leave it to my 'friend' Elaine to scrape off the sugar coating ...
(snip)"Bond Insurers Are Going Bankrupt Now
Once again, stocks rose on FAKE news. The employment numbers are pure fiction. If inflation statistics are science fiction then the employment figures belong in the 'Harry Potter Magic Books' section of the library. Tier 3 assets which are those horrid little ABX-He babies, must be valued in real terms by January so I expect a flood of red ink to pour out of many slit wrists on Wall Street soon. And three major risk-insurers of these speculators and wild cat lenders are now going under rapidly. Time to visit not only these three but Goldman Sachs and Citigroup. The Saudis are getting razor-wielding mad over the weak dollar. And a news story just in: stock analyst, Meredith Whitney is blamed for all the bad news and people are sending her death threats! Wow.
From Reuters:
Credit derivative traders are valuing bond insurers Ambac Financial Group (ABK.N: Quote, Profile , Research) and MBIA Inc (MBI.N: Quote, Profile , Research) as deep junk credits, while their stock prices have also plunged on concerns the companies may need more capital to shore up their high ratings.
Credit default swaps on Ambac have surged to around 620 basis points, or $620,000 per year for five years to insure $10 million in debt, from 185 basis points a month ago, according to data provided by CMA DataVision.
Its shares have tumbled nearly 60 percent since the beginning of October, 41 percent this week alone.
Ambac and MBIA both reported third-quarter losses last week caused by their writing down the market value of their respective credit derivative portfolios, which are used to insure assets including residential mortgages against default.
This is a major failure. This is deep beneath the surface of the waters, like the Titanic ripping its hull underwater, these organizations we will visit tonight are similar: they are the hull of the banking system. They are the ones who are supposed to protect the banking system from failure and they are now failing, themselves. This is serious.
During the entire banking collase that became obvious after August 15th but started really at the end of February, 2007, we can see more and more clearly how this is evolving as time passes. I still remember February [not yet senile!] and back then, everyone thought that China caused the wobble that clearly showed many weaknesses in our economic system. I disagreed with that prognosis and I predicted that China and Japan would engage in a series of vicious tit-for-tat currency battles because China was angry that Japan was allowed to peg the dollar while China got no reward for raising the value of the yuan.
This battle has gotten even worse and during the time frame where China was strong-arming the yen from falling to 130 to the dollar up to 115 to the dollar, the world's banking system froze up and then collapsed! Odd, wasn't it, that both the Bank of Japan and the Bank of China were the only major banks NOT hit in August? I remarked on that and used that as proof, they were toying with each other's currencies and not playing the games that are roiling the other markets.
Indeed, as the central banks in Europe and America churn out massive amounts of money causing global inflation, China and Japan have massively increased their FOREX reserves this last three months! Which is the exact opposite of what the old British Empire, the US and Europe have been doing.
Knowing this background, it is time to look at the effects of this major banking collapse which is bigger, I think, than the previous 3 banking collapses I have seen in the past.
CDS traders warn of 'blood on streets'
Bond insurers, or monolines, were also hit hard.
"[These triple-A rated companies are] exposed to the crumbling housing market," said Gavan Nolan, an analyst at derivatives data provider Markit. "Investors in monolines will be waiting for the coming months of housing data with trepidation," Mr Nolan said. CDS on MBIA Insurance rocketed to a four-year high, of 345bp, CMA Datavision said.
Last week the insurer posted $36.6m net loss and halted its share buy-back programme. Contracts on the bond insurance unit of Ambac Financial climbed to a five-year high of 310bp. Gimme Credit, an independent research term, downgraded both MBIA and Ambac this week.
When the AAA rating is dropped, this means one has to pay a higher interest rate because one looks more and more like the bastard sons of Miz Risky, that wench, that wild female who sleeps around and parties all the time and who goes to Vegas at the drop of her panties, no one trusts Risky or her children! But all speculators love her to death. Insurance groups that are supposed to be hedging banks and lenders can't afford to look like Risky's kiddies, they have to appear sober and clean, not drunk and staggering about the place. But who is going to replace these organizations that messed up?
