100% correct

But reason 2.) is more correct than reason 1)

I've been doing a bit of reading on Argentina and Uruguay. Am I right in believing that the bank runs over there were prompted by the expectation of an unpegging of the peso against the dollar. So did the central bank of Uruguay respond to the cash crisis by just printing up the fiat needed to meet the depositors demands for cash

I guess that things in the UK wil get even more serious as

1. Recession = increased repos
2, Falling house prices = increased bad debts for banks

What other causes of money supply growth could be significant? Is the war in Iraq significant for the UK in terms of its impact on monetary growth?

Surely one factor that will reduce the growth of the moeny supply will be a decrease in the demand for credit in the UK as the credit crunch bites

Citi had to pay junk interest rates to cover a dividen promise and still deal with their mtg losses. That will not go over well and again it would seem the bounce off citis capital infusion would be short lived.


"By Bradley Keoun


Nov. 27 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, is paying a ``junk bond'' rate to uphold Chairman Robert Rubin's pledge to preserve the dividend and weather this year's mortgage-market decline.


The 11 percent interest rate on $7.5 billion of convertible shares that Citigroup sold to the Abu Dhabi Investment Authority is almost double the rate it offers bond investors. Countrywide Financial Corp. paid 7.25 percent to Bank of America Corp., the second-biggest U.S. bank by assets, for bailout financing three months ago. Citigroup's common stock pays a dividend equivalent to a 7.1 percent yield.


Citigroup sought a cash infusion from the ruling family of Abu Dhabi, one of seven sheikdoms that comprise the United Arab Emirates, because losses on U.S. subprime-mortgage investments left the bank short of its own capital targets. The deal may dilute the value of Citigroup's stock, reducing 2008 earnings by as much as 20 cents a share, Bank of America analyst John McDonald estimated. "


http://www.bloomberg.com/apps/news?pid=206...&refer=home

More on ShittyGroup from Bill Murphy aka Midas, from GATA.

November 27 – Gold $813.80 down $12.50 - Silver $14.46 down 35 cents
Citigroup News Very Gold Friendly


"All things come to him who waits -- provided he knows what he is waiting for."...Woodrow T. Wilson

GO GATA!!!!

The US financial markets are becoming more farcical by the day. Got up later than usual this morning after my trip back to Dallas from San Diego, only to find the DOW up 100 and gold down $14, with the euro unchanged. So much again for gold moving with the dollar. The real story? Option expiry and The Gold Cartel and friends throwing a temper tantrum and minimizing their pay out to spec longs.

The DOW is even a bigger joke. Time and time again I have pointed out how the PPT rescues the DOW each time it plunges and puts a mini-scare into the investing public. There was not one good reason to cause a surge like today, as the economic news continues to worsen.

The supposed bullish news for the market was the bailout of Citicorp by Abu Dhabi. The way some in the Planet GATA camp see it…

Hi Bill
http://www.bloomberg.com/apps/news?pid=206...&refer=home

Can you believe this one! Citi had to raise $7.5 BILLION of quick cash so they borrowed it from the MIDDLE EAST! This is the biggest bank in the united states that :

1) Needed $7.5 BILLION of emergency cash
2) Couldn't get it from any other bank in the states or the Federal Reserve
3) Diluted their common stock shares without identifying WHY they were doing this

The house of cards is falling fast!
Bix

From Dave in Denver:

Based on the implied cost of capital to Citicorp of the $7.5 billion dollar investment by Abu Dhabi, the implication is that Citicorp may be on the verge of insolvency. The deal is structured as a passive, subordinated convertible security with an 11% dividend and is convertible into 4.9% of the Company, based on a price conversion scale that ranges from $31.83 to $37.24 and the conversion expires in Sept 2011. Without further details on the conversion feature, and keeping the analysis "plain vanilla" for these purposes (i.e. we don't have all the terms of the deal and there's some theoretical "nuances" to consider) I'm assuming the average conversion price would be $34.53. And assume Citicorp stock performs such that it is worthwhile for Abu Dhabi to convert into common (i.e. the stock rises above the conversion range by 2011 and I doubt Abu Dhabi would do this if they didn't believe in that event). Based on yesterday's closing price of $30.70, th e implied cost of capital to Citicorp on the conversion feature is 12.5%, plus they've paid out an 11% dividend. That's an all-in cost of capital of 23.5%.

