The timing is impeccable. Wait for some good news and when the market is up a couple of percent, then drop the bomb that basically only acknowledges what everyone knew was a complete detachment from reality. And with the downgrade, it's still not close to right, since these turds are BKs walking.
It is sure getting interesting. These are truly interesting times. So, what's next?
Just some guesses,
BoA renegotiating with Countrywide.
Wachovia cutting its dividend to 1 penny and announcing large writeoff on Golden West loans.
Downey or FirstFed or BankUnited or Corus taken over by regulators.
It's like when they give C's to students at Ivy League schools. It's essentially a failing grade. But some of the students don't ever figure it out. One in particular comes to mind. Still getting F's to this day.
I feel dizzy, jubilant, my pants are wet, my hands are numb, my lunch is cold, my water just broke, my skin is tingling, my, oh my... very euphoric!!
Re: IMHO, all else being equal, we have been told by that a $1,000 increase in the price of a home will generate $20 to $70 of extra spending -- thus with every decrease in home price of $1000, the wealth effect and impact on a homeowner will be the equivalent of taking a 4.5% pay cut this year or between $20 to $70 per household -- which needs to be added to inflation factors of about 5% (oh yah exclude oil and food inflation) and thus, on average IMHO, the average population/homeowner will be down about 15% or more by the end of 2008 (in terms of wealth effect).
IT - don't you understand this racket yet? Month's ago, if this were to occur, it would have been a disaster. So they talk of the possibility, there is upheaval, everyone gets time to figure out how to prepare for it when it does happen, and then when it does, it is largely a non-event. You can pretty much ascribe this to all financial news that involves any sort of rating, govt involvement, etc.
I thought monolines can't get any new business unless they're AAA. Which means they're goners, along with the bonds they insure. Add the whole thing with the pension funds, and this looks terrible.
So when they are sure that those non-AAA papers are defintely in Fed's hand, then they downgrade the insurers. Real classy.
jin | 06.05.08 - 3:04 pm | #
Jim, if that is true, we just have to wait 28 days until that paper has to be swapped out of the fed.
Was it Rich (?) months ago who noted in these pages that what became known as the Plunge Protection Team was propping up the market
UNTIL
the "Big Boys" got all their SHORT positions in a row and then the market would drop like an anvil?
What was the prediction DOW 6,000, 7,000? Like 2001 level, dropped from an 11,000 plus high in March 2000 ?
But until then this yo-yo market
is what we have seen? Many have called this a manipulated securities market and many like myself have never felt less secure with Wall Street. it may take years for trust to be restored vis a vis my money and their having any part of it.
"it was 75 year's ago today......
The Gov't told us all how we'd play...."
We've been going deeper into debt
But no one's taken 'way the punchbowl yet..."
Market rallying...wonder why? Perhaps the fact that the market isn't crashing as a result of this downgrade means that the news was already priced in and we've reached the bottom.
Such a joke. This house of cards will fall. Market manipulators will hold the bag in the end. Die you WS scum!
Jay, that's pretty funny. But seriously, just watch, they'll downgrade it maybe one more step, but the final downgrade to BBB will come only the day AFTER they are starting bankruptcy proceedings.
In times when it seems the world has gone bat shit freekin' crazy, it's wise to question whether it might be you - and not the world - who has gone 'round the bend. After reading the comments here, I can say with assurance, it ain't me.
It's clear that since mid March, a liquidity faucet has been turned on for the express purpose of priming the pump of U.S. stock market indexes.
The U.S. is the world's weakest economy. Yet, European markets have already topped out and turned down while the U.S. keeps flying.
There was a specific purpose in using speculative leverage to goose the markets at this particular time, and I agree that it was an orchestrated, anticipated event. There's also an underlying reason oil has been so strong and volatile, and we'll soon probably find out.
It's interesting that there is only enough money and manipulators to goose the U.S. market, not Europe, too. Eventually markets return to equilibrium due to arbitrageurs looking for relative value. You can't prop up $50 trillion of global equity market value artificially with speculative leverge for very long.
I think we've reached a point where speculative leverage has grown greater than at any time in U.S. market history. Trailing TTM of the Russell 2000 Index is fast approaching 90, which is higher than the NASDAQ was before dot.bomb.
I had a source tell me today that for most U.S. small-cap companies, ALL traditional sources of capital have been completely shut off, including stock market, bond market, bank loans and credit lines. The denial of credit to small companies may be unprecedented.
Primary dealers submitted $26.9 billion of bids accepted by the Federal Reserve for the $50 billion of Treasuries offered on Thursday in the Fed's Term Securities Lending Facility (TSLF) auction.
ac said: "Anything besides the availability of credit to these funds and irrelevant."
