Risk is all about choices. Everyone knows people can look at the same market data and get different views of the risks lying ahead in any trade or investment . Why? Value and opportunity are rarely what you think. The person who asks the right question wins, as long as they have created the ability to maximize a utility which captures those opportunities. To build great utilities however is expensive both in time and money and few have the ability or desire to contribute to such efforts.
While there are many proprietary utilities on Wall Street, it prefers to use another utility to make money . They collect from opportunities created by tapping into wealth reserves of the general public. 401ks, home equity markets, and the sub prime market have been a source of great profits. But not better than the latest, the Fed. If the trades go bad in the other aforementioned areas, the Fed will not only cover it, but continue to feed you. Bloomberg reported yesterday that Wall Street investment banks made an estimated 13 billion dollars from access to secret, practically free money from the Fed.
Wall Street may have discovered their best utility yet.
