patrick.net

While the sheer volume of bubble/hedge fund/MBS-CDO implosion stories appearing in the news daily nowadays, it can be difficult to pick out the "pearls" among the pebbles, or the truly extraordinary items from the mundane "yet another Wall Street multi-billion-dollar write-down". (Btw, amazing to see bubble implosion lead headlines every day on Bloomberg, MSNBC & CNNMoney, etc. compared to just 2-3 years ago, isn't it? Any long-timers remember Face Reality, Fake P, MarinaPrime, CuriousCat, DAiryQueen, etc. brushing off our concerns as Chicken Little, doomster hand-wringing?).

This one recently caught my eye, and stayed in the back of my mind (via Tanta with Calculated Risk):

“It’s a zero-sum game. If you put trades on that worked so well that you bankrupt your counterparty, you will not collect on those trades.”

--Jim Keegan, a senior vice president and portfolio manager at American Century Investments

I've often read MSM quotes from Wall Street outfit bigwigs (Goldman Sachs, Merrill Lynch, Morgan Stanley, Chase, Citibank, etc.) to the effect that, "Even if all these MBSs/CDOs, derivatives, swap agreements & $Trillions in other financial Dark Matter go 'boom!', we're ok, dude. 'Cuz we, like, hedge 'n stuff."

Apparently, (if I'm reading Jim Keegan correctly), if your "insurance company" goes belly-up, then you "may" have a problem collecting on that insurance policy. So, I guess it comes down to a case of gambling --even on the bearish/short side-- is *still* gambling?

Am I interpreting this correctly?

Discuss, enjoy...
HARM

#bubbles