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" Barclays Bails Out Cairn To Tune Of £800m "

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http://www.telegraph.co.uk/money/main.jhtm...1/cnbarc101.xml

Barclays bails out Cairn to tune of £800m

By Philip "Phil" Aldrick, Banking Correspondent

Last Updated: 12:10am BST 01/09/2007

Barclays now has $1.6bn tied up with Cairn
Barclays has been forced to come to the rescue of a high-risk investment vehicle it created that threatened to collapse under pressure from the credit markets.
Providing further evidence of the ongoing liquidity crisis, Barclays yesterday injected $1.6bn (£800m) of emergency financing into Cairn High Grade Funding I - a so-called "SIV-lite" that is heavily invested in toxic US sub-prime mortgages.
...../
The liquidity crunch has seen prices for short-term lending shoot up at the same time as demand for long-term, sub-prime mortgage-backed assets has tanked.
As a result, a number of SIV-lites have hit valuation trigger points that require assets be sold, even though they are trading at a discount. Mainsail II and Golden Key, two other SIV-lites arranged by
Barclays, have had to liquidate positions after being unable to raise new financing.

If Barclays have been denied on a loan they are in trouble. If an individual is denied credit it goes on the record.

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RB

Why in the world would these so called financial experts think a sensible place to invest LOTS of money was in US mortgages (subprime to boot) ?

WHat possessed them ? was it simply the high rates of return offered ?

If you ( a lawyer ) could see these investments were dodgy why couldnt they ?

Was there nowhere else they could have invested the money or where the alternatives dismissed because they paid lower yields ?

Edited by jimmyjazz

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RB

Why in the world would these so called financial experts think a sensible place to invest LOTS of money was in US mortgages (subprime to boot) ?

WHat possessed them ? was it simply the high rates of return offered ?

If you ( a lawyer ) could see these investments were dodgy why couldnt they ?

Was there nowhere else they could have invested the money or where the alternatives dismissed because they paid lower yields ?

IMO, they were all mesmerised by the hope of massive profits. When greed takes over risk factors fade into the background. But don't forget, that which propelled the US housing market also propelled the miracle here and accross Europe. The ridiculous notion that you can have 300% HPI without negative consequences to follow beggars belief. However, for some it was a good deal. They applied the old "buy low and sell high" formula and got out in time. Foxtons comes to mind.

The problem with most greedy people is that they don't sell high but hang on and on and on and get burned.

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IMO, they were all mesmerised by the hope of massive profits. When greed takes over risk factors fade into the background. But don't forget, that which propelled the US housing market also propelled the miracle here and accross Europe. The ridiculous notion that you can have 300% HPI without negative consequences to follow beggars belief. However, for some it was a good deal. They applied the old "buy low and sell high" formula and got out in time. Foxtons comes to mind.

The problem with most greedy people is that they don't sell high but hang on and on and on and get burned.

of course "buy low and sell high" is fine for the actual houses themselves,

but isnt the problem with all these debt vehicles (sivs, cdos etc etc ) that once the fund manager (mr cahill take a bow) has invested millions or billions into the underlying asset he cant easily sell or did they just hang on too long ?

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of course "buy low and sell high" is fine for the actual houses themselves,

but isnt the problem with all these debt vehicles (sivs, cdos etc etc ) that once the fund manager (mr cahill take a bow) has invested millions or billions into the underlying asset he cant easily sell or did they just hang on too long ?

I think Warren Buffett's approach can sum it all up: buy from pessimists and sell to optimists. The time to get out is when everyone else is getting in. With deriviatives based on non-existent money it was never a good time to get in IMO.

As for property, there is still enough optimism, left in the market to get out as the VIs are still telling us HPI is continuing. Whether or not that is true, enough people believe it making it an opportune time to get out before The Sun write a headline to the effect that it is all over. Property is all about herd mentality and people have been sufficiently brainwashed into thinking that it is a one-way bet.

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IMO, they were all mesmerised by the hope of massive profits. When greed takes over risk factors fade into the background.

aint that the truth!

People think banks are these huge things run by the brightest people in the world when really they are all just guessing at what they are doing like stock trading, they guess it will go up or down but either way its just a guess.

