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Non-Tech : Derivatives: Darth Vader's Revenge
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To: Freedom Fighter who wrote (846)3/29/1999 12:30:00 PM
From: Worswick  Read Replies (1) of 2794
 
Wayne hello and thanks for all your great work and thoughts here and on your site. I keep up with every word you say. You are doing a great, great job.

Regardless, of what Henry says about these instruments the modalities here are this: In the derivatives market one is dealing with physics. Here is a self evident, simple exercise.

"What happens when only one leg of the three cornered stool collapses and 400 lb. fat man who is sitting on the stool eating chocolate begins to wobble ... where does he go? To Park Place?"

For the trader in these derivative instruments baby you are only as whole as your weakest creditor.

At that these modalities are always, always subject to the whim of the market, and to the intelligence (or lack of intelligence) of the person(s) or financial institutions who entered into these obligations.

Believe me there are people who are hugely leveraged out there. Believe me there are people out there who are hugely irresponsible as well. Remember Long Term Credit at 200 X 1 adn this I am sure is not the only example in the sand box.

And it is not 80 trillion of obligations outstanding. Henry, alone, has admitted to holding (a single person) over or nearly 1 trillion dollars of derivative trades at one point.

How many Henry are there out there? Only 80 in the whole world? You bet. And we know, all of us, that they are not nearly as smart as our Henry.

Now.... the Dow goes to 10 K but do not foreget that.. in times of crisis these instruments are only as good as.... the soon to be troubled and possibly bankrupt counterparty.



Best to you,

Clark
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