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To: Gary Wisdom who wrote (23229)	8/17/1999 8:52:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Gary, that is correct...the big WS firms make massive use of derivatives, most of it is o-t-c and therefore impossible to track. i studied some annual reports of the big brokers and it is a bit disconcerting to see how high the notional value of outstanding derivative contracts has become in relation to the firms' equity capital. while a lot of the stuff is hedged in one way or another, SOMEONE is assuming the risk. unlike the risks assumed by, say, an insurance company, this risk is ultimately systemic. to illustrate what i'm trying to say: if 10 insurance companies write fire policies on 100 houses each, no systemic risk exists, since it is highly unlikely that all the houses will burn down at the same time. in the case of derivatives however, when there is a financial meltdown in the form of a stock market crash, all the houses do burn down at the same time. i remember that for instance the notional value of Salomon Brother's derivatives positions shortly before they were taken over amounted to more than 2 trillion bucks. the amounts across the global financial community are simply staggering. guess who will foot the bill in case of a major financial accident - the taxpayer of course. so the little guy gets shafted no matter what happens, it's a disgrace. regards, hb