Global Rally Shines on Wall Street

The question is what would cause Wall Street to tighten credit, and what impact would that have on market liquidity, Petas writes. The cause is impossible to know, he writes, but the impact would be huge.

With the proliferation of both hedge funds and derivatives, Wall Street's exposure to leveraged players has increased, writes Petas. He adds that risk tolerance models might be skewed given the lack of market volatility over the past five years. "Most of the models do not adequately anticipate the potential effects of a large de-leveraging event."

Petas believes that brokers make 95% of their money from 5% of their clientele and that most of that 95% is in hedge funds.

"The one lock in our view is that banks and the Street will behave as they have every time in the past": They'll cut lines of credit, make their margin calls and protect themselves as best they can, he writes.

But until we see that kind of activity anywhere but subprime, the crisis isn't upon us. On Monday, traders seem to be embracing that notion.