Gasparino reported on this during the trading day! Seriously, who can bail these guys out? No one.
Ratings agencies already are behind the ball and should have downgraded them weeks ago. They didnt because we would be at 11,000 right now, and we cant handle that kind of market correction in an election year
Nah, this is a setup. It instead WONT come before the cut, and financials will soar. You can count on a ridiculous outcome these days. Everything is inverted.
people always say the monolines will be downgraded, but it never happens. as long as they don't get downgraded everyone's gonna be fine: the insurers, the I banks, the investors...
also, as long as they don't get downgraded they will be able to keep paying claims for years, long after this whole credit mess goes away. and once the credit mess goes away they'll still be able to pay the claims because ...well...the credit mess went away.
the only way the monolines are toast is if:
1) they get downgraded
2)the credit mess never, ever goes away
I agree, this is ridiculous. I always thought the children's story about the emperor with no clothes was a bit over the top, but I guess not!
Maybe the ratings agency simply can't delay any longer and still justify their existence. What good is a ratings agency that can't even tell $hit from shinola?
S&P promised to come out with there new review of MBIA (i think) over a week ago so they are really behind the ball on that. They have to be fearing litigation over their negligence in holding a AAA company that issues debt at 14% and is looking to the companies they insure for handouts.
And if they are going to downgrade, do it on a day that it wont be the lead story and you know the market is going up and has a momentum.
This is getting crazier by the day. I don't no wether to be in PUTS, Calls, cash,metals, or the mental institution
- 01/20/2009 end of an error
On the contrary, this just reaffirms the inevitable outcome, which is further debt destruction, further writeoffs, further harm to financials. As long as your PUTS are long-term (LEAPS for 1/09 or 1/10) you'll eventually get the desired result. I'm betting much sooner than the expiration dates.
Somebody name one move by "the authorities" that has been successful in turning back the flood? They can delay and confuse the markets momentarily, but the effects of exploding debt is unstoppable.
Announcing this tomorrow? Could this be an additional piece of pressure put in by the markets to twist the Fed's arm into complying with their wishes. An "insurance policy" (no pun intended) just in case, Ben had any crazy ideas.
If this is announced early enough, it will pretty much guarantee a 50 basis point cut and maybe work up to 75. Not stating, just wondering.
Has this been sourced anywhere other than cnbc. I can see them spreading a rumor to get Ben's panties in a bunch so he cuts 200 bps. Then, gasperino comes on and shrugs his shoulders and says ooops, guess I was wrong.
I am in SKK and 01/10 HOG, Google and QQQQ PUTS. I have doubled my stake and then some the last few months so I took my original investment off the table and let the winnings ride. I just hate days like these that make you think even though you are right you will still lose.
What a great time for the monolines: Buffett announces he's coming after your profitable lines of business as the downgrades hit. Creative destruction I guess.
As an aside, what kind of mental makeup do you need to have gone long in Ambac or MBIA in 2008? I mean Kay-rist: become a war photographer in Iraq or something.
I just looked up the futures and there is hardly a blip. This news came out in the afternoon. I would have guessed that it would have affected the markets a little more. Wow, I thought this was big enough news. It wasn't totally unexpected but some people thought there might be a bailout before it would get to this.
I'v turned into a wuss. I don't have the nerve to play this market. Too wierd. I'll just keep my powder dry. Helps me sleep at night.
IMO the cut tomorrow will be 25bp, with promises to be watchful and of more to come next month. A cut of greater than 100bp in little over a week will be too much even for Bernanke, although with that 'emergency' action last week and the weasel language in the statement he showed how really spineless he is.
I know most people would say a 50bp cut is 'baked in', and anything less will send the markets down. But anyone who claims to know what this market -- which so obviously stopped trading on fundamentals some time ago -- will do is just blowing smoke.
Lots of frustrated shorts out there, no doubt. But from what I see they are largely (still) their own worst enemy.
Ackman show that the rating agencies have yet to take into account the fact that MBIA own "SIVs" (captive, off-shore re-insurers) have already imploded.
Yes they cancel each other out. The monolines destroy the market with their downgrade. Then the FED lowers rates 100bp and destroys the dollar so it won't matter.
Cramer and CNBC has been on a crusade against the monolines for weeks now. They need someone to pin the blame on after all...
What will likely happen is that FGIC gets downgraded...and maybe Ambac. It's improbable that MBIA gets downgraded any time soon (although anything is possible)...
I'm praying for a Big Boy rate cut tomorrow: I loaded up on DJP (a basket of diversified commodities). It's up something like 18% YoY. Yeah, inflation is under control.
I'll never own a share of stock while Helicopter Ben is chairman, just hard assets that appreciate as the dollar degrades itself like a co-ed in South Padre Island for spring break.
Rate cuts cannot solve a solvency problem. It might cover up until Friday close, but there is no cancel.
However my suspicion is a slow bleed. While the Fed et. al. monitor the situation with the Re's. The Re's are far more fragile. If the go poof, a bunch of garbage goes back on the monolines' balance sheets.
I'm praying for a Big Boy rate cut tomorrow: I loaded up on DJP (a basket of diversified commodities). It's up something like 18% YoY. Yeah, inflation is under control.
I'll never own a share of stock while Helicopter Ben is chairman, just hard assets that appreciate as the dollar degrades itself like a co-ed in South Padre Island for spring break.
If that's what you're after why not buy real estate? That's a hard limited asset. The explosive growth overseas should drive up real estate prices just like commodities since the supply is just as limited.
Some people here acts like weird unexplainable things are going on, and "they're out to get you."
Everything is happening just like you would expect as the unwind accelerates.
If you had some big map of institutional money and hedge funds all over the world, you would be seeing the lights go dim one by one. The lights are borrowed/fictional money.
Did Rogue Trader use real money or borrowed/fictional money? If it was real, he wasn't rogue, right? And where's that money now?
As the lights go out, the money goes to the graveyard. As homebuilder shorts are bought back, leverage goes to the graveyard. Most shorts are leveraged.
Bond insurance is just another form of borrowed/fictional money. It created debts that can't be sustained. A lotta lights are about to go out.
Mis - Was just being facetious. I don't think it matters if or when the downgrades come. Everyone knows the truth, most are just pretending to ignore it.
I guess they finally decided that 2 cents on the dollar was just too big an obstacle to over come, they must have been thinking, shit, it looks like we have a crisis of confidence that in this environment, just ain't gonna cut it, we could send investors letters, spainin the 2-cent valuation, but, they might be pissed -
"Basis said that in past market crises, confidence quickly returned, but added: This time it may be different given the adverse systemic issues that prevail and we find it difficult to identify a catalyst that will likely restore confidence quickly. FT.com / In depth - Basis hedge fund valued at 2 cents in dollar
Naw, Cramer hasn't been on a crusade against them. Any negativity he expressed about them was picked up from Doug Kass' analysis a couple of months ago on RealMoney Silver.
The last couple of weeks, he's been vacillating between calling for a bailout/backstop of the monolines with public money or, when the antidepressants wear off, for them to fail and thereby wake up the Fed.
It would be inappropriate to blame the shorts for the troubles at these companies. The charts were in waterfall long before there was short interest of any consequence.
I'm just a humble retail trader and I was looking at them back in the spring, when Cramer was saying to get long them.
I've been in and out of these things 4 times each now. I'd rather trade a white phosphorus instrument like FXP or EEV. At least with those, you know you're not going to get a ridiculous rumor that Buffett's buying the Shanghai Composite.
I doubt that Moodys et al. will downgrade in the face of pressure from not only all the majors but also NY Attorney General, and countless other politicos.
hey, is riding your subs a version of vendor financing?
damn then i'm there!
woohoo
give me cheap rates, vendor financing, back-end write offs, negotiated settlements, and a future of mud!
sounds like a recession to me.
on a serious note.
and i mean, like, seriously.
everyone i talk to and i mean EVERYONE always prefaces each conversation and then peppers it throughout with this soon to be cliched if not already gem:
"well in this environment......"
everyone has the code words now. recession time baby. bankers, in this environment. borrowers, in this environment. vendors, in this environment. clients, in this environment.
so HOLY SHIT THIS IS WHAT A RECESSION IS LIKE?
i hate it.
make it stop!!!!!
can i please have ZIRP ASAP MF?
ask me later what MF means.
and yes i'm a early mid-thirties business guy thats never fed my family of four through a r-e-c-e-double-s-i-o-n before.
is this it?
can everyone change their mores and standards of conduct / underwriting / standard protocol just because MSM says its a r-e-double-hockey-sticks-recession?
oh my, they cannot be thinking of securitizing the monolines, what next?-
"Troubles at U.S. bond insurers are forcing industry regulators to rethink a decade-old legal loophole that allowed insurers to venture into the obscure world of derivatives."
The trick to Kitten Cannon is to aim for the blocks of TNT that have been carefully prepositioned by agents of the Federal Reserve.
That way you can turn a mediocre, or even feeble, dead kitten bounce into a moonshot! Especially if you get one of those surpise floating bomb rate cuts.
NEW YORK, Jan 29 (Reuters) - Connecticut State Attorney General Richard Blumenthal said on Tuesday his office has issued subpoenas to all major rating agencies and bond insurers in a widening probe of industry practices related to the subprime mortgage crisis.
In an interview, Blumenthal also said his office is investigating the role of investment banks in a "far reaching" probe into "problematic practices in the ratings and securities areas."
"We have an investigation relating to possible wrongdoing involving the bond insurers and mortgage lenders and also the investment banks, seeking to know whether people buying securities backed by mortgage debt may have been misled by failures to disclose relevant facts on the risks involved," said Blumenthal.
He specifically said MBIA Inc (MBI.N: Quote, Profile, Research) and Ambac (ABK.N: Quote, Profile, Research) were subpoenaed. He also said his office had issued demands for information from "all" the rating agencies. He didn't name investment banks involved in the probe.
