Wow! …what a market & CME’s Global Financial Leadership

Last Friday we all knew SOMETHING was going to happen. But who could have predicted the week that now was? LEH, MER, AIG and even RTC2…. 500 down, 500 up: certainly a time to understand the new science of decision-making!

Early in the week, I had the enormous privilege of attending the CME’s Global Financial Leadership Conference. Beginning with Paul Volker and ending with Burton Malkiel, the 36 hours taught me more than I think I have ever learned at any other single conference.

The question that keeps coming back to me is what if there had been a public market for structured mortgage products, market-makers for credit default swaps? Would we be here now? While DC raises the value of regulation and tends to blame the speculator, all I can think is specs could have helped us avert this problem altogether. Bob Schiller, who wrote Irrational Exuberance and The Sub-Prime Solution, and others at the conference seemed to agree.

Not an easy task, no. But clearly a necessary one.

Thoughts anyone?

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This Post Has 4 Comments

  1. I love specs; some of my best friends are specs, but…central banks, fractional reserves, fiat currency, mercantilist/fascist gov – thats too much, even for specs. Glaciers are melting, sea level is rising, so specs are going to do what? Bring liquidity to the ocean? Ponzi goes to the sky , forever & ever, as long as we can roll into the next contract?

  2. I love specs; some of my best friends are specs, but…central banks, fractional reserves, fiat currency, mercantilist/fascist gov – thats too much, even for specs. Glaciers are melting, sea level is rising, so specs are going to do what? Bring liquidity to the ocean? Ponzi goes to the sky , forever & ever, as long as we can roll into the next contract?

  3. Mark, they would have brought more liquidity to the CDO’s traded primarily between BSC, GS, MS, MER, JPM and a relatively small group of others (compared to any other sort of liquid market) …

    that along with maybe a review of mark-to-market accounting could have had a positive effect on the depth and severity of this crisis. I am not saying it would have averted it completely but I am saying that small and opaque markets made it much much worse than it had to be. As soon as one instrument was in trouble, everyone else was too.

  4. Mark, they would have brought more liquidity to the CDO’s traded primarily between BSC, GS, MS, MER, JPM and a relatively small group of others (compared to any other sort of liquid market) …

    that along with maybe a review of mark-to-market accounting could have had a positive effect on the depth and severity of this crisis. I am not saying it would have averted it completely but I am saying that small and opaque markets made it much much worse than it had to be. As soon as one instrument was in trouble, everyone else was too.

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