Insights from a Derivatives Salesman

I spent over 10 years in derivatives, from 1993-2003. My role was a transactor in the Structuring and Origination part of the business, advising corporations on all manner of risk management strategies. During this time I saw the power - and the risks - of inappropriate derivatives transactions, either due to unnecessary complexity or blatant mis-application.

The 1994 derivatives blow-ups of Proctor & Gamble (PG), Gibson Greetings, Air Products and Orange County, the 1998 leveraged bets of LTCM and assorted scandals ranging from MG to Barings to various municipalities marked the ebbs and flows of the industry. I spent the better part of 1994-95 restructuring broken transactions and giving "best practices" presentations, only to see many of the same mistakes made again and again over the subsequent decade. I have seen the "it" asset class move from interest rates to equity to credit, and transaction volumes move from billions to many trillions. It is a new - and scary - world. My years in derivatives as a practitioner, and now as an observer, have taught me many things and clarified my view of how and where these instruments should be used. Bottom line: an exchange-based model is the way forward for the good of hedgers and speculators, promoting stability of the financial markets and protection of governments and taxpayers across the globe.

The OTC market was cool - for making money

I was a big proponent and beneficiary of the over-the-counter (OTC) derivatives market. Customized and client-specific, these transactions also meant something else: fat spreads. By the time the 1990s rolled around, spreads on vanilla derivative transactions collapsed rapidly and new entrants moved in and competition increased. Doing a vanilla fixed-to-floating swap off the back of a bond issuance or floating-to-fixed swap to lock-in the rate on a bank financing simply wasn't interesting - from a compensation perspective. Knock-ins, knock-outs, up-and-outs, down-and-ins, embedded bermuda swaptions, momentum caps, etc. all helped to differentiate solutions from competitors and preserve proprietary profits in trades. Volumes off the corporate desk simply weren't great enough to make a business solely on vanilla trades, and smart and creative derivative originators, structures and traders found ways to "add value" through complexity. The question always was: does the structured solution better meet the client's needs than the vanilla option? It was our job to convince the client that this was, in fact, the case. And sometimes it was, but other times it wasn't. 

Bought and sold optionality - toxic or transient insurance

Trades ranged from those that substantially increased risk through complexity (such as the P&G swap, with an implied duration of 100+ years, which meant it was massively leveraged and hedging absolutely nothing) to those that decreased risk through complexity (such as vanilla swaps with embedded sold options that produced cost savings under a wide range of outcomes but whose protection would go away under large rate moves). The trades that increased risk had durations that far exceeded those of the hedged underlying, while those that decreased risk had durations that were less than those of the hedged underlying. Those that increased risk could blow up and generate eye-popping losses, while those that decreased risk had ugly mark-to-market values over their lives until the embedded optionality decayed over the swap's life.

The bottom line, of course, is that nothing was free. Cost savings over a range of scenarios could rapidly be consumed by unexpected rate moves, but these were the bets made by corporate treasury departments every day and pushed by Wall Street derivatives professionals. And the compensation imperative was present in the corporations as well, where treasury departments were often treated as profit centers driven by money made on derivatives trades. So all that embedded optionality in swaps that reduced financing costs by 40 bps per annum - unless...? Corporate treasury staffers got paid on that this year, notwithstanding the fact that these trades could blow up in later years. This was a huge flaw in the corporate compensation model, a weakness that ended up generating billions of losses through inappropriate transactions done in the name of individual compensation. Sound familiar?

Educating clients - who only understood half the story

After the high-profile 1994 losses, banks became much more sensitive about client communication when it came to derivatives. At Citi, we had "client appropriateness" letters for each corporation that were signed by both the coverage banker and the derivative professional, which were updated every year. This was the bank's way of saying to the Fed: "If you come and audit us, we've already thought about which clients are suitable for certain kinds of derivative transactions."

Further, we needed to document all client communications and to show sensitivity analyses for all transactions that clearly showed the downside scenarios, in order that the client could never come back and say "But you never told me this could happen." I always kept copious notes and detailed deal files, which were, in fact, reviewed by bank examiners on several occasions. They loved my files, because they were clear in both numbers and narrative. But at the end of the day, the examiners and certain less sophisticated clients had only a surface-level understanding of the solutions, and didn't really comprehend each piece of the structured solution but only the results of the bundled product. And in this era most clients weren't focused on mark-to-market issues as hedge accounting rules (FAS 133 - Accounting for Derivative Instruments and Hedging Activities) hadn't fully been enacted. As long as the trades were risk-reducing they were treated as hedges, and changes in swap value would be used to offset the change in value of the hedged underlying. Derivative pros made a lot of money in this era.

