Col. Flagg wrote:
http://www.fintools.com/docs/Warren%20B ... atives.pdf
Seek the Truth wrote:CF, the derivatives thing is a big misunderstanding. Nothing wrong with derivatives.
Warren Buffet: "I view derivatives as time bombs. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal".
Seek, derivatives were the cause of the 2008 financial meltdown. Saying there is nothing wrong with them is like saying nothing bad will happen if the Titanic hits an iceberg.
Warren Buffet is not a derivatives trader and knows little about them and is probably an LDG.
I have been a derivatives trader for 20 years and am a world leading expert.
Derivatives can only be used as leverage and hedging (insurance) and of course are only one way to lever or hedge. Leverage and hedging can be represented numerically independent of the instrument involved and like anything both leverage and hedging carry risks, regardless of the instrument.
The 2008 collapse was because of the subprime mortgage collapse. Credit default swaps are merely a hedge or insurance position against the default of mortgages. Like all insurance, if the claims outweigh the balance sheet of the insurer the insurer will collapse. In this case the CDS were inadequate to the collapse. Arguably if we had MORE derivatives the blow would have been cushioned.
By analogy, if the Yellowstone super volcano erupted and destroyed California, you would blame the economic destruction on insurance companies who didn't adequately insure.
No derivative market failed at all except the ones tied to subprime markets. Repackaging of debt occurs across all debt markets and derivatives are in almost every capital market there is. No debt repackaging market or derivatives market failed except those tied to subprime mortgages.
It was all about subprime.
You've been dramatically misled.
The ancient prophets declared in the last days the God of Heaven should set up a kingdom which should never be destroyed, nor left to other people.
Joseph Smith HC, v6 pg 364-365