Wednesday, 5/8, Markey WrapUp

Thank you for the link, rob. I've been reading a lot about Herr Lips at Metropole.

Both insights are helpful. I try to imagine the wizardry that the central banks might attempt to rescue their derivitive strapped buddies. Thanks & Cheers to you, 'pikes !

It appears that we are in a pump and dump scheme. We will most likely have a spring rally, and then the summer rally could be combined together. But after that, I do believe the party will be over.
The gravy train comes around once every twenty years. Maybe Bush will try somehow to sustain the market before the elections, and I hope he succeeds in it, and the Republicans won't lose the elections. But if you are in the markets right now, be very careful. The worst case scenario is if interest rates go up significantly, and at the same time the stocks will start falling. That way, the bonds will be losing, and the stocks, at the same time, will be losing, too. This move will unglue a huge amount of margins and put an end to he Ponsi scheme for a long time. Some people, so-called high rollers, will end up on the streets, and the ones who end up on the streets will be awfully happy, because they are still alive.
This is not my imagination, I did a deep study of the ends of bubbles, and most of the time they are washed with blood, big time.
1887, not long after, WWI; 1929, WWII. I hope I am wrong. But this is not a crystal ball, I am saying something about the future by studying the past.
The funny part is that the one who thinks ownership of gold will do some good, is awfully wrong. The guys who were stealing gold during the ship crash, the Central America, forgot about one thing - gold is heavy, and when you jump overboard, there is no way you can float. You go right to the bottom, with your gold in your pockets.

Hasn't the Federal gov't reduced duration in recent years?

Yes. And that interest rate volatiity goes inversely as cube root(!!) of maturity.

Wacky times ahead...

What does an insurer or re-insurer do?! I kinda think "Deriavtives" have an awful lot of hidden background assumptions in them ... like what the volatility is ... we'll see ...

Yep, wacky times are ahead. I collect old coins. They are small and convenient, you can put them in your pocket and wait until the times improve. My family is just about ready to go permanently live on the ocean. A 55-Foot cruiser will leave the worries and insanity behind us; there will be different problems. But for now, I am still trying to graduate from medical school, and that's the only thing that keeps my father on dry land. It is not an act of fear or desperation to leave the mess behind us. My parents are slowly getting tired of the rat race. My family does love America very much, and it breaks our hearts to watch fellow Americans suffering, being cheated out of their money and possessions. Since we are not powerful enough to significantly change anything, and no one wants to join the parade of fools and crooks, that way we do not have much choice, what can I say? Anchors aweigh.

A medical doctor's training and skills are better than gold, they are marketable in any market.

Another risk with derivatives is counter party default. Most derivatives are OTC and not backed by any exchange. Another assumption in hedging strategies is liquidity, which tends to dry up during those crises that are out beyond 2 standard deviations.