http://ftalphaville.ft.com/blog/2007/11/01...ore-writedowns/


and in the comments section

The comment sounds disturbing really.

Are these figures net? For example if I sell £500 protection on Abbey and buy back £400, is my notional £100 or £900. I would assume the later otherwise I would expect to see some negative figures for banks that have bought more protection than sold

In fact, reading this some more, I note the following

"Changes in notional volumes are generally reasonable reflections of business activity, and therefore can provide
insight into revenue and operational issues. However, the notional amount of derivatives contracts does not
provide a useful measure of either market or credit risks."

"Net Current Credit Exposure, the net amount owed to banks if all contracts were immediately
liquidated, increased $20 billion from the prior quarter to $199 billion."



However, there is always the counterparty risk, so say if a bank has bought protection from a hedge fund on Abbey National, Abbey defaults, and the hedge fund can't pay up, then the bank has a problem.

There will be another significant next leg down over the next three days of trading on Wall St.

Watch for more fall our from Citi - apparently the CEO is to be fired over the weekend in an EGM.

The mother of all frauds is about to surface from Merrill and spread to all other banks as reality sets in that we are in a significant period of realisation. See the front page of the WSJ....

http://online.wsj.com/article/SB1193969563...p_us_whats_news


We are now entering a period of acceleration. It's exciting for some and scarey for others.

I have followed a lot of your posts in the past zinny01. You once posted a very good read from a blog (can't remember the name) but it was very, very informative.

ps - I find it both interesting to be living through this, but also a bit scarey to be honest in case it does play out as bad as I think it might over the next few years.

Prepare to be relieved.

why?
you don't think anything will happen then ?

edited - I don't just mean this weekend btw.

Yes something will happen it is happening now. It has been happening every day for the last 61 years, 51 weeks, 1 hour and 38 minutes. But is happening so slowly that nobody here can see it.

This site is all about crashes and collapses and panic and pandemonium.


Whereas what is actually happening is people are slowly aging. And scurtinising the news ticker every day means that everyone is totally oblivious to the root of the problem.


It is a demographic shift, a slow and easily controlled decent. The effects of which can be spread.

yes I understand that & agree. I have never called a sm crash since I have been on this site.
There are however days or weeks when significant things happen, there has been a lot of CEO replacements within the large cooperates over the last few months, very significant imo.

I understand the idea of a controlled shift so that panic doesn't ensue.....but what went wrong with NR then if this is the case ?

I get the feeling that you obviously know a lot more than you can post on here (which is a shame but understandable depending on your position), but surely they can't control it forever, if so then we entered a new era of 'total control'. I personally don't think they are at this stage yet.

most people are greedy by nature & imo one of these people or organisations will 'break rank' & let the cat out of the bag, a deal gone sour or prior dodgy agreements not upheld etc......

also ?...!

I don't pretend to fully understand the financial markets or be an economics expert btw, but what I do have a very good understanding of are people. How they think & act, what motivates them, what will they be prepared to do to make money or save face for example.

You can't beat real life experience, escpecially from being right at the bottom & mixing in the middle, I never made it up to the bigs boys top floor (& never wanted too, no really i didn't ;) ), but I would imagine that the same rules apply, just the money & pride stakes are much higher.

Zinny has real information. Is that a problem? I also know first hand of several UK based hedge funds in very similar positions. BTW what is your point? Too many people on this site react badly to anyone they deem "not in the City" trying to dicuss markets. That's a bit like politicians trying to stop people discussing issues.

I recommend reading the section on prosper.com in this article on DrHousingBubble if you don't understand what mr cgnao is talking about.

Just trying to cast perspective on the day.


Talking about 20% falls every other day is a very sqewed debate. In the past 20% falls happen perhaps once in 5,000-10,000 days?

And it is perfectly reasonable for anyone to talk about the possibility of such an event, but I must remind everyone that such an event happens 1 in every 1000 week.

AND

That our financial market has evolved a great deal, thanks to telecomunications and information technology. There are now many safety valves at many levels of our markets and wider economy. Rising inventories are spotted much sooner, as are falling retail takings, price fluctuations, levels of productivity etc.

So events that in the past may have resulted in an explosive release now result in a piercing scream and a gradual relief, as we are able to divert resources from oversupplied areas and to undersupplied areas much earlier in a crisis than we were able to before such technologies as the internet, and automated inventory recording.


