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Scot,
You are basically right, the only problem is if you trade synthetic
derivatives, instruments they made up themselves, there is no stop and quite
probably no exit as there is no liquidity and just nobody to take the other
side. I think, this was their main problem, they created such complicated
investments which such incredible leverage that nobody else understood what
they were doing. And if you have no controls who can truly supervise your
operations, this is a sure way for disaster too. As for Niederhofer, that was
another story and exactly the way you described it.
Thomas
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