Yes. The credit expansion will continue until until it's finally forced to stop, which can be quite a while after it should prudently stop. That applies to consumers as well, of course.
I don't think bears get this, even the smart ones.
So what you're saying Rich, is that you too have been taking a hard look at TWM lately...perhaps? Id say it is almost ripe for the picking. Im glad I held off last week though...must...show...a...bit...more.... patience.....ugh.
What does it mean when there's only $26.9 billion in TSLF bids with $50 billion available? I thought that in previous auctions the bids exceeded the amount available.
Others already wrote these lyrics above
"It was 75 year's ago today......
The Gov't told us all how we'd play...."
We've been going deeper into debt
But no one's taken 'way the punchbowl yet..."
I'd add:
We're Ben and Alan's massive central bank,
We hope you have enjoyed the show!
We're Ben and Alan's not-too-passive massive central bank,
We couldn't keep inflation low!
(bum bum bum bum)
Ben and Alan's massive,
Ben and Alan's massive
Ben and Alan's massive
Cen-tral bank!
So what you're saying Rich, is that you too have been taking a hard look at TWM lately...perhaps? Id say it is almost ripe for the picking. Im glad I held off last week though...must...show...a...bit...more.... patience.....ugh.
Geoff,
Yes, I bought some more TWM today. I sold half of what I had right near the top back in late January. But then I got back in way too soon and the last couple of months have been rough. Long-term, I'm very bullish on TWM.
I do not see any positive earnings catalyst for small-caps for at least two years. I think at least 20% of the 2,000 companies will not survive in their present form, due mainly to lack of access to capital.
I thought monolines can't get any new business unless they're AAA.
They could still insure munis, assuming that someone is willing to pay to have their debt rating boosted to AA (or AA-). Yeah, I'd say they're dead men walking.
Anything besides the availability of credit to these funds and irrelevant.
I disagree. It's usually not the denial of credit that starts the leveraged pile cascading downward. It's some outlier event like war, weather, terrorist, company failure, etc.
And the difference between this credit melt-up and all others is that this one is being orchestrated by policymakers. A lot of those policymakers don't have much future left in power, and everybody knows it.
Anything could trigger deleveraging. About all you need to know is that at least half the money propping up the world's equity markets right now is borrowed.
This deal has been months in the making, so this is a plan with a strategy and the game is afoot me thinks.
IMHO, you have a coordinated effort to have placed pawns in position at The Fed Window and that this model has been played thousands of times and the "market" has been warned for 6 months and The Fed has provided a bunker for the survivors.
Yet, how does this play out with pension funds and all those hundreds of thousands of puzzle pieces scattered about the playing field, which may be melted by some little kid with a blow torch?
I assume that this is a matter of segmentation, where the solution will be spun around like cream rising to the top for butter, then the rest of the particulate waste being added to chocolate bars as milk fat (filler), which is a way to re-package waste into something that the public will buy into
Sebastian writes:
ac said: "Anything besides the availability of credit to these funds and irrelevant."
Yes. The credit expansion will continue until until it's finally forced to stop, which can be quite a while after it should prudently stop. That applies to consumers as well, of course.
I don't think bears get this, even the smart ones.
Nice try Sebasstion. You've said this is a healthy, vibrant economy. Don't try and change your tune that you're playing the liquidy event. You've been screaming "sound fundamentals" for over a year. Stick to your guns, douche.
That can also be translated to say: "Too Fuc_ing Big To Fail"
This corrupt little crap racket should be shut down by DOJ, but why would the mafia close down the illusion of justice or law, after all this is American Mafia, not The KGB Russian mafia (I think).
Yes. The credit expansion will continue until until it's finally forced to stop, which can be quite a while after it should prudently stop. That applies to consumers as well, of course.
The credit expansion has stopped in its tracks, for 90% of U.S. consumers and companies. They can't get more financing on reasonable terms, unless they are blue-chip in credit and provide collateral. This is particular true for small companies and small business. Try being an entrepeneur in today's market who needs capital.
Where it hasn't stopped is at the highest policy-making monetary levels. And a large amount of the credit being created at that level is going into speculative investments. I agree -- it sets the stage for the mother of all margin calls, or for a panic unwind when a negative catalyst occurs.
Wake up and get a clue! Here is a link to mapquest which has gas prices from $3.47 to $5.30. These are like ocean weather buoys that are tracking the hyper-inflation storm. All you need to do is go look at California and Arizona and think ahead to those "micro" economies which have record foreclosures, then add in cost of living impacts and then plan ahead on decreased economic activity. This is like watching Katrina in the Gulf Of Mexico churning away. Some people are filling up the car and making plans to get organized and prepare, while the vast majority are looking for parties and planning on BBQ's, as if reality belongs somewhere else......this is fuc-ing retarded (again and again)!!
