Charles Davì

The Suggestion Box

In Uncategorized on May 5, 2009 at 8:09 am

I realize that many of you have questions about the financial markets that I probably have yet to answer. As such, I’m taking requests. So please leave a comment below and let me know what you’d like me to write about. If there are any topics that prove to be of common interest, I will write something about them. Depending on the level of feedback, this might be something I’ll do again.

Regards,

Charles

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  1. My questions are very primitive, but I (and a lot of people I think) don’t know the basics about the Fed. I know I could start reading the wikipedia article on Federal reserve system but I am hoping for a better exposition from you.

    What is the money supply and how does the Fed affect it? (What I thought was the money supply is something you guys call “M0″) What goes into Fed’s balance sheet? What is the relationship between the Fed and the treasury department?

    PS: even if you don’t answer my questions could you suggest a nice read on the subject?

  2. Great. The day I turn in my Derivatives final. This would have been nice to know last week. And that CDS clearinghouse post would have been really useful if it was up 24 hours earlier.

    Seriously, though, thanks for all of the information. I’ve learned a lot and look forward to continuing reading.

  3. I know you have touched on it a little in the past, but given the recent spate of articles attacking ‘naked cds purchasing,’ I would very much like to see your thoughts on changing the rules to only allow bondholders to purchase CDS’.

  4. First off, thank you for taking the time to maintain your blog. I enjoy reading it and its one of the few that I frequently check.

    How were CDS contracts written on MBS (mortgage backed securities)? I understand in the case of corporate bonds, a credit event (default, credit downgrade) could act as a trigger for payment. How did this work in the case of MBS? Individual mortgage defaults would occur frequently (especially in higher-risk tranches), how were credit events defined?

    What are your thoughts on total-return swaps? How large a market do such swaps constitute?

    Would you mind briefly explaining dynamic credit swaps? (As described in the JP Morgan guide to Credit Derivatives: http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf)

    Thanks!

  5. I have no question. Instead, let me say thank you for your generosity and willingness to educate the finance hobbyist and insecure practitioners on the topic of credit derivatives. Also, for your willingness to possibly repeat this exercise in the future, I feel fortunate.

    May you continue to gain satisfaction by such offers to the reader, under the guise of a distorted sense of altruism and perverse sense of power you most certainly feel.

    You ant.

    • AMGTrades,

      When did I ever claim that this blog was an altruistic effort? It is not. Others certainly benefit from my selfish efforts to gain notoriety. But that is not altruism. It is capitalism.

      To the rest of my non- miserable and embittered readers, thanks for the suggestions. I will be following up with articles soon.

  6. You indeed did not claim your blog was altruistic. Nor did I suggest that. I suggested that your offer is nothing more than a guise, as I wrote in my prior comment. It is a guise to satisfy your true, but equally vain, goal.

    As you admit in your response, you reveal your aim, which is ‘gaining notoriety’. The fact that ‘notoriety’ in the eyes of others is your aim is a pathetic pursuit. Your goal of fame is a slavish one, and your master is a ‘Johnny Come Lately’ group of spectators who have a fickle interest in a pop-finance topic.

    I first commented because I was so disgusted by the pretentious language of the post offering your gift of knowledge to your readers, I felt strongly compelled to respond. A judgment of my ‘happiness’ is not only irrelevant, but again highlights a desperation for your pursuit not to be discredited or even challenged.

  7. what you mighd to is tend to your website, news/comments get old. heres an idea, add another page

  8. Hi Charles,

    I have a question, or point of confusion, rather, about how large companies tend to store their cash?

    The preface is this:

    It seems to me that the fear around admitting insolvency is that there will be a bank run but I have to question just how much of a run and over-all social/financial maham of some form. There is something about that doesn’t make sense to me though…

    If you have more than 250k in funds sitting in the bank, the odd are that you are smart enough to have put that money into Treasuries of some sort, making them bank-fail proof (is that a correct assumption?). If you are a large corporation, the same kind of logic would be applied. I guess I don’t understand why all the cloaking around this insolvency issue? I suppose the govt would rather not be in a position to FDIC bail out all the insolvent banks once admitting insolvency, but it seems that we are headed down that road regardless. It seems like the results of Citi insolvency would not be as large as people think. What do you think?

  9. The growth of leveraged ETFs seems to have exploded over the last 12 months. It would be interesting to see how firms construct these artificial levered positions using derivatives tools. While I have my own ideas, it would be quite interesting if you would take us through how they construct the cashflows that result from these products.

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