mikemichaelson

Bond Expert: Wednesday Outlook

when are people going to realize that a CDS exchange needs to be set up ASAP. this nonsense in this market can not continue to go on. Hedge funds are able to drive the spreads up to any level they want with little money and no proven collateral to cover the potential defaul losses, thereby gaming the system. the average person doesnt even realize that you don't need to post collateral against your positions in the CDS market to show that you can cover your losses. AIG got into this position and it screwed over everyone because they took on positions over $1 Trillion that they never even had to prove they had collateral to cover losses. Hedge funds are able to manipulate the spreads on these contracts and the ratings agencies look at these spreads to determine credit quality of companies. GE is getting crammed down because of this. Those same hedge funds are also taking short/put positions in the equity of the underlying company and therefore profiting on both the credit and equity side. This game absolutely has to stop.