They are worth more now that they have explicit US support.

These suckers should expire worthless. Or maybe get their premiums back.

Not talking about the stuff that tanked (if there were cds’s on em (junior stuff)).

I cannot believe that our regulators, and professors missed these two simple/obvious observations (which are at the heart and are well understood in the traditional insurance industry).

http://marketwarnings.blogspot.com/2008/10/cds-credit-default-swaps-are-wrong-as.html

On October 14, [1987] the DJIA dropped 95.46 points (a then record) to 2412.70, and fell another 58 points the next day, down over 12% from the August 25 all-time high. On Friday, October 16, the DJIA closed down another 108.35 points to close at 2246.74 on record volume. Treasury Secretary James Baker stated concerns about the falling prices. That weekend many investors worried over their stock investments.

The crash began in Far Eastern markets the morning of October 19.
. . . .

The trader Paul Tudor Jones predicted and profited from the crash, attributing it to portfolio insurance derivatives which were “an accident waiting to happen” and that the “crash was something that was imminently forecastable”.

Black Monday/Tuesday II:
October 6-7, 2008.

An historic opportunity for your cash.

I’ve seen very little discussion of the hedge funds selling CDS insurance. and I thought they were the 2nd biggest writer after the Banks. Recently, insurance companies have been fingered as the next shoe to drop. (I suppose following AIG). Up to now, the hedge funds have been thought to have better risk management prowess than the banks. Will this change during this month’s CDS settlement process now that many are reeling under the LEH bankruptcy?

I am extremely pessimistic about the entire situation, but there are a few tiny glimmers of hope that we may be able to arrange a very hard landing for the economy, rather than a crash landing.

First, the lengthy CRMPG process is finally beginning to bear fruit. Most notably, its latest incarnation (CRMPG III) has been enormously helpful in pushing the likely opening of a prototype CDS clearing house by the Thanksgiving Holiday. This is an extraordinarily complex undertaking, but it is being accomplished in record time and will surely help.

Secondly, the notional value of credit default swaps has been routinely quoted at around 65 trillion. Although there is still a long way to go, that number has now been reduced to 50 trillion, thanks in very large part to this same CRMPG process.

As I stated in a previous comment, October should indeed be a turbulent month for the markets because of these three critical auctions referred to in the article Yves cites.

Matt Dubuque
mdubuque@yahoo.com