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Just a round error.
MBIA, Ambac Understate Losses: Short Seller
Hey guys, a friend of mine and former employee of Chipotle is saying that they don't use real chicken in their restaurants and that their supply chain is a total fraud. He's about to go public with the allegation and claims he has rock solid evidence.
wink wink nudge nudge
Rumors that these two are in trouble are what caused the massive plunge in financials last few weeks. Now we're back in the same game?
Downgrading the jokers (bond insurers) would be amusing - that might snuff out the "free debt!" binge in the markets today. But it won't happen since then the eCONomy would suffer. So, instead we'll have ZIRP and hyperinflation - yeah!
Here is Bill Ackman (Pershing Square Capital Management) on Bloomberg TV earlier this month
. I highly recommend watching the interview.
Highlights:
* MBIA's numbers are presented net of reinsurance. About half of the reinsurance comes from Channel Re (rated AAA with $300 million capital)
* MBIA helped set up ChannelRe in 2004 with a 17.4% ownership stake. ChannelRe provides reinsurance services exclusively to MBIA.
* MBIA shifted their riskiest exposures to ChannelRe. ChannelRe expects $200 million in credit impairments from a $3.3 billion mark-to-market charge at MBIA.
* $42.2 billion of MBIA's reinsurance is from ChannelRe.
* MBIA needs to raise in excess of $10 billion of capital, depending on circumstances.
* If MBIA does not cut the dividend and cannot access cash held at its investment management subsidiary, they run out of cash at the end of this June. If they are able to access the cash, they run out of money by the end of this year.
His presentation can be found here:
Download
Anyone have the SEC's address? I need to send them analysis on my short positions too.
Why does this remind me of the time I was asked if I would take a postdated check on a closed account?
Very nice summary, Will T.
Drop the nuke, Moody's and S&P!
WillT,
Yeah, that's the ticking time bomb. As I've been saying the Re's are the primer for the coming implosion.
Cheers,
...hey...the waves are coming back...things are returning to normal...
I wonder what those people on the hill are yelling about...
FGIC (Blackstone owned bond insurer) just downgraded to AA
When will the FBI open an investigation into the Bond Raters -- that's what I want to know! I want to see Moody's, Fitch, S&P on picture posters in the Post Office!
I still think this would be a bizarre time for the ratings agencies to be hard-nosed about the numbers. There must be 100s of other issuers they can be agressive about before they take on these two overly-critical components.
Interesting price action on MBI, ABK just a half hour ago...
Benny needs to get that crack pipe back out, that hit wore off fast.
Market just went red. Might have overdosed - choked on its own greed.
FF,
There aren't too many monolines.
Cheers,
A short seller publicly bashing the companies he shorts?
STOP THE PRESSES!!
rcyran - how do you know? I don't see the news...
Marcus - It's tragic that your post-cut comments are spread across so many threads. Truly classic.
I think the market finally got the fib retrace it needed. Look out below....
....Oh my god!
Look at the size of that wave!
I'm waaaay too far out...
Tsunami!
That's what they're yelling!
Tsunami!
Marcus,
Muahahahahahahaha!
Cheers,
Fitch cuts "AAA" rating of FGIC insurance unit
144 words
30 January 2008
15:42
Reuters News
English
(c) 2008 Reuters Limited
NEW YORK, Jan 30 (Reuters) - Fitch Ratings on Wednesday cut its top "AAA" ratings on FGIC Corp's bond insurance arm, saying the insurer does not have the capital required for a top rating.
Fitch cut FGIC's "AAA" insurer financial strength rating by two notches to "AA." It also cut parent company FGIC Corp's long-term rating by three notches to "A" from "AA," the third-highest investment grade.
FGIC is owned by a group including mortgage insurer PMI Group Inc and private equity firms Blackstone Group , Cypress Group, and CIVC Partners LP. The group acquired FGIC from General Electric Co in 2003 for about $2.18 billion. (Reporting by Dena Aubin; editing by Gary Crosse
Sorry for the color commentary, but ya' had to see this comin'.
I'll stop when the first body washes in.
AZ,
Looks like - red tape atm...
Nemo,
Read the analysis, and pay close attention to the Re part. Some times people short for VERY good reasons.
Cheers,
since shorts are institutionally disadvantaged (look at historical uptick rules, capital gains treatment), its a hard way to make money. those who do it successfully often have to do more due diligence than the longs.
Cliff diving in the markets towards the close!
That was just a few nanoseconds of rate cut glory. Is that all a 125 bps will do???
The fat baby cries again, not enough! wants more. ZIRP is waiting at the door step, considering the 500 trillion worth of grease that has to be addressed. The price of "3% GDP growth year after year."
My favorite Bill Ackman quote made the rounds last Friday when he asks Fitch ratings the following:
Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace? Can this possibly make sense?
