Also, one very very important consideration that the author of "When Genius Failed" pointed out with great insight was that it was really the Fed, while not having any direct monetary part in the process, who saved the system by bringing together all the banks who would otherwise never ever have done so themselves. If you have a worldwide catastrophe there is no world Fed to arrange something...every bank and fund will hit the exits and not wait for the Fed to call to try and fix everything.
In the way they've had to fix it before. That doesn't mean a deal/fix can be brokered like it was in the case of LTCM necessarily. And my whole point comes back to the point that we're load balancing a bunch of entities together that have no historic value as a whole being...in parts perhaps, but this is all very new and untested as a system. Sometimes technology and markets move too fast to allow for any sort of serious inquiries into their value. The whole thing can come down because of one loose screw much like a space shuttle and no one would every suspect that until it happened and then everyone would be realize how clear it was. That's my point...while not arguing about just a black swan that does this or that...I'm just pointing out the fact that if this were a clear pictured economy and system it might be more simple to say it will all just work out...but with everything that's tied into the current financial system that traverses the globe, I think it's impossible to really think the system would be up to any tests without having really tested it against reality in its current state. You know Schroedinger's cat right? You can't just run a model of this or that and see how the system reacts or would react, once it happens you can find out what the concoction of elements gives you, but assuming that because there is a tight knit across world markets they'll hold one another together seems somewhat delusional to me. Maybe I'm blowing this out of proportion, but I just think that markets crash for reasons that no one really predicts or reacts to swiftly enough and it will surely happen again the way it's happened more than once in the last century. I feel it could be much more catastrophic due to the tight knitting and derivative markets that have no real public place in the public markets an are really more of a giant giant giant floating question mark. The World Bank fucks up a lot and isn't necessarily an organization I look at as a savior of humanity and I have no doubt that there are certain cases where they'd back the fuck off and let something melt down just to either step in later to get their feet wet for less or out of some other monetary interest. That's my bias surely, but I think their history has shown that the IMF has a very slanted view of helping poor nations if you're talking about helping people for their sake vs. helping for monetary or political/economic sake. Cheers bro.
World markets are classical systems, not quantum mechanical systems. The reason you don't know until you know is not because of SC, but because of the enormous complexity of the system. The discipline you seek is Complexity Theory and Chaos. http://en.wikipedia.org/wiki/Complexity_theory nitro
Haha..I don't know why I used SC, I think because of the point that what you want to know is unknowable. Complexity theory is part of it...but it also has to deal with the elements you don't foresee. The simple ones that everyone who read their first book on TA asks....what if one guy decides do dump a position and screws up the perfect chart and causes everyone else to throw in the towel too? It's more about the limitless unknowables, not necessarily the complexity of their interaction, and how those elements that are totally unpredictable under the duress of a huge loss coming into their line of sight than to do with how many elements or their complexity. It's like having a million strike-anywhere matches in a pile of sandpaper and shaking it, maybe none light, maybe all light, maybe one lights and fizzles, maybe one lights and everything engulfs in a seconds, or maybe one lights, burns a bit and then fizzles and the effects are muffled. One trigger point can do nothing or create havoc and you can never test for that exact instant because it's impossible to predict.
Nutmeg, you have it in a nut shell. Not because you are correct, but because you are wrong, dead wrong. You take that side bet around a high stakes poker game and you had better have the funds to cover it otherwise you are dog tucker. And this is exactly the problem with the derivatives markets, no one can cover because there is simply not enough wealth in the world. You may say that there is always someone taking the other side and of course you are correct. However hedgies could easily be on the wrong side of two or more funds and be unable to cover their position, therefore the winners wind up with nothing which upsets the gentle balance of nature. This has already happened and the ripple effect was capped. What I think the OP is concerned about is, if one day the cap does not hold and the dam bursts. The real problem then will be who to sacrifice and who to cover. This will not be a dilemma for TPTB but rather a grave problem for you if you have a marble in the ballot like 401K etc etc. Obviously, the problem is asymmetrical and man made, and can and will be solved by man. Where you lie in the solution is largely up to you and the actions you have taken.
No, sorry...I meant VIX calls...I usually use Puts to hedge and so I made an error in my typing. Thanks.
