Friday, November 30, 2007

Update Blogroll

Time for another update......

Undoubtedly UK is currently the biggest mess when we talk about bubbles in Europe and probably the entire world. If you want more inside i suggest to visit the excellent Blog The UK Housing Bubble from "the bitter renter" Alice Cook

Unzweifelhaft ist UK momentan die Hochburg in Sachen Bubble. Ich persönlich denke das es sich diesen Rang sogar weltweit verdient. Für mehr Expertise in diesem Bereich kann ich euch wämrstens den Blog The UK Housing Bubble von der "frustrierten Mieterin" Alice Cook empfehlen.

This statistic gives a hint how bad the situation has become Total UK personal debt.... And all this on top of the failure from the "Three Lions" against Croatia ..... Tough times!

Diese Statistik Total UK personal debt gibt einen ziemlich ernüchternden Blick auf die finanzielle Verfassung der Briten. Das Sie nach dem EM Aus auch emotional ein bißchen durchhängen macht die Lage sicher nicht besser.... Schwierige Zeiten!

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Moody's Takes Ratings Action on Six of Citigroup's Seven SIVs

It will be interesting to see if the fire sale to Abu Dhabi will be enough. With all capital ratios plunging and downgrades coming fast and furious i have some serious doubts.... But as long they can pay their dividend and they remain their creativity as shown in No Kidding.... More Off Balance Sheet Vehicles For Citigroup everything is fine....Lets hope for them that this kind of deal won´t backfire like the famous "Liquidity Puts" .... I highly recommend to see this video with the analyst Meredith Whitney and hear her latest thoughts on Citigroup!

Es wird interessant zu sehen sein ob die Notoperation mit Hilfe von Abu Dhabi ausreichen wird. Da momentan alle Kapitalparameter im freien Fall sind und die Downgrades praktisch täglich eintreffen habe ich da so meine leichten Zweifel....Immerhin wollen sie weiter fleißig eine Dividende ausschütten und sind kreativ wie gewohnt wenn es darum geht die Bilanzen zu frisieren ( sieheNo Kidding.... More Off Balance Sheet Vehicles For Citigroup ) . Bleibt zu hoffen das diese Art an Konstruktion nicht wie die "Liquidity Puts" übelst zurückschlägt...... Zudem empfehle ich dringend sich das Video von der Analystin Meredith Whitney die vor einer Woche die große Krise bei Citi ausgelöst hat anzusehen. Es gibt doch noch Hoffnung das nicht alle Analysten vollkommen verblöded sind.

Dec. 1 (Bloomberg) -- Moody's Investors Service may cut the top ratings on six of Citigroup Inc.'s seven structured investment vehicles as part of a review of $130 billion in SIV debt.

The net asset value of the $64.9 billion in Citigroup SIVs dropped to below or near 60 percent, prompting the ratings action, Moody's said in a statement yesterday. The junior notes of three of the funds have been downgraded to below investment grade.

> What a difference afew weeks made....Compare this action with the Fact Sheet Citi-Advised Structured Investment Vehicles (SIVs) from mid October

> Was für ein Unterschied doch ein paar Wochen ausmachen.....Vergleicht das mit den Aussagen von Mitte Oktober Fact Sheet Citi-Advised Structured Investment Vehicles (SIVs)

  • The assets are of very high quality.

  • The SIVs have no direct exposure to U.S. sub-prime assets.

  • The SIVs have approximately $70 million of indirect exposure to sub-prime assets through securities such as collateralized debt obligations. Those securities are AAA-rated and carry credit enhancements.

  • All assets are rated "A" or above; 80% - 90% are rated "AA" or
    above; approximately 50% are rated "AAA"

SIVs, which sell short-term debt to buy longer-term, higher-yielding assets, were shut out of the short-term market as losses on subprime mortgage securities prompted investors to retreat from all but the safest of securities. Unable to finance themselves, three SIVs have defaulted and others are being bailed out by their sponsors. The world's 30 SIVs have more than $300 billion of assets.

``In recent weeks, Moody's has observed material declines in market value across most asset classes in SIV portfolios,'' the ratings company said in the statement.

Moody's said it surveyed 20 SIVs since Nov. 7 and expanded its review after noticing ``significant additional deterioration'' in asset values.

Moody's cut $14 billion in debt in all, mostly capital notes that rank below commercial paper and medium-term notes and are usually the first to absorb losses, Henry Tabe, managing director in charge of structured finance, said in a telephone interview. The ratings company placed $105 billion of debt on review for a downgrade and confirmed the ratings on $11 billion, Tabe said.

Links Finance Corp., a SIV sponsored by Bank of Montreal with $19.1 billion of debt, also had its junior notes cut and may have the remainder downgraded, Moody's said.

`Continued Deterioration'
SIV assets on average are 38 percent financial institution debt, 16 percent asset-backed securities and 12 percent collateralized debt obligations, Moody's said.

The downgrades are ``a reflection of the continued deterioration in market value of SIV portfolios combined with the sector's inability to refinance maturing liabilities,'' Moody's said. Net asset values have slumped to 55 percent from 102 percent in June, Moody's said, including the NAVs of the three defaulted SIVs.

Citigroup, the largest U.S. bank by assets, provided $7.6 billion of emergency financing to the seven SIVs it runs earlier this month after they were unable to repay maturing debt.


Citigroup, based in New York, created the first SIV in 1988 and is the largest manager.

The SIVs' struggle for survival, and the threat of having their assets dumped on the market, prompted Treasury Secretary Henry Paulson to broker talks with Citigroup, JPMorgan Chase & Co. and Bank of America Corp. to form an $80 billion "Superfund" to help bail them out.
Centauri, Beta
HSBC this week said it will take on $45 billion of assets from the two SIVs it manages after they were unable to finance themselves. SIVs set up by Dusseldorf- based lenderIKB and London-based Cheyne Capital Management Ltd. defaulted last month after investors stopped buying their asset-backed commercial paper.

Citigroup said in a Nov. 5 regulatory filing that it ``will not take actions that will require the company to consolidate the SIVs.'' The strategy ``remains unchanged from the disclosures in the third quarter'' filing, spokesman Jon Diat said yesterday in an e-mail statement. ``We continue to focus on liquidity and reducing leverage,'' Diat said. Citigroup's SIV assets have dropped to $66 billion from $83 billion on Sept. 30, Diat said.


