Home Site Map

 
Go Back   Kitco Forums > The Markets > The Economy, Banking, Markets and Global Stocks discussion group
Register FAQ Members List Calendar Search Today's Posts Mark Forums Read

Reply
 
Thread Tools Display Modes
  #261  
Old 03-10-2012, 11:22 AM
ZeroSum's Avatar
ZeroSum ZeroSum is offline
Member
 
Join Date: Sep 2010
Posts: 303
Default

The question on everyone's mind this weekend is, "what does the eurozone CDS exposure look like?"

The amount of the actual default is relatively small 3 or 4 Billion Euro, I think. But that in no way reflects the potential CDS exposure.

A good analogy that I've heard to explain CDS exposure is the "home insurance" analogy. Imagine you had a $500k house, and you insured it against fire. The house burns down one day, and the insurance company pays you $500k.

While Credit Default Swaps (CDS) are basically insurance, there are two key differences. First, you don't need to own the insured asset to take out insurance on it. And second, the amount of insurance does not have to be in proportion to the assets insured.

So using the above analogy, Greek CDS is the equivalent of 10 of your neighbors taking out $10M of fire insurance apiece on YOUR $500k house. If it burns down, the "insurance company" may owe your neighbors $100M.

So the question now is, how much fire insurance did Eurozone banks take out on Greece's house?

There's a reason that these things happen on Fridays. Right now in Europe there are a whole lot of people trying to figure out how this plays out. We'll find out on Monday, I guess.

And that doesn't even take into account what Portugal, Spain and Italy are going to do now that they've had a chance to watch Greece's default play out...
__________________
"All men see these tactics whereby I conquer. But what none sees is the strategy from which victory is evolved."

-Sun Tzu
Reply With Quote
  #262  
Old 03-10-2012, 11:42 AM
HardlyPeeved's Avatar
HardlyPeeved HardlyPeeved is offline
Member
 
Join Date: Jul 2008
Posts: 8,211
Default There are many ways and many things

Quote:
Originally Posted by wgadget View Post
Prepare...How? Could you be more specific?
Survival: see Kitco's survival area. Food, shelter, defense.

Family.

Wishes/thoughts/mental/values/personal.


If you want a humorous approach, read or see the TV video/series, Hitchhiker's guide to the Galaxy --- Originally a radio comedy broadcast on BBC Radio 4 in 1978 -- where the world gets wiped out for an intergalactic highway. All Arthur Dent needed was a Towel, and a good friend Ford Prefect.


Its up to you what you think is important or relevant or significant or worthwhile.

You choose.
__________________
Buy Gold and Silver, then wait.
Gold, Silver: Beautiful Insurance in Ugly Situations
Monetary triangle: U-Unit of Account, W-Store of Wealth, M-Medium of Exchange.
PMs are unencumbered tangible fungible fractionable portable durable liquid insurance...without counter party risk; elementary, "Internet Safe" w/o tech issues.
Silver cheaper than Gold, both precious !!
Gold and Silver are atomic and elemental, with no man-in-the-middle.
Reply With Quote
  #263  
Old 03-10-2012, 11:49 AM
HardlyPeeved's Avatar
HardlyPeeved HardlyPeeved is offline
Member
 
Join Date: Jul 2008
Posts: 8,211
Default Another point...counterparty risk

Quote:
Originally Posted by ZeroSum View Post
The question on everyone's mind this weekend is, "what does the eurozone CDS exposure look like?"

The amount of the actual default is relatively small 3 or 4 Billion Euro, I think. But that in no way reflects the potential CDS exposure.

...

So the question now is, how much fire insurance did Eurozone banks take out on Greece's house?

There's a reason that these things happen on Fridays. Right now in Europe there are a whole lot of people trying to figure out how this plays out. We'll find out on Monday, I guess.

And that doesn't even take into account what Portugal, Spain and Italy are going to do now that they've had a chance to watch Greece's default play out...

There are a few much larger issues which you discuss:
1. contagion.
2. counterparty risk (the writers of the CDS contracts)
3. derivative investments "around" the CDSs and default events.


There is no telling (today, Saturday) how each of these 3 will "devolve" on Monday.

The weak banks who wrote the CDSs are nearly bankrupt and many will require government backing if the bank's default when they "pay out" the CDS to the holders.

So the CDS event may trigger many banks going bankrupt...which will trigger many governments "printing or backing" the banks that were going bust.

Even if the Greek CDS payout and secondary effects are "contained"....the bond vigilantes are moving camp to Portugal, Spain, and Italy (coming soon).
__________________
Buy Gold and Silver, then wait.
Gold, Silver: Beautiful Insurance in Ugly Situations
Monetary triangle: U-Unit of Account, W-Store of Wealth, M-Medium of Exchange.
PMs are unencumbered tangible fungible fractionable portable durable liquid insurance...without counter party risk; elementary, "Internet Safe" w/o tech issues.
Silver cheaper than Gold, both precious !!
Gold and Silver are atomic and elemental, with no man-in-the-middle.
Reply With Quote
  #264  
Old 03-10-2012, 02:01 PM
Carpenter's Avatar
Carpenter Carpenter is offline
Member
 
Join Date: Apr 2009
Posts: 10,296
Default

For a year the ISDA contended the negotiated Greek default would not be a considered a "credit event".

A week ago they reiterated the same; "no credit event" therefore no credit default swaps would be triggered.

Well, guess what......... in the last instant all that changed.

"KA Finanz, the Austrian bad bank, faces $1.32 billion in losses due to their exposure to the Greek CDS contracts according to a Bloomberg article."

About $79 billion worth of Greek CDS are coming into focus.

