- LEH raised $3b in preferred stock offering today
- WB sold $3b stock in January
- BAC sold $12b stock in January
- UBS may write down $11b after $17b last quarter $15.6b from Singapore investors
Will ask investors for approval to raise $16b
- MER may write down $4.5b in CDO writedowns $19b last quarter Sold $11.6b in securities
- JPM may write down $2.5b
Monday, March 31, 2008
Saturday, March 29, 2008
Daily Potpourri
- German watchdog eyes $600b in losses from banks
- BAC, Citigroup, WB, WFC may be forced to cut dividend
- GS estimates total $460b write-downs. We have seen upto $120b till now. $340b more to come. It may take more than 2 quarters for that to come off completely.
- WB sold $3b stock in January
- BAC sold $12b stock in January
- UBS may write down $11b after $17b last quarter $15.6b from Singapore investors Will ask investors for approval to raise $16b
- MER may write down $4.5b in CDO writedowns $19b last quarter Sold $11.6b in securities
- JPM may write down $2.5b
Since November Wall Street banks have raised $81b from various places.
- Japanese have started to sell-off overseas assets. It may be an indication of what is to come on Wall Street in the coming months.
- Wall Street cheered Lehman's earnings, but there are questions about its balance sheet.
- Citi analyst says firm has "ample liquidity." Isn't it ironic?
- Too much complacency for a market low. This is one of the best articles I read today. And here is a quote from it that puts 65-years of market experience in perspective -
“Historically, I have found that when people are still looking across the valley to the recovery, then we haven't had the worst of the bear market yet. It's when they stop looking over the valley and stare into the abyss that you begin to have an appropriate level of fear needed to form a real lasting market bottom.”
- BAC, Citigroup, WB, WFC may be forced to cut dividend
- GS estimates total $460b write-downs. We have seen upto $120b till now. $340b more to come. It may take more than 2 quarters for that to come off completely.
- WB sold $3b stock in January
- BAC sold $12b stock in January
- UBS may write down $11b after $17b last quarter $15.6b from Singapore investors Will ask investors for approval to raise $16b
- MER may write down $4.5b in CDO writedowns $19b last quarter Sold $11.6b in securities
- JPM may write down $2.5b
Since November Wall Street banks have raised $81b from various places.
- Japanese have started to sell-off overseas assets. It may be an indication of what is to come on Wall Street in the coming months.
- Wall Street cheered Lehman's earnings, but there are questions about its balance sheet.
- Citi analyst says firm has "ample liquidity." Isn't it ironic?
- Too much complacency for a market low. This is one of the best articles I read today. And here is a quote from it that puts 65-years of market experience in perspective -
“Historically, I have found that when people are still looking across the valley to the recovery, then we haven't had the worst of the bear market yet. It's when they stop looking over the valley and stare into the abyss that you begin to have an appropriate level of fear needed to form a real lasting market bottom.”
Saturday, March 15, 2008
The Bear Saga
The Bear is bleeding and this time its bleeding hard. Citic doesn't want any part of the deal.
Citic learned its lesson the hard way from the Backstone deal. I think JPM also doesn't want any part of Bear either. Its mostly acting at the behest of the Fed to save some of its money tied to Bear. JPM wouldn't do the deal without the Fed's securing it. Will this save the Bear for another "28 days" before vultures start tearing off it in parts.
Looking at some of last week's events its hard not to relate them to the Bear. Bernanke asking the need for Banks to raise capital. The Fed turning its Term Auction Facility into a Permanent Auction Facility. S&P saying on Thursday the credit crisis is over. President Bush's address.
Telegraph is reporting Bear sucks to Wall street's fear. The article raises the possibility that the Bear crisis will trigger the situation like Great Depression of 1929. Will it ? For the fear to grapple over Wall street into a Great Depression what would be a good sign Dow falling of 1-2% or 30-50% ? Dow is still overpriced.
Within a week 2 people used the word "ridiculous" to save the stocks. 1. Dick Bove of Citigroup's stock price on the "rumors" that C's capital ratio was going to be 8.8%. I wonder why Citi didn't respond :-) 2. Alan Schwartz of the BSC liquidity position. And alas within one day half the capitalization is wiped out. Perfect example of what high leverage can do to you.
