also - MBIA and AMBAC share price tanked too. But did anyone see the DOW chart for today?
Sharp down at open
Straight back up
Down again but slower
Up again but slower
down slower
Plunge protection team in action? Twice? And then gave up?
Worse to follow tomorrow?
Full Version: Credit Derivative Meltdown In Progress
Pages: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47
QUOTE (SaintJay @ Jan 16 2008, 10:09 PM) 
also - MBIA and AMBAC share price tanked too. But did anyone see the DOW chart for today?
Sharp down at open
Straight back up
Down again but slower
Up again but slower
down slower
Plunge protection team in action? Twice? And then gave up?
Worse to follow tomorrow?
Sharp down at open
Straight back up
Down again but slower
Up again but slower
down slower
Plunge protection team in action? Twice? And then gave up?
Worse to follow tomorrow?
They seem no longer able to pull it up as usual.
Furthermore they are now concentrating on a bigger problem, the US dollar.
This is Operation Lockstep.
Look at the attacks on the price of gold. They want to correlate gold with the DOW Jones.
Look at the dollar, which is being supported by all central banks but in particular the ECB, so that all currencies go to hyperinflationary hell together.
I think this would an ideal time to be poor. You would have less to lose. Because I think there are going to be lots of losers in this.
Correct. There'll be no winners, only losers. The winners will be those who manage to lose the least.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Jan. 16 (Bloomberg) -- Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.
Ambac, the second-largest insurer of municipal and structured finance debt, fell the most ever on the New York Stock Exchange, extending a 76 percent decline from the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.
....
`Clock Ticking'
Ambac said the infusion of capital, which may include the sale of shares and convertible stock, will satisfy Fitch Ratings, which threatened to cut the company's AAA rating unless it raised $1 billion. The bond insurers are under scrutiny from Fitch, Moody's Investors Service and S&P to increase their capital after a slide in credit ratings of the debt they guarantee.
The loss of the AAA stamp of Ambac, MBIA, FGIC Corp. and other insurers would throw into doubt the ratings of $2.4 trillion of municipal and structured finance debt that the companies guarantee, potentially causing losses of as much as $200 billion, according to Bloomberg data. It would also cripple the insurers' ability to keep underwriting new bonds.
``The clock is ticking for all these companies,'' Robert Haines, an analyst with New York-based bond research firm CreditSights Inc., said in an interview before the announcement.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Jan. 16 (Bloomberg) -- MBIA Inc.'s surplus notes have tumbled as much as 12 percent since they were sold last week on concern that the world's largest bond insurer may need to tap investors for more money.
The AA rated debt fell as low as 88.5 cents on the dollar today, according to bond traders. That's the equivalent of a yield of 18 percent, data compiled by Bloomberg show. The notes were trading at 97.5 cents yesterday, according to Bloomberg data.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Jan. 16 (Bloomberg) -- Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.
Ambac, the second-largest insurer of municipal and structured finance debt, fell the most ever on the New York Stock Exchange, extending a 76 percent decline from the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.
....
`Clock Ticking'
Ambac said the infusion of capital, which may include the sale of shares and convertible stock, will satisfy Fitch Ratings, which threatened to cut the company's AAA rating unless it raised $1 billion. The bond insurers are under scrutiny from Fitch, Moody's Investors Service and S&P to increase their capital after a slide in credit ratings of the debt they guarantee.
The loss of the AAA stamp of Ambac, MBIA, FGIC Corp. and other insurers would throw into doubt the ratings of $2.4 trillion of municipal and structured finance debt that the companies guarantee, potentially causing losses of as much as $200 billion, according to Bloomberg data. It would also cripple the insurers' ability to keep underwriting new bonds.
``The clock is ticking for all these companies,'' Robert Haines, an analyst with New York-based bond research firm CreditSights Inc., said in an interview before the announcement.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Jan. 16 (Bloomberg) -- MBIA Inc.'s surplus notes have tumbled as much as 12 percent since they were sold last week on concern that the world's largest bond insurer may need to tap investors for more money.
The AA rated debt fell as low as 88.5 cents on the dollar today, according to bond traders. That's the equivalent of a yield of 18 percent, data compiled by Bloomberg show. The notes were trading at 97.5 cents yesterday, according to Bloomberg data.
THIS IS IT, RIGHT HERE AND RIGHT NOW. PROTECT YOURSELVES NOW.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
S&P Will Re-Examine Bond Insurers After Revising Assumptions
By Christine Richard
Jan. 16 (Bloomberg) -- Standard & Poor's plans to re-examine bond insurers including MBIA Inc. and Ambac Financial Group Inc. to see if the companies hold enough capital to protect their AAA credit ratings.
S&P, which completed a review of the bond insurers in December, will reassess its results based on new assumptions about the housing market announced yesterday, according to Mimi Barker, a spokeswoman for S&P in New York. The credit rating company plans to have the update completed within a week, Barker said.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
S&P Will Re-Examine Bond Insurers After Revising Assumptions
By Christine Richard
Jan. 16 (Bloomberg) -- Standard & Poor's plans to re-examine bond insurers including MBIA Inc. and Ambac Financial Group Inc. to see if the companies hold enough capital to protect their AAA credit ratings.
S&P, which completed a review of the bond insurers in December, will reassess its results based on new assumptions about the housing market announced yesterday, according to Mimi Barker, a spokeswoman for S&P in New York. The credit rating company plans to have the update completed within a week, Barker said.
