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5.2.09

The End of Wall Streets Boom--Michael Lewis Article

The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong. (Conde Nast Portfolio)

This is now two months old but absolutely relevant. A long article but definitely worth the read.

A few points of relevance for Islamic Finance: in general, leverage is more limited, and there is none of this endless creation of synthetic products--real assets back transactions.

Nowadays, synthetics are larger than real CDOs. This is now a repeated story, much like what happened at the end of LTCM when they owned more options than stocks outstanding (or in 1987 when rehedging portfolio insurance could make the equity market gap) and pricing models like Black-Scholes are guaranteed to not work.

Can it happen to Shariah-compliant finance? Not like this...no
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