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

To: stan_hughes who wrote (85715)	8/30/2007 10:02:10 AM
From: 10K a day	Read Replies (1) \| Respond to of 110194

>>by buying such an instrument I'd just be throwing away my premium to some Jack and his magic beans.<< WHO you callin' Jack???, STAN the man.

To: stan_hughes who wrote (85715)	8/30/2007 10:11:23 AM
From: Paul Kern	Read Replies (2) \| Respond to of 110194

That being the case, how does CDS viability come to degrade to the point where it ceases to be a legitimate guarantee without fraud occurring? It seems to me that at some point in the re-assignment process someone would have to knowingly transfer the liability (perhaps multiple times) to an entity clearly incapable and/or without any history of performing in the event of a claim (which is insurance fraud). You're still paying premiums to GS, who pays them to counter party B taking a small servicing fee, who pays them to counter part C, taking a small servicing fee, who pays the premium to ..... Eventually, the money gets to the three guys in Boca. The guys in Boca had the money to cover in the offshore account when they accepted the assignment. A day or two later, that was moved to some other entity in say, Liechtenstein or the Channel Islands and the cycle begins again. There were a couple of big international meetings in Basel to address these concerns but i don't think anything came of it. On the other hand, the participants got to stay in great hotels and eat some really fine meals on the expense account. Did I mention the cuban cigars and great brandies?