Centauri Corp., the largest SIV run by Citigroup with $16.9 billion of debt, had its P1 commercial paper rating placed on review for downgrade as well as its AAA medium-term note program, Moody's said. Centauri's net asset value dropped to 60 percent from 85 percent since Sept. 5, Moody's said.

Beta Finance Corp., the second-largest Citigroup SIV with $16 billion of debt, had its senior debt ratings placed on review for downgrade after its net asset value declined to 60 percent from 87 percent, Moody's said.

Sedna, Dorada
Four other Citigroup SIVs, Sedna Finance Corp., with $10.7 billion of debt, Five Finance Corp., with $10.3 billion, Dorada Corp. with $8.5 billion, and Zela Finance Corp., with $2.5 billion, had their P1 commercial paper rating and AAA medium- term note programs placed on review, Moody's said.

Sedna's net asset value dropped to 56 percent, Five's declined to 63 percent, Dorada dropped to 62 percent and Zela's fell to 61 percent. A seventh Citigroup SIV, Vetra Finance Corp., wasn't part of the review.

The capital notes of Dorada, Beta and Centauri were reduced 11 levels to Caa3 from Baa1.

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Porsche chief defends €70m salary

WOW! At least the proportion ( 5 times ) to the CEO from Deutsche Bank is ok....... I assume this isn´t helpfull to win the hearts and minds of the VW employees that are still very sceptical how deep the cost cuts Porsche as the new major sharholder ( 30 percent ) will implement at VW.... At least he gets the outrages pay for good stock & company performance and not for screwing up like O´Neil, Prince etc....

Noch fragen....? Einzig die Relation zu Ackermann stimmt......Ich kann mir gut vorstellen das diese astronomische Zahl nicht hilfreich sein wird die Herzen bei den VW Angestellten zu erwärmen.....Immerhin bekommt Wiedeking das als Gegenleistung für ne gute Firmen & Aktienentwicklung und nicht wie in den USA als Abfindung für unterirdische Leistungen...


FT Porsche chief defends €70m salary
Wendelin Wiedeking, chief executive of Porsche, has defended a hefty pay rise and an overall package estimated at €60m-€70m ($89m-$103m) last year, which makes him one of the world’s highest paid industrial managers. The German sports-car maker does not disclose individuals’ pay but insiders said Wednesday that Mr Wiedeking accounted for more than half of the €113m the management board received, up from the €42m the board was paid last year.
The highest individual pay declared last year by a listed German company was an estimated €13m received by Josef Ackermann, Deutsche Bank chief. Mr Wiedeking pointed to Porsche’s rise in pre-tax profits from €2.1bn to €5.9bn and an increase in both bonuses to workers and dividends to shareholders.
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Banks "Dog days of winter" / Economist

Nice summary what just happend the past few days and that so far and a reminder that all the central bank action didn´t change anything.....

Nette Zusammenfassung von allem was alleine in der letzten Woche passiert ist und eine Erinnerung das sich trotz aller Zentralbankaktionen nicht wirklich viel geändert hat.

Dog days of winter / Economist
Banks are gripped by worries about liquidity. How long will they go on?
WRITE-DOWNS of $45 billion, and billions more to come. A collapse in share prices that has destroyed even more value. The blood of two Wall Street chieftains and many more underlings on the carpet. The fallout from the credit crunch has been so intense that some feel a pain barrier may have been breached. On November 27th and 28th the S&P 500 posted its first consecutive daily gains since October, partly on hopes of a cut in American interest rates and on some rare good news about Citigroup. Abu Dhabi Investment Authority paid $7.5 billion for a 4.9% stake, boosting the bank’s faltering capital ratio. Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi But four months after they first seized up, the credit markets remain in a state of paralysis. The banks still have a long, hard slog ahead.

Short-term interbank rates at which banks lend to each other, and which are a good gauge of concern, have risen steadily since mid-November. On Wednesday November 28th the two-month London Interbank-Offered Rate hit its highest level in euros since May 2001. Rates in euros and dollars tower obdurately above central-bank targets, despite announcements from both the European Central Bank and America’s Federal Reserve that they will inject extra funds into the money markets

As in the summer, banks are hoarding cash because there is still great uncertainty about their own and counterparties’ exposure to losses and off-balance-sheet vehicles. Groups of banks that know each other well, such as the Spanish and Scandinavian banks, are rumoured to have agreed on informal lending arrangements. Elsewhere, caution prevails: what interbank lending there is tends to happen in the afternoon, after all the bad news has had time to come out.

There’s still plenty of that to go round. Kreditanstalt für Wiederaufbau, a state-owned German bank, announced on November 27th that it was setting aside another 2.3 billion ($3.4 billion) to cover subprime-related losses at IKB, a Dusseldorf-based bank in which it has a large stake. German IKB Bailout Now Over $ 7 billion & More trouble ahead for German Landesbanken. On the same day, Wells Fargo, an American bank that had been looking pristine in comparison with its peers, revealed that it would take a $1.4 billion charge on its home-equity loans.

Nerves have frayed in even the sleepiest corners. Europe’s covered-bond specialists emerged blinking into the light after a spike in spreads (see chart) and the postponement of several new issues led to the temporary suspension of the market in late November. By most measures, covered bonds are the safest of bets. The assets that back them (either pools of mortgages or public-sector loans) are required to meet stringent quality standards. If things do go wrong, investors have recourse both to the assets that back them and to issuers’ balance sheets. Yet even these belts and braces did not reassure investors. Europe Suspends Mortgage Bond Trading Between Banks

> No conincident that UK and Spain are leading.....

> Sicher kein Zufall das gerade UK und Spanien die Liste anführen....

Liquidity problems are compounded by impending calendar and fiscal year-ends. Banks are keen to hold cash when markets are closed or trading is thin. Many are also cleaning up their books for accounting purposes. Some of the central-bank interventions are geared to getting banks over the year-end squeeze: the Fed has extended $8 billion in short-term loans until early 2008.

Year-end fretfulness has prompted some comparisons with the turn of the millennium, when fears of the “Y2K bug” also encouraged the stockpiling of cash. But the analogy ends there: although funding conditions should ease in January, few believe that the credit markets are going to spring back to normal. Valuation methodologies and disclosure standards on toxic investments still vary widely. The market value of subprime assets continues to move around. Question marks over the wider economy are intensifying—on November 28th Don Kohn, the Fed’s vice-chairman, sparked hopes of another interest-rate cut in December when he acknowledged the impact of “elevated turbulence” in financial markets on the availability of credit.

