To me, as a layman on the sides, I have a notion of what I believe was the root of this market reset: There was an aggregated pinch in the flow of money, triggered by reflection and forethought by the large market players about the derivatives being held on their books during an election year. They properly anticipated the shifting tide of voting sentiment moving toward a clear governmental transition (away from pro-business toward pro-labor). That really precipitated their extraction process from their market positions; the entire market then picked up the sense that the big dogs were off the hunt. This triggered free-fall as nobody could put their finger on the money as it became clear that they had all cross-leveraged into each other during different trades. There clearly wasn't enough market cash to back up the factoring that had aggregated itself because they were trading basically with and against themselves at some level. . . and true settlement of trades could not occur under that reality. Therefore, they needed Government cash injected into the system to square the books. Close?
Richard in Greenvilleof TX10:57AM January 06, 2009
Mr. Swenson's clever way to profit via his swap method is dealing with perceived value instead of actual assets. It is similar to the risk of credit based borrowing except there is no equity or collateral. Fer shame. For decades there have been people trying to figure ways to undermine the protective reasons a stock exchange exists - I suppose it was inevitable traditional means of valid forms of debt leveraging for profit would have fallen to uncontrolled conceptual scams based on dreams of expectation. In short, swapping spends money that is not there.
martof KS5:15AM January 06, 2009
Thank you Mr. Swensen.
Regulators, you mean those little men with a handbook on what they can do and what they cannot do? Do you mean the ladies and gentlemen whose mantra is "I owe, I owe, so off to work I go"?
Mr. Swensen, asking a regulator to understand any of what has been written in this article is like asking a 5th grader to explain string theory physics to his teacher.
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Richard in Greenville of TX 10:57AM January 06, 2009
mart of KS 5:15AM January 06, 2009
Tom in San Diego of CA 2:43AM January 06, 2009