First, I would suggest they never had insured these CDOs and tranches in the first place. Like Moody's and others who also decided they wanted to play footsie with Risky, these guys threw caution to the winds and embraced an obvious old whore and kissed her and got the cooties. Yuck. Well, serves them right!
Market Oracle:
10's of billions of dollars of securities have been downgraded since the beginning of October and this will require that they be sold in a timely manner. Once those securities hit the markets we will know their true value, and it won't be pretty. The super SIV will quickly become an exercise in wishful thinking as their “high quality” paper becomes junk in the maelstrom of liquidation which increases every time a security is downgraded. The super SIV's whole reason for being was to prevent fire sales and price discovery. Some of the Triple AAA CDO's fell to 57 cents - aka Junk territory. More and more is slated to become so. Every sub index of elements (AAA, AA, A etc.) of the structured products has crashed since October 1. The carnage of losses is staggering!
Bond insurers Radian, Ambac and MBIA shares' are in freefall, not only from the projected losses from their insurance of CDO's and structured products, but state and municipal finances in the US are in freefall as well. Many Muni bond holders face BIG problems in the coming year. What will you do if a state or municipality goes bust and the insurance company guaranteeing their bonds does also? The real estate boom inflated their tax incomes and now is deflating them. I live in Chicago and they are angling to raise taxes 1 billion dollars, and it is no different in any other city or state in America . Soon you can add Europe to the list as the real estate BUBBLE is in a precarious position around the globe.
The attempt at passing off all of Risky's offspring to Japan and China have failed. I noted just one month ago, the exposure Asia has to these lousy CDOs, ABX-HEs, Sub-primate this and that, is quite marginal. Most of it is held right here in the US/EU/UK empire! The day dreams of dumping our debts into Asia's laps and then running off with Risky to have more booze and sex is not going to happen. Nor should we want this. Japan can't nuke us. China certainly can and will.
Anyway, it is time to get on our broomsticks and fly off to Amback, MBIA and Radian to see how they are handling this crisis.
Ambac's Press Release Page:
NEW YORK, October 10, 2007 -- Ambac Financial Group, Inc. (NYSE:ABK) today announced the results of its third quarter fair value review of its outstanding credit derivative contracts. Ambac's estimate of the fair value or "mark-to-market" adjustment for its credit derivative portfolio at September 30, 2007 amounted to an unrealized loss of $743 million, pre-tax. The company expects to report a net loss per diluted share up to $3.50 in the third quarter."(snip)
(snip)"Since the Day of Doom, 7/17/7, this stock has collapsed from $67 a share to penny stock status at less than $10 today and next week, obviously, this poor ship will be done firing off roman candles, signalling Bernanke, they need to be saved. If just one week ago, the head of Radian thought these stocks were worth nearly $50...which wasn't true back then, it was near $20, he was pretty optimistic. I know these guys have to talk up their stocks but this sort of disconnect isn't wise. Everyone saw it was BS and took flight even faster than at the other companies we discussed earlier.
From the Telegraph:
Barclays shares fell by 7pc to a two-year low this morning on the back of rumours that it had been forced to seek emergency funding from the Bank of England.
According to the news wires, neither Barclays or the Bank of England wanted to comment on the speculation.
12:20 UPDATE: Barclays' external PR agency have just been on the phone, pointing out that the Bank of England has said it did not make any emergency loans to banks at its penalty rate yesterday.
“Barclays is rumoured to have gone to the Bank of England for some funding,” Mamoun Tazi, an analyst at MF Global Securities told Bloomberg. “My guess it that it's very unlikely, but never say never.”
