On 3/8/07, Leigh Meyers <[EMAIL PROTECTED]> wrote:
You mean to say investing pennies on the dollar for price-volatile derivatives which are often traded in and out at prices that just clear the brokerage costs ISN'T gambling?
That's a rather superficial similarity. Aside from the fact that motel managers gamble when pricing their rooms, I don't see a similarity between this example and derivatives. In a certain sense all economic activity involves some form of gambling and most of the time it is harmless (who is being harmed because of the pricing of motel rooms?) On the other hand I see derivatives as a disease. Not only is the gambling aspect taken to a ridiculous extreme here, but a lot of derivatives trading may be closely tied to various forms of tax dodges, moral hazard scenarios and such (see Frank Partnoy's "Infectious Greed" for an interesting account of derivatives in the 1990's). I am very interested in seeing how the current explosion of "financial innovation" plays out when the apparent "liquidity glut" of today dries up. -raghu.
