Credit Default Swaps

Scary stuff, that.

The ENTIRE world is scary right now. Things are crazy and out of hand with the government. And, remember, technically..I work for them (I'm in the military).LOL

I don't have a whole lot of faith in our economy, our judicial system or much of the government..now I am not an anarchist either, since that would make things even worse I'm sure..but I think the whole system is broke and needs to be fixed, not to mention I think the government changed a long time ago from "by the people for the people" to "by the government for the government".

I love my country. It's my government I fear............

OK, don't lynch me, but I work with derivatives and swaps at my new job. I'm basically an auditor that reconciles actual money changed for the premiums on these derivatives matches what we, or the client, have booked. If they don't I have to research the problem and fix it.

I don't create or sell them, I'm just an accountant making sure the money's right.

I didn't see the 60 minutes special, and I haven't had a chance to completely read this article.

I do have this to say, though.

Like any tool like this, if it is used properly it can be a very good thing. The problem comes, as it always does, when people get greedy. What I did read of the article mentions the three companies taking in all the premiums on the mortgage credit default swaps without thinking long term that they might actually have to pay out a loss when the mortgages started defaulting. Which they did.

If they had thought long term, planned ahead, and payed closer attention to what was going on, it might never have happened the way it did.

[quote=FloridaRon].....I work with derivatives and swaps at my new job.[/quote]





Just kiddin, Ron. How you been?

LOL! Too funny, UncleWulf.

I'm doing OK and loving my new job. Still.

What the heck have you been up to? I hope things have settled down for you, and you aren't as busy as usual.

To be honest, Derivatives is used and sold wisely, are a really effective tool to protect investors from losses. A way to look at them is they are lust like car insurance policies, except on investments. You pay your monthly premiums and if you're ever in an accident you file a claim against your insurance and according to the terms of your policy, you are reimbursed for your losses.

A very simplified way of looking at it, but pretty accurate.

As I stated earlier, the problem comes in when companies are selling these derivatives like crazy, not taking into consideration there might actually have to be a payout at some point in time, and not accounting for this payout. Companies were loving the premiums they saw coming in; however, when mortgages that made up the credit default swap went bust, they had not accounted for the losses they would have to pay the purchasers of these swaps. That's where things started going down the toilet.

As with anything, there are good companies and irresponsible companies when it comes to this sort of situation. I like to think my company is one of the good ones and acts responsibly.

FLORIDA RON..can you PM me and tell me what company you work for? I don't know alot of 'decent' companies ( or decent people who WORK for those companies..). Yep.....I agree, it's the 'Greed thing'. It's like the Government is satifying themselves. They don't care about the 'little people' as much. I LOVE serving my country.....ALOT of the 'decisions' they are making is killing people ( literally).

I'm just takin' it easy, Ron. Recovering from minor surgery, and enjoying a little time away. Gotta go back to work tomorrow, but it's about time.