The folks at Pragmatic Capitalism (PragCap) posted a blog today by Walter Kurtz titled “Time to Stop Fearing the Greek CDS Bogeyman.”  The article essentially presents an argument that the market shouldn’t be overly concerned about a potential significant payout by writers – banks, insurance companies – of credit default swaps (CDS) on Greek sovereign debt.

Part of this topic relates to Greek lawmakers wanting to retroactively change the existing Greek-law bond agreements by including a collective action clause (CAC) that would enable a supermajority of bondholders to force a debt restructuring on all holders.  S&P wrote that it would consider this amendment an action of default, hence triggering a default and a CDS payout.

PragCap includes some useful charts from SoberLook.com and outlines four points regarding why a CDS trigger would not be a concern.  The first and last points relate to CDS being marked to market.

This argument may be valid if most or all of the CDS written were done so prior to mid-2010 when laws were imposed for writers of derivatives contracts to post collateral.  However, these laws were not imposed retroactively.  We can thank Warren Buffett, as he lobbied Congress in 2009 and 2010 against making this law retroactive, which is fair (unlike the CAC insertion mentioned above).  Note, however, at the time Berkshire Hathaway had $63B+ of derivatives contracts of which it was at risk of being asked to provide collateral of between 10% and 20% of the total amount, or roughly $7B to $14B of collateral.  Nevertheless, since the law is not retroactive, Berkshire doesn’t have to post collateral for these contracts, which are mostly index derivatives, incidentally.

Our sense is that a lot of the outstanding Greek sovereign debt CDS were written prior to the collateral posting requirements.  Ergo, the writers of said CDS – banks, insurance companies – have not posted collateral, just like Berkshire Hathaway has not posted collateral for its derivatives written prior to the change in rules. 

We shall see…

Below are links of an eclectic variety.

Woolly Mammoth to Be Cloned – Discovery News
Within five years, a woolly mammoth will likely be cloned, according to scientists who have just recovered well-preserved bone marrow in a mammoth thigh bone. Japan's Kyodo News first reported the find.

A Government Censors a Blog – techdirt
Be thankful for your liberties and freedoms, as some governments secretly censor information (in this case, a blog) without apparent due process.

Expose an Alleged Financial Crook and be Fined Millions – Seattle Weekly
Apparently bloggers need to be careful writing about crooks and ponzi schemes.  The unintended consequences of the Court's actions will likely be more anonymous, offshore blogging.

Aunt Midge Not Dying in Hospice Reveals $14B Market – Bloomberg
When private equity firms salivate about for-profit hospice investments, what is the probability that Medicare (i.e., taxpayers) is being pillaged and plundered?

Stephen Hawking on Time Travel - Letters of Note
This one is short and comical.

Truckin' - got my chips cashed in
Keep truckin - like the doodah man
Together - more or less in line
Just keep truckin on

-- Grateful Dead, Truckin’

There are many indices to use to gauge economic activity and Coventry League tends to gravitate to proprietary and idiosyncratic ones. 

However, we incorporate established indices as well, including a trucking activity index as a leading indicator: Ceridian-UCLA Pulse of Commerce Index, or PCI. 

Essentially, a unit of Ceridian manages payment cards that trucking companies and drivers use to, say, fill up their tanks with diesel. It measures diesel fuel purchases at 7,000 truck stops nationwide.  The big picture of the index is a measure of the flow of goods to U.S. factories, retailers and consumers.

So, what’s the index suggesting?  Near-term economic sluggishness at best. 

Coventry League may or may not have its chips cashed in…

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"Biographies: Ceridian-UCLA Pulse of Commerce Index." Economic Data | Ceridian-UCLA Pulse of Commerce Index. Web. 15 Sept. 2011. <http://www.ceridianindex.com/about-the-index/biographies/>.Biography of UCLA economics professor, Ed Leamer, who is chief economist for the Ceridian-UCLA Pulse of Commerce Index.

Durden (ZeroHedge), Tyler, and Lee Adler (Wall Street Examiner). "The Pulse of Commerce and The Chicken's Dilemma | ZeroHedge." ZeroHedge | On a Long Enough Timeline the Survival Rate for Everyone Drops to Zero. The Wall Street Examiner, 13 Sept. 2011. Web. 15 Sept. 2011. <http://www.zerohedge.com/contributed/pulse-commerce-and-chickens-dilemma>.

Gross, Daniel. "The 18-Wheeler Recovery: What Trucking Statistics—yes, Trucking—can Tell Us about the Economy." Slate Magazine. 13 May 2010. Web. 15 Sept. 2011. <http://www.slate.com/id/2253823/>.

Maio, Pat. "Trucking Activity Boosted in California by Exports." North County Times - Californian. 13 Sept. 2011. Web. 15 Sept. 2011. <http://www.nctimes.com/business/article_2d91a1dc-10e4-5dca-80c9-06bb5e7fdb28.html>.

Please reference “Iran's Kish Oil Bourse Begins Oil Transactions in Euro and Dirham” dated 19 August 2011 from Hamsayeh.net.

Having an oil exchange that trades in multiple currencies, including a basket of global currencies, provides an alternative in the marketplace for those who don’t want to rely on any specific fiat currency (a currency not supported and backed by some tangible commodity).

Rolling Stone Magazine is becoming a source for provocative investigative journalism. 

Here is its most recent article (17 Aug. 2011) titled "Is the SEC Covering Up Wall Street Crimes?" by Matt Taibbi.

Also, here is a related Rolling Stone's article by the same author from earlier this year (16 February 2011) titled "Why Isn't Wall Street in Jail?"

Enjoy.