[Paul T]

Originally Posted by Shaun @ Tru6

Thank you for posting. Agree but a part of my question which may not be answerable is determining CDS volume. Given this story, with more to come, will CDS volume go up? What is the tipping point? Will we see complicated made from whole cloth financial instruments like the synthetic CDOs of 2008 fame enter the arena? Someone in the private credit world must be modeling a way to socialize the losses and creating financial instruments to affect that outcome if things so south. Someone else has to be modeling that model on Wall Street. At least I hope so.

If history is any guide, the answer to all of the above is yes. Volume will go up, dealers will respond to demand for protection by writing more swap contracts, dealers will also probably devise more complicated structured products around the AI space (think CDO’s, high leverage) and ultimately there will be another subprime type implosion. Wall St has a short memory - sooner or later they make the same mistakes all over again.