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

To: Henry Volquardsen who wrote (71)	9/11/1998 9:05:00 AM
From: Worswick	Read Replies (1) \| Respond to of 2794

Henry now I don't want to offend you when I say this. This statement that I want to make is not about you... rather, it is about the system. I was speaking to a friend of mine at Morgan Stanley yesterday and he is a trader. It suddenly occurred to me, with his conversations about "netting out deals", "this is a net net deal here"... in the derivative world that he is always playing with the houses money. Always. This money that is on the table is not his money, insofar as his bonus and indeed job is on the line and coupled with her performance yes it is his money. However, what I realized is his almost blind faith "that the systems will work..." and his insistence that these financial instruments are "non-corralated" (ie. these derivative instruments aren't directly tied to stock market performance) is tied very much with his perception that whatever happens it isn't his money. This is the houses money. If he really thought this through and it was really his money on the line here I really wonder if he would have this blind faith and trust in "the system". As you point out the weak link here is the execution, the back office work. I pointed this out to him. He changed the subject as to how the commodities were just going to perk up heavenly in the next few weeks. I don't think I see it this way....it seems to me that we are in a deflation. That deflationary forces once gathered can only be halted by a "bank holiday" sort of remediation of the markets alza the Roosevelt solution. Ah, another topic. The problem is the system Henry. The problem is when, exactly do these derivative instruments become liabilities and not assets? Can people just walk away from them? On anther topic the sun is out here. It is a beautiful day and we are living in most interesting times. My best to you. Clark