正文
Why MF Global went into bankrupcy? bond investments and credit default swaps!
MF Global hold Greek Euro bond in their portfolio. The also bought CDS to cover the risk of Greek bond default.
Greek bond got a 50% hair cut. MF Global thought they were covered by their CDS positions on Greek bond. But no. The 50% hair cut on greek bond was give another name rather than the word "default".So MF Global had to pay margin call on their leveraged Greek bond holdings because the insurance (CDS) they bought did not work and did not pay.They could not sell assets to cover the margin call because of crappy market and dubious assets. So out of desperation, they dipped into clients' funds. The rest is history...
Now folks, we know there are at least USD$600 trillion worth of derivatives in the banking system. These derivatives are supposed to provide protection/offset risk. Will these derivatives contracts be honoured when bad things happen? If not, or if a certain percentage of them not to work, then how many bankrupcies are we going to get?
Folks, this is the very reason of QE; this is why QE will keep coming! For not doing so means widespread bankcrupcies and gigantic financial/banking/credit market crisis.And through the unending QEs to come in the near future, the value of currencies, mainly US dollar and the Euro, will be destroyed. It is upon this foundation that gold will rise.
There is no target as to how high gold will go. it depends on how fast the US dollar value gets diluted/devalued through continued QEs.
When the Euro currency's value gets depreciated serverely, there is a solution, a way out of this mess through gold, a way for the Euro to continue as the medium of exchange for the Eurozone.
When the US dollar value gets diluted severely, what asset will rise to take up the role of central bank reserve assets? What is the hard asset that is also a financial and monetary asset? GOLD.
Those who claim gold to be a risky asset have no real appreciation of what is THE real risk;
Those who claim gold is too volatile lacks basic arithematic learning. What percentage is gold going up and down? what percentage is the share market going up and down. Ah, but no matter, this is so trivial.
MF Global hold Greek Euro bond in their portfolio. The also bought CDS to cover the risk of Greek bond default.
Greek bond got a 50% hair cut. MF Global thought they were covered by their CDS positions on Greek bond. But no. The 50% hair cut on greek bond was give another name rather than the word "default".So MF Global had to pay margin call on their leveraged Greek bond holdings because the insurance (CDS) they bought did not work and did not pay.They could not sell assets to cover the margin call because of crappy market and dubious assets. So out of desperation, they dipped into clients' funds. The rest is history...
Now folks, we know there are at least USD$600 trillion worth of derivatives in the banking system. These derivatives are supposed to provide protection/offset risk. Will these derivatives contracts be honoured when bad things happen? If not, or if a certain percentage of them not to work, then how many bankrupcies are we going to get?
Folks, this is the very reason of QE; this is why QE will keep coming! For not doing so means widespread bankcrupcies and gigantic financial/banking/credit market crisis.And through the unending QEs to come in the near future, the value of currencies, mainly US dollar and the Euro, will be destroyed. It is upon this foundation that gold will rise.
There is no target as to how high gold will go. it depends on how fast the US dollar value gets diluted/devalued through continued QEs.
When the Euro currency's value gets depreciated serverely, there is a solution, a way out of this mess through gold, a way for the Euro to continue as the medium of exchange for the Eurozone.
When the US dollar value gets diluted severely, what asset will rise to take up the role of central bank reserve assets? What is the hard asset that is also a financial and monetary asset? GOLD.
Those who claim gold to be a risky asset have no real appreciation of what is THE real risk;
Those who claim gold is too volatile lacks basic arithematic learning. What percentage is gold going up and down? what percentage is the share market going up and down. Ah, but no matter, this is so trivial.
评论
目前还没有任何评论
登录后才可评论.
