The demise of the Enron Corporation occurred relatively swiftly. Over a 16-month period, Enron's stock price declined from a high of $90 to a low of under $1 before the giant energy-trading company declared bankruptc
Do I have to go into The Pension Reform Thing here....probably not, as know one ever got it the first few hundred times, but now that we have 172,860 municipal dumbass retards trading pension money like casino/lotto chips in front of a Playstation.....maybe, just maybe, someone will notice that the people who will pay for this, are the people that ignore legislation that allows America to be used as a conduit for Cayman Island hedge funds, which are owned by China! Heck of a job with your Katrina-like plodding there SEC, FTC, DOJ, FBI, FASB, Congress, Senate....barfbag inserted here
"If ACA Capital and its much larger brethren, Ambac and MBIA, are forced under, this negates the insurance guarantee that many derivative players are currently using to justify to auditors their current mark-to-market values (on the argument that it is not them that has to absorb the losses on a default but ACA Capital or Ambac or MBIA, etc. that sold them default credit insurance). Worse yet, many if not all of these credit default swaps are predicated on the counterparty selling it maintaining an average A rating or above so it doesnt necessarily mean that the monocline insurers even have to fail... they just have to lose their pristine credit rating."
Now lots of these muni's would have pretty good credit ratings on their own and have very little danger of real default. But they are not AAA.
Wonder how much of the debt is held by entities requried to be in AAA only bonds? The real danger seems to be the possible flood of forced sales if these aren't AAA anymore.
From the posting at Sinclair's website, it's stupid-simple to recognize what's about to happen.
Not only are these "insured" bonds about to be reclassified, which will cause an immediate and enormous wave of liquidations from funds which are not permitted to hold "junk"...but...
The MANY, MANY, MANY credit swap players who accepted insured bonds as their collateral now hold bags of much lower value.
Those lower values go directly to retained earnings. The consequences are breathtaking.
Bankruptcy blowups due to solvency crises are merely the tip of the economic collapse.
Think about this.
Hey, it looks like some of the investor types are doing just that! Look at the drop in USTreasury interest, across the entire time spectrum...and this is before the reality takes place.
Pension funds have few safe choices for their inflows; so, down goes the interest in UST's as they all pile in.
But the collapses are not "one time" write offs; this is a house of cards and these are the bottom cards being pulled from the structure.
Ok, just one more time, because this downgrade will be like a Fibonacci Spiral, with successive inflations, or in this case, deflations:
Greenspan acknowledged that derivatives, by construction, are highly leveraged, a condition that is both a large benefit and an oversized Achilles' heel. It appeared that the benefit had been reaped in the past decade, leading to a wishful declaration of the end of the business cycle. Now we are faced with the oversized Achilles' heel, with "the possibility of a chain reaction, a cascading sequence of defaults that will culminate in financial implosion if it proceeds unchecked". According to Greenspan, "only a central bank, with its unlimited power to create money, can with a high probability thwart such a process before it becomes destructive. Hence central banks have, of necessity, been drawn into becoming lenders of last resort." Greenspan asserted that such "catastrophic financial insurance coverage" by the central bank should be reserved for only the rarest of occasions to avoid moral hazard. He observed correctly that in competitive financial markets, the greater the leverage, the higher must be the rate of return on the invested capital before adjustment for higher risk. Yet there is no evidence that higher risk in financial manipulation leads to higher return for investment in the real economy, as recent defaults by Enron, Global Crossing, WorldCom, Tyco and Conseco have shown. Higher risks in finance engineering merely provide higher returns from speculation temporarily, until the day of reckoning, at which point the high returns can suddenly turn in equally high losses.
And who will timely reclassify the rating on 100 thousand + bond offerings?
Will there be an "ignore the details, this looks like a safe municipality" broad brush, or will there be sanity applied?
The ratings agencies are garbage, and we all know it.
Ah, but so much "new" business should result in fat bonus checks for the idiots in charge of Fitch, Moody's and S&P, among others. They struck gold because of their total incompetence.
Rewarding the stupidest of all. Tom Hanks played a ratings company senior exec, didn't he??? Oh, sorry, he was playing the fool. "Stupid is as Fitch, Moody's and S&P."
Im seriously not trying or wanting to torture anyone here or elsewhere, but this is worth thinking about in terms of pension funds, i.e, you may want to make sure your cash is as safe as possible and to contact your pension fund to see what types of obligations they have, which connect your money to derivatives.....this is not a joke folks, do your DD and be very afraid!
Re: President Bush Signs Pension Reform Act; Cross Trading Exemption Included
President Bush this week signed the Pension Reform Act (H.R. 4), comprehensive pension legislation that represents a significant overhaul of the prohibited transaction provisions of the 32-year old Employee Retirement Security Income Act. H.R.4 is Public Law No: 109-280. The changes include a prohibited transaction exemption for cross-trading between separate pension accounts held with the same money manager and boost the level of ERISA assets that can be invested in investment vehicles such as hedge funds. Under the legislation, cross-trading would be allowed for private pension plans with at least $100M in assets, resulting in lower transaction costs for pension plans.
November 30, 2007 6:27 PM
Re: August 2006 - Landmark pension reform legislation passed last night by Congressand expected to be signed by the President this month includes the most significant changes to the fiduciary provisions of ERISA since its enactment in 1974. The new legislation (the "Pension Reform Act") significantly relaxes the rulesgoverning when asset-backed securities ("ABS"), including commercial mortgage backed securities ("CMBS") and collateralized debt obligations("CDOs"), may be offered to investors holding certain types of retirement planassets. Absent an exception, issuers of ABS, CMBS and CDOs that are not structured as debt must comply with ERISA, including its stringent fiduciary and prohibited transaction rules -- which is not practical for most ABS, CMBS and CDO issuers. One regulatory exception (known as the "SignificantParticipation Exception") relied on by many issuers of either below-investmentgrade ABS, CMBS and CDOs or ABS, CMBS or CDOs that are notcharacterized as debt for tax (each of which typically cannot be characterized asdebt for ERISA purposes) applies if an issuer does not have "significant participation" by "benefit plan investors".
OT, but isn't it interesting commentary on the potential losses on private equity deals done over the past few years when you see that Salle Mae was going to be taken private this summer at $25B, and now has a market cap of $8.5B?
How can the credit raters still be studying whether or not MBIA is worthy of a AAA rating?!?! So let me get this straight, literally hundreds of thousands of MBIA-insured issues are on negative ratings watch, yet MBIA is still AAA?!?!? LOL!!!
Yea, though I walk through the valley of the shadow of debt, I will fear no consequence: for the Fed art with me; thy credit window and thy staff they comfort me.
Munis have low returns. Double tax free in California 3% is roughly 5% equivalent. The problem is you have to sell to somebody with cash in California. Removing insurance and going from AAA to say Aaa could knock a couple points off par wiping out a couple years of interest. The city of Poway has an offering out 5.3% rated BBB. Nearly 9% equivalent yield. That's a for them to pay just to avoid insurance to AAA. You gotta wonder if the muni market is getting all frozed up.
Fitch has previously stated that losses reported during the third quarter of 2007 by a number of financial guarantors due to mark to market accounting standards for insurance sold in credit derivative form are not a ratings concern (see Fitch's Oct. 11 special report 'Financial Guarantors - A Review of Recent Mark to Market Losses'). Similarly, Fitch's capital adequacy analysis discussed here today will focus on underlying fundamental credit performance of insured portfolios, and will not be based on market value movements of insured securities.
