Comments on: When companies short their own securities http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: simoniddings http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-28548 Thu, 14 Jul 2011 08:53:33 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-28548 This is not a solution, it’s suicidal. It’s like jumping into a bottomless pit of debts and loans with eyes wide open.

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By: AlbertSparks http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-28432 Tue, 12 Jul 2011 08:25:37 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-28432 Companies in business today, and individuals who involve themselves in the finance sector have a sizable challenge and must exercise diligence and evidence based practice, in order to monitor and forecast future needs without the high risk of exposure that was very much part of the 1990’s.

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By: ab http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5338 Tue, 11 Aug 2009 14:45:53 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5338 @dsquared

I still don’t understand how this is worse than a ratings-based interest rate. Do you think it is? Or are you just pointing out that any credit-linked rate is procyclical?

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By: dsquared http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5320 Tue, 11 Aug 2009 06:51:19 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5320 A CDS-linked line of credit would appear at first glance to be a product with similar correlation risk properties to a soluble umbrella.

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By: Dan http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5316 Tue, 11 Aug 2009 04:42:28 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5316 Felix —

Could this be a way for CDSs to justify their existence?

It seems that it can be stabilizing for a company to buy insurance on itself. If I buy Aflac, as the duck explains to me, I will get paid if I get hurt and miss income. This would seem helpful for people and companies alike.

The point is of course moot since CDS contracts are barely contracts at all while the jokesters that play in them need not have the ability to pay.

In San Francisco in 1907 at least they were rebuilding in a much better way. Watching our collective impotence is really depressing.

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By: William Wild http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5301 Mon, 10 Aug 2009 21:50:30 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5301 These are mostly standby/CP backstop lines that are not meant to be drawn. The pricing link to the CDS is usually used now in an attempt to protect the bank because these facilities tend to be drawn only when something has gone wrong, either with the company or with the market, and it is tough to set the loan pricing in advance to cover such scenarios. These facilities are also now more costly because they were usually ridiculously underpriced before, in the order of a few bp over Libor, which in a drawn scenario would go nowhere near to covering the bank’s cost of lending and credit costs. Banks got pretty burned on these when they were drawn last year.

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By: ab http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5294 Mon, 10 Aug 2009 21:03:39 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5294 As a more substantial comment, do you really think this is inappropriate? Really no reason to think that credit ratings-based rates (which are common) are more appropriate than CDS-based rates. Unless you think the Agencies’ performance recently instills a lot of confidence.

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By: David Harper http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5293 Mon, 10 Aug 2009 20:59:40 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5293 …plus i think these would be procyclical: credit deterioriation leads to higher interest rate risk.

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By: ab http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/comment-page-1/#comment-5291 Mon, 10 Aug 2009 20:52:49 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/when-companies-short-their-own-securities/#comment-5291 I could be off on this, but I don’t think any dealer would sell a company CDS on itself. Am I wrong?

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