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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (32473)	5/20/2012 9:52:06 AM
From: Hawkmoon	2 Recommendations Read Replies (1) \| Respond to of 219795

Yep.. we saw this with MF Global too.. re-hypothecation of collateral is a major threat to financial stability. And this pernicious CDS issue, where speculators can take out "insurance" against assets they do not own further undermines the value of collateral. Have no problem with CDS if folks own the underlying asset, usually bonds or other debt. But when everyone can "pile on" naked by buying them, it will eventually overwhelm the ability to write such insurance, forcing the government (taxpayers) to backstop the insurance contracts. Banks cannot be in the business of writing loans, and then insuring them. It's a recipe for disaster. Hawk