MBIA is the largest financial guarantor in terms ofnet par outstanding and claims-paying resources. Itsinsured portfolio, which totaled $580.7 billion on a net par outstanding basis as of June 30, 2005,includes exposure to the municipal finance,structured finance and international sectors. As afinancial guarantor, MBIA provides an unconditionaland irrevocable guaranty to pay debt service on allinsured bonds in its portfolio. These insurance policies require MBIA to pay principal and interest when due, but at its option, the company mayaccelerate the timing of debt payments under certain prespecified circumstances
I know some people hate these long posts, but this is stuff that you wont find on the news, its MBIAs SEC reported info, as a simple FYI...hope it doesnt piss anyone off!
MBIA's municipal services operations are consolidated under MBIA MuniServices
Company (MBIA MuniServices) and provide revenue enhancement services and
products to public-sector clients nationwide, consisting of discovery, audit,
collections/recovery and information (data) services. The municipal services
operations also include Capital Asset Holdings GP, Inc. and certain affiliated
entities (Capital Asset), a servicer of delinquent tax certificates. MBIA
currently insures debt obligations with an outstanding balance of $117 million,
or $42 million net of existing loss reserves of $75 million, related to Capital
Asset's tax lien portfolio. Substantially all of this exposure relates to a
Capital Asset securitization, which was structured through the sale of tax liens
by Capital Asset to an off-balance sheet qualifying special purpose entity that
was established in 1999 in connection with the securitization.
The Company recorded $20 million in losses and LAE in the first quarter of 2006,
a slight decrease from the first quarter of 2005. The variance in losses and LAE
corresponds to the slight decrease in scheduled net earned premium, as scheduled
net earned premium is the base upon which the Company's 12% loss factor is
applied. At March 31, 2006, the Company had $218 million in unallocated loss
reserves, which represent the Company's estimate of losses associated with
credit deterioration that has occurred in the Company's insured portfolio and
are available for future case-specific activity. Total case basis activity
transferred from the Company's unallocated loss reserve was $11 million in the
first quarter of 2006, compared with $20 million in the first quarter of 2005.
Total case basis activity during the first quarter of 2006 primarily consisted
of loss reserves for insured obligations within MBIA's guaranteed tax lien
portfolio and insured obligations issued by Allegheny Health, Education and
Research Foundation (AHERF). Total case basis activity during the first quarter
of 2005 primarily consisted of loss reserves for insured obligations within
MBIA's guaranteed tax lien portfolio and insured obligations issued by Fort
Worth Osteopathic Hospital and AHERF.
The typical muni bond with 30 years to maturity (at issue) doesn't hang around for 30 years. It's refunded after 5-10 years. Refunding can mean calling in the old bonds and issuing new ones. Or it can mean refinancing, placing the principal into a trust, and paying down the old bonds from the trust. In either case, it's exactly like the homeowner who got in over his head and used a new HELOC to pay next month's mortgage.
When the refunding market dries up, a lot of old bad credit that it papered over will be exposed. Bonds that can't repay will be exposed, instead of being refinanced.
The real disaster is that money flow into munis is just going to dry up, and muni revenue bond defaults will really spike. If MBIA isn't dead after ratings downgrades, defaults will kill it.
I have this image stuck in my mind of a very burly, football sized guy in an oversized hat punching out a horse (mule? - whatever). There is a metaphor relative to today's situation in the image somewhere but ,try as I might, I can't find it.
Who/what represents Alex Karris and who/what is the horse?
Consolidation of such VIEs does not increase MBIA Corp.s exposure above that already committed to in its insurance policies. VIE assets and liabilities consolidated in MBIA Corp.s financial statements at June 30, 2007 and December 31, 2006 are related to MBIA Corp.s guarantee of certain VIEs. Such assets and liabilities are primarily reported in Investments held-to-maturity and Variable interest entity floating rate notes, respectively, on the face of MBIA Corp.s balance sheet. The assets and liabilities of these VIEs each totaled $1.4 billion at June 30, 2007 and $1.5 billion at December 31, 2006. Revenues and expenses related to third-party VIEs are primarily reported in Net investment income and Interest expense, respectively, on MBIA Corp.s statements of income and substantially net to zero. Third-party VIEs creditors do not have recourse to the general assets of MBIA Corp. outside of the financial guarantee policy provided to the VIE.
Then, a few months later: Fitch cited deterioration on some of the $22 billion of securities MBIA insures that are backed by second-lien mortgages. MBIA announced last week it was setting aside $500 million to $800 million to cover expected claims on those bonds.
However,
More than $2 trillion of insured securities would lose their AAA ratings amid mass downgrades of bond guarantors. MBIA fell $7.07, or 26 percent, to $19.95 at the close of regular New York Stock Exchange trading. Ambac rose 24 cents to $27.70.
MBIA posted a document on its Web site late yesterday showing it insured $8.1 billion of so-called CDOs-squared, which repackage other CDOs and securities linked to subprime mortgages. Rising delinquencies on subprime loans contributed to downgrades on 2,007 CDOs last month alone, according to Morgan Stanley.
In regard to the fact that More than $2 trillion of insured securities would lose their AAA ratings, related to 172,860 municipal bond downgrades and universal bogus collateral....non of this little speed bump is connected to the broad and general theories relating to a broad range of financial crimes, including bank fraud, making false statements to banks and auditors, securities fraud, wire fraud, money laundering, conspiracy and insider trading?
Nah, this a casino and the mob says, spin the wheel again, make my day!
A second New Deal is headed our way. Beware, it might yield another 50 years of American prosperity, if we can get through the chaos without losing our heads...
Who here owns munis? I do. And have for over 30 years. First off - I do not know of a single muni-investment fund or other vehicle that requires a AAA minimum rating (although perhaps there are some mutual funds that say they are "insured muni funds" - but read the fine print - I doubt any mandate AAA ratings).
Second - a huge percentage of my muni bonds are insured. The older ones are all MBIA and AMBAC (the old "stalwarts"). Some newer ones are FGIC. I don't have any insured by ACA or Radian (guess they must be the new guys on the block). For over 30 years - I have always looked at the underlying credit ratings. And all I have ever bought are GO's - and essential services revenue bonds. No airports - no health facilities - no industrial development revenue stuff. I went through all the stuff I own (or have bought for others - family) - in August - when this whole insurance thing started to smell - and there is only one single A rated in the lot of them). The rest are AA or better.
Now if you think that the State of Florida - or the State of Texas - or Nevada or Washington or New York - or the City of Las Vegas - or Dallas - or Phoenix - will go under - fine. But you are talking about something that didn't even happen in the Great Depression. It is your prerogative to think that. But it is about 5 standard deviations away from the situation today.
OTOH - I wouldn't feel so great if my insured bonds were Newark NJ nursing home bonds.
One nice thing about all of this. There used to be a time when underlying credit quality of issuers made a difference in prices and yields. And I think we are returning to that era.
BTW - for those of you who are young and easily frightened - I was there once too. I bought a fair amount of physical gold in 1981 - maybe 1982. It is now at a profit - up about .5%/year over the last 25+ years! Should have bought more munis and stocks then. I will tell you one thing about physical gold. Look at the buy/sell spreads on the internet. Even if you buy high quality stuff - like government coins (which is what I own) - and they are mint - a buyer won't pay you what the gold is worth per ounce. It is not a very liquid market. Too bad I'm not a rapper type - I'd put the stuff into jewelry.
