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The money quote: > Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go

by vkou 3y ago

The money quote: > Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go at highly leveraged financial institutions,” you were running a regulated financial institution. > The thing you were running — a bank, a commodities futures exchange — served some social purpose, and the leverage you provided was an essential part of that purpose. So regulators allow it, but uneasily: They keep an eye on you, they monitor your risks, they don’t let you lend all of your depositors’ money to one affiliated hedge fund, etc. > There are rules to keep the customer money safe, and they also serve to keep you safe: Sometimes banks blow up, but if you ran your bank according to the rules, you don’t generally go to jail for its failure. > Running a crypto futures exchange in the Bahamas is not like that. The takeaway? If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it. You might not get the book thrown at you.

JumpCrisscross 3y ago
> If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it If you’re going to be risking other peoples’ money. If you follow the rules they shouldn’t be losing it.
- zie 3y ago
  That's not how investing works. People lose money in the stock market all the time, without breaking any rules.
  - JumpCrisscross 3y ago
    > People lose money in the stock market all the time, without breaking any rules Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
    - zie 3y ago
      UPRO[0] is highly leveraged(3x), and regularly loses money. It's down over 14% this month alone. It's a 3rd party taking your money and doing incredibly risky things with it. I don't think you are trying to argue UPRO can't exist, because it has since 2009 and nobody cares. I think what you mean to say is, You can't take other people's money and promise no risk, and then go risk it. I.e. you can't lie to the investor, you have to tell them the truth as you know it. SBF clearly didn't do that, he promised his customers, your money is safe like a bank. And then took that money and did ridiculously risky things with it. If his customers are lucky, since some of those incredibly risky things actually paid off, they may not end up actually losing money when it's all said and done, which is pretty awesome for them. 0: https://www.proshares.com/our-etfs/leveraged-and-inverse/upro https://www.proshares.com/our-etfs/leveraged-and-inverse/upr...
  - kaycey2022 3y ago
    People lose their own money or give to some ace gambler to use it to make bets and lose it for them. When you say I'll keep your money safe and not invest it somewhere and then turn around and gamble with it, then you get into the breaking of rules.
    - zie 3y ago
      Exactly, he lied and eventually got caught lying.
- oooyay 3y ago
  > If you follow the rules they shouldn’t be losing it. This is not necessarily true otherwise we wouldn't have the FDIC. You wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets.
  - JumpCrisscross 3y ago
    > not necessarily true otherwise we wouldn't have the FDIC They, i.e. depositors, don’t lose money with FDIC insurance. > wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets Levine is discussing “highly leveraged financial institutions” like “a bank” or “a commodities futures exchange.” (Or FTX.) SBF isn’t going to jail because his customers lost money on Bitcoin and apes. (They did.) He’s going to jail because they lost the money “deposited” with him. The analogy is bank embezzlement. Not investment losses.
kaycey2022 3y ago
When it came to crypto, in the good times of 2022 a lot of people just wanted to own it and exchange it now and then. Just at that basic level I'm sure a lot of businesses could be profitable without risking other people's money. But once you get into the game of making the line go up faster, you start taking risks with money you don't own, then all this devolves into BS.
kaycey2022 3y ago
The takeaway is you say what you do and then do what you say.

by vkou 3y ago

JumpCrisscross 3y ago

> If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it If you’re going to be risking other peoples’ money. If you follow the rules they shouldn’t be losing it.

zie 3y ago
That's not how investing works. People lose money in the stock market all the time, without breaking any rules.
- JumpCrisscross 3y ago
  > People lose money in the stock market all the time, without breaking any rules Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
  - zie 3y ago
    UPRO[0] is highly leveraged(3x), and regularly loses money. It's down over 14% this month alone. It's a 3rd party taking your money and doing incredibly risky things with it. I don't think you are trying to argue UPRO can't exist, because it has since 2009 and nobody cares. I think what you mean to say is, You can't take other people's money and promise no risk, and then go risk it. I.e. you can't lie to the investor, you have to tell them the truth as you know it. SBF clearly didn't do that, he promised his customers, your money is safe like a bank. And then took that money and did ridiculously risky things with it. If his customers are lucky, since some of those incredibly risky things actually paid off, they may not end up actually losing money when it's all said and done, which is pretty awesome for them. 0: https://www.proshares.com/our-etfs/leveraged-and-inverse/upro https://www.proshares.com/our-etfs/leveraged-and-inverse/upr...
- kaycey2022 3y ago
  People lose their own money or give to some ace gambler to use it to make bets and lose it for them. When you say I'll keep your money safe and not invest it somewhere and then turn around and gamble with it, then you get into the breaking of rules.
  - zie 3y ago
    Exactly, he lied and eventually got caught lying.
oooyay 3y ago
> If you follow the rules they shouldn’t be losing it. This is not necessarily true otherwise we wouldn't have the FDIC. You wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets.
- JumpCrisscross 3y ago
  > not necessarily true otherwise we wouldn't have the FDIC They, i.e. depositors, don’t lose money with FDIC insurance. > wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets Levine is discussing “highly leveraged financial institutions” like “a bank” or “a commodities futures exchange.” (Or FTX.) SBF isn’t going to jail because his customers lost money on Bitcoin and apes. (They did.) He’s going to jail because they lost the money “deposited” with him. The analogy is bank embezzlement. Not investment losses.

kaycey2022 3y ago

When it came to crypto, in the good times of 2022 a lot of people just wanted to own it and exchange it now and then. Just at that basic level I'm sure a lot of businesses could be profitable without risking other people's money. But once you get into the game of making the line go up faster, you start taking risks with money you don't own, then all this devolves into BS.

kaycey2022 3y ago

The takeaway is you say what you do and then do what you say.