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NEW -> Contingent Buyer Assistance Program
This is the top of the first inning:<p>


Derivative auction set for Movie Gallery loans

Mon Oct 22, 2007 2:38pm EDT<p>




NEW YORK, Oct 19 (Reuters) - An auction will be held on Tuesday to determine the value of loan derivatives on Movie Gallery Inc, which triggered the payout of credit default swaps written on the debt by failing to pay interest due on the loans.

<p>


Movie Gallery Inc (MOVI.O), the second-biggest U.S. video rental chain, on Tuesday filed for Chapter 11 bankruptcy protection to slash debt and reorganize as it faces competition from lower-cost rivals like online DVD rental company Netflix Inc (NFLX.O) and others. For details, see [ID:nN16406035]<p>




The auction of the credit default swaps on Movie Gallery's loan will be the first to take place in the loan derivative market, Markit and Creditex, the administrators of the auction, said in a release on Friday.<p>




Credit default swaps protect against borrowers defaulting on their debt. When a borrower fails to pay, the contract is triggered and protection sellers compensate protection buyers for the amount of debt insured, minus the amount of principal the debt recovers after default.
 
<p>Awgee, any idea what the underlying assets are that secured the loans? Basically, the "protection seller" has reimbursed the protection buyer for the for 'insured' amount, but now the protection seller get's the triggered underlying 'foreclosure' asset and is going to dump the asset in an auction. </p>

<p>Do I have that right?</p>
 
NSR - Sorry, but your interpretation is way beyond my comprehesion. My understanding, as small as it may be, is that the underlying asset is irrelevant in the sense that the payer of the swap, (default insurance), is not involved in the asset sale transaction. The payer has to make the other side whole.<p>


My interest is on more of a macro level. It will be interesting to see what these swaps actually sell for compared to what they have been carried on both parties books as. It will be a test of confidence in the payers ability to make good.
 
<p>Very interesting</p>

<p><a href="http://www.usatoday.com/money/economy/housing/2007-10-23-countrywide_N.htm?csp=N008">http://www.usatoday.com/money/economy/housing/2007-10-23-countrywide_N.htm?csp=N008</a></p>

<p> </p>
 
<p>Not a headline, but a very interesting article. Well worth reading.</p>

<p>The First Crisis of Financial Globalization and Securitization. And the Coming Generalized Credit Crunch


<a rel="nofollow" href="http://www.rgemonitor.com/blog/roubini/222079">http://www.rgemonitor.com/blog/roubini/222079</a></p>
 
<p>Awgee, I don't know, I'm asking. I think I miss understood, I thought what was being auctioned was the triggered CDS, rereading it, I think what is being auctions is the underlying loan package (equivalent of MBS) various strips (interest portion, principle portion etc.)</p>

<p>If that's the case, then the CDS is just a simple 'insurance' policy and the auction is really just an auction of established defaulted loans.</p>
 
<p>First-time homeowner ready to 'go down with his ship'</p>

<p><a href="http://www.latimes.com/news/local/la-me-standoff23oct23,0,1933928.story?coll=la-home-center">http://www.latimes.com/news/local/la-me-standoff23oct23,0,1933928.story?coll=la-home-center</a></p>

<p>"Ashtari [21-year old] saw his four-bedroom house as an investment that could change his life. With his girlfriend of five years, his sister and his brother-in-law, and some financial assistance from his mother, a registered nurse, they had scraped together a down payment. They bought it out of foreclosure from a bank. Price: $420,000."


</p>
 
NSR - I will reread it. I think the actual "insurance" poilcies, (CDSs), are being auctioned. But, I could easily be mistaken. I usually am. But if it is the CDSs actually up for auction, it will be very interesting indeed, because they will be marked to market, which is unusual as there is really no secondary market for them.
 
<p><strong><strong><strong>Merrill, Home Sales Sink Stocks</strong></strong></strong></p>

<p><strong><cite><a href="http://biz.yahoo.com/ap/071024/wall_street.html">http://biz.yahoo.com/ap/071024/wall_street.html</a></cite></strong></p>

<p><strong><cite></cite></strong></p>
 
Does anyone think the 8% drop in home sales is an underestimate?

