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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (1456)	1/2/2010 6:35:46 PM
From: axial	Respond to of 2794

C2, good post. There's an array of differing thought on where we are, and how (or if) finance will once again adversely affect economics. To me it appears there are "roughly" two camps - one is riding the current bubble to profit fully hedged, using carry-trade OPM and their ability to quickly exit large positions in an instant. Mostly these are big players - if you subtract HFT volumes from various exchanges, trading is still thin. In the other camp are the cautious, who have heard warnings from many authoritative sources that systemic risk is still with us in various forms from derivatives to debt and deficits. Not knowing how it will all come out, I see two major risks: [1] Interest rates: they can topple everything and cripple recovery. [2] Major default, triggering the same domino effect we saw in 2007-8 (supposedly swap rates, VIX, etc. are early-warning indicators that will save the alert investor) Of course that's an oversimplification but for me, there must be a way to reduce all the noise to an operating assumption. I still find it difficult to stay long, and have lost some profit in the interest of preserving capital. So far, that has not been optimal. "Optimal" was to roll the dice with the big players. Jim