Sunday, May 13, 2012

Wall Street Casino's CDX NA IG Series 9

CDX NA IG Series 9 originated in September 2007.  Most corporate debt is five year, which means maturity in 2012.  Thus, JP Morgan's synthetic credit trading may contain a short term element.. 

Any investor wishing to hedge their investment can do so with credit default swap specific to the corporate instrument they hold.  They don't need to buy a basket of derivatives covering 121 North American companies.  That makes the "investment" like a bet/wager on the North American economy.

FTAlphaville reported four companies in IDX face credit challenges, Radian, MBIA, Sprint Nextel, and R.R. Donnelley & Sons.  Markit reported companies outside CDX IG 9 that sustained a credit event include AMR, Dynery and Eastman Kodak. 

I have four questions.  One, which companies outside the four cited by FTAlphaville face credit difficulty & possibly default?

Two, who, outside hedge fund traders, wants to buy CDX NA IG 9?  Three, how might JP Morgan push their losses on clients?

Four, how might jilted hedge fund traders gang up on JP Morgan?  Credit default swaps played a role in Lehman's fall.  Lehman's peers were merciless in demanding capital relative to derivative obligations.. 

The Wall Street casino remains alive and unwell.