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Pastimes : Prudent Bear Fund (BEARX): contrarian investing -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (516)	1/3/1999 1:35:00 PM
From: Bonnie Bear	Read Replies (1) \| Respond to of 793

Tommaso: guess you need some treasury zeroes as a hedge against BEARX..it's interesting to see the S&P correlates incredibly well to the 30 year zero coupon bond and inversely to commodity prices.... the global off-balance sheet derivatives market is something like 50T dollars...totally unregulated..offshore..the kings of the derivatives market are JPM and Goldman Sachs, is their front organization the Dow and Nas? And the stock is at these prices as a settlement for the derivatives contracts? .the people touting dow 12000 and $200 gold are probably noticing this monster and its trajectory if the bond yield went down to below 3%, as in the great depression. We've been looking at the notional value of stocks in the derivatives market valued like a 30-year zero, I guess. If the settlement for the S&P or Nas derivatives contracts was THAT huge, the power mavens would be forced to use every means possible to settle contracts, such as creating bogus companies to raise capital, crushing small companies and forcing indexes down for the notional value of their shorted stock, creating debt defaults and margin calls to raise capital quickly. No wonder the market froze up. If this continues, money market funds are at risk, because they largely use off-balance-sheet commercial paper and debt to get higher interest rates. If money markets came under attack, people would run to treasuries, which are in shortage, and drive yields down, which feeds the monster some more... If this is the game and it is sanctified by Rubin and Greenspan, Bearx will underperform simple puts and calls against the S&P. Put your money in treasuries and stick to options? One hope here is that Japanese rates have increased enough that the risk-adjusted yield as pretty close to US...so if the Japanese sell US and return their money to Japan, Greenpan will need a whole bunch of buyers for those treasuries, fast. A crash, or crashlets, could sure come in handy to sop up all that debt. Hmmm....