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To: chomolungma who wrote (174877)	6/23/2003 12:28:47 PM
From: Robert O	Respond to of 186894

Indeed in response to Amy's assertion that '$700bn... The world of derivatives may be immune to the mention of figures followed by 11 zeros, yet such exposure is the equivalent of five times the portfolio of Long Term Capital Management at its height. The "notional value" of LTCM's portfolio was over a trillion dollars if memory serves! So not 5 times less but over $300 billion more! RO

To: chomolungma who wrote (174877)	6/23/2003 1:37:32 PM
From: The Duke of URL©	Read Replies (2) \| Respond to of 186894

I think your comments, meant to assure, do not reflect anything close to the problem. Ask yourself, would you lend me $250,000 today at 5.5% interest for THIRTY YEARS? I think not. Then where do you think all this home mortgage money is coming from. No amount of fancy buzzwords that the banks are using will cover this up for very much longer, and when Peter finally talks to Paul on this one, the consequences will be somewhat higher than your 2500 dollar loss limit. But feel free to chime in anytime.

To: chomolungma who wrote (174877)	6/24/2003 7:21:10 AM
From: Amy J	Read Replies (2) \| Respond to of 186894

Hi Chomolungma, RE: "the house is almost always profitable." Let's hope so, otherwise those consumers who are tapping into their house equity, might instead distribute their pain to investors. Do you have a chart on housing prices corrected by inflation? My prices weren't adjusted for inflation. RE: "But derivatives are very misunderstood. The numbers you generally see are the "notional value" of the contract." What's the max risk? Shouldn't the absolute worse case be obvious & easy to define - just a matter of setting all variables to the worse possible case? Also, what is the actual risk here? As far as I understand, their (Fannie & Freddie) risks are two-fold: people pay off their debts too early (forcing the lenders to replace old profitable loans with new loans whose interest rates are lower, thus decreasing their profits) and when interest rates eventually rise the potential for bankruptcy goes up (creating more risk for the lender since it guarantees loans.) I'm interested in learning the scope of the risk. If it's really on a smaller scale than the LTC (as you or Robert implied), then what's the big deal? Aside from the very annoying possibility of bailing financial lenders out for their irresponsible lending practises, if it's smaller than LTC, then what's the scare about? What's worse case scenario and how big? Regards, Amy J