Analyzing the Market

Derivative markets .... an understandable explanation:


Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi’s bar and soon she has the largest sale volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.

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

At the banks corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS, and PUKEBONDS.

These securities are then traded on securities 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 nations leading brokerage houses.

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 Heidi’s bar.

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

DRINKBOND and ALKIBOND drop in price by 90 %. PUKEBOND 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 Heidi’s bar, having granted her generous payment extensions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds.. Her wine supplier claims bankruptcy, her 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.

It could be worse, these could be your lawyers!

The following quotations are from a book called Disorder in the American Courts by Charles M. Sevilla and are things people actually said in court, word for word, taken down and published by court reporters that had the torment of staying calm while these exchanges were taking place. Regardless of originations, they can be eye openers as to the mentality of those engaged in the drill...

ATTORNEY: What was the first thing your husband said to you that morning?
WITNESS: He said, 'Where am I, Cathy?'
ATTORNEY: And why did that upset you?
WITNESS: My name is Susan!
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ATTORNEY: What gear were you in at the moment of the impact?
WITNESS: Gucci sweats and Reeboks.
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ATTORNEY: Are you sexually active?
WITNESS: No, I just lie there..
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ATTORNEY: This myasthenia gravis, does it affect your memory at all?
WITNESS: Yes.
ATTORNEY: And in what ways does it affect your memory?
WITNESS: I forget.
ATTORNEY: You forget? Can you give us an example of something you forgot?
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ATTORNEY: Do you know if your daughter has ever been involved in voodoo?
WITNESS: We both do.
ATTORNEY: Voodoo?
WITNESS: We do.
ATTORNEY: You do?
WITNESS: Yes, voodoo.
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ATTORNEY: Now doctor, isn't it true that when a person dies in his sleep, he doesn't know about it until the next morning?
WITNESS: Did you actually pass the bar exam?
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ATTORNEY: The youngest son, the twenty-year-old, how old is he?
WITNESS: He's twenty, much like your IQ.
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ATTORNEY: Were you present when your picture was taken?
WITNESS: Are you shitting me?
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ATTORNEY: So the date of conception (of the baby) was August 8th?
WITNESS: Yes.
=2 0 ATTORNEY: And what were you doing at that time?
WITNESS: getting laid
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ATTORNEY: She had three children, right?
WITNESS: Yes.
ATTORNEY: How many were boys?
WITNESS: None.
ATTORNEY: Were there any girls?
W ITNESS : Your Honor, I think I need a different attorney. Can I get a new attorney?
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ATTORNEY: How was your first marriage terminated?
WITNESS: By death.
ATTORNEY: And by whose death was it terminated?
WITNESS: Take a guess.

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ATTORNEY: Can you describe the individual?
WITNESS: He was about medium height and had a beard.
ATTORNEY: Was this a male or a female?
WITNESS: Unless the C ircus was in town I'm going with male.
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ATTORNEY: Is your appearance here this morning pursuant to a deposition notice which I sent to your attorney?
WITNESS: No, this is how I dress when I go to work.
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ATTORNEY: Doctor, how many of your autopsies have you performed on dead people?
WITNESS: All of them. The live ones put up too much of a fight.
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ATTORNEY: ALL your responses MUST be oral, OK? What school did you go to?
WITNESS: Oral.
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ATTORNEY: Do you recall the time that you examined the body?
WITNESS: The autopsy started around 8:30 p.m.
ATTORNEY: And Mr. Denton was dead at the time?
WITNESS: If not, he was by the time I fini shed.
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ATTORNEY: Are you qualified to give a urine sample?
WITNESS: Are you qualified to ask that question?
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And the best for last:

ATTORNEY: Doctor, before you performed the autopsy, did you check for a pulse?
WITNESS: No.
ATTORNEY: Did you check for blood pressure?
WITNESS: No.
ATTORNEY: Did you check for breathing?
WITNESS: No.
ATTORNEY: So, then it is possible that the patient was alive when you began the autopsy?
WITNESS: No.
ATTORNEY: How can you be so sure, Doctor?
WITNESS: Because his brain was sitting on my desk in a jar.
ATTORNEY: I see, but could the patient have still been alive, nevertheless?
WITNESS: Yes, it is possible that he could have been alive and practicing law.