The gist of the article was that the explosion in derivative volume over the last 5 years is due to massive speculation by non financial companies. And many companies are playing dangerously by taking on some of the riskiest bets the markets can offer.
Interesting to note that the fabled retail company Sears (SHLD) earned $101 million pre-tax profits via its investments in total-return swaps which the company noted in its earnings release ‘involve substantial risks’.
Howard Davidowitz, Chairman of Davidowitz & Associates Inc, a New York based retail consulting firm puts it best when he remarked that ‘at the end of the day, what you’re going to have is a publicly traded hedge fund’
Tick-tock because it won’t be too long before one of these non financial business such as Sears gets caught out.
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