Now, just on the surface, the 11% dividend is similar to the yield that a mid-quality junk bond issuer would have to pay to get bond deal done. But the 23.5% implied cost of capital embedded in this deal reflects the kind of return that would be required for a "vulture" investor to invest in a highly distressed company. In other words, the cost of capital to Citicorp's shareholders of this deal implies that the rate of return required to induce investment capital into the Company reflects an assessment by the market that Citi is on the verge of insolvency. I would be interested to know if the good folks in Abu Dhabi were allowed to see the real "insider" financials at Citi, including ALL of the off-balance-sheet financing structures AND all of the derivatives. Somehow I doubt it....

***

Dear Bill,
Abu Dubai just announced that it is buying up to 4.9% of Citigroup for $7.5 billion. It is purchasing convertible preferred stock with a dividend yielding 11% until conversion into common stock.

While the popular press is heralding this as a "lifeline from a Middle Eastern nation," I see it as a sign of significant distress at Citigroup. Unless I am missing something, an 11% yield is what one would expect from something in the high risk or "junk" category. To me, this suggests that Citigroup is desperate for new capital.

This is a clear example of a country using its Sovereign Wealth Fund to acquire assets on favorable terms. We are going to see more and more of these types of investments by foreign countries as they use their hoards of dollars to buy up U.S. assets. Through our profligacy as a nation, we are giving away much of our future wealth. The "mortgages" created by our debts to foreigners are being foreclosed on in creative ways.

It is telling that while Congress loudly denounced Abu Dubai’s buying some of our ports, there isn’t a whisper when it steps in to save a troubled bank.

Unrelated to this theme but indicative of Abu Dubai’s long term thinking and asset diversification, it is also about to buy Primewest Energy’s oil, gas and oils sands assets in Canada. When a Middle Easter deriving its income from the sale of oil and gas begins buying up these assets in North America, can "peak oil" be far behind?

All the best,

Edmund C. Bujalski
President & CEO
Bariatric Partners, Inc.

What is most grating, and reveals the extent of the gold price manipulation, is one day to watch gold dip each time the US stock market lurches lower. The comment from the mainstream Peanut Gallery is that investors are leery of holding gold during stock market liquidations. Then, after putting up with that crappy commentary, does gold not soar when the market recovers sharply? Because a gold option expiry is not a day in which The Gold Cartel allows it to do so.
To prove that point, gold is now down $3.50 in the Access Market because the DOW fell 150 points off its high at one point. This is sick.


One could blame a $3 drop in the price of oil (closed at $94.42 per barrel, off $3.28) as a mitigating bearish gold factor for the day. That is until we reflect that the price of gold is almost half of what it should be per the price of oil based on its historic 15-to-1 price relationship.

This rumor is as good as any to explain how The Gold Cartel did their dirty today. From a well informed fellow Café member:

"A reliable source has it that Abu Dhabi sold gold to 'pay for' the Citi deal. Of course that didn't sell anywhere near the full price - but partly it appears that 'they just wanted to calm things down a little bit as they went in.'"

Surely if the gov't spends more into the economy than it takes out of the economy in taxes (as is usually the case) then there is more money floating around in the system and therefore inflation. The difference between spending and taxation is made up by inflation. In the long term, deficit spending will be inflationary. They dont need to have a war, but that is certainly one of the best excuses for wasting dosh.

Also I should point out that deficit spending isn't always inlfationary. If the money supply increase faster than increase of good/services available in the economy then you will get price inflation. If however the gov't spends £Xmil on infrastructure which then causes an increase in the economy of £Xmil, then there shouldn't be any price inflation. For example, if the gov't spent £20mil building the M25, but then the M25 increased the size of the economy by a similar amount then no problemo.

In reality of course, politicians just p*ss away our money on complete rubbish.

Yeh, if M>T then the result iss inflation

But where's most of the monetary growth going to come from. It looks like it will come from bailing out insolvent banks with eye watering losses

True CGNAO?