The banks effectively/collectively are reserve negative. The monolines are effectively bankrupt. When/How is the MSM ever going to explain this to the sheeple?
Here's a solution for at least the muni market -
The questionable insurers have to sell the their muni insurance contracts to Buffett or any other AAA credit out there. The toxic stew is left behind. It wouldn't surprise me to hear/read that Warren is only offering 50% on the Dollar on their muni insurance.
You have to love the regulated markets. Mark-to-market each day, settle in three, clearing in the middle. When is nonsense going to end?
"The banks effectively/collectively are reserve negative."
Yes, but The Fed is willing to let the Banks have all the money they need, "as long as necessary" (BB-quote), through TAF. Isn't this correct? Can't they put that money to good use, like helping out the bankrupt monoliners? (A question, not an assertion!)
WASHINGTON, DCPlagued by late fees, high interest rates, and harassing creditors, the U.S. took out a debt-consolidation loan Monday, combining the nation's $6.1 trillion debt into a single, easy monthly payment.
ZACKATTACK: "Naw, Cramer hasn't been on a crusade against them. Any negativity he expressed about them was picked up from Doug Kass' analysis a couple of months ago on RealMoney Silver. "
I don't subscribe to Realmoney so I have no idea what is happening on that site. All I'm familiar with is some of his views on CNBC and the freely released stuff on thestreet.com. Cramer's attack against the monolines started late last year or early this year. Why was he blaming the collapse in US stocks on the monolines? Why was he insinuating that the Dow would rally something like 3000 points if the monolines were nationalized? He is likely doing it because he wants the government to nationalize the monolines and shift the losses to the the government, away from hedge funds, investment banks, and others who hold insured assets. Remember how he was saying that, instead of the government giving $150 billion on rebates to the working and middle class that it should be given to the Wall Street parties through nationalization of the monolines?
The shock to Cramer is going to be when the Dow falls even when the bond insurers make it out alive.
ZACKATTACK: ÈIt would be inappropriate to blame the shorts for the troubles at these companies. The charts were in waterfall long before there was short interest of any consequence.È
What the shorts are doing is ok. Itès a free market, and although they arenèt helping the monoline case, itès ok in my eyes...
AZ Cowboy - we think alike. I was on Onion today looking for more recent articles to post... The Bob Evans article almost hit too close to home to be funny, at least here in the Midwest.
[But the 'I Love Commuting' Official Onion Coffee Mug advertisement made up for it... might have to get the Little Misses one of those for Valentines Day - she's scheduled for a colonoscopy first thing the very next morning!!! Some kinda romantic evening we'll have, her getting ready for the big day and all.]...
a large portion are held by individuals who probably hold to term.
towns have the right to levy taxes, so the default rate probably won't be that high.
-Restructuring seems more likely than hard default when trouble does occur, because (see above) and much of the debt probably builds infrastructure - which often can be run profitably, but can't pay for its construction cost (high capex, low opex)
I know next to nothing on the topic however, so please correct me if I'm wrong.
NB-
I'm not trying to minimise the effects - this will crush a lot of CDOs etc. (all the stuff the bond insurers probably never should have been insuring anyway)
rcryan,
that has been the historical pattern, but let Rob Dawg fill your mind with mello roos and oddball agencies flying out million in bonds that were only really saleable due to insurance as anything but muni junk bonds.
Um, I am beginning to think that something really bad is about to happen to markets, and the fed knows. And is totally powerless to do more than standby to provide liquidity.
I don't claim to understand the Bond Issuers or those that rate them, but I am confused as to what would force the rating agencies to downgrade them. Not why should they downgrade them, but why would they, it seems to me at this point that they are "in for a penny, in for a pound."
I guess what I am asking is who is twisting the rating agencies' "arms" to force a downgrade?
"The banks effectively/collectively are reserve negative. The monolines are effectively bankrupt. When/How is the MSM ever going to explain this to the sheeple?"
blink, blink, blink,...sitting here comprehending the implications of that statement.. blink blink blink... realizing I should've invested in the company that manufactures "depends"... blink blink blink
"The swaps also let investment banks move commitments off their balance sheets. Banks meanwhile could book profits up front. They used a trading strategy known as the "negative basis trade," the paper said, citing unnamed industry participants."
If I owned Puerto Rico GO bonds insured by MBIA, should I be worried?
What's the likelyhood Buffet will take over the muni isurance fro MBIA? I heard he applied for license there?
Dryfly,reassure the little miss,1)they are unlikely to find signs of intelligent life.2) people in san francisco do it for fun...of course they also keep electing Feinstein.,,so maybe don't bring THAT up.
bacon dreamz writes:
dryfly: too much information!
bacon dreamz | 01.29.08 - 10:40 pm | #
Hey man I spared you my vision of how that evening will go...
Nice romantic candle light dinner, the two of us home alone... me with a nice glass of red wine & steak dinner, she with her gallon milk jug of whatever it is they have you drink the night before... [use imagination to fill in rest].
for some reason though when you wrote that all i could think of was your lil' Mises not Misses - as in ludwig von...
thought that was kinda funny though the situation surely isnt.
you know, you're kinda my hero even though we live entirely 180 opposite lives. you in a county thats not even rated by countrywide, me in DC. you, cash hoarder experienced independent guy, me mid 30's credit based hope this shit all works out kinda guy, you, seller of real shit, me seller of me, you - me - you - me - you - me
guess we're all just people
told my wife today that i re-came-across this paraphrased quote today "measure your wealth by what you got when you lose all your money"
while she didnt dig the 'overtones' she got the 'undertones'
I know many here are sticking to cash equivalents for the moment (while possibly playing some side bets) so they can eventually take advantage of the coming doom. Me too!
But I have been worried for a bit thinking about my cash positions. Some of it is in CD's in a laddering scale, but some (lots) of it is in money market FUNDS with Fidelity. How worried shall I be about the money market fund breaking the buck.
Just curious because many (if not most) of us here agree that the "end" is coming. I just want to have money left so I can buy at the end for the new beginning.
Hey DC - I'm figuring out how to re-invent my business right now too. Not sure where it will lead... maybe I'll do more contract work for others & take the pressure off me a little... or just spending more time fishing or doing stuff with the wife (but not this Valentine's Day - I think I'll give her some space that evening).
Interesting how the "lights go out" imagery is akin to the comment made days immediately prior to WWI.
homedad43,
I think a lot of Americans will prove adaptive to austerity changes, like the British were in WWII. Some won't, but you may be surprised how many people find their inner pioneers.
You know, really, this phony life of luxuries we've been living and half believing in the U.S. kinda sucks.
The state lets me go pick up more guns and ammo tomorrow...I'll do it Friday...then go back out to the high desert and look around some more. Oh yeah and target practice.
Money seems an appropriate post, but so does time. enjoy:
You have it all wrong. Yes, the bond insurers will get downgraded tomorrow, but NOT AS MUCH AS EXPECTED! See, they are implying big downgrades, but it will only be minor ones. Kind of like a company reporting a loss of $1.00 per share versus consensus estimates of a loss of $1.01 per share. Therefore, along with the rate cut, the market will rally.
wish i could make those decisions. unfortunately for me its press on press on press on. nothing like a $100k nut to make a man move.
and to that end, we're downsizing, getting cheap, getting small, sending shit to kinkos and the whole nine. boooooooooooooooom times be done booooooooooom'ed up.
I think a lot of Americans will prove adaptive to austerity changes, like the British were in WWII. Some won't, but you may be surprised how many people find their inner pioneers.
I fully agree rich - I've been through a couple two three recessions... saw my folks almost lose the home (and all their savings)... saw the ravages of the Farm Crisis & Rust Belt, both at ground zero. Most folks eventually rise to the occasion.
But getting to that realization prior to rising to the occasion isn't a smooth ride.... be a few temper tantrums on the way.
this reminds me of an old mountain dew commercial. being "cool" / "recession" is a state of mind, a "refreshing" / "depressing" state of mind, what "cool" / "fear" is all you got, doin' it mountain dew...whoooaaaa, doin it mountain dew.....whoaaaaaaa doing it mountain dew
everyone i talk to, everyone says: "in this environment"
Who says you can never go back? Or do something else?
1) Don't Panic [time for Mise to queue up something from "Hitchhiker's Guide"]
2) If it is REALLY going south - fact based not fear or faith based - either pull the plug or go into hibernation BEFORE somebody else shuts you down...
yeah no doubt. we're already moving into a 50% off space. gotta do what we gotta do. overhead slashed. head count cut. buckledown, batten down, get straight, its a R-E-C-E-DOUBLE S-I-O-N.
we're doing what we gotta do and moving forward.
whats great, and i mean GREAT for me is that i'm coming out of this with the cash-flowing commercial assets paying me each month and cranking up lease rates every year FOREVER. (i mean 15 years).
the moves now are all about OH / SGA stuff
the net worth wealth stuff been done takin' care of
next step - invest in industrial/flex properties related to export based economies
this reminds me of an old mountain dew commercial. being "cool" / "recession" is a state of mind, a "refreshing" / "depressing" state of mind, what "cool" / "fear" is all you got, doin' it mountain dew...whoooaaaa, doin it mountain dew.....whoaaaaaaa doing it mountain dew
We need to have nice name for it so people don't feel so bad.
'91, i was in high school, dad lost his job. but didnt seem too bad to me. same shit going on. just dad went to the 'head hunter's' office every day instead of work.
thats my experience with a real recession
now that i totally get the fact that this is a consumer-led recession..
i mean like,
dude, where's my economy?
what the f is up with this whole US thing? we're all idiots? eeeeeeeeeeeeeeeeeeeediots i tell you
Actually, it's not prejudiced. I don't trust white people to pay taxes.
rich | 01.29.08 - 11:33 pm | #
Rich has a point.
