Wow 2000 point drop, that may be a GREATTTTT buying opportunity if you are going to stay long for the next 5-10 years. If any of those companies go belly up along with any homebuilder going belly up, the bottom is far from being found in this market.
if they get a waiver from creditors that they don't have to post collateral then they may be able to reorganize. A KEY point is that ACA is the ONLY insurer with this type of Forbearance Pact agreement to post collateral "if downgraded" with the banks. So perhaps there is still time for them to find a workout for the bond insurers as a whole But really if they dont get some headlines out to this effect ASAP it will be too late. The market will start discounting the idea that these banks will soon be make more statements of losses tied to the likely washout of the bond insurers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=alKf23cwrb5Q&refer=home These Central bankers with all their education are going to fuck the system and all of us along with it. They are going to send us back to the financial dark ages. The stimulus packages is a bunch of BS and will do nothing to stop the potential domino effect of the base of the house of cards from collapsing (ie the bond insurers and the financial pillars that exits due to the faith that they are not counterparty phantoms). Fed rate cuts also will do nothing to shore up faith in the financial system, they will help get the system back on its feet and inject liquidity where needed and they need to come down 1.25-1.5% pretty quickly but alone Fed cuts will do nothing to stave off the current brink of collapse that the financial system is facing. Its not about the equity markets, they can get creamed and it won't kill the global economy, but if credit markets vaporize then the party is over, and over for a very long time. The solution here is limited to the US government coming out and saying categortically that the pillars of thefinancial system are intact, that there is no reason for panic as their hedges are real and backed by the US gov. That will buy time for positions to be unwound in an orderly manner and for repricing of risk to occur in a market place that will stil be functioning. Remember that the parties involved in the LTCM bailout actually made a profit, a government guarantee here would not necessarily mean a huge taxpayer bailout if the markets are given time to reprice in an orderly fahsion. There may be some taxpayer money needed but it will be cheap compared to what it will cost in losses and in lost growth if this step isn't taken and fairly soon. Once trust is lost it takes a long time to regain. The financial markets have to know that the US will never allow panic to trash its financial system.
"I can say one thing: We are there, to help facilitate an injection of capital, if that ends up being the right idea, or if things go in the wrong direction, to do a quick rationalization of their situation"
It means that all their economic models and theory is telling them one thing but the reality that is smacking them in the faces like dead wet fish is completely different and they don't know what the hell to do. The central banks are always behind the curve. In the current situation there isn't time for them to figure it out and even if there was the tools they have at their disposal are not sufficient. Credibility is now the issue and the CB who have been saying everything is fine for the last year are hardly going to be able to instill that when they have none left themselves.
here's the S&P lastest actions on ambac Ambac Assurance Corp. Ratings On CreditWatch Negative After Canceled Equity Offering 01-18-08 55 Classes In 22 European Securitizations Placed On CreditWatch Negative After Ambac Action 2008-01-21 22 Ambac-Insured, 'AAA' Rated Emerging Market Securitization Ratings Placed On Watch Negative 2008-01-21 think they might get a call from the new york fed tonight to go easy in their attempt to end the financial world
Insurers are insured by insurers are insured by insurers... ad infinitum. The total Credit Default Swaps value is approx $450 trillion. If there's a domino collapse of the bond insurers the net loss will be a minimum of $20 trillion. This would be a catastrophe on an unprecedented scale - the economic devastation unimaginable. And guess what - it can happen.
i've been saying this for weeks now. Thank you for the numbers. where can I read more in depth into the numbers? Are we really talking a 3-5% loss??