DB: So what will replace the United States and its currency as the dominant force?
GS: I think that the dollar is probably still, will emerge as the most widely used currency but the United State will have to abide by the limitations that are imposed on it by the willingness of the rest of the world to hold dollar reserves. So it constrains the ability of the Fed, for instance, to lower interest rates. That is also what was behind the Fed chairman's remarks yesterday: that if you kept lowering interest rates beyond this, the dollar would suffer further decline, so you can't go anywhere in that direction.
Observe that this prevented a payout on CDS. The banks have found a way to duct tape the CDS market togother ... for how long is the question? And do they have a plan for when they run out of duct tape?
BTW, does anyone know if bank cooperation ever falls afoul of antitrust regulations?
Can anyone explain what happened to today's markets?
Crude up nearly 6, markets up 200 this despite the fact that the dollar weakened and precious metals , namely gold dropped too.
Re: "Observe that this prevented a payout on CDS. The banks have found a way to duct tape the CDS market togother ... for how long is the question? And do they have a plan for when they run out of duct tape?"
Re: (I posted this this morning) Blood in the waters (still) writes:
The ABX.HE.PENAAA tied to bonds from the first half of 2007, which requires the same 0.18 percentage point of annual protection payments as the existing ABX.HE.AAA, opened at a mid- price of 65.5, according to a note to clients today from Lehman. The index closed at 67.78, according to Markit.
The ABX contracts trading for the first time today are tied to subprime bonds that are a class one step higher than those in existing indexes, according to administrator Markit Group Ltd.
The index contracts from banks including Goldman Sachs Group Inc. and Deutsche Bank AG may provide benchmarks for a wider range of debt that has contributed to more than $335 billion in writedowns at financial firms. The contracts also may boost trading in similar bonds by making it easier for investors and traders to hedge what they own, according to Barclays Capital.
Re: 404 Not Found produc...
Blood in the waters (still) | 06.05.08 - 12:46 pm | #
My last take on this (within the next several minutes) is that the subprime toxic waste has been brought to The Fed Alter and repackaged into derivatives, also known as CDS, like ABX.HE.PENAAA , which are like CDOs in a new plain paper bag, and just as Moody's, et al downgrade MBIA, et al, the toxic waste which would have melted them, is now substituted for this Fed blessed, rating agency blessed
ABX.HE.PENAAA stuff. These types of derivatives are the lifeline and as repackaged, re-engineered structures they probably have been built to reduce some stress, but will the buyers really buy this shit, or will The Fed (my bet) end up holding a bigger bag of shit?
Until credit securitisation in all its forms is stopped, asset inflation will continue. The hedge fund/stock market outlet is about the only place it has to go now. Very like the Japanese bubble in many respects.
While we believe the ABX provides insight into the U.S. residential subprime mortgage market, we think its indices provide only limited insight into class-level creditworthiness among AAA rated U.S. RMBS, said credit analyst Andrew Giudici, a director in Standard & Poors U.S. RMBS surveillance
group.
The AAA tranches that were included in the original ABX indices were the last-pay AAA bonds in their respective deals, which are relatively more exposed to losses than AAA classes with a priority claim on cash flow.
Giudici and the reports other authors argue the AAA classes share equally in any losses on a pro rata basis once credit enhancement is exhausted, structural subordination does exist in the form of payment priority and that subordination often serves to protect senior-most bondholders.
Typically, all principal prepayments are initially directed to pay down the first AAA class until it is paid off in full. Once that class is retired, all future principal is directed to repay the next class in sequential order (performance triggers may temporarily alter this payment priority, but well avoid more complex issues here for now).
As prepayments and losses build over the life of a transaction, the classes with an early claim on principal repay, Giudici said. Longer-dated AAA classes remain outstanding as losses build and reduce available credit enhancement. As mortgage pools season, prepayment and loss trends provide insight into relative credit quality among all classes, including those rated AAA.
S&Ps research comes on the heels of a very recent introduction of the ABX.HE.PENAAA tranche sub-index, or the penultimate AAA sub-index, which references AAA-rated bonds that are second to last in principal distribution priority.
Its worth noting that the 2007 roll of both new penultimate sub-indexes the ABX-HE-PENAAA 07-1 and ABX-HE-PENAAA 07-2 settled at all-time lows Friday. The second 2007 series closed at $66.92, according to data provided by MarkIt, which administers the ABX index.
