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• Friday, August 17, 2007 06:31 AM

  Wall Street - derivatives etc.

  Derivatives belong to what should be called -- but never is -- the unreal economy, a place where speculators make bets about what will happen in the real economy

  In an era with derivatives proliferating (and still unregulated) not to mention CMOs (collateralized mortgage obligations or "Toxic waste") and a market mostly leveraged on debt - no individual citizen - unless loaded with disposable income they can afford to lose, has any business playing the "Maul street" casino.

  Let's also not forget these little items:

  i) the markets are now 95% driven by "momentum investors" - huge monolithic, institutionalized consortiums like corporate-owned pension funds etc. They use computerized trading with "triggers" that can precipitate meltdowns in nanoseconds.

  ii) As per a Financial Times report from three years ago, despite revised prospectuses (ostensibly with greater information) - the specific details of "red ink" on any company's blotter are still not disclosed. This means individual investors are still gambling with their hard-earned money - since they don't have ALL the info they need to make investment decisions. Let's also not forget the Bloomberg report (from Jan. 1997) on how large institutional investors were always given "heads ups" at least a day in advance of the small fry.

  What this means is the small fry are expendable. In any bubble scenario their gains will be sacrificed first - even as they are plied with the degenerate, self -serving advice to "buy and hold", "stay the course", and "don't panic".

  Hey - I "panicked" and pulled out of the Janus Worldwide fund in 1997. Glad I did, as the fund lost more than 33% in share value after that, which I wouldn't have recovered from years of working. Was I diversified? Yes, but only later did I find the bond "funds" I held, were laden with "toxic waste". So I pulled out of them too.

  The honchos on the Street may call me "pedestrian" - but I am now in fixed income instruments exclusively. No, I will not be a millionaire by the time I retire. But, I will not have to work until I am 85 either - just to have more $$$ to feed to the scheisters and sharks on the "Street".

  —droogoy Read droogoy's other letters
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