and FSA get round to hiring the PhDs they need to make sense of the mess, the smart money will have already moved on, selling out as their Lear Jets get cleared for take-off.
What about the dumb money, you may wonder. Well, if you can't spot the patsy, then it must be you. And only two questions sit between us and the next raft of "last war" regulations today: Where will the bubble explode, and what should private investors do for a helmet?
First up, the bubble – or bubbles...
"The number of [corporate] defaults will rise even in the absence of an economic downturn or interest rate increases," said Wilbur L.Ross, the 'King of Bankruptcy' to a conference in London late last month. Chairman of W.L.Ross & Co. in New York, he says default rates will rise to around 7% of all companies in 2007. The rate is just 1% now.
Full article - http://www.marketoracle.co.uk/Article204.html |
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Wade
Saving Enthusiast
Joined: 17 Feb 2005
Posts: 185
Cash Points ££ 2569.94
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| Posted: Mon Jan 15, 2007 2:25 am Post subject: |
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Whilst many metals like copper are tumbling, gold seems to be holding up pretty well. I will definetly look into that bullion vault site for buying some, a small amount
I am also coming around to the idea that gold is set to take off much further |
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