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Closing Dexia Long CDS With $3.6MM Profit On Imminent Nationalization Concerns

Tyler Durden's picture


Back on May 25, somewhere close to the irrelevant equity market's highs, when once again a little ahead of the market curve we suggested that Dexia would be the bank most impacted by the next round of Greek-induced risk flaring, we were banging the table on a long Dexia CDS SUB position. 5 Year subs were trading at 568 bps then. They are now 31/39 points upfront and every day for Dexia could be its last. Which is precisely why we are closing the trade: should Dexia go under it will drag all of Europe with it. We expect a partial or complete nationalization to be announced imminently, which in addition to all other side effects, would lead in a Bear Stearnsing of all accrued profit. With a 20% recovery rate on the CDS, the P&L on the trade is $3.6MM on $10MM notional. Not bad for a 4 month holding period. 



Source: Bloomberg


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Fri, 09/30/2011 - 09:44 | Link to Comment Top_Kill
Top_Kill's picture

That will buy a lot of AG a firesale prices!

Fri, 09/30/2011 - 10:30 | Link to Comment Don Birnam
Fri, 09/30/2011 - 10:34 | Link to Comment WoodMizer
WoodMizer's picture

I came on Aline for five years.

That German bitch was the best fuck I ever had.

Fri, 09/30/2011 - 11:14 | Link to Comment BrocilyBeef
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Just buy silver buff rounds.

Fri, 09/30/2011 - 09:43 | Link to Comment Seize Mars
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bang tidy

Fri, 09/30/2011 - 09:44 | Link to Comment Captain Willard
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Tyler: Precisely whom will nationalize this Bank? Belgium?

Just what is Belgium these days? (aside from great beer and very nice people)

Fri, 09/30/2011 - 09:55 | Link to Comment GeneMarchbanks
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Aside from being the worlds most peaceful anarchy they are soon to be the lucky inheritor of an extremely over-leverged slush fund. Questions?

Fri, 09/30/2011 - 10:16 | Link to Comment sultan_selim
sultan_selim's picture

It's Franco-Belgian. So France will. 

Fri, 09/30/2011 - 10:33 | Link to Comment Don Diego
Don Diego's picture

Luxembourg put, I believe, 500 million in Dexia in 2008, time to double up on the loss!

Fri, 09/30/2011 - 10:50 | Link to Comment Overflow-admin
Overflow-admin's picture

Should say which GOVERNMENT will nationalize this Bank??? Belgium doesn't have any since... more than a year!

Fri, 09/30/2011 - 09:47 | Link to Comment snowball777
snowball777's picture

I see a giant roulette wheel...but instead of numbers, there are symbols on each of the for MS, one for Dexia, one for SocGen...the wheel is spinning...who will it be...who will it be?


Fri, 09/30/2011 - 09:49 | Link to Comment ISEEIT
ISEEIT's picture


Fri, 09/30/2011 - 09:49 | Link to Comment PontifexMaximus
PontifexMaximus's picture

They will create a "new" sep. bank, protecting only saving accounts. Do not ask me what will happen to the rest! Don't forget, Belgium can't saddle it, they are broke. Sarko? I didn't check his wallets. Monday we know more.

Fri, 09/30/2011 - 09:49 | Link to Comment swissaustrian
swissaustrian's picture

Get out of CDSs anyway. I did that a few days ago, too. I don´t trust my counter parties.

Fri, 09/30/2011 - 09:51 | Link to Comment pooplagrande
pooplagrande's picture

Well done sir! I only wish that us wee little folk could trade with such coinage...guess we have to just stick with partitioning our rations towards our tidy armageddon kit!

Fri, 09/30/2011 - 09:53 | Link to Comment oogs66
oogs66's picture

these products should have been on exchanges 2 years ago....banks fought it, and now banks pay the price as their shares get hammered for all their counterparty exposure

Fri, 09/30/2011 - 09:53 | Link to Comment walküre
walküre's picture

I don't understand this market today.

