Thursday, January 31, 2008

The Great Credit Unwind of 2008

An Inverted Pyramid of Subprime Slop

Good questions...

"How could a layered concoction of questionable debt pools, many of dubious origin, achieve the equivalent AAA rating as U.S. Treasury securities, backed by the full faith and credit of the U.S. government, and time-tested over a century of panics, crashes and the Great Depression?

How did a 200-year old "efficient" market model that priced its securities based on regular price discovery through transparent trading morph into an opaque manufacturing and warehousing complex of products that didn't trade or rarely traded, necessitating pricing based on statistical models?"

Posted by lvmreader @ 12:31 AM (184 views)
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3 thoughts on “The Great Credit Unwind of 2008

  • It means that the system will freeze and the stock market will crash. Listen to TV stock guru Jim Cramer summed it up last week in an interview with MSNBC’s Chris Matthews:

    “But, Chris, there is something I would urge all the candidates to think about and our Treasury Secretary, which is that there are a group of insurance companies which insure all these bad mortgages and, Cris, I think they are all about to go belly-up, and that will cause the Dow Jones to decline 2,000 points. They’ve got to be shut down and the insurance given to a New Resolution Trust. This is going to happen in maybe two or three weeks, Chris, it going to on the front of every newspaper and no one in Washington is even willing to admit it.”

    Chris Matthews: “So who are you including in these mortgage companies that are going to go belly-up; give me a description?”

    “These are MBIA and Ambac. Remember the companies that Merrill Lynch and Citigroup wrote down a lot of stuff the other day? All these companies are relying on insurance to save them. The insurers don’t have the money. There’s also personal mortgage insurance; that’s PMI, is one company; MGIC is another. Chris, I am telling you that these companies do not have the capital to “make good”. And when they do fall, and I believe it is when—if the government does not have a plan in action; you will not be able to open the stock market when they collapse.” No one is even talking about the fact that these major insurers, who insure $450 billion of mortgages are all about to go under.”

    Cramer is correct in assuming that the market won’t open. And yet, so far, nothing has been done to avert the disaster just ahead. Maybe nothing can be done?

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  • @ ivmreader.. chr*st!!

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  • These views are becoming increasingly widespread. If there was nothing in them, then I think they would have been refuted very loudly. The fact that they are met with a wall of silence when aired suggests to me that they have validity. Buy physical gold…

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