Heinz Blasnik- Views You Can Use Message Board

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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: Eva who wrote (3474)	8/26/2003 12:29:52 PM
From: Eva	Read Replies (2) of 4904

Date: Tue Aug 26 2003 12:17 trotsky (Earl Grey) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved not to forget, the preferred methodology is 'dynamic hedging' a.k.a. 'delta hedging'. this presumes of course that the market will always be liquid, and more especially, that it will be liquid when that liquidity is needed MOST - in a stress situation. naturally, the models incorporating this basic assumptions are all set to fail at a critical juncture. the blow-out of swap spreads recently nicely illustrated that point. as an aside, 'hedging' may insure individual risk - but it heightens systemic risk, as the risk is only passed on to other risk takers, and the perceived 'insurance' encourages recklessness. FNM's debt to equity is about 55 to 1. GE Capital's is 25 to 1. i don't know CFC's ratios off the cuff, but i know they are recently expanding their ( sub prime lending saddled ) balance sheet by a 200% annualized rate. when the conflagration ultimately comes, no-one is going to be able to stop it, not even the dudes with the printing press.

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