My understanding is if a muni bond defaults a court appointed overseer comes in and runs the municipality, county, whatever, if the citizens don't voluntarily pony up taxes to fix the shortfall. I am not certain if that overseer can raise taxes (probably not)... but s/he can sure re-allocate existing revenue to make sure the bonds get paid first and the holders eventually get made whole.
And they aren't elected so they don't give a rat's ass if the garbage gets picked up or if the library stays open. Just get those bonds paid. It doesn't take much of that before tax increases stop looking so bad.
Now the question is... can the courts enforce that in PR? PR isn't a state, its a protectorate or common wealth or something. Federal law applies but there are some subtle differences.
It is a reasonable question to ask whether those bonds carry as much or more risk than say Ohio or California bonds.
I was planning on building a small sailing dinghy, but given the tsunami heading our way, I may change it to an ark.
I told my wife we're building and moving onto a river boat and living on the river. Ummmm, she's not there [mentally] just yet. That's good - it will take time to build a river boat.
91, i was in high school, dad lost his job. but didnt seem too bad to me. same shit going on. just dad went to the 'head hunter's' office every day instead of work.
thats my experience with a real recession
Ninety One was a pussy cat too - nothing like the 70s and 80s (I graduated from HS in 1975 and college in 1981 - very ugly).
Most youngish folks today haven't really seen a bad recession... but then none of us have worked through a 'depression' (unless they be real old).
In all fairness 'dot.bomb' while not a terrible recession nationwide was pretty fierce for the IT field. Same with the Farm Crisis in agriculture. Folks who experienced those at ground zero saw a hint of how bad things can get. I fully expect the real estate & related financial sector will see that kind of intensity too. The question is how far will it spread?
we're pretty much shutting down the transaction / development side of the biz and rolling forward with the A&D side. this means, me, as the owner/founder, has been down-sized. so i'm officially on the market.
head hunters say, darn dc1000, just 12 months ago we coulda placed you at 175k in heartbeat.
oh but now, no one is hiring a thing
but really, you're an intelligent resourceful blahlblahbla bloooozie blah
dc is hearing the advice of a bunch of old bears, who made it through. '91 to him must have been as bad as '75 was to my old man. Or 80-82 must have been to me.
Damn dc1000- Tell you what. While some people are out in the desert, what say you fly into LAX and we'll go gold mining in Ventura. I heard there's a lot of gold in them thar hills.
head hunters say, darn dc1000, just 12 months ago we coulda placed you at 175k in heartbeat.
oh but now, no one is hiring a thing
Ummmm, I wouldn't say that just yet. You might want to emphasize your rain maker skills - finding new bus. See if somebody would put you on a mix of salary & commission. You'd be hungry at first but probably kick the typical salaried 'Biz Dev' type.
BTW - I've been contacting domestic mfgrs with the same message and they are receptive. My problem is they all want 100% commission & I'm tired rebuilding & rebuilding my book over and over... my sell cycle is very long. So I've gotten a little pickier about who I sign up with.
But its a similar story - talk to them about your biz dev skill and I think you'll find folks who want to talk. JMHO.
DC1000 - I don't get it. (Perhaps I missed a better explanation in a previous thread.)You've been on here a while and as far back as I can remember and until very recently, you've been one of the more optimistic/"things are going fine for me" kind of peoples around, and now this. May I ask what the heck just happened? Did someone drop a nuke on your industry?
My understanding is if a muni bond defaults a court appointed overseer comes in and runs the municipality, county, whatever, if the citizens don't voluntarily pony up taxes to fix the shortfall.
This is for GO bonds. But I'm talking revenue bonds.
For example, our local school district, with 1,200 students, borrowed $25 million with bonds to build a high school gym. We had to vote for the bond issue. And we have to approve the school budget every year to pay off principal and interest.
Every year, the parents group has to work like hell to drum up enough voters in favor. This isn't a poor town. It's in the ritzy suburbs of NYC. But people have had it up to here with 10% school tax increases every year. In some NY State counties, school budgets haven't been passing. In a recession, a lot wouldn't.
So, what would happen to the school gym bonds? There's probably about a year or two of payments in the sinking fund. But after that, what? The bondholders can't shut down the town. They can't take back the gym.
what cracks me up is that i got offers from solomon (citi) and ambac coming out of grad school in 2001. skipped out on them both to do RE. now they're blowing up just like RE. funny - damned do damned dont.
so yeah, the length of the sales cycle is really the biggest problem. if someone said go on now and make mexico issue $2BB in new debt i could do it but it would take me 9-12 months.
or i could hustle some leases and get that done in 3-6 months.
what i really am looking for is a national/international platform from which to do what i do now - i.e. find deals, and have the sponsor pay for pursuit, due diligence, sign the loan docs and then kick me a piece of the residual.
trammel crow, cb re, jll, carr america, boston properties, etc etc etc
In DC? Its gonna be military subcontracting... all that shit that was shooting or shot at in Iraqistan is going to be replaced... it isn't even worth lugging home the stuff is so badly worn out. Ask anyone who has been there.
Doesn't matter who wins the next election either - it will be part of whatever stimulus comes out of the next budget.
Find folks involved in that and $175K/yr looks like chump change.
so yeah, the length of the sales cycle is really the biggest problem. if someone said go on now and make mexico issue $2BB in new debt i could do it but it would take me 9-12 months.
I'm bidding automotive work right now - very large contracts - that won't go into production until 2011. No commishie until then... and they wonder why I'm less than fully motivated working those accounts.
dc i cant hire enough and have been doing it for dozen years, still not much good news for mortgage industry addicts. they got you good and i cant get at this price tag without industry credentials.
a guy i know who is about to lose job in recent events is willing to go from 230 to 150 and is calling me as he is hot commodity, but in a little while chances are he'll land somewhere take 40% pay cut and be happy. feel sorry for him with couple private schools and wife at home.
turning the corner from 2007 to 2008 the following things happened:
1) charter school client i had been working with/for for 15 months imploded. lost a $500k contract for my design shop
2) $1.6MM construction project went bye-bye due to financing issues. had been working with that client for 12 months prior
3) $500k construction project, went bye bye due to decrease in demand for the product offered by the client. had been working with him for 6 months
4) sales and leasing volume POOF at the end of Nov, no recovery since
so,thats where i am vis-a-vis overhead/income
like i said, i'm coming through this with stabilized income commercial assets, so i'm good long-term. but for the short-term, i need a job. the A&D business we own is viable and moving ahead, its just ironic, its my own division that we decided to eliminate as part of our 'right sizing' for the recession.
hard as shit to give yourself the pink slip but i did it. my firm lives on but only slimmed down. time for me to move on and make it happe
no doubt, headhunters explicit in their statements that govie contracts are the hot topic for a while to come.
guess i gotta go learn a new industry in 60 days. done it before, can do it again.
theeeeeeeeeeen again - why not take this chance to go find that international development job i always wanted?
or being a free-lance travel writer? man, thats the job of my dreams. travel, expense accounts, writing, wife and kids safe at home....my accountant says thats a prime example of escapism.....
So, what would happen to the school gym bonds? There's probably about a year or two of payments in the sinking fund. But after that, what? The bondholders can't shut down the town. They can't take back the gym.
They can have some basketballs.
rich | 01.30.08 - 12:15 am | #
The courts (at the bequest of the bond holder/servicer) might impose an overseer on the school board... make them cut programs, layoff teachers and administrators, etc., to funnel additional revenue from existing operations to the bond holders. I've seen that happen before.
Guardian, UK: Warning over one million homes at risk:
The FSA cites three warning signs on mortgages:
· The loan was taken out for longer than 25 years;
· It is worth more than 90% of the home;
· The amount borrowed is 3.5 times or greater than income .
Over a third of all mortgages sold between April 2005 and September 2007 fall into one or more of these categories. This suggests that more than 2m of the 5.7m mortgages written during this period are of potential concern.
The farm crisis in the 80's paved the way for ridiculous food prices we're seeing now. Yes, ethanol is part of it. But really, there is just an extreme amount of monopolization at crucial intersections of the supply chain.
got another day of small business hand-to-hand combat to conduct tomorrow.
to get back on topic, i'd say, bail out ambac and mbia because if they can stay on top, then the ratings stay on top, then the bonds dont need to be written down, then the reserves can be lower and liquidity/solvency can make it another day!
So, any confirmations to underpin all this speculation?
At this point I really work hard not to be surprised by things, but this would be a bizarre time for the ratings agencies to be hard-nosed about the numbers.
The downdraft from such a move could sink Manhattan.
Yeah, I saw a guy in the Circle K the other day trying to buy Cheetos with some kind of state AFDC card that belonged to his girlfriend. But it only had 67 cents on it and the Cheetos were 80.
of course stimulus package will provide enough funds for exactly 1,000 cheetos, and even better news is the fact that person was only 13c short. here we go this is enough for six thousand cheetos, bingo!
"Obviously, there is a careful line we need to walk. We don't want to stop financial innovation. But on the other hand, crisis and scandals aren't good for the financial markets," said David Neustadt, a spokesman for the New York insurance department."
Well, I for one wouldn't mind if someone wanted to stop some of the recent financial innovation. With friendly innovators like them, who needs enemies?
UBS said it expects a fourth-quarter net loss of $11.4 billion, including around $12 billion of losses linked to subprime debt and $2 billion in other mortgage-related losses. Full article coming shortly.
I thought the interviewer asked some tough questions unfortunately she never asked any follow up questions. Like when she pointed out that if Fannie uses it capital for jumbo loans that will be less capital available for more affordable loans, the CEO completely dodged that question.
AllenM writes:
...but let Rob Dawg fill your mind with mello roos and oddball agencies flying out million in bonds that were only really saleable due to insurance as anything but muni junk bonds.
Um, I am beginning to think that something really bad is about to happen to markets, and the fed knows.
