Having read and heard very little of George Soros directly, I enjoyed his column today in the Financial Times.
Now, of course, I disagree with his globalist, inflationist, communist prescriptions. But it's always important, make that EXTREMELY IMPORTANT to keep abreast of the Moron
I admit that *credit default swaps* aren't my thing. BUT, I don't understand this statement of his:
The second step is to understand credit default swaps and to recognise that the CDS market offers a convenient way of shorting bonds. In that market the asymmetry in risk/reward works in the opposite way to stocks. Going short on bonds by buying a CDS contract carries limited risk but unlimited profit potential; by contrast, selling credit default swaps offers limited profits but practically unlimited risks.
How exactly could *buying a CDS contract* have *unlimited profit potential*?
Wouldn't *insurance* on say $1 million worth of bonds have a price ceiling at say, $1 million?
Someone please educate me. (Or George.)