Off-balance-sheet assets are another source of worry. On November 26th HSBC, Europe’s biggest bank, announced that it would consolidate $45 billion-worth of assets held in two structured investment vehicles (SIVs) onto its balance sheet. That puts pressure on other banks with exposure to SIVs, troubled Citigroup chief among them, to follow suit. It also shows that HSBC does not believe funding conditions for SIVs will soon ease. HSBC Will Take on $45 Billion of Assets From Two SIVs

A prolonged period of tight liquidity is arguably more threatening to banks than one-off write-downs, particularly for those that rely on wholesale funding. Expect to see slower loan growth, more asset sales and a fight for deposits, as banks try to diversify their sources of funding. Vasco Moreno of Keefe, Bruyette & Woods, an investment bank, thinks it will take a year of banks reporting decent numbers before an end can be called to the credit crunch. Roll on 2009.

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Thursday, November 29, 2007

The Panic About The Dollar / Economist

This cover is just too beautiful to let it pass. Only this cover is fitting the greenback issue better.It also feels like Der Spiegel has had a similar idea for their cover. The story Losing faith in the greenback is also worth the read. Brad Setser has as usual some very insightful views on the currency front.

Diese Cover ist einfach zu schade um nicht gepostet zu werden. Lediglich dieses Cover zum Thema ist einen Tick besser gelungen. Es scheint fast so als wenn Der Spiegel eine ähnliche Idee gehabt hat. Die dazugehörige Geschichte Losing faith in the greenback ist zudem ebenfalls einen Blick wert. Brad Setser hat sich den Economist Bericht noch einmal gesondert zur Brust genommen. Wie immer empfehlenswert!

I especially agree with the first quote.....

Überflüssig zu erwähnen das ichbesonders den Einstig mag....

THE long-run value of all paper currencies is zero. That is a fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter. So why should the dollar be any different?

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UK House Prices Largest Decline since 1995

Crunch, crunch, pop, pop........ No wonder the Bank of England Extends Lending to Relieve `Tight' Money Market . The numbers of loans approved for house purchase are also showing signs of "strss".....For more insight visit the label or the excellent blog from Alice The UK Housing Bubble .

Crunch, crunch, pop pop......Kein Wunder das die Bank of England ernuet "creativ" werden muß Die Anzahl der genehmighten Hypotheken befindet sich wenig überraschend im freien Fall Für mehr zum Thema UK bitte das Label durchforsten oder dem wunderbaren Blog von Alice The UK Housing Bubble einen Besuch abstatten

FT More dismal news for UK homeowners. House prices fell 0.8 per cent in November, according to Nationwide - reining in the annual rate of growth to 6.9 per cent.

That drop is the first since February 2006 - and is the largest decline logged since the summer of 1995.

The figures reverse the unexpectedly strong performance in October - when prices rose 1.1 per cent - but which was widely seen as an aberration in what is a markedly weakening trend for house price data. That’s born out in the three-monthly growth numbers that in the latest period fell back to 1.5 per cent, from 1.8 per cent the month before.

The figures come on the back of dark predictions made through the medium of new derivatives contracts, through which the City is betting on house prices falling 7 per cent next year. The deterioration in outlook reflected in derivs trading, which showed expectations shifting from a 2 per cent fall to a 7 per cent decline in the space of one month, demonstrates how quickly sentiment can shift.

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Fed & Moral Hazard

For the three people out there that still think the Fed and the majority of other central banks are still fighting inflation i recommend to read Moral Hazards And Fed Actions fom Mish. I coudn´t have said it better. AMEN!

Für die zwei bis drei Leute die immer noch denken das die Fed und fast alle anderen Zentralbanken sich die Inflationsbekämpfung auf die Fahnen geschrieben haben sollten zwingend Moral Hazards And Fed Actions von Mish lesen. Besser kann man es kaum beschreiben. Sehr treffend!


Thanks to John Trevor

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Tuesday, November 27, 2007

German IKB Bailout Now Over $ 7 billion

We in Germany don´t need Abu Dhabi to provide $ 7 billion in capital. ....Here are the initial posts on the IKB scandal one, two & three . Together with the bailout for the Landesbank Sachsen the German taxpayer have provided way over $ 10 billion ......

Schön zu wissen das wir kein Scheichtum wie Abu Dhabi benötigen um eine deutsche Mittelstandsbank die sich sinniger weise hoffnungslos bei Subprime Immospekulationen in den USA verzockt hat rauszuhauen. Zur Vorgeschichte zu diesem Skandal siehe Teil 1 , 2 & 3 Wenn man die Summen für die Landesbank Sachsen hinzurechnet kommt der deutsche Steuerzahler locker für Schieflagen von über 10 mrd € auf........

The bailout from the IKB is (surprise surprise) much more expansive than originally estimated. The updated loss provision is now $ 8.5 billion! Over $ 7 billion is shouldered from the state owned KfW. It seems the higher provision was needed because the liquidation of the conduits isn´t going as smoothly as the naive "experts" have originally thought......Probably the same experts that have advised to invest in subprime.....
The KfW was usually created to help the backbone of the Germany economy called the Mitterstand ( small and midsized companies). The help for the IKB who originally had also the German Mittelstand as their core business is threatening the ability to fund the Mittelstand.
FT KfW said the outlook for Rhineland Funding, an investment vehicle launched by IKB, had deteriorated after it identified “crucial” new information about its risk exposure to the US subprime loan market.

Handelsblatt KfW gerät in den Sog der IKB-Krise
Die Rettung der Industriebank IKB ist weitaus teurer als bisher angenommen. Der Großaktionär, die staatseigene Förderbank KfW, muss weitere 2,3 Mrd. Euro an Risiken zurückstellen und kommt damit langsam an die Grenzen ihrer eigenen Tragfähigkeit

teurer als bisher angenommen. Der Großaktionär, die staatseigene Förderbank KfW, muss weitere 2,3 Mrd. Euro an Risiken zurückstellen und kommt damit langsam an die Grenzen ihrer eigenen Tragfähigkeit. KfW-Chefin Ingrid Matthäus-Maier informierte den Verwaltungsrat am Dienstag über die dramatisch gestiegenen Risiken aus der milliardenschweren Zweckgesellschaft Rhineland Funding, die die IKB aufgebaut hatte. Die IKB hatte sich am US-Markt für Hypothekenkredite verspekuliert.

