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This note stems from the research that I have been doing on the Hartford Insurance Group, AIG and their peers. AIG has been caught with their hand in the cookie jar, so to speak, writing naked CDS under the guise of synthetic securities. Basically, they were gambling. In this economic climate, the writers of CDS are most likely to take a loss, particularly those who wrote the swaps on anything related to a financial company or financial asset as an underlying. Those who bought the CDS have often recorded a paper gain, but counterparty risk is an issue as well. Realizing (after growing up in NY) that there is seldom only one cockroach, I had my team search for other insurance companies that basically gambled with their balance sheet under the guise of issuing insurance.

 

All subscribers are urged to read this note before the start of trading today. When time permits, compare and contrast this simple but hopefully timely not to the Hartford Insurance Group research.

icon Actionable Intelligence Note (162.29 kB 2008-12-12 06:01:55)