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Re: CA Dives back into the Bond Pond

Unread postby mattduke » Sun 22 Mar 2009, 19:08:52

Why don't they just spend less than they steal from taxpayers?
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Re: CA Dives back into the Bond Pond

Unread postby UltraViciousBudgie » Sun 22 Mar 2009, 22:36:24

$this->bbcode_second_pass_quote('mattduke', 'W')hy don't they just spend less than they steal from taxpayers?


Not just the whores in Sacramento but also the people stealing from themselves (and future generations) by voting for more spending ballot measures every election. Of course those who don't pay taxes but instead receive them--and there are more than a few in this state--probably don't mind.
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Re: CA Dives back into the Bond Pond

Unread postby Fiddlerdave » Mon 23 Mar 2009, 02:16:04

$this->bbcode_second_pass_quote('UltraViciousBudgie', '')$this->bbcode_second_pass_quote('mattduke', 'W')hy don't they just spend less than they steal from taxpayers?


Not just the whores in Sacramento but also the people stealing from themselves (and future generations) by voting for more spending ballot measures every election. Of course those who don't pay taxes but instead receive them--and there are more than a few in this state--probably don't mind.
Iy is interesting IN CA with prop 13 limiting increases in property taxes.

What this turns out to mean is that anyone who already owns a home or business property can happily vote for any expenditure that raises property taxes and not cost themselves or their heirs a dime (Prop 13 tax limitations follow you if you buy a new house, or when your children take yours over!).

So the long term residents I know here have been more than happy to vote for any expenditure at all. It is no skin off their nose while still bitching about "too high taxes" while paying $450/yr on a million dollar home. But even if you buy a house today, tomorrow you lose ALL liability for new spending.

"Tax Revolt" actually produces massive spending. Party ON, Bros!
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First Bond Insurer Suspends Claim Payments

Unread postby mattduke » Sun 03 May 2009, 10:49:26

Image
$this->bbcode_second_pass_quote('', 'S')ellers of protection on debt issued by bond insurer Syncora Holdings will need to make payments to counterparties after the company suspended claims payments, the International Swaps and Derivatives Association said on Friday.

$this->bbcode_second_pass_quote('', 'T')he company is the first U.S. bond insurer to suspend claims payments as it struggles to reduce losses on about $8.6 billion of residential mortgage-backed securities it insured.


link
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Re: First Bond Insurer Suspends Claim Payments

Unread postby StormBringer » Sun 03 May 2009, 10:59:38

So what are they serving for dinner tonight on the Titanic......
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Re: First Bond Insurer Suspends Claim Payments

Unread postby shortonsense » Sun 03 May 2009, 11:01:27

$this->bbcode_second_pass_quote('mattduke', '[')img]http://www.numericdomains.com/photos/uncategorized/2008/01/21/iceberg_2.jpg[/img]


That is a fantastic picture. [smilie=icon_thumright.gif]
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Re: First Bond Insurer Suspends Claim Payments

Unread postby Sixstrings » Sun 03 May 2009, 11:07:00

Oh my. As a taxpayer, I insist we must bail them out! For the security of the financial system! Write your congressman everyone. ;)
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Re: First Bond Insurer Suspends Claim Payments

Unread postby shortonoil » Sun 03 May 2009, 13:01:01

Sixstrings said:

$this->bbcode_second_pass_quote('', 'O')h my. As a taxpayer, I insist we must bail them out! For the security of the financial system! Write your congressman everyone.


This is starting to look like trying to bail out Lake Michigan with a teaspoon. It is amazing that ABAC and MBIA are even still in business. Once the corporate and commercial refis hit we’ll see counterparty defaults skyrocketing. With AIG sitting on several hundred billion of F & F CDS maybe Mr/Mrs taxpayer should reserve some of their floatation gear for when the tsunami really hits?
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Re: First Bond Insurer Suspends Claim Payments

Unread postby shortonoil » Sun 03 May 2009, 14:00:08

pstarr said:

$this->bbcode_second_pass_quote('', 'D')oes this particular catastrophe portend a specific new trend?

Is it possible to place this event anywhere in this scheme?

I'd like to understand the context.


That is certainly where the mess all started, but I think it has now grown much, much larger. To sum it up quickly, I think the banking industry (the already insolvent one) is likely to wake up one morning in the very near future, and realize that they are sitting on $3.5 trillion in T-bills that are absolutely worthless to them. If they try to liquidate them they will go broke, if they don’t liquidate them, they will still go bust!

If Turbo Tim’s PPIP (which may be the stupidest idea ever conceived) doesn’t work, we could have a banking/bond crisis that would make 1929 look like a $2.00 cash error at the church bake sale!

The FED appears to have gotten themselves in a box, and it looks like the Jolly Green Giant could be thinking about stomping on it!
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Re: First Bond Insurer Suspends Claim Payments

Unread postby Daniel_Plainview » Sun 03 May 2009, 16:36:36

The net CDS payout is only $1B on this ... so the question is how many other similar companies will eventually be following suit.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby eastbay » Sun 03 May 2009, 17:30:33

$this->bbcode_second_pass_quote('shortonsense', '')$this->bbcode_second_pass_quote('mattduke', '[')img]http://www.numericdomains.com/photos/uncategorized/2008/01/21/iceberg_2.jpg[/img]


That is a fantastic picture. [smilie=icon_thumright.gif]


It's not a picture silly. Look at it carefully and you'll see. That cute photo shop work of art has been around for at least 10 years.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby FireJack » Sun 03 May 2009, 17:43:16

IS this likely the beginning of a derivative market crash? What does that mean?
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Re: First Bond Insurer Suspends Claim Payments

Unread postby shortonoil » Sun 03 May 2009, 19:15:23

pstarr said:

$this->bbcode_second_pass_quote('', 'I') guess I was hoping for a sign i.e. that the insured devices were a particular class of mortgages. No?