Damit wächst das gesamte Rettungspaket für die IKB von 3,5 Mrd. Euro auf 5,8 Mrd. Euro. Den größten Anteil daran trägt mit bisher 4,8 Mrd. Euro die KfW, die 38 Prozent an der IKB hält. Doch mit den höheren Risiken ist der KfW-Fonds für allgemeine Bankrisiken von 5,3 Mrd. Euro so gut wie ausgeschöpft. Nach Informationen des Handelsblatts hat die KfW bereits beim Bund vorgefühlt, ob Garantien des Bundes vorstellbar seien.

Am Mittwoch trifft sich der Bankenpool, der die Rettung der IKB finanziert hat, zu einer weiteren Krisensitzung. An dem Treffen nehmen neben der KfW Vertreter der Verbände der Privatbanken, Sparkassen und Genossenschaftsbanken teil. Auch die Bundesbank, die Finanzaufsichtsbehörde BaFin sowie das Bundesfinanzministerium werden vertreten sein. Finanzkreisen zufolge sind die Bankenverbände weiterhin nicht bereit, sich an den zusätzlichen Risiken zu beteiligen

Zudem müssen bei solchen hochkomplexen Zweckgesellschaften in bestimmten Situationen Anlagen verkauft werden, obwohl die Preise dafür nicht vorteilhaft sind. Diese Auslöser für Zwangsverkäufe waren anscheinend im Sommer noch nicht in allen Einzelheiten bekannt. Die KfW spricht lediglich von „neuen wesentlichen bewertungsrelevanten Informationen“ bezüglich der abgeschirmten Risiken.

Die Düsseldorfer Mittelstandsbank IKB hatte sich mit zweien solcher milliardenschweren Zweckgesellschaften und eigenen Anlagen in verbriefte Anleihen verhoben. Parallel zu den neuen Milliardenrisiken, die die KfW bekanntgab, wird seit Tagen darüber spekuliert, dass die IKB selbst ebenfalls zusätzliche Kapitalhilfen von bis zu 400 Mill. Euro benötigt. Mehr Informationen dazu, ob das Rettungspaket für die Bank damit noch einmal größer wird, dürften spätestens am Freitag bekanntwerden, wenn die Mittelstandsbank ihre Quartalszahlen vorlegt

Das Finanzministerium wollte die höheren Risiken zunächst nicht kommentieren. Der Vorsitzende der Mittelstandsvereinigung der Union, Michael Fuchs, sagte: „Ich mache mir erhebliche Sorgen um eine adäquate Fortsetzung der Mittelstandsfinanzierung.“ Auf keinen Fall dürften die Milliarden des ERP-Sondervermögens, die die KfW in diesem Jahr übertragen bekommen hat, für die Risikoabdeckung verwendet werden.

Die explodierenden Risiken bei Rhineland Funding könnten aber auch für weitere Skepsis in der gesamten Bankenbranche sorgen. Braucht die KfW die Risikovorsorge in Höhe von 4,8 Mrd. Euro für Rhineland Funding wirklich in voller Höhe, hieße dies, dass mehr als die Hälfte ihrer Liquiditätslinie für die Zweckgesellschaft letztlich zum Verlust wurde. Viele Banken, die milliardenschwere Liquiditätslinien für Zweckgesellschaften eingegangen sind, spekulieren jedoch derzeit noch, dass diese kaum zu Verlusten führen. Die britische Großbank HSBC hatte sich in dieser Woche dazu entschieden, ihre beiden Zweckgesellschaften in die Bilanz zu nehmen und damit Liquidität und Zwischenfinanzierungen über 35 Mrd. Euro zu stellen.
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Monday, November 26, 2007

Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

When you have to increase your capital with your share price at multi year lows you know that they don´t do it for charity reasons...... Nice dilution but probably the only way to stay solvent..... Now it should be clear why they are still pushing for the "Superfund" . They are simply not able to follow HSBC. I assume this time there will be no congressional hearing related to sovereign wealth funds.......Nice to see that some "experts" still focusses on the dividend.... ;-). I assume this time even FOX Business News will get it right...... :-)

Kein gutes Zeichen wenn man sichn neues Geld zu Zeiten besorgen muß wenn die Aktien auf Mehrjahrestiefs notiert. Auf gut deutsch "Denen steht das Wasser bis zum Hals". Schöne Verwässerung für die Altaktionäre aber wohl die einzige Möglichkeit solvent zu bleiben. Nun sollte auch dem letzten klar werden warum Citigroup auf Biegen und Brechen den "Superfund" pusht und nicht wie HSBC diese Gesellschaften wieder in die Bilanz aufnimmt. Ich denke das es diesesmal kein Störfeuer von der US Politik geben wird....Besonders lustig zu sehen das einige der Experten sich immer noch mit der Dividende befassen..... Ich denke diesesmal wird sogar FOX Business News richtig berichten.... :-)

Nov. 26 (Bloomberg) -- Citigroup Inc., the U.S. bank searching for a new chief executive as it faces at least $8 billion of writedowns, agreed to sell as much as 4.9 percent of the company to the government of Abu Dhabi for $7.5 billion.


Citigroup will sell equity units to the Abu Dhabi Investment Authority that convert into common shares, the New York-based lender said today in a press release.

``This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business,'' Win Bischoff, Citigroup's acting CEO, said in the statement. It helps ``strengthen our capital base,'' he said.

> It´s about time..... Wird aber auch dringend Zeit.......

Charles O. Prince III ( deaf & ingorant CEO Prince ) was forced to step down as Citigroup's chief executive officer Nov. 4 after the biggest U.S. bank said losses on subprime mortgages and related securities may cut fourth-quarter net income by $5 billion to $7 billion. The lender said at the time that it planned to shore up capital. The company's shares, which have fallen about 44 percent this year, sank to $30.70 in New York Stock Exchange composite trading today, the lowest price in five years.

Time for a review of the buybacks in 2006 Financial Highlights 2006 pdf


....our return of cash to shareholders through our $7 billion stock buyback in 2006 ( Stock was between $ 45 and $ 55....)

> Well done! Eine Meisterleistung!

ADIA, the sovereign wealth fund of the government of Abu Dhabi, is buying equity units that convert into Citigroup shares at prices ranging from $31.83 to $37.24 per share, on dates ranging from March 15, 2010, to Sept. 15, 2011, the U.S. bank said. The units will pay 11 percent annual interest.

