...for acute observers trying to deconstruct how all this risk is financed.
It seems clear to the REcapitulator that foreign owned subsidiaries of US investment banks are financing massive risk-taking here in the States. The current troubles with Bear illustrates this. Take a look at the relative repo rates of US/Euro area countries and you will see what I mean.
The VIX (which, for disclosure puposes, we have short interest in) and the implied vol. surface therein (although at the moment, the REcapitulator fails to remember all the consituent names in the VIX) is interesting. I thought that July would be the capitulation with regards to bond yields and FED action.
Cantor is another interesting story. The REcapitulator was unaware they traded exotic mortgages (they don't).
And yet, they had to auction off some 350m of securities posted
by Bear, for pennies on the dollar. How does one model that?