Home a bit late and I have to do a couple of errands this evening, so just a quick post.
So Which Is It?
Late last week and most certainly today there has been a ton of talk about this being "the bottom" or the possibility for an economic recovery late in 2009. I just wanted to know:
IF this is the greatest economic catastrophe since the Great Depression, and IF we are facing "Systemic Risk" daily, and IF there has never been a credit crunch of this magnitude in history...
THEN how is all this going to get resolved by the end of 2009? How is growth going to return at anywhere near the silly dream numbers being discussed (3-3.5% for 2010)?
It seems to me that you cannot have it both ways. Either this whole thing is a big scam to promote wasteful spending and mega bailouts for the financial class or there is no way GDP is going to grow in 2010. What say you all?
A Little Hedge Help
I had wanted to write tonight about the whole AIG drama. Time constraints and a lack of knowledge have conspired to stop me. I will have time tomorrow, but the knowledge may still be lacking.
I read today that JP Morgan had fully "hedged" its insurance CDS exposure to AIG and thus was not in trouble should AIG go down. Let us put aside whether that is pure bullsh%t for now. I would like to know how a firm goes about hedging CDS and other exotic instruments. If indeed everyone is hedged all around, just what is the problem here? If all is covered there should be no AIG bailout at all. That AIG is getting the biggest bail in history (so far, but it is only March!) we know intuitively that this is false. Who can help shed a little light by comments or articles? Any help is appreciated.
Have a good night.