Rising commoditization - and a push to other products and asset classes

By the late 1990s, the interest rate swap business became very uninteresting. FAS 133, which put a huge crimp in the structured swap business together with every bank on the planet opening a derivatives trading desk caused the brains to flee to more fertile pastures - equity and credit-related transactions. While the equity and credit derivative businesses existed in the mid-late 1990s, they really took off around the new millennium. And while many of the solutions had less pure math complexity than the interest rate transactions, they had plenty of accounting, tax, legal and regulatory details that created barriers to competition and offered opportunities for proprietary profits. Much larger, in fact, than those available during the halcyon days of the interest rate derivatives market of the 1990s. And while the equity derivatives market was huge - buyback-related transactions, private mandatory convertible instruments for monetizing large stakes in other companies, structured capital-raising transactions - it eventually was dwarfed by the credit derivatives market and its offshoots. As complex as the market was in the 1990s, it became orders of magnitude more complex - and large - in the 21st century.

Where do we go from here - lessons learned

The evolution of the derivatives markets over the past 20 years have made clear the power and danger of these instruments. They can mitigate and distribute risk, they can assist with corporate budgeting and planning and they can promote liquidity and efficiency of the cash markets. But the sheer size of the OTC markets and the interconnected web of transactions among global institutions has rendered the current model dangerous and almost impossible to monitor. And the financial markets crisis has laid bare these risks and de-bunked the traditional view that dispersion of risk is at any time and always a positive thing. In a vacuum, this statement is correct. But without an ability to trust counterparties and to understand where the exposures lie, fear can, and has, caused the markets to seize up.

This couldn't happen in a world where the lion's share of the OTC derivatives market was pushed to exchanges, where simplicity, transparency and liquidity are paramount. Centralized clearinghouses for trading and margin management would have eliminated almost all the factors associated with the current financial crisis. The time for wide-spread commoditization is upon us. Based on experience, the give-up of customization is a small price to pay for price efficiency, liquidity and stability. Like most things, it's the 80/20 (or, in this case the 95/5) rule: getting the big things right provides the lion's share of the benefit. In an earlier time, when volumes were small and users were few, the OTC market was an essential element of the development and growth of the derivatives markets. But derivatives have become like air: they're everywhere. And in their current state, there is only one answer for how the derivatives market can safely promote its use and continued growth: exchanges.

Comments

[vbierschwale:]

Why do we allow trading in derivatives at all, except for greed ?

In my opinion, if you are trading in a product that you cannot physically buy, sell or trade and take possession of, then you are trading in something that is worthless except to the one making money and to me any type of derivative does nothing to better our country and only seems to be designed to fleece the sheep out of their money, so my question is why do we allow derivatives to be traded at all and the only answer I can come up with is greed.

Virgil
www.KeepAmericaAtWork....

2008 Nov 09 07:20 AM

[Asbytec:]

I agree. They need to go away. Let's get back to real investment and quit driving up the money supply toward infinity. We are in real danger of losing our entire financial system.

I might argue thats a good thing...a severe correction leading to a prolonged depression in the worst case. No amount of Fed liquidity can prevent it.

Think we can get back to economic those sound economic fundamentals that made American great: jobs, strong currency, and less debt? I truly hope so for our kids sake, but am not holding my breath.

2008 Nov 09 08:39 AM

[Managing Ed...:]

There ARE legitimate and necessary uses of derivatives. Futures, for example, are derivatives that provide commercial producers and users a means to hedge their needs and, in the end, reduce prices and volatility for consumers.

2008 Nov 09 09:10 AM

[morph366:]

Interesting perspective. Exchange clearing is not the real problem though - it's the maths. Quant PhD's were able to bully their way through the boardroom maze because most people felt completely out of their depth with the complexity of the maths. Problem was that it was not only complex but based on the fallacy that risk can be quantified

2008 Nov 09 10:06 AM

[xsuddensam:]

Mitigating risk at what price and for who's benefit?

It seems all the risk was incredibly multiplied, obscene profits and commissions generated and then the risk fobbed off on the public. It's the same old story of the greedy rich bankers and the Wall Street operators (like this author) walking the fine line of legality under the guise of helping "investors". This time, they have crossed it. They were actually aiding and abetting a criminal enterprise. It's time to go after these sons of bitches, throw them in jail and confiscate everything they own.