Markit Group is adding a new penultimate sub-index to the beaten up ABX to increase liquidity in the asset-backed market proxy. The idea behind the addition is to bring more price discovery to paper that is seeing secondary market interest right now, according to an official at Markit.
The new AAA index will be added to all four vintages on May 14 and will reference a pool of AAA bonds that are second in line to get paid principal from their respective ABS deals. Previously the ABX only referenced the AAA class of bonds directly below the penultimate class in payment priority.
These bonds are also shorter in duration than other classes in the ABX and some bonds issued in 2006 are starting to come due because of faster amortization rates, according to an ABX trader. Most of the AAA bonds currently in the ABX are five-year and the new additions are about three-year, the trader said.
Another ABX trader noted that most of these new bonds are money good right now in that principal is coming due. Investors are looking to sell protection on these classes to dealers that have to hedge these bonds for mark-to-market declines in value.
The decision to add this new slice was a majority decision by dealers, according to the Markit official and dealers also chose the penultimate name.
Is it just me, or does anyone else see the humour in the whole ratings system starting at AAA, AA, etc.. instead of A, B, C? It's like being downgraded from "Fantastic" to "Super". Or fast food places only having lrg, x-lrg & jumbo, instead of sml, med, lrg.
Isn't so nice that the SPX buyer knows the coming news so that they inflate upwards to soften the blow?
This is about 2 year's late.....
Ciao
MS
Wheeeeeeeee!
The timing is impeccable. Wait for some good news and when the market is up a couple of percent, then drop the bomb that basically only acknowledges what everyone knew was a complete detachment from reality. And with the downgrade, it's still not close to right, since these turds are BKs walking.
Buy Buy Buy! The worst is behind us!
I have to tell you I saw this story on your blog before Bloomberg or Reuters, so good work even if you missed the A.
It is sure getting interesting. These are truly interesting times. So, what's next?
It's interesting sort of like tennis is interesting. Lots of rack(qu)ets involved.
At least S&P beats Moody's to it...
you should all be happy they're using our taxpayer money to stick save the stock mkt.
It is sure getting interesting. These are truly interesting times. So, what's next?
Just some guesses,
BoA renegotiating with Countrywide.
Wachovia cutting its dividend to 1 penny and announcing large writeoff on Golden West loans.
Downey or FirstFed or BankUnited or Corus taken over by regulators.
BBB would still be too high.
Holy prolific blogging, CR!
That's 10 posts already today, if you include the ones you posted at midnight and 1:30 AM.
When do you sleep, anyway?
We appreciate it! (But we miss Tanta, hope she's back soon).
It's like when they give C's to students at Ivy League schools. It's essentially a failing grade. But some of the students don't ever figure it out. One in particular comes to mind. Still getting F's to this day.
so the add on downgrades of all the wrapped debt insured by these guys should follow soon right?
I feel dizzy, jubilant, my pants are wet, my hands are numb, my lunch is cold, my water just broke, my skin is tingling, my, oh my... very euphoric!!
Re: IMHO, all else being equal, we have been told by that a $1,000 increase in the price of a home will generate $20 to $70 of extra spending -- thus with every decrease in home price of $1000, the wealth effect and impact on a homeowner will be the equivalent of taking a 4.5% pay cut this year or between $20 to $70 per household -- which needs to be added to inflation factors of about 5% (oh yah exclude oil and food inflation) and thus, on average IMHO, the average population/homeowner will be down about 15% or more by the end of 2008 (in terms of wealth effect).
Ame
What are the implications of this now?
Pension funds will have to sell their debt instruments that are currently insured by these guys right?
Forcing Mark-to-Market... and all the fun that comes with that?
Does anyone want to give us the crystal clear ramifications?
OT: Top Air Force officials are force to resign, and oil shoots up. Hmmmm....
IT - don't you understand this racket yet? Month's ago, if this were to occur, it would have been a disaster. So they talk of the possibility, there is upheaval, everyone gets time to figure out how to prepare for it when it does happen, and then when it does, it is largely a non-event. You can pretty much ascribe this to all financial news that involves any sort of rating, govt involvement, etc.
its not a non event
patience
this is big
I thought monolines can't get any new business unless they're AAA. Which means they're goners, along with the bonds they insure. Add the whole thing with the pension funds, and this looks terrible.
And the market is still up.
So when they are sure that those non-AAA papers are defintely in Fed's hand, then they downgrade the insurers. Real classy.
So when they are sure that those non-AAA papers are defintely in Fed's hand, then they downgrade the insurers. Real classy.
jin | 06.05.08 - 3:04 pm | #
Jim, if that is true, we just have to wait 28 days until that paper has to be swapped out of the fed.
