Detailed market commentary at The Market Ticker and Ticker Classics
(The Year 2012 In Review)
Donations accepted; we offer GOLD ACCESS for enhanced privileges. T-Shirts, caps, coffee mugs? Click here.
BlogTalkRadio - Mondays at 3:30 Central - Yes, TickerGuy has a radio show (kinda)
RSS available You are not signed on; if you are a visitor please register for a free account!
|MarketTicker Forums Single Post Display (Show in context)||
User: Not logged on
|User Info||Better watch these.... ; entered at 2007-07-02 19:22:53|
Registered: 2007-06-27 Jackson
Man. The trouble you could get into if you were issuing CDS for this stuff. Just a few contracts could totally wipe you out. It's a little like like having sold PUTs on a stock that was doing great and is now about to BK. At least here the bonds have some recoverable value but it sure doesn't look like it will be much when all is said and done. ABX BBB is going to zero.|
For the swap to happen their has to be a "credit event" which is defined in the contract of the swap. That may why they are so afraid of having any of this stuff marked to market. And ratings agencies are dragging their feet to downgrade this stuff. Anyway the news folks talk about RMBS and CDOs that Bear Stearns' hedge funds held as being illiquid and difficult to account for. CDS is way worse than RMBS and CDO in that respect. Most CDS is not tracked by the ABX, CMBX, CDX, etc. Those indices represent only a sample. The total notional amounts of these contracts that in existence is in the hundreds of trillions. A hedge fund doesn't need leverage to get in trouble with these. These things are levered 10-20x to begin with.