Next Disaster: CDS (Credit Default Swaps)

What do we guess the next financial disaster will be coming soon to a hedge fund or bank near you? Probably Credit Default Swaps. Suffice to say that investment banks saw an opportunity, hedge funds jumped on board and everyone is making a lot of money. Sound familiar? Yeah, you’ve heard it before and it was called Mortgage Backed Securities. My favorite revelation from the article:

So what started out as a vehicle for hedging ended up giving investors a cheap, easy way to wager on almost any event in the credit markets. In effect, credit default swaps became the world’s largest casino.

Yep. You got it. It’s just a big casino making financial bets. Oh, one difference between a casino and CDS. Casinos are regulated by the government. CDS are not.

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2 Responses to Next Disaster: CDS (Credit Default Swaps)

  1. Brandon says:

    Oh my goodness, siiiiigggggghhhhhhh. And the same morons that allowed all of this to happen have now changed their message from speedy fear mongering to slow fear mongering (we need to bailout TODAY! vs. hopefully we can pass something to help poor Americans out before they are all homeless.) GIVE ME A BREAK. Did you see that guy that called into a C-Span show and said that “Bush and Cheney should be drug out into the street and hanged?”

  2. John Murphy says:

    No, I missed that. It is unbelievable, we are going to be discovering more and more of these rats nests as time goes by that made serious cash in the good times and are disasters in bad times, but hey, what do the people that sold them care, they’ll be living in Bermuda and sailing.

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