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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Skeeter Bug who wrote (101522)2/21/2009 9:05:42 AM
From: Boca_PETE2 Recommendations  Read Replies (1) of 110194
 
"look at these numbers - and keep in mind that the value of all outstanding mortgages in the USA is about $11 trillion..."

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BAC has as much as $38.2 trillion in derivatives exposure and $3.4 trillion in CDS

C has as much as $40.0 trillion on derivatives exposure and $2.5 trillion in CDS

JPM has as much as $92.0 trillion in derivatives exposure and $9.5 trillion in CDS
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DERIVATIVE NOTIONAL VALUES become DANGEROUS WHEN one of the counter-parties to the contract becomes insolvent. Otherwise these contracts require the payment or receipt of the CHANGE IN VALUE of the NOTIONAL AMOUNT.

The notional amount designated per a derivative contract could be some quantity of a commodity such as gold, crude oil..., some amount of a foreign currency, some principal amount of fixed or variable debt payable, or some combination of these.

Because in the current environment of collapsing counter-parties on a global scale and the interconnected character of the global banking system, it's understandable why there is increasing alarm about derivative exposure. During my working years at a major oil company that hedged with derivatives, I never thought we could arrive where we are today because of the perceived quality of the counterparties to these agreements. Now one wonders if quality counter-parties even exist.

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