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    • Tue Nov 4th 13:57 PM
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      Commented on:
      Exchange-Traded Derivatives: Why Stop at CDS?
      www.bis.org/statistics...

      This is probably the source of Pirrong's $600 trillion #. If you net net down the f/x and ir contracts, you'll have a much lower number. The MV for the classifications will have changed a great deal from the values athered as of 12/31/07.
      View article »
    • Tue Nov 4th 13:51 PM
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      Commented on:
      Exchange-Traded Derivatives: Why Stop at CDS?
      "But of course the amount of non-CDS OTC derivatives, with all their counterparty risk, dwarfs the CDS market."

      This is clearly a wrong statement, but feel free to come back and provide evidence. Does posting articles in SA mean that you don't have to check facts any more? Is SA the recepticle of fractured journalism?
      View article »
    • Thu Oct 30th 17:23 PM
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      Commented on:
      Mark Cuban's New TARP ETF Idea
      I disagree with jswede. I think that if you put the terms of the assets out there in a completely transparent setting, you could have much better price discovery. People with superior knowledge would bid strongly, and those with limited expertise would require a higher margin of error.

      You could also hide the name of the offeror so that a stigma does not attach to the seller.

      The problem is not in price discovery. The problem is that if all these assets were priced by the market and they cleared at market prices, thousands of financial intitutions would be insolvent. The bailout is a mechanism for inflating toxic asset prices. That's why it's a bailout. The inflated price provides relief from immediate insolvency.

      The solvency issues of many financial firms have not been resolved, and this proposal does not provide a feasible solution.
      View article »
    • Tue Oct 21st 15:08 PM
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      Commented on:
      In the Year 2010: Will CDOs Still Exist?
      The main reason why the CDO market exists is because it provides a way to convert junk-rated assets into investment grade assets.

      Financial firms have portfolios of junk corporate debt, B and equity tranches from securitizations that are not marketable. These can be pooled, structured and combined with credit enhancements like bond insurance, CDS, etc.

      Voila, a pool of junk assets suddenly produces several tranches of investment-grade securities.

      Due to restrictions on pensions and other institutional buyers ability to hold junk-rated debt, in a normal market, the market trades investment-grade debt at a premium higher than that warranted by the credit characteristics of these securities alone. The junk-rated debt trades at a similar discount for this same demand constraint.

      Therefore restructuring the cash flows in a CDO pool generates a profit to the asset structurer.

      This is basic finance.
      View article »
    • Tue Oct 21st 12:58 PM
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      Commented on:
      Why Lending Standards Did Not Fall
      if you are arguing that lending standards did not fall during the housing bubble...

      ...put down your crack pipe and slowly walk away.
      View article »
    • Mon Oct 20th 17:34 PM
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      Commented on:
      Trying to Look Forward
      roger has a penchant for saying nothing with a lot of words. would be interested in knowing what his clients are saying about the portfolios that he manages for them, preferably without editing for expleitives.
      View article »
    • Mon Oct 20th 11:16 AM
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      Commented on:
      Why the CDS Market Didn't Fail
      Replace CDO with CDS above.
      View article »
    • Mon Oct 20th 11:16 AM
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      Commented on:
      Why the CDS Market Didn't Fail
      Another problem is that the media doesn't recognize that CDOs are not only sold as default protection. It was also widely sold as a synthetic asset that is highly levered and poorly understood many buyers.

      To say that there is little to worry about in a highly levered product where written notional is 2-3 digit multiples of the volume of the reference asset is irresponsible and misleading.
      View article »
    • Mon Oct 20th 11:08 AM
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      Commented on:
      Why the CDS Market Didn't Fail
      It is a problem. Many are booked as debt securities at amortized cost.
      View article »
    • Mon Oct 20th 09:31 AM
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      Commented on:
      Why the CDS Market Didn't Fail
      You don't understand finance.

      Synthetic CDO = CDS.

      The synthetics are on the books as debt and aren't even MTM.
      View article »
    • Thu Sep 25th 10:00 AM
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      Commented on:
      5 Things the Treasury Should Clarify Now
      Well it was going well until we get to the last exec pay paragraph.

      Spoken like a true investment banker protecting his bonus.

      I don't believe that exec pay be should be limited, but it should be fair. Today, the pay of financial execs and associates on trading floors is based on a if we win we reap huge bonuses and if we lose taxpayers, investors or some other bag holders reap big losses. But certainly, the IB creators and distributors never want to take responsibility nor want to be accountable for the losses by returning some of the obscene bonuses paid out for failed deals.

      There is a huge agency problem at IBs where the investment horizon of any deal is the bankers' bonus pay out date. Using CDS you can insure the garbage that comes out of their shops for a couple of years. They receive their bonus, watch it trade with protection, and subsequently laugh all the way to the bank when the bagholders are hit with huge losses.

      I was impressed with the article until in the end, when the author shows his true colors as another weasel with valuable interests to protect.
      View article »
    • Mon Aug 25th 09:37 AM
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      Commented on:
      Ignore Stock Market Volatility
      If you believe in the mean-variance asset pricing model or any other multi-factor model that includes mean and variance, as most people do, then vol has to be a determinant of stock prices. Period.
      View article »
    • Tue Jul 29th 13:28 PM
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      Commented on:
      Merrill CDO Deal: How Can It Book a 'Sale'?
      SFAS 140 is dead. Also MER is not securitizing its CDO portfolio.
      View article »
    • Fri Jul 25th 13:42 PM
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      Commented on:
      The Dead Cat Returns to Earth
      MikeB, are you kidding?

      According to the Census Bureau's 2005 Current Population Survey (CPS), there were 45.8 million uninsured individuals in 2004, or 15.7% of the civilian non-institutionalized population.

      aspe.hhs.gov/health/re...

      I guess to some 45.8 million people is very very few people in the U.S.
      View article »
    • Tue Jul 15th 12:39 PM
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      Commented on:
      Overselling the Case for Indexing
      google: "The Arithmetic of Active Management
      William F. Sharpe"
      View article »