This evening, Miss Marketcrash is off to a holiday drinks party with the posh parents from that school that we pay for child number two to attend. As some of you may remember, child number one has recently been pulled from his lovely sweet school and placed in the state school due to ummm....circumstances. This week, a letter from the school arrived asking us if we would be so kind as to pay half the terms fees as a compromise from January until Easter whilst our child is not there and attending the free state school. Well - a glance at the markets tells me I could propose a compromise of my own. Perhaps I could propose trading shares to cover my debt - a scheme modeled on the goings on in America? Yes...I could volunteer to give them 285 shares of Citigroup. Alas, I think they would rather take back my child for free than be burdened with Citigroup shares.
And that is what the market thinks of the burden as well. The cost of buying a CDS - the price one is willing to pay to insure against the U.S. Government defaulting on its debt is sky-high these days. If you are new to all this - I'll try to explain without spinning your head around -very simply - the rising cost of a cds reflects the idea that default is a realistic proposition. In fact, the cost of these little bullies are almost three times higher than on the Dawn-of -Doom in September when Lehman collapsed. Indeed, the cost has risen astronomically in past few days as the world has digested the terms of the Citigroup bailout...
I must admit I kind of love the sheer folly of the idea that there exists such a thing as a U.S. Gov't CDS. But what is really astonishing is that one share of Citigroup won't even buy you a pint of beer these days...never mind a G&T...
Not that I drink of course.
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