DOW down 223 points in 1st hour of trading

NEW -> Contingent Buyer Assistance Program
My takeaway from the ad was that they needed to get bodies on the planes because far fewer people are going to Europe because the dollar is tanking vs. the Euro. Case in point: we had planned on France for our 2008 trip, but won't if the exchange rate is horrible.
 
I took EvaL's comment as we don't have enough of you bloody yanks coming here for vacation because your dollar doesn't go far. Bunch of wankers.
 
<p>awgee - "I would be very curious to know specific reasons why the analysts at your company do not believe the CDSs are a concern."</p>

<p>In summary, as a standpoint of the company, you go with the trends. Companies move slower and you invest with the masses. If what you are saying does indeed happen, then everybody's in trouble.</p>
 
Graphix understands this stuff way better than me. But here is my take on it. Kass is a bear and is predicting that the inabilty to insure these debt intruments in the open market will drive the value of them into the ground. They are going that way on their own. But the AAA and other quality paper will also get hammered making the credit crises even worse. Freddie and Fannie are suspect as it is since they do not have to publish a balance sheet. The government lets them slide on timely reporting. But it would leave all the debt they are holding and the bondholders in a big jam. The insurance is a huge part of a quality bonds value. And that insurance used to be very cheap. The premiums on the insurance for these bonds is just going up x100 in recent weeks as well. Just look at the ABX <a href="http://www.markit.com/information/products/abx.html">http://www.markit.com/information/products/abx.html</a> Everthing but the AAA is tanking. All that 06 paper is toast.
 
<p>AAA was selling at around 85 cents on the dollar that last time I check. Am I wrong?</p>

<p>FNMA and FHLMC have a lot of risky loans masquerading as prime loans in their portfolios. I do not know what accounting regs they are held to, but I do know they kinds of loans they buy. And, since they are gov't sponsored entities, investors feel that they are as good as treasuries. Ohhh someone is in for a rude awakening one day.</p>
 
rickhunter - I think that is the general attitude. As it was towards CDOs, CMOs, yadda yadda. It kind of reminds me of the story of the guy who is in midflight, down 40 stories, from a jump off an 80 story building, who is thinking, "Hmm-m, everything is ok so far."
 
awgee - the analysts are telling me that when we enter into negotiations with a company for derivative transactions, we usually go by the ISDA. Then on top of that, we have a CSA document. These are guidelines of the negotiations in case... Basically, they are saying that the CDSs and interest rate swaps are Collateralized.
 
"Amongst the dealer community (Dealer to Dealer), eligible collateral is almost exclusively... Cash, Treasuries, and Agencies. Other, non-dealer, counterparties will negotiate additional collateral, such as corporate bonds, certain mortgage-backed securities, etc. Insurance companies, for example, don’t tend to hold many Treasuries, so they simply don’t have them to post. So, they post corporates, but at a larger haircut than that for Treasuries."
 
Thanks rickhunter. There is so much to learn about over the counter derivatives. What is the dealer community? Who are dealers in a dealer to dealer transaction? My understanding, as limited as it is, is that the majority of CDSs are collateralized with ABSs consisting of corporate bonds, and collateralized with leveraged CDOs and CMOs and even other CDSs. It is a good thing there is a regulatory agency with which OTC derivatives are registered to make sure the issuer is not using the same collateral for more than one instrument, or even selling or trading the collateral without the holder's knowledge. Oh, I forgot. There is no regulatory agency and these derivatives are not registered.
 
Well today looks like some more wind is coming out of the financials. Especially WAMU (WM) Off 15% at $ 20.50. This was a $ 40.00 stock in the summertime. Dow off 235 as I head for lunch. WAMU is going to need to come clean on how much loss they see coming on the Mortgage paper they are holding. Otherwise the market is just going to keep pounding them.
 
I think everything is leading up to the new disclosure rules on Level 3 assets. I feel the banks are trying to "weather the storm" in order to avoid huge shocks to their market value when they have disclose the value of their "toxic" assets.
 
<p>Coming clean all at once would mean mark to market for all assets. What if there is no market? What valuation do you ascribe? And what if marking to market means the bank is insolvent?</p>
 
So what are you saying...come to market in bits and pieces so that eventually they will be insolvent or that we start having huge runs to take out your deposits like Northern Rock in London?





First off lets be quite honest...even if banks like Citi, BAC, JPM, WaMu (possibly), were to go insolvent a federal trustee would come in and operate the bank and eventually they would either a) be purchased or b) be backed by the govt and eventually turn out ok but a bit smaller with lots of regulations in place.





<em>What if there is no market?</em>


We know their is a market for them it's just the the banks don't want to attempt to sell them because these securities are on their books at .90 cents or more on the dollar and buyers are only willing to pay .20 cents on the dollar.





<em>What valuation do you ascribe?</em>


I know not to answer a question with a question but what is wrong with the valuation they have right now? The only thing I see wrong with the valuations is that the Banks or Brokerages don't like the value of them. Kind of like that appraiser that wouldn't appraise the home for enough.





<em>And what if marking to market means the bank is insolvent?


</em>Regional banks might go under and it will give larger banks, that are solvent, a chance to come in and purchase the left over assets. Larger banks won't go under b/c the FED will save them but when they are solvent again they will be on a very short leash.
 
Well, the mkt finished off 361.



I don't know anything about the regional banks. Is there reason to think they are in worse shape than the biggies? If I were a betting woman, I would bet they are in slightly better shape.
 
You must log in or register to reply here.
Back
Top