I can't wait to see what MBI tries to do with the $900M now.
Unrelated, I think Tank makes a good point.
Dot connectors
Was it Rich (?) months ago who noted in these pages that what became known as the Plunge Protection Team was propping up the market
UNTIL
the "Big Boys" got all their SHORT positions in a row and then the market would drop like an anvil?
What was the prediction DOW 6,000, 7,000? Like 2001 level, dropped from an 11,000 plus high in March 2000 ?
But until then this yo-yo market
is what we have seen? Many have called this a manipulated securities market and many like myself have never felt less secure with Wall Street. it may take years for trust to be restored vis a vis my money and their having any part of it.
Warren Buffet is smiling as this is the nail in the coffin of his competitors.
C Mack - my trust in them is probably gone forever. It is almost impossible to imagine a world where it could return.
Indeed, this should help Buffet, but his monoline only insures (relatively) high quality stuff (munis), and not all the other garbage.
Complete this sentence to the tune of Sgt. Pepper..
"it was 75 year's ago today......
The Gov't told us all how we'd play....
Feel free to add...
Ciao
MS
"it was 75 year's ago today......
The Gov't told us all how we'd play...."
We've been going deeper into debt
But no one's taken 'way the punchbowl yet..."
Market rallying...wonder why? Perhaps the fact that the market isn't crashing as a result of this downgrade means that the news was already priced in and we've reached the bottom.
Such a joke. This house of cards will fall. Market manipulators will hold the bag in the end. Die you WS scum!
Credit rating downgrades AND oil shoots up! I've never seen a stronger buy signal in my life. BUY BUY BUY!
so may I regurgiate to you,
Alan, Ben, Henry and of others quite a few,
Lt. W's Genius Kool-aid Drinking Band
and so o
Can't wait for the MBIA statement bemoaning this "unnecessary" action.
Thinking over 200 when all is said in done
Hilarious. Both Ambac and MBIA are up. Must be good news?
ABK up 4% on the news. Guess the market was pricing in a bigger downgrade!
My balls itch.
Jay, that's pretty funny. But seriously, just watch, they'll downgrade it maybe one more step, but the final downgrade to BBB will come only the day AFTER they are starting bankruptcy proceedings.
Oh man... I'm not diggin' DUG no more.
So, what's next?
why, bank failure Friday .. of course.
Integrity Bank (Staples, MN) may have been the under-card warmup event.
Market rallying...wonder why?
Err... did the Bank of Japan and the Federal Reserve suddenly raise interest rates?
If not, then all the trading algorithms at these hedge funds are going to keep doing the same thing:
Borrow and buy. Borrow and buy. Borrow and buy...
Anything besides the availability of credit to these funds and irrelevant.
In times when it seems the world has gone bat shit freekin' crazy, it's wise to question whether it might be you - and not the world - who has gone 'round the bend. After reading the comments here, I can say with assurance, it ain't me.
Insane shit goin' on out there.
It's clear that since mid March, a liquidity faucet has been turned on for the express purpose of priming the pump of U.S. stock market indexes.
The U.S. is the world's weakest economy. Yet, European markets have already topped out and turned down while the U.S. keeps flying.
There was a specific purpose in using speculative leverage to goose the markets at this particular time, and I agree that it was an orchestrated, anticipated event. There's also an underlying reason oil has been so strong and volatile, and we'll soon probably find out.
It's interesting that there is only enough money and manipulators to goose the U.S. market, not Europe, too. Eventually markets return to equilibrium due to arbitrageurs looking for relative value. You can't prop up $50 trillion of global equity market value artificially with speculative leverge for very long.
I think we've reached a point where speculative leverage has grown greater than at any time in U.S. market history. Trailing TTM of the Russell 2000 Index is fast approaching 90, which is higher than the NASDAQ was before dot.bomb.
I had a source tell me today that for most U.S. small-cap companies, ALL traditional sources of capital have been completely shut off, including stock market, bond market, bank loans and credit lines. The denial of credit to small companies may be unprecedented.
Primary dealers submitted $26.9 billion of bids accepted by the Federal Reserve for the $50 billion of Treasuries offered on Thursday in the Fed's Term Securities Lending Facility (TSLF) auction.
Fed accepts $26.9 bln bids at $50 bln TSLF auction
| Reuters
Trash for treasuries market still humming along.
Nymex RBOB Gasoline Future $333.30\t +13.79 cents +4.32% 14:38(delayed- actually higher)
Oh, I get it! When gasoline rallies the most ever in one day that means Wal-stco will make higher nominal profits. The hyperinflationists were right!
ac said: "Anything besides the availability of credit to these funds and irrelevant."
