Sounds so familiar. The pattern seems to be that if no one is sure how bad it is, it is worse than most expect. I'm just glad I can actually trade the downside without doing real shorts. ETFs on derivatives might be an evil, but IMO they would be even moreso if only 'qualified investors' could play with them. It's nice to have another option besides cash. I don't think we are going to end this cycle without global financial regulation, and that most likely won't be an improvement.For starters, a lot of this debt was securitized, packaged into collateralized loan obligations that were privately traded, so we have no clue of the level of risk. Many CLOs were synthetic, too, and a good number of hedge funds bought CLOs with borrowed money. So Third Avenue, and like-minded distressed-debt specialists, are one thing. The real question is how the CLO holders hedged themselves, and who else has a piece of this crap.
I'm curious as to your proposed framework for "global financial regulation." We've got trade agreements but those aren't quite the same. Meanwhile, the parties that most need regulation are the most international ones, and they'll just skate from haven to haven.