Sun Mar 11th, 2012 at 11:39:53 PM EST
No, not as far as being able to predict what's going to happen, just in figuring out what's happening. Over at Credit Slips and London Banker, we're discussing different aspects of the Greek default, and we may have stumbled upon a couple of insights.
On Credit Slips, we're discussing CDSes and whether CDS buyers in general should expect to be compensated according to the terms of the swap. My position is a harsh "No", for the simple reason that, as I've been saying for years, we call a CDS an insurance policy but treat it as a security. Calling a truck a boat doesn't mean you should expect it to float. Moving on from there, I noted that if an investor really wanted to insure an investment position, he needed to find someone who would sell him a policy. If, as many claim, such a policy can not be had and a CDS is all that's available, that should give everyone significant pause. They'll sell you an investment position, and they'll sell you a thing they call an insurance policy but that is really just another investment position, and they won't
sell you actual insurance, although they'll insure themselves via stacked tranches and inside hedging. How much more evidence do we need that the markets are a casino with every table rigged?
At London Banker's blog, we're discussing regulatory reform. I'm backing another commenter who says the rule for permitting a particular investment should be simple: If the regulator doesn't understand it, it doesn't fly. I'm running with that one for the simple reason that, if the regulator can't understand it, how can an investor, and what good is "transparency" if comprehension is impossible? LB is concerned about regulators logrolling investments they don't understand to keep from looking stupid on the golf course, but we already have that problem. The "understanding" standard is the only way to make transparency work, so given that transparency is what our entire regulatory regime is about, we'd better head that way. Unless we want transparency to be a sham, and our whole regulatory system is just a come-on to get the suckers into the rigged casino. Oh my, did I say that in my "out loud" voice?