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<p>[QUOTE=&quot;InfleXion, post: 1364775, member: 29012&quot;]Let&#039;s see if I can phrase this appropriately and not have to delete again. What I am wondering is whether the fact that BAC is a member of the ISDA (International Swaps and Derivatives Association) factored into your decision. Since the ISDA is the governing body that determines what constitutes a &#039;default&#039; for both sovereign nations and financial institutions there is a conflict of interest here in that they will most likely never allow a default to happen. The 5 member banks of the ISDA are the US banks that hold 97% of credit default swaps. If a default is triggered these swaps will be called upon for insurance purposes so it is in the their interest, as dual role owners of these swaps and keymasters to whether the swaps need to fulfill their role, not to declare a default that would decimate their balance sheets. It is only a default if they say it is, regardless of losses. That is why Greece may continue to have haircuts on their bonds, but it will not be declared a default, just like it wasn&#039;t at the 50% haircut before since a large portion of the European debt is insured against default by these default swaps.</p><p><br /></p><p>Considering all this I can see why BAC stock would be attractive since they control their own destiny within the framework of the current system, however I do not think that it is a safe play to have your money in a company that survives by preventing these credit default swaps from performing the role they were created for, because if they actually had to pony up the money then the counter party risk chain would drag all of these CDS holders under, which are all the too big to fail banks. The potential domino effect because of the risk inherent to this situation makes all paper/electronic assets too dangerous for my liking, and the vulnerability of this paradigm lends credence to the idea that the Federal Reserve will have to come to their rescue with further currency printing at some point in the future. While this may boost stocks, and will definitely boost metals, I don&#039;t feel safe with stocks because these markets only function as long as these banks function.[/QUOTE]</p><p><br /></p>

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