The very low interest rates are forcing banks and insurance companies to gamble with their investments to make up for the lower returns they get from traditional investments. These companies are allowed to use hypothetical loss estimates which can be changed. They are allowed to “mark to book value” (the purchase price) or they can recognize a gain when they sell. So these companies are skating on thin ice by taking increasing greater risks to earn money through short term trading like the fiasco at Chase where Chase lost $2 Billion to $3 Billion in bonds CDS contracts.
The risk …Read More