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RB

Why in the world would these so called financial experts think a sensible place to invest LOTS of money was in US mortgages (subprime to boot) ?

WHat possessed them ? was it simply the high rates of return offered ?

If you ( a lawyer ) could see these investments were dodgy why couldnt they ?

Was there nowhere else they could have invested the money or where the alternatives dismissed because they paid lower yields ?

..this was a lending segment controlled in the past by back street money lenders..... Big Banks entered the arena to spread their misery and anguish purely as you suggest for the wide margins to enhance their bottom lines and provide themselves as individuals with big bonuses at Christmas time...they certainly were not doing it for the good of the neighbourhood......I wonder how many claim 'green' and other 'worthy' corporate badges for parading to the public at large..... :o:o:o

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of course "buy low and sell high" is fine for the actual houses themselves,

but isnt the problem with all these debt vehicles (sivs, cdos etc etc ) that once the fund manager (mr cahill take a bow) has invested millions or billions into the underlying asset he cant easily sell or did they just hang on too long ?

The most interesting this is that the returns were not all that great anyway.

As to your question of why they invested; they were not thinking at all for no thought is required when artificial rules as a proxy for risk control are in place.

As soon as the agencies gave the OK by stamping this stuff with 'investment grades' the game was over. It was all inevitable.

Most entertaining watching the markets now. They so want it not to all meltdown that any day without bad news is seen as the beginning of the sunshine and happiness.

This thing is set to be a big battle between dumbo politicians and central bankers... and reality.

Expect these people to believe that they can sort out a problem caused by excess liquidity by pumping yet more into the system. And watch how the markets welcome these acts, for a little while, then watch how they shit themselves as they slowly realize exactly what central banks are really doing.

The action can be observed in increasing volatility but volatility is not the only story. Just as some strikers in football score lots of goals and other only score a few but at the exact, most critical time, the timing of the volatility will be important, for it is up against the aggregated might of the world central banking system (and while at first it will seem powerful, in the fullness of time it will be revealed to be a puny weakling in the face of fundamental economic forces; but what the hell do I know?).

After and during the volatility we will see the start of the real bear market. Not for a wee while yet but the longer it takes to get going the deeper it will be.

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The most interesting this is that the returns were not all that great anyway.

As to your question of why they invested; they were not thinking at all for no thought is required when artificial rules as a proxy for risk control are in place.

As soon as the agencies gave the OK by stamping this stuff with 'investment grades' the game was over. It was all inevitable.

Most entertaining watching the markets now. They so want it not to all meltdown that any day without bad news is seen as the beginning of the sunshine and happiness.

This thing is set to be a big battle between dumbo politicians and central bankers... and reality.

Expect these people to believe that they can sort out a problem caused by excess liquidity by pumping yet more into the system. And watch how the markets welcome these acts, for a little while, then watch how they shit themselves as they slowly realize exactly what central banks are really doing.

The action can be observed in increasing volatility but volatility is not the only story. Just as some strikers in football score lots of goals and other only score a few but at the exact, most critical time, the timing of the volatility will be important, for it is up against the aggregated might of the world central banking system (and while at first it will seem powerful, in the fullness of time it will be revealed to be a puny weakling in the face of fundamental economic forces; but what the hell do I know?).

After and during the volatility we will see the start of the real bear market. Not for a wee while yet but the longer it takes to get going the deeper it will be.

ok so the ratings agencies said it was AAA and dumbos like EDward Cahill bought billions of pounds of the stuff ?

incredible really.

S&P, along with key competitors Moody's and Fitch, are paid by the issuers of bonds and other asset-backed securities to rate the level of risk inherent in these investments.

Despite the fact that concerns about the collapse in the US sub-prime market stretch back to last year, the rating companies failed to downgrade many securities linked to sub-prime mortgages until July, by which time the value of some of these assets had already declined markedly.

Christopher Dodd, chairman of the US Senate's Banking Committee, said yesterday that credit rating companies must explain why they assigned "AAA ratings to securities that never deserved them."

http://www.telegraph.co.uk/money/main.jhtm.../bcnrate131.xml

Edited by jimmyjazz

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