CGNO, two questions:

1. What does CGNO stand for?
2. What's your profession/day job?

A billion here and and billion there -- chump change really.

http://news.yahoo.com/s/nm/20071127/bs_nm/...U3fj1cEJlsG1vAI

Expect much more of this as favours are called in - throw in blackmail and all sorts of other shenanigans too...

Countrywide gets secret 51 billion dollar bailout Quote

[link to www.rgemonitor.com]


Merely more lies, deceit, cover up, and outright fraud. Has a single person been arrested over this?


--


The Stealth Public Bailout of Reckless “Countrywide”: Privatizing Profits and Socializing Losses
Nouriel Roubini | Nov 27, 2007
The letter by Senator Schumer questioning the $51.1 billion that Countrywide borrowed from the Federal Home Loan Bank system (specifically the Federal Home Loan Bank of Atlanta) has finally revealed the little dirty secret - that was known only to a few insiders and was noticed on this blog a month ago – that Countrywide, the largest US mortgage lender, has received a massive stealth public bailout that has put at severe risk taxpayers’ money. Here is Countrywide - the premier poster child financial institution of the reckless and predatory lending practices of the last few years – getting in severe financial trouble because of its rotten lending practice in subprime, near-prime and prime mortgages – and whose CEO Mozilo is under SEC investigation for potentially illegal activities – now receiving a massive $51.1 billion of public bailout money with little official supervision of such lending. Mozilo is under investigation for his accelerated sales of Countrywide stock under a 10b5-1 plan. Mozilo has made more than $100 million on stock sales this year, while Countrywide shares collapsed more than 50%.


As the Schumer letter correctly points out the collateral against this $51 billion loan is mostly toxic waste subprime garbage whose market value is now much lower than the face value of such mortgages; so $51 billion dollar of taxpayers’ money has been put at risk with garbage as collateral for it.


At least Northern Rock – that also received a massive official bailout in the UK – did so under the public scrutiny and serious criticism of such bailout by media, public, politicians and investors. Instead Countrywide – a huge mortgage lender that is most likely insolvent rather than illiquid – received a stealth bailout that only now is emerging to the public eye.



In the case of Northern Rock – another institution that is most likely insolvent rather than illiquid – the botched bailout led to public embarrassment for the Bank of England, the FSA and the UK Treasury. As authoritative analysts - such as Martin Wolf of the FT - have correctly argued, in cases where massive amounts of public money are at stake to bailout a nearly insolvent institution the fair punishment to the shareholders of such bank it to wipe out their equity and a public takeover – yes a nationalization – of the bank; that nationalization should be a temporary action to clean up the mess, get the incompetent and reckless shareholders and managers out, restructure the bank and then sell back to the private sector. Capitalism without punishment for reckless lending breeds moral hazard and pestilence.

more:
[link to www.rgemonitor.com]

Money supply is out of control. This is the mark of the derivative beast and explosive fuel for the gold rocket. Also note, this is october data, before the massive ECB injections announced last week.

The central bankers want to save the system but they can't.

They want to hold gold back but they can't.

Their futile attempts are buying time for the insolvent banks but are transforming the current stagflation into a global hyperinflationary monetary holocaust.

This is all you need to know and is 100% correct, guaranteed.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Nov. 28 (Bloomberg) -- Money-supply growth in the euro region accelerated more than economists forecast in October to the fastest pace in more than 28 years, adding to the European Central Bank's inflation concerns.

M3 money supply, which the ECB uses as a gauge of future inflation, grew 12.3 percent from a year earlier, after gaining 11.3 percent in September, the Frankfurt-based bank said today. That's the highest rate since July 1979. Economists expected growth of 11.5 percent, according to the median of 35 forecasts in a Bloomberg News survey.

....

M3 is the broadest gauge of money supply and includes cash- in-circulation, some forms of savings and money-market holdings. Its growth rate has exceeded 4.5 percent -- the level the ECB still deems non-inflationary -- every month since May 2001.

The three-month average of the annual M3 growth rate through October was 11.7 percent after 11.5 percent in the three months through September, the ECB said. Loans to the private sector rose 11.2 percent in October from a year earlier after 11 percent growth in the previous month.

