[NativeNewYorker]

the Metallgesellschaft AG debacle

was simply a case of mismatched maturities between their exposure and their hedge.

IIRC, they had way forward oil price exposure, but stoopidly hedged it with short-dated crude oil contracts.

When the spread between the two moved against them, the game was over.

It was the kind of mistake a ROOKIE trader with NO SUPERVISION might make.

[SongathuSouth]

No one thinks the wizards at Long Term Capital Management were rookie traders. They were the very best at what they did. And their derivative positions were deemed such a threat to the international monetary system that Greenspan got all the big brokerages and bullion banks to coordinate who would bail them out for how much.

Of course this increases moral hazard. Of course this only exacerbates the culture of "too big to fail". Of course it is technically illegal (talk about a violation of anti-trust!). Of course we are in uncharted waters--and anyone who thinks they understand all the risks and ramifications is like a trans-Atlantic sailboat in 1502 without any knowledge of when hurricane season is. The world has simply never been wired together like this before under an umbrella of such complex financial instruments.

As to Freedom Farmer's $30,000 an ounce gold, LOL. GATA thinks the free market price should be $500-600/ounce. The 1980 peak price adjusted for inflation would be around $2,000. I certainly don't see gold hitting that under any circumstances in the near-term.

As those great commercials that have been running during the U.S. Open this year keep saying, "One can't know the future. One can prepare."