Well it seems like actual credit investing failed so insurance policies were invented to get rid of actual cash flow and collateral analysis.
There was no need to do any research. Just buy a default insurance policy.
The funny part is the banks created and sold default insurance policies to hedge funds and they couldn’t manage their own books. makes sense
That’s why the government needs to shut down the hedge fund and bank bullshit relationship in the credit market.
None of them provided any value to the market.
Hedge fund,I-bank trades don’t need to be shut down. There just needs to be more exchange based transparency. Simple as that.
These banks don’t know how to do credit analysis. How about we reform these worthless I-bank universities.
Seems like they realized this so they created credit default swaps. But they all screwed up with that as well. Need better credit/CDS universities.
Banks/hedge funds can hedge their credit positions with CDS but retail investors can’t hedge with unsecured bonds? Banks andHFs aren’t the smart $?
So in conclusion, these large funds aren’t the smart money and are not doing credit analysis. They are doing financial system arb trades.
If credit analysis fails and derivatives created to hedge against the failure of credit analysis fails, then fin system needs something new.
- 2012 Most read post – The JP Morgan series (sandyyadav.com)
- What are Hedge Funds – (sandyyadav.com)
- CDS, Bonds Or Basis Trade : (sandyyadav.com)