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A derivatives contract has two sides. You have to pick which side you're talking about when you say it's dumb -- if one side of the trade was exceedingly stupid
by byrneseyeview 17y ago
A derivatives contract has two sides. You have to pick which side you're talking about when you say it's dumb -- if one side of the trade was exceedingly stupid, the other side must be extremely smart.
And your argument doesn't make sense in light of how much money the Euro-banks lost. If lack of regulation was the problem, why did the most regulated entities, buying the most regulated securities, according to the strictest rules -- lose the most money?
Why did regulated hedge funds beat the S&P by about 20% in 2008? If regulation keeps us safe, why is it always so dangerous?
- shin_lao 17y agoBecause European banks do a lot of business with American banks. Even banks who did stay out of the "contaminated" credit business had business with banks who didn't.
- sokoloff 17y agoIt's entirely possible for both sides to be dumb. Suppose your liquid net worth is $2mm. It would be a very bad idea for you to enter into a legally binding wager with a penniless person on a fair coin where "heads you win $1M; tails you lose $250K"