The only thing I would add to this is: Closing your eyes, snapping your fingers, saying "Google" three times, and praying will not make this problem go away. What is taking so long?
1) I hear MBIA's numbers are due out today, with a call tomorrow at 11:00 Eastern. MBIA.com - Investor Relations - Press Release
Perhaps some facts would provide substance for this discussion.
2) Ackman is very smart and persuasive. He's quite right to distinguish between the holding company and the insurer, which are very different. He's also short: putting his money where his mouth is, yes, but also he has every incentive to persuade the market (and the rating agencies) to go along with him. You might want to read his analysis.
3) In spades for Egan Jones, although my inability to find their analysis makes it difficult to comment. You can, however, read a contrary back-of-the-envelope analysis at The Monolines Need $200 Billion? No Way -- Seeking Alpha.
4) There are several easy ways to support the monolines. Capital injections and/or reinsurance are probably not the most effective. I rather like the idea of a P&C-style fund just for the bond insurers: collect the requisite support amount; put it in a protected fund (SPE or other); assess bond insurers a surcharge on their worldwide premiums; gradually replace the third-party support with the premiums. But there are other possibilities as well.
5) I don't think the sky is falling. Yet. Sounding like a broken record, downgrades, yes (and of course the marks make that expensive); default, no.
Great stuff, marcus (and you do look good in that speedo).
Maybe after the Tsunami 60 minutes will come and interview CR posters like when they went and interviewed Malaysian sea gypsies who all got to high ground prior to the Tsunami waves. The answers will probably be pretty similar. The gypsies said that when the water goes out, you run to the hills, you don't go pick up fish - "everyone knows that".
as I posted in the last comments section:
NEW YORK, Jan 30 (Reuters) - Fitch Ratings on Wednesday cut its top "AAA" ratings on FGIC Corp's bond insurance arm, saying the insurer does not have the capital required for a top rating.
Fitch cut FGIC's "AAA" insurer financial strength rating by two notches to "AA." It also cut parent company FGIC Corp's long-term rating by three notches to "A" from "AA," the third-highest investment grade.
FGIC is owned by a group including mortgage insurer PMI Group Inc (PMI.N: Quote, Profile, Research) and private equity firms Blackstone Group (BX.N: Quote, Profile, Research), Cypress Group, and CIVC Partners LP. The group acquired FGIC from General Electric Co (GE.N: Quote, Profile, Research) in 2003 for about $2.18 billion. (Reporting by Dena Aubin; editing by Gary Crosse
Looks like the credit crack pipe might need another reload already...
Shorts are usually correct. It is the timing what is difficult.
Ackman is not just a short seller he has a large position in Target for example.
The bulls don't want to go quietly into the deep red.
They're hell bent on finishing green.
541 online, has to be close to a record.
Would it be too soon for another emergency rate cut tonight?
iceman,
Yep max down 100% at any point. Max up infinite at any point.
Cheers,
Only the Bull's lips remained above water...
Look at the huge volumes for ABK, at or near the close.
malabar as with most addicts its seems we've built up quite a tolerance to this substance...
...here it comes...
...it's going to break right over me...
(better tighten the Speedo...)
(...check that, better rinse-out the Speedo...)
OMG! IT'S GIGANTIC!
...glug...
Can anyone say...
"cascading cross defaults"
Chris
The economy may need a big adrenalin
shot in the heart after ODing.
Barley,
MBI volume way up too.
Cheers,
Wait Ben! Come back! We need some more!!!!
Misean - Here's why:
Expired
Bernanke got pwned.
Will T,
Have you ever considered applying for a job at Warburg Pincus?I think they could use somebody like you.
There aren't too many monolines.
Yes, that's a problem, and that's why downgrading them could cause such big waves. So why do it now? If the ratings agencies want their credibility back one nasty move won't be enough. Or maybe the problems at the monolines are so obvious that the agencies can't not downgrade them.
Anyway, the rumors sure are whipsawing equities.
Yes, the crack pipe high is short-lived, but now that the Fed has cut again, liquidity pumping can begin in earnest.
In short, there's lots more crack.
Rate cuts fail to juice the markets. I dont think it is b/c of monolines, I think the Fed is so predictable now, that markets rally into a rate cut and then have nothing to rally on between meetings so sell off. This is why the fed developed the suprise rate cut.
FF,
They're that obvious. AAA companies don't pay 14% for loans.
Barley,
Thanks for the link. Caught a rumor of it earlier.
Cheers,
Ready the money cannons.....
Fire!
Bonzai!
I have seen Ackman's short-side presentations on MBIA for almost a year now...
My point is not that he is wrong. (I actually think he is probably right and these stocks are going to zero.) My point is that this is not news.
i think one of the biggest pieces of news today is the 10y UST yield UP 2.05%. mortgage rates going up.
Why didn't the fed wait until after news on bond insurers?
