Economic Amrageddon - Bond Insurers About To Default
- Thread starter Trendytrader
- Start date
I too was in fixed income during that period of time Brownsfan! And you are 100% correct!
Daddyeaux, you're 100% right too about the derivatives ponzi scheme!
I already posted this in another thread, but it bears repeating. The exact same applies the derivatives market in general....
Here's a recap how we have gotten to where we are:
1) the Fed driving interest rates ridiculously low, fueling cheap money bubbles in every market
2) to the individual real estate speculator, investor, flipper, living beyond their means people that bought the properties under the greater fool theory that prices only go up,
3) to the mortgage companies that underwrote the loans with a total disregard for underwriting standards and the ability to repay
4) to the investment banks that pooled those loans and sliced and diced the cashflows into fixed income securities and products
5) to the rating agencies that assigned them investment grade ratings
6) to the insurance wrapper companies that made the high ratings possible
7) to the hedge funds, money managers, mutual funds, banks, credit unions, insurance companies, pension funds etc that purchased the products created by the Street
And now they are ALL crying fowl, demanding restitution.....but all was fine as long as they were MAKING money.
The game IS rigged.....because the government refuses to let the markets go where they MUST go. The real estate market and the financial markets NEED the cleansing that should be allowed to occur naturally.....and that means LOSSES MUST BE BOOKED AND TAKEN, PERIOD. Whatever happened to taking responsibility for your actions!?!?!?!
Oh, unquestionably.
The only problem is - what is going to happen in those time?
Dollar up or dollar down? Either option is concievable. And equity markets will move accordingly, permabulls or permabears not withstanding. Harry Dent's 36,000 dow might not seem so silly when EUR/USD is 5:1 (reductio ad absurdum). Nor would a global financial implosion cause a potential dollar bull the likes of which we have never seen.
The only thing you can count on is volatility. That much is certain.
I've been short MBI for a few months now. I read the Jim Willie article and read about the CDO squared and I'm just amazed by the amount of stuff the company has "insured".
I am also long gold because of the continuing bailouts of the financial industry.
At what point will the US govt start to bailout MBI and the insurers? Currently MBI has a market cap of over $2 billion, so I'm thinking the short position is good for at least a decline to $10 per share.
Then again I could be wrong. Like another poster wrote earlier in this thread, gold is holding at support, and is up strongly today.
I am also long gold because of the continuing bailouts of the financial industry.
At what point will the US govt start to bailout MBI and the insurers? Currently MBI has a market cap of over $2 billion, so I'm thinking the short position is good for at least a decline to $10 per share.
Then again I could be wrong. Like another poster wrote earlier in this thread, gold is holding at support, and is up strongly today.
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daddyeaux: Thanks for the comments. I don't see as much posting as to what to do with dollars. Yes there is a big time problem but what to switch to is the $64 question. I wonder what worked well during the 1930s depression? I started putting some into an Agri fund since the grains should do well with ethonal sucking up crop land we need for food crops but that can't counter what this could collapse into. I think I'll leave accounts alone, for tax reasons, untill early Jan and then start transfering early Jan. ag
Basically...
Unless you are a Pro Bond Trader...
STFU...
Because amateur speculation is worthless.
I trade bonds everyday...
And the VAST MAJORITY of the banks and investment dealers that are "in trouble"...
Are yielding between 7.5% and 8.2%...
Specifically C, BAC, MS, MER, DB, ING, JPM, RBS, etc.
NO WHERE NEAR EVEN MINISCULE RISK OF BANKRUPCY LEVELS.
For constrast...
Here are yields of 2 companies in REAL danger of default and liquidation:
CFC 15.5%
GM 11.3%
If bonds for the banks and investment dealers DROP ANOTHER 30%...
And are yielding in the 10.0% range...
Then one can start to talk about a small risk of default.
It's almost as stupid as somebody like yourself suggesting it can't happen AGAIN....
