Research123

Demonic Short Sellers

The real problem with the CDS market is that buyers don't need to have an insurable interest when buying or selling a CDS. In the bad old days of individual insurance, this lack of insurable interest lead to speculators buying life insurance on some unsuspecting soul, then hiring someone else to do in the insured so that the policy ownere could collect.

Kind of like what seems ot be going on in the CDS space today, except that buyers of CDS coverage don't need to hire intermediaries to kill the insured. All they need to do is give away stories for free to the media who will happilly help kill any organization in return for eyeballs.

A CDS is not de facto a bad thing, but without transparency and a clear insurable inteerest, the CDS marklet is driving lots of unintended and perhaps quite evil consequences.