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 : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (1193)	9/28/2007 4:06:10 PM
From: Real Man	Respond to of 71454

You are right, of course, T-bonds sold off a bit. I was talking about the basic LTCM model, the convergence of yields. It does seem nothing else matters at this point. Nobody really knows what the OTC positions are, who holds them, who are the counterparties. 400 Trillion dollars is a notional number, the bulk of it is interest rates swaps. Derivative pros argue, notional does not matter, cause in swaps only cash flow from rates is exchanged. They also argue only VAR matters, and that's small. Well, it's the VAR that blew up due to increased currency volativity. Then, as leverage unwinds, someone is forced into some action. As someone blows up, the whole notional (in some derivatives, such as credit derivatives) starts to matter. The same thing goes on with stocks - computers sell volativity for income. Then VAR blows up and stocks will crash unless the Fed injects liquidity, which they always do. The whole purpose is to protect. Ironically, as they protect this systemic model with rate cuts, the very same model will sell the dollar.