We've talked throughout this week about the great business, the Investment Banking Business and we mentioned that, although, these institutions on the front edge of financial innovation, then they also play a significant role in the inception and sometimes in the development of some events or processes that prove to be expose harmful for a lot of people and for the market in general and these are so-called crisis. Now, there are plentiful books written about crisis starting from the mania of Tulip Bulbs in Holland and then later this famous story of the South Sea Company and then the stories of other situations and then The Bubbles for the Great Depression and even the, one of the most recent this is the Bernie Madoff Pyramid. One thing is clear, that oftentimes, you talk about some illegal activities where people do not tell the whole truth and they get a lot of people engaged and they're lying to them and then these people get damage so we set this aside. Instead, we're talking about the situation. No one lies but then people sort of get deceived by themselves. The mechanics of any crisis includes the point at which a lot of people at large, the public, the crowd gets involved. So no offense intended to these people, they are the ones who cannot properly assess risks. They are the ones who are really overwhelmed with greed and jealousy. They are the ones who ignore the clearest signals that show that something is going wrong and you do not have to be just a person at large. It's time to recall that Sir Isaac Newton, one of the greatest thinkers of his time, also fell a victim of the South Sea Bubble and he once he is quoted as having written that I can calculate the movement of the stars but not the madness of men. And therefore, if people of this caliber sometimes are victims, you can imagine what happens to just regular people who have very limited ability to protect themselves or even to think what's going on. And here, as you can see, that greed plays the key role in quoting Oscar Wilde we can say that, I can resist everything but temptation. And people are really tempted because they see that everyone else makes money and say why wouldn't I try to do so too? Now, the story here can go on for a while but what is important for us is that the crises of the past, they sometimes will deal with some simple instruments but again, a share of stock is an events instrument for a person who has nothing to do with understanding of financial markets, let's say a couple of hundred years ago. But now, when we look at that, bubbles here. We now are in the shoes of the people who can take a look at that with have some more analytical approach. Well, first of all, we know that in private settlements, we go and see runs, right? Remember when we talked about banks when they saw that people go crazy, they run on the bank and there is a self-fulfilling prophecy. In public settlements, we go to these bubbles and crashes. Well, why do we talk about them? I already said, but for now, the important thing is that the damage is when the bubble bursts because let's say, if you are a participant of any bubble, you have some money saved and you take this money and you just put this money in the market, fed the growth and let's say you lost this money. The bubble burst and you got nothing. Now, it's bad for you but it's not so bad, if you didn't use leverage. You didn't borrow money. But let's say if you borrowed money and you put your house as collateral, invested all this money and then you can see that that the results in the distorted and damage situation in the economy. When a lot of people become bankrupt or penniless in a very short period of time and that really distorts prices for many assets not only these assets that are participants of this bubble. So we can see that this, in itself, possess a huge challenge and this is only the beginning of the story. But now we imagine that, we are entering the new era and recent decades have been marked with the explosive growth of new innovative activities by the market participants primarily from the investment banks so they introduced a lot of instruments that are very difficult to properly evaluate, even to them but to the public for sure and we are talking specifically about derivative instruments. The ones that use some underlying as collateral or quasi-collateral and then, the cash flows produced by these instruments are a function of the cash flows produced by collateral. Now, this, in itself, first of all, fundamentally as a result the volume grows significantly and if you talked about the volume of open interest in some option containing securities, you can count in hundreds of trillions of dollars right now. This is more than the GDP of the whole world but and obviously, more than the overall volume of all non-derivative financial markets. But the reason here is most of this money is on paper but the key story is that it is the existence of this advanced instruments that makes it more and more difficult for the public at large and investors at large to control these risks and that even makes it harder for them to properly manage these risks. By the same token, the people who invent those and who market those name of investment banks, they have an incentive to enjoy this advantage and to somehow get a lot of this money involved in these processes and when everything goes okay. Everyone sort of makes money because prices for some of the assets, they do go up. And, as a result of that becomes really dangerous. Now, I would like to tell you that we talked about temptation's, we talked about greed. But if you look at the performance of the US Stock Market or less a hundred years, you would see that the periods when it was profitable. They really were much more frequent when the periods when the market crashed. And that, in itself if, you take the really long term perspective, tells you that you know you can survive and you still will be in a significant profit. The problem though is that sometimes people will have to act right now and these crashes they happen over a short period of time, and people lose everything and if they are leveraged, if they really pledged collateral they can become penniless and go bankrupt really quickly. Now, the technology based. Let's say innovation based, crises are even more dangerous because they involve not only one market, but in all the global capital markets. So what happened? Let's say, what started here can easily as a huge wave go over the whole global market and that contributes to the potential damage. And the most recent financial crisis that, the most acute phase of which we saw back in 2008. Some people say 2007, 2008 it doesn't really matter right now. Most of them believe that the crisis is not yet over completely. That was to a significant extent fed by the introduction of new specific financial instruments but at the same time that the good old thing when people keep telling everyone. The price for this asset would always rise. And this is really being hammered in human minds and sometimes they lose track of effect of what is real and what is not. And that is why we had such a huge damage in this crisis. We will talk about that and what the resulted in that in the beginning or, next week. And the end of this course will be devoted to what measures were taken and how that cope with the situation but for now, we see that the existence of large scale crisis really, it cries out for some kind of regulation. In the next final episode of this fifth week, we will say a few words about the regulation in the area of investment banking.