> Here is a more detailed look via the FT Junk Citi

Citi is paying a higher interest rate than companies that borrow on the high-yield, or junk-bond, market; currently they pay roughly 9% for straight bonds. Typically, convertible bonds pay lower interest rates than straight bonds, although a particular bond’s structure could affect the interest rate paid......

Even after the spurious tax argument, it is difficult to see how this funding can be costing much less than 9 per cent.

Abu Dhabi, one of the United Arab Emirates, will have ``no role in the management or governance of Citi, including no right to designate a member'' of the company's board, according to the statement.

FT Alphaville has some more thought on The stealthy rise of the sovereign wealth fund

Von FT Alphaville gibt es ein paar mehr Gedanken zum The stealthy rise of the sovereign wealth fund

More insights from Mish , Naked Capitalism and the "Peter Schiff" of bank analysts Meredith Whitney


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HSBC Will Take on $45 Billion of Assets From Two SIVs

Finally .......If you take this event one step further you might ask why Citi & Co are not able to do the same and Paulson & Co is tring desperately to help and create the "Superfund"...... Maybe it has something to do with the strenth of their balance sheets...... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Endlich...... Im Umkehrschluß sollte man sich sehr wohl fragen warum Citi & Co es der HSBC nicht gleichtun und warum Paulson & Co so verzweifelt versucht den "Superfund" ins leben zu rufen....... Das liegt sicher nicht an den "starken" Bilanzstrukturen....... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Nov. 26 (Bloomberg) -- HSBC Holdings Plc, Europe's largest bank, will add $45 billion of assets to its balance sheet by consolidating two structured investment vehicles it manages.

The bank doesn't expect any ``material impact'' on its earnings or capital strength, it said today in a Regulatory News Service statement.

HSBC's decision comes as U.S. lenders led by Bank of America Corp. seek to persuade competitors to help finance an $80 billion bailout of other SIVs, companies that borrow short-term to invest in higher-yielding assets. HSBC will give investors in Cullinan Finance Ltd. and Asscher Finance Ltd. the chance to swap their holdings for securities issued by a new company, backed by loans from the London-based bank.

``HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher,'' Stuart Gulliver, HSBC's chief executive officer of corporate and investment banking in London, said in the statement.

SIVs borrow in the $836 billion asset-backed commercial paper market to buy longer-dated debt including bank bonds, mortgage-backed securities and collateralized debt obligations. Investors are shunning SIVs because the holdings are difficult to value now that trading has collapsed in some mortgage debt markets. That's stoking concern SIVs will sell assets at distressed prices, adding to turmoil in credit markets.

FT Alphaville The other problem is that declines in asset values have left these vehicles facing NAV or market value triggers that would put them into a restricted state of operation.

The latter seems to be the more immediate problem for HSBC. The bank says that both its SIVs are funded beyond the end of the year, with Asscher funded to April 2008.

In terms of their asset value, Asscher, back at launch in January, was intended to have about about 10 percent of its portfolio invested in triple-A cash CDOs, with about 40 percent in residential mortgage-backed securities. Not a great place to be.

Other SIVs have been hamstrung by declining NAVs. But, as we noted earlier this month, HSBC has kept its portfolio tests under wraps

Bank of America Takes Lead in Backing `SuperSIV' Fund The ``SuperSIV'' fund, backed by U.S. Treasury Secretary Henry Paulson, would buy assets from so-called structured investment vehicles, whose $300 billion of holdings include corporate and mortgage debt in danger of default.

Bank of America, Citigroup and JPMorgan, the three largest U.S. banks, want SuperSIV in place by year-end because some SIVs haven't been able to trade, people familiar with the fund said. BlackRock Inc., the biggest publicly traded U.S. money manager, probably will manage the fund, said a person with knowledge of the plan.

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

``It's so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,'' said Fuss, who decided participating wasn't worth the risk to his firm. ``Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.''

BRAVO :-)

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Sunday, November 25, 2007

Cover Stoy Indicatior....

The $ crash and the strong € (€/$ today 1,4875) is making more and more headlines in Germany and the rest of Europe. Dozends of companies are now warning on a daily basis that the strong € is hurting their business. "Der Spiegel" is the most influential, respected and important news magazine in Germany. So i think it qualifies for the "Cover Story Indicator" and the worst at least for the short term for the $ might be over. Largely thanks to the way overvalued € and the weakening European economy..... Another hint that the € is way overvalued can be seen when you look at the exchange rate vs the oil rich Norwegian Crown.....

Der US $ Crash (€/$ 1,4875) macht mehr und mehr Schlagzeilen in Deutschland und dem restlichen Europa. Dutzende Firmen warnen täglich in Ihren Veröffentlichungen das der starke € ihr Geschäft erheblich beeinflußt. Wenn also der Spiegel als wohl bedeutenstes Magazin dieses Thema auf den Titel hebt könnte einnmal mehr der "Cover Story Indicator" greifen und daraufhin deuten das zumindest kurzfristig das schlimmste vorbei sein könnte. Das basiert aber weniger auf der stärke des $ als vielmehr auf der krassen Überbewertung des € der noch keinerlei Abschwung in der Eurozone diskontiert hat....... Wie extrem der € inzwischen aus dem Ruder gelaufen ist läßt sich am besten erahnen wenn man sich den Vergleich mit der norwegischen Krone vor Augen führt......

One company is follow closely is K+S. They are one the leading fertilizer companies in the world and they have have warned 2 times within a week that the higher $ did hurt earnings significantly and much stronger than anticipated. Even with a complex hedging strategy they were not able to compensate for the slump ( maybe too complex even for the management...). Compare the charts from the US competitor Potash with K+S over the past 6 month. If you now add the 10 percent exchange rate difference during the 6 month to the Potash outperformance the chart would look even more impressive.......

Ein gutes Beispiel für die Problematik ist die bei uns im MDAX gelistete K+S. Sie sind einer der führenden Dünge/Fertilizer Firmen weltweit und mußten binnen einer Woche zwei Warnungen wegen des schwachen $ herausgeben. Trotz einer angeblich durchdachten Absicherungsstrategie waren Sie nicht in der Lage diesen rapiden Verfall auszugleichen. Die Schuld für die zweite Warnung geht klar zu Lasten des Managemenst. Es änder aber nichts an der Tatsache das trotz bommenden Geschäftes die Gewinne pro Aktie durch Absicherungsgeschäfte und den starken € aufgefressen worden sind. Vergleicht den Chart mit dem führende US Konkurrenten Potash. Wenn man jetzt noch die 10% Währungsverfall berücksichtigt ist die Outperformance noch deutlicher....

