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Sunday, February 22, 2009

Week in Review Podcast: Will the Real Derivative Traders Please Stand Up?

"Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient." - Alan Greenspan

This is the "Week in Review" on February the 22nd, for February 21st, 2009 (Wow, does that make any sense? I'll explain, trust me)

There is a lot to talk about this rather late edition of the "Week in Review". Derivatives and taxes. Wow, is it possible to find two more possibly boring subjects?

But really? What is a derivative? What makes a derivative trader? The fact is, that the term "derivatives trader" is to talk about a very, very wide group of people.

A man provides liquidity to the marketplace, liquidity between producers and commercial purchasers of Sugar #11, and this man trades the Sugar #11 contract successfully. Is he a derivatives trader? Absolutely. Did these sorts of derivative traders have anything to do with the global meltdown.

Absolutely not.

A collateralized debt obligations (CDO) is created and then sold around the world, but this sale does not take place on any exchange that can be viewed by the public. Is the person who sold this CDO and insured this CDO a derivatives trader? Absolutely. Did these sorts of derivative traders have anything to do with the global economic meltdown?

Absolutely.

But more of that, in the actual podcast ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click This Link ...)



Click here to download this podcast.

We'll see everyone on Monday.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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