The Issue of Hedging

In finance the definition of a hedge is making an investment to reduce the risk of adverse price movements in an asset.

In the wake of the JP Morgan severe hedging loss of at least $2 Billion dollars, that has made fear in the markets reemerge at a very fast pace, I wonder how this was even able to happen.  In the text of the lengthy Dodd-Frank legislation and the Volcker Rule, there are major liberal uses of language that annihilate the intent of the rules passed by the people in DC. Hedging against a single security is not allowed by banks, but somehow a bank has the ability to hedge against an entire portfolio, something much more risky!

How did this happen?  The short answer is lobbyists, the long answer is different, and needs to be answered by posing the question should banks be allowed to hedge?  The INTENT of the Securities and Exchange Act of 1933/ 1934 was to eliminate risky maneuvers by banks to protect the people who had their money in these supposedly strong financial institutions. If anyone is to hedge, doesn't that already say that the risk is too great?  There are very few if any sure things in life, but anytime a hedge is put into play, the strategy is on the basis of limiting a potentially devastating risk.  To an individual, I say go ahead and take great risks, and hedge the even greater risks.  To the financial institutions that make markets and provide liquidity and stability for global economies, I say stay out the risk business altogether.

One might respond to this by saying that banks ALWAYS take risks when they lend money to people to buy houses.  This is true, but the risks are not large, nor are these risks over leveraged when a home loan is created.  When a qualified buyer  purchases a home, a sufficient down payment is made to ensure that the buyers cash flow or other money will be able to cover every payment for the life of the loan.  At the height of the housing bubble that crashed and brought us to where we are today, people were given the opportunity to buy houses that they were not qualified to own or pay for with very little if any money down! In fact, there were loans that gave out 110% of the "value" of the house.  Those risks were evidently unacceptable, the problem ballooned, the bottom fell out, and here we are.  Housing prices have stabilized to the point that banks lending habits can't really be considered risky.  

Banks should be restricted to only the business that banks have thrived on for the better part of a century.  Hedge Funds, Private Equity Firms, Venture Capital Groups, and retail investors (not quite the 99%, but definitely not the 1%) should move cautiously when making risky investments, but at least these parties gains and losses do not affect the global economy like a big bank might in the event "something goes awry".  If banks took less risks, people would have more faith in them, that is just the logically sound way to approach the new investment world  that we live in.  Regulations on risk need to be strictly structured by the legislature. Loopholes need to be as narrow as possible to uphold the intent of the law.  Finally, everyone needs to be responsible for investment actions that either make a ton of money or lose a ton of money.  Finger pointing never leads anywhere.  

Xanax Moms: The Real Housewives of Beverly Pills

I had this really well crafted blog about mothers and fathers who roam the streets of Beverly Hills, and any other major upper class neighborhood in the United States who are hopped up on Xanax, and consider that little pill a problem solver.  I had funny names for Xanax, including "Beverly Hills Tylenol", "Mother's little helpers" and my favorite, "Beverly Hills Breakfast." This blog was all ready to go, and something in the blogoshphere had other plans for this post -- so it was deleted magically.

The main idea of this post was that people are over using anti anxiety pills at dangerously high levels without any regard for their own health or the health of people around them.  People are vilified for drinking and driving, texting and driving, and driving without a proper headset for a mobile phone; yet, too many people are operating heavy machinery or making expensive purchases on Rodeo Drive under the influence of Xanax.

These pills are perceived as problem solvers, when in reality they are problem procrastinators.  We are all very good at procrastinating.  It's part of our nature, I do not know why, but it doesn't really matter.  Something goes wrong at school, a parent pops a Xanax and meets with the principal, the $500 hair stylist doesn't have the most recent issue of US Weekly - Xanax is there, and popping a pill while going to a place of worship is just as important as the pair of Christian Louboutins you will be wearing.  (Even though I fully condone taking any mind altering substance before worshiping and Deity)

I have recently been experiencing this rampant Xanax popping by so many people, and they see it the same way that I might see taking an over the counter headache medication.  It's absurd that this is the case, and it's even more absurd to me that this is beyond recreational use of drugs, because it's regimented in a way that people go to Urth Cafe (my new have coffee spot, sorry CBTL), order their latte and pastry, down it with a Xanax and their day begins.  Not the breakfast of champions, unless a champion is a zombie walking around under the influence of "the little pill that could."

The Art of Blogging

Blogging is awesome. If you have gotten this far, and are still reading, clearly I had your attention earlier. The 21st century version of a public diary has enabled millions of people to communicate thoughts, feelings and ideas to other people all over the globe. Blogging can be done from the comfort of one's bed, a coffee shop, a desk at work, a desk at school, a plane, train, or automobile. It can be done from anywhere.

Broadcasting anything online is what some may consider a risky venture, but I have always been of the opinion that if you post anything online at any given time, you ultimately wanted it to be public, no matter what the repercussions. It is human nature to talk about other people, and it is even more natural to want to know about other people, yet I find myself most fascinated with myself. I never have, and probably never will care about what anyone thinks about ME. That is not to say that I will not put strong effort into any piece of work I do for somebody else's approval, however, it does mean that if you care to gossip or discuss my personal life amongst yourselves, go for it.

I am one of the happiest people that I know, and the people who matter to me know it, with or without a blog. With blogs, there is no magical fine line to be drawn between permissible and unacceptable. Anything written here is fair game for anyone to discuss, disagree and dissect.

Blogging allows people to express themselves freely, and uninterrupted. It enables a message to be delivered in the form that people might not get whether it is via twitter, Facebook, or a giant plane in the sky. Controversy can be caused, but this controversy can be controlled, whereas a controversy amongst people and some loose cannons can run amuck easily in an uncontrolled atmosphere like Taco Tuesdays.

If you want to keep something private, keep it private, if you have a problem with someone or something, address it, and if you just have something to say, blog it. Just remember, what you say can follow you forever, like this one thing: In second grade I confessed to committing adultery: I thought it meant acting like an adult.

THERE ARE NO ACCIDENTS - NOT MY WORDS, BUT THEY'RE WISE

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