Posted by: stillironic | July 21, 2010

Hedge funds, derivatives, swap meets. What do they all mean?

Hedge funds, derivatives, swap meets. What do they all mean? Yes, the financial world is difficult to understand, even for us smart people.

That’s because we never learned the rudiments of finance or business in public school. Where we were supposed to pick it up? From Our parents? But what if our parents knew squat about finance? Then we were just fucked—is that it? Public schools, go ahead and keep telling everyone you’re the great social equalizers. Your cover is blown.

Instead of teaching us how to balance our checkbooks and who the hell eats pork bellies, the public schools taught us stuff that’s totally useless. Who cares that 1066 was the Norman Conquest. Or an IRS form. And how come we were taught “they’re,” “there,” and “their” are homonyms. I just checked my dictionary and it says homonyms are like bank (money) and bank (river), words that have different meanings but are spelled the same. Words that sound the same, but spelled differently are homoPHONES. Thanks a lot, school; you didn’t even get that right. (Remember, you learned the truth about homonyms here.)

If you want to learn about the financial world and you didn’t study it in college, here are some tips: Let’s start with hedge funds. Hedge funds are betting clubs for rich farts who belong to golf clubs. The key word here is “rich.” You can golf—or fart—all you want and never be allowed near a hedge fund. But if you’re rich, it doesn’t matter if you’re a professional assassin or a double agent who likes to masquerade as a circus clown. Hedge funds will take your money and return it a zillion-fold.

The upside of investing in hedge funds is that “hedge fund” is a good term to drop at parties: it’s practically guaranteed to attract members of the opposite sex. You can hardly say this about terms that describe other places where your money might end up, like “piggy bank,” “gambling casino,” or “stock market.”

The downside of a hedge fund is it requires you to know the meanings of words like derivatives and arbitrage. Now “arbitrage” is easy. It’s a kind of bird you shouldn’t kill. Because if you do, you have to wear its carcass around your neck. Trust me, this will not make you popular with your investment partners.

Derivatives are more complicated. They are, according to Warren Buffet, financial weapons of mass destruction.

Derivatives are bought by hedge funds, just like bets are made by winos hanging out at the track. The kicker is that hedge funds bought insurance on the bets they made. And they were betting that a business would fail!!! Often the insurance was worth way more than the business itself. If the business failed, insurers had to pay. Except the insurers, which could be banks and most definitely was A.I.G., often didn’t have the money to pay out because derivatives are what is called “unregulated.”

So we the taxpayers rescued the banks from ending up in the crapper. We gave them money they owed to the rich farts out playing 18 holes on your better golf courses. So ends today’s lesson of our financial system at work.



  1. Vivid, brilliant, you belong on MSNBC or even FOX, the pinnacle of goofy financial analysis. The only thing missing is…. you didn’t blame the government or at least Obama for anything!

    • Why thanks! But why are you blaming Obama!

  2. Whoa, JJ! Why blame Obama for this? The bailout of AIG and TARP was on Bush’s watch. Obama just got financial reform passed — not as strong as a lot of people would like, but it would have been a lot stronger if Republicans weren’t trying to protect the asses of their friends on Wall Street. Not only that, but several of the banks that got money under Obama’s watch have paid it back WITH interest.

    Great, smart post, Ginny. A good use of your blog.

    • Totally agree, Jayne. Appreciate your visits and comments. Glad you stopped by.

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