The crazy thing is that, despite everybody looking at the same market, the players all think they’re “making money” with all of their in-and-out trading. Maybe or maybe not — although a lot of people extract big money from the Wall Street system. But the whole process wreaks havoc on the idea of creating wealth by investing in the best companies with the best ideas and assets.
All along, derivative exposure is growing. But what happens when there’s a market setback, and the derivatives trigger? There’s no way that all the exposure can ever get covered. There’s not enough money to go around. We’ll see failure in the derivatives markets, and it will likely tank other parts of the world of finance, if not the larger economy.