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Alice-in-Wonderland Banking

|Includes: Citigroup Inc. (C)

We had to go to Australia to learn how Citi booked a profit this quarter.

Apparently, it bet billions on derivatives based on its own CDS spread. In other words, the higher the spread (based on investors' expectation of Citi's bankruptcy), the more "profit" it could book on these derivatives!


What a clever system! Now no one who can trade derivatives need ever go bankrupt, because the closer to bankruptcy it gets, the more assets it has.  


Original article HERE.


Disclosure: no position