but it can also be plummeting all at the same time

Champagne! Last Thursday, the Dow Jones index feature of the American Stock Exchange, crossed in meeting the level of 11.722,98 points, its all-time closing reached on January 11, 2000. But drunkenness curiously gives way to a deaf anxiety. The specialists are more and more concern, not both of the high level of stock prices as the impressive mounted power of financial tools of a particular type. It comes to financial products "to strong leverage effect. Use new actors as "hedge funds" them massively, with very aggressive policies, beyond the direct control of the authorities. Gold leverage can push the markets... but it can also be plummeting all at the same time. The uncertainty is greater that the financial system has been strong in recent years. "The truth is that it is not known if the financial markets have become more dangerous or more stable, says Adam Lerrick, Carnegie Mellon University Professor, coming before Congress to testify on the subject." But, clearly, without knowledge of the risks, financial markets are vulnerable.

The situation is sufficiently strained that financial authorities themselves speak. "The same factors that today contribute to reduce the likelihood of a systemic crisis could, however, should such an event occur, accentuate the seriousness and complicate the resolution", said Timothy Geithner, the very influential President of the Federal Reserve of New York. The risk is perhaps more diffuse, but it may be that great.

That has happened Simply invest in long term shares or bonds traded on public markets is definitely past fashion since the time of the dot-com bubble. New products or more sophisticated montages have indeed multiplied. Companies to finance more and more by debt negotiated outside of the public financial markets, taking more risks. While emissions of shares and listed obligations are stabilized in the world around 600 to 700 billion dollars per year between 2000 and today, syndicated loans, them, now issued at a rate of 3,500 billion annually, half than in the year 2000. Investment in the non-coté ("private equity") are the first to take advantage of the "privatization" of the economy. They were able to buy only first-half of this year for $ 300 billion of shares in companies, against only 100 billion for the year 2000. "However these operations occur often in financial terms strained economic degradation could destabilize", explains Adam Lerrick. In addition, this credit is then crushed in every sense. It is sliced, repackaged in different slices and resold in a thousand different forms, so that it is difficult to know who really bears the risk.

This task is all the more difficult that all financial instruments are the basis of the constitution of "derivatives", instruments complicated coverage for example against the rise of a currency. Derivatives which may be at high risk have invaded the portfolios. Therein lies the most impressive developments of the international finance since the collapse of the dot-com bubble. In the category of rates and foreign exchange instruments, derivatives have now value "notional", i.e. facial 250,000 underlying assets $ billion, five times more than in 2000! Of course, this does not represent the amount of investors paris, but this gives an idea of this category of investment growth. "Swap credit", which ensure against the default of a loan, including the part of one of these companies purchased in strained conditions, double every year and reached 26,000 billion. While derived products have been designed as insurance products. But they are also of great instruments of speculation because of their leverage effect, which allows to accept (or lose) much more than his release.

However, the new players of finance, the "private equity", and sophisticated credit financing are not afraid to test the limits of all these products. Here is another great evolution of the markets of money since 2000. Investors became much more adventurous. "Hedge funds", who promise to their policyholders to beat the market indices, weigh and between 1,200 and 1,500 billion, almost three times more than in 2000. "They represent a huge proportion of the volume traded on many products, explains Adam Lerrick.". They are the ones who set the price. "Not only they escape to direct regulation, the reluctant authorities to cripple their ability to innovate, but their approach was to emulate. The border between the banks, "private equity" groups and even institutional investors, who want to enjoy all the most of the good markets, blurs.

To some observers, the enumeration of these risks is however playing to fear. "Overall, the balance sheet of the investors and the enterprises, which are full of cash, are solid," said James Glassman, a specialist in the financial markets at the American Enterprise Institute. For him, the capacity for innovation and depth characterizing financial markets today helped to better allocate risk among all the actors in the system. Crises recent September 11 disaster Enron, fall in the category "junk" from the obligations of the automakers Ford and GM were received correctly. The last is the fall of the "hedge fund" Amaranth, which has lost $ 6 billion last month on raw materials, without any serious impact, at least for the moment.

But what is known of the capacity of the system in a crisis Can we continue to play with fire Adam Lerrick proposes a solution. Without going to regulate "hedge funds", considers that it is possible to find a system bringing the positions to "leverage effect" of investors and to inform the market and the authorities responsible for the stability of the system. If he was aware of the potential risks, the market could be more serene. Unless it takes suddenly afraid.