Thursday, March 05, 2009

Fears of systemic risk rising


I defined systemic risk in a previous article--Systemic risk defined--Too Big to Fail. Fears of systemic risk are rising and this is being evidenced in the widening of interest rate spreads for credit default swaps (CDS). The credit default swaps on the venerable Berkshire Hathaway widened to more than 500 basis points this week. This, a clear sign that the market is worried about mounting losses at the company headed by Warren Buffett. Spreads in the CDS market are rising across the board. Investment grade spreads are now out to the 200 basis point area. In the junk area spreads have widened to more than 1100 basis points.

The jitters in the market continue to spread. Much of the focus this morning is on GE, GM, and HSBC.

My guess is that GM is nearing bankruptcy, an event that would lead to a market capitulation in stocks.
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Bob DeMarco is a citizen journalist, blogger, and Caregiver. In addition to being an experienced writer he taught at the University of Georgia , was an Associate Director and Limited Partner at Bear Stearns, was CEO of IP Group, and is a mentor. Bob currently resides in Delray Beach, FL where he cares for his mother, Dorothy, who suffers from Alzheimer's disease. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.


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