How is it that 173,000 bond issues are placed on "credit watch" and I don't see a single reference to that in the MSM? I don't doubt that there is some reason to argue this away as a non-event, but the sheer numbers seem to demand some sort of acknowledgment.
Instead the big news is that RIM is selling more Blackberries than expected. I guess that's why I look at CR before the WSJ, Bloomberg, etc.
Not only are these "insured" bonds about to be reclassified, which will cause an immediate and enormous wave of liquidations from funds which are not permitted to hold "junk"...but...
Somebody with emergency powers declaration authority needs to issue an edict or papal pardon to these funds so that they dont have to disgorge themselves of their paper junk.
WALL STREET CHANGING OFFICIAL NAME TO ....
'BID WANTED STREET"...
Muni market taking initial "tremor waves" with TSUNAMI approaching very fast....Municipal bond market will be in dissarray within WEEKS, IMO, as individual investors run for the hills to sell off their munis before they lose their AAA status.
The muni bond market is a AAA market, period....and without AAA paper, the muni market is SAYANARA.
My advice to investors and brokers looking to protect their client's portfolio's and business?
The cutting edge of TOB technology has come to look more and more like a SIV,'' Christian Stracke, a strategist at CreditSights in London wrote in the report today titledThe Muni Meltdown -- Are TOBs the next SIVs.''
TOBs hold fixed-rate local government bonds in a trust. They use the securities as collateral to sell floating-rate notes. Buyers of the floating-rate notes accept a lower interest rate because they have the option to sell the debt back to the trust.
`Highly Sensitive'
The TOBs are ``highly sensitive'' to the credit ratings of bond insurers, CreditSights said.
Moody's Investors Service, Standard & Poor's and Fitch Ratings have been reviewing the seven top-ranked bond insurers as losses on securities backed by subprime mortgages accelerate. S&P cut its ratings outlook to negative for MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, and downgraded ACA Financial Guaranty Corp. 12 levels to CCC today.
Municipal bonds are headed for their worst year since 1999, according to Merrill Lynch & Co. indexes. The slump may persist after securities firms reduced their holdings at the fastest pace in at least 12 years during the third quarter, according to data compiled by the Federal Reserve.
TOBs are in a better situation than SIVs because of the municipal bonds underlying the securities, according to Matt Fabian, managing director of Municipal Market Advisors, an independent research firm based in Concord, Massachusetts.
TOBs may have lost money but the U.S. munis they own have an undeniable clearing price not terribly worse than current levels,'' Fabian said in an e-mail.SIVs are invested in assets that have depreciated to maybe 30 cents on the dollar, have no secondary market, and are liable to see massive downgrades below investment grade.'
Is it just me, or does Paulson, Helicoter Ben, Bush and all the other crooks look more and more retarded every day?
This mess was never about subprime hocus pocus, it was about banking collusion and corruption at the very highest levels...and that was why we never had any investigations and that is why, this scam is unfolding into chaos!
Not a mention related to any financial crimes, including bank fraud, making false statements to banks and auditors, securities fraud, wire fraud, money laundering, conspiracy and insider trading
Re: MBIA is now saying that all the CDO squared stuff was previously disclosed.
I have not done a total search, but the amount of money talked about today, is not in any SEC docs! The mechanics of CDOs squared or otherwise, like VIE, or whatever is just not there and not disclosed!
"Second - a huge percentage of my muni bonds are insured. The older ones are all MBIA and AMBAC (the old "stalwarts"). Some newer ones are FGIC."
Didn't you start your post saying enough of the BS, and then you spout the biggest piece of BS of all? What good is your "insurance" if the insurer is no good? MBIA's business is a lot like writing flood insurance during a long drought.
Robyn,
I really like your posts. I am young (30s) and smart enough to be really really concerned and angry about all this.
Finance is not my field, but I learned a lot since summer 2006 when I first started seriously thinking about buying a house, ahhh the American Dream. I got a graduate degree in one of those technical areas we always hear the US is falling behind in. Seems like we have enough people to me.
Since then I have become completely disgusted. I like my job though. . . and renting.
As James Grant wrote, there is a time to bury gold and a time to dig it up and invest it in Microsoft. 1971 was a great time to bury it. 1981 was the time to dig it up. Timing is everything.
Robyn, I'm nothing more than an MBA who crunches numbers and voraciously reads history.
My wife has been happy with my calls on not buying, back in '04, a fourth home in California (prices are back to '04 levels, now), and putting everything we had into gold mining stocks in '05 (our money doubled over '05-'06).
If the averages hold, we'll have our stock market correction by April. If that happens, my 100%-of-our-portfolio-in-SDS call will do well.
"Conjure Bag's Global Financial Meltdown Clock now reads:
11:59 PM"
mp | 12.20.07 - 6:54 pm
"[Re: CB starting to count in seconds] Maybe"
mp | 12.20.07 - 7:53 pm
Alright, I'll ask again. Is C. Bag rounding off, or doesn't his Meltdown Clock even display seconds? Your answers are ambiguous.
p.s. Thanks for yesterday's youtube link to the Italian jazz pianist. I enjoyed it this a.m. very much.
"Geez, Robyn, no wonder you're a muni person; you're old."
jg | 12.20.07 - 8:00 pm
Dunno about munis, but if Robyn bought U.S. Treasuries in summer '82, she's been making 15% to 18% per year, for over a quarter of a century.
Robyn - some twenty-something relatives of mine currently hold two homes, and something above $1M worth of mostly I/O loans. I suspect the make well under $100K, but even if I grant them an above average income, I don't know how the numbers work out EXCEPT when one assumes some pretty hinky price inflation, forever.
Professionals, with mighty fine qualifications, gave my rather nice, if not college educated, relatives a $1M option at no cost.
If you insist on pulling the old qualification argument out anymore, I shall taunt you a second time.
Let's stick to the numbers, shall we?
BTW - like your posts, this one nit notwithstanding.
I know no one knows if you're a dog on the internet - but sometimes it's nice to know whether or not you're talking with that legendary internet dog.
Robyn | 12.20.07 - 7:43 pm | #
A lot of the time you are better off talking to the internet dog - he makes more sense.
Brownsville Boy - you sir are an internet liar... I've owned Newfies and they are so lazy they couldn't POSSIBLY find the energy to log on and battle away on the internets. Hell they hardly have the energy to hold the rug down.
"US Treasuries will never, ever yield 15-18 percent again.
If they do, 15-18 percent of the US general population will be carrying guns.
And they will be using them . . ."
Quincy k | 12.20.07 - 8:35 pm clears throat That sounds a tad extreme. I mean, can't they just short Treasuries like everybody else? I'll concede its nowhere near as exciting and all. But its easier, and you don't even have to leave the house.
CR, These rating agencies--fitch, moody's, s&p-- seem to have so much influence on the whole debt market. How do they make their living, and who pays their bills? And how do they make up the rating rules? Does the govt regulate them? Very mysterious!
dry would be a whippet-pointer- always sticking it nose into everything with that 'nsatiable curiousity.
so now that the rich folks are going to get their haircut on their fine muni bonds starting tomorrow, I wonder if they will have any sympathy for us poor homebuyers;-}
they better or we will drop their cola on social security;-}
But it is about 5 standard deviations away from the situation today.
That whole "so many sigmas out there it will happen once in the life of the universe" bit really worked out well in August.
Statistics seems to work differently in finance. It's like the feedback effects turn what used to be a six-sigma event into a bankable certainty once you wander a short ways from where everyone is comfortable.
