Friday, 10 October 2008

Understanding the Turmoil - Credit Derivatives

Came across this clearly-written explanation by Daniel Amerman about the problem of credit derivatives, whose value is larger than the whole world economy. Very sobering. He includes a bit of his advice about to cope.


Anonymous said...

This is indeed a very troubling observation. It looks like a good chunk of the last "growth" is just on paper.
What's the best way to protect your investment against the unwinding of this credit fueled growth?
Cash? Gold, Silver or precious metal? Oil?

CanadianInvestor said...

Perhaps gold and silver but my best guess is real assets in general, oil, base metals, agricultural products, all the things that resist inflation (one of the best ways to devalue debt, which the US government could well allow and which would ravage cash). These products are of course, the core of the Canadian economy. There is a huge hit to all economies from the disruption but I think different countries will emerge with different degrees of prosperity and Canada is highly likely to be a winner. Not only does it have the right products, it has a stable national balance sheet and much less debt than the US.

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