Reply #2: There are many many kinds of derivatives

[sui generis]

Just saying that CDO's represent the entirety isn't quite right but that's our woefully stupid newsdesk who probably had to spell check "derivatives" before they forgot wiki it.

Just the same, ANY bet that pays on a loss is a great bet if the losses are few and far between. If everyone's betting on the loss, it's a lot less profitable to bet against the house, and these CDO's had time frames attached to them, often under a recapitalization agreement (usually turnaround or growth-style investment, but sometimes pure LBO) such as private equity, or other guarantee or assumption of corporate debt.

Highland Capital in Dallas is one such organization that invested heavily in building these houses-of-cards and is now sucking wind just like the bigger players. Greed and Karma will get you faster than Karma alone.

It gets worse in multinational corporations where there are layers of real and paper companies passing profit and derivative income through income-recharacterization schemes, while hiding risk and loss. I think we've only seen the facade start to crumble - there's a whole international building right behind the part that we can see.

It ain't over until the rest of the market regulates more effectively, and does so beyond our borders.