OK CGNAO aka Resident Mushroom Cloud,
What do your two posts mean for HSBC's new Ireland-based CDO that was involved with MBIA's surplus notes?
p-o-p
What do your two posts mean for HSBC's new Ireland-based CDO that was involved with MBIA's surplus notes?
p-o-p
QUOTE (piece of paper @ Jan 16 2008, 10:55 PM)
OK CGNAO aka Resident Mushroom Cloud,
What do your two posts mean for HSBC's new Ireland-based CDO that was involved with MBIA's surplus notes?
p-o-p
What do your two posts mean for HSBC's new Ireland-based CDO that was involved with MBIA's surplus notes?
p-o-p
Snapshot of HSBC's CDO:
From jsmineset.com -
This is the script for the Formula:
1. Recession begins.
2. Central Banks seek to offset slowing of the economy by expansion of monetary policy.
3. Monetary inflation turns into price inflation with lower business activity.
This is the script for the Formula:
1. Recession begins.
2. Central Banks seek to offset slowing of the economy by expansion of monetary policy.
3. Monetary inflation turns into price inflation with lower business activity.
QUOTE (cgnao @ Jan 16 2008, 09:58 PM)
Snapshot of HSBC's CDO:
Image removed for load speed
Image removed for load speed
Will HSBC have provided a standby facility and/or a guarantee that is likely to result in them having to meet any of MBIA's undertakings if MBIA loses its AAA rating?
EDIT: Basically, who screwed who?
p-o-p
Cgnao, let me ask you - and I really enjoy your posting - what percentage of your assets are in ...
gold
silver
real estate - including your home(s)
gold or silver mining stocks
energy companies
agricultural companies
cash (which currencies0
bonds
other stocks
elsewhere ?
Forgive me if this is too personal, or if you have answered the question elsewhere, but I would like to know.
gold
silver
real estate - including your home(s)
gold or silver mining stocks
energy companies
agricultural companies
cash (which currencies0
bonds
other stocks
elsewhere ?
Forgive me if this is too personal, or if you have answered the question elsewhere, but I would like to know.
I get a funny feeling that libor will be headed north once again.
OK I think I have finally been pursueded on an inflationary outcome and I would like to buy `some` gold, do you trust e-gold and in particular BullionVault? If there is a more secure alternative please let me know.
On a slightly different point, How long do you genuinely think we have before this unravels enough to cause financial missery?
Regards,
Craig.
On a slightly different point, How long do you genuinely think we have before this unravels enough to cause financial missery?
Regards,
Craig.
QUOTE (warpig @ Jan 17 2008, 12:07 AM)
OK I think I have finally been pursueded on an inflationary outcome and I would like to buy `some` gold, do you trust e-gold and in particular BullionVault? If there is a more secure alternative please let me know.
On a slightly different point, How long do you genuinely think we have before this unravels enough to cause financial missery?
Regards,
Craig.
On a slightly different point, How long do you genuinely think we have before this unravels enough to cause financial missery?
Regards,
Craig.
Just buy physical gold and keep it safe.
My favourite source is
www.coininvestdirect.com
Doesn't owning physical gold present problems at the point you wish to sell it? i.e. doesn't the quality of the gold have to be re-evaluated after you take physical posession of it and before the point of sale?
Thanks for the link,
Craig.
Thanks for the link,
Craig.
QUOTE (narco @ Jan 17 2008, 12:18 AM)
Just buy physical gold and keep it safe.
My favourite source is
www.coininvestdirect.com
My favourite source is
www.coininvestdirect.com
QUOTE (warpig @ Jan 17 2008, 12:39 AM)
Doesn't owning physical gold present problems at the point you wish to sell it? i.e. doesn't the quality of the gold have to be re-evaluated after you take physical posession of it and before the point of sale?
Thanks for the link,
Craig.
Thanks for the link,
Craig.
Just buy recognised bullion coin (krugerrands, britannias, eagles, maples etc..) and you wont go wrong.
You will never ever experience a time when there is zero demand for gold.
Do not be fooled by the fact that the crash seems to be happening in slow-motion.
Soon the forced sales will begin and things will start moving disorderly at lightening speed, leaving you no time nor chance to protect yourselves.
Protect yourselves NOW, or regret failing to do so forever.
http://www.bloomberg.com/apps/news?pid=206...&refer=bond
Moody's, S&P Reviewing Bond Insurers as Losses Mount
Jan. 17 (Bloomberg) -- Moody's Investors Service and Standard & Poor's increased their scrutiny of bond insurers after losses on subprime-mortgage securities prompted Ambac Financial Group Inc. to report writedowns of $3.5 billion.
Ambac may lose its AAA credit rating after reporting larger losses than the company previously indicated, Moody's said in a statement yesterday. S&P is examining all bond insurers after increasing its predictions for losses on subprime mortgages.
Moody's and S&P are starting new reviews one month after affirming ratings on New York-based Ambac and MBIA Inc., the two largest bond insurers. Both companies slashed dividends and announced plans to raise $1 billion to shore up capital and retain their top rankings.
``No one knows when the end may be in sight, including the raters,'' said Richard Larkin, a municipal bond analyst at JB Hanauer & Co. in Parsippany, New Jersey. ``The rating agencies have lost as much credibility as the bond insurers. Every time you turn around they're changing their minds about what's going to happen in the subprime-mortgage market.''
The bond insurers came under review after they started guaranteeing securities linked to subprime mortgages that began plunging. Until last year, Ambac and MBIA had recorded annual profit increases for the past decade from their traditional business of insuring municipal bonds.
Shares Drop
Losing the AAA stamp would cripple the bond insurers' business and throw doubt on the ratings of $2.4 trillion of debt the industry guarantees, causing as much as $200 billion in losses, according to data compiled by Bloomberg.
