At The Rotterdam
Two old friends talk finance, money, and investing, every Friday. The Rotterdam was a popular downtown Toronto pub known for its extensive European beer selection. It was the perfect place for two rookies working for a large, US investment dealer to hang out after work on Fridays and discuss the capital markets. The discussion continues today on our podcast, with more perspective. We will tackle a new topic each week and try to keep the sessions shorter than thirty minutes. There seems to be an unprecedented amount of crisis news in current headlines. Our podcast explains why those who ignore history and react to noise typically have poor investment results. Always challenging but historically important, the stock, bond, currency, crypto and derivatives markets provide a unique look at human economic behavior. Jeff and Rasheed are not macro “talking heads” selling theory as fact. Rather than making short-term calls, we seek to simplify, clarify and discuss the financial markets from an honest theoretical and historical perspective. Importantly, our views come from our personal wide and deep experiences in the field. We hope that you enjoy the discussions. If you do please subscribe and recommend us to your friends. Please feel free to use the links to send comments or questions.
Listen on:
Episodes
Thursday Nov 17, 2022
Thursday Nov 17, 2022
FINANCE (ADVANCED)
Recorded November 15, 2022
Our inaugural episode of At The Rotterdam uses the recent events in crypto – FTX and Celsius failures – to explain why we (in the US) have the financial regulation we do.
It’s all due to history: From the Forgotten Depression of 1920-1, through the Crash of 1929, the bank and mortgage market failures of the early 1930s, and the broker defaults of the 1970s.
The US government, its agencies and the financial industries themselves regulated financial markets in order to restore investor trust and confidence.
In the 1920s, the Chicago exchanges and the Federal government cleaned up and legitimized commodity futures markets by requiring brokers to segregate funds and eliminate manipulation and conflicts of interest.
The regulation that established the SIPC in the 1970s ensured that retail client funds would be safe even if the broker defaulted. The SIPC helped repay all of Madoff’s small investors.
If FTX and Celsius were regulated like their traditional counterparts, at the very least the losses would likely have been mitigated and likely compensated, and the events might never have happened.
We shouldn’t need crises to remind us why we have consumer protection regulation in financial markets. History should be enough.
References:
What do we know about FTX so far.
What happened at Celsius.
Coinbase’s policies.
Rasheed’s book on the regulation of markets in the 1920s and 30s
Reminiscences of a Stock Operator (1923)
The history of the Securities Investor Protection Corporation (SIPC)
Refco bankruptcy
Links:
Show Twitter: https://twitter.com/AtTheRotterdam
Rasheed’s Twitter: https://twitter.com/r_sale
Disclaimer: Nothing At The Rotterdam should be considered as investment advice. Always speak to a registered financial advisor before investing in anything mentioned on this podcast.
Why are humans such bad investors? And what can we do about it?
Hosts
Rasheed Saleuddin holds a PhD in Financial History from Cambridge University where he remains a fellow after completing his post-doc. He also holds an MSc in regulation from the London School of Economics. Rasheed was the founder and manager of a specialized distressed investment fund from 2008-2018, and he continues to be a professional angel venture investor and consultant.
Dr. Saleuddin has authored two well-received books, The Government of Markets, dealing with the creation of modern futures markets and Regulating Securitized Products, a Post Crisis Guide, defining the risks that emerged during the 2008 Global Financial Crisis.
Jeffrey Sandler is a retired portfolio manager with a large US investment firm’s Canadian subsidiary. He previously managed large divisions for two Canadian, bank-owned investment dealers. Jeffrey has been a frequent guest on radio shows and other media outlets for many years where he commented on the capital markets, usually during times of market unrest. Prior to entering the investment industry, he worked in broadcasting covering crime and business.