I'm 38 and was 100% Munis(to term) until a few years back where I went 20% euro denom. bonds. Rolled over GDP growth + whatever I didn't spend. It's served me well and I'm now waiting for a good spot to go long financials. Could be next week, could be next Q, could be next year.
But then I'm looking for wealth preservation wth a little upside.
Ya know, it is time to remove GW and DC from office. Enough is enough. We are not "dumb asses"; we are simply trying to live in a fair game. Raising future Americans against a backdrop of Sandi Weil POS.
How to do it thow. Any suggestions besides anarchy ?
The global credit crunch claimed another victim yesterday when insurer Friends Provident suspended withdrawals from its £1.2bn property fund, prompting fears that billions of pounds held in unit trusts are now under threat.
The insurer said investors in the fund, 118,000 people, will not be able to access their money for up to six months. It blamed the freezing of assets on a "general sharp decline" in the commercial property market "brought about by the credit crunch".
The fund invests in office blocks and retail developments and usually holds a cash buffer of around 10-15% of assets to meet demands for withdrawals. But it said yesterday the buffer had fallen to 5% of the value of the fund after a wave of redemptions, giving the company little choice but to suspend the fund.
Spokesman Jim Murdoch said the only alternative would have been a fire sale of property investments, which would be against the interests of policyholders.
Fears are now growing of a domino effect among other property funds as investors seek to withdraw their cash. "We are the first, it happens to be us, but this is a problem across the industry," said Murdoch.
Britain's biggest property fund, with £3.2bn run by Norwich Union, revealed last week that its cash buffer had fallen to 7.5% from 17.5% in September. But it said yesterday that trading was continuing as normal and that it was meeting any requests for redemptions. Scottish Widows said cash reserves in its £1.3bn property unit trust had fallen to 6.5% but it can borrow another 10% to meet withdrawals in exceptional circumstances.
Sun Trust had to beef up its MM fund with billions. A run on MM or other funds would really bring home the crisis to Americans.
Thats a lot of issues...and here i am thinking just trying to keep food in the fridge and a roof over my family's head was an issue...but this ...this is not issues...this is...a death knell.
Yes - I am old (median age in the US is about 36). And I am female. But I would appreciate it if any insults coming my way be non-sexist (call me an idiot or a moron but not a bitch). I apologize for insulting dogs and dog lovers (but will never apologize to cat owners who let their cats roam in my yard and eat my birds). And I also apologize for being a bit irritable. By this time of year - my books are usually closed and the most important issue is what cookies I'll bake. The financial "Masters of the World" have made a mess of my desk this holiday season.
Regarding a "Great Depression" scenario - I just don't see 25% unemployment down the road - or anything like it.
And my main point about bond insurance is insured bonds with good underlying credit quality will probably be ok. Those with poor underlying credit quality won't. If you own insured Texas GO's - I wouldn't lose any sleep over it. If you own insured CDOs squared - refill your Ambien prescription.
Anyway - I hope that all of you have a great holiday season.
Is that 100% of the issues insured by MBIA?
Yah aby
The demise of the Enron Corporation occurred relatively swiftly. Over a 16-month period, Enron's stock price declined from a high of $90 to a low of under $1 before the giant energy-trading company declared bankruptc
What's the total value of these bond issues?
Do I have to go into The Pension Reform Thing here....probably not, as know one ever got it the first few hundred times, but now that we have 172,860 municipal dumbass retards trading pension money like casino/lotto chips in front of a Playstation.....maybe, just maybe, someone will notice that the people who will pay for this, are the people that ignore legislation that allows America to be used as a conduit for Cayman Island hedge funds, which are owned by China! Heck of a job with your Katrina-like plodding there SEC, FTC, DOJ, FBI, FASB, Congress, Senate....barfbag inserted here
From Welcome To Jim Sinclair’s MineSet
12 20 07:
by a contributor to Jim Sinclair's website.
"If ACA Capital and its much larger brethren, Ambac and MBIA, are forced under, this negates the insurance guarantee that many derivative players are currently using to justify to auditors their current mark-to-market values (on the argument that it is not them that has to absorb the losses on a default but ACA Capital or Ambac or MBIA, etc. that sold them default credit insurance). Worse yet, many if not all of these credit default swaps are predicated on the counterparty selling it maintaining an average A rating or above so it doesnt necessarily mean that the monocline insurers even have to fail... they just have to lose their pristine credit rating."
Now lots of these muni's would have pretty good credit ratings on their own and have very little danger of real default. But they are not AAA.
Wonder how much of the debt is held by entities requried to be in AAA only bonds? The real danger seems to be the possible flood of forced sales if these aren't AAA anymore.
From the posting at Sinclair's website, it's stupid-simple to recognize what's about to happen.
Not only are these "insured" bonds about to be reclassified, which will cause an immediate and enormous wave of liquidations from funds which are not permitted to hold "junk"...but...
The MANY, MANY, MANY credit swap players who accepted insured bonds as their collateral now hold bags of much lower value.
Those lower values go directly to retained earnings. The consequences are breathtaking.
Bankruptcy blowups due to solvency crises are merely the tip of the economic collapse.
Think about this.
Hey, it looks like some of the investor types are doing just that! Look at the drop in USTreasury interest, across the entire time spectrum...and this is before the reality takes place.
Pension funds have few safe choices for their inflows; so, down goes the interest in UST's as they all pile in.
But the collapses are not "one time" write offs; this is a house of cards and these are the bottom cards being pulled from the structure.
Got gold?
Well, it's not Friday afternoon. That's when they'll get started on the real list of issues.
Ok, just one more time, because this downgrade will be like a Fibonacci Spiral, with successive inflations, or in this case, deflations:
Greenspan acknowledged that derivatives, by construction, are highly leveraged, a condition that is both a large benefit and an oversized Achilles' heel. It appeared that the benefit had been reaped in the past decade, leading to a wishful declaration of the end of the business cycle. Now we are faced with the oversized Achilles' heel, with "the possibility of a chain reaction, a cascading sequence of defaults that will culminate in financial implosion if it proceeds unchecked". According to Greenspan, "only a central bank, with its unlimited power to create money, can with a high probability thwart such a process before it becomes destructive. Hence central banks have, of necessity, been drawn into becoming lenders of last resort." Greenspan asserted that such "catastrophic financial insurance coverage" by the central bank should be reserved for only the rarest of occasions to avoid moral hazard. He observed correctly that in competitive financial markets, the greater the leverage, the higher must be the rate of return on the invested capital before adjustment for higher risk. Yet there is no evidence that higher risk in financial manipulation leads to higher return for investment in the real economy, as recent defaults by Enron, Global Crossing, WorldCom, Tyco and Conseco have shown. Higher risks in finance engineering merely provide higher returns from speculation temporarily, until the day of reckoning, at which point the high returns can suddenly turn in equally high losses.
One more weekend of consumer "soma" required to get us through the Christmas frenzy buying season.
And who will timely reclassify the rating on 100 thousand + bond offerings?
Will there be an "ignore the details, this looks like a safe municipality" broad brush, or will there be sanity applied?
The ratings agencies are garbage, and we all know it.
Ah, but so much "new" business should result in fat bonus checks for the idiots in charge of Fitch, Moody's and S&P, among others. They struck gold because of their total incompetence.
