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US Financials CDS Update
Remember when MS CDS was back at 300 bps a few days ago when it reported it was perfectly hedged?
BANK & FINANCE 5YR CDS
BAC 410/430 +15 AXP 118/128 k100 +3
GS 375/395 +10 COF B 112/122 k100 +5
JPM 160/170 +5 COF F 155/170 k100 +5
MER 450/470 +10 GECC 270/285 k100 +10
MS 480/500 +20 HSBCF 270/300 k100 +5
WFC 163/173 +3
BAC SNR/SUB 160/210
CITI 280/300 QTE +5
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CDS? I thought the ISDA killed that market dead?
Post tomorrow's UCG if it's still around.
That was sovereign CDS.
Corporate CDS is very much alive for good reason, a company can go bankrupt, regardless how ISDA tries to hide a default in "credit events".
If you think MS is going bankrupt anytime soon then good luck to you sir.
Dude, they are already Bankrupt. Not admitting it is their biggest crime.
Besides, sovereign CDS is difficult to kill due to regulator rules (new Basel and some regional and domestic) which allows banks to offset sovereign debt exposures and therefore affects their risk capital. This is why CVA desks continue to be the largest market participants and largest short credits, despite what the media and EU politicians may have you believe about nefarious speculators.
I've spoken with several MS people lately who openly admit to being nervous about the future of the company.
I'm nervous about the future of the country
Relative value idea:
Buy 5 yr protection on a 5th to default basket on GS, C, MS, BAC, JEF
Sell...hummmm errrr......Aha! sell protection on 5yr Mars (after all they must be doing really well to import all that stuff from earth). In additon, there is huge carry since the Mars year is 686.98 Earth days. Make sure your mars trade has the ActEarth/360 daycount convention and not the ActualMars/690 convention to benefit from the carry arbitrage.
Execution tip: Buy the protection from a martian counterparty under Martian Swaps and Derivatives Association (MSDA) standards and martian law as nobody on earth will honor that leg of your trade if it pays off. Just imagine a determination committee formed by GS, C, MS, BAC deciding on weather their own failure to pay was a credit event or a voluntary restructuring. Touché.
Why not, it almost happened before, save for our collective largesse.
In response to "Corporate CDS is very much alive for good reason, a company can go bankrupt, regardless how ISDA tries to hide a default in "credit events"."
Yeah right, see my post above. Here is the committe that is supposed to determine if the banks defaulted
ISDA Determinations Committees (effective 30 July 2011)
Americas
Voting Dealers
Bank of America / Merrill Lynch
Barclays
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS
I think that kills both the sovereign AND financial CDS markets
'I think that makes the sovereign AND financial CDS market dead'
ISDA made an oopsy with the Greece/French banks statement. Not a credit event because it was 'voluntary'. Unintended consequences 101 as Durden likes to point out.
So you are implying that they will not make an "oopsy" again, and that banks have no risk of calling a haircut voluntary or a controversial resturcturing. My guess is that there is a proposal of paying bondholders 100 % of face value zero coupon in 200 years and, CDS buyers ask ISDA their if that is a credit event and they hold it to a vote, they would unanimously determine that that is NOT a credit event. Do you at least happen to see the conflict of interest of banks determining weather their own acts are a credit event or not? This is the equivalent of someone raping you and then that same person being the sole jodge on weather you consented. Ouch!
You misunderstood. The 'ooops-ee' discredited (pun intended) the ISDA. We're in agreement.
Sorry for the confusion mate. I tried once to make up ten puns to make people laugh and no pun in ten did.
BAN CDS (again)
it's pure poison, in every sense
CDS is bad for systemic stability, but good for clearing out the trash. All the junk needs to be liquidated, and trying to prevent that either by reinflating the bubble, or regulating Kyle Bass out of business is pretty stupid.
http://azizonomics.com/2011/11/17/negative-real-interest-rates/
look, I like Kyle Bass, ok?
still, it's poison
you buy a house in a new city
you see how a house burns down
you realize your pals made good money out of insuring it
you see another house burning
your pals make more money
you realize some pals of your pals burn down houses for profit
you still taint yourself by "doing as all others do"
ISDA may have killed the sovereign CDS market. I'm not sure about that though.
Someone else asked "who would buy these". The answer: it is rational as an employee (CEO, trader, etc) of these companies to play with these. it would NOT be rational for an owner who has full personal liability to do these.
If you play the CDS and win big (and your counterparty can pay), you can rake in huge profits, which means huge bonus.
If you play the CDS and lose big, then your firm goes under and you get a golden parachute and probably a "retention" bonus.
If you play the CDS and your counterparty goes bust, you cry to Uncle Sam and the Bernank who WILL bail you out. Bonus again.
There is no losing proposition for these twerps.
The answer is clear
-ban all CDS products. they are gambling instruments and not "investments"
-reinstate Glass Steagal.
-disallow public "ownership" in i-banks. instead they need to all be partnerships WITH liability.
for one thing the CDS were and are heavily used as regulatory workaround hedges on position trading desks.
the answer is to make CDS less likely to dramatically explode, and prohibitively costly to game.
put them on listed exchanges, with central clearing, margin calls and daily settlement.
ambitiously, replace credit rating agencies with a credit rating market.
and ban naked shorting.
Who would buy a CDS now?
LOL
CDS are DEADer than Elvis
No Way! Elvis was spotted at a Walmart last nite!!
Casino Royale ...
bnp?
CDS.. Cuntish Derivative Sluts!
/ES going back to VWAP
Computers back in charge
bEep beEEP bloop Errrrp bluRp
'Twas never in doubt. The message to Merkel has been sent...
MS is too big to succeed. if not for being bank holding company they'd be six feet under with Lehman. Citi, BofA and MS are zombies. John Mack and James Gorman are full retards.
I wish I can buy those CDS easily. For example the swiss CDS was up 50% yesterday, it looks like something fun to play with.
yeah where the emini cds's at ?
Perfectly hedged?
Ha, no such thing.
Given that JPM holds about half of all derivatives, north of $50 trillion, I guess it's logical that their CDS are priced relatively low. I mean, no matter what happens, TPTB will circle the wagons around
whatever comes Jamie's way.
Jamie Dimon has got to be the world's most powerful man. What Jamie asks for, Jamie gets.
Forget nukes, it's THIS terror that needs to be defused.
Yea...
According to the Bank Of International Settlements global derivatives were @ 516 trillion (and this was for 2007)
So no. JPM does not hold half of all derivatives.
And the BIS IS probably the most influential and powerful entity in the world, not Jamie Dimon
i think this guy's blog is hilarious. except the part about the big global banks being insolvent. not so hilarious.
http://fucklloydblankfein.blogspot.com/2011/11/thursday_17.html
hello paarsons. a douche by any other name is still a douche....
lloyd blankfein and mini-me look alike. blankfein is mini-me, mini-me is blankfein.
BLK is trading as if its bailout is in the bag. Or maybe that Larry Fink will be successful in MAKING PEOPLE BUY BLK SHARES.
CDS = Can't Do Shit
CDS about it at this point bitches.
This muther is about to blow up.
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Short crude oil. The world is swiming in oil as everything else. Its elevated price is just a scam. The probability of war is zero. Uncle Sam can´t go to war against Iran because both its flanks are insecure. The left flank goes to the Straits of Hormuz and if that is closed this means crude price $300 and Stalingrad for US forces in Iraq and other US vassal states in the gulf. As for the right flank that supply line goes through Pakistan. It´s shaky enough as it is.