Re: Re: Why did Ireland bother? Don’t they have Trojan horses?


Thanks to all who have contributed to a discussion thats not that obvious in the short term to most people.

All I will say about this excitement is (for those who care) to monitor the CDS (Credit Default Swap) market — this is the canary in the coal mine.

For those that dont know what CDS’s are — they are an insurance policy for you to paid your income come what may if the borrower defaults or cant pay. In other words, if you buy the bond+CDS premium you will be guaranteed to be paid — what you get back depends on the price of in the insurance policy.

As CDS’s are insurance policies and just that and not the real asset they are termed “derivatives” — an instrument that you might heard of — and amazingly you can buy and sell these.

When a CDS approaches 1000bps (ie 100%) it means its pretty certain the market thinks they wont pay and default — this market largely operates on news, rumours and chinese whispers and other scuttlebutt from the stables.

So, when a bank or country or company goes beyond 800 bps its danger zone stuff.

I had a lot of money in Kaupthing (the Icelandic bank) and called them to pull my money out when it went to 750bps in 24 hours — when I called them at luchtime 2 days later (my fault) CDS price was 1300 — I was toast — the UK Govt saved my deposit.

What I am trying to say is watch the CDS market — you get stuff like UK Govt and HSBC in the low 100’s up to Spain at 650 (at its height) and Ireland at 850+ (now lower) to other Govts even higher.

Normally you need a bloomberg terminal at £15k a year to monitor this but you can do it for free but you have to look for it– CMA datavision is one the market providers.

Apologies in advance if this has nothing to do with Spanish property (Sorry Mark) but it may be useful to retired property in Spain who depend on the income.

— Munky