Rewarding the stupidest of all. Tom Hanks played a ratings company senior exec, didn't he??? Oh, sorry, he was playing the fool. "Stupid is as Fitch, Moody's and S&P."
Im seriously not trying or wanting to torture anyone here or elsewhere, but this is worth thinking about in terms of pension funds, i.e, you may want to make sure your cash is as safe as possible and to contact your pension fund to see what types of obligations they have, which connect your money to derivatives.....this is not a joke folks, do your DD and be very afraid!
Dear Senator Boxer,
First, thank you for your vote, last year!
Re: U.S. Senate: Legislation & Records Home > Votes > Roll Call Vote
U.S. Senate Roll Call Votes 109th Congress - 2nd Session
as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate
Vote Summary :
YEAs 93
NAYs ---5
Boxer (D-CA)
Burr (R-NC)
Coburn (R-OK)
Cornyn (R-TX)
Feingold (D-WI)
Not Voting - 2
Baucus (D-MT)
Lieberman (D-CT)
Re: President Bush Signs Pension Reform Act; Cross Trading Exemption Included
President Bush this week signed the Pension Reform Act (H.R. 4), comprehensive pension legislation that represents a significant overhaul of the prohibited transaction provisions of the 32-year old Employee Retirement Security Income Act. H.R.4 is Public Law No: 109-280. The changes include a prohibited transaction exemption for cross-trading between separate pension accounts held with the same money manager and boost the level of ERISA assets that can be invested in investment vehicles such as hedge funds. Under the legislation, cross-trading would be allowed for private pension plans with at least $100M in assets, resulting in lower transaction costs for pension plans.
November 30, 2007 6:27 PM
Re: August 2006 - Landmark pension reform legislation passed last night by Congressand expected to be signed by the President this month includes the most significant changes to the fiduciary provisions of ERISA since its enactment in 1974. The new legislation (the "Pension Reform Act") significantly relaxes the rulesgoverning when asset-backed securities ("ABS"), including commercial mortgage backed securities ("CMBS") and collateralized debt obligations("CDOs"), may be offered to investors holding certain types of retirement planassets. Absent an exception, issuers of ABS, CMBS and CDOs that are not structured as debt must comply with ERISA, including its stringent fiduciary and prohibited transaction rules -- which is not practical for most ABS, CMBS and CDO issuers. One regulatory exception (known as the "SignificantParticipation Exception") relied on by many issuers of either below-investmentgrade ABS, CMBS and CDOs or ABS, CMBS or CDOs that are notcharacterized as debt for tax (each of which typically cannot be characterized asdebt for ERISA purposes) applies if an issuer does not have "significant participation" by "benefit plan investors".
173,022?
That was quick. Aren't computers wonderful?
OT, but isn't it interesting commentary on the potential losses on private equity deals done over the past few years when you see that Salle Mae was going to be taken private this summer at $25B, and now has a market cap of $8.5B?
No the lying moron of a president is forgiving taxes on short sales.
Had enough of the lying republicans?
How can the credit raters still be studying whether or not MBIA is worthy of a AAA rating?!?! So let me get this straight, literally hundreds of thousands of MBIA-insured issues are on negative ratings watch, yet MBIA is still AAA?!?!? LOL!!!
Winter (Economic and Market) Watch » Takes the Cake
doc holiday, you just described K-Winter.
Yea, though I walk through the valley of the shadow of debt, I will fear no consequence: for the Fed art with me; thy credit window and thy staff they comfort me.
Munis have low returns. Double tax free in California 3% is roughly 5% equivalent. The problem is you have to sell to somebody with cash in California. Removing insurance and going from AAA to say Aaa could knock a couple points off par wiping out a couple years of interest. The city of Poway has an offering out 5.3% rated BBB. Nearly 9% equivalent yield. That's a for them to pay just to avoid insurance to AAA. You gotta wonder if the muni market is getting all frozed up.
Fitch has previously stated that losses reported during the third quarter of 2007 by a number of financial guarantors due to mark to market accounting standards for insurance sold in credit derivative form are not a ratings concern (see Fitch's Oct. 11 special report 'Financial Guarantors - A Review of Recent Mark to Market Losses'). Similarly, Fitch's capital adequacy analysis discussed here today will focus on underlying fundamental credit performance of insured portfolios, and will not be based on market value movements of insured securities.
on Fitch watch negative:
287,833 MBIA & FGIC insured issues
MBIA is the largest financial guarantor in terms ofnet par outstanding and claims-paying resources. Itsinsured portfolio, which totaled $580.7 billion on a net par outstanding basis as of June 30, 2005,includes exposure to the municipal finance,structured finance and international sectors. As afinancial guarantor, MBIA provides an unconditionaland irrevocable guaranty to pay debt service on allinsured bonds in its portfolio. These insurance policies require MBIA to pay principal and interest when due, but at its option, the company mayaccelerate the timing of debt payments under certain prespecified circumstances
"287,833 MBIA & FGIC insured issues"
What's on the list? Requires Fitch subscription to see?
knee-jerk reaction:
let me guess, market up 200 friday on the news
the cabal has become a disaster, closing all accounts....
except I series bonds-hat tip stag-mark as i rock my 7-month old on my knee:
"billy hand me that bottle of ativan"
(More Blazing Saddles)
Gentlemen, please. Rest your sphincters.
Had enough of the lying republicans?
sf_jack | 12.20.07 - 6:16 pm |
One thread is enough with this crap eh jack?
Fine, republicans lie. I'm republican, I admit it.
I take comfort in the fact that many of their predecessors (Kennedy, LBJ and Clinton) were prolific in their use of lies as well.
Get over it.
RIMM blew out earnings
Triple-witching options expiration
And MBIA is imploding
Tomorrow should make for an interesting show.
Republicans lie?
What is this..."free association Thursday"?
When you find a politician who (1) isn't lying, and (2) actually holding office, let us know...that'd be a newsworthy event.
I know some people hate these long posts, but this is stuff that you wont find on the news, its MBIAs SEC reported info, as a simple FYI...hope it doesnt piss anyone off!
MBIA's municipal services operations are consolidated under MBIA MuniServices
Company (MBIA MuniServices) and provide revenue enhancement services and
products to public-sector clients nationwide, consisting of discovery, audit,
collections/recovery and information (data) services. The municipal services
operations also include Capital Asset Holdings GP, Inc. and certain affiliated
entities (Capital Asset), a servicer of delinquent tax certificates. MBIA
currently insures debt obligations with an outstanding balance of $117 million,
or $42 million net of existing loss reserves of $75 million, related to Capital
Asset's tax lien portfolio. Substantially all of this exposure relates to a
Capital Asset securitization, which was structured through the sale of tax liens
by Capital Asset to an off-balance sheet qualifying special purpose entity that
was established in 1999 in connection with the securitization.
The Company recorded $20 million in losses and LAE in the first quarter of 2006,
a slight decrease from the first quarter of 2005. The variance in losses and LAE
corresponds to the slight decrease in scheduled net earned premium, as scheduled
net earned premium is the base upon which the Company's 12% loss factor is
applied. At March 31, 2006, the Company had $218 million in unallocated loss
reserves, which represent the Company's estimate of losses associated with
credit deterioration that has occurred in the Company's insured portfolio and
are available for future case-specific activity. Total case basis activity
transferred from the Company's unallocated loss reserve was $11 million in the
first quarter of 2006, compared with $20 million in the first quarter of 2005.
