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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Square_Dealings who wrote (77941)	1/21/2007 9:06:56 PM
From: Gemlaoshi	Read Replies (1) \| Respond to of 110194

Maybe put sellers have no intention on paying up when things collapse? In a major default scenario seems like there could be big defaults in all derivatives including put/call options. I think its part of "the plan". SD, I think "the plan" is to milk the present situation for all it is worth, future obligations be damned. Exchange traded derivatives such as options are the least of our derivative problems. The tens of trillions of third and fourth generation paper for which there is no formal market is where the real danger lies. None of these products have been stress tested in a negative environment. Any given eal is only as strong as the counterparty, and I think we may be getting a good preview in the mortgage market. The sub-prime lenders are finding it much more advantageous to just close the doors and melt into the woodwork instead of taking back the CMO paper they knew was faulty to begin with. My point: why wouldn't I enter into billions of CDS or CMO agreements with JPM? If I'm right, I make bundles; if I'm wrong, I close the doors and walk away.