Why this Blog?

A place where I can lament the changing times; for eccentric comments on current affairs and for unfashionable views, expressed I hope, in cogent style; also occasional cris de coeur largely concerned, I regret to say, with myself.


I welcome your comments, so do please write. Please note however that all comments are moderated prior to publication. Whilst I fully appreciate that life can be frustrating, nevertheless, abuse, SMS language and illiteracy will not be tolerated!

Sunday, 23 March 2008

Mysterious Money & Bear Stearns &c.

First, read this extract:

The London Telegraph claims that the Fed had to step in to prevent a derivatives implosion. "By taking this course, the Fed has crossed the Rubicon of central banking," write Ambrose Evans, "To understand why it has torn up the rule book, take a look at the latest Security and Exchange Commission filing by Bear Stearns. It contains a short table listing the broker's holding of derivatives contracts as of November 30 2007. Bear Stearns had total positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms. The contracts were described as "swaps", "swaptions", "caps", "collars" and "floors". This heady edifice of new-fangled instruments was built on an asset base of $80bn at best. On the other side of these contracts are banks, brokers, and hedge funds, linked in destiny by a nexus of interlocking claims. This is counterparty spaghetti. To make matters worse, Lehman Brothers, UBS, and Citigroup were all wobbling on the back foot as the hurricane hit."

$13,400,000,000,000... as the article suggests, a lot of money. I have written before that I have no understanding of money, or indeed how one acquires some (please don't say "hard work" as this is untrue). "Swaps" Swaptions" "Collars" Quoi??

Much as I enjoy reading Mike Swanson's musings in his Wall Street Window, I remain utterly in the dark and I expect, will do so until I die.

Until the next time

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