“A good drug dealer is like a good investment bank, they don’t try their own products.”
Imagine an amazing product that takes advantage of other people’s addiction. Wouldn’t dealing such a product be profitable? As all those with a minimal understanding of the drug industry would know (or watched Requiem for a Dream), dealers should never try their own products.
Well, Goldman Sachs certainly is enjoying the benefits of selling credit default swaps. Let’s think about this for a moment, and remember the last few banks who sold credit default swaps in the late 2000s financial crisis. Depending on the payout, we could be looking at some very screwed dealers. And not just Goldman Sachs, all the banks that sold Credit Default Swaps on Greece, thinking that they could get easy cash on paranoid investors may just slowly watch their non-existent capital get whittled away.
I find it intriguing that people are still selling CDS on bonds that have a, according to the market prices, 99% chance of default. In my opinion, selling credit default swaps for the past few months is analogous to a drug dealer addicted to their own product. And, I personally don’t see a good end to these people who bet that Greece wouldn’t default.