Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: Real Man who wrote (83589)	11/24/2008 8:04:32 AM
From: robert b furman	1 Recommendation Read Replies (1) of 94695

Hi Vi, Let me take the other side of this debate. When Lehman collapsed the entire market was braced for the CDS unwind to create a systemic collapse. It was in fact very orderly. The post auction unwind cost was small relative to to notional value. The notional value of the total CDS market is thrown around quite alot. Only 8% of it is related to motgage/subprime crap. The other interest rate related CDS has not been proven off the mark or toxic. I believe that the CME will/should trade these secret intruments - give them transparency and much of the mystique will quietly go away. THE REAL PROBLEM WAS/IS THAT INVESTMENT BANKS WANTED IN ON THE REALESTATE MORGAGE BUSINESS THAT DEPOSITORY BANKS PREVIOUSLY MANAGED VERY WELL. THE CORRUPTION OF ORIGINATION, COUPLED WITH POLITICAL MULTICULTURAL GOALS ,WAS LEVERED BY INVESTMENT BANKS BUYING RATINGS AND AIG GIVING UNRESERVED INSURANCE COVERAGE (WHICH MADE FOR GREAT AND SICK SALES PITCH FOR THE INVESTMENT BANKERS). This does not taint the entire system,although Paulson would have you believe it does. There is a cancer - it is sick. The fed has injected capital and kept the toxic situation in the banks that gave it birth and legitimacy. It is their's and so are their losses- with a fed backstop only after their assets are depleted. To the degree that the toxic stuff pays out on a cash flow basis - there will become a real and unfetered market for them. The development of a market for them will accelerate the recovery of the entire market. Markets will not go to zero. There are many companies out there doing just fine. The over emphasis of this sector's troubles, isolated or universal, has been excessive. The recovery from this over exposure will be quick and powerful as we learn many /most other companies are doing quite fine thank you. I'm off my soap box.<smile> Bob

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