The sorriest chapter in this story involves the corrupt political hacks who were complicit in this fraud by taking contributions and allowing these criminals to flourish by deregulating the financial and banking industry.
During the recent congressional whitewash hearings, the politicians sugar coated their findings with euphemisms such as "lack of transparency" for the word fraud and "poor lending practices" for sub-slime liar loans.

And now, they want us to bailout the criminals. Boy, they got a lot of nerve; but you got to hand it to them, they're getting away with it.

2008 Nov 09 10:45 AM

[N E Buddie:]

The only way to assess MBS risk is to know the parties and influences on the values of the properties DIRECTLY. There is no moving or flowing formula for doing this accurately. The present systems don't change with local markets and factors such as storms, toxic spills, local economies, earthquakes, tax structures, building/construction methods and materials, crime data, etc...
Bundling of mortgages and reselling to another party is foolish and should be banned.
Period, end of subject.

2008 Nov 09 01:48 PM

[roy mckoi:]

Most derivative problems this crisis arose as a result of rating agency mistakes. Some of which were truly asinine. Examples: Canadian Liquidity and the rating agency DBRS permission of illiquid leveraged super senior derivatives into conduits; AIG's incredible half trillion of CDS on CDOs; the monoline business model; Mezz ABS CDOs with CDO tranches inside; etc. The rest of the derivative problems are minimal compared to the rating agency issues.....

2008 Nov 09 03:11 PM

[Hoosier:]

The previous two responses could not be more wrong. Futures, options and other derivatives have use. Tell a farmer that they don't. Tell someone who has a substantial position in their company and can't sell it that they don't. Tell that to pension manager's/fund managers that need a way to protect ordinary workers hard earned retirement money. Second, bundling of mortgages allows for cheaper home ownership. Thank you 'managing editor' for your comments. Exchange is the issue. How many problems did you see with people participating in the exchange based model. There were losses, but trading continued and there were no defaults. Morph man- risk is quantified every day when the market opens. Risk has a supply and demand just as a market for a stock, house or whatever market you look at. My question to all these people putting down these financial products, why are you reading 'seeking alpha'? This is a website exactly for the people you supposedly despise. Thanks for the support and ad clicks to keep the site that promotes all these things you hate, up and running.

2008 Nov 09 03:25 PM

[aarc:]

The age of agriculture and industrialization have already come and gone for most part of the Western world.

Consumerism as a product of industrialization with the multitude of products with minimal or no differentiation is also at the last stages of its expansion - at least in the west. The developing world are now entering the age of industrialization and consumerism the west has been privy during the second half of the last century.

Technoligization has been tried but most of the west has been burned with the dot.com bust.

Hard assets are finite just like land and the minerals they contain such as oil.

Meanwhile, Financialization has taken root with credit becoming the de-facto commodity in the western world - much like rice for rural China or Indonesia. Credit has become the engine of growth for most part of the former Industrialized World we know now as the Developed World.

The west has started monetizing assets, that are not hard assets, such as intellectual assets, physical assets, athetic prowess assets, even talents and popularity has become assets most investors are willing to put a high price. Tom Cruise and Tiger Woods are among the those who have been able to monetized their assets to the hilt. They are mostly based on trust that their assets will not deteriorate rapidly in the short term.

Likewise, investment and commercial banks have started monetizing their "trust" assets thru the ABSs and MBSs only that it went bad early in the process due to excessive leveraging.

Financialization is the remaining "asset" the western world has a definite edge since the developing countries now have an iron grip on industrialization and are becoming a heavy contender with technologization thru the so called "cheap hard labor".

Ehrenberg is right, MBSs such as CDOs and CDSs have become too complex for most investors.

The best solution is to set up a Securities Exchange (SX) where ABSs and MBSs originators will be obliged to simplify and clarify their securities to potential investors.

ABSs can even be used by most people in the west since they can no longer use hard assets such as land for agriculture or mining and plain "hard labor" building infrastructures and as laborers in manufacturing plants.

The west has already completed infrastructure buildup (with maintenance needed) and industrialization has already been taken already by the developing world. Likewise, technologization in the west is mostly limited to those that are technology savvy.

The west has been spearheading the world of "investorization" if I may say so with the stock markets and the investment and commercial banks also becoming a major part of that "investorization" process.

Likewise, assets such as experience in managing companies, salesmanship, athletic prowess, even working experience have become coveted assets but are still not securitized.

What is needed by the western world for the future is for everyone with monetizable asset(s) to be able to securitize those asset(s) in order to become more productive citizens and a Securities Exchange will be needed.

