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Wall street casino John Bogle: Avoid the Wall Street casino


Wall Street is an eight-block-long street running roughly northwest to southeast from Broadway to South Street, at the East River, in the Financial District of Lower.

Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. I recently found myself awake in the wee hours, making a last-minute attempt to fill out some NCAA tournament brackets.

As Wall street casino pondered whether VCU really could make it to the Sweet Sixteen, I began to think about the detailed statistical model I could craft. My theoretical NCAA tournament model would be built a lot like those used on Wall Street to wall street casino and sell many speculative wall street casino, including those nasty credit default swaps that brought down AIG NYSE: Specifically, wall street casino model would be based on applying historical statistical relationships to current data.

This all made me wonder: Is there a difference between what Wall Street has been doing and out-and-out gambling? A very fine line Credit default swaps have been mercilessly maligned during the financial meltdown, and for good reason. It was largely collateral on CDS contracts owed to counterparties such as Goldman Sachs Wall street casino GS wall street casino, Bank of America NYSE: BACand Deutsche Bank that brought AIG to its knees.

And it link hundreds of billions worth of CDS contracts outstanding that made the collapse of Lehman Brothers so scary. Credit default swaps can be used a few different ways.

The most legitimate is as protection against the default of a borrower. For example, let's say I'm Wells Fargo NYSE: My return on the loan to Citi is lowered by the premiums I pay Goldman, but I've also protected my downside. Credit default swaps are also used for hedging purposes.

In the example above, Wells Wall street casino may want to take out a CDS on Goldman, in case Goldman folds at the same time that Citi does. Though people often refer to CDSes as insurance, they're different in all the important ways.

Most notably, there are no reserve requirements and you don't have to be exposed to the insured risk to take out a CDS. That wall street casino allowed CDS contracts to be pure speculative bets. Somebody without direct, or even indirect, exposure to Citi's debt can still take out a CDS against Citi -- a move that amounts to "I'll bet you that Citi goes bust," which isn't all that dissimilar to "I'll bet you that Memphis wins the NCAA tournament.

Using the house's money The fact that Wall Street has been flipping around instruments similar to the tickets in Wynn Resorts please click for source NASDAQ: WYNN sportsbook is only part of the problem though.

After all, you don't see MGM Mirage NYSE: MGM flirting with bankruptcy because it bet the wrong way on the recent Roy Wall street casino Jr. For years, Wall Street has been doing what the folks in Vegas wouldn't dream of doing: It's been as if Steve Wynn had levered up a bunch of the company's equity and given it casino campione italia some inside "specialists" to gamble at competing casinos.

If he had savvy specialists, the profits could be great. But big, highly leveraged bets might mean that a bad run wall street casino some hotshot gamblers could put the entire company at risk. There's a big difference between our ultrarisky Wynn described above and the actual Wall Street firms, though. In addition, the Wall Street firms were so interlinked that a failure had a high probability of cascading through Wall Street and the rest of the U.

Wall street casino again With all that said, we don't want to decry risk taking. Our great economy was built on wall street casino taking risks, whether it's going off in search of new ideas, starting a business, or financing a start-up company.

Demonizing risk taking would assuredly shove us off the path to a healthy, recovered America. Fortunately, it seems like the government has caught on to what does need to be done: The rallying cry of big financial institutions as they put their hands out for government alms has been that they're " too big to fail.

The shock waves through the system after the failure of Lehman were a warning about what might happen if Wall street casino or AIG were to fold.

Looking ahead, there need to be regulations to prevent financial institutions from becoming bloated companies that have the potential to hold the U. This isn't just some silly game involving a ball and a net, you know. Of course, not everybody agrees that more power is what the government needs now.

Check out what some of my Foolish colleagues think, and then weigh in with your own take. Fool contributor Matt Koppenheffer owns shares of Bank of America, but does not own shares of any of the other companies mentioned.

The Fool's disclosure policy plays check this out. Matt is the Managing Director of The Motley Fool GmbH, The Fool's German business. Besuch uns bei Fool. Skip to main content The Motley Fool Fool.

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Mar 25, wall street casino Bank of America NYSE: American International Group NYSE: MGM Resorts International NYSE:


Burying the Wall Street Casino -- The Motley Fool


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