I could name several other examples for this kind of currency impact also for other currencies like the Yen etc...

Eine ähnliche Beeinträchtigung gibt es auch für anderen Währungen wie z.B. den Yen usw.....

More currency posts

Mish Currency Twilight Zone

Naked Capitalsim Dollar Increasingly Used to Fund Carry Trade

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Financial Markets Anticipate Recessions Before They are Obvious / Hussman

I agree with Hussman that the US is very close to a recession. I´m not so sure if the stock market is a good indicator. To my experience the market only reacts when the obvious is no longer to hide and every spin attempt has failed.....

I stimme mit Hussman überein das die USA sich schon nahe einer Rezession befinden. Allerdings glaube ich nach meinen Erfahrungen nicht das der Aktienmarkt irgendeine verläßliche Aussagekraft in diesem Zusammenhang geben kann. Der reagiert erst dann wenn sich die Tatsachen überhaupt nicht mehr kaschieren lassen und jeder erdenliche Spinversuch gescheitert ist. Dann allerdings umso heftiger......

Financial Markets Anticipate Recessions Before They are Obvious
Two weeks ago, for the first time since the 2001-2002 downturn, our measures again signaled an oncoming U.S. recession. This signal is based on four general conditions. They are all well-known to be related to economic weakness (not the result of spurious data-mining), but they do not have great usefulness individually. They become powerful when they are unanimous – these conditions have always occurred together during or just prior to recessions, and they have only occurred together during or just prior to recessions. Apart from the survey measures in the fourth condition (the ISM Purchasing Managers Index and U.S. employment), the most reliable evidence for an oncoming recession is based on financial market indicators. It is the forward-looking aspect of market action that produces a timely risk signal. These measures are:

1: Widening credit spreads: An increase over the past 6 months in either the spread between commercial paper and 3-month Treasury yields, or between the Dow Corporate Bond Index yield and 10-year Treasury yields.

2: Moderate or flat yield curve: 10-year Treasury yield no more than 2.5% above 3-month Treasury yields (this doesn't create a strong risk of recession in and of itself).

3: Falling stock prices: S&P 500 below its level of 6 months earlier. Again, this is not terribly unusual by itself, which is why people say that market declines have called 11 of the past 6 recessions, but falling stock prices are very important as part of the broader syndrome.

4: Moderating ISM and employment growth: PMI in the low 50's or worse (below 54), coupled with either total nonfarm employment growth below 1.3% over the preceding year (this is a figure that Marty Zweig noted in a Barron's piece years ago), or an unemployment rate up 0.4% or more from its 12-month low.

For ease of reference, I've reproduced the chart I presented two weeks ago. The recession signals based on the foregoing criteria are depicted in blue in the chart below. Actual recessions are depicted in red.

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Thursday, November 22, 2007

Bank Capital "Tightening the safety belt" / Economist

Crunch, crunch......And they are still only talking about subpirme...... I assume lots of banks are already regretting their massive buybacks during the past years..... Just ask Fannie, Freddie, Countrywide etc...... But this is also true for almost every other company out there. Jeff Matthews has more on this topic Big Buybacks Begin to Haunt Firms SCHADENFREUDE!

Man kann den Credit Crunch deutlich hören....Und bisher wird immer nur das Thema Subprime angeführt...Ich bin mir sicher das etliche Bankvorstände Ihre Aktienrückkauforgien aus den letzten Jahren schon jetzt bereuen....... Fragt mal bei Fannie, Freddie, Countrywide usw nach......... Gleiches gilt aber inzwischen aber wohl für die meisten Firmen. Hier ein nettes Beispiel von Jeff Matthews Big Buybacks Begin to Haunt Firms


Bank Capital "Tightening the safety belt"
THE only thing bankers can have felt grateful for this Thanksgiving was a rest. Confidence in subprime-related mortgage products continues to fall. Rating agencies are slashing collateralised-debt obligations (CDOs) faster than you can slaughter turkeys. Analysts at Goldman Sachs reckon that, despite the large write-downs already announced by financial institutions, another $108 billion-worth of losses on subprime CDOs have yet to surface (see chart). Adding to the gloom, a $2 trillion source of mortgage funding in Europe, known as the covered-bond market, was temporarily suspended on November 21st because of sliding prices.


All this turmoil is focusing attention on banks' capital ratios, the amount of money they set aside as a percentage of assets to cover unexpected losses. This cushion is being squashed in a number of ways. First, net losses eat directly into capital. Second, since capital ratios are typically calculated on the basis of how risky a bank's balance sheet is, the ratings downgrades add to the amount of rainy-day money banks need to set aside. Third, assets are growing as banks take on the financing of more off-balance-sheet vehicles, which again adds to the capital they need.

At some banks, capital ratios are dropping fast. UBS, a Swiss bank, has seen its tier-one ratio (which divides a bank's risk-weighted assets by its core capital) fall from 12.3% at the end of the second quarter to 10.6%. At Citigroup the tier-one capital dropped to 7.3% in the third quarter, down from 7.9% in the previous one. It remains comfortably above the 6% threshold that American regulators use to define institutions as well capitalised. But as expectations of further write-downs grow, it and others with deteriorating capital ratios will be under pressure to reverse the trend.

There are a number of ways for banks to improve things. They can suspend share buybacks. Or sell non-core assets: Merrill Lynch's stake in Bloomberg, a financial-information provider, looks eminently disposable. They can cut dividends: expectations are growing that Citigroup will do so. In more extreme cases, they could issue new shares: the bond insurers, which depend on impeccable credit ratings and are important for the health of the banking system, may have no choice but to raise capital. One, French-owned CIFG, has been promised $1.5 billion.

Rights issues and punier dividends would be bad news for shareholders. But the really pernicious effect of capital weakness comes when banks rein in their lending and investment activity in order to keep their capital ratios constant. Back-of-the-envelope calculations from Goldman Sachs suggest that if banks suffer a $200 billion loss on subprime mortgages but want to keep their capital ratios at an average level of 10%, that would stifle lending by a whopping $2 trillion.

