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Tag Archive: SUB-PRIME FIASCO


History may rhyme, it doesn’t repeat itself’ (Twain). Or that, “the only thing that is constant is change” (Heraclitus). blogThese two famous quotes apply to the financial markets as much as anything.

The way the mid and small caps in the Indian markets are trading gets to sense the equity markets are either at the start of a bull run breaking out higher or are on the verge of a break down lower.

Just correlate with layers 2007 and early 2008

  • Sub Prime issue was lingering in the mouths of traders for three years before the pain struck. Now, Greece is lingering for five years. Markets did not price in the Sub Prime issue. Now markets have under-priced Greece exit.
  • When the major markets peaked and languishing in ranges we have seen for about three months a surge in Indian equities (along with mid and small peaking to astronomical levels) then eventually Indian equities crashed.

 

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As I have been continuously posting on the Credit derivatives these days thought of sharing a post that  I did early in 2008 when the face of Investment banking completely changed after sub-prime crisis. 

There was an era  when Investment banking (IB) was on the role … hefty packages, luxurious life, dream job for a financial student were some of the features of IB. Over the years evolved as a very big concept coined by the US, In India we use to call that as a merchant banking .

Goldman Sachs, Bear stern, Morgan Stanly, Lehman Brothers and Merrill Lynch were the 5 icons which use to shine at the wall street over the period of time. Continue reading

RISK is a four letter word and it become cult with some models like VAR , stress testing analyses. Time and again the crisis have proven you cannot copy paste the past for the future predictions. Markets have become more volatile , more extreme operational risk, systemic risk become the buzz word, I am posting some events that I can recall in the global economy :
Continue reading

Was going through Zerohedge and find some interesting facts the (TBTF) Too Big To Fail get Too Bigger To Fail. The top 5 banks of the world holds 97% approx $221 trillion derivative outstanding.

$220 trillion is more than enough for the world to collapse in a daisy chained failure of bilateral netting (which not even all the central banks in the world can offset).

Time and again history has repeated itself unregulated derivatives are prone to catastrophic failure. And yet, nearly four years after the crash, and nearly two years since the passage of the Dodd-Frank law, the multitrillion-dollars derivatives market is still dominated by a handful of big banks, and regulation is a slow work in progress. Unregulated derivatives are still an economic threat. That’s because derivatives have become deeply embedded in the global economy. ( an article from Ny times quoted) Continue reading

This weekend  financial media was concentrating on the credit event of Greece.Greece has officially defaulted on its debt to private lenders. It was an “orderly” default, negotiated rather than simply announced. This formal default on about $100 billion triggered payment of $3 billion in credit-default swaps.

One of the washington post tried to revealed that Insurance and CDS are different, CDS should never be treated like insurance, as its Mandatory for the insurance company to make reserve against insurance that it has issued on the other hand Credit Default swaps (CDS) is naked gambling. Continue reading

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