Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (31268)	5/4/2000 6:12:00 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 42523

Joan, the thought certainly occurred to me. couple today's speech with the recent outsized repos, the blowing out of credit spreads and the precarious condition of the credit markets generally, and the thought that there might ALREADY be a problem can't be dismissed out of hand. note also that e.g. CMB, which i believe is the second or third largest bank in terms of assets, made a full two thirds of its last quarterly earnings by speculating in NAZ stocks. Greenjeans certainly directed the barb about banks with large equity holdings at them. in terms of derivatives, the money center banks are all extremely engaged. the notional value of JPM's derivative positions is nine times its equity. now most of those positions are hedged according to their VaR (Value at Risk) computer modelling techniques. but these are inherently faulty, as they work under the assumption that historical inter market correlations will ALWAYS hold up. we have seen numerous examples where this turned out to be wrong in times of market duress. unfortunately the burgeoning derivatives market has as of yet not been tested under recessionary conditions. and unlike e.g. with the sale of fire insurance (if you sell 1,000 policies and 5 houses burn, you're not going under), the main problem here is the systemic risk factor as one large counterparty failure can bring everyone down like falling dominoes. well, Greenjeans was pretty clear...he's going to defend the system's integrity with the resources at his disposal, but he's not going to let the 'too big to fail' doctrine come between one of the big players and chapter 11 (or ch.7, whatever occasion demands). do i believe him that? not for a second actually, but it's the third time he's said this since October last year, and his constant 'look out below' references implied in these admonishments should be taken seriously. i think he knows the jig will be up someday, and the more time passes, the closer we get to that point as the imbalances straining the economy get ever more pronounced. thus his admonishments have lately taken on an air of urgency.