The annual rate of growth of M1, a measure of cash and equivalents, rose to 6.5 percent from 6 percent.

Credit crisis reveals widespread accounting manipulation by top US banks.

Yikes! Enron X 1,000,000

http://www.inteldaily.com/?c=139&a=4370

This really is the most terrifying thread I've ever read (and re-read).

Governments and Banks colluding across the world to hide the biggest fraud in history...devaluation of all fiat currencies through monetary expansion (theft from you and me).

They've got to be careful, to be quite honest. People don't just roll over and starve/stop trading because pounds/dollars etc are worthless, they move swiftly onto commodity money such as gold. This means state collapses of enormous magnitude and societal freedoms unseen since the 19th century. (Including the freedom to fail and starve to death, sadly)

My take on it is that Goverments and central banks will eventually become buyers of last resort for all the toxic CDO, SIV, MBS etc waste out there, essentially printing the money to do it. They will be doing this to prevent the market finding a true price for all the ficticious assets the banks are holding - at any cost! This will amount to a broad monetisation of the bad debt on a collosal scale. Some of it will be by stealth, some overt, and some perhaps DEMANDED by the very people who will be left holding the can! (the taxpayers, any holders of cash, and anyone on fixed income ie, pretty much everyone) We've already seen the UK govt fail to blink on bailing out Northern Wreck, on what will turn out to be the first sign of trouble. Similar bailouts are also already happening in the US with the collusion of the financial elite over there (Counrtywide, the Super SIV fund, etc). Hence the liabilities of the elite, will be shifted onto the already debt-burdened people, and in doing so the integrity of the currency will eventually be brought into question.

Is this how you guys see it happening? I'd be interested in hearing how others see it panning out..

There was a great graph posted recently from the US which showed that the amount of GDP wealth generated for each additional dollar of debt taken on has been in terminal decline sonce the 1950s. In other words, diminishing returns - more and more deficet spending is required to generate less and less economic growth as time goes on. Government spending is getting less efficient and more wasteful as time goes on. But we don't need a graph to tell us that, do we?

If this happens, I will be rioting.

The derivative beast is coming to a place near you.

http://www.bloomberg.com/apps/news?pid=206...amp;refer=rates

Nov. 28 (Bloomberg) -- Standard & Poor's said it may cut its credit ratings on six collateralized debt obligations in Europe because of losses on securities backed by U.S. subprime mortgages.

S&P placed the ratings of 17 portions of CDOs on CreditWatch with negative implications, according to a statement today. It's the first time S&P has reduced the outlook for cash and so-called hybrid CDOs in Europe after downgrades on mortgage-related securities in the U.S. earlier this year, the New York-based ratings company said.

Rapidly spiralling, uncontrolled losses. This is the mark of the derivative beast.

http://www.reuters.com/article/governmentF...28?rpc=401&
EU eyes mounting cost of German subprime rescue
Wed Nov 28, 2007 12:58pm EST

BRUSSEeLS/FRANKFURT, Nov 28 (Reuters) - The European Commission said on Wednesday it wanted more details about Germany's aid to banks as the cost of the Berlin-led bail-out for subprime casualty IKB soared.

EU Competition Commissioner Neelie Kroes said she intended to speak to Finance Minister Peer Steinbrueck a day after the state-owned lender KfW warned the cost of its rescue of IKB was rocketing.

IKB nearly collapsed under the strain of losses from investments in risky U.S. home loans earlier this year and was rescued in an effort spearheaded by KfW. Government bail-outs of private sector companies are normally illegal under EU law.

On Tuesday, KfW announced that the outlook for Rhineland Funding -- an offshore outfit IKB set up to invest in subprime mortgages and which is now housed at KfW -- had turned dramatically worse.

Given Rhineland's problems, KfW said it would more than double the money it set aside for expected losses to 4.8 billion euros.

EDIT: typo

You and your family have been eating baked beans on toast for the last three weeks to save the cash needed to pay your next mortgage installment. Following the end of your 2-year fixed rate deal, you were unable to secure a new cheaper deal and the repayment has gone up 20%.

