Wednesday, April 29, 2009

CDS and The Rally

Here is a great post recapping what I have been posting about the last few weeks –
thin liquidity, Quant Fund leveraged bets, a rally led by the weakest of the weak. Insiders are selling and companies are issuing new shares (selling) into the rally. Both are doing so to bolster their own cash positions to get through what is coming. That is not bullish.

The real question is who is writing the new round of CDS insurance on this rally? Somebody is doing it – and they are going to get crushed on any selling. The (un)intended consequence of all the government bailouts is that banks now know they can write infinite CDS, thus generating enormous income off of this leverage, and be bailed out by the government when the who thing blows up. Good stuff Geithner…

http://debtsofanation.blogspot.com/2009/04/debts-of-spenders-bear-market-rally.html

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