All the tranches have been insured, but the alt-a, jumbo and prime paid a lot less in premiums than the sub-prime, thus the counter-parties have a lot less with which to cover any losses. The problem is that the higher tranches are now imploding at rates approaching the defaults rate we previously saw in subprime. The spread on these instruments was never enough to cover reasonable losses; they were fairy tale, godilocks, figments of someone’s imagination. The entire monoline industry used an algorithm that was concocted by a guy by the name of Li. He was wrong, and now there is no way back.

The real monster, though, is brewing in Treasuries. When a bank buys Treasuries as an asset it is allowed by law to hold them on their books at the issue price regardless of the going market price. This insures the banks that they will make a profit on their purchase no matter what happens. Now, a bond’s market value and interest rate move in opposite directions. When the interest rate goes up the value of pre-existing bonds goes down, and visa versa.

If a bank buys a bond, and subsequently interest rates go down, they can sell that bond for a profit in the market. If interest rates go up the bank can hold the bond until maturity, use the bond as reserves against loans, and again be guaranteed a profit. This system insures that there will be a demand for US government paper, and it also guarantees that the banksters can own two Mercedes, a big house in a gated community, and get the best pick of goods at Madame Louesi’s Pleasure Place.

As the credit markets imploded the FED forced interest rates lower and lower. Everyone was happy as declining bond rates provided big profits to bond speculators and the banks. Even left with diminishing loan issuance the banks where getting by on cheap government bale out money and bond speculation.

Then the foreign buyers took a hike. Interest rates started rising and the banks where left with massive quantities of assets that they couldn’t sell without taking huge losses and further impairing their already insolvent balance sheets. The FED and Treasury faced with having to raise vast quantities of new money are now left without their reliable old buyers, and sellers, the banks.

There isn’t enough credit origination taking place to service existing debt. The FED to compensate has been buying trash of any sort to provide that liquidity. The PPIP is Turbo Tim's new such device, and one doomed to failure. No one is going to buy assets that don’t have a real market value, or market in which to trade them.

Like the credit markets the bond market is becoming quick frozen. No one can sell, nor does anyone want to buy. It looks like Uncle Willy has trouble coming down the line !
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Re: First Bond Insurer Suspends Claim Payments

Unread postby patience » Sun 03 May 2009, 22:12:33

So-o-o-o-o. The FED buys the Treasuries, since no one else will, and we have the snake eating its' own tail. How long does that last? Then, interest rates go asymptotic, and the dollar is crap, right?

I've read about that sort of thing, but not what happens THEN. Sounds like Iceland to me. If so, then we get to live with whatever we have here in the US, because imports will be priced out of reach, it sounds like. O-o-o-o-h shite.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby Tyler_JC » Sun 03 May 2009, 23:39:42

The result is the Obama Bond (the modern Carter Bond).

Faced with massive budget deficits and a depreciating currency, the Feds will be forced to issue bonds denominated in foreign currency. That way foreign investors will know that their investment can't be stolen by inflation.

The theory is that a government forced to pay back its debt in foreign currency will be forced to balance its books and restore the stability of its own currency.

If we don't balance our books soon and if public debt grows larger than we can service, the dollar will crash. More importantly, the US will be cut off from foreign capital. We would become 1980s Brazil.

Cut off from foreign capital with a large foreign debt to pay, we would be forced to sell off assets, hike taxes, slash social spending, and slash imports. Eventually the US current account balance would stay in positive territory for long enough to get the debt down to a manageable level.

The problem is that the correction could take decades and we would lose our global leadership position.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby Keith_McClary » Mon 04 May 2009, 00:19:38

$this->bbcode_second_pass_quote('Tyler_JC', 'F')aced with massive budget deficits and a depreciating currency, the Feds will be forced to issue bonds denominated in foreign currency. That way foreign investors will know that their investment can't be stolen by inflation.
So far, the $US has been holding up against other currencies which have similar problems. Have you seen any good analysis on the comparative strengths of currencies? Some swear by Swiss Francs, but there is a small economy backing them.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby shortonoil » Mon 04 May 2009, 20:47:49

patience said:

$this->bbcode_second_pass_quote('', 'S')o-o-o-o-o. The FED buys the Treasuries, since no one else will, and we have the snake eating its' own tail. How long does that last? Then, interest rates go asymptotic, and the dollar is crap, right?

I've read about that sort of thing, but not what happens THEN. Sounds like Iceland to me. If so, then we get to live with whatever we have here in the US, because imports will be priced out of reach, it sounds like. O-o-o-o-h shite.


Buying Ts by the FED for the purpose of supplying liquidity to the Treasury, rather than control of the money supply, will be seen as increasing the risk of holding Ts. As risk is one of the key determinates controlling interest rates, rates will go up.

Increased interest rates will add to the federal budget, further restrict the origination of credit, slow economic growth, and result in lower GDP. With tax receipt already falling precariously, they will not be sufficient to cover interest payments. This will result in more monetization and a repeat of the cycle above.

My original prediction that the monetary system would fail no later than the 3rd or 4th quarter of 2011, still stands.
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Re: First Bond Insurer Suspends Claim Payments

Unread postby bodigami » Tue 05 May 2009, 00:18:16

$this->bbcode_second_pass_quote('shortonoil', '(')...)
My original prediction that the monetary system would fail no later than the 3rd or 4th quarter of 2011, still stands.


what do you consider a monetary system failure? why in that specific date?
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