It was just a matter of time before it happened. With many big banks being stuck in the Subprime mess by taking large losses, and others being involved with lawsuits alleging unsuitable investments to municipalities which, after the collection of huge upfront fees, collapsed in value, private clients finally took notice. The article “Ripe for the poaching” had this to …
Downgrades May Cost Billions
In a follow up to yesterday’s post regarding bond insurers. CNN Money reports that any downgrades may cost banks billions in increased reserves:Downgrades of bond insurers could require banks and securities firms to increase reserves by between $7 billion and $10 billion, rating agency Moody’s Investors Service estimated on Tuesday. If trouble in the so-called monoline business gets even worse, …
Breaking Up Is Hard To Do
In the latest saga of bond insurers’ problem, Bloomberg reports that “Bond Insurer Split May Trigger Lawsuits:”Regulators’ plans to break up bond insurers into “good” businesses covering municipal debt and “bad” businesses liable to subprime-related losses may trigger “years of litigation,” Bank of America Corp. analysts said. New York Insurance Department Superintendent Eric Dinallo and New York Governor Eliot Spitzer …
Have We Reached Bottom?
Based on the amount of reader e-mails I have received, I am amazed about how many investors are in hot pursuit of trying to pick a bottom in certain beaten down ETFs. Others are using an assortment of analysts and TV gurus to confirm their uncontrollable desires to enter the market and, hopefully, pick a declining investment (a loser) on …
Sunday Musings: It’s Not About You
No matter where you look, and which online news service you scan, you are bombarded with stats about the declining housing market and the daily increase in the number of homes entering foreclosure. It’s not only happening in the bubble states (California, Nevada, Arizona, Florida) but nationwide as well. Calculated Risk featured an update story on the subject in Georgia, …
How Credit Default Swaps Work
One of the many terms you’ve been reading about is Credit Default Swaps (CDS). They represent a market that is currently valued at some $50 trillion (yes, trillion, not billion) and can, given today’s counter party risk, which I alluded to in a recent post, affect the markets very negatively given the right circumstances.So what on earth are CDSs and …