Also I understand you feelings behind distrusting upper levels of management, and yes you get bad people in all walks of life, but there are also a good deal of decent folk there who take their role of responsibility over other peoples livlihoods very seriously indeed and do more than is ever expected of them to look out for the interests of their staff and the customers they serve.

yes but you specifically replied to me, when I have never forcast a stock market crash yet, impying, imo, that I regularly call sm crashes ?(in fact I rarely comment on them or any of the daily bear stats, even when it suits me).

ps - what if we are at week number 999 ;)

edited - I am however a 100% doom'n'gloom monger (at the moment), there's no denying that. ;)

week 999 = another 500 weeks to go

nope, not imo.

almost, nearly, nearly, ever so close there.

can't you sense it, surely you can ?

I want it to happen. It is like jumping off a bike that has no brakes thats flying down a hill. The ssoner you jump the less its going to hurt however it is going to hurt a lot!

The choice is hyperflationary depression or deflationary depression.

Anarchy...

Followed by communism if the people blame the bankers or

If the people wrongly blame immigrants or black people etc then facism.

either way i have hedged myself by telling everyone it is coming.

it will take a few years to play out of course. (the bad recession/depression that is)
I think some people reading our type of posts think we are saying an overnight crash etc, well I think that we will have various major events that will trigger off more major events.
By the sounds of it we will see some major events next week in the US. The media will try to make it look like everything is not as bad as we think it is.
Just look at Sky news tonight disputing the Barclays rumour about them needing funds from the BoE. We don't really know now do we, but if I had to make an educated guess from what I hear on here & read on the web, I think they probably have.

All the warnings from cg & others are falling into place with remarkable accuracy.

Basically, if you have savings ANY bank anywhere in the world you should be taking them out on Monday. Ideally, you should have taken them out months ago, but don't miss the opportunity now.

I say lay off GOM.

?...! . I enjoy your posts and I have learned a lot from them. GOM is not one of the doomsters on this site. He is one of the few that constructs good debate, which is why most of us post on here.

I myself am not in the doomster posse but I do have friends in much higher places than I both in the City and on Wall Street and importantly on one of the worlds biggest business news agencies.

My comment about Citi group has materialised as fact....

http://online.wsj.com/article/SB1194033638...p_us_whats_news

From speaking to a friend a few weeks ago, who has just left a job in a Europen bank as a derivatives trader (personal not redundancy) he said the only thing that will send this down again will be "when" (not if) they discover some fraud.

This looks as though it is going to happen very very soon. Especially with the SEC all over Merrill at the moment.

Notice I said the next leg down not the end of the world.

Sorry to sound defensive but we should put all things into perspective and get back to the debate of the topic.

the drivates market is valued at $500tr and thats $80-90,000 for every man woman and child on the earth and it's taken a long time for it to reach this level so predicting the day it will come down fast then the twin towers on 9/11 is not an easy game.

Yes i feel stupid posting such figures but go check it out for yourself and feel free to come back and corect me if i'm wrong.

http://www.jsmineset.com/

bump.

No further comment necessary.

http://www.forbes.com/business/2007/11/03/...1103prince.html

Street Quakes As Another Chief Falls
Liz Moyer, 11.03.07, 10:16 AM ET

By the end of the weekend, two major U.S. banks may be without chief executive officers, days before they are both scheduled to file their quarterly financial statements with federal regulators, all because of ongoing concerns about their exposures to credit derivatives.

...

Both Citi and Merrill have to file their quarterly reports, known as 10-Qs, with the Securities and Exchange Commission in the next week or so. Chief executives, as well as chief financial offices, have to sign off on those reports under corporate governance regulations put in place after the collapse of companies like Enron and Worldcom, which were found to have fallen prey to accounting fraud.

...

Regulators are said to be examining how banks accounted for derivatives exposures held off balance sheet. That might add further pressure to Citi's board to act.

Relative of Merrill Lynch Founder Predicts Stock Market Crash

Kerri Panchuk | 10.30.07
In a market where fears over the subprime shakedown are spreading pessimism nationwide, Charles Merrill, the cousin of the man who founded Merrill Lynch & Co., is predicting a stock market crash that will put the 1929 crash to shame.

Merrill, in an exclusive interview with a financial author, said, “There is going to be a major stock market crash, so protect your assets. Buy physical gold and hide it.”

