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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (1054)	2/7/2002 11:57:19 AM
From: Worswick	Respond to of 2794

Very many thanks for your very thoughtful and incisive take on the Morgan derivative risk Henry. My sense is that they do have a credit risk - who doesn't here in this economic cycle - but it is heartening that "the street" has not hung out the red sign here on the systemic risk front. Between times on your Reuters Japan flag of somedays ago my correspdonets in Japan have thrown up their hands at the current government's policies in regard to the restructuring of Daiei. Why not just let it go into reorganization like K-Mart? Secty. O'Neil on his visit to Japan in January warned the Japanese government that devaluaition and the well known protectionist policies of the Japanese would not work and would lead to a weakening of the Japanese economy. You simoly wonder how many times they can circle the wagons around the banking sector? My correspondents in Japan point out that the current accounts amounts due Japan remains high... so they do not see an Argentina type scenario. On the other hand I have been hearing this for years and years. Hope you are well. Agazin, many thanks for your take on Morgan Henry. Clark

To: Henry Volquardsen who wrote (1054)	2/7/2002 11:58:31 AM
From: Worswick	Read Replies (1) \| Respond to of 2794

Very many thanks for your very thoughtful and incisive take on the Morgan derivative risk Henry. My sense is that they do have a credit risk - who doesn't here in this economic cycle - but it is heartening that "the street" has not hung out the red sign here on the systemic risk front. Between times on your Reuters Japan flag of somedays ago my correspondets in Japan have thrown up their hands at the current government's policies in regard to the restructuring of Daiei. Why not just let it go into reorganization like K-Mart? Secty. O'Neil on his visit to Japan in January warned the Japanese government that devaluation and the well known protectionist policies of the Japanese would not work and would lead to a weakening of the Japanese economy. You simply wonder how many times they can circle the wagons around the banking sector? My correspondents in Japan point out that the current account amount due Japan remain high... so they do not see an Argentina type scenario. On the other hand I have been hearing this for years and years. Hope you are well. Again, many thanks for your take on Morgan Henry. Clark

To: Henry Volquardsen who wrote (1054)	2/19/2002 5:15:26 PM
From: LLCF	Respond to of 2794

The big risk with derivatives is indeed credit risk and the 'netting' of the contracts. The trillions in notional amount [much smaller than it sounds, the notional value of one S&P is 1100] in many cases are long X barrels of oil from XON and sort X barrels to ENE for instance. So the actual amount on the books appears meaninless, unless of course a daisy chain got started due to a couple bad apples. Greenspan tried to get congress to pass a 'netting' rule that would keep netted derivatives out of bankrupcy court [net the contracts before fighting over the carcass]... don't know what ever happend to that. dAK