For example, an employee who has considerable experience working in a restaurant can monetize his experience thru securitization or ABS and sell that security to the SX to raise capital for a small restaurant. ABS investors will then have to insure those ABSs in case of default.

A person with considerable experience in home decors for example is going to have a hard time finding investors or borrowing from the banks in order for him/her to be able to set-up a company specializing in home decors if he/she has been axed due to adverse economic conditions.

Those who have become unemployed will have no other recourse other than the unemployment benefits - even if those that have the necessary skills and knowledge do have a greater chance to start a better future and be able to help the country overcome adverse economic conditions.

Likewise, a group of employees with diverse experience can securitize their experience and sell the ABS in the SX instead of raising money thru the stock markets in order to start-up a corporation. Bigger investors who would prefer to received annuities instead the unpredictable stock markets will be receiving higher interest rates than other investment options and will be able to insure those ABSs at lower rates than stocks market shares.

Even a local community can monetize their "aspiration" to help with the nationwide efforts to for energy independence by monetizing their tax base and sell an ABS thru the SX to raise money and start-up a windmill or solarmill farm in their community. The govt will have to insure or guarantee their ABS to potential investors.

My brain went too far.

10 or more years of severe depression will be needed for this type of economic recovery effort to become feasible.

2008 Nov 09 04:23 PM

[BerkeleyBob:]

I guess I am too simple minded to grasp the advantages of an exchange for the trading of derivatives. There is a place for short sellers of stocks, a place for hedging by futures contracts by producers of commodities and a place for re-insurance and issuance of loan default guarantees. But the issuers of derivatives intentionally obfuscated the nature of the transactions and were aided and abetted by the credit rating agencies. The underlying debt (mostly home mortgages) were toxic because their true value and risk was concealed. The arcane terminology and claims of complexity are strikingly similar to the tactics of the Enron energy traders. There was a failure of the responsible governmental agencies in regulation of electricity energy trading and there is a present failure of the responsible governmental agencies in making sure there is a rational market with full disclosure. Hoosier has it wrong only in that caveat emptor is not sufficient.

2008 Nov 09 05:15 PM

[beaux:]

I too was a derivative salesperson for a decade and presently run a number of businesses including several derivatives units participating in multiple asset classes. I concur with Roger's comments. My perspective on this varies, however. In my view the Fed cannot be ostensibly held responsible for managing and mitigating systemic risk if they cannot ascertain the component risks. And today their mandate excludes investment banks (ok, there are no investment banks anymore), hedge funds, private equity firms, and other non-bank financial institutions. The advent of standardized contracts will greatly aid the Fed in measuring and, with proper regulatory authority, managing these risks on a pro-active basis. Think of the Fed's role as playing air traffic controller and each firm acting as independent pilots. The mid-air collision we are currently living through will undoubtedly conspire to make us all believers in a robust air traffic control function. This differs meaningfully from the current system under the CFTC. A combination of expanded standardization and regulatory oversight will go along way to making life in the capitalist skies safer. And what if we do not do this? Your old W2 can always be used as a floatation device...

2008 Nov 09 05:53 PM

[TR1:]

I think it all comes down to the ratings agencies. They should never use their good name to bless anything they do not fully understand or loosen their standards for profit.

Much of the world market doesn't really understand he instruments, but relies on the agencies to inform them of the risks involved.

Wall street will always innovate and try new structures, but the ratings agencies should have not allowed these structures to become an investment vehicle for the conventional investors.

If the ratings agencies can be rebuilt and regulated to never take risks, then these exotic instruments will stay at the margin which is where they belong.

2008 Nov 09 06:53 PM

[Asbytec:]

I believe it is a money supply issue. As best I can tell, derivatives add nothing to GDP. They simply pass risk and generate money. This money needs to be spent. It's spent by consumers in the form of endless credit. And credit enslaves the American consumer.

Endless credit is endless money.Endless money should mean inflation and a worthless currency, if it were not for China's unfair trade. Much of our inflation has been exported to China. Thank you, China, you communist nation with a free market interface.

One has to ask themselves how a simple mortgage downturn in the US can bring the world to it's knees. It's the money, it's disappearing. In my view, the reason the credit markets are jammed is because the failed MBS have dried up much global liquidity. Forex volatility has hampered the Yen carry, which makes up another portion of global liquidity.

In short, the system is undergoing a major correction. Derivatives are safe, despite the ratings (which is a player in this), as long as the P/E remains favorable. If P/E being to drop for the remainder, or even another portion of the market, the drop off is truly bottomless and a severe and prolonged depression is the likely and unavoidable outcome.

