A understandable explanation of derivative markets by Arturo Montenora

"Most people don't understand what a derivative investment is nor fully understand the sub prime mortgage crisis suffered in this country"

Online PR News – 05-August-2014 – BROOKLYN NEW YORK – Arturo Montenora, is the proprietor of a bar in Brooklyn New york,.. In order to increase sales, He decides to allow his loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. He keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Arturo's drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Arturo's bar and soon He has the largest sale volume for any bar in Brooklyn By providing His customer freedom from immediate payment demands, Arturo gets no resistance when He substantially increases his prices for wine and beer, the most consumed beverages. His sales volume increases massively.

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

At the bank's corporate headquarters, expert traders transform these customer loans into WINEBONDS, BEERBONDS and BOOZEBONDS. These securities are then traded on security markets worldwide.

Naive investors don't really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nation's leading brokerage houses who collect enormous fees on their sales, pay extravagant bonuses to their sales force, and who in turn purchase exotic sports cars and multimillion dollar homes and condominiums.

One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Arturo's bar.

Arturo demands payment from his alcoholic patrons, but being unemployed they cannot pay back their drinking debts. Therefore, Arturo cannot fulfill his loan obligations and claims bankruptcy.

WINEBONDS and BEERBONDS drop in price by 90%. BOOZEBONDS performs better, stabilizing in price after dropping by 80%. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.

The suppliers of Arturo's bar, having granted him generous payment extensions and having invested in the securities are faced with writing off his debt and losing over 80% on his bonds.

His wine supplier claims bankruptcy, his beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.

The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on

EMPLOYED MIDDLE - CLASS NON DRINKERS...

written by Arturo Montenora

Visit Our Site
 
Bookmarkse-mailGoogledel.icio.usStumbleUponSlashdotFurlDiggTechnoratiYahooMyWebBlinkListSpurlRawSugarWists
Copyright 2014 Online PR Media | PO Box 5043 | La Quinta, CA 92248