KA Finanz is the first casualty in what may turn out to be a very ugly event.
__________________
http://i573.photobucket.com/albums/ss171/KitcoKontests/Trophies/Single%20Trophies/GoldTrophy4.jpg$X5

"Like liberty, gold never stays were it is undervalued."

Limit politicians to two terms. One in office and one in jail.
Reply With Quote
  #265  
Old 03-10-2012, 06:00 PM
HardlyPeeved's Avatar
HardlyPeeved HardlyPeeved is offline
Member
 
Join Date: Jul 2008
Posts: 8,211
Default 800 Pound Greek Gorilla (exposed)

ZH and Mark Grant

Greek €107 Billion Contingent Liability Gorilla Exposed

When we have been given the data on Greek sovereign debt it appears we have been misled. I have added up now the ISDA debt issuances and I present them to you; all of these issuances are GUARANTEED by the Hellenic Republic; full faith and credit.

GREEK SOVEREIGN GUARANTEED DEBT

The New Economy Development Fund $139,000,000.00

The Hellenic Railway $2,240,000,000.00

Structured Notes (Not counting Floating Rate Notes) $20,683,000,000.00

Athens Urban Transportation $837,000,000.00

Greek Bank Guaranteed Debt $83,314,000,000.00

TOTAL GREEK GUARANTEED. DEBT $107,213,000,000.00

Here is $107 billion of OTHER debt; guaranteed debt that does not appear to be included anywhere in the official Greek sovereign debt figures.

Contingent liabilities that are not counted any longer perhaps as the accepted manner of doing business now in Europe. Most of these issuances are governed under British law with “Default” clauses and “Negative Covenant” clauses. Greece defaults on €105 billion Euros and adds new debt, the IMF/EU loans, of 130 billion Euros and we are told that Greece is better off today than yesterday. What drivel! With the addition of the new IMF/EU loans of $172 billion and the revelation of the guaranteed debt at $107 billion Greece now has $279 billion of new and hidden debts.

http://www.zerohedge.com/news/greek-...orilla-exposed
__________________
Buy Gold and Silver, then wait.
Gold, Silver: Beautiful Insurance in Ugly Situations
Monetary triangle: U-Unit of Account, W-Store of Wealth, M-Medium of Exchange.
PMs are unencumbered tangible fungible fractionable portable durable liquid insurance...without counter party risk; elementary, "Internet Safe" w/o tech issues.
Silver cheaper than Gold, both precious !!
Gold and Silver are atomic and elemental, with no man-in-the-middle.
Reply With Quote
  #266  
Old 07-24-2012, 09:04 AM
Carpenter's Avatar
Carpenter Carpenter is offline
Member
 
Join Date: Apr 2009
Posts: 10,296
Default

"Greece now in Great Depression, PM Says."



http://www.reuters.com/article/2012/...86L07L20120722
__________________
http://i573.photobucket.com/albums/ss171/KitcoKontests/Trophies/Single%20Trophies/GoldTrophy4.jpg$X5

"Like liberty, gold never stays were it is undervalued."

Limit politicians to two terms. One in office and one in jail.
Reply With Quote
  #267  
Old 07-31-2012, 09:50 AM
Carpenter's Avatar
Carpenter Carpenter is offline
Member
 
Join Date: Apr 2009
Posts: 10,296
Default

Greece Is Broke .... Again.

The payment for public services including police, fire protection, pensions and other social benefits are at risk.

Quote:
"Cash reserves are almost zero. It is risky to say until when (they will last) as it always depends on the budget execution, revenues and expenditure," Deputy Finance Minister Christos Staikouras told state NET television.
http://www.reuters.com/article/2012/...8IV9U820120731
__________________
http://i573.photobucket.com/albums/ss171/KitcoKontests/Trophies/Single%20Trophies/GoldTrophy4.jpg$X5

"Like liberty, gold never stays were it is undervalued."

Limit politicians to two terms. One in office and one in jail.
Reply With Quote
  #268  
Old 07-31-2012, 02:54 PM
Silvercoin's Avatar
Silvercoin Silvercoin is offline
Member
 
Join Date: Mar 2008
Posts: 7,272
Default

why don't they sell their gold if they are broke.

i fail to understand how they can continue to hang onto their 130+ tons of gold while pleading poverty. can anyone explain that.
Reply With Quote
  #269  
Old 07-31-2012, 03:01 PM
Llama Dog Llama Dog is offline
Member
 
Join Date: Mar 2012
Posts: 1,163
Default

Quote:
Originally Posted by Silvercoin View Post
why don't they sell their gold if they are broke.

i fail to understand how they can continue to hang onto their 130+ tons of gold while pleading poverty. can anyone explain that.
Gold is money, debt is paid with fiat currency. It should be reassuring to stackers that nations DON'T dump their reserves.
Reply With Quote
  #270  
Old 07-31-2012, 03:30 PM
Carpenter's Avatar
Carpenter Carpenter is offline
Member
 
Join Date: Apr 2009
Posts: 10,296
Default

Quote:
Originally Posted by Silvercoin View Post
why don't they sell their gold if they are broke.

i fail to understand how they can continue to hang onto their 130+ tons of gold while pleading poverty. can anyone explain that.
Where is their gold?

I think the ECB tried to lay claim to Greece's gold as collateral.
It was in the headlines for a few days, then nothing ... my bet is, it is long gone.
__________________
http://i573.photobucket.com/albums/ss171/KitcoKontests/Trophies/Single%20Trophies/GoldTrophy4.jpg$X5

"Like liberty, gold never stays were it is undervalued."

Limit politicians to two terms. One in office and one in jail.
Reply With Quote
Reply


Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 03:08 AM.


Copyright@ 2007 Kitco Inc.