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US Default Protection Surges To Widest Levels Since March
The fire in the sovereign periphery is slowly moving to the core. Today, US CDS, on which we have been constructive since it hit 20 bps in September, as unprecedentedly cheap insurance, are trading 55/60, or almost 200% "higher." This is the most 5 year US protection has cost since the market lows in March. We anticipate at least another 15-20 bps of widening in US risk absent some dramatic and miraculous improvement in Europe, as existing shorts are forced to cover en masse. As for the "sure buy" out there, it doesn't get any better than German CDS.
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if this breaches 75/80 it will be a shit show
if this breaches 75/80 we are in for a shitshow
Count on it. Everyone has always wondered what happens when China says FU. I say they do it for next week's auctions in retaliation for the Taiwan arms sale. That's why protection is probably surging because everyone is scared shitless if they make a public announcement like this. WTF do you think the equity markets would look like if the shorts were finally spot on about US Treasuries? It's a super shitstorm and there will be no cover in either the fiat US of fiat dollar. Everyone will freak out. And China will have the other side of the trade because they started it.
901-905 sounds about right. Of course nobody wants to know what happens once 901 goes buh-bye.
886 should be the absolute bottom, but I think 911 is first support, then 886. We will see! :)
I would like to think 886 would hold; then again I turn on the news, read ZH and go "oh shit" and realize that Bernanke is still our central bankster.
792 is possible if we break each resistance level with another 2.5% down on over 1.5 to 1.8 billion shares every time we support it. The 200 DMA could die tomorrow.
my guess is an 85% decline from the all time high over a period of perhaps five years.
Interesting...and of course there is a non-zero chance that the US defaults on some debt (and getting more non-zero all the time) but there is probably a pretty narrow set of circumstances where it becomes the case that A) The US defaults on some of it's debt and B) that whoever is on the other side of your CDS protection is still in a position to make good on his half of the deal.
how does the dollar maker default on dollar denominated debt? or is there some u.s. sovereign debt denominated in foreign currencies or commodities we don't know about?
Easy, just devalue the dollar to zero.
Or just set it up that it scares everyone out of the game. The loss of faith will be many times more dramatic and overamplified than the reality.
Man i keep waiting for people to lose that faith. But they've all got battered women's syndrome.
Every battered woman knows they should grab that fork and stab him to death but they are worried about being punished for it, being told by EVERYONE it's not the right thing to do or it was the wrong way to handle it. Everyone who tells her to leave can't provide the job or support or real help to make that happen. Everyone who tells her to stay probably could provide the help but don't want to.
The MSM was going to try make a big deal about Haiti "lawlessness" because they were scrounging for things to eat and survive. So it's clear that powers that be want to have "laws" when they don't even make any freaking sense or have 0 justification.
Mother Teresa devoted her life to helping the poor because she had some intense religious experiences as a youth and got hooked on the temporal manipulative satisfaction of it. So they clearly know how to make you their bitch. It's just people gotta learn how it works and why it won't work and why it will end badly.
God's going to end up with more gang members and more victimcs to abuse more harshly than ever or they are going to get torn to shreds, pulled to the 4 corners of the earth like a giant drawn and quartering event. Giddyup.
Anyone know a way for retail investors to get in on some CDS action?
I found a couple of the comments on this Seeking Alpha post (which referenced something here on ZH) useful:
http://seekingalpha.com/article/179964-cds-spreads-how-to-profit-from-th...
Maybe some bright bulb at one of the big asset management shops can come up with an ETF that tracks the STUPID/PIIGS/BRIC CDS spreads or one of the existing similar indexes or something?
It is simply amazing!!!!......how the worlds problems will be solved by more debt and less net capital available to the PRIVATE SECTOR.....basic stuff .......pain avoidance seems to not be on the menu.......years of bloated political corruption and violation of fundemental economics will clearly end badly......GLOBALLY and locallly.
Germany is going to have to hold up the whole EZ with their gold/bunds. Good luck!
It is sadistic of me, but I do find it funny that so many people ignored the warning signs from the EZ. Now to see how people will react to the same news about US states and cities in 20 10. I bet no one listens. It is like in "White Men Can't Jump" when Snipes says to Woody, "You hear Jimi, but you ain't listening."
Listen, paper is paper. It's value is as good as the ink on it. The system goes now! Buy gold and silver and whatever you want but if you think that holding solar doelarrs is going to help, good luck.
you don't have to marry your doelarr position. if you can only be one thing now, let it be nimble. Ready to buy silver @ < $10 again with all my FRN's
how do you buy the German CDS?
What bank has the capital to pay out a default of any of the countries withing Europa! I think the media is missing the big picture here. It's the leverage that this debt has brought to the world that is the real problem. These policies are worthless yet they have been used as collateral!
There will be no "default." There will be a "strategic default" by currency. B Gross was over the top today saying no one is going to default. Of course Bill. They will cut their currencies in half and that will not be announced either. This will kill two birds....claims on CDS will not need to take place and the debt will be paid off.
What about the interest rate swaps though?
Heck I'd sell a CDS contract of US Debt. Besides, If the US defaults I can't make good on the contract, so you're screwed. BTW, I'll keep the premium.
andy, euro just dropped to 1.3692.
and japan down 3%....in danger of giving up 10,000 (again)
....and gold is up :)
The Samurai like their gold. I guess they want it back from Averall, Bunny, and Prescott haha!
whack or be whacked
That graph reminds me so much of some other stupid graph I've seen ... just can't remember where I saw it last ...
http://www.takeitbackday.org/Website_Summary.php
http://www.takeitbackday.org/
Nobody with a brain buys US CDS and expects to get paid. Most likely IBs sell it to each other and book gains on the sell side and pay out bonuses.
Institutions buy it because it enhances the value of something else they own or want to sell due to some bogus ratings arbitrage whatever.
LoL! Insurance against US debt default. I'm I understanding this right? That policy couldn't be worth the paper it is written on.
More news out scrolling across CNBC ticker now that Europe CDS spreads have widened even further. Euro might get to 1 for 1 on the dollar LOL