Was supposed to be the bear trap and Germany fix and then this? /sarc

Fri, 09/30/2011 - 09:52 | Link to Comment youngman
youngman's picture

"Monday we know more." we won´t ...and that is the problem.....

Fri, 09/30/2011 - 09:54 | Link to Comment Gordon Marock
Gordon Marock's picture

Please sir, may I have some more CDSs?

Fri, 09/30/2011 - 09:54 | Link to Comment Peter K
Peter K's picture

You go girl:)

Fri, 09/30/2011 - 09:56 | Link to Comment koeleköpke
koeleköpke's picture

dikke Imbev Dehaene will solve this problem on his way...


Fri, 09/30/2011 - 09:57 | Link to Comment WoodMizer
WoodMizer's picture

Now I know why this song is so Goddamn long.

Somebody pull the plug already.

Life support costs a fortune.

Fri, 09/30/2011 - 09:59 | Link to Comment disabledvet
disabledvet's picture

"Bear Stearnsing" still sounds better than "Lehmanizing." I'm still trying to figure out what an "systemized deconstruction" of these large financial entities (i'm not including "the country of Greece" in this btw) looks like in Europe ala a European Dodd/Frank. Actually I can see a "takeover" of Greece more easily than i can of say "the entity known as Dexia."

Fri, 09/30/2011 - 10:09 | Link to Comment dcb
dcb's picture

you do all these trades, and they look good, but my question is where can the retail investor get stuff. sounds nice, but...

Fri, 09/30/2011 - 10:19 | Link to Comment Growyourownfood
Growyourownfood's picture

I have a few questions about this and would very much appreciate an answer from someone knowledgeable on this:

What is required to be able to trade CDS? Does one need an acocunt at Goldman or some place like that, or can the retail investor also get access?

Is it possible to buy CDS on margin, and if so, what are the margin rules for CDS? In this trade, the CDS tripled, and the profit was $3.6M, so does that mean that $1.8M was invested on day 1?

If Dexia is nationalized, would the equity drop substantially, so is the equity potentially a good short?

Fri, 09/30/2011 - 10:34 | Link to Comment Don Diego
Don Diego's picture

if you need to ask....don't do it

Fri, 09/30/2011 - 11:01 | Link to Comment Captain Willard
Captain Willard's picture

You need as ISDA agreement with a broker.

I have one with Morgan Stanley. Will they pay me if I'm right about anything? I doubt it. So I haven't used it. Look at their CDS!!

Fri, 09/30/2011 - 11:02 | Link to Comment JW n FL
JW n FL's picture



The largest growth segment since 2007..

shorting shit..

destroying shit..

vulture oppurtuntites..


All the talent is breaking the World.. no one is putting it back together, the fact is even if someone wanted to put things back together they would get blown out (away) by some Government Program.

The World can Not! Right itself thru normal supply and demand becuase everything has been FUCKED UP BY GOVERNMENT INTERVENTION(s).


SO anyone who is not shorting something.. and using the money to buy Silver / Gold.. well thats just too, fucking bad! for YOU!

Fri, 09/30/2011 - 12:30 | Link to Comment hungarianboy
hungarianboy's picture

Nice done, just didn't knew you actually took position in it according to that Article.

Keep up the good work

Fri, 09/30/2011 - 12:31 | Link to Comment Lmo Mutton
Lmo Mutton's picture

Beats the coinage I am making selling newspapers.

Fri, 09/30/2011 - 14:20 | Link to Comment SAME AS IT EVER WAS

That was a very nice trade, very nice indeed! I must conclude their is not a ppt or skybot 3000 hft's in the cds market.

Sun, 10/02/2011 - 15:35 | Link to Comment LookingWithAmazement
LookingWithAmazement's picture

Dexia being saved. No Armageddon. Boring world we live in.

Do NOT follow this link or you will be banned from the site!