This blog post was originally published on the MoneyGeek.ca blog by Jin Choi. The website no longer exists, but Jin has graciously allowed us to re-publish his research for the benefit of future investors forever.
With just a few days to go before April Fools, Id been wondering about what I should write. I thought about making a mock announcement that a major bank had bought MoneyGeek, but I didnt think that would go down too well with people who might believe me.
So instead, Ive decided to explain 5 good finance jokes Ive found. I hope you enjoy them.
A Greek, an Irishman and a Portuguese go into a bar and order a drink. Who picks up the bill? A German. Source
This joke is in reference to the bailouts that Greece, Ireland and Portugal have received at various times since 2010.
In the aftermath of the 2008 financial crisis, the debt levels of all of these countries in relation to their economies rose significantly. Their debt levels grew primarily for two reasons:
One, the debt level rose because of shrinking economies. Shrinking economies meant lower tax receipts, and since the governments continued to spend similar amounts but collected less tax, their debts rose. Debt level is also measured in relation to the size of their economies, so the level rose as the size of their economies shrank.
Two, Portugal and Ireland borrowed money from the public to bail out their banks. Without such intervention, their banks would have failed, leading to an even worse economic situation than the ones they were experiencing.
As the debt level of these countries grew, investors became concerned about the abilities of these countries to repay their debts. Investors therefore refused to lend them anymore money except at very high interest rates. As a result, these countries had to turn to other European countries for help. Germany (among others) agreed to lend them a lot of money; hence the joke.
A market analyst is an expert who will know tomorrow why the things he predicted yesterday didnt happen today. Source
The financial media is full of investment experts who confidently make predictions about the future. They will claim that the price of this or that will go up in a weeks time, or theyll claim that certain companies will lose customers to their rivals next quarter.
Invariably, a great many of these predictions will turn out to be wrong. But instead of acknowledging that they dont have any powers of prediction, many of these experts will find excuses for why they were wrong and continue to offer up predictions.
The problem with investment bank balance sheets is that on the left side nothing is right and on the right side nothing is left. Source
This joke is in reference to the state of financial health that investment banks found themselves in during the 2008 financial crisis. The balance sheet is a financial statement that shows the assets owned by a bank, as well as the liabilities and the equity owed by it.
There is considerable leeway in the way that banks can prepare their balance sheets. Banks can inflate the recorded size of their assets to a degree if they want to, using legal means. The left side of the balance sheet shows the banks assets, so the statement on the left side nothing is right refers to the fact that the value of the assets shown on the balance sheet dont match their real values.
Also, the right side of the balance sheet includes the banks equities. Equity can be thought of as the amount of money that shareholders contributed. So the statement on the right nothing is left refers to the fact that the banks lost their shareholders monies.
An investment banker said he was going to concentrate on the big issues from now on. He sold me one in the street yesterday. Source
Heres how investment bankers make money: If a company wants to raise money by issuing new bonds or stocks, the company contacts an investment bank. The investment bank then contacts investors and sells them the bonds or stocks. The bank charges the company a small percentage of the amount of money they raised for the company. The new bonds or stocks that are sold this way are called issues.
A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100. The farmer agreed to deliver the donkey the next day.
The next day the farmer drove up and said: "Sorry son, but I have some bad news. The donkey died."
Kenny replied, "Well then, just give me my money back."
The farmer said, "Can't do that. I went and spent it already."
Kenny said, "OK, then just unload the donkey."
The farmer asked, "What ya gonna do with him?"
Kenny: "I'm going to raffle him off."
Farmer: "You can't raffle off a dead donkey!"
Kenny: "Sure I can. Watch me. I just won't tell anybody he is dead."
A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?"
Kenny: "I raffled him off. I sold 500 tickets at $2 a piece and made a profit of $998.00."
Farmer: "Didn't anyone complain?"
Kenny: "Just the guy who won. So I gave him his $2 back."
Kenny grew up and eventually became the chairman of Enron. Source
The joke itself is pretty self-explanatory, but I thought I would explain the reference to Enron.
Enron was a big energy trading company that was ultimately found out to be a fraud in 2001. They pretended to be a wildly profitable company by using creative accounting. That is, they inflated their revenues and exaggerated the value of their assets, using both legal and illegal means. Like the raffle in this joke, the value of each Enron share was worth about one dead donkey. But the Enron executives became rich through selling those share.
This blog post was originally published on the MoneyGeek.ca blog by Jin Choi. The website no longer exists, but Jin has graciously allowed us to re-publish his research for the benefit of future investors forever.
