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Tag Archive: CREDIT DEFAULT SWAPS


In this world of uncertainty where life do not has guarantee, people aspire for guaranteed returns. The recent posts SONY DSCdone on my blog pertains to are market’s overvalued and volatility .That how a financial television especially is built on the idea of using volatility, wherever it may be, to capture eyeballs

The Warren buffet latest (2015) letter to the Berkshire Hathway shareholders is a great – great read especially from the page 24 onwards. Here is the link Berkshire Hathway Letter
Some of the smartest blogger have shared their thoughts on the volatility & risk from the letter .

Josh Brown writes:-
The modus operandi of a lot of Street denizens is to present something as a problem for you so that they can sell you the solution. By putting the fear of volatility in front of you as though it’s a serious long-term risk, the door is then opened for all manner of high-cost, horrifically ineffective products or strategies. My partner Kris likes to say “the easiest way to sell someone a map is by first convincing them that they’re lost.”  Continue reading

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How MF GLOBAL Failed

Not many people know about the convictions behind how MF global failed. This is how the destruction process works @ Wall Street and MF Global bankruptcy was one of the example of it.

They were very bad in Europe; leveraged 33:1 so there is no space of error when the firm is leveraged like that.

The three lessons that are can be shared from MF Global’s death:

  • Accounting loopholes have to be closed and oversight improved.
  • Non-bank financial firms should have a lead regulator.
  •  Rule-writers should consider “non-systemic” firms as well as “too big    to fail” banks.

But there is a contrast view to it:

More regulation, more rules, Dodd Frank/EMIR/FATCA  and to no purpose at all.

A banker wants to bet his firm on the direction of sovereign debt. If successful, we call him Soros and pat in him on the back. And if not, the firm is closed down. Regulations were pointless, because no rule book can reign in human ingenuity. Continue reading

Alternative Investments

Alternative investments is not a new concept but seems to be gaining momentum, I did a story in back in 2012 under the CDSDEFAULT-1-1heading ART TREATED AS AN ALTERNATIVE INVESTMENT .Would like to evolve on those terms, Let’s face it : The financial crisis & the European crisis that seemed to mark a turning point in the spectacular growth of alternative investments, such as managed investments in hedge funds, private equity, real estate, commodities, and infrastructure. Poor performance and liquidity problems led to massive redemption in several categories. By now, however, those problems have subsided, and alternatives are back on track.

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International Swaps and Derivatives Association is the body corporate to make over the counter (OTC) derivatives market CDSDEFAULT-1-1safe and efficient.

It has 815 members from 58 countries including global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouse and other service providers.

The Key areas of ISDA are
* Reducing counterparty risk
* Increasing the Transparency
* Improve the OTC operational infrastructure.

The details are provided on the ISDA Brochure

ISDA came under criticism in 2012 on its decision that based on evidence the Greek bailout would not prompt payments on the (CDS) credit default swaps.
Continue reading

September 15 2008 was one of the most extraordinary days in global financial history.A simmering credit crisis exploded into a full-blown apocalypse in the global financial sector when Lehman Brothers filed for bankruptcy.  

With assets of $639bn and a further $613bn of debts, it was the biggest corporate bankruptcy in the US. The collapse of Lehman had immediate repercussions, frightening financial markets around the world, but with hindsight its demise has come to embody the failure of investment banks to adequately assess risk and invest accordingly.

Market Performance (from the close before Lehman BK) – Silver +71%, Gold +61%, S&P +58% ( For S&P the dividend are not accounted for. Including dividend it will be close to 88%)

Here is a must watch documentary of 60 min : “The West is done, it’s over! We screwed it all up. Do you want your great-grandchildren speaking Chinese 🙂

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