The result is that we do a lot less hedging than we did in the past, and we are spending a lot less money. The VAR calculation in the portfolio has also gone down significantly. We go through that exercise several times a year. That s why we use the caps to create asymmetry. We can t protect ourselves completely against a meltdown scenario in interest rates, but for any movement in rates, either positive or negative, we want the upside to be worth more than the cost of the downside.
Economic fundamentals are meaningless in times of crisis.
The dramatic deterioration in credit spreads last September and October had nothing to do with the fundamentals of corporates. We don t have this thing completely right. Quite frankly, we re not sure we ve completely fleshed out all of the ramifications of an inverted yield curve over the long run. We have a lot of internal academic debate about that. But apart from that, we think this is the way to go.