Merrill also discussed all the changes at Merrill Lynch that indicate a potential market crises—even alluding to the company's chief executive officer, who stepped down this week.

“Merrill Lynch is crashing, due to the ineptness of the CEO,” Merrill said. “No matter who is running Merrill Lynch & Co., it's going to need a regimen of restraint and recuperation after getting badly bruised by the global credit market shakedown. I predict a house of dominos, and the whole stock market is going to crash.”

Lynch's less-than-encouraging remarks were part of an interview with writer Michael Grace, who is writing a book called, “The Final Great Depression.”

During the interview, Merrill concluded, “There is so much wealth in Palm Springs ... from inherited to funny money, and I'm advising my friends to buy gold. Grace's book on the 'final depression' sounds like a novel or fantasy but unfortunately it is a picture of our horrible future here in America. My cousin Charlie must be turning over in his grave.”

Any company that names itself with deliberately wrong spelling, like Citigroup or Krispy Kreme Donuts, deserves to face bankrupt oblivion with the CEO having his soft body parts slapped hard with a copy of "Eats, Shoots, and Leaves".

I must admit my feeling is when this one goes it could well go that badly. I have finished reading a book recently (The Final Crash) that does a pretty good job of sumerising where we are now and the potential future we have. It is not out and out doom mongering it just very plainly describes the recent excesses and the price we will have to pay for them The thing is so few people could even contemplate the impact this will have to our lives!

I have a very contented life and am constantly amazed at what we can afford to do both with the free time we have and the things we can buy. People think I am mad when I suggest this is unlikely to go on. People are used to ever increasing living standards, believe me I would be happy to keep our current lifestyle for the rest of our lives, I am just a little bit more realistic about the prospect of this.

On a final note for those who harp on about the stock markets being good value because they have only just to where they were in 2000 I have attached a graph to show this may not be the best way to be looking at it. As ever the bigger picture can put things into perspective!

That graph underlines how huge the economic boom was during the Clinton years.

It was interesting talking to my Dad a while back he recollected how he was advised when he was young, by a financially switched on relative, to get into shares, the first 10 years in the 70's early 80's his investments stood still, then bam the big rise you can see. This is where the long term investment bul!!sh!t you hear on the financial new channels every time there is a bit of turbulence advising people to grab a bargain clearly don't take an interest in history or even try to imagine what the future could be like. I find graphs like this put things into perspective even if they are not inflation adjusted.

For some inflation adjusted graphs please look at link

http://www.angelfire.com/or/truthfinder/index14.html

Still not looking good!

Quickly spiralling, exponentially increasing losses. This is the mark of the derivative beast.

This is 100% correct, guaranteed.

http://www.thebusiness.co.uk/news-and-********...will-quit.thtml

Citigroup's Prince will quit
Sunday, 4th November 2007

Charles "Chuck" Prince, the chief executive of Citigroup, is poised to resign later today, as the world's biggest bank prepares to unveil billions of dollars in additional losses from bad mortgage debts.

An emergency meeting of the Citigroup board will take place in New York, at the bank's midtown headquarters. The meeting was originally called to assess the bank's exposures to burgeoning losses from sub-prime investments, which some analysts believe could increase by $4bn or more.

But sources close to the situation confirmed that Prince will stand down in the face of mounting pressure from investors.

Prince would become the highest profile casualty yet to be claimed by the credit crunch, with his departure coming less than a week after that of Stan O'Neal, the chief executive of Merrill Lynch.

Prince's resignation would mark the end of a tumultuous four-year reign dogged by an underperforming share price and a string of legacy issues inherited from his predecessor, Sandy Weill.

Prince, 57, is expected to leave with stock options worth $87m, and could also receive a severance package, at the discretion of the board.

The Citi crisis comes after a week that saw share prices of UK banks take a pounding following rumours of big losses. While the US banks have had to report third-quarter numbers, details of the exposures of UK banks will only begin to emerge with trading statements due to be delivered over the next few weeks.

Barclays, whose shares dropped on Friday amid rumours over the strength of its balance sheet, has already made several public comments insisting that it has no issues and that Barclays Capital, its investment bank, continues to make money.

Citi revealed a 57 per cent drop in third-quarter profits two weeks ago, thanks to a $5.9bn (£2.8bn) write-down on holdings in structured credit vehicles.

