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To: LLCF who wrote (15106)	2/16/2002 10:54:15 PM
From: Raymond Duray	Respond to of 74559

DAK, The trillions on the books is notional value and isn't what is actually at risk in a blow-up. The actual exposures are measured in the hundreds of billions, and not trillions. I hope I've made you less anxious about this. <gg> Have you reviewed any of Frank Partnoy's work? Quite illuminating on the nature of the inherent risks in the derivatives markets. I also found that Nicholas Dunbar's "Inventing Money", a history of Long Term Capital Mutilation was also well worth the time, for an appreciation of how quickly the sorts of money machines that End Run, LTCM, JPM and lots of others have created can implode within weeks if not days. Re: I'm amazed that more isn't being said about counterparty risks with all the derivative trades I don't find it surprising, at all. 99.9% of the population is essentially clueless about how derivatives work, and the risks involved. In fact, I dare say that the lesson of LTCM is that derivatives are so novel that even the greatest collection of wonks and quants ever collected still could not adequately predict what their money machines would do. We are truly at an unknown frontier. With only the world's entire financial system to blow up in a catastrophic collapse of a house of cards. How will the markets react? As I've been advised, Joseph Schumpeter said of the Great Depression, "Investors stood there ground, and the ground gave way beneath them." Cash is King! RGD