Comments on: Obama’s Weak Regulatory Reform For Derivatives

By: calltoaccount

calltoaccount — Sun, 28 Jun 2009 20:37:58 +0000

A very important, well reasoned piece by The Institutional Risk
Analyst at: http://us1.institutionalriskanalytics.com/pub/
IRAStory.asp?tag=335
suggests worldwide economic/financial disaster is imminent unless and
until the US government cuts off CDS speculators like GS, JPM
and others who have tens of trillions in monstrously leveraged negative CDS bets– but no underlying risk interest, so can’t deliver a bond. The piece doesn’t quite say so, but the monstrous leverage is certainly tantamount to abusive naked shorting of the underlying debt/business– not to mention the self-perpetuating, self-fulfilling power it wields.

It makes several references to insurance industry standards– and
argues for CDS protection to be available only to those with an
underlying [sic. insurable] interest, (evidenced by being able to
deliver the bond, the default of which, you were supposedly hedging
with the CDS.)

The piece refers to a powerful “CDS Mafia”– but refrains from
mentioning that these gumbas ran roughshod over long-standing
insurance laws by prestidigitating a market innovation that’s allowed
them to walk away with billions in profits and destruction wrought–
but which would clearly be against public policy and therefore
unenforceable, if called “bond insurance”– instead of a Credit
Default Swap.

a few excerpts:

“commercial banks, insurance companies and commercial companies,
[are] all…targets for the CDS Mafia and the unlimited leverage they
use as weapons against us all to generate speculative gains.”

“The Fed and Treasury must immediately force the CDS market onto
exchanges and go back to the pre-Delphi bankruptcy model to require
physical delivery of the underlying bonds in order for purchasers of
protection to collect their insurance payments.”

It’s about time this quintessential reality got some “leverage” in
the public forum.

By: DeDude

DeDude — Wed, 24 Jun 2009 18:22:00 +0000

How about risk management by not investing in things you don’t understand, and not investing in something that carry more risk than you are willing to suffer!

Now there is a new concept that would never be implemented. Way to many suits would have to work for their money, and a lot of them would lose their jobs when all those juicy fees on derivatives of derivaties of derivaties were no longer there to milk investors out of their yields.

By: DeDude

DeDude — Wed, 24 Jun 2009 18:00:16 +0000

I say we should put a really heavy tax on all derivative trades. Then the gamblers would not find it so attractive, and only those few who have a real legit need for insurance would get it. The trillions of dollars of derivatives serve no positive purpose for society. More than 90% of it is a tool for gamling and fraud – get rid of it.

By: Hal

Hal — Wed, 24 Jun 2009 13:27:16 +0000

Power corrupts

in additon these folks want to be proven right–consequently they keep on pushing for their end game no matter what other evidence may surface along the way.

Did I hear Obama say in yeaterdays daily press conference that 75% of our population likes the current health system and then, if true, why is he changing something that 75% of the population likes.

By: Wes Schott

Wes Schott — Wed, 24 Jun 2009 11:45:27 +0000

Andy@11:51, 6/23 -

hey dude, glad you showed up – i went to bed

look forward to your take on the SP and DX wiggles

you are not buyin’ in to the reverse H&S in Au – some goldbugs are salivating – perhaps it is time for the slaughter, unless and until the bank start deleveraging again……

By: David Merkel

David Merkel — Wed, 24 Jun 2009 03:59:17 +0000

You can’t ban nonstandard OTC derivatives without infringing the right of contract.

http://alephblog.com/2009/06/19/unchangeable/

By: Andy T

Andy T — Wed, 24 Jun 2009 03:51:50 +0000

Wes: I was away belatedly watching a very funny and crude movie, The Hangover. To your point on TA….this is short term stuff:

I hate the action in the DX last 24-48 hours….it makes me nervous that we’re going to set new lows in the DX before or a very strong rally this summer.

The SP500 is facing very short term resistance 903-904…I see two impulsive lowers that have completed….the big question is do we set one more new low on an impulsive move? If we do, then it will look “horriblus maximus” for stock bulls. I see MAJOR resistance 928-930 if we can bounce that high from the current levels. I would be advising friends and family to hit the exits into anything with a 900+ handle.

I’ll get an SP500 and DX update out tomorrow….FWIW.

Andy.

By: Greg0658

Greg0658 — Wed, 24 Jun 2009 00:55:09 +0000

the problem I have with this whole derivatives escapade is
… why should we taxpayers spend one dime to ensure the legality / functionality of them
… they should not be subsidized by taxpayers in the courts or any other taxpayer funded office operation
… if there are over $500Trillion floating around .. just how many cops should we hire to oversee that
… why try … and just what are markets again .. I thought they were invented to fund corporations that you thought had sound plans to boost your investment to the moon
… from my my pov it seems just a mind bend from expecting the courts to back you after asking the mafia for a loan that the dog ate before you got it back from its intended purpose
… I am wasting my finger movements talkin to the choir ain’t I

By: matt

matt — Tue, 23 Jun 2009 23:34:41 +0000

“It’s easy to call Unregulated Derivatives a risk management tool when the Government will bail you out (especially with “economist” & financial regulators being hired from financial firms). Where would the derivatives industry be today if AIG went to bankruptcy court instead of funneling taxpayers dollars to counter parties who would not have gotten funds otherwise. Is it risk management or corporate communism?

BR is having a book opening, maybe you should go.”

Where did I say anything about regulation? I was simply pointing out that a great many people (including the media that fuels misconceptions) think that derivatives don’t have any purpose except speculation.

Don’t even bother going to BR’s book opening, since you can’t read.

By: Wes Schott

Wes Schott — Tue, 23 Jun 2009 22:49:54 +0000

ahab@6:24 –

the banks are not lending

inflation will come when money velocity picks up – banks start lending

fed can have the banks lend whenever the creature is ready to have his families horrors unleashed upon the backstoppin’, dare i say, sheeples!