Ambac, the second-biggest bond insurer, tumbled 39 percent on the New York Stock Exchange yesterday, and has lost 85 percent of its market value in the past year. MBIA fell almost 17 percent, bringing its decline to almost 73 percent.
Soon the forced sales will begin and things will start moving disorderly at lightening speed, leaving you no time nor chance to protect yourselves.
Protect yourselves NOW, or regret failing to do so forever.
http://www.bloomberg.com/apps/news?pid=206...&refer=bond
Moody's, S&P Reviewing Bond Insurers as Losses Mount
Jan. 17 (Bloomberg) -- Moody's Investors Service and Standard & Poor's increased their scrutiny of bond insurers after losses on subprime-mortgage securities prompted Ambac Financial Group Inc. to report writedowns of $3.5 billion.
Ambac may lose its AAA credit rating after reporting larger losses than the company previously indicated, Moody's said in a statement yesterday. S&P is examining all bond insurers after increasing its predictions for losses on subprime mortgages.
Moody's and S&P are starting new reviews one month after affirming ratings on New York-based Ambac and MBIA Inc., the two largest bond insurers. Both companies slashed dividends and announced plans to raise $1 billion to shore up capital and retain their top rankings.
``No one knows when the end may be in sight, including the raters,'' said Richard Larkin, a municipal bond analyst at JB Hanauer & Co. in Parsippany, New Jersey. ``The rating agencies have lost as much credibility as the bond insurers. Every time you turn around they're changing their minds about what's going to happen in the subprime-mortgage market.''
The bond insurers came under review after they started guaranteeing securities linked to subprime mortgages that began plunging. Until last year, Ambac and MBIA had recorded annual profit increases for the past decade from their traditional business of insuring municipal bonds.
Shares Drop
Losing the AAA stamp would cripple the bond insurers' business and throw doubt on the ratings of $2.4 trillion of debt the industry guarantees, causing as much as $200 billion in losses, according to data compiled by Bloomberg.
Ambac, the second-biggest bond insurer, tumbled 39 percent on the New York Stock Exchange yesterday, and has lost 85 percent of its market value in the past year. MBIA fell almost 17 percent, bringing its decline to almost 73 percent.
QUOTE (Frizzers @ Jan 16 2008, 11:27 PM)
Cgnao, let me ask you - and I really enjoy your posting - what percentage of your assets are in ...
gold
silver
real estate - including your home(s)
gold or silver mining stocks
energy companies
agricultural companies
cash (which currencies0
bonds
other stocks
elsewhere ?
Forgive me if this is too personal, or if you have answered the question elsewhere, but I would like to know.
gold
silver
real estate - including your home(s)
gold or silver mining stocks
energy companies
agricultural companies
cash (which currencies0
bonds
other stocks
elsewhere ?
Forgive me if this is too personal, or if you have answered the question elsewhere, but I would like to know.
As of yesterday
90% gold bullion in allocated, segregated and insured storage (Switzerland)
4% gold+silver bullion in goldmoney, used as a savings account
6% speculation funds, changes daily, mostly options. When I take profits, they are routed through to goldmoney
In addition and not included in the calculation
- a few gold sovereigns in my direct possession, which I hope I'll never need in order to get out of the country in an emergency.
- I owe a small amount of USD which I borrowed in 2006 and used to buy gold bullion. This is held and accounted for separately.
- No more than one grand in my current account. As soon as this is exceeded, I buy gold/silver through goldmoney. When I need cash, I sell some.
Hope this satisfies your curiosity.
Forgot to add, apart from the above I own no other assets and even though I could buy a mansion for cash with no problem, I live in a comfortable and spacious rented accomodation as I have done for the last 25 years, often switching countries.
QUOTE (cgnao @ Jan 17 2008, 12:49 PM)
I live in a comfortable and spacious rented accomodation as I have done for the last 25 years, often switching countries.
Does this mean that you are 25, or that you opted to STR in 1983?
OK thanks. Nevertheless, if you are selling gold in any form isn't the quality of the gold questioned once it leaves the vault, at the point of re-sale?
Whilst I am comfortable holding some gold, I would feel uncomfortable having a reasonable sum of gold in the house safe, my preference would be to store it elsewhere, i.e. a vault. Can anyone explain to a gold div like myself what my options are please?
Thanks,
Craig.
Whilst I am comfortable holding some gold, I would feel uncomfortable having a reasonable sum of gold in the house safe, my preference would be to store it elsewhere, i.e. a vault. Can anyone explain to a gold div like myself what my options are please?
Thanks,
Craig.
QUOTE (narco @ Jan 17 2008, 12:48 AM)
Just buy recognised bullion coin (krugerrands, britannias, eagles, maples etc..) and you wont go wrong.
You will never ever experience a time when there is zero demand for gold.
You will never ever experience a time when there is zero demand for gold.
Merril Lynch just discovered how derivative notional value becomes real value as the loser in the agreement default on its obligation.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Merrill Lynch Plans to Write Off ACA Bond Insurance
By Mark Pittman
Jan. 17 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, said it will write off $2.6 billion in default protection from bond insurers including ACA Capital Holdings Inc. because it's worthless.
....
``We are reserving against ACA dollar for dollar so it's 100 percent reserved,'' said John Thain, chief executive officer of New York-based Merrill Lynch, during a conference call today with analysts and journalists.
Merrill Lynch's writedowns demonstrate how a downgrade of bond insurer credit ratings can spread throughout financial markets. Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of securities.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Merrill Lynch Plans to Write Off ACA Bond Insurance
By Mark Pittman
Jan. 17 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, said it will write off $2.6 billion in default protection from bond insurers including ACA Capital Holdings Inc. because it's worthless.
