Post by jeffolie on Jul 29, 2007 14:56:22 GMT -6
The D-word: derivatives...no one has a clue....
Ray Dalio of Bridgewater Associates - a venerable hedge fund manager who shuns the spotlight and the charity circuit - has one of the most solid records you'll ever find. He told investors on Friday that he and his colleagues embarked on an extensive study a few months ago to determine the extent of the derivatives risk.
Their conclusion: "no one has a clue." According to Dalio's calculations, derivatives exposure has risen more than fourfold in the last five years to a staggering $400 trillion. Yes, that's $400 trillion with a T, or 30 times the entire gross domestic product of the U.S.
That's why the smart money took their cash off the table this week. Sure, the markets may snap back and vault to new records just like they did this spring. But with the extent of the risks out there so opaque, it may not be worth the gamble.
The stock market is channeling the possibility of a severe credit collapse. It's the reason why equity prices from Seoul to Paris were rocked this week, even though there is no housing recession in those markets, or in much of the world outside the United States. It's why the Blackstone Group, a private-equity firm whose lifeblood is credit has lost 22 percent of its value since going public just one month ago.
By "big one" people are referring to a meltdown in the multi-trillion-dollar derivatives market - a financial crisis that would rival the Asian contagion a decade ago. Such an event would send interest rates higher in the short-term - sending stocks and housing careening lower.
www.nypost.com/seven/07292007/business/was_latest_market_meltdown_the_big_one__business_terry_keenan.htm
Ray Dalio of Bridgewater Associates - a venerable hedge fund manager who shuns the spotlight and the charity circuit - has one of the most solid records you'll ever find. He told investors on Friday that he and his colleagues embarked on an extensive study a few months ago to determine the extent of the derivatives risk.
Their conclusion: "no one has a clue." According to Dalio's calculations, derivatives exposure has risen more than fourfold in the last five years to a staggering $400 trillion. Yes, that's $400 trillion with a T, or 30 times the entire gross domestic product of the U.S.
That's why the smart money took their cash off the table this week. Sure, the markets may snap back and vault to new records just like they did this spring. But with the extent of the risks out there so opaque, it may not be worth the gamble.
The stock market is channeling the possibility of a severe credit collapse. It's the reason why equity prices from Seoul to Paris were rocked this week, even though there is no housing recession in those markets, or in much of the world outside the United States. It's why the Blackstone Group, a private-equity firm whose lifeblood is credit has lost 22 percent of its value since going public just one month ago.
By "big one" people are referring to a meltdown in the multi-trillion-dollar derivatives market - a financial crisis that would rival the Asian contagion a decade ago. Such an event would send interest rates higher in the short-term - sending stocks and housing careening lower.
www.nypost.com/seven/07292007/business/was_latest_market_meltdown_the_big_one__business_terry_keenan.htm