The BillyB, Aster & JR8 roundtable!

[BillyB]

No CDS a small investor could buy into? Although, from what I've seen, nothing technically defaults right now. And possibly, those selling CDS's couldn't back them anyway if things went totally turtle.

If you have US$10m, sure More seriously Bunter might know, but AFAIK things like CDS are not available to the retail market, even via retail funds.

Your follow up points are spot on. Nothing defaults these days, it is not allowed to. Hence one might ask, why buy CDS?

Funny old world eh!

It's difficult for retail investors to buy CDS's, as the notional amount insured is usually in blocks of $10m. Even though you're just paying a premium which is a small percentage of that amount, it's still a big credit risk for the person on the other side of the trade to stomach.

I believe there are retail CDS and they are called something like event driven options or some bullshit term, but I have no idea what they actually do and who trades them, and if the people who trade them are forced to keep collateral aside in the event of a default. As with all masterminded instruments, it's all about making hay while the sun shines and hoping someone else will pick up the pieces when things go wrong.

The CDS market is a bit of a mickey mouse game IMO. You're both right in that there is so much small print on the contracts and the fact they are insuring against Government borrowing, that it's unlikely we'll see a pure 'default'. There'll be all sorts of T&C's tied to the practicalities that doesn't explicitly make it a default and, hence, any protection is worthless.

[JR8]

There'll be all sorts of T&C's tied to the practicalities that doesn't explicitly make it a default and, hence, any protection is worthless.

Maybe they're like an expensive fig-leaf allowing you to book a hedge on your balance sheet, whereas in the real light of day they're worth toot.

[JR8]

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved"

Ludwig von Mises, Human Action

[Strong Eagle]

What I don't get about CDS is this:

a) If I wanted to buy a life insurance policy on Kim Il Jong I could not do it because I am not an 'interested party'.

b) If I want to bet against bond trades of some 24 year old yahoo, I can... and so can 10,000 other people... which greatly amplifies the risk... a billion dollar position in sh*t bonds could have 10 or 100 times that amount of payable liabilities in the event of a default.

It just don't make sense that dis-interested parties can buy into a trade like that.

[JR8]

What I don't get about CDS is this:

a) If I wanted to buy a life insurance policy on Kim Il Jong I could not do it because I am not an 'interested party'.

b) If I want to bet against bond trades of some 24 year old yahoo, I can... and so can 10,000 other people... which greatly amplifies the risk... a billion dollar position in sh*t bonds could have 10 or 100 times that amount of payable liabilities in the event of a default.

It just don't make sense that dis-interested parties can buy into a trade like that.

Maybe you have identified the difference. In 1) the risk is so defined, that you could arguably bring it about yourself. Whereas in 2) you are but a drop in an ocean with anonymous potential victims.

[BillyB]

What I don't get about CDS is this:

a) If I wanted to buy a life insurance policy on Kim Il Jong I could not do it because I am not an 'interested party'.

b) If I want to bet against bond trades of some 24 year old yahoo, I can... and so can 10,000 other people... which greatly amplifies the risk... a billion dollar position in sh*t bonds could have 10 or 100 times that amount of payable liabilities in the event of a default.

It just don't make sense that dis-interested parties can buy into a trade like that.

Maybe you have identified the difference. In 1) the risk is so defined, that you could arguably bring it about yourself. Whereas in 2) you are but a drop in an ocean with anonymous potential victims.

CDS's for speculation, as with naked shorting, should be banned full stop.

[BillyB]

Anything relating to the EU - especially the recent bond issues - should now be moved to the joke section!

[JR8]

CDS's for speculation, as with naked shorting, should be banned full stop.

Heh?

So I can speculate and buy a stock if I think it will rise, but not sell a stock (naked) if I think it will fall? You're worse than bloody Sarkozy!

[BillyB]

CDS's for speculation, as with naked shorting, should be banned full stop.

Heh?

So I can speculate and buy a stock if I think it will rise, but not sell a stock (naked) if I think it will fall? You're worse than bloody Sarkozy!

If you're long, you own it. If you short it naked you haven't even borrowed it so your losses are potentially infinite.

I was only relating it to CDS's. And that's the biggest insult yet, saying I'm worse than the FRENCH!!!!!! tete de merde.....

[JR8]

If you're long, you own it. If you short it naked you haven't even borrowed it so your losses are potentially infinite.

Yes of course... I was thinking blur!

I was only relating it to CDS's.

OIC, I thought you were relating it to everything. Hence my comment that you're worse that Le Dwarf de Paris (who only has a ban on shorting (even covered) the main French banks)


And that's the biggest insult yet, saying I'm worse than the FRENCH!!!!!! tete de merde.....

Bwahahaha... I will remember that for the future M. Gros-bouffi Bunter

[JR8]

For those who believe the current crisis in the euro is all down to Bankers and the Greeks.

From an interview with Jacques 'Father of the euro' Delors, and ex-President of the European Commission:



'Euro doomed from start, says Jacques Delors
... Mr Delors claims that the current crisis stems from “a fault in execution”

[sundaymorningstaple]

Which is what they tried to do in '39. This time it's being given to 'em? Interesting, in so much as they may eventually succeed in what they originally tried to do so many years ago in WWII. All without firing a shot.

[JR8]

Which is what they tried to do in '39. This time it's being given to 'em? Interesting, in so much as they may eventually succeed in what they originally tried to do so many years ago in WWII. All without firing a shot.

It seems to be a very schizo moment for Germany. On the one hand there are a lot of people who think precisely as above, i.e. that the leopard never did change it's spots.

On the other hand you have the Germans who still live under a significant cloud of guilt regarding their historic actions (you can hardly walk down a street in Berlin without tripping over some war or holocaust memorial). If you believe the local media the Germans are 'bewildered and hurt' by accusations of taking over Greece and Italy. Apparently France have already agreed that they will bow to Germany. This week Merkel also came out with some classic line, roughly, 'Having control does not necessarily mean dominating'.

p.s. Everything Sarkozy does currently is being driven by his desire for re-election in a few months time. And I was reading an interesting article yesterday that described how Obama is whipping Cameron as hard as possible to publicly support the Franco-German plan (which of course would be completely against the wishes of the UK citizenry), as Obama too sees a renewed and deepened crisis will torpedo his re-election chances too.

Amazing how so much is driven by the power-crazed vanity of politicians. As the original quote from Delors suggests, power and empire-building mattered more than that what was built was a castle made of sand.

[JR8]

How very timely

re: what I was describing yesterday regarding the feeling on the street in Germany, the disconnect between how the people feel and the what the politicians plan, this article sums it up very well.

-------------
European financial crisis? Not in Berlin
http://www.telegraph.co.uk/news/worldne ... erlin.html
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And another amusing snippet, that could be sub-titled '18th successive crisis talks: Complete triumph declared, as with the previous 17.'
--------------------
'Brussels has warned that Europe will “disintegrate”

[JR8]

Germany and France announce agreement to save Europe.
-
2 hours later S&P announce there's a 50% chance 15/17 euro-zone countries* will be downgraded within three months.


haha!




* Incl. Germany and France