Links: Defusing Structured Credit Bombs and Distorting Credit Default Swap Indexes (CDX)

From the movie 'Margin Call'
Former head of structured credit: 'We saw numbers behave in ways barely conceived possible' (The Joris Luyendijk Banking Blog - Guardian)

JPMorgan Trader Iksil’s Heft Said to Distort Credit Indexes (Bloomberg)

'London Whale' Rattles Debt Market (WSJ)

JPMorgan Trader Accused Of "Breaking" CDS Index Market With Massive Prop Position (Zero Hedge)

Hedge funds and the Whale, credit index edition (FT Alphaville)

Synthetic CDO’s – When Risky Isn’t Risky – Or Free Equity (TF Market Advisors)

While I'm linking, read this: The Market’s Obsessive Fixation on The Fed & QE (Economic Musings)


VIX Option Traders Are Selling Puts, VIX Cash Around 2-year Low (16.44)

Today on the OptionMonster Volatility Sonar Report, Jamie Tyrrell, of Group One Trading, said traders were selling VIX puts yesterday and today. Watch the video below. It looks like the VIX, or volatility index, which uses S&P 500 option prices to measure forward looking (implied) expectations of market volatility, closed around the 2010 and 2011 lows today at 16.44. In 2010, the VIX bottomed at 15.23 and spiked to 48.20 during the flash crash, and in 2011, the VIX bottomed at 14.27 and spiked to 48 when Standard & Poor's downgraded the United States' credit rating. Last month (March 2012) the VIX hit a new low of 13.66.

The VIX is interesting because when the index is this low, it's all about timing the next eruption in volatility. The market can do nothing for months, like it did in the first half of 2011 ex-the earthquake/tsunami in Japan. But a low VIX can also mean, or present the idea, that volatility is cheap (S&P option premiums) to hedge against a fearful move in the S&P 500 index.

Icahn to CVR Energy's Board: "Admit Defeat!", The Icahn Lift" on 60 Minutes, and Icahn's Guest Lecture at Yale

Watch this 60 Minutes segment from August 2008 on the day in the life of activist investor Carl Icahn. A few months later, in November 2008, Icahn gave a guest lecture to Robert Shiller's class at Yale. I put that video up as well. Also, here is Icahn's statement to CVR Energy's board after he put in a bid (tender offer) to buy CVR Energy (CVI) at $30 per share or $2.26 billion, and "64% of the shares owned by shareholders unaffiliated with me (Icahn) were tendered into our offer." Here it is via


Bank CDS Indexes Added To S&P/ISDA CDS Sector Indices, Are CDS Index Futures Coming Soon?

Lehman Brothers, Merrill Lynch, Morgan Stanley, Goldman, 
Citi, JP Morgan CDS in 2008 (Bloomberg chart via Mish)
CreditLime, a blog that covers the credit default swap market, reported that S&P/ISDA added two bank indexes to its family of CDS Sector Indices, the S&P/ISDA CDS U.S. Financials Select 10 Index and S&P/ISDA CDS European Banks Select 15 Index. On ISDA's website you can track the daily activity of the S&P/ISDA CDS indices, the most active single name reference entities (with some historical percent change data), and Markit's CDX and Itraxx indices (there are short-term charts available at Markit's site). So, when do CDS index futures start trading on exchanges? And what about exchange traded credit protection (insurance, hedges, or whatever you want to call it) on single name corporate bonds and sovereign debt? More on this later. Here is more info on the new CDS indices via

Update on Terrafugia's Flying Car (Video)

Here's an update on Terrafugia's flying car that I blogged about in 2010 and 2009. The "Transition Street-Legal Airplane" had its first flight on 3/23/2012. It looks really simple, watch the video below.

"New York, NY & Woburn, MA – (April 2, 2012):
The Transition® Street-Legal Airplane is now a significant step closer to being a commercial reality. The production prototype of the Transition® Street-Legal Airplane completed its successful first flight at Plattsburgh International Airport in Plattsburgh, NY on March 23, 2012. The same vehicle has also successfully conducted initial drive and conversion testing, demonstrating the Transition’s capability to provide unmatched freedom, flexibility and fun in personal aviation. Developed by Terrafugia, Inc., the Transition® is a two seat personal aircraft capable of driving on roads and highways, parking in a single car garage, and flying with unleaded automotive fuel. (Terrafugia)

Marc Faber: Massive Wealth Destruction Coming Down The Line (CNBC Video)

via CNBC
Marc Faber, editor and publisher of the "Gloom Boom Doom" report, shared his gloom and doom views on the market and economy in an interview with CNBC's Andrew Ross Sorkin this morning on Squawk Box.

"Well, basically I think that the whole bailout and the money printing will not create long-lasting wealth, nor will it create healthy economic growth. And if I look at the world, then i see essentially well-to-do people that have done unbelievably well and I see the middle class and working class that hasn't done well. And I think somewhere down the line we will have a massive wealth destruction that usually happens either through very high inflation, or through social unrest, or through war, or a credit market collapse. Maybe all of it will happen but at different times."

"I would say that well-to-do people may lose up to 50% of their total wealth. They'll still be well-to-do; instead of a billion, they'll have say 500 million. But, I think there is a massive wealth destruction coming down the line. I'm not saying it's coming tomorrow, but looking at the bailouts and the money printing, they have postponed the problems and actually made them larger in the sense that the government debt has increased dramatically, and somewhere a solution will have to be found for this government debt."

Home Price Index Makes New Low in January, Annual Decline Possibly Leveling Off (ITB)

S&P/Case-Shiller Home Price Index (pdf)
The S&P/Case Shiller Home Price Index made a new low in January (chart on the right), which isn't a good sign for the $717 billion in negative home equity outstanding.

"S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed annual declines of 3.9% and 3.8% for the 10- and 20-City Composites, respectively. Both composites saw price declines of 0.8% in the month of January."

I guess you could say it is positive that the annual decline seems to be leveling off (chart below). Detroit led the composite with a 1.7% annual gain, followed by Phoenix and Denver with gains of 1.3% and 0.2%, respectively. I wonder if anyone made money on that IndyMac foreclosed home in Detroit that was going for $600.