The credit default swap market is a modern Delphic Oracle. It speaks
loudly and profoundly – these days at regular intervals – albeit using somewhat arcane terminology.
…The most plausible interpretation - and here I’m willing to debate what
the Oracle meant exactly – is that people expect the government will
force the conversion of junior bank debt into equity. The treatment of
private preferred shareholders at Citigroup, last week, is seen as the
harbinger of further losses for investors.
…The events of mid-September 2008 were traumatic and awful to behold. I
saw that trailer and I don’t want to see the movie. But it is exactly
into that scary future that we now head.
Addendum: An excellent follow-up.
Fix first URL, Will Wilkenson will be confused
http://baselinescenario.com/2009/03/06/whatever-did-the-cds-market-mean-by-that/
I’ve corrected the link, thanks…
Bill’s comment is gold – you can (if you are situated in a firm that is creditworthy
can place bets WITHOUT much capital outlay, as to the financial health of another firm
now there is credit inherent in one’s firm making good in the case that the bet goes
awry, but markets are groups/associations that can embody extremes, and being at an
extreme for a very short time in the CDS market is now affecting the equity and bond
markets, even though there is NO assurance that the CDS market is going to STAY there
so there’s a disconnect between the tenor of the CDS opinion and the actual, operational
rhythms/activities of the firm being bet upon
ofcourse in 2006 the equity market had no idea of funding or liquidity or CDS, so that
was *that* market’s flaw which has been corrected (in a way)
groupthink is what is behind all this, and it’s a grind on the downside but no less
present on the upside, but never decried in the latter case
…The events of mid-September 2008 were traumatic and awful to behold. I saw that trailer and I don’t want to see the movie. But it is exactly into that scary future that we now head.
So the $700 billion of the TARP just bought us six months?
Raivo Pommer
raimo1@hot.ee
Lada-krise
Nach dem wiederholten Stopp der Montagebänder geht im „russischen Detroit“, der Stadt Togliatti an der Wolga, die Angst um. Im Januar brach brach die Autoproduktion im Reich der Ladas im Jahresvergleich um desaströse 80 Prozent ein.
Russlands Autoindustrie legt Wert auf Tradition. Selbst in der Hauptstadt Moskau bieten Händler bis heute fabrikneue Ladas als modernisierte Nachbauten des Fiat 124 an. Der kleine Italiener war immerhin Europas Auto des Jahres – allerdings schon vor mehr als 40 Jahren.
Von der Wärme Italiens ist in der 1000 Kilometer östlich von Moskau gelegenen Lada-Stadt Togliatti, benannt nach dem italienischen Kommunistenführer Palmiro Togliatti, nichts zu spüren. In bitterer Winter-Kälte haben sich einige Dutzend Arbeiter mit Plakaten vor die Tore des Automobilwerks gestellt. „Wir Arbeiter kämpfen für unsere Rechte“, steht auf einem Schild. Die meisten der Demonstranten sind Frauen. „Mein Lohn reichte bislang gerade so zum Leben. Nun weiß ich wirklich nicht, wo das alles enden wird“, sagt die 26-jährige Anna Semjonowa, eine alleinerziehende Mutter.
CDS Market? Interesting idea…
great story!
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