The Fed has lost control under Greenspan. Bernanke is trying hard to replace the liquidity and has been the lone dog in this fight for over a year. Not until the stimulus package and the bail out did congress act, despite Bernanke's pleas. It's the soft landing approach.

I pray he succeeds and we Americans can get from under the heavy debt. I also pray we get back to real forms of investment.

2008 Nov 09 07:25 PM

[Moon Kil Woong:]

All derivatives policies need to be managed, disclosed, and proper collateral put into place like options derivatives but maybe at 1-2%. Unfortunately this would bankrupt all the big banks which goes to show how messed up derivatives already got us. With no tradability and no disclosure the CDS andCDO market still looms as a big cloud.

We don't need bailout and stimulus as much as we need disclosure, and sound policies. So far we have 0 new regulation and 0 real CDS and CDO disclosure or collateral requirement. Bring back Glas Stegall please and break up these bad International behemoths.

2008 Nov 09 08:35 PM

[poor&unempl...:]

If we want stable prices in out stores, we need derivatives. We have govenment run Lotto and Casinos run by the publically held companies.

When an individual buys a specific stock in a specific industry it is similar to derivatives as opposed to bank deposits and T-bonds/T-bills.

We need to prevent people running the corporations from gaming other people's money. They need to be held accountable for their gambles with investors money.

In words of Forest Gump - That's all I have to say!

2008 Nov 09 08:57 PM

[msoori:]

This isnt risk management. This is similar to sweeping the dirt unde the rug, or littering the city little by little and now its grown up a huge pile of shit that is being cleaned up at the public expense.

Any one with half a brain can understand when you keep piling the risk under one carpet, eventually it will have to be cleaned up. I think this was well understood by those who engineered it, knowing fully well that the tax payer would be put to bail out the risk takers. I agree, these criminals should be put in Jail.

2008 Nov 09 09:08 PM

[Roger Ehren...:]

There are, without question, powerful and prudent uses of derivatives. It is only a lack of understanding that renders people afraid of their use, and this makes sense. But with an exchange-based approach to the use of these tools, the risks borne by banks, hedgers and speculators would be transparent, quantifiable and protected by margin. Ergo, had such a regime been in place we wouldn't have the derivatives-related problems we are experiencing today. See the comments over at my blog Information Arbitrage through the Disqus feed informationarbitrage.d.../.

2008 Nov 09 09:42 PM

[SugarDaddy:]

Everything opined thus far may just be right or partially wrong. In any event the sheer size of the derivatives markets itself needs to be examined for its destructive/constructi... power.

When financial instruments like this have the absolute power to destroy the entire financial system through mismanagement, mistakes or bad luck/timing in the US and/or abroad, it tells me something is severely wrong.

Thus, everything written in this thread just doesn't make a damn. It's the size Man !

2008 Nov 09 10:29 PM

[xsuddensam:]

Hoosier,

It's real simple. There are no degrees of honesty; either it's honest or it's not.

Lack of transparency, which is a euphemism for fraud, is dishonest.

And for those of us who question the integrity of those who participate in fraudulent activity, it's not a matter of "despising " them; it's a matter of calling it like we see it. Most often, people involved in unethical behavior don't even realize that they are doing anything wrong. It's easy to rationalize one's own behavior when everyone else is successful doing the same thing.

2008 Nov 09 10:39 PM

[curious cat:]

i have no problem with risk takers who want to purchase protection or purchase risky investments. either way, they should simply be made to accept the consequences of their decisions. banks should fail. we have investors in those banks that will lose money, that's the risk they took.

the fed can then capitalize other banks and let them assume the accounts of account holders. again, no problem there. anyone doing business with an enterprise that fails, gets screwed but that is exactly what happens to people who run businesses in america, every day.

how many checks bounced on me in my business? how many people declared bankruptcy and never paid their debt, legally? if i paid a business for a product and a warranty and they subsequently went broke, my warranty was worthless. people, this is america, land of the get away free card.

stop making tax payers carry the burden for people who make bad decisions. if they buy a house they can't afford, they need to beg the bank for an extension, a restructuring of their mortgage or they need to borrow from a relative or a friend to pay what they owe or they need to MOVE OUT.

sorry, but i have enough trouble paying my own bills and i only bought what i could afford. get that? i only bought what i could afford. that's the safe way to play the game. try that from now on, ok? otherwise, don't whine when the bill comes due.

