• Sprott Money
    04/29/2016 - 05:58
    There is unfortunately no basis for renewed optimism that this current litigation will have any meaningful impact on precious metals manipulation – with respect to either silver or gold.

CDS Traders Haven't Lost Their Shirts, But They Can Be Naked

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Tue, 09/20/2011 - 13:50 | 1689469 entendance
entendance's picture

No media, and probably a column published today and nothing more about this. You wouldnt know anything of this without the internet.
OCCUPY-WALL-STREET-PROTESTERS-ARRESTS( Sept 20, 2011) Spread This Video Please.

Tue, 09/20/2011 - 14:07 | 1689523 LookingWithAmazement
LookingWithAmazement's picture

Obama will be re-elected in 2012. Not because he's so good, but the others are worse or divided.

Tue, 09/20/2011 - 14:20 | 1689563 SheepDog-One
SheepDog-One's picture

Nope, youre wrong, Obama will NOT be 're-elected', I guarantee that...he WILL be put in place by the banksters as a martial law COG Continuity of Government president though when the country collapses very soon.

The sheeple of america really have no idea whats coming next for them, I find it hillarious!

Tue, 09/20/2011 - 14:22 | 1689574 LookingWithAmazement
LookingWithAmazement's picture

So you're a "collapse-believer". What exactly will collapse then?

Tue, 09/20/2011 - 14:31 | 1689589 SheepDog-One
SheepDog-One's picture

And youre so 'Nah, everythings fine really theyre trying to fix it all so you and I can have a good comfy life, really they are'....hey good luck with that man, youll need it.

BTW what I was talking about was not pulled out of my ass, that was from a leaked CIA memo look it up yourself, 'CIA Obama last president' on youtube should get you to it.

Tue, 09/20/2011 - 18:09 | 1690270 LookingWithAmazement
LookingWithAmazement's picture

So far politicians were successful. No Armageddon. You have a direct link on YouTube?

Tue, 09/20/2011 - 14:51 | 1689685 fuu
fuu's picture


Don't fret precious I'm here,
step away from the window
and go back to sleep

Lay your head down child
I won't let the boogeyman come
Countin' bodies like sheep
To the rhythm of the war drums
Pay no mind to the rabble
Pay no mind to the rabble
Head down, go to sleep
To the rhythm of the war drums

Tue, 09/20/2011 - 14:17 | 1689555 GeneMarchbanks
GeneMarchbanks's picture

Rather than getting arrested and your typical nonsensical heroics, I'd prefer an educated revolt within the financial gulag that Wall St has created. At this point I'm convinced closing money markets or buying PMs is superior.

Tue, 09/20/2011 - 14:27 | 1689587 muckraker
muckraker's picture

Nice avatar!

Tue, 09/20/2011 - 14:47 | 1689661 GeneMarchbanks
GeneMarchbanks's picture

Likewise. You're a nice piece of fractal...

Tue, 09/20/2011 - 14:52 | 1689688 fuu
fuu's picture

What should people who do not have money market accounts, no jobs, and no PM's do?

Tue, 09/20/2011 - 15:16 | 1689767 GeneMarchbanks
GeneMarchbanks's picture

Great question. Certainly not asking questions at a financial blog. Your point is made however the occupywallst movement is clearly organized by interests with money.

Tue, 09/20/2011 - 15:29 | 1689814 Bob
Bob's picture

You mean if they weren't getting paid, there wouldn't be even a thousand people in this entire country who would be willing to occupy Wall Street?

Now that's hopeless. 

Tue, 09/20/2011 - 16:25 | 1690008 fuu
fuu's picture

That may be a point, it's just not my point.

My point was that if you do not have a money market, PM's, etc then perhaps all that is left is "getting arrested and your typical nonsensical heroics". I was also hoping you actually had an idea or two on how to have an educated revolt that includes other people besides the monied ones.

Tue, 09/20/2011 - 18:39 | 1690339 AdahPrice
AdahPrice's picture

Join the Ron Paul campaign, and arrange to go door-to-door hanging Ron Paul flyers on doorknobs, before the primary elections.  Not only will you be working for a noble cause, but you will be joining a phyle (re: The Diamond Age).  After the blowup occurs, everyone will have to join some phyle to survive.

