From: "andrew cooke" <andrew@...>
Date: Mon, 17 Nov 2008 21:18:11 -0300 (CLST)
Some interesting points in this interview - http://www.nytimes.com/2008/11/17/business/economy/17gramm.html/?_r=1&oref=slogin&pagewanted=all Are CDSs good or bad things? The argument presented there is that they helped spread risk. But perhaps it is better to have a few banks fail than bring everything down? Perhaps the issue here is what most damages consumer confidence? Or perhaps it is which most efficiently clears away over-leveraged positions? And another point, not addressed, is synthetic CDOs. Even if CDSs are useful when used to spread risk, that doesn't mean that they should be "abused" in other ways. Although it's not clear to me to what extens synthetic CDOs ever were a serious problem... On reflection, an awful lot of things are not clear to me. Andrew
Actually, no...
From: "andrew cooke" <andrew@...>
Date: Mon, 17 Nov 2008 21:29:42 -0300 (CLST)
Actually, no, I *do* have an opinion on this. The problem was not CDSs or CDOs or any other product itself. The problem was that there was insufficient information to reliably assess the risks - there was no way to see how things were correlated. And, related to that, there was (perhaps wilful) ignorance about how those correlations align as amount of money involved becomes "significant" in relation to, say, the GDP of "important" nations. So it would be fairer to say that any "sufficiently complex" financial product is a problem. That then includes CDSs when they are, for example, used without a central authority, or used to construct CDOs, or whatever... Andrew
Correlations
From: "andrew cooke" <andrew@...>
Date: Tue, 18 Nov 2008 14:10:56 -0300 (CLST)
As I was saying.... http://blogs.wsj.com/marketbeat/2008/11/17/all-for-one-and-one-for-all/ Andrew