Don Kaufman here.
So I'm watching everyone obsess over NVIDIA earnings this week, and honestly, I get it. But there's something else happening that's got my attention.
I heard the term "CDS" more in the last two months than I've heard in the previous 15 years.
CDS stands for credit default swaps - basically insurance contracts against firms going belly up. These were a huge part of the 2008 mess, then disappeared from trading conversation.
Until now.
What's Got My Attention
I still talk to a few institutional traders, and I was genuinely surprised to hear this coming up again. There's been significant activity in credit default swaps lately happening in OTC markets you can't see.
When institutional money starts buying insurance against corporate defaults after 15 years of not caring? That's worth paying attention to.
Goldman Sachs and the other big desks will make a derivative contract on anything you want. The fact that these conversations are happening tells me smart money is getting nervous.
The Fed Gets Involved
There was a "hastily organized" New York Fed meeting recently - they told top bankers to cancel their plans because they had an issue. Combined with repo market strain and increased CDS activity, it paints an interesting picture.
By the way, if this kind of institutional insight is valuable to you, I've got something pretty wild happening through December 1st - doubling every dollar you spend on TheoTrade credits. More on that at the bottom.
Why This Matters
While everyone's focused on earnings beats and misses, the real question might be about companies that loaded up on debt during this AI boom.
Amazon announced a $12 billion debt offering this morning. Oracle has huge debt loads around AI infrastructure. A lot of these companies funded their buildouts with borrowed money.
Now institutional traders are asking: what happens if some can't service their debt loads?
The Bottom Line
This is why I keep saying stop trying to marry news stories with market moves. The real information is in what institutions are actually doing.
When smart money starts buying insurance against defaults, that's a signal worth understanding. I could be completely wrong, but when the same instruments that helped create 2008 start showing up in conversations again, it's worth knowing what that might mean.
Keep watching your daily moves if you want. But sometimes the most important signals come from markets you didn't even know existed.
To your success,
Don Kaufman