Few questions :-
LEH who is leveraged more than 30 obtained $2 billion credit line from 40 banks to stave off the current crisis. Is it sowing the seed for another day ? This article in the Telegraph reports that LEH swap spreads rocketed to 465 on Friday an indication to Bear like crisis? FRE and FNM bonds were in free fall on Monday indicating a wave of further bank write-downs.
Where is Goldman in all this mess? Is it busy "shorting" the banks and brokerages as it did to make record profits in Aug-Dec 2007?
Is there any reason why Bear will post its earnings report on the closing bell on Monday and Fed's cutting interest rates on Tuesday morning ? Will the Fed able to stop the sell-off, only if the past (actions) is any indication ;-)
Will the Fed intervention in the Bear crisis and further more crisis to come stave off the selling ? Unlikely, what it will do though is give sellers enough time "28 days" for more controlled sales than fire-sales ? Do you think most of the volatility in the marketplace in the last few months is caused by individual investors or the big institutions preforming "programmed sales" ?
S&P and Fitch were "quick" to downgrade Bear's ratings. Why don't they act so "quickly" w.r.t to Ambac and MBI ratings or are they waiting for Bear like sell-off. Hasn't the market given its verdict on these 2 already?
Are we going to see further write-downs in MER, UBS and C?
As children we have saved money in the "piggy-banks". Now I wonder why did we call them "piggy" banks. Did those cute-little-things represent the greed of the current brokerage/banking system? Was there a lesson there?
Why do I still see executive's pay in millions-and-millions of dollars? Is it the way of "responsible" managements "to contain the crisis"?
Are random events related (lol...) ? Is the storm that hit Atlanta an indication of what's to come on Wall Street next week ?
Citic learned its lesson the hard way from the Backstone deal. I think JPM also doesn't want any part of Bear either. Its mostly acting at the behest of the Fed to save some of its money tied to Bear. JPM wouldn't do the deal without the Fed's securing it. Will this save the Bear for another "28 days" before vultures start tearing off it in parts.
Looking at some of last week's events its hard not to relate them to the Bear. Bernanke asking the need for Banks to raise capital. The Fed turning its Term Auction Facility into a Permanent Auction Facility. S&P saying on Thursday the credit crisis is over. President Bush's address.
Telegraph is reporting Bear sucks to Wall street's fear. The article raises the possibility that the Bear crisis will trigger the situation like Great Depression of 1929. Will it ? For the fear to grapple over Wall street into a Great Depression what would be a good sign Dow falling of 1-2% or 30-50% ? Dow is still overpriced.
Within a week 2 people used the word "ridiculous" to save the stocks. 1. Dick Bove of Citigroup's stock price on the "rumors" that C's capital ratio was going to be 8.8%. I wonder why Citi didn't respond :-) 2. Alan Schwartz of the BSC liquidity position. And alas within one day half the capitalization is wiped out. Perfect example of what high leverage can do to you.
Few questions :-
LEH who is leveraged more than 30 obtained $2 billion credit line from 40 banks to stave off the current crisis. Is it sowing the seed for another day ? This article in the Telegraph reports that LEH swap spreads rocketed to 465 on Friday an indication to Bear like crisis? FRE and FNM bonds were in free fall on Monday indicating a wave of further bank write-downs.
Where is Goldman in all this mess? Is it busy "shorting" the banks and brokerages as it did to make record profits in Aug-Dec 2007?
Is there any reason why Bear will post its earnings report on the closing bell on Monday and Fed's cutting interest rates on Tuesday morning ? Will the Fed able to stop the sell-off, only if the past (actions) is any indication ;-)
Will the Fed intervention in the Bear crisis and further more crisis to come stave off the selling ? Unlikely, what it will do though is give sellers enough time "28 days" for more controlled sales than fire-sales ? Do you think most of the volatility in the marketplace in the last few months is caused by individual investors or the big institutions preforming "programmed sales" ?
S&P and Fitch were "quick" to downgrade Bear's ratings. Why don't they act so "quickly" w.r.t to Ambac and MBI ratings or are they waiting for Bear like sell-off. Hasn't the market given its verdict on these 2 already?
Are we going to see further write-downs in MER, UBS and C?
As children we have saved money in the "piggy-banks". Now I wonder why did we call them "piggy" banks. Did those cute-little-things represent the greed of the current brokerage/banking system? Was there a lesson there?
