gregm

CDS Prices Trend Calls Another Downturn in Equities

How can you say based on three issuers, all which are outliers, financials service companies and are part of the IG-11 index spread a better indicator of systemic credit risk than the index? Is the stupididity of your comment apparent yet?

Why mention Citi's proprietary pricing system? It is not universally used nor is it likely to become so. Do you know what levels it is pricing at, i.e is it indicating spreads are thin? If the system was relevant, this is kind of criticial to your thesis.

Credit spreads are the qunatification of default risk, they cannot be seperated.

If a base rate drops borrowing cost deop period. Spreads may not but overall cost does.

Whay do you metion the TED spread, it a measurse of liquidty as much, if not more that risk. Are you aware it is not a pricing benchmark.

"On the other hand, they fear that the severity of the global recession may force a widening of spreads anyway, towards 500 basis points in early 2009." What???? have you seen where spreads were about two weeks ago? You think 500bps is a downside scenario?

Current levels indicate nothing regarding where EM debt will be for the rest of the decade. We are in the middle of a credit debacle and you are saying current spreads are indicative of a normalized market?Pure ignorance.

Cost of debt is already a key component in the creation of shareholder value. Have you any conception of corporate valuation basics such as a firm's WACC?