Tue, 09/20/2011 - 13:54 | 1689480 topcallingtroll
topcallingtroll's picture

CDS and their related options are just the messenger. They provide crucial information about the state of finances of the underlying asset.

Politicians would prefer to control the sources of information, hence ban CDS. It has been hard for european politicians to lie and deceive the people when there is a snitch out there telling everyone the truth.

Tue, 09/20/2011 - 14:02 | 1689508 equity_momo
equity_momo's picture

I dont like the CDS market as it allows cockroaches like Goldman to game the system in their favor , a la AIG , HOWEVER , if you go around banning this and that , or putting restrictions on shorts or naked shorts , the market will find other ways to punish companies , soveriegns , currencies. It always does.

Short selling ban on financial stocks? Then long only investors run for the exit putting pressue on price and this is magnified with no shorts to give financials a bid.

CDS ban? Then bond investors will reduce exposure if they cannot hedge and those wanting to take an outright short will do so elsewhere putting pressure on other instruments , especially upward pressure on rates.

It all comes out in the wash.   If a companies balance sheet and business is sound , shorts will utlimately get burnt. If a countries balance sheet and politicis is sound , then shorts will ultimately get burnt.

Shorts are the last bastion of democracy. Those betting against "the system" are doing us all a favour. When you see governments impose capital controls and whatnot , you know its a fucked up situation. Freedom? Democracy? I cast my vote by betting against the ponzi - without that ability its a hop skip and jump to a fully planned economy and some spiffy new uniforms.


Viva la shorts.

Tue, 09/20/2011 - 14:25 | 1689583 reload
reload's picture

"ESPECIALY UPWARD PRESSURE ON RATES" - thats my take on the most obvious, but obviously unintended consequence that political intervention would cause. Hard to quantify though.

Tue, 09/20/2011 - 14:12 | 1689530 Paul67
Paul67's picture

Great idea; lets fix one ponzi scheme with another ponzi scheme.

Yah that’s the ticket, now back to my wife........ Morgan Fairchild.........., whom I’ve also seen naked.

Tue, 09/20/2011 - 14:09 | 1689535 LookingWithAmazement
LookingWithAmazement's picture

PMs don't rise so steeply anymore; investors turn to "undervalued" gold stocks, where risk is lower. Or will the folks at KWN ("gold to $12.000") eventually get it right?

Tue, 09/20/2011 - 14:27 | 1689577 SheepDog-One
SheepDog-One's picture

Thats because gold is also manipulated heavily by the world central banksters. Yea they want you to buy 'gold stocks' instead. And no, I dont believe the 'Gold to $12,000' people have it 'right', because they havent factored in a world where gold is $12,000 'dollars' also means we've totaly collapsed, and youre spending your days trying to fight off mobs of people who want to kill you and take your gold or whatever else youve got.

Tue, 09/20/2011 - 14:59 | 1689717 Paul67
Paul67's picture

Correct, a world with Gold at 12K/oz doesn’t buy what 12K does today. Hence why you need a fixed rate fiat debt on a real asset in order to leverage the increases in any PM appreciation.

Tue, 09/20/2011 - 14:13 | 1689544 buzzsaw99
buzzsaw99's picture

CDS are a scam. The sellers have no intention of paying off ever. Heads they win, tails the taxpayer loses. I wish I could sell me some CDS.

Tue, 09/20/2011 - 14:41 | 1689637 equity_momo
equity_momo's picture

Keep that train of thought , follow it through and where does that end up? Reset occurs sooner or later. CDS sellers are doing us a favour as those seeking the most efficient use of capital will ultimately win - and the mispricing of risk and mis allocation of capital , ie governments and government sponsored entities (including Wall St) , will be forced to act as capital dictates.