Regulators may tighten the screw as well. Confidence in the tier-one capital ratio favoured by European regulators seems to have evaporated, says Simon Samuels, an analyst at Citigroup. Investors seem to pay closer attention to more cautious capital measures such as the leverage ratio, which does not allow for any risk-weighted adjustment to assets.

Some regulators may be tempted to take a more conservative approach, perhaps by imposing additional charges on individual banks. They should be wary: banks may need to swerve to avoid a capital crisis; but slamming on the brakes entails dangers of its own.
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France Bails Out Monoline Insurer.......

Here we go..... After Germany balied out IKB & Landesbank Sachsen, UK Northern Rock now France is joining the parade..... To be continued.......... Too bad that ACA isn´t a French company...... ;-)

Der nächste bitte.....Nachdem Deutschland die IKB & Landesbank Sachsen, UK Northern Rock rausgehauen hat beglückt uns nun Frankreich mit einem Bailout erster Klasse...... Eines ist sicher.....Frankreich wird nicht das letzte Land sein das in das Marktgeschehen eingreifen wird.... Zu dumm das ACA keine französischen Wurzeln hat..... ;-)




Natixis's Bond Insurer to Get $1.5 Billion in Capital
Nov. 22 (Bloomberg) -- Natixis SA's bond-insurance unit, CIFG Guaranty, will be taken over by the French bank's controlling shareholders in a $1.5 billion rescue to preserve its top credit rating.

> It will be interesting what the private owners will do with FGIC.....

> Es wird spannend zu sehen sein was die privaten Eigner bei FBIC machen werden....

Marketwatch

Privately held FGIC has been in discussions to raise new capitals from its existing investors, which include Blackstone Group , Cypress Group, PMI Group , General Electric and CIVC Partners, the newspaper reported, citing people familiar with the matter


Naked Capitalism / WSJ

Private-equity firms Blackstone Group and Cypress Group each bought 23% stakes in FGIC in 2003, while mortgage insurer PMI Group Inc. owns a 42% stake. General Electric, FGIC's former owner, retained a 5% stake while CIVC Partners, a Chicago private-equity firm, owned 7%.

Natixis rose as much as 19 percent in Paris trading after Groupe Banque Populaire and Groupe Caisse d'Epargne, French mutual banks that jointly control Natixis, said today they will provide the capital and assume full ownership of CIFG. They said the purchase will be completed ``as quickly as possible.''

CIFG was named by Fitch Ratings and Moody's Investors Service as among the likeliest bond insurers to face ratings downgrades after turmoil in the fixed-income market hurt the value of the debt they insure. Bond insurance allows municipalities and companies to gain top credit ratings on their debt, and to pay lower interest rates. Fitch affirmed its AAA rating on CIFG after the announcement today.

Under Review
Fitch on Nov. 5 said it would start a six-week review of bond insurers to ensure they had enough capital to warrant their top ratings. CIFG was insuring $85 billion of bonds as of June 30, according to figures on its Web site. The entire bond insurance industry has guaranteed more than $1 trillion of debt, allowing borrowers to use the insurers' AAA ratings.

``Natixis has been hurt by subprime,'' Franck Hennin, a fund manager who helps oversee about $5 billion in assets with Richelieu Finance in Paris, said yesterday. ``Its CIFG subsidiary in the U.S. is suffering enormously as a result of credit defaults.''

Moody's and Fitch are also examining AAA-rated insurers including MBIA Inc., Ambac Financial Group Inc. and FGIC Corp. to see if they have enough capital.

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Wednesday, November 21, 2007

Europe Suspends Mortgage Bond Trading Between Banks

WOW! Desperation ? If you don´t like the quotes just shut down the market until things get better...? Credit Crunch at its best.... Mish has more on this topic

But when even the German Pfandbrief market is affected you know that something very serious and maybe irrational is happening. The German Pfandbrief is probably one of the safest bonds out there.

Verband Deutscher Pfandbriefbanken

To guarantee the high standard of safety of Mortgage Pfandbriefe at all times, besides the prudent determination of the mortgage lending value only parts of a loan up to 60% of the mortgage lending value are included in cover. Pfandbrief banks can also provide finance above the 60 % lending limit. However, these parts of the loan must not be funded through Mortgage Pfandbriefe.
And remember we are talking about German real estate that is flat for almost a 10 to 15 years and didn´t have any excess in lending practices etc....... The other states that are issuing covered bonds have a less ( often significantly) "tight" restriction and of course way often very inflated collateral........

Wenn das nicht nach einem leichten Anflug von Verzweiflung klingt Denke die Bezeichnung "Credit Crunch" ist hier keineswegs untertrieben..... Zeitenwende hat mehr zu diesem Thema.

Wenn aber selbst der Deutsche Pfandbriefmarkt betroffen ist dann ist wirklich was teilweise irrationales am laufen. Immerhin handelt es sich bei den Pfandbriefen um die wohl sichersten Papiere die zu bekommen sind. Zudem sind die zugrundeliegenden Sicherheiten im Gegensatz zu anderen Anlageklassen die letzten 10-15 Jahre nicht vom Fleck gekommen. In anderen Ländern sind die Sicherheiten der Covered Bonds nicht so weitreichend wie bei den Pfandbriefen. Zudem müssen diese sich dazu noch mit dem Problemen herumschlagen das die zugrundeliegenden Sicherheiten doch erheblich "infaltioniert" sind....

Verband Deutscher Pfandbriefbanken

Um die hohe Sicherheit der Hypotheken-Pfandbriefe jederzeit zu garantieren, werden zusätzlich zu der vorsichtigen Ermittlung des Beleihungswertes nur Darlehensteile bis zu 60% des Beleihungswertes in Deckung genommen
Europe Suspends Mortgage Bond Trading Between Banks
European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders.

The European Covered Bond Council, an industry group that represents securities firms and borrowers, recommended banks withdraw from trades for the first time in its three-year history until Nov. 26. Banks are still obliged to provide prices to investors, according to the statement today.


Banks including Barclays Capital, HSBC Holdings Plc and UniCredit SpA took the step as investors shun bank debt on concern lenders face more mortgage-related losses than the $50 billion disclosed. Abbey National Plc, the U.K. lender owned by Banco Santander SA, became the third financial company to cancel a sale of covered bonds in a week as investors demanded banks pay the highest interest premiums on covered bonds in five years.