-------------------------------------------------------------------------------- Quote from jack hershey: ...100 years of terrorist incubation brings fantasitc improvement once the guys who are having "the best trading day of my life" get finished removing and rebuilding what once was a nest for creating terroists. There are patsies all over the place allowing the messes; they aren't breaking anything. They aren't fixing anything. You think fiancial industry derivatives "evaporation" is whatever. sudden or othewise. What it is is: "the best trading day of my life". And those profits you think evaporated are there and, in my case and for others like me, we just dump the money into solving community or regional or national or international problems. I trade leveraged. Why? I get more condensation. We need a "create a derivative week" every month. Some us do pool extraction by price change all of the time. It is taken OUT of the market. And it is PUT into something else more useful. There is nothing to fix and no one is breaking anything. -------------------------------------------------------------------------------- Jack - I am a big fan of yours - but this post sounded like you are on acid - are you ok? My comments drew some other downside comments as well. Conicidentally I did write speech copy at EOP...lol.... The dialogue here seemed to have a limite "persistence" character, so I wanted to bridge that. We all, later, after my post, found out that the OP and others are really big risk takers. I am very very risk adverse so I do not deal with getting in trouble, ever. The theme of the thread is incidents and if incidents can have effects. I do the Alexander's Method thing for anything important. As a consequence, I look at the least connectness of incidents and all economic and econometric structures I pointed out that incidents have the greatest money making potential short term, intermediate term and long term. Here the focus is on having risk in intermediate term and seeing only the intermediate term downside of an incident. Even the related fear, anixety and anger showed when my coments were addressed. I chatted with two programmer friends, yesterday and we looked at page 108 (two nice prizes for writng up a couple od solutions related to incident damage; we looked at ASEAN Foundations's appointment ad on page 104 that relates to the OP topic and how to do the admin on an incident. We chatted about the first ad in the mag (Economist 16JUN07) on page 23. Working and writing white papers for three admins at EOP makes this theme deja vu for me. Nowadays, NGO's get the consequences of incidents solved. there are many under way of various proportions. It is daring to imagine what the globe would be like without all of these underway and growing. My point was, that to deal, a person or team has to be adult. It is the responsibility of people to take care of others. If a person is freaked out and investing at very high risk, then he is on the crappy side of incidents. For me, I am always leaning forward with goods, srvices and funds for victims of incidents and I approach other matters that cause incidents from an orientation towards eliminating the causes. Take money for example, it is a tool and a lot of it needs to be made available for appropriate use at the right ime. this year was a good time to put a million bucks into road building. it get food to the right place at the right time. That is 20,000 ES ticks. Greenspoon does 24,000 contracts a day at a net of less than a tick. So a million dollars of road building is 1 days work for him. I'm automated on the ES; I can't imagine less than one tick a trade per contract. One portion of logic on the program simply adds 1, 2, or 3 ticks to each end of a turn for me. Incidents for people like me are the greatest opportunities to bank really high money velocity profits. That capital can easily be transferred to victims of incidents. Dumb investors and money managers are NOT victims. Now I expect our autoamtion to be applied to 25 exchanges in the near term. for me trading is automated and 24/7 and the sun never sets on pool extraction from the derivatives out there. when the market is closed we are liquid. when its open we are on the right side and optimizing the extraction until we pop out on market orders at very frequent partial fill rates determined automatically. Arbitraging to the EMH tune is fixing leaks. So is sitting on the wrong side o the market betting. There is no requirement whatsoever to use probabilistic mathematics ever. there is no requirement to ever use anything other than binary data set element for monitoring to assure that you know you know (See info gap theory particularly the contraction side as opposed to the nestiung side). I am a little ahead on my writing so I am on a break. The last copy is due tomorrow.. In this thead there are a bunch of people who bet. They bet on predictions. They sit in a market that they do not monitor to know that they know. They like risk They calculate how much they can lose and actually sit there in losing trades and lose what they calculated. I stay in the market all the time, stay on the right side of the market and do reversals when the right side changes. On each reversal I take profits from the segment of price movement that just finished. It is all automated including annotations and signal and status displays. Greenspoon at Kingstreee keeps Steenbarger servicing him so he can do less than a tick for 24,000 contracts a day on 60 scalping trades. He only clears 2 or 3 million a year. It may be possible so of he posters here do better I can't tell. IF they aren't then incidents do not matter because they have nothing to lose to speak of and considering they are on the wrong side of the market by choice a lot of the time. And they hold when their one market is closed and the rest of the world may be doing incidents. after I meet my writing deadline this Wednesday, I get to train for the rest of the week on getting pyschological and psychiatric benefits from the VA to the military who are coming back from extended and repeated tours. My job is to get people to put parallel services to that of the VA in place pronto, sufficiiently and of highest quality. Since we are training in SD, we will be at the expo as well.