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.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (40531)	11/3/2005 10:17:25 AM
From: LLCF	Read Replies (2) \| Respond to of 116555

< I wonder if I'm the only one who is reminded of "Portfolio Insurance?"> Yep, Wells Fargo was one of the big 'pukers' for those few days in '87... no doubt they had to turn buyer later!! LOL. I went through the 'CFA' program in the mid 90's and wrote several letters to a guy from Mutual of Omaha (who was sitting on the CFA board pertaining to material taught) expaining to him that 'portfolio insurance' was a gross misnomer and the 'dynamic hedging' or 'options replication' practice or strategy needed it's name changed changed. I explained the paper the practice is based on briefly {"Replicating options with t-bills and stock"- I think it was Fama and French... but I forget}. I pointed out that the paper missed the whole point {that puts and calls get most of their value from the 'insurance' premuim} and one of the examples I used was what if all his companies customers could 'replicate' earth quake or fire insurance by having stone mason's on call to rush over and replace bricks and mortor at the exact moment they shook loose, or replace boards and shingles as they burned?? Don't think he got it... never heard back. Needless to say he marked my rant on the test wrong for that portion. The fixed income market dwarfs the equity market of back then, so the amount of crap outstanding on banks books much be enormous. They all have derivative departments and have made tons punting around {paid out handsomely to the genius traders based on current income regardless of the exploding portfolios} so nothing would surprise me if the i rate market pukes at some point. DAK