2008 Nov 09 10:56 PM

[Hoosier:]

The real issue here guys, (that some of you understand) is money supply and otc markets. Loose money supply and lack of otc derivative regulation are the two causes of where we are at now. That is what i'm arguing. Anyone who participated in either of these activities was part of the problem. Exchange based derivatives solves one of those problems. The money supply issue is the fed. And until they stop making drastic interest rate moves all the time, we will not see bubbles end. Berkelybob---yes you are too simple minded. sudden sam..you clearly missed my point.

2008 Nov 09 11:06 PM

[You're Kidding:]

What we need to do to solve our problems is to find another planet in our galaxy that has human-like beings on it.

Then, we sell them derivatives to hedge capitalism here on Earth. I'm sure we have the players that could pull it off.

2008 Nov 10 01:23 AM

[xsuddensam:]

Hoosier,

I think you care to miss my point.

Why is the derivative market unregulated? Who benefits from the unregulated market? Why isn't there more transparency. What's the purpose of non-disclosure? Why should the common investor's portfolio be at risk when that investor has nothing to do with the derivative market? When I invest in a company, why do I have to assume the risk of my stock price declining because of the murky activity in the derivative market?

Care to answer my questions without hedging ;-)

2008 Nov 10 07:15 AM

[b3rkut:]

How is trading stocks any different??

You cannot physically buy, sell or trade, or take possession of a company either.





On Nov 09 07:20 AM vbierschwale wrote:

> Why do we allow trading in derivatives at all, except for greed ?

>
>
> In my opinion, if you are trading in a product that you cannot physically
> buy, sell or trade and take possession of, then you are trading in
> something that is worthless except to the one making money and to
> me any type of derivative does nothing to better our country and
> only seems to be designed to fleece the sheep out of their money,
> so my question is why do we allow derivatives to be traded at all
> and the only answer I can come up with is greed.
>
> Virgil
> www.KeepAmericaAtWork....

2008 Nov 10 07:52 AM

[Asbytec:]

Suddensam, I think you missed Hoosier's point. Derivatives created a huge amount of money, as SugarDassy mentioned. I went on to explain, as P/E ratios fall, all that money begins to disappear. There is little left for anyone to spend.

Hence, a simple housing downturn in the US has brought the world to it's knees and damned the credit markets. Banks are failing and others are making huge write downs. The Fed is busily trying to plug the liquidity leak.

Why? It's a money supply issue. The Fed cannot hope to influence that much money: 75% of world liquidity is derivative money (New Monetarism, Rosh.)

2008 Nov 10 09:38 AM

[xsuddensam:]

Asbytec,

Thanks for your effort to enlighten me. From what you say, I can only infer that all that money that disappeared only existed in the ethereal world of derivitives. Why should this funny money be allowed to be mixed into the real world of hard assets? You can paint it any way you want, but you're not going to convince me that this is a good thing. If it smells like a rotten fish, it probably is a rotten fish.

Thanks again.

2008 Nov 10 10:03 AM

[xsuddensam:]

Asbytec,

I'm from the old school unlike you and Hoosier who don't have a problem with institutions leveraging 40:1. Leverage is a good way to accelerate profits, but in all fairness, the one leveraging has got to back up his bet with hard assets. When you put the financial health of the entire nation behind the leverage eight ball, a reasonable person can only come to the conclusion that this is wrong.

2008 Nov 10 11:03 AM

[notsosmart:]

first rename wall st vegas 2.next explain to people that you lose your money slower & nobody brings you a drink.last caution all "dont believe anybody,anytime about anything.now thats investing?LOL

2008 Nov 10 11:04 AM

[BerkeleyBob:]

Hoosier, my comments were based on my simple minded understanding of, among others, two recent and important articles. James Stewart's The Omen (New Yorker 10-20-08) and Niall Ferguson's "Wall Street Lays Another Egg" (Vanity Fair, December 2008). I also found useful a NPR piece on the relationship of a bank in Dublin (originally German), Lehman Brothers, and an unwary school district board in Wisconsin which suddenly found itself upside down on an inappropriate derivative investment. I'll debate but not do ad hominem attacks. I was surprised at the staggering growth of the derivative market, or in Ferguson's terminology, Finance World. We are all struggling to come to terms with causes and cures and most of us are in deep yoghurt.

2008 Nov 10 12:44 PM

[Buck Woodford:]

for those who believe derivative markets should not exist, you should direct your attention to the massive world of Equity Options. should that not exist? I'd beg to differ.

2008 Nov 10 11:14 PM