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Fudge

Cds Story On Channel 4 News

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I just nodded of in front of the telly and woke up as a story on Channel 4 on CDS's was on.

It was claiming that the credit crunch is not over and that CDS's are going to cause the next wave of problems.

It was about 20-30 mins in. They seemed to be a problem with the broadcast and it looked like the story was cut short.

It will be on channel 4 + 1 and will try and catch it again.

Edited to change CDO's to CDS's Credit Default Swaps

Edited by Fudge

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Guest Shedfish

you were right i thnk - there was a big chunk of that missing, that would have made the conclusion make more sense...

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Didn't Faisal miss the essential point of the CDS problem?

That being, companies were buying CDS packages to insure against losses on products they didn't own; like me insuring your car despite the fact I'll never drive it. If you crash it, I'll claim.

Therefore, there were many more CDS out there than products being insured.

So, the insurers who provided the CDS', in the event of a default, were in hock multiple times.

Or have I got this wrong?

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Didn't Faisal miss the essential point of the CDS problem?

That being, companies were buying CDS packages to insure against losses on products they didn't own; like me insuring your car despite the fact I'll never drive it. If you crash it, I'll claim.

Therefore, there were many more CDS out there than products being insured.

So, the insurers who provided the CDS', in the event of a default, were in hock multiple times.

Or have I got this wrong?

I don't know if you're right on that specific point but I'm sure from loads of other artciles I've read that the trading in CDS and the potential problems are much more complicated than laid out in this report

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Didn't Faisal miss the essential point of the CDS problem?

That being, companies were buying CDS packages to insure against losses on products they didn't own; like me insuring your car despite the fact I'll never drive it. If you crash it, I'll claim.

Therefore, there were many more CDS out there than products being insured.

So, the insurers who provided the CDS', in the event of a default, were in hock multiple times.

Or have I got this wrong?

As far as my limited understanding goes I think it is right.

It looks like the Hedge funds will be in trouble and I for one wouldn't lose any sleep if they all went bust.

So how is this CDS problem trouble for the average joe in the street?

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So how is this CDS problem trouble for the average joe in the street?

Quite a big problem I suspect, old bean; most of my CDS have started skipping despite the fact I take

good care of them by chucking them on the floor and cleaning them with a brillo pad!

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Analysts at Standard & Poor's Rating Services warned against mortgage-related debt products in internal e-mails that, in one case, called the complex financial deals "ridiculous," the Wall Street Journal reported in its weekend edition. The Journal cited a draft revision of a U.S. Securities and Exchange Commission report on bond-rating firms that was first released on July 8.

In one email message, an S&P analyst called a mortgage or structured finance deal "ridiculous" and wrote "we should not be rating it."

In another email, an S&P manager said ratings agencies were helping to create an "even bigger monster -- the CDO (collateralized debt obligation) market. Let's hope we are all wealthy and retired by the time this house of card falters."

Rating agencies struggled with the growth of asset-backed securities and saw breaches in their conflict-of-interest policies, according to the report released early last month.

http://news.yahoo.com/s/nm/20080802/bs_nm/...ters_journal_dc

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In one email message, an S&P analyst called a mortgage or structured finance deal "ridiculous" and wrote "we should not be rating it."

Did this analyst receive:

a] A bonus

b] The sack

My money's on B

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Didn't Faisal miss the essential point of the CDS problem?

That being, companies were buying CDS packages to insure against losses on products they didn't own; like me insuring your car despite the fact I'll never drive it. If you crash it, I'll claim.

Therefore, there were many more CDS out there than products being insured.

So, the insurers who provided the CDS', in the event of a default, were in hock multiple times.

Or have I got this wrong?

Has been discussed on another thread

http://www.housepricecrash.co.uk/forum/ind...showtopic=79344

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please give C4 credit for at least trying to deal with the major issues,they are the only terrestrial channel that does.

the cds problem will affect ledning.you can imagine if a major cds writer goes under then whoever bought the insurance is liable for the shortfall.it could lead to a withdrawal of credit and a rush for the exit with whatever assets are liquid

"you can imagine if a major cds writer goes under then "

Such as a monoline?

"then whoever bought the insurance is liable for the shortfall.it could lead to a withdrawal of credit and a rush for the exit with whatever assets are liquid"

Or they could just write it off.

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Didn't Faisal miss the essential point of the CDS problem?

That being, companies were buying CDS packages to insure against losses on products they didn't own; like me insuring your car despite the fact I'll never drive it. If you crash it, I'll claim.

Therefore, there were many more CDS out there than products being insured.

So, the insurers who provided the CDS', in the event of a default, were in hock multiple times.

Or have I got this wrong?

