Reading between the lines from the Bank of Italy , Back to 2012 in the month of July Mario Draghi, on the verge of yet another Eurozone collapse, promised the world that he would do literally “whatever it takes” to defend the Euro, banks in the insolvent continent took his promise seriously, and ramped up their participation in the most epic Ponzi scheme conceived in Europe to a whole new level. The scheme, of course, was one where banks would buy sovereign bonds issued by their host country (most notably Spain and Italy), and subsequently repo them back to the ECB for near full cash (net of a minuscule haircut) collateral.
The IMF also published a crucial paragraph doing the spillover analysis indicates that a shock from Italy could have a marked impact on the Europe and beyond through trade and financials channels. Continue reading “Italy all over the Europe – It’s a Déjà vu Feeling for Mario Draghi”
What’s a credit event? It’s a difficult question. Dealbreaker is exercised on this, or more specifically on the issues with CDS protection holders getting paid on some unusual credit-event-like happenings:
- There are bonds.
- You buy CDS that is supposed to pay off if something goes wrong with the bonds.
- Something goes wrong with the bonds, insofar as they poof into some weird garbage-y thing or assortment of garbage-y things.
- You can scoop up garbage-y things to your heart’s content, but the contract doesn’t let you deliver them into CDS in a way that achieves the sensible result.
- Sensible Result = Face Value of Bond minus Value of Package of Garbage-y Things You Got For Your Bond
- So you get less than Sensible Result, and are screwed, and the CDS seller has a windfall. Continue reading “What is a Credit Event ?”
Recalling Felix salmon review on The lessons of “Margin Call” : I don’t believe that Wall Street is meaningfully improving the lives of the 1%, except insofar as Wall Streeters are the 1%. (Remember that financial professionals make up only 14% of the top 1%, and 18% of the top 0.1%. They’re a large chunk, but by no means the majority.)… I suspect that the top 1%, if anything, are responsible for a disproportionate share of Wall Street’s income. Wall Street isn’t picking the pockets of the 99% and giving the proceeds to the 1%: it’s picking the pockets of the 1% and giving the proceeds to itself. And Wall Street is taking a whole bunch of money from the 99%, too. But for the 86% of the top 1% who don’t work in finance, I really don’t believe for a minute that Wall Street is helping them out by giving them the hard-earned money of the 99%. Continue reading “Margin call and the Lessons:”
Yesterday night was sharing some past experiences with the friends and the topic was rogue traders. Some people ask why rogue traders still exist. But, that seems as if it’s an easy one to answer. Fool-proof risk management doesn’t exist and never will. At, least it won’t while the rogue traders are being covered by rogue managers.
You see, the definitions at the beginning had one thing wrong. They are definitions of solitary, lone-wolves. But, even lone-wolves belong to a group. They just prefer to avoid the assistance of others in certain matters. The rogue trader’s pack is the howling, fierce management for which he works. Lone-wolves always have alpha members they take orders from, don’t they? Lone-wolves are sometimes excluded from the pack to protect that alpha-male, thus preventing ‘in-breeding’ in the pack. It’s exactly the same in the trading world of finance. The rogue trader is excluded from the pack, forced to work alone, shunned so that if caught, there will be no ‘inter-breeding’. The alpha-male manager won’t be caught and be brought down if the rogue falls! Continue reading “The Rogue Traders who became famous :-“
Recalling the movie Other People’s Money . as I was more curious to know about the heated debate in US whether Private Equity to be termed as Hero or Villan. Those of you who has seen the Wall street series and remember Gordon Gekko,a character resembling popular culture for unrestrained greed (with the signature line, “Greed, for lack of a better word, is good”), often in fields outside corporate finance.
Let us try to understand Private Equity (PE) :
Private equity generally make investments in the operating companies through a variety of loosely affiliate investment strategies leveraged buyout, venture capital and growth capital.Typically, a private equity firm will raise pools of capital, or private equity funds that supply the equity contributions for these transactions. Continue reading “What is Private Equity?”