Why do I still see executive's pay in millions-and-millions of dollars? Is it the way of "responsible" managements "to contain the crisis"?
Are random events related (lol...) ? Is the storm that hit Atlanta an indication of what's to come on Wall Street next week ?
Monday, March 10, 2008
What goes down ain't Depression always...
One of my friends asked me my views on the current state of the markets...
Any advice for someone like who's baffled by the downturn in markets and spooked by recession fears? Is it gonna be recession at all or is it all fear mongering? Or as some people say, could this be a depression?
Let me say that I am no market expert or an economist e.g. one of the JPM lead economist who said we are in period of slow growth and growth will pick after second quarter. And one month later he says we are in deep recession. I can't see what changed in month that wasn't apparent in previous months. Anyway ...
So here are my views...
This is the best time to buy stocks (not any stocks though :-) ) Both the market environment and interest rate environment is helpful for stock buyers. Mostly the last 4-5 years were years of rapid growth and were periods of unsustainable growth for the very reasons revealed today like subprime, CDO, lot of use of leverage. So this is period of so called "correction" or self-healing. Basically people have realized the "true" value of assets they own. And this correction will cause the fall of a few more hedge funds and banks.
As for fear mongering, Nathan Rothschild made a fortune by "fear mongering" by calling the Battle of Waterloo. He made a fortune. So when people tell you that all hell is going break loose, think of Nathan Rothschild. These are the best times to make a fortune. You take calculated risk. You are right if your numbers are right. Don't speculate in stock market. Bet on your right numbers.
"Depression" ha ha... Look at the numbers coming out of most companies. They are still making profit... well most of them... Financial markets have made similar messes in the past (think LTCM, asian bank crisis) and this too will pass (w/o depression). Its going to be slow growth. Thats all for some time. Some hedge funds and banks will fail but that shouldn't drag the entire economy into a recession. It sure will create some panic and fire selling. When you are drowning (in this case hedge funds/banks) you want to create so much fear that the entire world is going to drown. So the entire world (reserve banks, governments etc.) rescue you instead of calling your bluff :-)
Any advice for someone like who's baffled by the downturn in markets and spooked by recession fears? Is it gonna be recession at all or is it all fear mongering? Or as some people say, could this be a depression?
Let me say that I am no market expert or an economist e.g. one of the JPM lead economist who said we are in period of slow growth and growth will pick after second quarter. And one month later he says we are in deep recession. I can't see what changed in month that wasn't apparent in previous months. Anyway ...
So here are my views...
This is the best time to buy stocks (not any stocks though :-) ) Both the market environment and interest rate environment is helpful for stock buyers. Mostly the last 4-5 years were years of rapid growth and were periods of unsustainable growth for the very reasons revealed today like subprime, CDO, lot of use of leverage. So this is period of so called "correction" or self-healing. Basically people have realized the "true" value of assets they own. And this correction will cause the fall of a few more hedge funds and banks.
As for fear mongering, Nathan Rothschild made a fortune by "fear mongering" by calling the Battle of Waterloo. He made a fortune. So when people tell you that all hell is going break loose, think of Nathan Rothschild. These are the best times to make a fortune. You take calculated risk. You are right if your numbers are right. Don't speculate in stock market. Bet on your right numbers.
"Depression" ha ha... Look at the numbers coming out of most companies. They are still making profit... well most of them... Financial markets have made similar messes in the past (think LTCM, asian bank crisis) and this too will pass (w/o depression). Its going to be slow growth. Thats all for some time. Some hedge funds and banks will fail but that shouldn't drag the entire economy into a recession. It sure will create some panic and fire selling. When you are drowning (in this case hedge funds/banks) you want to create so much fear that the entire world is going to drown. So the entire world (reserve banks, governments etc.) rescue you instead of calling your bluff :-)
Thursday, March 6, 2008
Tale of two cities: Ambac and Citi
Forbes is reporting "Ambac Is a Downtrend"
In a silly move Ambac is trying to raise capital in the markets upto $2.3b and similarly Citi is trying to sale its bonds for $3b which it is underwriting itself. Most investors are avoiding these 2 companies like these are land-mines that will explode if you step on them.
