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

To: Worswick who wrote (530)	10/15/1998 9:53:00 AM
From: Ahda	Respond to of 2794

The tree just might be the commodity market. Technology creating efficient and finance not seeing said, to much expectation. I just popped in and popped out. I enjoy your posts.

To: Worswick who wrote (530)	10/15/1998 11:20:00 AM
From: Richard L. Williams	Read Replies (1) \| Respond to of 2794

A most thought-provoking post, Worswick. As I go about my day-to-day life, I keep asking myself, "Is this an economy on the brink of disaster?" But the signs I see say no...the roads are jammed with newish automobiles (I see the debt, though), the skies are filled with airplanes going here and there, shipping traffic on the Delaware seems as heavy as ever, and the want ads in the paper are still screaming for people. Then I come home and read the Darth Vader thread...smells like 1929, looks like 1929, quacks like 1929, does nobody else see it? Or are we simply more comfortable in ignoring it? I get an image in my mind's eye of the Grinch's sled, perched on the edge of a precipice, with only his poor, mistreated dog to save it and the Grinch...yes, the sled is full of goodies, but the cliff is a looooong way down. Cheers! Rick

To: Worswick who wrote (530)	10/15/1998 1:03:00 PM
From: Zardoz	Respond to of 2794

"We still have yet to hear about the true derivative exposure of Japanese banks, the US pension and endowment funds, and the international bank exposure to "South American" derivative products. Remember all those Brady bonds?" Would this be what you want? The notional amount outstanding of derivatives transactions by Japanese primary dealers at end-June 1998 was $12.9 trillion for OTC (Over-The-Counter) contracts and $7.3 trillion for exchange-traded contracts. Single-currency interest rate derivatives accounted for most of the total derivatives outstanding (73.8% of OTC contracts and 99.7% of exchange-traded contracts). Note: Those are USD. Here's the whole page. boj.or.jp

To: Worswick who wrote (530)	10/15/1998 3:44:00 PM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

Clark, I agree that it is not enough to say that I am careful. I am but the thundering herd, as you aptly name it, can swamp the most prudent man. One of my favorite sayings is that 'the market's ability to stay irrational is greater than any individual's ability to stay solvent'. But even in this environment a cautious person can figure out how to protect himself from the herd. As soon as the LTCM situation developed it was pretty clear there would be fallout just not clear how it would play out. There was plenty of time for us to take actions to alter our risk profile. I don't disagree with the sentiment that we are in a very sensitive period. However I aways get a little skeptical about comments that these are the most extreme conditions since _______ (fill in any historical milestone). I may be to sanguine but I have lived through some pretty chaotic and end of the world scenarios and we are still here kicking. Yes there are significant challenges here and there is a potential it all blows up. But I suspect that there is even more likelihood that we muddle through some how. But then I am an optimist by nature. Anyway if you read the interview with Leon Cooperman in last weeks Barron's I pretty much endorse his view of the world. Henry

To: Worswick who wrote (530)	10/17/1998 2:48:00 AM
From: Frodo Baxter	Read Replies (4) \| Respond to of 2794

I tire of your allusions, again and again, of some lurking catastrophe hiding under someone's bed, or in some closet. You cannot prove a negative. Sure, there have been some high-profile flameouts. Big deal. This is capitalism. Failure is essential to efficient capital usage. Non-specific, hand-wringing pessimism sheds no light, and you are awfully short on real data to support any of your conclusions. >The trend world wide is deflationary. American now have 93% cash flow of their disposable income commited to consumer debt. This is up from 65% in 1982 (Oct. 13, 1998 Barron's) This has nothing to do with traders. This has nothing to do with hedging anything. The engine of the world was the American consumer. The engine is very tired and the shopping basket needs oiling. Deflation is caused by tight money. You fix deflation by loosening monetary policy. That process has begun. This is not an intractable problem. The "pushing on a string" may be applicable to Japan, where all the banks are insolvent, but has ABSOLUTELY NO APPLICATION to the U.S. If you lower the cost of capital, banks will lend more, businesses will borrow more, and the money supply will expand. Consumer debt is but a sapling in the forest of money. Most aficionados agree that consumer debt has gone up because people use credit cards more than they did in 1982. Total debt is about 180% of GDP; that ratio has been flat for about the past ten years. Total debt is about 225% of liquid assets, which is actually a decrease from a peak of 244% in early 1995. There is no debt problem in the United States. >...and the truely remarkable thing about all this strum und drang is that the people, the average person in the US is totally oblivious to what is going on. My god. We are really suffering the effects of a terminally rotten education system here in the US, and are deeply into the wonder bread world here. Brains have been replaced by giant pink twinkies in people's heads. So, the average person disagrees with you, and therefore must have mush for brains? I fail to see the logic in that statement. Any rudimentary student of history is aware that the contemporary American is legions healthier, wealthier, and yes, smarter than at any time prior. Your protestations, nay disappointment, notwithstanding.