Colin Posted February 20, 2009 Share Posted February 20, 2009 Credit Default Swaps http://en.wikipedia.org/wiki/File:Credit_default_swaps_vs_total_nominals_plus_debt.png Guess who are the above average size players in the wild dog that wags the world economy? http://www.dtcc.com/products/derivserv/data_table_i.php?id=table6 Alteria AMBAC Autozone Bank of America Barclays Venezuela British Telecom Carrefour Centex CenturyTel CIT group Citigroup Clear Channel Compass Computer Sciences Continental AK Daimler Deutsche Bank Lufthansa Ford and Ford Credit France Telecom Gannet GE GMAC Harrah’s Hutchison Whampoa International Lease International Paper Sainsbury Jones Apparel JPMorgan Chase (CDS creators) Kingfisher Koninklijke companies Lennar Limited Brands Marks and Spencer MBIA Meadvest Merrill Lynch MGIC Morgan Stanley Pearson Portugal Telecom PPR Pulte Radian Indonesia Turkey Korea Philippines Residential Capital Russian Federation Sara Lee SLM Southwest Airlines Italia Telecom Telefonica Bear Sterns Dow Chemical Goldman Sachs PMI Thomson Time Warner Toll Brothers Tyson Foods Mexico Vodafone Volkswagen Wachovia Wells Fargo Weyerhaeuser Whirlpool Wolter Kluwer Quote Link to comment Share on other sites More sharing options...
merkin Posted February 21, 2009 Share Posted February 21, 2009 Colin, Auto zone, where I get car parts? This is alphabetic but are they the top 100 or what? I don't understand. Is this who have sold the swaps or are they the holders of the paper? Quote Link to comment Share on other sites More sharing options...
djk Posted February 22, 2009 Share Posted February 22, 2009 Please explain what I am seeing on those charts. Quote Link to comment Share on other sites More sharing options...
John Warren Posted February 22, 2009 Share Posted February 22, 2009 Please explain what I am seeing on those charts. Credit Defaults Swaps are contracts "similar" to insurance. Let's say I'm in the speaker business and I make bookshelf speakers and source my drivers from XYZ and only XYZ. If XYZ goes under, my company goes under. So I find someone (anyone) who will "insure" me against XYZ going down. Djk will insure me. You come to me with the terms (contract). I agree and pay you some amount every agreed upon period. If XYZ survives you make money, I loose. If XYZ goes down you pay according to contract (say $1M). The contract between you and I is a Credit Default Swap or CDS. I do not have to have any stake in the company XYZ. Now, say 1000 other speaker companies decide to enter CDSs for the same reason I did becasue they all sole-source from XYZ. The total "value" of the compensation is now $1B. That $1B is termed the "Gross Notional" for XYZ. The list above is an estimate of companies with largest Gross Notionals. Quote Link to comment Share on other sites More sharing options...
merkin Posted February 22, 2009 Share Posted February 22, 2009 Please explain what I am seeing on those charts. Credit Defaults Swaps are contracts "similar" to insurance. Let's say I'm in the speaker business and I make bookshelf speakers and source my drivers from XYZ and only XYZ. If XYZ goes under, my company goes under. So I find someone (anyone) who will "insure" me against XYZ going down. Djk will insure me. You come to me with the terms (contract). I agree and pay you some amount every agreed upon period. If XYZ survives you make money, I loose. If XYZ goes down you pay according to contract (say $1M). The contract between you and I is a Credit Default Swap or CDS. I do not have to have any stake in the company XYZ. Now, say 1000 other speaker companies decide to enter CDSs for the same reason I did becasue they all sole-source from XYZ. The total "value" of the compensation is now $1B. That $1B is termed the "Gross Notional" for XYZ. The list above is an estimate of companies with largest Gross Notionals. Yes I understand that. But there are also company ABC (autozone) that has nothing to do with speakers or their manufactures. They also buy CDS on XYZ just because they think they are going to go down. When xyz goes down ABC gets paid. Basic like someone buying life insurance on someone else that they have no realtion too. Since these are not regulated by insurance boards of the states they are just bets or gambling. Instead of a horse race they are betting on viablity of companies or package morgages. So in that list does autozone buy the swaps, sell the swaps or are they the subject of the swaps? Quote Link to comment Share on other sites More sharing options...
John Warren Posted February 22, 2009 Share Posted February 22, 2009 The Gross Notional total represents the total value represented by ALL swaps where Autozone is listed. CDSs are nothing new, look up "bucket shops". Quote Link to comment Share on other sites More sharing options...
Colin Posted February 23, 2009 Author Share Posted February 23, 2009 What is amazing, to me, even now, is the absolutely ridiculous size of this unseen, unregulated market, its dramatic impact on our much smaller economy and the huge number of players CDS attracts, not just from logically related markets, such as banking and housing, but also from many other national corporations. We apparently have learned nothing from the manic tulip bulb boom of 1637, where a leverage ratio of 28-to-1 on contracts for future deliveries inflated prices ten times higher than before and after the boom – in less than six months! That is like Crude Oil suddenly trading to $200 or 400 a barrel. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.