Also on CNBC (The prime hype-hoopla channel) Olstein says Citi shares would double in 2 years. Looks like its just a ploy to at least recover some of his 2x investments in 2007. They know they are holding a explosive waiting to go bust. Its amzing how people appear on CNBC at the "right time" to say the "right things". CNBC amazes and amuses me :-)
In a silly move Ambac is trying to raise capital in the markets upto $2.3b and similarly Citi is trying to sale its bonds for $3b which it is underwriting itself. Most investors are avoiding these 2 companies like these are land-mines that will explode if you step on them.
Also on CNBC (The prime hype-hoopla channel) Olstein says Citi shares would double in 2 years. Looks like its just a ploy to at least recover some of his 2x investments in 2007. They know they are holding a explosive waiting to go bust. Its amzing how people appear on CNBC at the "right time" to say the "right things". CNBC amazes and amuses me :-)
Wednesday, March 5, 2008
Should I go up, should I go down?
Analysts see breakup of UBS as more likely
http://www.iht.com/articles/2008/03/03/business/invest04.php
UBS is standing on a land mine that will explode if it doesn't raise more capital. Citigroup and UBS will need to split up into "bad bank" and "good bank". The "bad bank" businesses will eventually go down to be survived by the "good bank" business. These are the very likely scenarios for these banks given that both are already contemplating asset sales. Looks like most analyst are still sugar-coating the situation (compared to few brave ones, read Whitney) and buying the banks some time and in turn keeping the markets guessing. Wish more analysts were more forthright.
Bottom of subprime crisis not yet reached, study suggests
http://www.iht.com/articles/2008/03/03/business/rtrcol04.php
The study suggests much gloomier picture of the US economy. The banks face big loan losses - "far more dramatic" than most bank executives and ratings agencies have forecast, said Whitney of Oppenheimer. If her forecast/analysis were to come true ,like the last quarter forecast, it would cause a market crash or DOW would drop at least another 10-15%.
Mr. Market's whims
For last 2 days Mr. Market (read Dow) couldn't decide where should it exactly go. It was so confused. For today it decided to stay almost close to where it started? With the earnings season beginning to start and Ambac's future AAA rating in jeopardy (??) , will Mr. Market visit 11500?
Thought of the Day
If a man begins with certainties, he shall end in doubts;
But if he will be content to begin with doubts,
He shall end in certainties. -- [Francis Bacon 1561-1626]
Tuesday, March 4, 2008
Today :- Alice In Wonderland
Today's breakfast on fox news -
http://www.foxbusiness.com/markets/market-overview/article/citigroup-casts-shadow-wall-street-dow-tumbles-150_504851_42.html
Yesterday's Warren Buffet comments about US being in recession reminded me of Natahan Rothschild who made a fortune on the "Battle of Waterloo". Curious souls would like to read http://www.rumormillnews.com/cgi-bin/archive.cgi/noframes/read/39506. Its a classic example of how fear mongers could cost you fortune and make theirs while they are at it. Although Buffet's remarks, I truly believe, were more informative and not misleading at all.
UBS faces further writedowns -
http://www.bloomberg.com/apps/news?pid=20601085&sid=ahzF530iZp90&refer=europe
If you start salivating after reading "lowest since 2003", beware... its most likely to go down further. So wait and watch before you join the party. Its usually never too late to join the party...
There always some other party in town ...
Hedge fund sues WB/C -
http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-23521247.htm
From this story -
C - $1.66 1Q 2008 $3b write-down $1.05 for 2008 30,000 job cuts
WB - $2.50 for 2008
Reading http://www.businessweek.com/investor/content/mar2008/pi2008034_305072.htm?chan=top+news_top+news+index_businessweek+exclusives
Citi (that never sleeps will never sleep :-) )
- $1.66 loss for 1Q 2008
- $15b subprime $3b misc. troubled loans
- $1.05 for 2008
- 30,000 job cuts
Whitney thinks Citi may have to sell $100b in assets and with the recent credit crunch when the flood-gates open will it create LTCM like havoc in the market? Bye bye dividend.
Will Citi go to sleep forever? Looks unlikely. However it will and has ceased to be the largest bank in the world. Well the worst case scenario puts the Citi stock at $15.19.
Beware of what you wish for.
