Menachem Ben Yakov

Playing the Market as Delinquencies Continue to Rise

Heres the definition of a derivative from investopedia.com ( a great site by the way )....
" In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.
Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros. "

When analysis of derivative positions held by institutions is performed one cannot make a judgement on its true value without knowing the underlying article of value. Is it a sub-prime mortgage or ton of gold? Is it based upon bonds from Exxon or Washington Mutual?
The word " derivative " has been used to scare investors like the word " bogeyman " was used to scare children.
I have been buying HSBC and LLoyds TSB. My analysis is correct.
Folks should do their own homework.