....
``We are reserving against ACA dollar for dollar so it's 100 percent reserved,'' said John Thain, chief executive officer of New York-based Merrill Lynch, during a conference call today with analysts and journalists.
Merrill Lynch's writedowns demonstrate how a downgrade of bond insurer credit ratings can spread throughout financial markets. Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of securities.
Wait a minute.....have I got this right......it now costs $3.15 million upfront and $500,000 per year to insure $10,000,000 of debt for 5 years?
so....$5.65 million.....for $10,000,000 debt.........for 5 years.
MWHAAAAAA
Its so over. 100%. Guaranteed.
so....$5.65 million.....for $10,000,000 debt.........for 5 years.
MWHAAAAAA
Its so over. 100%. Guaranteed.
QUOTE (cgnao @ Jan 18 2008, 12:05 AM)
Merril Lynch just discovered how derivative notional value becomes real value as the loser in the agreement default on its obligation.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Merrill Lynch Plans to Write Off ACA Bond Insurance
By Mark Pittman
Jan. 17 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, said it will write off $2.6 billion in default protection from bond insurers including ACA Capital Holdings Inc. because it's worthless.
....
``We are reserving against ACA dollar for dollar so it's 100 percent reserved,'' said John Thain, chief executive officer of New York-based Merrill Lynch, during a conference call today with analysts and journalists.
Merrill Lynch's writedowns demonstrate how a downgrade of bond insurer credit ratings can spread throughout financial markets. Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of securities.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Merrill Lynch Plans to Write Off ACA Bond Insurance
By Mark Pittman
Jan. 17 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, said it will write off $2.6 billion in default protection from bond insurers including ACA Capital Holdings Inc. because it's worthless.
....
``We are reserving against ACA dollar for dollar so it's 100 percent reserved,'' said John Thain, chief executive officer of New York-based Merrill Lynch, during a conference call today with analysts and journalists.
Merrill Lynch's writedowns demonstrate how a downgrade of bond insurer credit ratings can spread throughout financial markets. Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of securities.
$500 trillion USD? Are you sure?
QUOTE (cgnao @ Jan 18 2008, 12:05 AM)
Merril Lynch just discovered how derivative notional value becomes real value as the loser in the agreement default on its obligation.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
This is a chain reaction that can't be halted. There is in excess of $500 trillion USD in derivatives out there waiting for the same fate.
Protect yourselves NOW.
Good stuff. Jim Sinclair would say 'told you so'.
Default=deflation, trillions of deflation when these insurers go down.
http://globaleconomicanalysis.blogspot.com...73-mbia-71.html[/size][size="4"]
QUOTE
Ambac Odds of Default 73%, MBIA 71%
The credit default swap (CDS) market shows increasing odds that Ambac (ABK)and MBIA (MBI) are headed for bankruptcy.
I raised the bankruptcy question earlier today in Death Blow For Ambac?
JP Morgan Model Posts The Odds
Bloomberg is reporting MBIA, Ambac Tumble, Default Risk Soars After Losses.
Credit-default swaps tied to MBIA's bonds soared 10 percentage points to 26 percent upfront and 5 percent a year, according to CMA Datavision in New York. That means it would cost $2.6 million initially and $500,000 a year to protect $10 million in MBIA bonds from default for five years.
The price implies that traders are pricing in a 71 percent chance that MBIA will default in the next five years, according to a JPMorgan Chase & Co. valuation model.
Contracts on Ambac, the second-biggest insurer, rose 12 percentage points to 27 percent upfront and 5 percent a year, prices from CMA Datavision in London show.
Ambac's implied chance of default is 73 percent, according to the JPMorgan data.
Ambac shareholder Evercore Asset Management LLC called on the bond insurer to accept a downgrade rather than follow through on its plan to raise capital.
"The company gambled its AAA rating and has now lost that bet," Evercore said in a letter to directors distributed in a PRNewswire statement today. "Attempting to buy back the AAA rating by giving away most of the company makes no sense."
Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of debt the industry guarantees, causing as much as $200 billion in losses, according to data compiled by Bloomberg.
Read that last sentence carefully. That is why Moody's, Fitch, and the S&P did not want to downgrade Ambac and MBIA. In the end, they will be forced to. But if Ambac and MBIA gambled and lost so did Evercore Asset Management in betting on Ambac.
Here is the letter from Evercore to Ambac.
To the Board of Directors of Ambac:
Evercore Asset Management, LLC (EAM) is a registered investment adviser with over $500 million in assets under management. We are long-term oriented, contrarian investors, with a typical holding period measured in years. We advise on more than 700,000 shares of Ambac on behalf of our clients. We wrote to you last month to express our opinion, as a co-owner of the company, on the undesirability of raising costly capital to preserve Ambac's triple-A rating.
We were extremely disappointed to hear yesterday's announcement that Ambac plans to raise additional equity capital. When we first wrote to you about this on December 21st, the company's stock was at $27 per share and we urged you not to contemplate the issuance of additional equity in order to preserve Ambac's triple-A rating. The notion of issuing equity with the stock now at a small fraction of that late December price is simply absurd. It is impossible for the value of future business to even come close to offsetting the dilution that will occur. Municipalities are wrapping their bonds at the lowest rates in years, and Berkshire Hathaway is entering the business. Even if these things were not happening, it would still be impossible for new business to be sufficiently profitable to justify raising new capital.
...
We remain willing to engage in discussions with you at your convenience.
Sincerely,
Andrew Moloff
Chief Investment Officer
Evercore Asset Management, LLC
About Evercore Asset Management
It's time for Evercore and investors in general to face reality. Those shares are never coming back regardless of what Ambac does or does not do.
