http://contraryinvestor.com/mo.htm"...You know that domestically, we only get a glimpse of the derivatives markets through the lens of the banking system. Otherwise transparency is virtually zip. One staunch supporter of all out secrecy in derivatives reporting was none other than the Maestro himself. Thanks Al, at least given what has occurred in credit markets and on the balance sheets of financial institutions as of late, that’s worked out really well, hasn’t it? This same lack of transparency has worked wonders for the current mortgage credit markets represented by off balance sheet CDO's, SIV's, etc., right? Just talk to the shareholders of financial institutions now writing off tens of billions of supposed "value" in these same vehicles about how they feel about the concepts of lack of disclosure and non-transparency. Anyway, as of the latest numbers, here's what we're looking at in terms of US banking system CDS exposure.
What is obviously apparent, I believe very meaningful, and perhaps little understood in the greater investment community, is the growth in magnitude over the 2004 to present period in the CDS market. From about $1 trillion in notional value outstanding at year-end 2003, we're looking at just shy of $14 trillion in notional exposure as of September 2007 for the US banking system singularly. A near fourteen-fold increase in three and one half years. I ask you, do you see this fact being discussed or at least being mentioned on the "front page", if you will? Do you even see this mentioned in discussions or articles regarding what led up to the current mortgage credit debacle? Do you see Senators and other assorted politicians grandstanding in their demands for investigations about how this could have come to pass? We need to at least think through potential investment consequences if indeed credit default swaps become the next credit market shoe to hit the floor in some manner. Why? Because at the periphery it’s already starting to happen.
Very quickly, who are the major players among the US banking system elite? The usual suspects, who else? Here's how it shakes out at present:"
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