Classic sign of a crash: rumors cause sudden lurches in the value of the stocks of even the most dignified, white haired, sober, oldster organizations and banks. The urge to panic rises. Everyone is wondering, did all the banks keep too little in reserves? Well...in the West, this goes without saying! All our systems are without reserves which I have complained loudly about. Our own Federal Reserve refuses to preseve our reserves! Meanwhile, many bankers in rival lands like Japan, Russia and China and now India and others are building magnificent, huge FOREX reserves. There is something very wrong with all this and it is plain as day: they are preparing us for a total collapse and want to FORCE US to NOT PASS OUR INFLATION TO THEM. These funds are now being changed into Sovereign Wealth Funds and they are buying up our systems so they can control our messy business. We seem unable to control this, ourselves.
Time to look at Citigroup who is also in the news today. From Times Online, just in, just a few minutes ago:
Meredith Whitney, the analyst who prompted a $369 billion (£177 billion) plunge in the value of US shares on Thursday by issuing a negative note on Citigroup, hit out at Wall Street’s culture of intimidation yesterday after receiving several death threats from investors in the bank.
Ms Whitney, a CIBC analyst who is married to the former World Wrestling Entertainment champion Death Mask, prompted a near 7 per cent drop in Citigroup’s shares on Thursday, after suggesting that the bank needed to raise more than $30 billion to restore its capital cushion.
She also downgraded her recommendation on Citigroup’s shares to “market underperform” in the note that set off America’s biggest stock market decline since August.
WHOA. Talk about 'blood in the streets'!!! And I love the fact that she is married to the Death Mask. This is so befitting. For anyone who can see what is going on has to have some connection with the Dark Realm, that bizarre place where I come from, where my Watchers live and where they love bad news and where money is created and is, of course, the home of Risky, herself. The Hell Cave. All of this is so amusing in a dark way.
Unlike Meredith and Death Mask, all I get is nasty letters from nasty lawyers representing nasty hell hounds and pirates on Elizabeth II's islands! No death threats yet! But then, few people listen to me. Poor Meredith Whitney, on the other hand, is on TV, etc. And now she gets what I have gotten in the past: death threats. Once, I was on TV talking about death threats and Captain Hill who eventually became the Captain in charge of all of Manhattan, was working with me. And he said, 'We will give you a bullet proof vest' and I said, 'You will wear it and take the bullets for me, right?'
Heh. He laughed at that one. But I have been shot at. The whiz sound of the bullet before it hits the wall behind the head can be unnerving. I hope no one blames Meredith. She is just telling the truth and the last thing speculators want to hear, is the truth. They want Benanke Santa Claus to helicopter money to them and give it to them! This really disgusts me. And her note about Citigroup didn't cause the markets to crash. They were crashing and she noticed the obvious. Geeze, I detailed here before the middle of August, the logic of this collapse, it was pretty obvious, and I even mentioned Citigroup more than once because I was amused at how the furious Saudis tried to stop the overspending there by the executives.
From the NYT:
Citigroup’s embattled chairman and chief executive has told senior officials at the bank that he expected to leave after an emergency board meeting this weekend, a banking industry official with ties to Citigroup said last night.
Charles O. Prince III, 57, had indicated that he expected to leave during this board meeting, this person said. Directors are also expected to discuss the possibility of another large write-off.
“The entire organization is in uproar and people have been looking for leadership,” said one Citigroup executive familiar with the situation. “The organization is waiting for something.”
Um, if anyone is going to have an unpleasant experience, Mr. Prince should consult books about the Saudi Royals. My parents knew them very well, very, very well. Unlike with the Chinese, they didn't let me live with the Saudis for obvious reasons. Heh. But that is in the past, when I was younger. In this case, the Saudis don't like to lose billions of dollars and they feel a personal grudge about this and they also will want to put some fear in other American hearts but can't use Bin Laden and his Group so they will use other means, there are many mercenaries willing to collect a fine fee and make it look like an accident."(snip)



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