|
PureBytes Links
Trading Reference Links
|
My take on Buffett and derivatives is that his main point is that there
are many financial institutions and corporations that have taken
positions in derivatives without truly understanding the various risks
that derivatives create, specially in times when market liquidity goes
haywire. Perhaps no major company will suffer an expected loss, but he
suspects one or more will, and that this possibility has not been
adequately provided for in market thinking.
I believe many of the derivative henny-pennies have been exaggerating
the 'problem' of derivatives -- the gold bugs and JPMorgan come to
mind, but my own past experience working in the accounting and risk
analysis areas of a major investment bank makes me think that Buffett
has a point -- some banks have put themselves in a position they could
not manage if past market illiquidities occur again. The practice of
risk management has employed adaptive analytical techniques that
effectively assume that what has happened in the past few weeks or
months is a much, much better indicator of the future than events that
happened years ago.
Those who forget the past are destined to repeat it.
Regards
DanG
Kent Rollins wrote:
With respect to the "derivatives
bubble", prove to me that there is one. This is the first I've heard
about it. Lately, Warren Buffet has been saying a lot of stuff with
which I don't agree.
Yahoo! Groups Sponsor
Select Make Acura Audi BMW Cadillac Chevrolet
Chrysler Dodge
Ford GMC Honda Infiniti Jaguar Jeep Lexus Lincoln Mazda Mercedes-Benz Mitsubishi Nissan Pontiac Porsche Toyota Volkswagen Volvo Other
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|