It is understood that the bank is preparing a filing for the US Securities and Exchange Commission (SEC) that will indicate a substantially higher number. The document is expected to be lodged with the regulator within the next few days.

Citi's shares were hit last week amid fears that the bank may have to cut its dividend to preserve the strength of its balance sheet.

Concerns have also been raised about the bank's exposure to Structured Investment Vehicles (SIVs) ? off-balance sheet funding vehicles. The bank is an adviser to seven SIVs that hold roughly $80bn in assets, about 20 per cent of all the SIV market globally. Although the bank does not have a contractual obligation to fund these vehicles, analysts believe that some of these vehicles could come on to Citi's balance sheet.

The SEC is understood to be investigating the way that Citi accounted for some of these relationships. But the bank has insisted that its bookkeeping is "in thorough accordance with all applicable rules and regulations".

Citi was one of the key architects behind the so-called "super SIV", the controversial fund announced recently to help bail out these funds, and other vehicles caught up in the sub-prime crisis.

Robert Rubin, the former US Treasury Secretary, and chairman of Citigroup's executive committee, is expected to be asked to serve as a temporary chief executive while a replacement for Prince is sought. Rubin is said to have no appetite to take the job for the longer term.

John Thain, the chief executive of stock exchange operator NYSE Euronext, has also been linked to the job. Thain, a former Goldman Sachs banker, is also tipped for the vacant Merrill Lynch post. Others in the running are Richard Parsons, a Citigroup board member who is expected to step down as chief executive of Time Warner later this year, and a number of internal candidates.

In other news, stock of tree planters and ink manufacturers are said to be at an all time high.

We are ******ed.

And it's not because we should be, it's because the guys at the top have decided that it's better that the man in the street suffer then their mates go to jail.

Start storing food, fags and booze and for later on, gold.

http://business.timesonline.co.uk/tol/busi...icle2796774.ece

man values money above life, always has, always will.

Take my life Grumpy - I'm saving my money for my old age.

http://www.telegraph.co.uk/money/main.jhtm...4/ccciti104.xml

Blimey

http://online.wsj.com/article/SB1193969563...p_us_whats_news

Ignore this at your own peril.

NO BANK, NO MATTER WHERE OR HOW BIG IT IS, AND REGARDLESS OF ANY GOVERNMENT DEPOSIT GUARANTEES, IS NOW SAFE.

This is 100% correct, guaranteed.

Avoid the stampede, move to safety before the herd tries to do so.

Safety is:

1) Gold and silver in your hands or in allocated, segregated storage offshore
2) Cash (banknotes) in your hands (NOT IN ANY BANK), preferably CAD, CHF.
3) Shortest term government bonds, preferably denominated in CAD or CHF, HELD IN YOUR NAME THROUGH NO INTERMEDIARIES

2) and 3) are safe in the sense that they can be exchanged at extremely short notice for 1) when (not if) it becomes clear what central banks are doing.

This is 100% correct, guaranteed.

<a href="http://business.guardian.co.uk/story/0,,2204764,00.html" target="_blank">http://business.guardian.co.uk/story/0,,2204764,00.html</a>
New credit crisis sparks rate-cut plea

Bank shares in meltdown as bosses' heads roll

Heather Stewart, economics editor
Sunday November 4, 2007
The Observer

Businesses are calling on the Bank of England to shield them from the credit crunch with an interest rate cut this Thursday, after a tumultuous week on the financial markets exacerbated fears that the sub-prime mortgage crisis will wreak serious economic damage.

'We urge the Bank to announce a small cut in interest rates next Thursday as further delays could cause serious problems in 2008,' said David Kern, economic advisor to the British Chambers of Commerce. 'Global risks are again worsening, and there are new concerns over the strength of many international banks.'


EDIT: TYPO

What about safety for those without savings, investments or assets? Ie - the many fresh graduates brimming with debt and student loans?

Is it too late to start pumping spare monthly salary into gold purchases?

http://www.youtube.com/watch?v=VgSVgKpq-ok

Keeping your money in a bank run. First few minutes are about FDIC but then it gets relevent to your question.

http://www.youtube.com/watch?v=8ibVh5oGRig

What to do with low/fixed income (student edition).

I see Cheers

+

Good grief man! Brew your own ,that stuff tastes like lousy water

This should last someone at least a month.



