Hacker News Reader

Full thread

DoubleMalt

The bank always wins. True in Las Vegas, true in New York.

[edit=elaboration] I really wonder who buys bonds from a bank when all of this is true:

a) I can only make profit when the bank loses

b) The bank's analyst predicts that I willmake profit

There are only two possibilities:

1) The bank does not know how to earn money

2) The bank tries to screw you over

As Goldman Sachs has a pretty good track record at making money, 1) is bloody unlikely.

View on HN

If you do your research then you will find that medium to large public bodies are especially good at getting ripped off buying these bonds.

Usually your local education board or city council (A) has some money to invest or some income to smooth out. 1. They talk to financial advisors (B) who give advice. 2. The advisors get commissions if they sell certain types of products. 3. The inexperienced financial staff in A believe the advice given by B. 4. The taxpayer shoulders the risk.

One more reason not to put money in the hands of politicians.

People that lose their own money on these scams can't expect sympathy for being greedy from me.

As fmstephe[0] pointed out earlier, Goldman makes their money by orchestrating the sale of these bonds. The performance of the derivative has no impact on their profit from this deal.

[0]: http://news.ycombinator.com/item?id=5133766

Reply on news.ycombinator.com