The credit default swap (CDS) market shows increasing odds that Ambac (ABK)and MBIA (MBI) are headed for bankruptcy.
I raised the bankruptcy question earlier today in Death Blow For Ambac?
JP Morgan Model Posts The Odds
Bloomberg is reporting MBIA, Ambac Tumble, Default Risk Soars After Losses.
Credit-default swaps tied to MBIA's bonds soared 10 percentage points to 26 percent upfront and 5 percent a year, according to CMA Datavision in New York. That means it would cost $2.6 million initially and $500,000 a year to protect $10 million in MBIA bonds from default for five years.
The price implies that traders are pricing in a 71 percent chance that MBIA will default in the next five years, according to a JPMorgan Chase & Co. valuation model.
Contracts on Ambac, the second-biggest insurer, rose 12 percentage points to 27 percent upfront and 5 percent a year, prices from CMA Datavision in London show.
Ambac's implied chance of default is 73 percent, according to the JPMorgan data.
Ambac shareholder Evercore Asset Management LLC called on the bond insurer to accept a downgrade rather than follow through on its plan to raise capital.
"The company gambled its AAA rating and has now lost that bet," Evercore said in a letter to directors distributed in a PRNewswire statement today. "Attempting to buy back the AAA rating by giving away most of the company makes no sense."
Losing the AAA stamp would cripple the bond insurers and throw doubt on the ratings of $2.4 trillion of debt the industry guarantees, causing as much as $200 billion in losses, according to data compiled by Bloomberg.
Read that last sentence carefully. That is why Moody's, Fitch, and the S&P did not want to downgrade Ambac and MBIA. In the end, they will be forced to. But if Ambac and MBIA gambled and lost so did Evercore Asset Management in betting on Ambac.
Here is the letter from Evercore to Ambac.
To the Board of Directors of Ambac:
Evercore Asset Management, LLC (EAM) is a registered investment adviser with over $500 million in assets under management. We are long-term oriented, contrarian investors, with a typical holding period measured in years. We advise on more than 700,000 shares of Ambac on behalf of our clients. We wrote to you last month to express our opinion, as a co-owner of the company, on the undesirability of raising costly capital to preserve Ambac's triple-A rating.
We were extremely disappointed to hear yesterday's announcement that Ambac plans to raise additional equity capital. When we first wrote to you about this on December 21st, the company's stock was at $27 per share and we urged you not to contemplate the issuance of additional equity in order to preserve Ambac's triple-A rating. The notion of issuing equity with the stock now at a small fraction of that late December price is simply absurd. It is impossible for the value of future business to even come close to offsetting the dilution that will occur. Municipalities are wrapping their bonds at the lowest rates in years, and Berkshire Hathaway is entering the business. Even if these things were not happening, it would still be impossible for new business to be sufficiently profitable to justify raising new capital.
...
We remain willing to engage in discussions with you at your convenience.
Sincerely,
Andrew Moloff
Chief Investment Officer
Evercore Asset Management, LLC
About Evercore Asset Management
It's time for Evercore and investors in general to face reality. Those shares are never coming back regardless of what Ambac does or does not do.
http://globaleconomicanalysis.blogspot.com...73-mbia-71.html[/size][size="4"]
QUOTE (cgnao @ Jan 17 2008, 12:36 PM)
As of yesterday
90% gold bullion in allocated, segregated and insured storage (Switzerland)
4% gold+silver bullion in goldmoney, used as a savings account
6% speculation funds, changes daily, mostly options. When I take profits, they are routed through to goldmoney
In addition and not included in the calculation
- a few gold sovereigns in my direct possession, which I hope I'll never need in order to get out of the country in an emergency.
- I owe a small amount of USD which I borrowed in 2006 and used to buy gold bullion. This is held and accounted for separately.
- No more than one grand in my current account. As soon as this is exceeded, I buy gold/silver through goldmoney. When I need cash, I sell some.
Hope this satisfies your curiosity.
90% gold bullion in allocated, segregated and insured storage (Switzerland)
4% gold+silver bullion in goldmoney, used as a savings account
6% speculation funds, changes daily, mostly options. When I take profits, they are routed through to goldmoney
In addition and not included in the calculation
- a few gold sovereigns in my direct possession, which I hope I'll never need in order to get out of the country in an emergency.
- I owe a small amount of USD which I borrowed in 2006 and used to buy gold bullion. This is held and accounted for separately.
- No more than one grand in my current account. As soon as this is exceeded, I buy gold/silver through goldmoney. When I need cash, I sell some.
Hope this satisfies your curiosity.
Thanks, much appreciated. Very interesting.
So ... no mining stocks ... comparatively little silver ?
Given your outlook I'd have thought it was worth owning some real estate somewhere?
In fact, what is your outlook post-derivatives meltdown, if I may ask? What will the world be like? Where will you be intending to live?
QUOTE (Frizzers @ Jan 18 2008, 12:06 PM)
Thanks, much appreciated. Very interesting.
So ... no mining stocks ... comparatively little silver ?
Given your outlook I'd have thought it was worth owning some real estate somewhere?
In fact, what is your outlook post-derivatives meltdown, if I may ask? What will the world be like? Where will you be intending to live?
So ... no mining stocks ... comparatively little silver ?
Given your outlook I'd have thought it was worth owning some real estate somewhere?
In fact, what is your outlook post-derivatives meltdown, if I may ask? What will the world be like? Where will you be intending to live?