Total case basis activity during the first quarter of 2006 primarily consisted
of loss reserves for insured obligations within MBIA's guaranteed tax lien
portfolio and insured obligations issued by Allegheny Health, Education and
Research Foundation (AHERF). Total case basis activity during the first quarter
of 2005 primarily consisted of loss reserves for insured obligations within
MBIA's guaranteed tax lien portfolio and insured obligations issued by Fort
Worth Osteopathic Hospital and AHERF.
4822
yes free registration will get you the 20+ MB excel files per insurer, I only own German Bunds and they are not on the list
The typical muni bond with 30 years to maturity (at issue) doesn't hang around for 30 years. It's refunded after 5-10 years. Refunding can mean calling in the old bonds and issuing new ones. Or it can mean refinancing, placing the principal into a trust, and paying down the old bonds from the trust. In either case, it's exactly like the homeowner who got in over his head and used a new HELOC to pay next month's mortgage.
When the refunding market dries up, a lot of old bad credit that it papered over will be exposed. Bonds that can't repay will be exposed, instead of being refinanced.
The real disaster is that money flow into munis is just going to dry up, and muni revenue bond defaults will really spike. If MBIA isn't dead after ratings downgrades, defaults will kill it.
They say in trouble lies opportunity.
Surely, there is a business waiting to be borne out of this ratings/insurance implosion.
Someone with a little credibility needs to get into the rating and insurance business.
Calculated Ratings
Calculated Risk Insurance.
I like it.
It was the grease of muni bond insurance that made the easy refunding of crummy revenue bonds possible.
(More Blazing Saddles)
I have this image stuck in my mind of a very burly, football sized guy in an oversized hat punching out a horse (mule? - whatever). There is a metaphor relative to today's situation in the image somewhere but ,try as I might, I can't find it.
Who/what represents Alex Karris and who/what is the horse?
CR,
Ratings, I agree. But why do we really need bond insurance? Isn't it a manipulation at its core?
MBIA insured issues include everything from:
A.B. Won Pat Guam International Airport Authority (GU)
to
Zumbrota-Mazeppa Independent School District No. 2805 (MN)
Conjure Bag's Global Financial Meltdown Clock now reads:
11:59 PM
"Bunny Slipper Bond Assurance Partners, LLC." Our motto: "Toe the line or get the toe."
I dont get it anymore:
Consolidation of such VIEs does not increase MBIA Corp.s exposure above that already committed to in its insurance policies. VIE assets and liabilities consolidated in MBIA Corp.s financial statements at June 30, 2007 and December 31, 2006 are related to MBIA Corp.s guarantee of certain VIEs. Such assets and liabilities are primarily reported in Investments held-to-maturity and Variable interest entity floating rate notes, respectively, on the face of MBIA Corp.s balance sheet. The assets and liabilities of these VIEs each totaled $1.4 billion at June 30, 2007 and $1.5 billion at December 31, 2006. Revenues and expenses related to third-party VIEs are primarily reported in Net investment income and Interest expense, respectively, on MBIA Corp.s statements of income and substantially net to zero. Third-party VIEs creditors do not have recourse to the general assets of MBIA Corp. outside of the financial guarantee policy provided to the VIE.
Then, a few months later: Fitch cited deterioration on some of the $22 billion of securities MBIA insures that are backed by second-lien mortgages. MBIA announced last week it was setting aside $500 million to $800 million to cover expected claims on those bonds.
However,
More than $2 trillion of insured securities would lose their AAA ratings amid mass downgrades of bond guarantors. MBIA fell $7.07, or 26 percent, to $19.95 at the close of regular New York Stock Exchange trading. Ambac rose 24 cents to $27.70.
MBIA posted a document on its Web site late yesterday showing it insured $8.1 billion of so-called CDOs-squared, which repackage other CDOs and securities linked to subprime mortgages. Rising delinquencies on subprime loans contributed to downgrades on 2,007 CDOs last month alone, according to Morgan Stanley.
Time for wine!
In college they used to call me Mongo.
I sure didn't dance in the ballet.
I do look like him too, especially when I needed a haircut.
Mongo no want to pay mortgage. You gotta problem with it Mr. Citibank?
Mongo want new deal, old one sucks now, or Mongo mail keys back along with property tax bill.
Have a nice day.
I picture the banker to be Hedley LaMarr;-}
someday this warz gonna end...
Mongo now need to go to gym, mongo have need to keep holiday weight below 300 pounds or Mrs. Mongo cut off cookies.
Mongo like cookies, 12 y.o. scotch, and fine wine.
Mongo did graduate from two colleges.
How about the Crimson Permanence Assurance?
After all we have come unmoored and have set sail on the seas of high finance!!!
In regard to the fact that More than $2 trillion of insured securities would lose their AAA ratings, related to 172,860 municipal bond downgrades and universal bogus collateral....non of this little speed bump is connected to the broad and general theories relating to a broad range of financial crimes, including bank fraud, making false statements to banks and auditors, securities fraud, wire fraud, money laundering, conspiracy and insider trading?
Nah, this a casino and the mob says, spin the wheel again, make my day!
A second New Deal is headed our way. Beware, it might yield another 50 years of American prosperity, if we can get through the chaos without losing our heads...
OK guys - enough of the BS.
Who here owns munis? I do. And have for over 30 years. First off - I do not know of a single muni-investment fund or other vehicle that requires a AAA minimum rating (although perhaps there are some mutual funds that say they are "insured muni funds" - but read the fine print - I doubt any mandate AAA ratings).
Second - a huge percentage of my muni bonds are insured. The older ones are all MBIA and AMBAC (the old "stalwarts"). Some newer ones are FGIC. I don't have any insured by ACA or Radian (guess they must be the new guys on the block). For over 30 years - I have always looked at the underlying credit ratings. And all I have ever bought are GO's - and essential services revenue bonds. No airports - no health facilities - no industrial development revenue stuff. I went through all the stuff I own (or have bought for others - family) - in August - when this whole insurance thing started to smell - and there is only one single A rated in the lot of them). The rest are AA or better.
Now if you think that the State of Florida - or the State of Texas - or Nevada or Washington or New York - or the City of Las Vegas - or Dallas - or Phoenix - will go under - fine. But you are talking about something that didn't even happen in the Great Depression. It is your prerogative to think that. But it is about 5 standard deviations away from the situation today.
OTOH - I wouldn't feel so great if my insured bonds were Newark NJ nursing home bonds.
One nice thing about all of this. There used to be a time when underlying credit quality of issuers made a difference in prices and yields. And I think we are returning to that era.
BTW - for those of you who are young and easily frightened - I was there once too. I bought a fair amount of physical gold in 1981 - maybe 1982. It is now at a profit - up about .5%/year over the last 25+ years! Should have bought more munis and stocks then. I will tell you one thing about physical gold. Look at the buy/sell spreads on the internet. Even if you buy high quality stuff - like government coins (which is what I own) - and they are mint - a buyer won't pay you what the gold is worth per ounce. It is not a very liquid market. Too bad I'm not a rapper type - I'd put the stuff into jewelry.
How is it that 173,000 bond issues are placed on "credit watch" and I don't see a single reference to that in the MSM? I don't doubt that there is some reason to argue this away as a non-event, but the sheer numbers seem to demand some sort of acknowledgment.
Instead the big news is that RIM is selling more Blackberries than expected. I guess that's why I look at CR before the WSJ, Bloomberg, etc.
Not only are these "insured" bonds about to be reclassified, which will cause an immediate and enormous wave of liquidations from funds which are not permitted to hold "junk"...but...
