The Markets

Many years ago, while all our peers were reading comics We were busy studying at Higher Economics We grasped the fundamentals very fast We always understood the way the markets operated While other people find its workings hugely complicated And the terminology leaves them aghast Warren Buffet says our fiscal lectures are the tops He likes the way we analyse the niceties of swaps So if you're sitting comfortably we hope you will forgive it if We start at the beginning with what's known as the derivative We hope you will forgive it if We start with the derivative We hope you will forgive it if We start with the derivative We hope you will forgive it if We start with the derivative-ative Hmm, sounds vaguely familiar... Derivatives are monetary instruments, that puts it very neatly But unlike stocks and shares the actual Value comes from something else completely The value of derivatives derives, you see, from value underlying And are often used to lessen risk Now value can be notional, a market and its values never meet In addition only market value gets recorded on the balance sheet Oh, and a sell is not a sell it's Called a put, just as a buy is called a call And thus anything you call you'd Better put before the prices start to fall! Oh the markets, the markets, the dollars and the dimes How lucky we all are to live in interesting times The markets, the markets, it takes a lot of skill To make your lifetime's savings worth absolutely nil! And there you have it, Clear as crystal. Any questions? No, right, moving on. To another complex concept that has been much in the news lately, And Adele has made a lifetime's study of this particular subject, So Adele, would you give us, In 8 rhymed lines without hesitation, Deviation, or repetition: short selling. Short selling is another term which many people find a bit confusing You could say it's a way of losing money without actually losing Say I, let's call me A, Acquire some futures at a price that's rather high Then you, we'll call you B, Will ask to borrow them without explaining why Thus, B aquires A's futures which he Doesn't own and sells them at a loss The markets panic, prices plunge, But B is a calm and doesn't give a toss Since B will now repurchase them at Half the price when A will get them back And B then trousers all the profit From the loss and ends up in the black! Oh, the markets, the markets, are not for the faint-hearted A fool and his investments are very quickly parted The markets, the markets, you've really got to hand it To the traders who designed it so that you won't understand it Very impressive, Adele. Thank you. Now, shall we have a quick Q&A? No cheating. Was Adele A, or was she B? A! Oh, yes, well we're all very smart now, Aren't we. And did she make a profit, or a loss? Oh, er, she didn't make a profit or a loss, She simply got back her original investment. The profit was made by B - yes, that's you. Do try to keep up! Yes, well, as I say it would help if you made some notes. Oh, Look at all their little frightened faces! Oh people, people, come on, We're getting to the easy part now! Liza is going to guide you through hedge funds, Futures, and that old chestnut: arbitrage. Liza? Thank you. A hedge fund, as its name suggests, Will spread the risk to better hedge its bets They will buy distressed securities From companies who struggle with their debts In fundamental growth or sector funds they will opt for long positions And through many types of arbitrage They'll build up an array of aquisitions Now arbitrage itself as an effective fiscal tool has much attraction As in when a hedge fund makes a Killing in a clever synchronous transaction Say they see the price of carrot Futures lower on the FTSE than the Bourse They buy in London, sell in Paris, Make a pile and Froggie comes off worse! Oh the markets, the markets, they lead us to despair What with bankers talking bull, and the cupboard's nearly bare The markets, the markets, each trader's a magician If his dealings lead to losses he still gets his commission In summation... So what, I hear you ask, Exactly is the reason for the credit crunch? Adele? The fault lies with the banks, Whose senior personnel are frankly out to lunch. Liza? They'd invent new ways to borrow, So that we could borrow more to keep on spending. Dillie? Then they'd borrow from each other to Facilitate their unsupported lending. So now the government will bail them Out with money that it simply doesn't have It's just the same as if they took our Bloody taxes and then flushed them down the lav With the result that we in future Generations will be forced to work like hoolies So if you ever meet a banker it's Your duty to divest him of his goolies. Oh the markets, the markets, diseased with debts like cankers Which leads us to conclude that the bankers are all wankers, The markets, the markets, they're complex and obscure Because no-one is accountable we're all in the manure The markets, the markets where the likes of Bernie Madoff Have created lots of paupers and caused thousands to be laid off The markets, the markets, where did it all go wrong? It began with sub-prime mortgages But that's another song!