Before I read anything meaningful on security analysis, I would look at the charts on Google finance and wish that I could buy at this point 10 years ago and sell at the peak 10 years after. Things do look beautiful and intuitive in hindsight. I am sure some such theory exists and may even being practiced. Well now that such prices seem to have created in some securities, my views have completely changed on the technical (chart) analysis.
http://www.foxbusiness.com/markets/market-overview/article/citigroup-casts-shadow-wall-street-dow-tumbles-150_504851_42.html
Yesterday's Warren Buffet comments about US being in recession reminded me of Natahan Rothschild who made a fortune on the "Battle of Waterloo". Curious souls would like to read http://www.rumormillnews.com/cgi-bin/archive.cgi/noframes/read/39506. Its a classic example of how fear mongers could cost you fortune and make theirs while they are at it. Although Buffet's remarks, I truly believe, were more informative and not misleading at all.
UBS faces further writedowns -
http://www.bloomberg.com/apps/news?pid=20601085&sid=ahzF530iZp90&refer=europe
If you start salivating after reading "lowest since 2003", beware... its most likely to go down further. So wait and watch before you join the party. Its usually never too late to join the party...
There always some other party in town ...
Hedge fund sues WB/C -
http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-23521247.htm
From this story -
C - $1.66 1Q 2008 $3b write-down $1.05 for 2008 30,000 job cuts
WB - $2.50 for 2008
Reading http://www.businessweek.com/investor/content/mar2008/pi2008034_305072.htm?chan=top+news_top+news+index_businessweek+exclusives
Citi (that never sleeps will never sleep :-) )
- $1.66 loss for 1Q 2008
- $15b subprime $3b misc. troubled loans
- $1.05 for 2008
- 30,000 job cuts
Whitney thinks Citi may have to sell $100b in assets and with the recent credit crunch when the flood-gates open will it create LTCM like havoc in the market? Bye bye dividend.
Will Citi go to sleep forever? Looks unlikely. However it will and has ceased to be the largest bank in the world. Well the worst case scenario puts the Citi stock at $15.19.
Beware of what you wish for.
Before I read anything meaningful on security analysis, I would look at the charts on Google finance and wish that I could buy at this point 10 years ago and sell at the peak 10 years after. Things do look beautiful and intuitive in hindsight. I am sure some such theory exists and may even being practiced. Well now that such prices seem to have created in some securities, my views have completely changed on the technical (chart) analysis.
Sunday, March 2, 2008
S&P 5 star stock ADSK/AMT
(ADSK) The puzzle:-
A company who has not been able to grow its earnings more than 2% for the last 10 years
when bought at $30. Somehow its worth $51 using DCF and P/E according to S&P analyst.
For $30 to grow into $51 in next 10 years will need an annual growth rate of about 6%. At 2% it will grow to $36. How can a company which can grow its earnings 2% multiply the shareholder's equity by 6%? Maybe money does grow on trees. Well if a greater-fool is willing to pay you $51 for this stock, thats a different story.
Should I call it the folly of the S&P 5-star ratings ? Anyway, by definition it has no value if you are looking to be a long term investor since the 5-star rating is projection only for a year.
(AMT) a sure folly:-
A company who according to S&P analyst is 31X free cash flows. Somehow with positive free cash flows in the last 10 years the company managed to produce negative earnings most of the time :-) Its like $1 comes in and $1 goes out and to produce that $1 outflows of cash the company has to 20cents. Its amusing that this stock trades at $32 and is S&P % star.
A company who has not been able to grow its earnings more than 2% for the last 10 years
when bought at $30. Somehow its worth $51 using DCF and P/E according to S&P analyst.
For $30 to grow into $51 in next 10 years will need an annual growth rate of about 6%. At 2% it will grow to $36. How can a company which can grow its earnings 2% multiply the shareholder's equity by 6%? Maybe money does grow on trees. Well if a greater-fool is willing to pay you $51 for this stock, thats a different story.
Should I call it the folly of the S&P 5-star ratings ? Anyway, by definition it has no value if you are looking to be a long term investor since the 5-star rating is projection only for a year.
(AMT) a sure folly:-
A company who according to S&P analyst is 31X free cash flows. Somehow with positive free cash flows in the last 10 years the company managed to produce negative earnings most of the time :-) Its like $1 comes in and $1 goes out and to produce that $1 outflows of cash the company has to 20cents. Its amusing that this stock trades at $32 and is S&P % star.
