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To: Dale Baker who wrote (64897)9/20/2008 10:06:17 AM
From: tom popeRespond to of 118717
 
As I remember it, portfolio insurance was a perpetual motion machine. As the market went down, the portfolio insurer sold futures. Futures would then go down to the point they were at a discount to fair value, so program traders kicked in, buying the futures and shorting the index components, creating a new cycle of insurance selling of the futures. Theoretically it could never end. And almost didn't.


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