if they get the credit markets moving again how will it effect cds's

[peilthetraveler]

Quote from sjfan:

You know - a lot of institutions (banks, insurers, pension managers) uses CDS to hedge their long debt exposures... if you nullify the contracts, they are all of a sudden unhedged and exposed to positions they thought were neutralized (not to mention loses a boat load of money from what's owed to them on a contract).

And how is it a "negative way to make money"? There's a buyer for every seller. It's no more "negative way to make money" than buying and selling futures or options.

Really? You see this here credit crisis we are in and you cant see it as a negative way to make money?


I personally think there should be a cap on how much someone or some entity can be worth. Put that number at say 500 million dollars. That way companies cant get so much control. Imagine if a company like wal-mart was capped at being worth 500 million dollars. That would mean that instead of the 5 or 6 waltons that own it now, there would be about 200 business owners sharing that 100 billion dollars that the 5 waltons are sharing now.

I mean really...once you have 500 million...there is nothing more to buy. You've got a million dollar house in every country in the world, all the cars you can drive and enough income on the interest to live the rest of you life without worry. Isnt it better if 40 people have 500 million dollar net worths than 1 person have 20 billion in net worth?

You just have too much power when you are a billionaire...power to really mess up peoples lives like what is happening right now. At least if there was a wealth cap, your power would be limited.

 

[sjfan]

Quote from peilthetraveler:


I personally think there should be a cap on how much someone or some entity can be worth. Put that number at say 500 million dollars.

Wow.... just.... wow. You, sir, are the embodiment of mediocrity. Good thing history and progress do not depend on people like you, but on mavericks with unbound ambitions.

 

[Cesko]

Wallstreet is the Pimp. And Politicians are its Whore.

The Tax Payer is the John who gets fucked.

In this colorful analogy, the Pimp and Whore need to convince the John (us) why we should let them fuck us for Money.




I know laughing is not appropriate in this case but.....

 

[achilles28]

Quote from magnum29464:

so why is everyone saying the 700bil is not enough?

Because it probably isn't.

Think in terms of likelihood not rule-based logic.

Ask yourself, will Wallstreet/Corporate America actually write themselves into insolvency by honoring trillions in CDS insurance they can't afford to pay?

Would that *actually* happen?

Or would they reneg? Come up with some bullshit excuse? Lobby Congress to nullify their exposure? Have the FED compensate with a partial payout and excuse the rest?

The Current Oligarchy will not shoot themselves in the head, regardless if their contractually obligated to do so.

They'll find some way to default.

As far as the 700 billion. Its probably enough for the big guys. If its not enough, they'll find another way to circumvent their payout.

 

[achilles28]

Quote from peilthetraveler:

I so agree with this statement. I think they should nulify every CDS in existence. Its a very negative way to make money.

Its like years ago when i was a craps dealer in vegas. You got the whole table betting on the pass line and one a-hole betting on the Dont's. The whole table hates that guy and ruins the experience for everyone at the table and when everyone else loses their money and he wins, they all want to kill him. Who would want to be THAT guy?

I hear ya.

Thats why its literally financial terrorism.

Wallstreet made a bet so large, that if it failed, the entire Global Economy - as we know it today - would literally implode.

They've got a gun to America's head, but its not loaded.

No way in hell these big firms would honor a Trillion dollar obligation in CDS insurance.

Detractors say they'd get sued. Yea, eventually.

But when your CEO of Bank of America and 5 TRILLION in derivative exposure comes due, do you hand over the banks entire balance sheet, and put every branch up for auction?

Or do you reneg, lobby for FED/Treasury/Lawmaker intervention, and take the battle to court - where your company and assets are still operational and in YOUR possession?

Sure, its contract fraud. But with a whole Floor of Contract Lawyers working feverishly to tie up the Complainant in court for years, maybe even a jury trial?! Frig......... they could make it last if they had too.

 

[achilles28]

Quote from sjfan:

That problem has already been addressed and solved via the "cash settlement" mechanism. Upon a default event, according to ISDA protocol, an cash debt auction will take place and used to set a recovery price. This price is then used as a reference for cash settling all outstanding cds instruments on that default.

Can you walk through an example for us?

So a cash debt auction determines payout price?

Who is permitted to bid on the debt (Government)? Why would any Corp bid on debt of a bankrupt company? And what determines bid price on defaulted debt?

LOL , can't believe i just said that.... what determines bid price on defaulted debt...lol

Thanks for sharing, btw.

 

[achilles28]

Quote from achilles28:

Can you walk through an example for us?

So a cash debt auction determines payout price?

Who is permitted to bid on the debt (Government)? Why would any Corp bid on debt of a bankrupt company? And what determines bid price on defaulted debt?

LOL , can't believe i just said that.... what determines bid price on defaulted debt...lol

Thanks for sharing, btw.

Bump for SJFan