how d you play it?

[rsk1963]

Recently there have been several "scoldings" by the major creditors. Threatening to down grade our credit rating to A status. Assuming the fed cannot get their acts together and we do get dropped (which is how I feel at the moment)... how do you trade it? where do the dow, s&p & nasdaq go? What about commodities (oil, gold & silver)?

[NHsorter]

I don't know how it will go down, but I can tell you the result. Little guy takes it in the rear. TPTB make out like a bandit

sorry for the useless, wise-ass answer. hopefully someone will chime in with some actual decent advice

[rsk1963]

I don't know how it will go down, but I can tell you the result. Little guy takes it in the rear. TPTB make out like a bandit

sorry for the useless, wise-ass answer. hopefully someone will chime in with some actual decent advice

sounds about right
fyi not useless...
Laughter is the best medicine.

[DTEJD1997]

I have heard through the grape vine that there are credit default swaps that you can get on treasuries.

HOWEVER, who is the counter party? If the Federal Reserve & Treasury fail,we might have bigger problems than money....

HOWEVER, the cds's might just be a way to gamble on the credit rating of the USA.

If I hear more, I'll post it.

[barrytrot]

Even if there are credit default swaps on treasuries that sounds like a poor play as even "A" credit means virtually zero chance of default.

And the odds of default when you pay people in the money you print and/or just write down on a computer? Seems quite low to me.

[DTEJD1997]

barrytrot:

I think this cds is simply a way to gamble/wager on the decline in USA credit rating.

As the subject of the CDS credit rating weakens, the premiums go up...

We are also talking about an EXTREMELY asymmetric bet.

I bet you a $1 on an EXTREMELY unlikely outcome. I'm probably going to lose my money...HOWEVER, if I hit, I am going to get paid 100x or more.

Kyle Bass was recently talking about this at the University of Chicago. It was hair raising to hear what he thinks! People need to listen to what he is saying/doing!

He claimed that he is buying CDS on Japanese sovereign debt for a FEW BASIS POINTS! He did not identify the bank(s) he got it from. I am going to hazard a guess that it is the "usual suspects" of the "too big to fail" behemoths.

The way he describes it, some 27 year old is writing this CDS. They are PROBABLY going to win, and they'll make their bonus for the year. This could go on for some amount of time...but when/if they are WRONG, the bank will be insolvent.

Where are the regulators? Asleep at the switch as usual.

One of the many questions I have is WHY are deposit gathering institutions backed by the FDIC engaging in anything beyond the most boring & plain vanilla derivatives? Why are these banks allowed to even have "trading desks"?

If they want to engage in this type of behavior, that is fine. They can just do it with their capital and not have government backing, nor can they take in deposits. JPM I'm looking at you!

Any thoughts guys?

[barrytrot]

Ah, I see. Yes, betting it will be nonsensically downgraded isn't a bad bet.

I say nonsensically only because of my thoughts above not because I think the United States is on "A+" firm ground.

But when you can create money out of thin air it's tough to not pay your bills

[DTEJD1997]

Barrytrot:

I don't think the USA will EVER be able to repay it's debts IN CONSTANT DOLLARS!

As the USA can print currency, this is what they will do...

Everybody gets their social security check, pension, etc.

The only problem is that eventually gas will be $15/gallon, and a bag of groceries will cost well over $100

So, in 20 years, your social security check will fill your gas tank and fill your grocery cart, and maybe have a bit leftover....

No way you pay the rent, electric and all the other bills on it...BUT THE GOVERNMENT IS STILL "PAYING" IT'S BILLS.

That is the easy way out, and thus, that is what will be done...