Lottery Post Journal

Why the financial markets collapsed; an explanation that anyone can understand

This arrived in e-mail today.  It's a wonderful little story that describes in clear terms how we got to where we are today.

An Easily Understandable Explanation of Derivative Markets
(OR: How We Got Here)

Heidi is the proprietor of a bar in the city. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in the city.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS, and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA-secured bonds are really the debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics, they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations, she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS, and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses, and their respective executives are saved and bailed out by a multi-billion, no-strings-attached cash infusion from the Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now, instead of "unemployed alcoholics", think "people who were allowed to get mortgages even though they couldn't afford to pay them" and you've got it.

Motivational poster of the day

I nominate this person "citizen of the year"

These videos arrived in my e-mail inbox today.

The videos are in 2 parts, both shown below.  After Part 1 is complete, you can click right onto Part 2.

This senior citizen and his wife made the tape from their ranch in south-central Texas.

At their own expense, they made 1,000 copies and sent one to every single congressman and senator and some media outlets.

Let's hope that each and every one of them watched and LISTENED!!!

• • • • • • • • • • •

PART 1

PART 2

VIDEO: This is why they don't let you carry-on liquids when you fly

This video was put together by the BBC.  It demonstrates how a small amount of liquid explosives can rip apart a plane.

Look at the tiny amount used (maybe the size of a 20 oz. Coke bottle), and how harmless it looks.

And look at the damage.

http://news.bbc.co.uk/2/hi/uk_news/7536167.stm

Video will bring a tear to the eye of every patriotic American

Woman fired for USING ALL CAPS IN E-MAIL

THERE ARE CERTAIN PEOPLE WHO SHOULD HAVE THE CAPS LOCK KEY FORCEABLY REMOVED FROM THEIR KEYBOARDS BECAUSE OF HOW ANNOYING IT IS TO SEE EVERYTHING THEY WRITE IN ALL CAPITAL LETTERS.  THOSE PEOPLE ACTUALLY THINK IT IS EASIER TO READ THEIR TEXT WHEN THEY TYPE IT LIKE THIS.

But should someone be fired for it?  Heck, maybe.  At least that's what one company thought.  Check it out:

Woman fired for USING ALL CAPS IN E-MAIL

Vicki Walker, an Auckland (New Zealand) accountant, was sacked for sending supposedly confrontational emails with words in red, in bold and in CAPITAL LETTERS.

The Employment Relations Authority in New Zealand ruled that Walker was not fairly terminated from her position after sending the emails to co-workers. Her previous employers, ProCare, have now been ordered to pay New Zealand dollars $17,000 (US$11,500/€8000) for unfair dismissal.

Fired in December 2007, after two years with the company, ProCare claim Walker had "caused disharmony in the workplace by using block capitals, bold typeface and red text in her emails."

Walker claims that the one email used in evidence was in regard to how her team should fill claim forms, and specifies a time and date highlighted in bold red, and a sentence written in capitals and highlighted in bold blue. It reads: "To ensure your staff claim is processed and paid, please do follow the below checklist."

Walker plans to seek further compensation.

Source