Yes. The credit expansion will continue until until it's finally forced to stop, which can be quite a while after it should prudently stop. That applies to consumers as well, of course.
I don't think bears get this, even the smart ones.
Sebastia
"OT: Top Air Force officials are force to resign, and oil shoots up. Hmmmm...."
Maybe they don't want to play in the next "War to Keep Up the Price of Oil" (Iran) - could that be it?
So what you're saying Rich, is that you too have been taking a hard look at TWM lately...perhaps? Id say it is almost ripe for the picking. Im glad I held off last week though...must...show...a...bit...more.... patience.....ugh.
Market is up - Seb rears head. Gee, that's almost as shocking as the MBIA downgrade.
What does it mean when there's only $26.9 billion in TSLF bids with $50 billion available? I thought that in previous auctions the bids exceeded the amount available.
Others already wrote these lyrics above
"It was 75 year's ago today......
The Gov't told us all how we'd play...."
We've been going deeper into debt
But no one's taken 'way the punchbowl yet..."
I'd add:
We're Ben and Alan's massive central bank,
We hope you have enjoyed the show!
We're Ben and Alan's not-too-passive massive central bank,
We couldn't keep inflation low!
(bum bum bum bum)
Ben and Alan's massive,
Ben and Alan's massive
Ben and Alan's massive
Cen-tral bank!
All that talk about Fitch being wrong, and MBIA asking them to stop rating them. Fitch looks like geniuses here.
So what you're saying Rich, is that you too have been taking a hard look at TWM lately...perhaps? Id say it is almost ripe for the picking. Im glad I held off last week though...must...show...a...bit...more.... patience.....ugh.
Geoff,
Yes, I bought some more TWM today. I sold half of what I had right near the top back in late January. But then I got back in way too soon and the last couple of months have been rough. Long-term, I'm very bullish on TWM.
I do not see any positive earnings catalyst for small-caps for at least two years. I think at least 20% of the 2,000 companies will not survive in their present form, due mainly to lack of access to capital.
I think we will not understand this til Bizzaro reports on market conditions.
Last ditch, desperation short squeeze.
I thought monolines can't get any new business unless they're AAA.
They could still insure munis, assuming that someone is willing to pay to have their debt rating boosted to AA (or AA-). Yeah, I'd say they're dead men walking.
I disagree. It's usually not the denial of credit that starts the leveraged pile cascading downward. It's some outlier event like war, weather, terrorist, company failure, etc.
And the difference between this credit melt-up and all others is that this one is being orchestrated by policymakers. A lot of those policymakers don't have much future left in power, and everybody knows it.
Anything could trigger deleveraging. About all you need to know is that at least half the money propping up the world's equity markets right now is borrowed.
I think we will see the mother of all margin calls comming soon.
Why isn't everyone happy?
I suppose all the speculation about panic selling by pension funds will now either happen or not.
My bet is not.
This deal has been months in the making, so this is a plan with a strategy and the game is afoot me thinks.
IMHO, you have a coordinated effort to have placed pawns in position at The Fed Window and that this model has been played thousands of times and the "market" has been warned for 6 months and The Fed has provided a bunker for the survivors.
Yet, how does this play out with pension funds and all those hundreds of thousands of puzzle pieces scattered about the playing field, which may be melted by some little kid with a blow torch?
I assume that this is a matter of segmentation, where the solution will be spun around like cream rising to the top for butter, then the rest of the particulate waste being added to chocolate bars as milk fat (filler), which is a way to re-package waste into something that the public will buy into
Sebastian writes:
ac said: "Anything besides the availability of credit to these funds and irrelevant."
Yes. The credit expansion will continue until until it's finally forced to stop, which can be quite a while after it should prudently stop. That applies to consumers as well, of course.
I don't think bears get this, even the smart ones.
Nice try Sebasstion. You've said this is a healthy, vibrant economy. Don't try and change your tune that you're playing the liquidy event. You've been screaming "sound fundamentals" for over a year. Stick to your guns, douche.
Oh, pardon me, it was right there in plain English:
"diminished public finance"
This is just setting the stage for private non-disclosed covenants or government bail-out-like Bear Stearns Helping invisible hand shakes...
This is making me mad, so I just turned off my screen. Even MBI is up. Something is proping up this market, or its a bull trap.
Save us Bizarro-man!
Moodys could be right?
Just noticed the rally. W.T.F? Walmart sales are up.........Buy..Buy..Buy
More butter please.......
Re: "diminished public finance"
That can also be translated to say: "Too Fuc_ing Big To Fail"
This corrupt little crap racket should be shut down by DOJ, but why would the mafia close down the illusion of justice or law, after all this is American Mafia, not The KGB Russian mafia (I think).
