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Strategies & Market Trends : Waiting for the big Kahuna
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To: dybdahl who wrote (82311)10/22/2008 7:45:26 AM
From: carranza22 Recommendations  Read Replies (1) of 94695
 
Just summing the size of contracts is actually plain stupid: If A borrows x from B, and B borrows x from A, the sum of the contracts is 2x, but the sum to the outside world is zero.

Tell that to Lehman, AIG and Bear Stearns.

Tell that to banks that have been terrified to lend for fear of counterparty risk.

Tell that to the TED spread for the past few months.

Your focus is stupidly narrow.

Derivatives risk hits unevenly; some institutions get hit harder than others for none of them set it up so that their positions were perfectly balanced. See, e.g., Lehman, AIG and Bear Stearns.

And when it hits the fan for those who carry more risk than others, collateral damage is done throughout the system.

And that is why it matters.

Have you, uh, noticed? Or have you been asleep for the past 3 months?

Using your 'logic', the bailouts were not really necessary, the past few months were a dream.
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