After the party has finished Cg will be the ECB plus the new Emperor Charlemagne of the Holy Gold Empire. With my couple of oz's I shall hold the vasselage of Kent or Surrey and will pay a yearly tribute of 1 gold sov, 100 barrels of beer and one virgin (although the last may be a bit problematic)...
Thought I would add this, for the goldbugs
Notional value becomes real value when the losing party in the derivative contract defaults on its obligation.
This simple fact is 100% correct and is bringing the international monetary system down.
http://dealbook.blogs.nytimes.com/2008/01/...-street-cringes
Wall Street’s Next Crisis: Bond Insurers?
January 18, 2008, 7:22 am
The growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street’s exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities, according to Forbes.
....
The banks, as counterparties, are on the hook for billions in insurance they bought to hedge credit-derivatives positions. The insurance policies, called credit default swaps, have exploded in popularity in the last few years, with some $45 trillion outstanding.
According to Fitch Ratings, Morgan Stanley, Deutsche Bank, Goldman Sachs and JPMorgan Chase were the biggest counterparties in terms of notional value outstanding at the end of 2006, and the market expanded substantially in 2007. Merrill Lynch, Citigroup and UBS were the top three underwriters of structured finance C.D.O.s last year.
...
“The ultimate systemic risk caused by the weakened positions of the monoline insurers is overwhelming and scary,” Oppenheimer analyst Meredith Whitney said in a late-December research note. “The impact will be sizable and very negative for the banks.”
This simple fact is 100% correct and is bringing the international monetary system down.
http://dealbook.blogs.nytimes.com/2008/01/...-street-cringes
Wall Street’s Next Crisis: Bond Insurers?
January 18, 2008, 7:22 am
The growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street’s exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities, according to Forbes.
....
The banks, as counterparties, are on the hook for billions in insurance they bought to hedge credit-derivatives positions. The insurance policies, called credit default swaps, have exploded in popularity in the last few years, with some $45 trillion outstanding.
According to Fitch Ratings, Morgan Stanley, Deutsche Bank, Goldman Sachs and JPMorgan Chase were the biggest counterparties in terms of notional value outstanding at the end of 2006, and the market expanded substantially in 2007. Merrill Lynch, Citigroup and UBS were the top three underwriters of structured finance C.D.O.s last year.
...
“The ultimate systemic risk caused by the weakened positions of the monoline insurers is overwhelming and scary,” Oppenheimer analyst Meredith Whitney said in a late-December research note. “The impact will be sizable and very negative for the banks.”
Here it is.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
QUOTE (hotairmail @ Jan 18 2008, 03:56 PM)
Here it is.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
From this article:
QUOTE
Jan. 18 (Bloomberg) -- Ambac Financial Group Inc. scrapped a plan to raise equity capital after the bond insurer's shares plunged 70 percent in the past two days, putting its AAA credit rating in jeopardy.
Without new money, New York-based Ambac risks losing the top ranking it depends on to sell bond insurance. Ambac, the second- largest financial guarantor, may have to stop writing insurance or sell itself, said Robert Haines, an analyst at CreditSights Inc., a bond research firm in New York.
``This is a stunning development,'' Haines said. Ambac will probably be downgraded by Moody's Investors Service and Fitch Ratings, Haines said.
Without new money, New York-based Ambac risks losing the top ranking it depends on to sell bond insurance. Ambac, the second- largest financial guarantor, may have to stop writing insurance or sell itself, said Robert Haines, an analyst at CreditSights Inc., a bond research firm in New York.
``This is a stunning development,'' Haines said. Ambac will probably be downgraded by Moody's Investors Service and Fitch Ratings, Haines said.
My opinion:
From another Bloomberg article...
"Bond-insurer stocks were lowered to ``neutral'' from ``overweight'' at Bank of America Corp., which cited slowing economic growth and rising potential for losses. The bank downgraded MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. to ``neutral'' from ``buy.''
No shit Sherlock. Those guys really earn their money (or is that credit?).
Edited to add:
``The bond insurers are in the perfect storm,'' analysts including Tamara Kravec wrote in a note to clients today. ``We would place a high probability now on our worst-case scenario of losses versus a remote probability just six months ago.''
"Bond-insurer stocks were lowered to ``neutral'' from ``overweight'' at Bank of America Corp., which cited slowing economic growth and rising potential for losses. The bank downgraded MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. to ``neutral'' from ``buy.''
No shit Sherlock. Those guys really earn their money (or is that credit?).
Edited to add:
``The bond insurers are in the perfect storm,'' analysts including Tamara Kravec wrote in a note to clients today. ``We would place a high probability now on our worst-case scenario of losses versus a remote probability just six months ago.''
QUOTE (hotairmail @ Jan 18 2008, 05:12 PM)
From another Bloomberg article...
"Bond-insurer stocks were lowered to ``neutral'' from ``overweight'' at Bank of America Corp., which cited slowing economic growth and rising potential for losses. The bank downgraded MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. to ``neutral'' from ``buy.''
No shit Sherlock. Those guys really earn their money (or is that credit?).
"Bond-insurer stocks were lowered to ``neutral'' from ``overweight'' at Bank of America Corp., which cited slowing economic growth and rising potential for losses. The bank downgraded MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. to ``neutral'' from ``buy.''
No shit Sherlock. Those guys really earn their money (or is that credit?).
One thing that has been interesting is how far behind the curve analysts seem to have been during the whole crisis.
What is the point of them?
QUOTE (hotairmail @ Jan 18 2008, 03:56 PM)
Here it is.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
Confirmation.
Unbelievable.
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Protect your goolies.
