Death by Paper Cuts - Why Ambac's Bailout Will Fail
As we have Nattered before... Cut All You Want...
this is a fait accompli, a train wreck in progress which nothing and no one can stop.
Take a seat and watch the horror show as the multiplier effect goes into reverse, sucking everything into its vortex.
We told you on 12/31/07 about record high PMI defaults,
and that wider credit spreads would impact profits vis a vis the inability to refinance debt.
"U.S. investment grade corporate bond issuers need to refinance about $557 billion of bonds next year.
The yield gap between US Treasuries and investment grade bonds is the highest since 2002."
Downgrade gets upgrade in Dead Pool... S&P lowered its long-term counterparty credit rating on Washington Mutual to BBB from BBB+
and its long-term counterparty credit rating on Washington Mutual Bank to BBB+ from A-.
S&P also placed all Washington Mutual ratings on CreditWatch with negative implications.
Dead Pool Update:
#1 Citigroup; #2 Ambac/MBIA #3 Merrill Lynch; #4 MGIC/PMI; #5 WaMu; #6 Wells Fargo; #7 Wachovia; #8 IndyMac; #9 FNMA; #10 FHLMC.
And Dishonorable Mention: Bear Stearns, Lehman Brothers, JP Morgan Chase, Morgan Stanley. Foreign Legion of Dishonor: Barclays, Deutsche Bank, UBS
Do you hear that whoosing sound growing louder? The ECB injected a record $500 billion into the banking system on Dec. 18.
The Federal Reserve provided $160 billion in short-term loans since mid-December in six auctions through the Term Auction Facility.
As banks hoard the freshly printed money, money market rates climb.
The euro interbank offered rate, or Euribor, for the loans climbed 3 basis points to 4.43 percent today, the highest since Jan. 17.
And little money in being lent out as in Europe, the market for new bond sales by non-financial companies is almost dead.
FYI, Libor increases raise US mortgage rates and increase the likelyhood of defaults as ARM's reset.
The Fed yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.
Corporate debt, municipal bond auction term, and now the agency bond markets have joined in the disarray of the mortgage bust.
Corporate and municipal borrowing costs have soared, straining state and local budgets already in deficit.
Upside? Investor Wilbur Ross on Thursday said he bought about $1 billion of U.S. municipal bonds last Friday
because yields had risen to "relatively unparalleled" highs compared with taxable Treasuries.
Perhaps a good move, as long as the municipalities don't have to declare BK, because this time there is no safety net. Speaking of which...
Final stake in the Vampire... Ambac has added a backstop to its common stock and equity units offering.
As a result, the consortium of banks (Citigroup, Barclays, etc.) would need to step in to supply capital if the stock offering falls through.
Here's a big hint for the clueless... THE BANKS DON"T HAVE THE MONEY!!! They are already technically insolvent as their reserves have been borrowed from the Fed.
Ambac is going to lose their AAA rating, and the debt they insure is going to plunge, and that will be all she wrote for Citigroup amongst others...
who will join Countrywide (bought by BofA) and bond guarantor ACA (went BK) as #3 in our Trifecta
called for originally on 08/09, "a least one major: lender, brokerage house and bank will freeze assets,
and collapse and board up its doors; or will be bailed out by private investors or the government."
We are confident that Ambac, WaMu and UBS will soon join the swelling ranks of our hall of shame.
Not to mention the agency backed (FNMA, FHLMC) paper debacle that is about to befall the markets.
As the vortex of the multiplier effect in reverse spins out its financial shrapnel, this truly will be a death by paper cuts. Can't say you weren't warned.
this is a fait accompli, a train wreck in progress which nothing and no one can stop.
Take a seat and watch the horror show as the multiplier effect goes into reverse, sucking everything into its vortex.
We told you on 12/31/07 about record high PMI defaults,
and that wider credit spreads would impact profits vis a vis the inability to refinance debt.
"U.S. investment grade corporate bond issuers need to refinance about $557 billion of bonds next year.
The yield gap between US Treasuries and investment grade bonds is the highest since 2002."
Downgrade gets upgrade in Dead Pool... S&P lowered its long-term counterparty credit rating on Washington Mutual to BBB from BBB+
and its long-term counterparty credit rating on Washington Mutual Bank to BBB+ from A-.
S&P also placed all Washington Mutual ratings on CreditWatch with negative implications.
Dead Pool Update:
#1 Citigroup; #2 Ambac/MBIA #3 Merrill Lynch; #4 MGIC/PMI; #5 WaMu; #6 Wells Fargo; #7 Wachovia; #8 IndyMac; #9 FNMA; #10 FHLMC.
And Dishonorable Mention: Bear Stearns, Lehman Brothers, JP Morgan Chase, Morgan Stanley. Foreign Legion of Dishonor: Barclays, Deutsche Bank, UBS
Do you hear that whoosing sound growing louder? The ECB injected a record $500 billion into the banking system on Dec. 18.
The Federal Reserve provided $160 billion in short-term loans since mid-December in six auctions through the Term Auction Facility.
As banks hoard the freshly printed money, money market rates climb.
The euro interbank offered rate, or Euribor, for the loans climbed 3 basis points to 4.43 percent today, the highest since Jan. 17.
And little money in being lent out as in Europe, the market for new bond sales by non-financial companies is almost dead.
FYI, Libor increases raise US mortgage rates and increase the likelyhood of defaults as ARM's reset.
The Fed yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.
Corporate debt, municipal bond auction term, and now the agency bond markets have joined in the disarray of the mortgage bust.
Corporate and municipal borrowing costs have soared, straining state and local budgets already in deficit.
Upside? Investor Wilbur Ross on Thursday said he bought about $1 billion of U.S. municipal bonds last Friday
because yields had risen to "relatively unparalleled" highs compared with taxable Treasuries.
Perhaps a good move, as long as the municipalities don't have to declare BK, because this time there is no safety net. Speaking of which...
Final stake in the Vampire... Ambac has added a backstop to its common stock and equity units offering.
As a result, the consortium of banks (Citigroup, Barclays, etc.) would need to step in to supply capital if the stock offering falls through.
Here's a big hint for the clueless... THE BANKS DON"T HAVE THE MONEY!!! They are already technically insolvent as their reserves have been borrowed from the Fed.
Ambac is going to lose their AAA rating, and the debt they insure is going to plunge, and that will be all she wrote for Citigroup amongst others...
who will join Countrywide (bought by BofA) and bond guarantor ACA (went BK) as #3 in our Trifecta
called for originally on 08/09, "a least one major: lender, brokerage house and bank will freeze assets,
and collapse and board up its doors; or will be bailed out by private investors or the government."
We are confident that Ambac, WaMu and UBS will soon join the swelling ranks of our hall of shame.
Not to mention the agency backed (FNMA, FHLMC) paper debacle that is about to befall the markets.
As the vortex of the multiplier effect in reverse spins out its financial shrapnel, this truly will be a death by paper cuts. Can't say you weren't warned.
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