Posted on 03/23/2008 5:49:23 PM PDT by DeaconBenjamin
“Do this and we will quickly get out of depression and create millions of jobs through innovation. Don’t do it and expect severe depression and another global war.”
Happy thoughts for 1 am on Easter Monday. But, JPMChase bought its rival for a song. Now to squeeze the workers into juice.
According to this , $492.6 billion.
OK. Thanks for talking me down. I was getting worked up there.
How about this tongue twister:
The Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund.
And of course, it failed!
http://www.businessweek.com/magazine/content/07_43/b4055001.htm
Thanks for the links!
That effer Greenspan allowed and approved the explosive growth in derivatives and CMOs and other garbage. Whoever call Greenspan a closet gold advocate is an idiot.....
Though I would not be surprised if he owns lots of AU as a hedge against his moronic policies
Same as Arnold Schwarzenegger -— No way does he manage his money —200 million— recklessly. He saves that for the state of California
Unfortunately, "mark to market" = "what people are willing to pay."
In times of uncertainty like this, the "market value" may be unfairly low (whatever that means); and the greater the pressure to do it, the lower the price is likely to go.
And then, once *anyone* sells at a low price, *everyone* will have their portfolios similarly valued; with the result that everyone will probably face margin calls at the same time, with the result that *everything* goes on a downward spiral at once. This would unwind the excesses all at once. BUT, that can't happen, because so many people are *highly* leveraged, based on the prior assumptios (during the bubble) of monotonically increasing prices, i.e. near zero risk. So even a relatively minor change in the prices downwards will drive many players to bankruptcy at the same time.
Cheers!
And I can just about bet the farm that $10 trillion of the $13.4 is BS funny money just created out of thin air and put on paper.
WTF?
So, who has the money now? And they want the US taxpayer to foot the bill? Give me a break!!!
I’m not speaking of derivative accounts. I’m speaking of normal stock/commodity investment accounts.
Do you understand what notional value is?
Do you understand what "notional value" refers to?
Your memory is failing you.
Read At Home Tonight BUMP!
You disagree with Jim Sinclair (post #35) where he states:
When an OTC derivative fails to perform, notional value becomes real value.
How is he wrong?
Your answer could read: "Yes, Jim Sinclair is wrong, because notional value is actually ...."
How is he wrong?
Here is an old explanation I posted about interest rate swaps, the most common type of derivative.
Say you loaned out $1,000,000 at an adjustable rate, say 3 month Libor plus 2 points. Now want a fixed interest payment every month to meet some of your own obligations. You go to another bank that is willing to pay you 5% fixed for the next 3 years in exchange for your adjustable payment.
On the last day of each month you take the 3 month Libor rate and add 2 points. If the number is above 5%, you owe the bank. If the number is below 5%, the bank owes you.
Say Libor hits 4% and stays there for the entire 3 year term of your swap. Every month you owe the bank 1% on the $1,000,000 swap. That's $10,000 a year. Every month you wire the bank $833.33, but you have a swap for $1,000,000 and the bank has a swap for $1,000,000.
$2,000,000 in swaps! OMG!!! And every month $833.33 changes hands.
Now, if this "OTC derivative fails to perform" (that's a stupid phrase, maybe, "If the counterparty stops paying"?), they aren't sending me $833.33 each month.
How does that make the $2,000,000 in notional value real? I'm losing $10,000 in payments a year, for 3 years. I don't suddenly owe $2,000,000. No one suddenly owes me $2,000,000.
Do you know what notional means?
Do you honestly believe this?
Is this why the Bear Stearns debacle occurred, because of purely imaginary notional funny money? Is this why Bernanke and Paulson are sweating bullets?
Do you honestly believe this?
How does that make the $2,000,000 in notional value real? I'm losing $10,000 in payments a year, for 3 years. I don't suddenly owe $2,000,000. No one suddenly owes me $2,000,000.
I am familiar with loans which provide that, if several payments are missed, the entire loan balance is due at once. Now you did not explain whether any principal is being paid on the loan or not (is it an interest-only loan?).
If both loans have a provision that the remaining balance is due if three payments are missed, and the debtor on your loan defaults, and as a result you default on your loan from the bank, then it would be appropriate for both your balance sheet and the bank's balance sheet to show a loan default in the amount of whatever the balance of the loan would happen to be.
Presumably, your balance sheet would also identify your status of being in default of the loan from the bank.
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