The Oil Drum

With frozen ABCP (asset-backed commercial paper) apparently about to spawn a litigation nightmare in Canada, huge bank writedowns in the US and Europe, bank closures, a lack of interbank lending, large-scale ARM readjustments, exploding credit card debt, a growing surge in foreclosures, and homebuilders further depressing real estate prices by selling off their inventory for whatever they can get, one could be forgiven for wondering why global stock markets seem so unconcerned.

Some aggressive speculators - cushioned by the moral hazard of central bank liquidity injections - may be prepared to throw caution to the wind in overextending the trend, but others are waiting in the wings, well placed, through bets in the derivatives market, to profit from its eventual reversal. In a market at the peak of a mania, where rampant speculation drives volatility for short-term gain, arguably the best place to be is out of the game.