Somebody with emergency powers declaration authority needs to issue an edict or papal pardon to these funds so that they dont have to disgorge themselves of their paper junk.
Yah, this is weird, SEC docs obviously hide any details related to this matter and as for the muni bonds, thats a very unregulated arena...great!
WALL STREET CHANGING OFFICIAL NAME TO ....
'BID WANTED STREET"...
Muni market taking initial "tremor waves" with TSUNAMI approaching very fast....Municipal bond market will be in dissarray within WEEKS, IMO, as individual investors run for the hills to sell off their munis before they lose their AAA status.
The muni bond market is a AAA market, period....and without AAA paper, the muni market is SAYANARA.
My advice to investors and brokers looking to protect their client's portfolio's and business?
SELL EARLY & SELL OFTEN...
The coming muni tsunami is approaching fast...
IMO
Do your own due diligence
HE
LOL. We are all mongo now.
The cutting edge of TOB technology has come to look more and more like a SIV,'' Christian Stracke, a strategist at CreditSights in London wrote in the report today titledThe Muni Meltdown -- Are TOBs the next SIVs.''
TOBs hold fixed-rate local government bonds in a trust. They use the securities as collateral to sell floating-rate notes. Buyers of the floating-rate notes accept a lower interest rate because they have the option to sell the debt back to the trust.
`Highly Sensitive'
The TOBs are ``highly sensitive'' to the credit ratings of bond insurers, CreditSights said.
Moody's Investors Service, Standard & Poor's and Fitch Ratings have been reviewing the seven top-ranked bond insurers as losses on securities backed by subprime mortgages accelerate. S&P cut its ratings outlook to negative for MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, and downgraded ACA Financial Guaranty Corp. 12 levels to CCC today.
Municipal bonds are headed for their worst year since 1999, according to Merrill Lynch & Co. indexes. The slump may persist after securities firms reduced their holdings at the fastest pace in at least 12 years during the third quarter, according to data compiled by the Federal Reserve.
TOBs are in a better situation than SIVs because of the municipal bonds underlying the securities, according to Matt Fabian, managing director of Municipal Market Advisors, an independent research firm based in Concord, Massachusetts.
TOBs may have lost money but the U.S. munis they own have an undeniable clearing price not terribly worse than current levels,'' Fabian said in an e-mail.SIVs are invested in assets that have depreciated to maybe 30 cents on the dollar, have no secondary market, and are liable to see massive downgrades below investment grade.'
mp,
Is CB going to start counting down the seconds?
MBIA is now saying that all the CDO squared stuff was previously disclosed.
link
I didn't get a harrumph outta that guy!
Is it just me, or does Paulson, Helicoter Ben, Bush and all the other crooks look more and more retarded every day?
This mess was never about subprime hocus pocus, it was about banking collusion and corruption at the very highest levels...and that was why we never had any investigations and that is why, this scam is unfolding into chaos!
Not a mention related to any financial crimes, including bank fraud, making false statements to banks and auditors, securities fraud, wire fraud, money laundering, conspiracy and insider trading
Re: MBIA is now saying that all the CDO squared stuff was previously disclosed.
I have not done a total search, but the amount of money talked about today, is not in any SEC docs! The mechanics of CDOs squared or otherwise, like VIE, or whatever is just not there and not disclosed!
Conjure Bag's Global Financial Meltdown Clock now reads:
11:59 PM
The "counterparty risk chain reaction" is certainly a scary prospect. I am still not convinced the System can allow MBIA to fail...
Robyn, this is going to be worse than the Great Depression of '29-'33.
Household debt-to-income levels are much higher than from the '20s; the Feds will be in no position to attempt 'fiscal stimulus.'
Good luck to you.
My apologies if someone posted this already; per Bill Gross, we are in recession as of December 1.
FT.com / US & Canada - Pimco boss says US in recession
JG - So you are "forecasting" 25+% unemployment? Like the Great Depression? If so - perhaps you can tell us your qualifications for this prediction.
And Hahverd Econ 101 - Does that mean you're a freshman at Harvard? I'm class of '71. If that is not your qualification to write - what is it?
I know no one knows if you're a dog on the internet - but sometimes it's nice to know whether or not you're talking with that legendary internet dog.
"Second - a huge percentage of my muni bonds are insured. The older ones are all MBIA and AMBAC (the old "stalwarts"). Some newer ones are FGIC."
Didn't you start your post saying enough of the BS, and then you spout the biggest piece of BS of all? What good is your "insurance" if the insurer is no good? MBIA's business is a lot like writing flood insurance during a long drought.
Robyn,
I really like your posts. I am young (30s) and smart enough to be really really concerned and angry about all this.
Finance is not my field, but I learned a lot since summer 2006 when I first started seriously thinking about buying a house, ahhh the American Dream. I got a graduate degree in one of those technical areas we always hear the US is falling behind in. Seems like we have enough people to me.
Since then I have become completely disgusted. I like my job though. . . and renting.
jg's Financial Times link- If I had to be bold Id say we began a recession in December, he [Bill Gross] said...
Conjure Bag and I are stone cold, not "bold." We're sticking to Q1-08 forecast of August, but might refine it at the end of December.
We re-iterate our November 22 opinion that the bull market in equities is over.
Robyn,
As James Grant wrote, there is a time to bury gold and a time to dig it up and invest it in Microsoft. 1971 was a great time to bury it. 1981 was the time to dig it up. Timing is everything.
tj- "Is CB going to start counting down the seconds?"
Maybe.
Time to stock up on aged single malt scotch and fine cigars...just in case
Those always come in handy
Robyn - the folks that got us into the various messes we're in have plenty of qualifications. Far as I can see, qualifications are not worth much.
Geez, Robyn, no wonder you're a muni person; you're old.
The "counterparty risk chain reaction" is certainly a scary prospect. I am still not convinced the System can allow MBIA to fail...
Would a failure of MBIA have any direct impact on C's holdings ?
jg- "Geez, Robyn, no wonder you're a muni person; you're old."
jg, I don't think you're objectionable by nature, so will assume you're teasing.
Robyn, I'm nothing more than an MBA who crunches numbers and voraciously reads history.
My wife has been happy with my calls on not buying, back in '04, a fourth home in California (prices are back to '04 levels, now), and putting everything we had into gold mining stocks in '05 (our money doubled over '05-'06).
If the averages hold, we'll have our stock market correction by April. If that happens, my 100%-of-our-portfolio-in-SDS call will do well.
Good luck with your munis.
Only 173,022 issues. Ho-hum.
Now that's quality snarking.
mp, I was being a smart aleck.
Ad hominem barb -- 'what are my qualifications' -- from Robyn, ad hominem retort from me.
"Conjure Bag's Global Financial Meltdown Clock now reads:
11:59 PM"
mp | 12.20.07 - 6:54 pm
"[Re: CB starting to count in seconds] Maybe"
mp | 12.20.07 - 7:53 pm
Alright, I'll ask again. Is C. Bag rounding off, or doesn't his Meltdown Clock even display seconds? Your answers are ambiguous.
p.s. Thanks for yesterday's youtube link to the Italian jazz pianist. I enjoyed it this a.m. very much.
"Geez, Robyn, no wonder you're a muni person; you're old."
jg | 12.20.07 - 8:00 pm
Dunno about munis, but if Robyn bought U.S. Treasuries in summer '82, she's been making 15% to 18% per year, for over a quarter of a century.
