DISQUS

lazerow · 1 year ago

Amazing. You need to get a column in the Journal. More people need to read you.

tomob · 1 year ago

Roger:

Nice post - you should be writing for the WSJ editorial page!

TO'B

rafer · 1 year ago

You meant "do no wrong." You are one of the few bloggers that bother with grammar and such (thank you for that), so the only typo in the whole thing jumped out at me.

I'm with you on most of it, but the credit default swap issue makes me wonder if you are seeing symptoms instead of disease. With all the panics that it both suffers and induces, that market needs to evolve. Where can more transparency be created?

infoarbitrage · 1 year ago

rafe, thanks for the editorial comment. noted and corrected.

concerning the CDS issue, we are seeing both symptoms and disease. the market is largely broken, particularly as it related to mortgage-related CDS, and this needs to be fixed asap. the transparency can be created by moving CDS trading to an exchange. this will simplify the market, enhance liquidity, and protect against counterparty default by having a centralized collateral function. i have written about this ad nauseum. I think my recent Insights from a Derivatives Salesman post http://www.informationarbitrage.com/2008/11/ins... gets at the solution to the problem.

Mike in the Midwest · 1 year ago

Roger, If CDS' are moved to an exchange do you think the next step is to augment 13-F filings to include them? Do you think that would take some systematic risk off the table if regulators/counterparties could see positions on a quarterly basis?
I think this issue already came up with Total Return Swaps in the CSX vs. TCI/3G lawsuit, but it was related to 13-d filings.

regards,
Mike

Paul Denlinger · 1 year ago

Roger, the more I read your posts (which I heartily agree with), the more I think that what you are proposing is a triage operation. After a major incident, it is necessary for rescuers to divide the victims into three groups: the dying who cannot be saved, and can only be comforted in their final moments; the seriously injured who can be saved with urgent care and those who are less seriously injured and will recover.

Nobody likes to speak openly about triage operations because it involves looking at a human tragedy in cold practical terms. This practicality is needed to save lives. I think Paulson would have been more successful if he had communicated the challenge in just those terms.

The difference with this triage operation is that if the rescue workers do not make the right moves, they may themselves be overwhelmed by the crisis. In that case, everything just goes collectively down the tubes.