This might be a case where the Fed is concerned for the muni bond market. California is up against a wall wrt taxation. There just isn't any more blood in those stones. Mello-Roos was the last tap in the vein. We are seeing municipalities across the nation "struggling" to "cut" even 5% from budgets. There just isn't a model to address the 20% revenue shortfalls coming. One sure bet is the floating of some of the worst "self-insured" muni paper that ever managed to slip past the waste treatment plant. And there's your topical tie-in. Real insurance is going to be expensive and the markets will command huge premiums on uninsured so look for hybrid products with the worst aspects of both.
A municipal revenue bond is tied to a specific project that will generate revenue to pay back the bond holders. The classic example is bonds used to finance a toll bridge.
A general obligation bond is not tied to the revenue stream of a project but may be issued to finance specific projects.
Depending on the state, local governments may also have strange creations such as tax allocation bonds and certificates of participation to issue debt and raise money.
Overall, muni bonds are as safe as you can get. Governments find ways to pay even if they can't raise taxes. Defaults are extremely rare. Even when Orange County went BK a few years ago (rogue finance director) all their bondholders were paid in full.
These insurers were incredibly stupid to deviate from their conservative models. Since muni bonds almost never ever default, it was almost a license to make money. No wonder Warren B is making a play for that segment of their business.
I am an engineer in my mid 20's. A lot of friends got whacked in the dot.bomb. Some didn't get steady work again until 2003/4.
Hot industries? How about nuclear power. 17 plants currently under construction, waiting on the permits. NRC hiring 800 engineers to keep up with all the applications. A lot on guys I work with (Navy Nukes) are jumping ship to the private sector. That's my plan, once I get the old DD-214. The only thing that can sink this is cheap oil. If oil falls back to $30 per barrel, I think a lot of the new nuke plants with be stillborn.
good luck, Nuke. While in general -- having lived in Japan and seeing firsthand the Foibles of Man -- I'm against widescale nuclear power, if the USN is in charge then I can possibly be persuaded that the risks are manageable.
As hinted at above, the negative basis books will be where the Ambac/MBIA writedowns come from. A one or two notch downgrade wouldn't have much impact (in the grand scheme of things) on a bank's wrapped investment portfolio, but some banks (about three or four in Europe, I don't know about the US) have taken on huge amounts of paper on a negative basis, um basis, exploiting the gap between cash and CDS spreads supposedly risk free . Any downgrade will hit them hard on that book.
Looks like Bubbles Ben Bernanke will have to fire up the helicopters and get more free money out there! Fiscal irresponsibility got us into this; I am sure it can get us out of this! What a joke!
In a deflating RE market, isn't bond insurance for MBS's just window dressing? When you need it, so does everyone else. The risk is then concentrated, as opposed to the intention of insurance.
Monolines RIP: Here is the Obituary. After New York gave its blessing, other states followed suit and the business of writing credit-default swaps on packages of mortgage bonds soared. Bond insurers wrote swaps on around $100 billion in mortgage securities over the past few years, the paper said.
Insurers set up shell companies under Delaware state law known as "transformers," because they transformed a traditional bond-insurance contract into a credit-default swap.
LaCrosse Financial Products LLC was the transformer for MBIA Inc (MBI.N), while Ambac Financial Group Inc (ABK.N) called its transformer Ambac Credit Products LLC.
Business boomed after Wall Street firms forced insurers to count these transactions as derivative contracts, rather than insurance contracts. Swings in the value of the swaps sold to Wall Street helped banks offset fluctuations in the underlying bonds.
The swaps also let investment banks move commitments off their balance sheets. Banks meanwhile could book profits up front. They used a trading strategy known as the "negative basis trade," the paper said, citing unnamed industry participants.
Yaba Daba Do
This, in combination with the decision of the FRB, could make it a very interesting day.
I'm rather stunned by this news. I thought they would be less aggressive and more willing to take the blame.
I wonder if they have been given any assurances from the New York regulators?
I am Death:
YouTube - Monty Python-The Meaning of Life-Death
Cheers,
This is all a setup for a monster rate cut by the fed???
When did this story break before or after the bell?
375 bps, then the downgrade. My dollars should be equivalent to the Peso by 11:20 am PST!
Gasparino reported on this during the trading day! Seriously, who can bail these guys out? No one.
Ratings agencies already are behind the ball and should have downgraded them weeks ago. They didnt because we would be at 11,000 right now, and we cant handle that kind of market correction in an election year
Nah, this is a setup. It instead WONT come before the cut, and financials will soar. You can count on a ridiculous outcome these days. Everything is inverted.
Maybe I'll take a walk over to my company's HQ and check for FID traders jumping out the windows.
This is getting crazier by the day. I don't no wether to be in PUTS, Calls, cash,metals, or the mental institution.
people always say the monolines will be downgraded, but it never happens. as long as they don't get downgraded everyone's gonna be fine: the insurers, the I banks, the investors...
also, as long as they don't get downgraded they will be able to keep paying claims for years, long after this whole credit mess goes away. and once the credit mess goes away they'll still be able to pay the claims because ...well...the credit mess went away.
the only way the monolines are toast is if:
1) they get downgraded
2)the credit mess never, ever goes away
I agree, this is ridiculous. I always thought the children's story about the emperor with no clothes was a bit over the top, but I guess not!
Maybe the ratings agency simply can't delay any longer and still justify their existence. What good is a ratings agency that can't even tell $hit from shinola?
They didnt because we would be at 11,000 right now, and we cant handle that kind of market correction in an election year
That would be after the dead cat bounce right?
At the very least, this does make sense.
S&P promised to come out with there new review of MBIA (i think) over a week ago so they are really behind the ball on that. They have to be fearing litigation over their negligence in holding a AAA company that issues debt at 14% and is looking to the companies they insure for handouts.
And if they are going to downgrade, do it on a day that it wont be the lead story and you know the market is going up and has a momentum.
We'll see.
and is looking to the companies they insure for handouts.
No conflict of interest there... nothing like biting the hand that feeds you & biting it off at the arm pit.
Ouch. That's going to leave a mark.
http://www.sxc.hu/pic/m/a/a5/a51media/236051_fasten_seatbelt_sign.jpg
This is getting crazier by the day. I don't no wether to be in PUTS, Calls, cash,metals, or the mental institution
- 01/20/2009 end of an error
On the contrary, this just reaffirms the inevitable outcome, which is further debt destruction, further writeoffs, further harm to financials. As long as your PUTS are long-term (LEAPS for 1/09 or 1/10) you'll eventually get the desired result. I'm betting much sooner than the expiration dates.
Somebody name one move by "the authorities" that has been successful in turning back the flood? They can delay and confuse the markets momentarily, but the effects of exploding debt is unstoppable.
My suspicion is that the raters do the same thing as th IB's. Slow write down here. Slow write down there. Until something pops and things go t up.
The Re's deserve special attention here.
But a good day to do it. All the mouth breathers will be going gaga over B.S. Bernutty's rate cut.
All good...nothing to see here.
Cheers,
dryfly writes:
They didnt because we would be at 11,000 right now, and we cant handle that kind of market correction in an election year
That would be after the dead cat bounce right?
No, that would the Fed Cat Bounce.
impeccable timing. . .
ever tried to write projections? or pro formas? or tell your wife whats gonna happen in the next few months?
its impossible.
things change every millisecond
its never as bad or as good as you think it is.
ever
ever.
EVER
Announcing this tomorrow? Could this be an additional piece of pressure put in by the markets to twist the Fed's arm into complying with their wishes. An "insurance policy" (no pun intended) just in case, Ben had any crazy ideas.
If this is announced early enough, it will pretty much guarantee a 50 basis point cut and maybe work up to 75. Not stating, just wondering.
Has this been sourced anywhere other than cnbc. I can see them spreading a rumor to get Ben's panties in a bunch so he cuts 200 bps. Then, gasperino comes on and shrugs his shoulders and says ooops, guess I was wrong.
Any chance that Bernanke is sufficiently embarrassed enough about his previous cut that the Fed won't do anything tomorrow?
I post this link in honor of the homebuilder rally:
Kitten Cannon
Any chance that Bernanke is sufficiently embarrassed enough about his previous cut that the Fed won't do anything tomorrow?
No. Although 25 bps is still very possible.
Short Courage,
I am in SKK and 01/10 HOG, Google and QQQQ PUTS. I have doubled my stake and then some the last few months so I took my original investment off the table and let the winnings ride. I just hate days like these that make you think even though you are right you will still lose.
Hard to believe this will take place. The climate of control and manipulation is too heavy right now.
What a great time for the monolines: Buffett announces he's coming after your profitable lines of business as the downgrades hit. Creative destruction I guess.
As an aside, what kind of mental makeup do you need to have gone long in Ambac or MBIA in 2008? I mean Kay-rist: become a war photographer in Iraq or something.
CR projected potential losses at $6trillion a couple of months ago. That may have been an optmistic projection!
I think crispy might be right about a setup. The downgrade comes at the same time as a 100 bp cut. Do they cancel each other out?
Maybe this story and the previous go together: The rating agencies are fearing legal action (from any number of fronts).
Us or them? Easy to answer that.
Then again, who knows? We're pawns.
I wonder if they have been given any assurances from the New York regulators?
ndk,
You have been misinformed. It's the insurance companies that give assurances, not regulators.
why tomorrow? Why not wait for the long weekend and another 75 bps 'surprise' cut?
I just looked up the futures and there is hardly a blip. This news came out in the afternoon. I would have guessed that it would have affected the markets a little more. Wow, I thought this was big enough news. It wasn't totally unexpected but some people thought there might be a bailout before it would get to this.
I'v turned into a wuss. I don't have the nerve to play this market. Too wierd. I'll just keep my powder dry. Helps me sleep at night.
IMO the cut tomorrow will be 25bp, with promises to be watchful and of more to come next month. A cut of greater than 100bp in little over a week will be too much even for Bernanke, although with that 'emergency' action last week and the weasel language in the statement he showed how really spineless he is.
I know most people would say a 50bp cut is 'baked in', and anything less will send the markets down. But anyone who claims to know what this market -- which so obviously stopped trading on fundamentals some time ago -- will do is just blowing smoke.
