Derivatives the world’s most mis-selling products or misunderstood

Good Morning, am back to Mumbai after some memorable moments with my family and relatives !!  I am a big fan of Traders Guns blogand Money the book written by Satyajit Das, the definitions Knowns and Unknowns revealed by him is the classic work. Probably this is the 3rd time I have read this book during my train journey and I love reading it again and again.  The reality is always to make sure that you have a seat when the music in this game of musical chairs for high stakes stops (referring to the examples for the crisis happened in the past). As a result of it some interesting statements the management of the firms make but the intensity is something to thought about:- 

Statement: As a Leading dealer with a global platform, we are the major player in the market.

  • Translation: We have spent a fortune to build this business and are now prepared to spend millions more subsidizing your requirements.

Statement: We have one of the most talented teams in this space.

  • Translation: Our staff are vastly overpaid and on huge guaranteed bonuses.

Statement: All the surveys show us to be the leading dealer in this product.

  • Translation: You would not believe the amount we have spent buying market share not to mention the amount of advertising and sponsorship’s that it takes to get voted the leading dealer.

Statement: We are confident that our proposal is competitive.

  • Translation: We are loosing money to do this business but we can’t lose again to that Bank.

Statement: The concept is highly proprietary and innovative.

  • Translation: We don’t know how the product works as we just copied a competitor’s idea and nobody we know has done it but we think you might.

Statement: We feel it is the best solution to your yield enhancement requirements.

  • Translation: This deal makes us the most money and it is around about what you may want and if it isn’t who cares?

Statement: The valuation does not reflect the true economics of the transactions.

  • Translation: We are misvaluing this deal but think you don’t know how to work out what it is truly worth.

Statement: We make markets in all our products at all times.

  • Translation: IF you want to sell this back to us good luck sucker.

Statement: There is currently a window in the market to execute this transaction.

  • Translation: It is almost bonus time and we need to close this deal urgently to make sure we can pay for our new model Porches.

Classics from Traders Guns & Money


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