Hilarious. Fed cuts rates, markets drop. What a life.
go Ackman!
I know I shouldn't do this, but I will anyway. Have fun poking holes in his logic. I look forward to reading the rest of this thread tonight. And if someone can tell me what is so different today (post Fed action) than yesterday, I'd certainly appreciate it.
We Can Rest Easy
By Jim Cramer
RealMoney.com Columnist
1/30/2008 3:00 PM EST
URL: RealMoney.com: We Can Rest Easy
The market's so-far-muted response to this good news is part of the confusion that is out there, the confusion that there's really nothing that can be done to fix things.
That's wrong. Do you realize that EVERYTHING depends on house price appreciation, or at least stemming house price declines, and there is nothing they can do better than what they just did.
If houses are cars, this is oil and the more oil the better. If these are coals needed to stay warm for us to be able to eat, this is lighter fluid. It is simply a way for the country to say, "OK, let's refi, let's look at property again, let's not be too negative."
Anytime we can take a calamity off the table, we should recognize that there is a sizable group of people that genuinely believes that a WaMu (WM) or a Wachovia (WB) is going belly-up. This cut makes that less likely.
This has to make you bullish, it has to make you tune out the people who say that the Fed doesn't matter or that you must now worry about inflation.
I just wanted to stop worrying about systemic national bank failure. A point and a quarter in a 10-day period tells me that you can rest much more assured that things will get better soon.
Oh, dear... market ended the day in the red. We'll need another rate cut tomorrow to keep the debt-binge going!
As for Cramer, he should be locked into some toxic "explode-a-loan" on some overpriced McMansion like so many other saps if he thinks the road to a healthy economy is built amid overpriced housing and extreme debt loads.
Bond Insurer Woes to Hit Three Banks Most
Oppenheimer financial analyst Meredith Whitney estimates that the risk of downgrades by rating agencies of monoline names MBIA and Ambac Financial would rack up at least $40 billion in writedowns and as much as $75 billion. UBS, Citi and Merrill would be among the hardest hit because those institutions hold about 44% to 45% of the risk exposure.
As a result, Whitney notes that a systemic banking crisis caused by monoline downgrades might not be as great a risk as many believe, given the disproportionate exposures at the three banks.
Somehow, that's not very reassuring.
Only 7 weeks until the next Fed meeting! When can the bulls start ramping the market up? I'm assuming expectations will be for a 3% cut by the end of February.
7 wks is an eternity.
Duceswild | 01.30.08 - 4:26 pm:
Are you worried about a systemic national currency failure?
This is not lighter fluid - it's money, and if you're burning it to heat your house (house of cards, after all), you're gonna have to address the underlying fundamentals of your economic assumptions and decisions.
This cut and the cuts that follow will change the direction and/or velocity of the economy. Only good fundamentals could have saved us (if we had used them before we drove through the guardrail and off the freekin' cliff).
This cut and the cuts that follow will NOT change...
Oy.
Fitch has been very busy - more dowgrades
Fitch Takes Various Rtg Actions on 2 Sequoia Mtge Funding Corp Transactions
News
My guess is they've been delaying the downgrades on the monolines to give citigroup time to finalize prep for BK... w/in the next two weeks after we hear of big monoline downgrades.
2 more bullets today, 12 bullets left. I wonder if they can use them all and go down to ZERO. This was sad for the bulls. After 5 bullets used up in just one week and all they got was a t-shirt.
O/T - but we all might be interested:
Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels.
The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.
That would be 17 percent higher than today's average of just under $3 a gallon, which already is about 80 cents a gallon higher than year-ago levels thanks to the surge of crude oil that took futures prices briefly to $100 a barrel. Prices in urban areas on each coast could approach $4 a gallon.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Cramer translation : The US is staggering from one mindless disaster to the next and we don't know what to do.
Cobradriver writes:
Can anyone say...
"cascading cross defaults"
Chris
you mean CDS guys can't make 3mil a year anymore playing
Cramer thinks that people earning $60-80k a year can afford to buy $500k condos. He's so inside the Manhattan bubble, he has no idea what he's talking about.
Cheers,
FT Woods,
"As a result, Whitney notes that a systemic banking crisis caused by monoline downgrades might not be as great a risk as many believe, given the disproportionate exposures at the three banks.
Somehow, that's not very reassuring."
Oh come on man, cheer up. This means it's all contained.
Cheers,
Liar'sPoker | 01.30.08 - 4:57 pm |
They are more than welcome to try
.
Misean | 01.30.08 - 4:59 pm |
I would like to retire before I die,Thankyouverymuch...
Chris
Marcus, your "beachcomber" series
was great. However, I was expecting
"glug" as the penultimate episode with
the last episode:
"Gee, that poor guy fooling around
on the beach didn't have a chance.
Good thing we're up her--- "
forget a investment and get a business
Lively Money: A true business takes money makes money!