Crisis Rollover

On the last Thursday of every month, the analyst appears on the television discussing the rollover in the derivatives market. Rollover is a term used to describe the closing of a derivative position for one month and opening it for the next month. Its rather strange that we have been rolling over one crisis after another, without much to cheer, for the last 18 months. Here is a quick recap of events.

• April 2007 - World wakes up to the concept of subprime mortgages and its implications.
• June 2007 - S&P downgrades over a 100 bonds.
• Aug 2007 - Large banks halt redemption's for a few fund offers.
• September 2007 - Central banks increase liquidity by reducing interest rates.
• October 2007 - U.S. Treasury announces the HOPE NOW initiative, an alliance of investors, mortgage market participants.
  
• December 2007 - U.S announces the Troubled Asset Relief Programme
  
• January 2008 - Stock markets across the world start collapsing.
  
• March 2008 - Bear Stearns is acquired by JP Morgan Chase in a distress sale
  
• September 2008 - Lehmann Brothers collapses.
• October 2008 - There is total freeze in the credit markets.
• November 2008 - The U.S. Treasury purchases a total of $125 billion in preferred stocks in nine U.S. banks.
• December 2008 - The U.S. Treasury authorizes loans of up to $13.4 billion for General Motors and $4.0 billion for Chrysler to bail them out.
• March 2009 - Stock markets bottom out and reach the point of despair.
• April 2009 - Swine flu scare grips the world.
• June 2009 - India receives deficient rainfall and the threat of drought looms large.

Its been a tumultuous few months for everyone. In this typhoon the small fry have been really badly hit. It seems to me, and I say this without data, that the tide is turning. The news cycle will move towards positive and so will the rollover.

Two Brothers - One Nation on its knees

This is a fascinating tale of two brothers. They grew up together with their parents in perfect harmony. Life seemed perfect and abound in happiness. But you know these things hardly last forever. The entire neighborhood looked at them with pride and sometimes a little envy.

Their father bought them a new GI Joe action figure. This was no simple action figure, it was a unique GI Joe collectors special. One of its kind figure. The brothers loved it, they played with it together all the time. Slowly a mild discontent starting brewing between the brothers. The GI Joe being the focal point of existence. Each tried to stake a claim over it. The situation deteriorated by the day, the parents intervened to no avail. The matter got so serious that the people in the neighborhood would discuss it with great detail. Slowly the battle ground became clear. You had to be supporting one of the two brothers, there was no middle ground. There were ugly exchanges between the two brothers and their associates. The local media for lack of other stories covered this one with great excitement. True to its style, the media added new twists to the saga. Somehow the local politicians also got involved. Things snowballed out of control. The amount of interest generated reached hysterical proportions.

Some sort of resolution had to be reached. The parents could not side with one and hence tried remaining neutral. After much thought and debate they confiscated the GI Joe. One wrap on the knuckles set things right. It was now clear to the brothers that unless they resolved their differences the GI Joe would be lost forever.
Conflict resolution was difficult. The politicians thought that the issue will distract the nation from more meaningful problems, so they wanted the battle to continue. They became party to the 'resolution meetings'.
Just like when god send the devil to count the political parties in the country and the devil never returned, these 'resolution meetings' continued without progress.

The episode had far reaching consequences. GI Joe never manufactured another toy in the country. A generation of children grew up without GI Joe's to play with.
And the saga continues...........

P.S - I apologize for my lack of subtlety.