All your credit cards and overdrafts are maxed out, so you reluctantly decide to borrow cash from a loan shark and use it to pay the mortgage. This will cost you in excess of 50% interest

How much longer will you last?

Familiar?

Citibank, the world's largest bank, is in the finance institution equivalent of your condition. They must keep paying the 7% dividend, or they'll be foreclosed.... so they decided to borrow at 11%.

It's only a matter of time now. Many other large banks worldwide are in similar or worse conditions.

This is 100% correct, guaranteed.

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

Nov. 27 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, is paying a ``junk bond'' rate to uphold Chairman Robert Rubin's pledge to preserve the company's dividend and weather this year's mortgage-market decline.

The 11 percent interest rate on $7.5 billion of convertible shares that Citigroup sold to the Abu Dhabi Investment Authority is almost double the rate it offers bond investors. Countrywide Financial Corp. paid 7.25 percent to Bank of America Corp., the second-biggest U.S. lender by assets, for bailout financing three months ago. Citigroup's common stock pays a dividend equivalent to a 7.1 percent yield.

Citigroup sought a cash infusion from the ruling family of Abu Dhabi, one of seven sheikdoms that comprise the United Arab Emirates, because losses on U.S. subprime-mortgage investments left the bank short of its own capital targets. The deal may dilute the value of Citigroup's stock, reducing 2008 earnings by as much as 20 cents a share, Bank of America analyst John McDonald estimated.

summed up purrfectly, I can see the masters of the financial universe stroking their white cats as we speak

agree x 1,000,000

So ,the Middle East begins to own bits of the U.S., interesting times.

And, as an added benefit for the elites, all those nasty future pension and social security liabilities will become much more affordable when repaid in depreciated currency. Brilliant.

How long do you estimate, Mr. C?

Excellent analysis piece by our Gillian (again) in today's FT:

This can and will be changed.

Xmas presents from Santa FED.

http://www.npr.org/templates/story/story.p...p;ft=1&f=17
Fed Promotes Holiday Lending

Day to Day, November 28, 2007 · The Federal Reserve plans to provide an 8-billion dollar cash infusion Wednesday to facilitate lending during the holiday season. The money is essentially a low-interest loan to the nation's banks, to be repaid on January 10th. Madeleine Brand talks to Marketplace's Nancy Marshall-Genzer about the rising demand for money at the end of the year.

Very scary, but not entirely unexpected.

The onrushing global hyperinflationary monetary holocaust:

http://www.businessweek.com/globalbiz/cont...age_top+stories

Europe November 28, 2007, 12:34PM EST
ECB to pump €30bn into money markets
The European Central Bank promises another injection of liquidity after last week's warning about the return of credit pressure

The European Central Bank has promised to supply the money markets with an extra €30bn (£22bn) in one-week funds, in another indication that the credit crisis is far from over. The ECB sold €178bn of these funds to eurozone financial institutions, compared with the €148bn it had previously said the banks would need for routine business.

It's like watching a very slow but massive train wreck!

The chain reaction has only just begun. Stand by for unprecedented turmoil.

When they really get desperate, things will start moving much, much faster.

I know, this is not good. People are going to physically suffer this time. I've seen this coming for a long time now. Took evasive action by becoming a farmer in the Far East part of the year, still a hazardous waste consultant in the UK the other part.

When it all goes t1ts at least I can grow food, have houses paid for, no debts. Rice and rubber, it's the future.

Sudden, unexpected large losses. This is the mark of the derivative beast.

http://sanjose.bizjournals.com/sanjose/sto...tml?jst=b_ln_hl
Wednesday, November 28, 2007 - 2:31 PM PST
Analysts stunned by Wells Fargo's home equity loan problems

Wells Fargo's decision to set aside $1.4 billion as a special provision for anticipated loan losses in the riskiest portion of its home equity loans surprised analysts.

The problem is that we may end up in a deflationary spiral in which case holding precious metals is not a good idea.

Real deflation --> bank collapses --> gold the only safe place to be.