You are 100% correct. I read a charming story in theFT about it over 18 months ago on a flight back from a meeting in Germany. Yes there was bugg*r all else to read.

Basically it was a full page story (lasted most of the flight!!!) saying how stupid it was and how it wsa all about to go wrong.

It's worth pointing out that CDSs, like CDOs were created with one "buyer"in mind. Pension companies.

When the CDSs go boom it will wipe out pretty much every pension fund on the planet.

You see pension funds arn't allowed to get involved in the insurance market - too high risk.

So the financial whizkids created CDSs. They arn't "insurance" they are financial implements... "income streams", that you can buy, that receice a high return. Astronomically high. Basically you buy one, you receive money every year. For no further investment. Of course, there is a risk involved, but the ratings companies rated them all triple-A... effectively zero risk. What a co-incindence that pension funds can only invest in triple-A assets.

It was money for nothing. The fund managers lapped them up.... a small capital investment for a huge return. Bonuses and champers all round. A £100k investment became £1m a year income. If you didn't buy in, your figures looked crap compared to everyone elses, so you have no choice but to buy in. Everyone knew that if it went bad the pension funds would be wiped out, but when you can get millions of £s in bonuses... well who could resist.

The banks SOLD the CDSs to the pension funds... no seriously, the pension funds PAID to BUY the CDSs. And heres the kicker. Shares and stocks have a maximum loss limit... basically the most you can lose is the amount you spent buying the asset.

CDSs can result in losses 100s or 1000s of times the original investment.

If you think you have a private pension to retire on... you are wrong.

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You are 100% correct. I read a charming story in theFT about it over 18 months ago on a flight back from a meeting in Germany. Yes there was bugg*r all else to read.

Basically it was a full page story (lasted most of the flight!!!) saying how stupid it was and how it wsa all about to go wrong.

It's worth pointing out that CDSs, like CDOs were created with one "buyer"in mind. Pension companies.

When the CDSs go boom it will wipe out pretty much every pension fund on the planet.

You see pension funds arn't allowed to get involved in the insurance market - too high risk.

So the financial whizkids created CDSs. They arn't "insurance" they are financial implements... "income streams", that you can buy, that receice a high return. Astronomically high. Basically you buy one, you receive money every year. For no further investment. Of course, there is a risk involved, but the ratings companies rated them all triple-A... effectively zero risk. What a co-incindence that pension funds can only invest in triple-A assets.

It was money for nothing. The fund managers lapped them up.... a small capital investment for a huge return. Bonuses and champers all round. A £100k investment became £1m a year income. If you didn't buy in, your figures looked crap compared to everyone elses, so you have no choice but to buy in. Everyone knew that if it went bad the pension funds would be wiped out, but when you can get millions of £s in bonuses... well who could resist.

The banks SOLD the CDSs to the pension funds... no seriously, the pension funds PAID to BUY the CDSs. And heres the kicker. Shares and stocks have a maximum loss limit... basically the most you can lose is the amount you spent buying the asset.

CDSs can result in losses 100s or 1000s of times the original investment.

If you think you have a private pension to retire on... you are wrong.

Your explanation appears to be 100% wrong, guaranteed

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When the CDSs go boom it will wipe out pretty much every pension fund on the planet.

If you think you have a private pension to retire on... you are wrong.

I choose the investments in my pension fund. It contains no CDSs.

I'd be suprised if pensions invested in CDS at all. CDOs would have been more likely (ready to be corrected) and they will take a bit hit.

VMR.

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I choose the investments in my pension fund. It contains no CDSs.

You're lucky... few people have any knowledge of or contorl over, how their pension fund invest their money.

I'd be suprised if pensions invested in CDS at all. CDOs would have been more likely (ready to be corrected) and they will take a bit hit.

Both CDOs and CDSs were created explicitly for the purpose of selling them to pension funds.

Pension funds had large piles of cash which the bankers wanted to tap into. Pension fund rules prevented them buying into high risk loands or insurance... 2 of the highest risk but highest return investments.

So the bankers created CDOs and CDSs and the ratings companies rated them triple-A so the pension funds could buy them.

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You're lucky... few people have any knowledge of or contorl over, how their pension fund invest their money.

Both CDOs and CDSs were created explicitly for the purpose of selling them to pension funds.

Pension funds had large piles of cash which the bankers wanted to tap into. Pension fund rules prevented them buying into high risk loands or insurance... 2 of the highest risk but highest return investments.

So the bankers created CDOs and CDSs and the ratings companies rated them triple-A so the pension funds could buy them.

Are you posting this as a wind up or have you genuinely no idea what you are talking about?

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Are you posting this as a wind up or have you genuinely no idea what you are talking about?

No, I'm afraid it's true.

um, none of this is particularly secret... DYOR.

