Friday, September 19, 2008

Derivative of what?

posted by The Vidiot @ 1:27 PM Permalink

When you say, "Oh, that artist's work is just sooooo derivative," only someone who knows art will get what you're saying. Say that to someone who knows nothing of art and they'll just shrug their shoulders and think you're a snob.

Same thing with credit derivatives. When you talk about credit derivatives, almost everyone outside of finance will be "Whaaaaa?" And rightly so. I've mentioned them before, March 23, 2006 and May 31, 2006. How foresightful I was!) Hell, even Warren Buffet thought they were crazy. But they're huge and they're part of the problem we have today. Here is a link to a loooong article. But if you want to understand what's going on, it's a must-read.
Unfortunately, few people understand credit derivatives, or the full risks to the United States and global markets and economies. In this article, I will take a Credit Derivatives Primer that I published in the spring of 2008 - which anticipated this exact type of event - and update it for the current situation. Through reading this article, you should be able to greatly increase your knowledge of what credit derivatives are, and why they are a far greater danger than subprime mortgages. We will end with introducing some concepts about how individuals can protect themselves and even profit from these unprecedented market conditions – something you won’t find in recent financial history or conventional investments.
How huge are they? Here's a graph from the article. It'll give you chills.


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