Or that the data has been massaged a bit so that, say we have a 9%

drop in November, and a 10% drop in December, etc., but really things

dropped 25% in Sept, and maybe somewhat less in later months.



Somehow, dragging it out looks better?
 
lawyerliz,





One of the issues with the sales data is it is sample survey based by NAR. So they can pick and choose what markets to survey making the data skewed. I don't know if they cherry pick which markets to survey but I wouldn't put it past them.
 
<p>Cash out your 401k to <a target="_blank" href="http://tinyurl.com/2ndxcv">save your house</a>.</p>

<p><em>U.S. Senator Norm Coleman (R-MN) today introduced the Home Ownership Mortgage Emergency Act (cleverly, the HOME Act), which would allow troubled borrowers under certain conditions to make penalty-free withdrawals from their 401K or other retirement accounts in order to bring their mortgages current.</em></p>

<p>...and in other news, the number of seniors found to be subsisting on dog-food is on the rise. Report at 11. </p>
 
lawyerliz and graphrix - Check out lm's post on the "Earnings and home sales data this week" thread. It addresses your questions.
 
This is hilarious:





<a href="http://www.youtube.com/watch?v=yoZV5jt9puc">http://www.youtube.com/watch?v=yoZV5jt9puc</a>





Yet they still mock him.
 
jw - OMG WTF was that? Yup it is only subprime, sure it is. That vid was as bad as Kudlow cutting off Doug Kass today. Laugh all you want. WTF net income is up? Um ok. Does that idiot with the long hair know how to calculate price inflation?





Eff - I saw that this last weekend and I nearly threw up. Great drain your 401K so you can save your house because when you need to retire it will be back up above what your 401k could ever be.
 
<p><em>"Does that idiot with the long hair know how to calculate price inflation?"</em></p>

<p>That idiot with the long hair is a realtor. Seriously. That is his only credential. They have him on all the time. I guess for entertainment.


</p>
 
<p>That is one of my favorite videos. . .Mike Norman is a crack up too. He was just on Fox recently with Schiff again and sounded just as silly.</p>

<p><a href="http://www.europac.net/Schiff-FBN-10-17-07_lg.asp">www.europac.net/Schiff-FBN-10-17-07_lg.asp</a></p>

<p> </p>
 
<p>Slightly old news but. . .B of A will cut 3000 jobs and sacked the head of its investment division.</p>

<p><a href="http://www.cnbc.com/id/21460713">www.cnbc.com/id/21460713</a></p>

<p class="textBodyBlack"><strong><strong>"<a href="http://www.cnbc.com/id/15837290/site/14081545/?q=bac"><strong>Bank of America</strong></a></strong></strong> on Wednesday said it plans to eliminate 3,000 jobs, and that the head of corporate and investment banking will depart after a dismal quarter at that unit led to a 32 percent drop in overall profit. </p>

<p class="textBodyBlack"><strong>The second-largest U.S. bank said a majority of the job cuts will be in corporate and investment banking</strong>, and the rest elsewhere. These cuts amount to less than 2 percent of the company's overall workforce." </p>

<p class="textBodyBlack">I guess those Porsches and yachts are just going to have sit on the lots.</p>

<p class="textBodyBlack">BTW: Oil back up above $88. Happy days.</p>
 
IrvineCommuter:





That was the funniest part of the video to me. That Mike Norman idiot does nothing but interrupt and mock Schiff nonstop. You'd think he might have learned something about what has transpired over the last 10 months.





But does he? Of course not. He was on JUST THIS WEEK and what is he doing? STILL MOCKING HIM.





It's hard to not believe the conspiracies about financial news channels being strictly about pumping stock. I'm surprised they even let Schiff on their shows anymore. They must just think it's a hoot to call him a conspiracy theorist for not believing fraudulent government inflation numbers.
 
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