Saturday, March 1, 2008
Banks should seek more capital
http://www.reuters.com/article/businessNews/idUSWBT00848420080228?feedType=RSS&feedName=businessNews
Banks should seek more capital. The obvious question comes to mind is why would banks need to seek more capital if the current ratios are adequate. In periods of expected weak economic growth there are going to be less opportunities to deploy such capital and in turn harder for the banks to pay high interests on such borrowed capital. So why seek more capital? Maybe there are more losses that are going to impair the banks capital ratios further. When Bernanke says it and doesn't explain why this is the only explanation I can find.
Banks should seek more capital. The obvious question comes to mind is why would banks need to seek more capital if the current ratios are adequate. In periods of expected weak economic growth there are going to be less opportunities to deploy such capital and in turn harder for the banks to pay high interests on such borrowed capital. So why seek more capital? Maybe there are more losses that are going to impair the banks capital ratios further. When Bernanke says it and doesn't explain why this is the only explanation I can find.
WYSIWYG err... VIWYGPIWYP
UBS -
US reference linked note $12b
Reference:- http://www.businessweek.com/investor/content/feb2008/pi20080229_909242.htm?campaign_id=yhoo
JPM -
Tanona's earnings estimate for $3.30. When in the past JPM had such earning's it traded as low as $20. A little perspective :-)
Reference:-
http://seekingalpha.com/article/66619-goldman-analyst-more-rough-waters-ahead-for-j-p-morgan
As I look at more and more balance sheets I find earnings not growing even at moderate 6% at most companies at today's prices. So even at today's prices most Wall Street firms look overvalued. Trailing P/Es, forward P/Es don't fancy me much either. Years going back to 2002 were the most prosperous years for most corporations. so you are most likely going to get blind sighted if you look at the balance sheet figures of those years. These are not years of sustainable financial growth for most companies. So beware what price you pay.
US reference linked note $12b
Reference:- http://www.businessweek.com/investor/content/feb2008/pi20080229_909242.htm?campaign_id=yhoo
JPM -
Tanona's earnings estimate for $3.30. When in the past JPM had such earning's it traded as low as $20. A little perspective :-)
Reference:-
http://seekingalpha.com/article/66619-goldman-analyst-more-rough-waters-ahead-for-j-p-morgan
As I look at more and more balance sheets I find earnings not growing even at moderate 6% at most companies at today's prices. So even at today's prices most Wall Street firms look overvalued. Trailing P/Es, forward P/Es don't fancy me much either. Years going back to 2002 were the most prosperous years for most corporations. so you are most likely going to get blind sighted if you look at the balance sheet figures of those years. These are not years of sustainable financial growth for most companies. So beware what price you pay.
Friday, February 29, 2008
Subprime CDOs. VIES Feb 29, 2008
NY Times :-
"Investors were also spooked by a report from UBS that predicted financial companies will face an additional $350 billion in losses tied to the subprime mortgage collapse. That figure would be on top of the approximately $160 billion in losses that have already been disclosed by financial firms worldwide."
Hmmm... Hope to meet the DOW at 11500 in coming months ;-)
"Investors were also spooked by a report from UBS that predicted financial companies will face an additional $350 billion in losses tied to the subprime mortgage collapse. That figure would be on top of the approximately $160 billion in losses that have already been disclosed by financial firms worldwide."
Hmmm... Hope to meet the DOW at 11500 in coming months ;-)
Sunday, February 24, 2008
NYtimes - Bond Insurer Plans a Split to Protect Ratings
Here is the link to New York Times story...
http://www.nytimes.com/2008/02/23/business/23bond.html
When Ambac is split up, should the credit rating agencies keep the AAA ratings on the CDO business. Absolutely not. Will this happen though? Absolutely not. It is well known that credit rating agencies generate business by providing "good" ratings to the loans and exotic instruments that banks invent. A little dishonesty can go a long way in this business.
The banks are infusing $3b to save almost $300b that Ambac insured. Isn't that a joke... Still the credit rating agencies will not downgrade the CDO business after Ambac is split... In fact the opposite will emerge and they will paint a rosy picture after they keep the AAA ratings on these instruments.