Channel 4 covered most of it with their despatches episode.

I'm amazed it doesn't get more coverage.

Lots of comments on here saying I'm wrong, but no-one can explain why... because I'm not.

Edited by TaxAbuserOfTheWeek

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No, I'm afraid it's true.

um, none of this is particularly secret... DYOR.

Channel 4 covered most of it with their despatches episode.

I'm amazed it doesn't get more coverage.

Lots of comments on here saying I'm wrong, but no-one can explain why... because I'm not.

You are wrong because you are talking absolute drivel. I'd leave it at that if I were you as you clearly have been misinformed. Suggest you google it old chap.

Harry

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No, I'm afraid it's true.

um, none of this is particularly secret... DYOR.

Channel 4 covered most of it with their despatches episode.

I'm amazed it doesn't get more coverage.

Lots of comments on here saying I'm wrong, but no-one can explain why... because I'm not.

"No, I'm afraid it's true."

That you have no idea what what you are talking about? Fair enough. It might be worth you going onto this thread

http://www.housepricecrash.co.uk/forum/ind...showtopic=79344

and posting any questions you may have.

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Are you posting this as a wind up or have you genuinely no idea what you are talking about?

I love your style... <_<

While I share your views, to some extent, I'd love to see you try and put together a statement to explain the state of play - from a big-picture-perspective... Something that covers asset backed securities; structured finance; credit derivatives; synthetic products; SIVs/Conduits and global debt-oriented portfolios. I find it difficult to believe that credit derivatives relating to corporate debt work significantly differently to credit derivatives on individual debt... so, understanding that this is your specialised subject - maybe the most valuable summary you might establish would target that domain? With a sound basis, maybe constructive criticism would put us further forward?

I find it far easier to pick the holes in others' descriptions - but I find it remarkably difficult to explain things coherently... and still impossible to quantify. I think that the fact the basic concepts fail at transparency, coupled with a complete lack of useful quantification is what leads people to jump to conclusions and entertain conspiracy theories for longer than is strictly rational.

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I love your style... <_<

While I share your views, to some extent, I'd love to see you try and put together a statement to explain the state of play - from a big-picture-perspective... Something that covers asset backed securities; structured finance; credit derivatives; synthetic products; SIVs/Conduits and global debt-oriented portfolios. I find it difficult to believe that credit derivatives relating to corporate debt work significantly differently to credit derivatives on individual debt... so, understanding that this is your specialised subject - maybe the most valuable summary you might establish would target that domain? With a sound basis, maybe constructive criticism would put us further forward?

I find it far easier to pick the holes in others' descriptions - but I find it remarkably difficult to explain things coherently... and still impossible to quantify. I think that the fact the basic concepts fail at transparency, coupled with a complete lack of useful quantification is what leads people to jump to conclusions and entertain conspiracy theories for longer than is strictly rational.

We need an ABS expert - I haven't worked in those markets so don't want to attempt to go into too much depth there. But yes, I gues you are right, we should write something to describe how it all fits together. The problem is finding the time, and as you say, it is far easier to pick holes (and infinitely more amusing) in other people's arguments.

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We need an ABS expert - I haven't worked in those markets so don't want to attempt to go into too much depth there. But yes, I gues you are right, we should write something to describe how it all fits together. The problem is finding the time, and as you say, it is far easier to pick holes (and infinitely more amusing) in other people's arguments.

I disagree that we must start on ABS... though, I agree, with respect to HPC, this is where the real action is to be found. I would really like to see a sensibly short document (no more than 2 sides of A4) that explains how corporate debt and its derivative markets work... References would be a bonus. I think it should focus on absolute levels of debt; how this debt is financed and by whom; who underwrites the risk using CDS and what their capital and exposures are.

While I think our outlooks have much in common, I think your default opinion is that there's no problem until we've found one - while mine is that I assume it's a disaster until there's evidence to the contrary. Just like with Mills' (Taleb's) "black swans" - no amount of refutation of flawed claims of imminent market implosion actually puts my mind at rest... a different strategy is called for. We need to try to explain why the corporate debt market works and is stable - rather than refute individual doomsayer claims. Even if the explanation is weak, it is likely better than what we have in writing at present... and, with my pessimist hat on, I wonder if critical analysis can undermine our argument that the debt markets are stable.

Edited by A.steve

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I think CH4 did touch on one of the main issues.

The credit crunch has arrived and keeps getting worse becaused previously banks could insure their risks or pass the risk on to somebody else. So no matter how ugly a risk they were exposed to turned out to be if they had the insurance then they could claim they were covered for regulation purposes. And in earlier times because they were covered they assumed it ok to lend. But in reality their optimism was only as good as the insurers.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
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      • up 5%



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