Hey Canuck,
Gasoline up 14 cents today.
Markets up almost 2% today. Wow.
This reminds me of the rallies we always have before a "suprise" fed action. But WTF is there left for the fed to do???
I bet we will find out after the market closes.
The credit expansion has stopped in its tracks, for 90% of U.S. consumers and companies. They can't get more financing on reasonable terms, unless they are blue-chip in credit and provide collateral. This is particular true for small companies and small business. Try being an entrepeneur in today's market who needs capital.
Where it hasn't stopped is at the highest policy-making monetary levels. And a large amount of the credit being created at that level is going into speculative investments. I agree -- it sets the stage for the mother of all margin calls, or for a panic unwind when a negative catalyst occurs.
Ouch. My ass hurts.
Yes saw the sign's at the station. But my oil interest's cover my back on that one. Oh and oil up $5.50 yaaaaaa....
More butter please.........
Wake up and get a clue! Here is a link to mapquest which has gas prices from $3.47 to $5.30. These are like ocean weather buoys that are tracking the hyper-inflation storm. All you need to do is go look at California and Arizona and think ahead to those "micro" economies which have record foreclosures, then add in cost of living impacts and then plan ahead on decreased economic activity. This is like watching Katrina in the Gulf Of Mexico churning away. Some people are filling up the car and making plans to get organized and prepare, while the vast majority are looking for parties and planning on BBQ's, as if reality belongs somewhere else......this is fuc-ing retarded (again and again)!!
Gas Prices - Find The Lowest Gas Prices Near You at Mapquest! Including BioDiesel and E85 stations.
BBB is the new AAA. Everything is good again.
Wow, what a day. Apparently we have another long, hot summer to look forward to, just like last year.
"The credit expansion has stopped in its tracks, for 90% of U.S. consumers and companies."
90%? Just a bit of hyperbole, right?
It was the jobs and retail reports that made stocks go up according to MSNBC. Oh and they would know, LOL!!!
It is probably some thing under the radar the Fed is going to announce.
Let's see oil up $5 and the stock market up 2%. Sounds like a bailout in progress.
Bubbles building in financial markets: billionaire Soros
CBC News - Money - Bubbles building in financial markets: billionaire Soros
DB: So what will replace the United States and its currency as the dominant force?
GS: I think that the dollar is probably still, will emerge as the most widely used currency but the United State will have to abide by the limitations that are imposed on it by the willingness of the rest of the world to hold dollar reserves. So it constrains the ability of the Fed, for instance, to lower interest rates. That is also what was behind the Fed chairman's remarks yesterday: that if you kept lowering interest rates beyond this, the dollar would suffer further decline, so you can't go anywhere in that direction.
This is my take:
Today's real story is the bank consortium's bailout of ResCap
FT.com / UK - GMAC and ResCap secure $60bn
Observe that this prevented a payout on CDS. The banks have found a way to duct tape the CDS market togother ... for how long is the question? And do they have a plan for when they run out of duct tape?
BTW, does anyone know if bank cooperation ever falls afoul of antitrust regulations?
"BTW, does anyone know if bank cooperation ever falls afoul of antitrust regulations?"
Enforcement- or not- of those regulations is essentially political.
Can anyone explain what happened to today's markets?
Crude up nearly 6, markets up 200 this despite the fact that the dollar weakened and precious metals , namely gold dropped too.
What gives?!
Short $
Hey, Thinkinh Hard:
Here is the duct tape:
Re: "Observe that this prevented a payout on CDS. The banks have found a way to duct tape the CDS market togother ... for how long is the question? And do they have a plan for when they run out of duct tape?"
Re: (I posted this this morning) Blood in the waters (still) writes:
The ABX.HE.PENAAA tied to bonds from the first half of 2007, which requires the same 0.18 percentage point of annual protection payments as the existing ABX.HE.AAA, opened at a mid- price of 65.5, according to a note to clients today from Lehman. The index closed at 67.78, according to Markit.
The ABX contracts trading for the first time today are tied to subprime bonds that are a class one step higher than those in existing indexes, according to administrator Markit Group Ltd.
The index contracts from banks including Goldman Sachs Group Inc. and Deutsche Bank AG may provide benchmarks for a wider range of debt that has contributed to more than $335 billion in writedowns at financial firms. The contracts also may boost trading in similar bonds by making it easier for investors and traders to hedge what they own, according to Barclays Capital.
Re: 404 Not Found produc...