***EDIT*** Not sure about the PG branded tea. That might be out of my price range over the next few years.

Look into my eyes, look into my eyes, the eyes, the eyes, not around the eyes, don't look around my eyes, look into my eyes, you're under.

THERE IS NO RISK OF A BANK RUN. THE EIGHT FAILURES IN THE PAST FOUR MONTHS ARE JUST A TECHNICAL GLITCH, STATISTICALLY INSIGNIFICANT. YOUR LIFE SAVINGS ARE VERY SAFE.

http://www.nzherald.co.nz/section/12/story...jectid=10473988
Figures dispel fears of finance company 'run on the bank'
5:00AM Monday November 05, 2007
By Brian Fallow

Figures released by the Reserve Bank should dispel fears that finance companies have been borrowing short and lending long, making them vulnerable to a "run on the bank".

For the first time the bank has unpacked its data on non-bank financial institutions into three categories: savings institutions (mainly building societies), deposit-taking finance companies (which largely rely on retail investors for their funding) and non-deposit-taking finance companies (funded from the wholesale market).

It is the middle group which has suffered eight failures over the past four months.

Three, two, one... You're back in the room.

cgnao, why don't you post some graphs of the credit derivatives indexes, like ABX, Itraxx and CDX?

You could explain to people what they mean, and how investment banks make money out of this disaster.

You idiot, please review the following and see for yourself how much money they are "making".

This is utter mess.

Protect yourselves.

http://business.timesonline.co.uk/tol/busi...icle2806823.ece
From The Times
November 5, 2007
Embattled bank faces SEC inquiry over SIVs
Siobhan Kennedy: Commentary

If things looked bad for Citigroup last night, they could be about to get worse.

The Securities and Exchange Commission, the US financial regulator, is understood to be conducting an investigation into Citigroup’s accounting of its use of structured investment vehicles, or SIVs.

One source described the investigation as a “routine look” at the business by the SEC’s corporation finance division. But depending on what it finds, the investigation could be passed on to the regulator’s powerful enforcement division.

Under Chuck Prince, Citigroup built up assets worth about $80 billion (£38 billion) in SIVs with names such as Beta, Centauri and Dorada. SIVs allowed the US banking giant to use the short-term commercial paper (CP) market to raise money to back long-term investments, such as mortgages.

Little was known about SIVs before this summer’s credit crisis, mostly because they were not held on balance sheets and were never declared. They were like a black hole, with no regulatory reports or SEC filings.

In total they held about $400 billion of assets and were categorised in a league of their own, as “bankruptcy remote vehicles”, which the banks had no fiduciary duty to disclose and no contractual obligation to support.

But as investors panicked over US sub-prime mortgages, it became clear that SIVs – and an even riskier variant known as SIV-lites – were about to create a severe headache for Wall Street.

When investors began fearing SIVs were packed with dodgy paper tied to the sub-prime market, the financing to fund them dried up.

For Citigroup, $6.5 billion of sub-prime writedowns and related losses pushed America’s largest bank by assets to post its biggest profit decline in three years and the stock is down more than 31 per cent since the beginning of the year.

It is believed that Citigroup may report further losses on Monday, reflecting continued declines in the value of some mortgage-linked securities since the end of the third quarter.

The aftermath of the SIV debacle has left a handful of banks, led by Citigroup and with the support of Henry Paulson’s Treasury, scrambling to patch together a bailout fund to buy assets from the off-balance sheet vehicles. But progress has been slow.

A spokeswoman for the bank said: “Citigroup is confident in its SIV accounting. It is proper and in thorough accordance with all applicable rules and regulations.”

But just a few weeks ago, its top ranking executives were insisting Mr Prince’s job wasn’t in jeopardy.

i buy that stuff for the slugs

Oh dear, you have to stoop to personal insults.

You're deluding yourself (and unfortunately others, which I find appalling) if you think you understand the tiniest part of the derivatives business.

There are a number of posters on this site who have a far deeper understanding of what is happening, and other posters can have a rational, sensible debate with them. They can explain complex issues, without pasting pictures of explosions and rockets. 'FreeTrader' and 'ockham' are examples, and you aren't.

Rather take some time to learn, rather than copy-and-paste stories that you don't really understand.

Please review my posts and protect yourself, or you'll live to regret it.

I am 100% correct, guaranteed.