Sean Carmody (sean)
User profile
- Photo
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- Nickname
- sean
- Full name
- Sean Carmody
- Location
- Sydney, Australia
- Note
- Founder of the Stubborn Mule.
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@magpie I don't think there's any hard data on net withdrawals yet, more people thinking that they would withdraw if they had Spanish deposits, so those who actually do might be thinking the same
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@magpie only speculation along the lines of "it Greece exits the euro, Spain could go too...if you had money in a Spanish bank, would you want to leave it there?"
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@magpie comment up
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@magpie agree with you in your post! https://twitter.com/#!/seancarmody/status/204160163463176193
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@magpie it would be painful and messy, but not quite as apocalyptic as Das makes out IMHO
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@magpie I'll have a read...
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@magpie Funny sort of reasoning, regressing on forecast errors. What if the forecast itself assumed that the stimulus would lead to growth. Then it could be true that stimulus=>growth, but forecast may have overstat the link.
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@magpie My guess: old fashioned greed. It looks like a division set up to hedge risks started taking risks and the firm was hooked on their profits and so allowed them to keep going, making bigger bets until I blew up. Won't be the last time!
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@magpie always a pleasure!
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@magpie yes, exactly: if the derivative increases in value in my favour by $1m, I would take that as $1m through the income statement and the increase in assets of $1m would be matched by a $1m increase in retained earnings (a component of equity).
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@magpie as an example, the aggregate of these revaluation assets/liabilities for derivates can be see here on p17 https://www.westpac.com.au/docs/pdf/aw/ic/1H12_Interim_Financial_Report.pdf
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@magpie if I enter into a swap with you today at "fair value" (think of this as meaning at the current market odds) the value is zero. If the market moves, then it might now be worth $1m to me and -$1m to you. That becomes a $1m asset for me and $1m liability for you.
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@magpie from a book-keeping point of view, these contracts are "off balance sheet". The contract notionals do not appear as assets or liabilities. But, if they change in value (say the A$ goes up or rates go down), they are revalued and that hits the accounts.
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@magpie for me, these figures only really give a sense of the level of activity in each of the markets and not of the potential loss in an extreme scenario
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@magpie you can't have every bank lose on every trade, when every trade has entities on each side with opposite position. In another twist, in theory on, say, a $10m interest rate swap you could lose more than $10m so they're not really always upper limits either.
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@magpie overall, those figures would be a drastic overstatement of the amount that would be lost even in a massive meltdown
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@magpie also, although this may seem strange, there would also be trades in there where the offsetting bets are with the same counterparty: I bet with you that there will be a coup in Patagonia at 20:1 and later close it out at 10:1 & do it with a second trade not closing the 1st
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@magpie except that the notional amount of the contract may not really represent the amount of the bet, but the basis for calculations. For example, if you have a $100 bet on the A$, you only lose $100 if the A$ goes to zero.
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