I also think SEC should investigate people on the news network channels. Friday's call on Ambac on CNBC looked like a rip-off of all the people who were shorting for some personal gains. There is no other explanation for this; entire days 200 point loss recovered in 1/2 an hour and that too on a Friday... difficult to chew ;-) And a breakup plan is reason to fear not cheer... Remember Buffet already made clear his intentions of cherry-picking the profitable muni business...
http://www.nytimes.com/2008/02/23/business/23bond.html
When Ambac is split up, should the credit rating agencies keep the AAA ratings on the CDO business. Absolutely not. Will this happen though? Absolutely not. It is well known that credit rating agencies generate business by providing "good" ratings to the loans and exotic instruments that banks invent. A little dishonesty can go a long way in this business.
The banks are infusing $3b to save almost $300b that Ambac insured. Isn't that a joke... Still the credit rating agencies will not downgrade the CDO business after Ambac is split... In fact the opposite will emerge and they will paint a rosy picture after they keep the AAA ratings on these instruments.
I also think SEC should investigate people on the news network channels. Friday's call on Ambac on CNBC looked like a rip-off of all the people who were shorting for some personal gains. There is no other explanation for this; entire days 200 point loss recovered in 1/2 an hour and that too on a Friday... difficult to chew ;-) And a breakup plan is reason to fear not cheer... Remember Buffet already made clear his intentions of cherry-picking the profitable muni business...
Two things in denial
There are two things in the state of denial : Hilary Clinton and the banks. Both are in deep s*&t ...
"Moral Hazard" - Taxpayers funded bailout of banks and bond insurers
New York Times is reporting this story:
http://www.nytimes.com/2008/02/23/business/23housing.html?_r=2&ref=business&pagewanted=all&oref=slogin
- $739 Billion loan-defaults in the next five years
- Bank of America wants Government to bail them out of these bad loans (Read you and me will pay through our noses for this bail-out)
There is definitely more to it than looks on the surface. The problem is more pronounced and these banks are capital-impaired and some will fail. So why not let them fail because they created this mess through greedy practices like predatory lending in the first place and such exotic debt instruments as CDOs. And these were off-balance sheet entities they have to carry on their balance sheet. And oh! they carry them on their balance sheet as "mark-to-market" (read we tell you is the fair value :-) Remember the Enron titans Andy Fastow, Jeff Schiling and Ken Lay who invented/used this term to give us the great "Enron"!!
Also why are bond insurers so afraid of being split up and why do banks want to rescue them?
Well, its simple really. The bond insurers split. Their muni bond business will be safe. However the business insuring CDOs etc will go to dogs and hence things will come crashing for the banks, because these "mark-to-market" CDOs on their balance sheets will be almost worthless. And this will cause market crash.
But should govt. rescue these guys with your and my money. Well I think not. Govt. should let some of these guys go to dogs. This will set a good precedent to the inventors of such exotic instruments as CDOs etc. And a govt. bailout is only going to be an incentive for inventing more exotic instruments and more asset bubbles.
http://www.nytimes.com/2008/02/23/business/23housing.html?_r=2&ref=business&pagewanted=all&oref=slogin
- $739 Billion loan-defaults in the next five years
- Bank of America wants Government to bail them out of these bad loans (Read you and me will pay through our noses for this bail-out)
There is definitely more to it than looks on the surface. The problem is more pronounced and these banks are capital-impaired and some will fail. So why not let them fail because they created this mess through greedy practices like predatory lending in the first place and such exotic debt instruments as CDOs. And these were off-balance sheet entities they have to carry on their balance sheet. And oh! they carry them on their balance sheet as "mark-to-market" (read we tell you is the fair value :-) Remember the Enron titans Andy Fastow, Jeff Schiling and Ken Lay who invented/used this term to give us the great "Enron"!!
Also why are bond insurers so afraid of being split up and why do banks want to rescue them?
Well, its simple really. The bond insurers split. Their muni bond business will be safe. However the business insuring CDOs etc will go to dogs and hence things will come crashing for the banks, because these "mark-to-market" CDOs on their balance sheets will be almost worthless. And this will cause market crash.
But should govt. rescue these guys with your and my money. Well I think not. Govt. should let some of these guys go to dogs. This will set a good precedent to the inventors of such exotic instruments as CDOs etc. And a govt. bailout is only going to be an incentive for inventing more exotic instruments and more asset bubbles.
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