Many people don't understand: In the same way the central banks can only choose between to catastrophes, hyperinflation or strong deflation, both of them are 'good' for gold, and both of them are bad for almost anything else.

EDITED for spelling etc.

What is happening is so far from my experience that I can't trust myself to make reasonable judgements about what is going to happen.

More rapidly spiralling, unexpected losses in unlikely places. This is the mark of the derivative beast.

http://www.ft.com/cms/s/0/e598e5e0-9dee-11...?nclick_check=1
LBBW faces €800m writedown

By Nina Luttmer and Ivar Simensen in Frankfurt

Published: November 28 2007 22:54 | Last updated: November 28 2007 22:54

LBBW, Germany’s biggest public sector bank, faces possible writedowns of more than €800m related to turmoil in the credit markets, potentially hitting consolidation hopes among the country’s troubled banks.

...

The problems at LBBW could have broad ramifications. Through a series of acquisitions under the leadership of Siegfried Jaschinski, it had become widely seen as the strongest of Germany’s Landesbanken.

...

The size of the writedowns is not yet finalised and could rise further, as they were based on prices from October 31. Since then, the market has weakened significantly. The bank declined to comment.

Please review http://www.sprott.com/pdf/marketsataglance/11_2007.pdf

The derivative beast holds central banks at ransom.

To delay the unavoidable collapse of the banking system, they must keep increasing the money supply exponentially.

This is monetary holocaust.

http://online.wsj.com/article/SB1196294748...ats_news_europe
Money-Market Rates Rise - Demand Is Strong For 3-Month Funds; BOE Seen as Wary
November 29, 2007

European money markets remained tight, as interest rates for the European Central Bank's regular auction of three-month funds hit their highest level since April 2001.

High interbank rates also spooked the Bank of England, according to market participants, prompting speculation that the British central bank could soon add extra funds to U.K. markets.

The ECB lent euro-zone financial institutions €50 billion ($74 billion) in three-month funds, which should cover banks through the turn of the year. The funds come on top of an extra injection of three-month money last week, as well as an additional €30 billion in one-week funds the ECB doled out earlier this week. But, in a sign markets remain tense, financial institutions bid an average 4.7% for the funds, far above the ECB's 4% policy rate.

...

London interbank offered rates climbed yesterday to 6.59% from the previous day's 6.56%, according to the British Bankers' Association. That marked the 14th straight day of increases, and the highest level since Sept. 18. The one-month rate rose to 6.07% from 6.05%.

"We've been approached by the [BOE], seeking to solve this problem," said a U.K. market analyst at a major European bank.

A trader at a second bank confirmed the approach by the Bank of England. "The [BOE] has been in touch with market participants," he said.

The BOE declined to comment. "We can't comment on market rumors and wouldn't discuss a directional move in interest rates," a spokesman said.

Some analysts say the BOE could inject extra funds into the money market as soon as today, when it holds its weekly short-term repurchase operation. Others say the more likely timing would be the last day of the current monthly maintenance period, which falls on Wednesday of next week.

"It's quite clear that tensions are very high, and something needs to be done," said Marc Ostwald, market analyst at Insinger de Beaufort. "I would expect something next Wednesday in terms of a special move," he said.

The spread is now much wider than when the fed cut in August. I agree the liquidity injections are having less and less impact. After the fed cut in August I felt angry that the Fed was bailing the pig men out. Now I just feel sorry that people belive the central banks are working for the greater good of society and trying to help solve a problem.

THEY ARE MAKING THE PROBLEM BIGGER AND JUST DELAYING JUDGEMENT DAY.

F*** it really is the end of the world as we know it. So glad I don't own anything as if I did I would be SERIOUSLY worried about my investment.

Sudden, unexpected losses due to complex, illiquid "assets". This is the mark of the derivative beast.

http://investing.reuters.co.uk/news/articl...NG-UPDATE-1.XML
LONDON, Nov 29 (Reuters) - British bank Alliance & Leicester will take a 55 million pound ($113.5 million) hit from losses on its Treasury investments, which will reduce its 2007 profit below the current range of analysts forecasts, it said.

In a surprise trading update on Thursday, A&L said the writedown for structured investment vehicles and other complex assets would cut core operating profit below the 598 million pounds consensus forecast from analysts.

