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To: DuckTapeSunroof who wrote (29733)	10/3/2008 5:06:40 PM
From: TimF	Read Replies (1) \| Respond to of 71588

That's just it: almost by definition they never 'understand' this. Because, anyone who DID 'understand' that any liar could make a trade and then walk away from it would NEVER ENTER INTO THE TRADE TO BEGIN WITH... If you know that the person you are dealing with is a liar, and there is no external guarantee or no guarantee that is reliable, then you probably don't participate in that trade. But that doesn't mean you don't participate in the market at all. People buy used cars, despite the well known fact that people selling such cars may lie about their conditions (and that there is no direct regulator only general rules against fraud, and no central clearing house or exchange). Of course you can see the car, its tangibility and viability give you a more reason to trust the seller, and you can even have it inspected by an expert. So there can be less risk from such a trade then from a similar trade in financial instruments. There is more information asymmetry in even many standard financial instruments then in car sales, and certainly more asymmetry in complex off exchange derivatives. But that doesn't mean that all traders would or should avoid all investments or trades in more uncertain and less reliable markets, only that they should be careful about them, and limit their exposure to even the most careful trades.