I don't pretend to understand the finer points of CDSs but it seems to me it is almost like asking your five year old to provide house insurance in return for his weekly pocket money, since now we have smoke alarms there is no chance that the house will catch fire. And when the house DOES go up in smoke, expecting the accumulated pocket money to pay for the rebuiilding of the house. Or have I underestimated the cleverness of our bankers?
QUOTE (JimmyMac @ Jan 18 2008, 05:15 PM)
One thing that has been interesting is how far behind the curve analysts seem to have been during the whole crisis.
What is the point of them?
What is the point of them?
Lunch.
p-o-p
QUOTE (Goldfinger @ Jan 18 2008, 04:02 PM)
From this article:
My opinion:
My opinion:
That's mine as well.
Footsie down 0.7 points.
Anyway in honour of that stunning picture, I feel an Oppenheimer moment coming on....
" We knew the world would not be the same. A few people laughed... A few people cried... Most people were silent. I remembered the line from the Hindu scripture the Bhagavad Gita; Vishnu is trying to persuade the prince that he should do his duty, and to impress him takes on his multi-armed form, and says, "Now I am become death, the destroyer of worlds." I suppose we all thought that, one way or another. "
http://www.faktoider.nu/oppenheimer_eng.html
Edited to add: Link to the old Ambac thread that was moved 'off topic'.
http://www.housepricecrash.co.uk/forum/ind...0241&st=120
You really should.
http://www.forbes.com/home_europe/wallstre..._0117ambac.html
You Should Worry About Ambac
Liz Moyer, 01.17.08, 4:47 PM ET
A growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street's exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities.
...
The banks, as counterparties, are on the hook for billions in insurance they bought to hedge credit-derivatives positions. The insurance policies, called credit default swaps, have exploded in popularity in the last few years, with some $45 trillion outstanding.
Closely watched bond guru Bill Gross of Pacific Investment Management calls banks' participation in the CDS market a ponzi scheme that may trigger losses of $250 billion.
Bank disclosure is sketchy, and the market is hard to evaluate for lack of information. Credit default swaps are sold over the counter, are not traded on an exchange and are outside the close scrutiny of regulators.
http://www.forbes.com/home_europe/wallstre..._0117ambac.html
You Should Worry About Ambac
Liz Moyer, 01.17.08, 4:47 PM ET
A growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street's exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities.
...
The banks, as counterparties, are on the hook for billions in insurance they bought to hedge credit-derivatives positions. The insurance policies, called credit default swaps, have exploded in popularity in the last few years, with some $45 trillion outstanding.
Closely watched bond guru Bill Gross of Pacific Investment Management calls banks' participation in the CDS market a ponzi scheme that may trigger losses of $250 billion.
Bank disclosure is sketchy, and the market is hard to evaluate for lack of information. Credit default swaps are sold over the counter, are not traded on an exchange and are outside the close scrutiny of regulators.
This will initiate a flood of forced bond sales, and is the beginning of the end.
http://www.reuters.com/article/bondsNews/i...833783320080118
NEW YORK, Jan 18 (Reuters) - Fitch Ratings on Friday cut by two notches the top "AAA" rating of Ambac Assurance Corp, the insurance unit of Ambac Financial Group (ABK.N: Quote, Profile, Research), citing the bond insurer's decision to scrap a $1 billion equity issue.
Ambac Assurance's rating was cut to "AA," the third-highest rating, from "AAA."
Fitch also downgraded the parent company Ambac Financial's long-term rating three notches to "A," the sixth-highest rating, from "AA." Fitch said that more rating cuts are possible.
Fitch is the first major rating firm to downgrade Ambac, which may now be at a competitive disadvantage compared with its peers in the bond insurance sector.
"The decision to downgrade (Ambac Assurance's issuer financial strength) rating by two notches, coupled with the continuation of the Negative Rating Watch, reflects the significant uncertainty with respect to the company's franchise, business model and strategic direction," Fitch said in a news release.
The downgrade comes after the close of trading in U.S. bond markets and ahead of a U.S. holiday weekend.
http://www.reuters.com/article/bondsNews/i...833783320080118
NEW YORK, Jan 18 (Reuters) - Fitch Ratings on Friday cut by two notches the top "AAA" rating of Ambac Assurance Corp, the insurance unit of Ambac Financial Group (ABK.N: Quote, Profile, Research), citing the bond insurer's decision to scrap a $1 billion equity issue.
Ambac Assurance's rating was cut to "AA," the third-highest rating, from "AAA."
Fitch also downgraded the parent company Ambac Financial's long-term rating three notches to "A," the sixth-highest rating, from "AA." Fitch said that more rating cuts are possible.
Fitch is the first major rating firm to downgrade Ambac, which may now be at a competitive disadvantage compared with its peers in the bond insurance sector.
"The decision to downgrade (Ambac Assurance's issuer financial strength) rating by two notches, coupled with the continuation of the Negative Rating Watch, reflects the significant uncertainty with respect to the company's franchise, business model and strategic direction," Fitch said in a news release.
The downgrade comes after the close of trading in U.S. bond markets and ahead of a U.S. holiday weekend.
This will initiate a flood of forced bond sales, and is the beginning of the end.
What was it my Mum used to say to me at times like these? Ah yes, "when one door closes...". No, no. It was "there's plenty of other fish in the sea". No, no, no - I remember it now - "don't have your bath too hot, it'll make you sterile". That's it.
What was it my Mum used to say to me at times like these? Ah yes, "when one door closes...". No, no. It was "there's plenty of other fish in the sea". No, no, no - I remember it now - "don't have your bath too hot, it'll make you sterile". That's it.
QUOTE (hotairmail @ Jan 18 2008, 09:32 PM)
This will initiate a flood of forced bond sales, and is the beginning of the end.
