JG, I think you are correct when you mention your gut instincts. Layman or no, the bottom line is that the financial market is driven by emotion, instinct (generally misguided) and greed.

I have seen quite a few people quoting Rational Market Theory in some of the posts here and elsewhere, but there is little rationality, especially when the market trends quickly downward. What was Galbraith’s maxim? “The market will remain irrational longer than you can remain solvent”. And as his book on the Great Crash of 1929 attests, it had far less to do with prevailing market conditions, then the emotions surrounding the market and the decision to rein in the money supply.

This last factor is the one that concerns me most right now. I agree that the CDO market will undoubtedly weather this particular storm. What if, however, it spreads? That was the danger that LTCM posed back in 1998. I don’t think anyone believed that a single company could trigger a meltdown, but no one fully knew how deeply LTCM’s positions went, the same way no one fully understands (or cares to understand) how grave the danger is regarding derivatives positions.

And, JG, I wouldn’t question your gut right now. I think your instincts are right. I think a lot of people looking at this right now have the same instinct in point of fact. I think we all feel something is not right, and in a big way; we just have yet to see the enormity of the mess.

French salute, huh? Boy, those poor French can’t seem to catch a break anywhere. There is a school of thought that claims the origination of that salute came from English bowmen showing their contempt for French knights (after the shafts from their longbows easily pierced French armor) during the Battle of Agincourt. The middle finger was the “drawing” finger, used by the bowmen to pull the bowstring fully back. Course, like “tranch”, I might be talking completely out my butt.