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In Friday's WSJ there was a quick article about Greenspan and his spin on
derivatives. It appears that this has been the magic elixer that has
smoothed many bumps in the ecomomy and a very, very welcome and faithful
sidekick in years past and hopefully for the infinite future in maintaining
Fed policy.
I guess LTCM was just an unusual late night call for putting out a very tiny
fire? Best to label derivatives along with "bubbles" that are hard to
predict and fade in the rear view mirror quickly if you step on the
accelerator of "productivity" fast enough.
Since he is expousing them, best to take the contrarian view? It is not a
matter of "if" but "when" all the derivatives will become unwound through
another crisis. Forget the BS and Bunk about safety nets implemented from
the 1930's. I would watch your FCM's and other financial institutions very,
very carefully.
My .02 worth.
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