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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Giordano Bruno who wrote (7774)	5/25/2008 9:36:48 PM
From: Real Man	Read Replies (1) \| Respond to of 71454

While normal market forces ensure a market crash at some point due to enormous size of the options market, the Fed always acted decisively and in a surprise manner to prevent such a scenario. This means enormous losses for bearish positions in times of crisis solely due to surprise actions of the Fed and nothing else. Expensive puts bought during such times always expired worthless, so the sellers of these puts (the market makers) close to the Fed always had enormous financial benefits at the expense of the buyers, who did not know of the Fed actions in advance. This has lead to enhanced activity in selling of all kinds of protection, because the sellers of protection always win, provided that they have access to unlimited pool of liquidity. And, if that was not enough, the Fed would definitely act on their side. The size of protection market (derivatives) grew exponentially due to this moral hazard. It is my belief that the crash will come, one of enormous size, that will have to take down the Fed. Most likely, due to the nature of the Fed (unlimited liquidity), the crash will be that of the dollar.