Robyn - some twenty-something relatives of mine currently hold two homes, and something above $1M worth of mostly I/O loans. I suspect the make well under $100K, but even if I grant them an above average income, I don't know how the numbers work out EXCEPT when one assumes some pretty hinky price inflation, forever.
Professionals, with mighty fine qualifications, gave my rather nice, if not college educated, relatives a $1M option at no cost.
If you insist on pulling the old qualification argument out anymore, I shall taunt you a second time.
Let's stick to the numbers, shall we?
BTW - like your posts, this one nit notwithstanding.
psychodave- "Alright, I'll ask again. Is C. Bag rounding off, or doesn't his Meltdown Clock even display seconds? Your answers are ambiguous."
CB has two event-driven clocks, the first measures in hours and minutes; it is the one with which you are familiar.
The second clock measures in seconds. After 11:59 PM Conjure will give the time in hours:minutes:seconds.
If circumstances warrant, the clocks can also go back in time.
US Treasuries will never, ever yield 15-18 percent again.
If they do, 15-18 percent of the US general population will be carrying guns.
And they will be using them on a daily basis for obtain daily necessities.
my daddy always tells me that the treasuries he bought in '81 paid for my college. not a bad trade dad!
PS: there are plenty of tax-exempt bonds that come out as junk and stay junk.
I know no one knows if you're a dog on the internet - but sometimes it's nice to know whether or not you're talking with that legendary internet dog.
Robyn | 12.20.07 - 7:43 pm | #
A lot of the time you are better off talking to the internet dog - he makes more sense.
my daddy always tells me that the treasuries he bought in '81 paid for my college. not a bad trade dad!
dc1000 | 12.20.07 - 8:35 pm | #
For you or society?
Robyn,
I am, in fact, a Newfoundland Dog, and I am offended by your comment.
Retract, please.
grrrr.
MBIA insured issues include everything from:
A.B. Won Pat Guam International Airport Authority (GU)
to
Zumbrota-Mazeppa Independent School District No. 2805 (MN)
Mike | 12.20.07 - 6:51 pm | #
Can't speak for the airport on Guam but the Zumbrota-Mazeppa ISD is probably as safe as anywhere (farm land - very good stuff - not many McMansions).
Just sayin'.
Brownsville Boy - you sir are an internet liar... I've owned Newfies and they are so lazy they couldn't POSSIBLY find the energy to log on and battle away on the internets. Hell they hardly have the energy to hold the rug down.
Fess up, are you really an English Setter?
dryfly- "Fess up, are you really an English Setter?"
That was a good one. Really good.
"US Treasuries will never, ever yield 15-18 percent again.
If they do, 15-18 percent of the US general population will be carrying guns.
And they will be using them . . ."
Quincy k | 12.20.07 - 8:35 pm
clears throat That sounds a tad extreme. I mean, can't they just short Treasuries like everybody else? I'll concede its nowhere near as exciting and all. But its easier, and you don't even have to leave the house.
CR, These rating agencies--fitch, moody's, s&p-- seem to have so much influence on the whole debt market. How do they make their living, and who pays their bills? And how do they make up the rating rules? Does the govt regulate them? Very mysterious!
From time to time usually during a full moon or bad hair day we get an unwelcome internet bitch on this blog and I'm NOT talking about Tanta.
dry would be a whippet-pointer- always sticking it nose into everything with that 'nsatiable curiousity.
so now that the rich folks are going to get their haircut on their fine muni bonds starting tomorrow, I wonder if they will have any sympathy for us poor homebuyers;-}
they better or we will drop their cola on social security;-}
This is really going to be fun!
Someday this war's gonna end...
But it is about 5 standard deviations away from the situation today.
That whole "so many sigmas out there it will happen once in the life of the universe" bit really worked out well in August.
Statistics seems to work differently in finance. It's like the feedback effects turn what used to be a six-sigma event into a bankable certainty once you wander a short ways from where everyone is comfortable.
It's not the monolines that are the lightening rod; it's the impact on credit swaps.
When the derivatives begin to buckle, there will be the latest WTO event for us to witness and experience.
While it's great to see the idle rich take part in this great act, it's not relevant to the cracking of the system itself.
I'm 38 and was 100% Munis(to term) until a few years back where I went 20% euro denom. bonds. Rolled over GDP growth + whatever I didn't spend. It's served me well and I'm now waiting for a good spot to go long financials. Could be next week, could be next Q, could be next year.
But then I'm looking for wealth preservation wth a little upside.
Ya know, it is time to remove GW and DC from office. Enough is enough. We are not "dumb asses"; we are simply trying to live in a fair game. Raising future Americans against a backdrop of Sandi Weil POS.
How to do it thow. Any suggestions besides anarchy ?
"But it is about 5 standard deviations away from the situation today."
You either understand the dynamic or you don't.
mp | 12.20.07 - 11:36 pm |
You either understand the dynamic or you don't.
LOL, Black Swans i guess
I wouldn't trust these folks to rate anything!
UK fund investors can't get their money out:
The global credit crunch claimed another victim yesterday when insurer Friends Provident suspended withdrawals from its £1.2bn property fund, prompting fears that billions of pounds held in unit trusts are now under threat.
The insurer said investors in the fund, 118,000 people, will not be able to access their money for up to six months. It blamed the freezing of assets on a "general sharp decline" in the commercial property market "brought about by the credit crunch".
The fund invests in office blocks and retail developments and usually holds a cash buffer of around 10-15% of assets to meet demands for withdrawals. But it said yesterday the buffer had fallen to 5% of the value of the fund after a wave of redemptions, giving the company little choice but to suspend the fund.
Spokesman Jim Murdoch said the only alternative would have been a fire sale of property investments, which would be against the interests of policyholders.
Fears are now growing of a domino effect among other property funds as investors seek to withdraw their cash. "We are the first, it happens to be us, but this is a problem across the industry," said Murdoch.
Britain's biggest property fund, with £3.2bn run by Norwich Union, revealed last week that its cash buffer had fallen to 7.5% from 17.5% in September. But it said yesterday that trading was continuing as normal and that it was meeting any requests for redemptions. Scottish Widows said cash reserves in its £1.3bn property unit trust had fallen to 6.5% but it can borrow another 10% to meet withdrawals in exceptional circumstances.
Sun Trust had to beef up its MM fund with billions. A run on MM or other funds would really bring home the crisis to Americans.
General comment on declining funds in the UK:
The nightmare: locked inside as the walls cave in |
Money |
The Guardian
Thats a lot of issues...and here i am thinking just trying to keep food in the fridge and a roof over my family's head was an issue...but this ...this is not issues...this is...a death knell.
Yes - I am old (median age in the US is about 36). And I am female. But I would appreciate it if any insults coming my way be non-sexist (call me an idiot or a moron but not a bitch). I apologize for insulting dogs and dog lovers (but will never apologize to cat owners who let their cats roam in my yard and eat my birds). And I also apologize for being a bit irritable. By this time of year - my books are usually closed and the most important issue is what cookies I'll bake. The financial "Masters of the World" have made a mess of my desk this holiday season.
Regarding a "Great Depression" scenario - I just don't see 25% unemployment down the road - or anything like it.
And my main point about bond insurance is insured bonds with good underlying credit quality will probably be ok. Those with poor underlying credit quality won't. If you own insured Texas GO's - I wouldn't lose any sleep over it. If you own insured CDOs squared - refill your Ambien prescription.
Anyway - I hope that all of you have a great holiday season.