Posted on 08/09/2010 6:07:25 PM PDT by Errant
fyi
The sky is falling!
This is the sort of article that gives fear mongering a bad name.
He does not clearly explain the difference between the notional value of derivatives and the actual amount of money that can be gained or lost.
For example, suppose I bet you a dollar that the Dow Jones Industrials will go down tomorrow. The notional value of this contract would be the amount of money spent buying and selling the 30 Dow stucks, which is billions of dollars even for one day. However, the most I can make or lose on this contract is one dollar.
Now let’s try a real-world example. When Lehmann failed, it failed for $380 billion. There were in fact CDOs outstanding on this debt several times over, or more than a trillion dollars worth of CDOs. However, when the 300-odd major holders of these derivative positions met to settle up, only about $18 billion in actual cash had to be paid out, since each position was heavily hedged.
....And "SubPrime" was "contained"......
I knew there was a Liberal in the woodpile somewhere... Nobody EVER explains what that nasty "triggering" event would be. Just like TARP... the sky is falling so pass this crazy legislation that you don;t understand and didn't bother to read. I think this threat is nuts... how many bets on tonight's baseball game? Who knows? But, when the game is over, the market clears real fast...
Or... I’m totally wrong and this is really scary!
So we’re only looking at about a 27 trillion dollar pay out? That makes me feel a lot better. Thanks!
Actually, there aren’t 1.5 quadrillion dollars in existence so somebody got snookered...
So - I have been hearing about these things for quite awhile. Why are all governments continuing with them. Why not reel them in, starting like tomorrow? Why do things have to burst? Where are the adults?
Can someone take the Market Oracle out back and shoot it, please?
I swear, it pains me to see otherwise sane people becoming as deranged as the “Oh my God, a car backfired, it’s a sign of the apocalypse!” types. It’s a sickness.
It won't be the first time! Ducking & lol...
The US economy is not the financial system.
The financial system is ALREADY destroyed, and the sooner it collapses, the better.
The end of this big con won’t destroy the real economy, it will liberate it.
They have been unable or unwilling to regulate them it seems.
I agree!
Yes, it's 999,999,999,999,999,999 more than the number of brain cells possessed by the average Market Oracle writer.
I have news for you, subprime mortgages are not derivatives.
A bank loan is not a derivative.
A covered call is a derivative, and selling covered calls is one of the safest investments you can make. In fact, it's safer than buying a stock without selling the call. But unless you know what derivatives are and how they can be used, you are fooled by all the references to big numbers in this article.
Here, you do it... http://www.marketoracle.co.uk :)
The incentives for mischief here are enormous. I doubt it means the end of the world if they all blow up. More likely, Michelle Obama will only be able to take 7 vacations next summer instead of 8.
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