A&L up 10% on that news.

Anyone - What's the difference between money that the BofE lends to Northern Roack and the money it 'injects into the market' both are lent at a penal rate (aren't they) but why does the latter not have stigma attached?

Hi Cgnao,

I have been following your posts for some time now; I love the way you put things across, just tell it how it is now beating around the bush!!

Can I ask, how you learnt so much? How do you know so much. I am only 23, but I can see easily see what your saying, I can't believe how many people on here would rather take the blue pill on this forum. The truth is there for all to see.

Cgnao, I need your help. I am in about £15,000 debt, havent got any real collateral to buy gold. What would you do in my situation? Is there any point me starting to save money in euros so when the GBP tanks I can pay off my debt with ease? I need your input.

Thanks
Flash

Time for another correction, cgnao.
You keep mentioning that these derivatives are "complex, illiquid" instruments, with no market or price etc. You've posted this many times.

That is completely incorrect, and quite easy to explain why:

A few weeks ago I explained to you that ABX is actually a credit derivatives index.
In a similar way that there are stock market indices, like the FTSE, there are credit derivative indices.
Whereas a FTSE index measures share prices, a credit derivatives index measures credit risk.

Dealers created indices for a number of reasons, for example they create far greater trade volumes, so it improves liquidity, this in turn leads to tighter spreads.
To put it simply, it makes it cheaper to trade these products, or to hedge positions.

However, it also makes it very easy to get price transparency. How transparent?
Well, there are a number of credit derivative indexes (ABX is one, there is also LCDX, iTraxx, CDX etc), which as I have explained, are very deeply traded, there's massive liquidity in these indexes. You're talking telephone numbers here. Massive, massive liquidity.

As for price transparency, look at this...

http://www.markit.com/information/products/abx.html

So you keep telling us that there's no market/price for these products, while posting pictures of the prices. Slightly ironic.

I think where you're going wrong is confusing credit derivatives with cash CDO's, which are the vehicles for all those toxic mortgages that no-one wants to buy anymore, because they're not going to get their money back.
These are entirely different financial instruments.

As you say, they're very complex instruments, but the lack of pricing transparency/liquidity in the credit derivatives market story is utter nonsense.

For you, its going to be a game of survival.

In defense of CGNAO you are wrong.

The ABX Index is a series of credit-default swaps based on 20 bonds that consist of subprime mortgages. ABX contracts are commonly used by investors to speculate on or to hedge against the risk that the underling mortgage securities are not repaid as expected.

The ABX swaps offer protection if the securities are not repaid as expected, in return for regular insurance-like premiums. A decline in the ABX Index signifies investor sentiment that subprime mortgage holders will suffer increased financial losses from those investments.

Likewise, an increase in the ABX Index signifies investor sentiment looking for subprime mortgage holdings to perform better as investments.

This does not put a value on and MBS only gives an indication of the cost to insure.

The free market is driving interest rates higher to compensate for the spiralling inflation and credit risks.

Higher rates and losses due to credit writedowns have made many borrowers and therefore their lenders insolvent.

The BoE and other central banks around the world are fighting a losing battle against the free market, and in the process destroying the purchasing power of all currencies. In a perverse vicious circle, the hige liquidity injections placate things in the short term but come back with a vengeance putting further upward pressure on interest rates.

The onrushing global monetary holocaust is accelerating and can't be stopped.

This is 100% correct, guaranteed.

Protect yourselves.

http://www.bloomberg.com/apps/news?pid=206...&refer=home
Nov. 29 (Bloomberg) -- The Bank of England said it will offer commercial banks emergency funds with longer repayment terms to stem a renewed increase in money-market interest rates.

The U.K. central bank will lend 10 billion pounds ($21 billion) at the benchmark interest rate, currently 5.75 percent, for five weeks in a Dec. 6 auction. It usually offers banks funding over a one-week period.

Cut your spending. Earn as much as you can. Spend as little as you can. No point saving, use any cash surplus to cut yur debt as much as possible, as soon as possible. Getting out of debt is your foremost priority. All else is unimportant in your situation.