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!