Blood in the waters (still) | 06.05.08 - 12:46 pm | #
OT -- for Ubernerds, the Senate housing bailout and GSE "reform" bill is now available to the public.
http://banking.senate.gov/public/_files/FinalGSEBilll.pdf
Why is this good? Downgrades less than expected?
ote that while gold was down, almost all of the miners were up.
My last take on this (within the next several minutes) is that the subprime toxic waste has been brought to The Fed Alter and repackaged into derivatives, also known as CDS, like ABX.HE.PENAAA , which are like CDOs in a new plain paper bag, and just as Moody's, et al downgrade MBIA, et al, the toxic waste which would have melted them, is now substituted for this Fed blessed, rating agency blessed
ABX.HE.PENAAA stuff. These types of derivatives are the lifeline and as repackaged, re-engineered structures they probably have been built to reduce some stress, but will the buyers really buy this shit, or will The Fed (my bet) end up holding a bigger bag of shit?
Yes!
Thinking hard: "The banks have found a way to duct tape the CDS market togother"
That's awfully expensive duct tape. To be used sparsely!
Here's some more fuel for the fire
4:45[PMI] Fitch downgrades PMI Mortgage Insurance to 'AA-' from 'AA'
4:44[MTG] Fitch cuts MGIC Investment to 'BBB+' from 'A
I guess today was a perfect example of sell the rumor buy the fact...
At the wholesale, interbank level, credit has been, and still is, contracting in a big way, and is increasingly becoming evident in the real economy.
Thinking Hard, thanks for the link.
More than 50 banks! Everyone with some counterparty risk, I presume.
They are so desperate already, I wonder how many leaks in the dyke they can fix?
imho
Until credit securitisation in all its forms is stopped, asset inflation will continue. The hedge fund/stock market outlet is about the only place it has to go now. Very like the Japanese bubble in many respects.
While we believe the ABX provides insight into the U.S. residential subprime mortgage market, we think its indices provide only limited insight into class-level creditworthiness among AAA rated U.S. RMBS, said credit analyst Andrew Giudici, a director in Standard & Poors U.S. RMBS surveillance
group.
The AAA tranches that were included in the original ABX indices were the last-pay AAA bonds in their respective deals, which are relatively more exposed to losses than AAA classes with a priority claim on cash flow.
Giudici and the reports other authors argue the AAA classes share equally in any losses on a pro rata basis once credit enhancement is exhausted, structural subordination does exist in the form of payment priority and that subordination often serves to protect senior-most bondholders.
Typically, all principal prepayments are initially directed to pay down the first AAA class until it is paid off in full. Once that class is retired, all future principal is directed to repay the next class in sequential order (performance triggers may temporarily alter this payment priority, but well avoid more complex issues here for now).
As prepayments and losses build over the life of a transaction, the classes with an early claim on principal repay, Giudici said. Longer-dated AAA classes remain outstanding as losses build and reduce available credit enhancement. As mortgage pools season, prepayment and loss trends provide insight into relative credit quality among all classes, including those rated AAA.
S&Ps research comes on the heels of a very recent introduction of the ABX.HE.PENAAA tranche sub-index, or the penultimate AAA sub-index, which references AAA-rated bonds that are second to last in principal distribution priority.
Its worth noting that the 2007 roll of both new penultimate sub-indexes the ABX-HE-PENAAA 07-1 and ABX-HE-PENAAA 07-2 settled at all-time lows Friday. The second 2007 series closed at $66.92, according to data provided by MarkIt, which administers the ABX index.
Markit Group is adding a new penultimate sub-index to the beaten up ABX to increase liquidity in the asset-backed market proxy. The idea behind the addition is to bring more price discovery to paper that is seeing secondary market interest right now, according to an official at Markit.
The new AAA index will be added to all four vintages on May 14 and will reference a pool of AAA bonds that are second in line to get paid principal from their respective ABS deals. Previously the ABX only referenced the AAA class of bonds directly below the penultimate class in payment priority.
These bonds are also shorter in duration than other classes in the ABX and some bonds issued in 2006 are starting to come due because of faster amortization rates, according to an ABX trader. Most of the AAA bonds currently in the ABX are five-year and the new additions are about three-year, the trader said.
Another ABX trader noted that most of these new bonds are money good right now in that principal is coming due. Investors are looking to sell protection on these classes to dealers that have to hedge these bonds for mark-to-market declines in value.
The decision to add this new slice was a majority decision by dealers, according to the Markit official and dealers also chose the penultimate name.
Derivatives Week
Is it just me, or does anyone else see the humour in the whole ratings system starting at AAA, AA, etc.. instead of A, B, C? It's like being downgraded from "Fantastic" to "Super". Or fast food places only having lrg, x-lrg & jumbo, instead of sml, med, lrg.