Lots of frustrated shorts out there, no doubt. But from what I see they are largely (still) their own worst enemy.
Ackman show that the rating agencies have yet to take into account the fact that MBIA own "SIVs" (captive, off-shore re-insurers) have already imploded.
See
Goode Value Investing & Trading Blog » Bill Ackman’s Letter to Rating Agencies Regarding Bond Insurers
Az Cowboy,
Yes they cancel each other out. The monolines destroy the market with their downgrade. Then the FED lowers rates 100bp and destroys the dollar so it won't matter.
Cramer and CNBC has been on a crusade against the monolines for weeks now. They need someone to pin the blame on after all...
What will likely happen is that FGIC gets downgraded...and maybe Ambac. It's improbable that MBIA gets downgraded any time soon (although anything is possible)...
I'm praying for a Big Boy rate cut tomorrow: I loaded up on DJP (a basket of diversified commodities). It's up something like 18% YoY. Yeah, inflation is under control.
I'll never own a share of stock while Helicopter Ben is chairman, just hard assets that appreciate as the dollar degrades itself like a co-ed in South Padre Island for spring break.
BrianTX@SD,
352ft, second shot.
LOL
Cheers,
1st Pay - I hope you put a tight stop on that. .25 tomorrow and you're toast.
This market has more rumors than a high school monday morning.
AZ_Cowboy,
Rate cuts cannot solve a solvency problem. It might cover up until Friday close, but there is no cancel.
However my suspicion is a slow bleed. While the Fed et. al. monitor the situation with the Re's. The Re's are far more fragile. If the go poof, a bunch of garbage goes back on the monolines' balance sheets.
Cheers,
I'm praying for a Big Boy rate cut tomorrow: I loaded up on DJP (a basket of diversified commodities). It's up something like 18% YoY. Yeah, inflation is under control.
I'll never own a share of stock while Helicopter Ben is chairman, just hard assets that appreciate as the dollar degrades itself like a co-ed in South Padre Island for spring break.
If that's what you're after why not buy real estate? That's a hard limited asset. The explosive growth overseas should drive up real estate prices just like commodities since the supply is just as limited.
Some people here acts like weird unexplainable things are going on, and "they're out to get you."
Everything is happening just like you would expect as the unwind accelerates.
If you had some big map of institutional money and hedge funds all over the world, you would be seeing the lights go dim one by one. The lights are borrowed/fictional money.
Did Rogue Trader use real money or borrowed/fictional money? If it was real, he wasn't rogue, right? And where's that money now?
As the lights go out, the money goes to the graveyard. As homebuilder shorts are bought back, leverage goes to the graveyard. Most shorts are leveraged.
Bond insurance is just another form of borrowed/fictional money. It created debts that can't be sustained. A lotta lights are about to go out.
Mis - Was just being facetious. I don't think it matters if or when the downgrades come. Everyone knows the truth, most are just pretending to ignore it.
rich,
"Bond insurance is just another form of borrowed/fictional money. It created debts that can't be sustained. A lotta lights are about to go out."
The lights are kept on by vendor finance.
Cheers,
AZ_Cowboy,
Cheers,
I guess they finally decided that 2 cents on the dollar was just too big an obstacle to over come, they must have been thinking, shit, it looks like we have a crisis of confidence that in this environment, just ain't gonna cut it, we could send investors letters, spainin the 2-cent valuation, but, they might be pissed -
"Basis said that in past market crises, confidence quickly returned, but added: This time it may be different given the adverse systemic issues that prevail and we find it difficult to identify a catalyst that will likely restore confidence quickly.
FT.com / In depth - Basis hedge fund valued at 2 cents in dollar
Rich, I like the "lights going out" imagery. It does help to step and remind oneself of the big picture. The trend is clear...
448ft..6th...
Dead cat abouncing.
Cheers,
Naw, Cramer hasn't been on a crusade against them. Any negativity he expressed about them was picked up from Doug Kass' analysis a couple of months ago on RealMoney Silver.
The last couple of weeks, he's been vacillating between calling for a bailout/backstop of the monolines with public money or, when the antidepressants wear off, for them to fail and thereby wake up the Fed.
It would be inappropriate to blame the shorts for the troubles at these companies. The charts were in waterfall long before there was short interest of any consequence.
I'm just a humble retail trader and I was looking at them back in the spring, when Cramer was saying to get long them.
I've been in and out of these things 4 times each now. I'd rather trade a white phosphorus instrument like FXP or EEV. At least with those, you know you're not going to get a ridiculous rumor that Buffett's buying the Shanghai Composite.
I doubt that Moodys et al. will downgrade in the face of pressure from not only all the majors but also NY Attorney General, and countless other politicos.
hey, is riding your subs a version of vendor financing?
damn then i'm there!
woohoo
give me cheap rates, vendor financing, back-end write offs, negotiated settlements, and a future of mud!
sounds like a recession to me.
on a serious note.
and i mean, like, seriously.
everyone i talk to and i mean EVERYONE always prefaces each conversation and then peppers it throughout with this soon to be cliched if not already gem:
"well in this environment......"
everyone has the code words now. recession time baby. bankers, in this environment. borrowers, in this environment. vendors, in this environment. clients, in this environment.
so HOLY SHIT THIS IS WHAT A RECESSION IS LIKE?
i hate it.
make it stop!!!!!
can i please have ZIRP ASAP MF?
ask me later what MF means.
and yes i'm a early mid-thirties business guy thats never fed my family of four through a r-e-c-e-double-s-i-o-n before.
is this it?
can everyone change their mores and standards of conduct / underwriting / standard protocol just because MSM says its a r-e-double-hockey-sticks-recession?
dude, this blows.
oh my, they cannot be thinking of securitizing the monolines, what next?-
"Troubles at U.S. bond insurers are forcing industry regulators to rethink a decade-old legal loophole that allowed insurers to venture into the obscure world of derivatives."
The Bond 'Transformers' - WSJ.com
Misean,
The trick to Kitten Cannon is to aim for the blocks of TNT that have been carefully prepositioned by agents of the Federal Reserve.
That way you can turn a mediocre, or even feeble, dead kitten bounce into a moonshot! Especially if you get one of those surpise floating bomb rate cuts.
Brian,
Working on it. Out to 1284 feet...Kinda of mindlessly fun.
Cheers,
let's start the buffett buying shanghai composite rumor here. i am sure it will drive fxi up by at least 10% during dreaming hours.
NEW YORK, Jan 29 (Reuters) - Connecticut State Attorney General Richard Blumenthal said on Tuesday his office has issued subpoenas to all major rating agencies and bond insurers in a widening probe of industry practices related to the subprime mortgage crisis.
In an interview, Blumenthal also said his office is investigating the role of investment banks in a "far reaching" probe into "problematic practices in the ratings and securities areas."
"We have an investigation relating to possible wrongdoing involving the bond insurers and mortgage lenders and also the investment banks, seeking to know whether people buying securities backed by mortgage debt may have been misled by failures to disclose relevant facts on the risks involved," said Blumenthal.
He specifically said MBIA Inc (MBI.N: Quote, Profile, Research) and Ambac (ABK.N: Quote, Profile, Research) were subpoenaed. He also said his office had issued demands for information from "all" the rating agencies. He didn't name investment banks involved in the probe.
The kitty cannon is quite the trip.
Wait 'til I show the kids.
I managed to get 1100 ft+
Rich:
Interesting how the "lights go out" imagery is akin to the comment made days immediately prior to WWI.
The banks effectively/collectively are reserve negative. The monolines are effectively bankrupt. When/How is the MSM ever going to explain this to the sheeple?
Here's a solution for at least the muni market -
The questionable insurers have to sell the their muni insurance contracts to Buffett or any other AAA credit out there. The toxic stew is left behind. It wouldn't surprise me to hear/read that Warren is only offering 50% on the Dollar on their muni insurance.
You have to love the regulated markets. Mark-to-market each day, settle in three, clearing in the middle. When is nonsense going to end?
Allen C,
When the war ends?
Cheers,
Yes "When the war ends?"
We need more soldiers (angry, reasonably informed constituents).
I don't know if this has already been posted, if so I apologise, and it's slightly off-topic, but it seems pretty darn scary to me:
Mish's Global Economic Trend Analysis: Bank Reserves Go Negative
Allen C,
"The banks effectively/collectively are reserve negative."
Yes, but The Fed is willing to let the Banks have all the money they need, "as long as necessary" (BB-quote), through TAF. Isn't this correct? Can't they put that money to good use, like helping out the bankrupt monoliners? (A question, not an assertion!)
U.S. Takes Out Debt-Consolidation Loan
WASHINGTON, DCPlagued by late fees, high interest rates, and harassing creditors, the U.S. took out a debt-consolidation loan Monday, combining the nation's $6.1 trillion debt into a single, easy monthly payment.
U.S. Takes Out Debt-Consolidation Loan | The Onion - America's Finest News Source
Brownsville Boy,
I've been looking at that number for a couple of weeks. It's disturbing.
Cheers,
ZACKATTACK: "Naw, Cramer hasn't been on a crusade against them. Any negativity he expressed about them was picked up from Doug Kass' analysis a couple of months ago on RealMoney Silver. "
I don't subscribe to Realmoney so I have no idea what is happening on that site. All I'm familiar with is some of his views on CNBC and the freely released stuff on thestreet.com. Cramer's attack against the monolines started late last year or early this year. Why was he blaming the collapse in US stocks on the monolines? Why was he insinuating that the Dow would rally something like 3000 points if the monolines were nationalized? He is likely doing it because he wants the government to nationalize the monolines and shift the losses to the the government, away from hedge funds, investment banks, and others who hold insured assets. Remember how he was saying that, instead of the government giving $150 billion on rebates to the working and middle class that it should be given to the Wall Street parties through nationalization of the monolines?
