tag:blogger.com,1999:blog-3782644139927778760.post721221157332948739..comments2008-02-08T12:35:45.319-05:00Yves Smithhttp://www.blogger.com/profile/03506020285476330865noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-3782644139927778760.post-65223648699776433892008-02-08T12:35:00.000-05:002008-02-08T12:35:00.000-05:002008-02-08T12:35:00.000-05:00Just a thought.<BR/><BR/>Seems like Deutsche Bank and Goldman are the ones who pretty much hedged the subprime crisis -- using CDS. I suspect that the current situation leaves them both scared silly -- not that Goldman will ever show it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-30726621024356454932008-02-08T08:17:00.000-05:002008-02-08T08:17:00.000-05:002008-02-08T08:17:00.000-05:00<I>...who said that Trichet, the ECB's chief, had made a strong plea for the Treasury to bail out the bond guarantors.</I><BR/><BR/>I been positing elsewhere over the last couple of weeks that this would ultimately happen, and be justified as the lesser of two evils.<BR/><BR/>Still, I personally would like to tell Trichet to phuck off, even if US officialdom won't.ehnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-31672418708013540892008-02-08T04:14:00.000-05:002008-02-08T04:14:00.000-05:002008-02-08T04:14:00.000-05:00Real justice would be for the the bond insurers to tell Deutsche Bank, Citigroup, Goldman Sachs, and all the other Mismanagers of the Universe to go pound sand.<BR/>Why? Because like any insurer, the insurer does not have pay claims when the claimant has acted recklessly or fraudulently.tom a taxpayernoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-76762149640290169932008-02-08T03:39:00.000-05:002008-02-08T03:39:00.000-05:002008-02-08T03:39:00.000-05:00Yves,<BR/>You bring up a stellar point about the new Basel II which banks have to adhere to. Perhaps you could elaborate in a later post on the ramifications of CDO downgrades and on the different tier capital levels. Just something to keep in mind since you could articulate the nuances of Basel II as good as anyone IMO.invictusnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-25684040785290489992008-02-07T22:26:00.000-05:002008-02-07T22:26:00.000-05:002008-02-07T22:26:00.000-05:00zweiblumen, <BR/><BR/>Whoops. Thanks. Readers know proofreading is not my strong suit, and the spell check in Blogger hasn't been working this week.Yves Smithhttp://www.blogger.com/profile/03506020285476330865noreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-64457189689905345992008-02-07T22:05:00.000-05:002008-02-07T22:05:00.000-05:002008-02-07T22:05:00.000-05:00Snaguine?Zweiblumenhttp://www.blogger.com/profile/09832645240597993470noreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-56964822207711378922008-02-07T20:56:00.000-05:002008-02-07T20:56:00.000-05:002008-02-07T20:56:00.000-05:00Debt tsumami story (OT):<BR/><BR/>Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.<BR/><BR/>The Office for National Statistics said it had taken the decision to designate it a state entity because the size of the government's support for the stricken bank meant it had effective control. The move has the effect of bringing up to £100bn of Northern Rock's liabilities onto the national debt.<BR/><BR/>Although the Treasury said the move was only temporary, it means that one of Gordon Brown's two fiscal rules - that public debt should not exceed 40% of gross domestic product - will be broken. The national debt stands at £537bn, equivalent to 37.7% of GDP. The ONS said the reclassification would add 6.7 percentage points to that figure, taking it to 44.4%.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-29165165507858107142008-02-07T17:25:00.000-05:002008-02-07T17:25:00.000-05:002008-02-07T17:25:00.000-05:00Hi Doc no,<BR/><BR/>Real interest rates = Nominal interest rates minus Inflation<BR/><BR/>TIPS - Treasury Inflation Protected Securities. A bond that receives a fixed stated rate of return, but also increases its principal by the changes in the Consumer Price Index.<BR/><BR/>A straight treasury bond only has a fixed nominal rate of return when purchased. <BR/><BR/>TIP usually pay 1- 3 % real return.<BR/><BR/>Treasuries pay a nominal return, but can even yield a negative real return. Say inflation is 7 % and a treasury pays 4%, so the treasury would yield a negative 3% real returnAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-31262347214417983432008-02-07T17:05:00.000-05:002008-02-07T17:05:00.000-05:002008-02-07T17:05:00.000-05:00Anon of 4:35 PM,<BR/><BR/>Ackman did not make the bad business decisions that led to the bond insurers' woes, so I find it a bit odd that he is the target of your ire. Saying that the emperor has no clothes doesn't make one responsible for his nakedness. I suggest you read his 145 page slide show on MBIA and Ambac, or his more recent 30 page letter to the regulators before casting aspersions.<BR/><BR/>Moreover, if this was merely a slander campaign by a determined short, the markets would shrug it off. But the credit default swaps for all the insurers are trading at distressed levels, and for some time.<BR/><BR/>Ackman has been saying since 2002 that the monolines' business model didn't work. If the regulators had listened to him then, the insurers never would have gotten in the position to endanger the financial system.Yves Smithhttp://www.blogger.com/profile/03506020285476330865noreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-31356447949560528072008-02-07T16:35:00.000-05:002008-02-07T16:35:00.000-05:002008-02-07T16:35:00.000-05:00Re: "``It is bad practice to rely on the judgment of those whose misjudgments have caused the current crisis,'' Ackman wrote in the letter dated Feb. 5."<BR/><BR/>>> Is he talking about himself there or who? I assume he is speaking in terms of some other underwriter, banker, investor or rating agency and trying to do some PR to make himself look less guilty?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3782644139927778760.post-74011681979340006012008-02-07T15:29:00.000-05:002008-02-07T15:29:00.000-05:002008-02-07T15:29:00.000-05:00Hey Yives,<BR/><BR/>Ot, but what do you know about TIPS and treasuries?<BR/><BR/>I went here and this is a little new to me: http://www.treasurydirect.gov/instit/annceresult/tipscpi/tipscpi.htm<BR/><BR/>My interest today is related to how The Fed target rate for lending is adjusted in relation to Treasuries.<BR/><BR/>This caught my attention today: Adjusted for inflation, the Fed's benchmark rate ``is now approaching zero,'' making it ``clearly an accommodative level,'' Plosser said. Traders expect the Fed to lower the target rate for overnight loans between banks to 2 percent by June, futures show.<BR/><BR/>Thus my question related to both parts above, is, is The 10 year treasury adjusted for inflation; I think not, but perhaps you can take a few seconde to explain that if possible.<BR/><BR/>The reason that interest me is because I sometimes look at stock index valuations based on earnings yield, e.g, The inversion of the S&P 500 index P/E is the earnings yield and can be thus correlated to a 10 year bond yield; this gives a simple range of overvaluation of undervaluation, but now, I am very curious as to the great possibility, that the 10 year treasury yield is not adjusted for inflation, thus this benchmark I use could be off by 3 or 4%.<BR/><BR/>Several weeks ago, I wondered if the S&P was overvalued by 5%, but now Im thinking maybe 8%.<BR/><BR/>Any thoughts?Doc Nonoreply@blogger.com