Posts filed under “Derivatives”

June 2007: 10 Questions About CDOs

Here is a blast from the past: Precisely 4 years ago on June 30th, we took a closer look  at CDOs. It was in response to a remarkably sanguine question: CDOs: what’s the big deal?

We thought they were a big deal, and posed 10 Questions About CDOs.

Here are my 10 questions:

1. What would have happened had Bear Stearns simply let their two funds, High-Grade Structured Credit Strategies Fund and High-Grade Structured Credit Strategies Enhanced Leverage Fund, dissolve?

2. If CDOs are not priced to market, what are the actual values of these holdings?

3. How levered up are the funds that own the bulk of the CDOs? 10-to-1? 20-to-1? More?

4. How many Hedge funds are or have been taking quarterly or annual performance profits, based in whole or in part, on hoildings that have been marked to a theoretical value (“Mark-to-Model”) versus an actual value (“Mark-to-Market”)?

5. Liquidity has been a driving force behind M&A activity, share buybacks, and leveraged buyouts. Might the CDO situation somehow impact liquidity?

6. Might a liquidation in a CDO/illiquid derivative fund spread to other asset classes?

7. How widely held are the toxic CDO tranches in funds that are self-decribed as “conservative” or “risk averse?”

8. How accurate are the major ratings firms (Moodys, Standard & Poors, Fitch) assessment
of these products. Are these outfits arm’s length objective raters, or
are they merely corporate whores who play for pay?

9. After the final chapter is written on CDOs, what might the total losses on the $250 Billion in quarterly CDOs that Wall Street has created actually be? 10 Billion? 100 Billion? 1 Trillion?

10. How much will systemic confidence be impacted if there is a
series of large fund failures due to CDOs? What impact might that have on the rest of the markets?

The point being: All that was required to recognize the brewing trouble was a willingness to ask questions, ignore traditional assumptions, question authority, and challenge what the “experts” were saying.

What trouble might be brewing now . . . ?

Category: Bailouts, Derivatives

JPM’s Saul Doctor on Greek CDS

Saul Doctor, JP Morgan research analyst, walks Tom Keene and Ken Prewitt through the complexities of credit default swaps on Greek government debt and why some short Greek paper may actually be a good buy. Q: Tell us the distinction between actual government bonds and credit default swaps. What is the the relative size of…Read More

Category: Derivatives, Think Tank

Grecian Burn – Credit Default Swaps

Aasif Mandvi explains how Goldman Sachs helped Greek people to continue retiring a few years before puberty. The Daily Show – Grecian Burn – Credit Default SwapsTags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Category: Derivatives, Humor, Weekend

Classic Goldman Sachs Alchemy

Did Goldman mislead Congress about its ‘Big Short?’ The answer, according to PPWIJ* Jesse Eisinger, is an emphatic yes. Eisinger cuts right to the heart of the matter regarding Goldman Sachs possible perjury regarding their “big short.” It was not the actual size of the short, but it was a) How GS got short; and…Read More

Category: Bailouts, Derivatives, Legal

Gundlach: What Currency Is Better Than Gold In A Crisis?


Jeffrey Gundlach: Here’s The Currency That’s Better Than Gold In An Extreme Crisis
Joe Weisenthal
Business Insider May 27, 2011

Category: Bailouts, Derivatives, Video

Isaac Gradman was involved in some of the earliest litigation arising from the subprime mortgage crisis. He received his B.A. in Political and Social Thought with Highest Distinction from UVA, where he was a Jefferson Scholar, an Echols Scholar and a member of the Raven Honor Society. Isaac received his J.D. cum laude from N.Y.U….Read More

Category: Credit, Derivatives, Legal, Real Estate, Think Tank

Uh-Oh: Is Shiller Defending the Failures of Economists?

Was it the hammers or the carpenters? That is the question alluded to this morning by Yale Professor Robert Shiller in the NYT. Shiller is one of my favorite academics working in the field of finance. He tries to (diplomatically) argue we can prevent future crises if only we had better econometric tools. I would…Read More

Category: Bailouts, Derivatives, Psychology, Really, really bad calls

ProPublica won the Pulitzer Prize for National Reporting for its series, “The Wall Street Money Machine.” Its lead reporters, Jake Bernstein and Jesse Eisinger, take a moment to explain the series, how it all started and their reaction after reeling in ProPublica’s second Pulitzer. Theirs was  the first Pultizer  awarded to a body of work…Read More

Category: Bailouts, Derivatives, Legal

ISDA Proposal: Standardized OTC Derivatives

This is rather interesting: “The International Swaps and Derivatives Association (ISDA) has proposed a new reference data registry for standardized over-the-counter derivative contracts which would leverage the FpML standard to provide a basic description of the contracts and identification codes through their lifecycle. The New York-based trade association for the $700 trillion market defined standardized…Read More

Category: Derivatives, Regulation

United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Tom Coburn, Ranking Minority Member Senate Report GS

Category: Bailouts, Derivatives, Think Tank