The shock to Cramer is going to be when the Dow falls even when the bond insurers make it out alive.
ZACKATTACK: ÈIt would be inappropriate to blame the shorts for the troubles at these companies. The charts were in waterfall long before there was short interest of any consequence.È
What the shorts are doing is ok. Itès a free market, and although they arenèt helping the monoline case, itès ok in my eyes...
look..ya gatta give em credit.
they strung this out way more than you'd'ave ever suspected.
"markets can remain irrational longer than you can remain solvent...etc... yeah, yeah, yeah"
ok so i got my cash position;
i'm fdci and ncua insured:(check)
some p.ms....yeah, canned food, (check) and beans (check).
and I'm into naked puts...(I hope my wife doesn't mind).
let's keep our sense of humor cause this is just the beginning of the beginning.
AZ Cowboy - we think alike. I was on Onion today looking for more recent articles to post... The Bob Evans article almost hit too close to home to be funny, at least here in the Midwest.
[But the 'I Love Commuting' Official Onion Coffee Mug advertisement made up for it... might have to get the Little Misses one of those for Valentines Day - she's scheduled for a colonoscopy first thing the very next morning!!! Some kinda romantic evening we'll have, her getting ready for the big day and all.]...
dryfly: too much information!
I suspect most munis will not be that affected.
-Restructuring seems more likely than hard default when trouble does occur, because (see above) and much of the debt probably builds infrastructure - which often can be run profitably, but can't pay for its construction cost (high capex, low opex)
I know next to nothing on the topic however, so please correct me if I'm wrong.
NB-
I'm not trying to minimise the effects - this will crush a lot of CDOs etc. (all the stuff the bond insurers probably never should have been insuring anyway)
I Can Has ZIRP?
OK Misean that's good to know. I'm short the USD/CHF and after seeing those figures I reckon I'll get a whole lot shorter.
rcryan,
that has been the historical pattern, but let Rob Dawg fill your mind with mello roos and oddball agencies flying out million in bonds that were only really saleable due to insurance as anything but muni junk bonds.
Um, I am beginning to think that something really bad is about to happen to markets, and the fed knows. And is totally powerless to do more than standby to provide liquidity.
They can't provide equity, so more loans.
On the lending side, I note that conforming jumbos here in Phoenix have really skyrocketed in price. How would you like 7 and an 1/8 for fixed 30 year money? Current Purchase and Refinance Mortgage Rates-Lending in AZ, CO, NM, OR, UT, WA - Hart West
Ugh, someday just is getting farther and farther away. I can see no good solutions emerging in time to restart the housing market in the West.
So, what should we do. I am all for just hunkering down, and having a nice life without thinking about this madness anymore.
I showed that fed chart from Mish to my wife and explained at least one big Wall Street bank is technically insolvent. She is amazed.
But hey, party on Wall Street, uncle Ben will provide some more sugar.
Someday this war's gonna end...
I don't claim to understand the Bond Issuers or those that rate them, but I am confused as to what would force the rating agencies to downgrade them. Not why should they downgrade them, but why would they, it seems to me at this point that they are "in for a penny, in for a pound."
I guess what I am asking is who is twisting the rating agencies' "arms" to force a downgrade?
Are the Rating Agencies just trying to save their skins in fear of future litigation?
"The banks effectively/collectively are reserve negative. The monolines are effectively bankrupt. When/How is the MSM ever going to explain this to the sheeple?"
blink, blink, blink,...sitting here comprehending the implications of that statement.. blink blink blink... realizing I should've invested in the company that manufactures "depends"... blink blink blink
rich | 01.29.08 - 9:23 pm |
Amen.
Sell Alaska back to Russians?
Trainwreck writes:
Are the Rating Agencies just trying to save their skins in fear of future litigation?
Actually that has a bit to do with it. But it also has to do with future legitimacy...if you can call it that.
Raters: Well we were downgrading and got hit by a bus. hoocoodanoode?
Cheers,
"The swaps also let investment banks move commitments off their balance sheets. Banks meanwhile could book profits up front. They used a trading strategy known as the "negative basis trade," the paper said, citing unnamed industry participants."
Expired
Allen M,
"I showed that fed chart from Mish to my wife and explained at least one big Wall Street bank is technically insolvent. She is amazed.
But hey, party on Wall Street, uncle Ben will provide some more sugar."
Blast from the past:
YouTube -
Cheers,
If I owned Puerto Rico GO bonds insured by MBIA, should I be worried?
What's the likelyhood Buffet will take over the muni isurance fro MBIA? I heard he applied for license there?
Trainwreck, look a little above your post. When Attorney Generals start investigating you (rating agencies and monolines), you tend to get religon.
Dryfly,reassure the little miss,1)they are unlikely to find signs of intelligent life.2) people in san francisco do it for fun...of course they also keep electing Feinstein.,,so maybe don't bring THAT up.
bacon dreamz writes:
dryfly: too much information!
bacon dreamz | 01.29.08 - 10:40 pm | #
Hey man I spared you my vision of how that evening will go...
Nice romantic candle light dinner, the two of us home alone... me with a nice glass of red wine & steak dinner, she with her gallon milk jug of whatever it is they have you drink the night before... [use imagination to fill in rest].
Looks like I'll be here on VD.
dry - my sympathies
for some reason though when you wrote that all i could think of was your lil' Mises not Misses - as in ludwig von...
thought that was kinda funny though the situation surely isnt.
you know, you're kinda my hero even though we live entirely 180 opposite lives. you in a county thats not even rated by countrywide, me in DC. you, cash hoarder experienced independent guy, me mid 30's credit based hope this shit all works out kinda guy, you, seller of real shit, me seller of me, you - me - you - me - you - me
guess we're all just people
told my wife today that i re-came-across this paraphrased quote today "measure your wealth by what you got when you lose all your money"
while she didnt dig the 'overtones' she got the 'undertones'
's'all good
til it aint
I know many here are sticking to cash equivalents for the moment (while possibly playing some side bets) so they can eventually take advantage of the coming doom. Me too!
But I have been worried for a bit thinking about my cash positions. Some of it is in CD's in a laddering scale, but some (lots) of it is in money market FUNDS with Fidelity. How worried shall I be about the money market fund breaking the buck.
Just curious because many (if not most) of us here agree that the "end" is coming. I just want to have money left so I can buy at the end for the new beginning.
's'all good
til it aint
dc1000 | 01.29.08 - 11:14 pm | #
Hey DC - I'm figuring out how to re-invent my business right now too. Not sure where it will lead... maybe I'll do more contract work for others & take the pressure off me a little... or just spending more time fishing or doing stuff with the wife (but not this Valentine's Day - I think I'll give her some space that evening).
OWL,it won't be the end of everything,just a hard time with much change.be reasonably prudent and enjoy the beauty each day brings.
Ratings affirmed but outlook negative.
Feb 04. On my mark!
[use imagination to fill in rest].
no thanks.
homedad43,
I think a lot of Americans will prove adaptive to austerity changes, like the British were in WWII. Some won't, but you may be surprised how many people find their inner pioneers.
You know, really, this phony life of luxuries we've been living and half believing in the U.S. kinda sucks.
We gotta get back to the rock garden.
The state lets me go pick up more guns and ammo tomorrow...I'll do it Friday...then go back out to the high desert and look around some more. Oh yeah and target practice.
Money seems an appropriate post, but so does time. enjoy:
YouTube -
YouTube - Time - Pink Floyd
Cheers,
You have it all wrong. Yes, the bond insurers will get downgraded tomorrow, but NOT AS MUCH AS EXPECTED! See, they are implying big downgrades, but it will only be minor ones. Kind of like a company reporting a loss of $1.00 per share versus consensus estimates of a loss of $1.01 per share. Therefore, along with the rate cut, the market will rally.
I hope that you are incorrect, Barley (but, gosh, that's all that they seem to say, huh?).
The bomb bay doors are open, Moodys and S&P. Drop the nuke, guys, NOW!
dry -
wish i could make those decisions. unfortunately for me its press on press on press on. nothing like a $100k nut to make a man move.
and to that end, we're downsizing, getting cheap, getting small, sending shit to kinkos and the whole nine. boooooooooooooooom times be done booooooooooom'ed up.
wish we woulda stayed in my basement.
como se dice, whocodanode?
I think a lot of Americans will prove adaptive to austerity changes, like the British were in WWII. Some won't, but you may be surprised how many people find their inner pioneers.
I fully agree rich - I've been through a couple two three recessions... saw my folks almost lose the home (and all their savings)... saw the ravages of the Farm Crisis & Rust Belt, both at ground zero. Most folks eventually rise to the occasion.
But getting to that realization prior to rising to the occasion isn't a smooth ride.... be a few temper tantrums on the way.
Only if you don't trust Puerto Ricans to pay taxes.
That's funny, rich.
Prejudiced, kind of, but funny.
this reminds me of an old mountain dew commercial. being "cool" / "recession" is a state of mind, a "refreshing" / "depressing" state of mind, what "cool" / "fear" is all you got, doin' it mountain dew...whoooaaaa, doin it mountain dew.....whoaaaaaaa doing it mountain dew
everyone i talk to, everyone says: "in this environment"
god damn make it stop!!!!!
recessions suck!
(PS i juvenile-ize my language to make a point)
In the town where I live, they only have a right to levy taxes if the budget passes by majority vote.
Each year taxes keep going up, the majority in favor keeps getting smaller.
In a deep recession, a lot of local budget votes won't pass because people are fed up with how much money govt. spends.
wish we woulda stayed in my basement.
Who says you can never go back? Or do something else?
1) Don't Panic [time for Mise to queue up something from "Hitchhiker's Guide"]
2) If it is REALLY going south - fact based not fear or faith based - either pull the plug or go into hibernation BEFORE somebody else shuts you down...
You'll probably do fine. Scary maybe but do fine.