We have a deflationary collapse or a hyperinflationary collapse. The former will be the least messy for society.  Do you really think the elite will do better through pricing the plebs out of food or just pricing them out of their own hopes and aspirations. People will suck up alot of misery if they are fed and kept warm. Hyperinflation does neither.  We are in the great unwind and governments will get taken to the cleaners until markert forces are sated. That means lower RELATIVE prices. Id guess that means lower nominal prices.

That does not mean gold collapses , we clearly need an anchor point and golds suppression over the last 30 years is still being unwound along with the mispricing of risk assets. Gold is not a risk asset.

In a World of no growth (IMF will be downgrading from 4 to 3.5 and from 3.5 to 2.5 etcetc as theyre always behind the curve) this is the only outcome possible.

Tue, 09/20/2011 - 14:13 | 1689546 Robslob
Robslob's picture

This is BULLISH!

Tue, 09/20/2011 - 14:17 | 1689553 Michelle
Michelle's picture

Naked CDS are a problem, a BIG PROBLEM, and this market should disappear! It's pure gambling and when they trigger causes liquidity problems in the markets. Protecting this market is insanity and is no more insane than deciding to build a bomb in my backyard and then expecting the government to pay for all the carnage when I decide to pull the trigger.

Tue, 09/20/2011 - 14:25 | 1689582 SheepDog-One
SheepDog-One's picture

Yet the 'Gubment regulators' now want to 'protect us' from 'risky gold trading' by gathering up your gold and handing you a voucher in return, according to congress.

Tue, 09/20/2011 - 14:29 | 1689585 topcallingtroll
topcallingtroll's picture

Buying a swap from a counterparty who has no ability to pay up is a naked cds in my judgment.

My counterparty doesnt have to own the asset I might demand he swap, he just needs access to the capital necessary to make good on his promise.

If only those who own the underlying asset could sell swaps it would be an even less liquid environment, and the information contained in the price trends less reliable as a guide to the underlying asset.

Tue, 09/20/2011 - 14:18 | 1689559 Piranhanoia
Piranhanoia's picture

The tsunami approaches.  For now it is just invisible rip tides dragging everything out to sea. It crosses the Atlantic draining banks, and like a hurricane does, it will hammer the caribbean and turn the paper banks to sand. Faith in something as inherently corrupt as a CDS based upon a sovereigh nation that bought crap paper and now relies on that as a major percentage of their assets may not be such a great idea going forward.

Tue, 09/20/2011 - 15:06 | 1689566 Bob
Bob's picture

Banning CDS?  Just another example of dot gov crippling the innovative invisible hand of the market.  So sad. 

How we gonna get our vig?  In advance, I mean. 

This will impair free and efficient price finding for gamma and zeta risk. 

Okay: /sarc

Tue, 09/20/2011 - 14:26 | 1689584 ZackAttack
ZackAttack's picture

I don't care who makes or loses money on swaps as long as they aren't ever transferred to the public balance sheet.  Treat it like any other insurance product and let the states determine whether there's adequate capital backing the writer.

Tue, 09/20/2011 - 14:31 | 1689596 Michelle
Michelle's picture

Hell, let's not ban anything, we are such an immoral society today anyway, everything should go and we should all be happy that we have free air to breathe, too.

If Wall Street creates it, we should be proud, no, HONORED, that such innovation exists within our borders. We should bow down to the Wall Street gods and allow them carte blanche on anything they want to do, no matter the outcome. We should bless the ability to even banter about these corrupt markets for what productivity may come otherwise?

Give me a freaking break, I say we stop TOLERATING and start DEMANDING that "The Markets" don't CONTROL US! The politicians are already owned and so are we.



Tue, 09/20/2011 - 18:19 | 1690218 jm
jm's picture

Interesting post.

I agree with you about moving trading onto exchanges.  But the exchanges then need to net against each other or you face the same problems as without any exchange clearing at all.   And this process presents a nightmare.

Also you seem to imply that a desirable aim is to cut CDS dealer margins.  There's not much to cut out of index trading, and I'm not sure how much volume there will be on single names at least in the short-term future. 

Also, there is a lot of institutional money that drops money into CDX.IG until OTR issuance comes around. It's not all hedge funds and prop that use CDS.

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