WILL SOLDIERS ON THROUGH TOUGH GIG AND THE BOYS FROM BOOK GROUP WEIGH IN ON WEIGHTY MATTERS

Will made his second appearance at Caroline's comedy club last night. Fair size audience and moderately nice turnout of friends and family for what was a 3 hour show. Will was scheduled as 11th or 12th out of 14 or 15 performers...and one of those was Darrell Hammond (of SNL fame) who staggered on ( I swear he was hammered) and did close to 30 minutes. Lot's of good stuff from him and others, but hard to keep energy in the room up through that many acts. Will did well for a rookie and held his own despite an audience that was by then breathing hard and beginning to look for waiters to square away their checks. Hope Will takes it in stride, since it coulda been worse and chances are if he stays in the game there'll be nights when it is.

Got some feedback from guys in book group who got Alex's e-mail with link to story about Bank of America's dumping of toxic assets and turning the IOU over to the fed where taxpayers will ultimately have to foot the bill. In the interest of fairness and the open door policy of Adrift on Driftwood, I reprint below what was said by respondees without divulging names.

"The title of the article is extraordinarily misleading. The banks aren't dumping anything - Bank of America appears to be trying to movetheir derivatives positions to its Merrill Lynch wholly owned subsidiary. Regulators are deciding whether to allow it. I'm not sure how that turns into dumping them on taxpayers....?

The potentially scary part of this, in my view, is the sheer notional amount of the derivatives positions - $73 trillion. According to the Bloomberg article, JP Morgan has $79 trillion on its books. Who knows what Wells Fargo, Citibank, etc. have? At the end of the day, the important numbers to be aware of are each bank's net exposure and counterparty risk. Neither the Seeking Alpha story, nor the Bloomberg article quantifies that. The Seeking Alpha author correctly references the s#@t show that occurred at AIG, but fails to identify exposures at the big banks."


and another who wrote:

Warren Buffet framed it best....
Warren Buffet on Derivatives

Following are edited excerpts from the Berkshire Hathaway annual report for 2002.

"I view derivatives as time bombs, both for the parties that deal in them and the economic system. Basically these instruments call for money to change hands at some future date, with the amount to be determined by one or more reference items, such as interest rates, stock prices, or currency values. For example, if you are either long or short an S&P 500 futures contract, you are a party to a very simple derivatives transaction, with your gain or loss derived from movements in the index. Derivatives contracts are of varying duration, running sometimes to 20 or more years, and their value is often tied to several variables.

Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counter-parties to them. But before a contract is settled, the counter-parties record profits and losses – often huge in amount – in their current earnings statements without so much as a penny changing hands. Reported earnings on derivatives are often wildly overstated. That’s because today’s earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years."