Actually, it's not prejudiced. I don't trust white people to pay taxes.
yeah no doubt. we're already moving into a 50% off space. gotta do what we gotta do. overhead slashed. head count cut. buckledown, batten down, get straight, its a R-E-C-E-DOUBLE S-I-O-N.
we're doing what we gotta do and moving forward.
whats great, and i mean GREAT for me is that i'm coming out of this with the cash-flowing commercial assets paying me each month and cranking up lease rates every year FOREVER. (i mean 15 years).
the moves now are all about OH / SGA stuff
the net worth wealth stuff been done takin' care of
next step - invest in industrial/flex properties related to export based economies
this reminds me of an old mountain dew commercial. being "cool" / "recession" is a state of mind, a "refreshing" / "depressing" state of mind, what "cool" / "fear" is all you got, doin' it mountain dew...whoooaaaa, doin it mountain dew.....whoaaaaaaa doing it mountain dew
We need to have nice name for it so people don't feel so bad.
"The Great Relaxation"
dude recessions suck.
'91, i was in high school, dad lost his job. but didnt seem too bad to me. same shit going on. just dad went to the 'head hunter's' office every day instead of work.
thats my experience with a real recession
now that i totally get the fact that this is a consumer-led recession..
i mean like,
dude, where's my economy?
what the f is up with this whole US thing? we're all idiots? eeeeeeeeeeeeeeeeeeeediots i tell you
How come nobody is bragging about their SKF and SRS today?
Actually, it's not prejudiced. I don't trust white people to pay taxes.
rich | 01.29.08 - 11:33 pm | #
Rich has a point.
My understanding is if a muni bond defaults a court appointed overseer comes in and runs the municipality, county, whatever, if the citizens don't voluntarily pony up taxes to fix the shortfall. I am not certain if that overseer can raise taxes (probably not)... but s/he can sure re-allocate existing revenue to make sure the bonds get paid first and the holders eventually get made whole.
And they aren't elected so they don't give a rat's ass if the garbage gets picked up or if the library stays open. Just get those bonds paid. It doesn't take much of that before tax increases stop looking so bad.
Now the question is... can the courts enforce that in PR? PR isn't a state, its a protectorate or common wealth or something. Federal law applies but there are some subtle differences.
It is a reasonable question to ask whether those bonds carry as much or more risk than say Ohio or California bonds.
ac, I am already lining up woodworking projects for my down time during 'The Great Relaxation.'
I was planning on building a small sailing dinghy, but given the tsunami heading our way, I may change it to an ark.
rich, it WAS funny.
I was planning on building a small sailing dinghy, but given the tsunami heading our way, I may change it to an ark.
I told my wife we're building and moving onto a river boat and living on the river. Ummmm, she's not there [mentally] just yet. That's good - it will take time to build a river boat.
Sounds fun, d-f-, and may your wife develop a fine river-going spirit soon.
dc1000,
I knew something was eating at your heart.
I am sorry this is your first adult life recession/depression.
They hurt. Keep your wife and kids informed. Stay as liquid as you can. Distance yourself from risk and debt.
Yeah I know, trivial stupid shit now...but do what you can. You seem a resourceful young man.
As they said in Britain during the war...Chin up.
You'll make it and understand the next time the storm clouds build on the horizen.
I'm not trying to condescend, I think you'll make it...
Cheers,
91, i was in high school, dad lost his job. but didnt seem too bad to me. same shit going on. just dad went to the 'head hunter's' office every day instead of work.
thats my experience with a real recession
Ninety One was a pussy cat too - nothing like the 70s and 80s (I graduated from HS in 1975 and college in 1981 - very ugly).
Most youngish folks today haven't really seen a bad recession... but then none of us have worked through a 'depression' (unless they be real old).
In all fairness 'dot.bomb' while not a terrible recession nationwide was pretty fierce for the IT field. Same with the Farm Crisis in agriculture. Folks who experienced those at ground zero saw a hint of how bad things can get. I fully expect the real estate & related financial sector will see that kind of intensity too. The question is how far will it spread?
we're pretty much shutting down the transaction / development side of the biz and rolling forward with the A&D side. this means, me, as the owner/founder, has been down-sized. so i'm officially on the market.
head hunters say, darn dc1000, just 12 months ago we coulda placed you at 175k in heartbeat.
oh but now, no one is hiring a thing
but really, you're an intelligent resourceful blahlblahbla bloooozie blah
time to switch industries.
WHATS HOT BITCHES? tell me!!!
dryfly,
dc is hearing the advice of a bunch of old bears, who made it through. '91 to him must have been as bad as '75 was to my old man. Or 80-82 must have been to me.
Just passing it on...dc's a good kid.
Cheers,
Damn dc1000- Tell you what. While some people are out in the desert, what say you fly into LAX and we'll go gold mining in Ventura. I heard there's a lot of gold in them thar hills.
"we'll go gold mining in Ventura. I heard there's a lot of gold in them thar hills.
sdtfs | 01.30.08 - 12:10 am | #"
If that's what you heard...I've got capital for that.
SERIOIUSLY.
Cheers,
so i'm officially on the market.
head hunters say, darn dc1000, just 12 months ago we coulda placed you at 175k in heartbeat.
oh but now, no one is hiring a thing
Ummmm, I wouldn't say that just yet. You might want to emphasize your rain maker skills - finding new bus. See if somebody would put you on a mix of salary & commission. You'd be hungry at first but probably kick the typical salaried 'Biz Dev' type.
BTW - I've been contacting domestic mfgrs with the same message and they are receptive. My problem is they all want 100% commission & I'm tired rebuilding & rebuilding my book over and over... my sell cycle is very long. So I've gotten a little pickier about who I sign up with.
But its a similar story - talk to them about your biz dev skill and I think you'll find folks who want to talk. JMHO.
yeah sdtfs - thats some productive shit right there i tell ya.
you some sort of comedian?
PS: Tanta - i hope this was the type of late night "salon-type" banter you can tolerate. yo no soy un trollito
DC1000 - I don't get it. (Perhaps I missed a better explanation in a previous thread.)You've been on here a while and as far back as I can remember and until very recently, you've been one of the more optimistic/"things are going fine for me" kind of peoples around, and now this. May I ask what the heck just happened? Did someone drop a nuke on your industry?
confused...
This is for GO bonds. But I'm talking revenue bonds.
For example, our local school district, with 1,200 students, borrowed $25 million with bonds to build a high school gym. We had to vote for the bond issue. And we have to approve the school budget every year to pay off principal and interest.
Every year, the parents group has to work like hell to drum up enough voters in favor. This isn't a poor town. It's in the ritzy suburbs of NYC. But people have had it up to here with 10% school tax increases every year. In some NY State counties, school budgets haven't been passing. In a recession, a lot wouldn't.
So, what would happen to the school gym bonds? There's probably about a year or two of payments in the sinking fund. But after that, what? The bondholders can't shut down the town. They can't take back the gym.
They can have some basketballs.
thanks dry.
thats the thing. i'm a natural salesman.
what cracks me up is that i got offers from solomon (citi) and ambac coming out of grad school in 2001. skipped out on them both to do RE. now they're blowing up just like RE. funny - damned do damned dont.
so yeah, the length of the sales cycle is really the biggest problem. if someone said go on now and make mexico issue $2BB in new debt i could do it but it would take me 9-12 months.
or i could hustle some leases and get that done in 3-6 months.
what i really am looking for is a national/international platform from which to do what i do now - i.e. find deals, and have the sponsor pay for pursuit, due diligence, sign the loan docs and then kick me a piece of the residual.
trammel crow, cb re, jll, carr america, boston properties, etc etc etc
What about those AZ exurbs that are depopulated..but sold munis for all of the infrastructure rich.
Same here in CA.
Inpopulated areas with bonds. Kinda like their HOA dues.
Just a thought.
Cheers,
WHATS HOT BITCHES? tell me!!!
In DC? Its gonna be military subcontracting... all that shit that was shooting or shot at in Iraqistan is going to be replaced... it isn't even worth lugging home the stuff is so badly worn out. Ask anyone who has been there.
Doesn't matter who wins the next election either - it will be part of whatever stimulus comes out of the next budget.
Find folks involved in that and $175K/yr looks like chump change.
Just sayin'.
so yeah, the length of the sales cycle is really the biggest problem. if someone said go on now and make mexico issue $2BB in new debt i could do it but it would take me 9-12 months.
I'm bidding automotive work right now - very large contracts - that won't go into production until 2011. No commishie until then... and they wonder why I'm less than fully motivated working those accounts.
dc i cant hire enough and have been doing it for dozen years, still not much good news for mortgage industry addicts. they got you good and i cant get at this price tag without industry credentials.
a guy i know who is about to lose job in recent events is willing to go from 230 to 150 and is calling me as he is hot commodity, but in a little while chances are he'll land somewhere take 40% pay cut and be happy. feel sorry for him with couple private schools and wife at home.
geoff:
yep exactly.
turning the corner from 2007 to 2008 the following things happened:
1) charter school client i had been working with/for for 15 months imploded. lost a $500k contract for my design shop
2) $1.6MM construction project went bye-bye due to financing issues. had been working with that client for 12 months prior
3) $500k construction project, went bye bye due to decrease in demand for the product offered by the client. had been working with him for 6 months
4) sales and leasing volume POOF at the end of Nov, no recovery since
so,thats where i am vis-a-vis overhead/income
like i said, i'm coming through this with stabilized income commercial assets, so i'm good long-term. but for the short-term, i need a job. the A&D business we own is viable and moving ahead, its just ironic, its my own division that we decided to eliminate as part of our 'right sizing' for the recession.
hard as shit to give yourself the pink slip but i did it. my firm lives on but only slimmed down. time for me to move on and make it happe
I'm done and out.
dc, you're smarter than you think. Be tight, and watch for those opportunities I know you see. Fear, be cautious...I doubt you'll be stupid.