What was it my Mum used to say to me at times like these? Ah yes, "when one door opens...". No, no. It was "there's plenty of other fish in the sea". No, no, no - I remember it now - "don't have your bath too hot, it'll make you sterile". That's it.
What was it my Mum used to say to me at times like these? Ah yes, "when one door opens...". No, no. It was "there's plenty of other fish in the sea". No, no, no - I remember it now - "don't have your bath too hot, it'll make you sterile". That's it.
Post deleted.
The ladder of life is full of splinters, but you never realise it until you begin to slide down. 
Monoline Dominoes - Who falls when
In a credit note sent out to clients on Friday, RBS started to outline what it thought was on the horizon for the monolines:
From a rating perspective, in the absence of a bail-out, we see the agencies as more likely to downgrade than not, and once the first downgrade has gone through (likely Fitch with respect to SCA next week), it will become much easier for the other agencies to follow suit with other monolines. We now expect the future for the monolines to play out as follows. Fitch will likely downgrade SCA next week, and FGIC and Ambac the following week - assuming it sticks to its own six week deadline. Moody’s will follow in due course with downgrades to Ambac, MBIA, FGIC and SCA, and S&P will downgrade FGIC. The damage the downgrades of other agencies will do to these monolines is likely to prompt the others to downgrade as well. In theory, these downgrades will be to the double-A category, based on the comments of the agencies so far.
Snaps on the wires also reported Ambac was scrapping its plans to raise $1bn in capital:
*AMBAC WON’T RAISE EQUITY CAPITAL UNDER CURRENT MARKET CONDITIONS
*AMBAC PLANS TO CONTINUE TO EVALUATE ALTERNATIVES
Which presumably will accelerate downgrades. Unless Ambac has something up its sleeve - like a government organised bailout.
According to Bloomberg, the CDS market is currently attaching a 70 per cent chance of bankrupcty to both MBIA and Ambac.
And yet, shares in Ambac rose 18 per cent in early trade.
http://ftalphaville.ft.com/blog/2008/01/18...who-falls-when/
Deag
In a credit note sent out to clients on Friday, RBS started to outline what it thought was on the horizon for the monolines:
From a rating perspective, in the absence of a bail-out, we see the agencies as more likely to downgrade than not, and once the first downgrade has gone through (likely Fitch with respect to SCA next week), it will become much easier for the other agencies to follow suit with other monolines. We now expect the future for the monolines to play out as follows. Fitch will likely downgrade SCA next week, and FGIC and Ambac the following week - assuming it sticks to its own six week deadline. Moody’s will follow in due course with downgrades to Ambac, MBIA, FGIC and SCA, and S&P will downgrade FGIC. The damage the downgrades of other agencies will do to these monolines is likely to prompt the others to downgrade as well. In theory, these downgrades will be to the double-A category, based on the comments of the agencies so far.
Snaps on the wires also reported Ambac was scrapping its plans to raise $1bn in capital:
*AMBAC WON’T RAISE EQUITY CAPITAL UNDER CURRENT MARKET CONDITIONS
*AMBAC PLANS TO CONTINUE TO EVALUATE ALTERNATIVES
Which presumably will accelerate downgrades. Unless Ambac has something up its sleeve - like a government organised bailout.
According to Bloomberg, the CDS market is currently attaching a 70 per cent chance of bankrupcty to both MBIA and Ambac.
And yet, shares in Ambac rose 18 per cent in early trade.
http://ftalphaville.ft.com/blog/2008/01/18...who-falls-when/
Deag
AMBAC lost its AAA rating...
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
QUOTE (SaintJay @ Jan 18 2008, 10:42 PM)
AMBAC lost its AAA rating...
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
yep, see also a couple of posts ago.
QUOTE (cgnao @ Jan 18 2008, 09:43 PM)
yep, see also a couple of posts ago.
oops. was looking for the post!!! - half way down page two!
Oh well, we need balances reporting from more than one source.
Monday's FTSE should be fairly painful to watch - or will they open specially tomorrow to reflect this?
QUOTE (SaintJay @ Jan 18 2008, 09:49 PM)
oops. was looking for the post!!! - half way down page two!
Oh well, we need balances reporting from more than one source.
Monday's FTSE should be fairly painful to watch - or will they open specially tomorrow to reflect this?
Oh well, we need balances reporting from more than one source.
Monday's FTSE should be fairly painful to watch - or will they open specially tomorrow to reflect this?
That's page 2 backwards I assume. Or did I miss something rather important.
QUOTE (SaintJay @ Jan 18 2008, 05:42 PM)
AMBAC lost its AAA rating...
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
Yes it just lost its wheels...
QUOTE (Pluto @ Jan 18 2008, 09:56 PM)
Yes it just lost its wheels...
Dude, I am LMAO!
QUOTE (SaintJay @ Jan 18 2008, 09:42 PM)
AMBAC lost its AAA rating...
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
http://www.bloomberg.com/apps/news?pid=206...&refer=home
now the fun starts
Warren Buffet (and his new bond insurer) is now going to be able to pick and choose which bonds to insure, and name his own price. That guy really is clever.
QUOTE (cgnao @ Jan 18 2008, 08:20 PM)
This will initiate a flood of forced bond sales, and is the beginning of the end.
Thanks CGNAO and everyone I've been followng this thread in awe, may I throw in a couple of questions at this juncture?
1) Does such a firesale of bonds have any precedent or are we entering new terrain here ?
2) Do the bonds have an inherent value that makes them an attractive proposition for the masters of the universe to pick them up on the cheap to shore up their own off balance sheet punts or are they crud anyway?
Ta.
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