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« The Biggest Investor Fear and How to Meet It | Main | Summer Reading Ideas »

June 15, 2011



NYT asks if there is a hidden AIG.


scm0330 -- Reporting in these markets has gotten better. The Depository Trust and Clearing Corporation reported recently that the total notional amount was about $5.8 Billion. There have been a number of academic studies pointing out that this market is about 2% of the cash market.

The key point -- and it would help if everyone would read The Big Short review as I suggested -- is that in 2008 the market was starved for "AAA" debt and Wall Street obliged with synthetics. The situation in Greece is not a good analogy to this.

People who keep repeating "Lehman moment" are missing this.

There are some sources this morning with lists of potential losers --

I hope this helps. This article was supposed to be an aid to people as they watch the story unfold. I will do my own reacting and trading before I have time to write about it.



scm0330 is onto something. Namely, when you say "There is no current evidence that there is a huge secondary market in the CDS holdings of European sovereign debt..." you seem to be dismissing the fact that there is also no current evidence that the market is CDS is NOT huge enough to manifest systemically.

Also, when you say "For systemic risk to occur, the entire list of worries must take place..." this seems preposterous. Only a few of the items on the list need to occur in order for significant dominoes to begin falling.

Finally, when you say "If the situation is resolved, it will be a major buying opportunity. This is the most probable outcome..." What is the 'THIS' that you deem as the most probably outcome? That the situation is 'resolved'? I.e. that private haircuts are taken along with the taxpayers? I.e. a 'credit event' that would trigger CDS payouts?

If you deem this a "major buying opportunity", please describe what, exactly, you will be buying.


Hi Jeff,

Could you elaborate on what you know about the CDS market (e.g., notional size, and dealers) for Greek paper? Presumably, CDS writes would include both sovereign and bank obligations. I was of the understanding that his is an private market and therefore highly opaque, whether it's in primary CDS deals or secondary derivatives on them. Can you point us toward your data sources on this topic?

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