In the end if I made it as old as I am...you'll be alright. Though at times it may suck
Cheers all,
dry -
no doubt, headhunters explicit in their statements that govie contracts are the hot topic for a while to come.
guess i gotta go learn a new industry in 60 days. done it before, can do it again.
theeeeeeeeeeen again - why not take this chance to go find that international development job i always wanted?
or being a free-lance travel writer? man, thats the job of my dreams. travel, expense accounts, writing, wife and kids safe at home....my accountant says thats a prime example of escapism.....
he's crazy
So, what would happen to the school gym bonds? There's probably about a year or two of payments in the sinking fund. But after that, what? The bondholders can't shut down the town. They can't take back the gym.
They can have some basketballs.
rich | 01.30.08 - 12:15 am | #
The courts (at the bequest of the bond holder/servicer) might impose an overseer on the school board... make them cut programs, layoff teachers and administrators, etc., to funnel additional revenue from existing operations to the bond holders. I've seen that happen before.
Misean,
I thought for sure you were going to post this "sugar" video. The first one is live while the second is the studio cut. This is the real sugar.
YouTube -
YouTube -
Later,
hiker90
ps dc I'd be glad to buy ya a beer/coffee next time I visit my brother up in Silver Springs. Best of luck to ya.
hiker - thanks for the offer. the coffee/beer offer is serious code word for beer/drink/few drinks
i'll be around. email CR here to get in touch with me if and when you ever make it around here.
We should have a thread about this some time...
Fees on 401(k)s Rock Boomers Facing Flawed Disclosure (FDIC uses T.Rowe Price which I would endorse as well)
Bloomberg.com
Guardian, UK: Warning over one million homes at risk:
The FSA cites three warning signs on mortgages:
· The loan was taken out for longer than 25 years;
· It is worth more than 90% of the home;
· The amount borrowed is 3.5 times or greater than income .
Over a third of all mortgages sold between April 2005 and September 2007 fall into one or more of these categories. This suggests that more than 2m of the 5.7m mortgages written during this period are of potential concern.
Warning over one million homes at risk |
Money |
The Guardian
The farm crisis in the 80's paved the way for ridiculous food prices we're seeing now. Yes, ethanol is part of it. But really, there is just an extreme amount of monopolization at crucial intersections of the supply chain.
mmmkay folks
good night
got another day of small business hand-to-hand combat to conduct tomorrow.
to get back on topic, i'd say, bail out ambac and mbia because if they can stay on top, then the ratings stay on top, then the bonds dont need to be written down, then the reserves can be lower and liquidity/solvency can make it another day!
(whatevah!)
dc1000,
Medicine's going to be hot. (Not pharma, but slice and dice to keep grandma going)
McMansions are optional, but healthcare will empty a bank account faster than you can say screw my selfish children, I'm living for a few more years.
Sorry, I found this link just in time, append to previous post:
£19m can't buy me good health, says Lotto winner |
UK news |
The Guardian
If you had some big map of institutional money and hedge funds all over the world, you would be seeing the lights go dim one by one.
I just checked and the lights are still on:
The World at Night
I look at the world
And I notice it's turning
. . .
Michelle Malkin mentions Calculated Risk in her latest column.
Michelle Malkin : The Politics of Foreclosure - Townhall.com
So, any confirmations to underpin all this speculation?
At this point I really work hard not to be surprised by things, but this would be a bizarre time for the ratings agencies to be hard-nosed about the numbers.
The downdraft from such a move could sink Manhattan.
Myself, I think it's good to be in Cheetos.
Cheap, and sell well in the unemployment lines.
Oh and twinkies too - they'll both keep forever!
Yeah, I saw a guy in the Circle K the other day trying to buy Cheetos with some kind of state AFDC card that belonged to his girlfriend. But it only had 67 cents on it and the Cheetos were 80.
The Bond 'Transformers' - WSJ.com
Transformers : Less than meets the eye.
Transformers : Toxins in disguise.
of course stimulus package will provide enough funds for exactly 1,000 cheetos, and even better news is the fact that person was only 13c short. here we go this is enough for six thousand cheetos, bingo!
From the article :
"Obviously, there is a careful line we need to walk. We don't want to stop financial innovation. But on the other hand, crisis and scandals aren't good for the financial markets," said David Neustadt, a spokesman for the New York insurance department."
Well, I for one wouldn't mind if someone wanted to stop some of the recent financial innovation. With friendly innovators like them, who needs enemies?
Junk bond market says "recession a foregone conclusion"
Junk Bond Rising Spreads Signal Worst Bust Since 2001 (Update2) - Bloomberg.com
WSJ Breaking News:
UBS said it expects a fourth-quarter net loss of $11.4 billion, including around $12 billion of losses linked to subprime debt and $2 billion in other mortgage-related losses. Full article coming shortly.
A good video of Fannie CEO Mudd saying that them going into the Jumbo market doesn't present them more risk:
Bloomberg News
I thought the interviewer asked some tough questions unfortunately she never asked any follow up questions. Like when she pointed out that if Fannie uses it capital for jumbo loans that will be less capital available for more affordable loans, the CEO completely dodged that question.
bacon dreamz,
Just in time for Super Bowl snacking. Pickled Pigs Lips
Pickled Pig Lips
All, UBS announced a $14 billion write down (see next post).
Best to all.
AllenM writes:
...but let Rob Dawg fill your mind with mello roos and oddball agencies flying out million in bonds that were only really saleable due to insurance as anything but muni junk bonds.
Um, I am beginning to think that something really bad is about to happen to markets, and the fed knows.
This might be a case where the Fed is concerned for the muni bond market. California is up against a wall wrt taxation. There just isn't any more blood in those stones. Mello-Roos was the last tap in the vein. We are seeing municipalities across the nation "struggling" to "cut" even 5% from budgets. There just isn't a model to address the 20% revenue shortfalls coming. One sure bet is the floating of some of the worst "self-insured" muni paper that ever managed to slip past the waste treatment plant. And there's your topical tie-in. Real insurance is going to be expensive and the markets will command huge premiums on uninsured so look for hybrid products with the worst aspects of both.
"The Great Relaxation". I like that.
The accelerating debt/inflation craze of the past couple decades has been just nerve-wracking.
I look forward to more relaxing times once the initial tough adjustment is gone through.
Thanks ac (I think that was your idea?).
Bond write downs and more I am getting ired of this so I have a free offer to give to you guys
One Month Free Trial! ProStores - an eBay Company
Lively Money: 7 things to do to achieve the unachieveable!
Since we are talking cheetos, they now have strawberry flavoured ones
Strawberry Flavored Cheetos Seduce Sweet-Loving Snackers
A municipal revenue bond is tied to a specific project that will generate revenue to pay back the bond holders. The classic example is bonds used to finance a toll bridge.
A general obligation bond is not tied to the revenue stream of a project but may be issued to finance specific projects.
Depending on the state, local governments may also have strange creations such as tax allocation bonds and certificates of participation to issue debt and raise money.
Overall, muni bonds are as safe as you can get. Governments find ways to pay even if they can't raise taxes. Defaults are extremely rare. Even when Orange County went BK a few years ago (rogue finance director) all their bondholders were paid in full.
These insurers were incredibly stupid to deviate from their conservative models. Since muni bonds almost never ever default, it was almost a license to make money. No wonder Warren B is making a play for that segment of their business.
Dryfly, Dc1000
I am an engineer in my mid 20's. A lot of friends got whacked in the dot.bomb. Some didn't get steady work again until 2003/4.
Hot industries? How about nuclear power. 17 plants currently under construction, waiting on the permits. NRC hiring 800 engineers to keep up with all the applications. A lot on guys I work with (Navy Nukes) are jumping ship to the private sector. That's my plan, once I get the old DD-214. The only thing that can sink this is cheap oil. If oil falls back to $30 per barrel, I think a lot of the new nuke plants with be stillborn.
good luck, Nuke. While in general -- having lived in Japan and seeing firsthand the Foibles of Man -- I'm against widescale nuclear power, if the USN is in charge then I can possibly be persuaded that the risks are manageable.
As hinted at above, the negative basis books will be where the Ambac/MBIA writedowns come from. A one or two notch downgrade wouldn't have much impact (in the grand scheme of things) on a bank's wrapped investment portfolio, but some banks (about three or four in Europe, I don't know about the US) have taken on huge amounts of paper on a negative basis, um basis, exploiting the gap between cash and CDS spreads supposedly risk free . Any downgrade will hit them hard on that book.
1,657 ft
Looks like Bubbles Ben Bernanke will have to fire up the helicopters and get more free money out there! Fiscal irresponsibility got us into this; I am sure it can get us out of this! What a joke!
bacon dreamz,
Just in time for Super Bowl snacking.
i thought baseball season was over...
In a deflating RE market, isn't bond insurance for MBS's just window dressing? When you need it, so does everyone else. The risk is then concentrated, as opposed to the intention of insurance.
Same with the Farm Crisis in agriculture. So we're going to see contractors driving construction equipment in the reflecting pool?
Monolines RIP: Here is the Obituary. After New York gave its blessing, other states followed suit and the business of writing credit-default swaps on packages of mortgage bonds soared. Bond insurers wrote swaps on around $100 billion in mortgage securities over the past few years, the paper said.
Insurers set up shell companies under Delaware state law known as "transformers," because they transformed a traditional bond-insurance contract into a credit-default swap.
LaCrosse Financial Products LLC was the transformer for MBIA Inc (MBI.N), while Ambac Financial Group Inc (ABK.N) called its transformer Ambac Credit Products LLC.
Business boomed after Wall Street firms forced insurers to count these transactions as derivative contracts, rather than insurance contracts. Swings in the value of the swaps sold to Wall Street helped banks offset fluctuations in the underlying bonds.
The swaps also let investment banks move commitments off their balance sheets. Banks meanwhile could book profits up front. They used a trading strategy known as the "negative basis trade," the paper said, citing unnamed industry participants.
bigchubasco,
Ah the joys of deregulation!