``We are in a deteriorating situation,'' Patrick Amat, chairman of the Brussels-based ECBC and chief financial officer of mortgage lender Credit Immobilier de France, said in a telephone interview.

``A single sale can be like a hot potato. If repeated, this can lead to an unacceptable spread widening and you end up with an absurd situation.''

Sales Pulled
Covered bonds are securities backed by mortgages or loans to public sector institutions. The notes offer more protection to bondholders than asset-backed debt because the issuing bank is liable for repayments. They typically have the highest credit ratings.

``There's a crisis of confidence for everything but AAA government bonds,'' Arnd Stricker, a management board member at Corealcredit AG, the German commercial property lender owned by Lone Star Funds, said at a conference in Frankfurt. ``Covered bonds are being thrown in the same basket'' as mortgage securities, even though they are safer, he said.

> No wonder spreads for financials are at historic levels and libor is rocketing.......

> Kein Wunder das die Risikoaufschläge auf historischen Ständen sind und Libor ein extremes Maß an Skepsis signalisiert....

Abbey National in London said today it postponed its sale of covered bonds because of ``poor'' demand. AIB Mortgage Bank, a unit of Dublin-based Allied Irish Banks Plc, pulled a covered bond sale in euros yesterday and Ahorro y Titulizacion, an investment unit controlled by Spanish savings banks, decided against issuing the debt on Nov. 16.

Spreads Widen
``In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads,'' the committee of banks and borrowers ``recommends that inter-bank market making be suspended,'' the council said in an e-mailed press statement.

The extra yield, or spread, that investors demand to hold covered bonds sold by German banks instead of government debt has climbed to 38 basis points from 23 basis points six weeks ago, according to Merrill Lynch & Co. indexes. The premium is the widest in more than five years.

Some banks agreed to stop providing prices on covered bonds for half a day on Aug. 16 to stem losses from widening spreads, according to Johannes Rudolph, a covered bond analyst at HSBC in Dusseldorf. Today's suspension is the first from the industry association, ECBC's Amat said.

``Conditions have really weakened over recent days,'' said Andreas Denger, a covered bond analyst at Calyon SA in London. ``Most investors are not willing to invest in the current volatile market.''

Pfandbrief `Solidarity'
Trading in Germany's pfandbrief market was also suspended in a sign of ``solidarity,'' said Helga Bender, a spokeswoman for the German Pfandbrief Association VDP's German Market Maker and Issuer Committee. Pfandbrief bonds are a subset of covered bonds with stricter regulations.

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Blue Pill Accounting At ACA Hits The Wall......

I suggest to read this post from July first ACA Capitals "Preferred Measurements Of Income" or "Blue Pill Accounting" & this from just a few days ago ACA "Hypothetical Speaking....." . In hindsight lots of comments from management, rating agencies & analysts are looking like they really live in the Matrix....... Amazing! Maxedoutmama has also a very good summary on ACA Hell's Bells Ringing On Wall Street

Ich empfehle im Vorwege dieses Post vom Juli ACA Capitals "Preferred Measurements Of Income" or "Blue Pill Accounting" und dieses von vor einigen Tagen ACA "Hypothetical Speaking....." zu lesen um deutlich zu machen wie planlos sowohl das Management, die Ratingagenturen und selbstredend auch die Analysten durch die Welt laufen...... Maxedoutmama hat eine weitere erstklassige Umschreibung zu diesem Thema Hell's Bells Ringing On Wall Street

ACA hits trouble - squared FT
More bad news from the world of structured finance. Lancer Funding II - a $1bn CDO squared - has entered an “event of default”, making it the first CDO squared to hit the wall.

CDO squared are, like the name suggests, CDOs of CDOs
. A CDO squared defaulting then, is perhaps significant, since it acts as a litmus test for the broader CDO universe.

And Lancer is also part of a bigger grim picture at ACA Capital, its management company. They reported their Q3s on Monday and joined the banking big-league with a $1.7bn writedown. ACA are a big manager of CDOs and also a leading provider of CDO default insurance policies - which strikes us a pretty shortsighted combination.

Considering that ACA’s prime line of business is in structured finance, a $1.6bn writedown is hardly surprising, but it’s still worthy of note for several reasons:

Firstly, relative to ACA’s size, it’s a very big hit.

Secondly, the writedown ACA has taken may yet be a lot worse. The main cause for concern here is the fact that ACA’s Q3 results only cover the period up to September 30. And the very worst month for CDOs was October. Testament to that the fact that Lancer has now entered an event of default.


And thirdly, as a monoline insurer, ACA’s problems are not just ACA’s problems. The security of their insurance - on billions of dollars of CDO paper - is dependent on the safety of ACA’s own rating. And in the light of such a big writedown and the prospect of more trouble ahead, S&P has put the group on review.

ACA has been used as a “dumping ground” by subprime securitizers says Barrons, and that might now come back to haunt them. Wall Street does indeed seem keen to prop ACA up. According to filings with the SEC, a consortium of banks has provided liquidity facilities to the company. In spite of disastrous performance, banks have also continued to take out ACA insurance, unwilling perhaps, to pull the rug from under ACA’s feet.

Barrons

ACA has long been a convenient dumping ground in which major subprime securitizers like Bear Stearns (BSC), Citigroup (C), Merrill Lynch (MER) and some 25 other prominent dealers could pitch billions of dollars of risky obligations for modest premiums.

That let them gussy up their balance sheets and shift any potential mark-to-market hits to ACA.If ACA Capital were to founder, more than $69 billion worth of CDOs, including the $25 billion in subprime paper, would come rumbling back to the Wall Street banks, and likely with heavy attendant losses.That's why Wall Street has continued to do a brisk business with the beleaguered firm.

In the third quarter, ACA insured some $7 billion of subprime collateralized-debt obligations. Even if the company survives for only another couple of quarters, that would stave off the recognition of billions of dollars of losses.

All of this, of course, is immaterial, because October has happened and its presumably now just a question of time before ACA ‘fesses up to the damage already done. Little wonder that the company’s share price has just gone down and down and down. It stopped just short of collapsing through the dollar mark on Tuesday at $1.09.

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Tuesday, November 20, 2007

Jim Rogers On "Phony Mae and Fraudie Mac"

Make sure you hear the "amusing" Bloomberg Interview with one of my heros Jim Rogers. Here my take from yesterday Freddie Needs Fresh Capital...... It´s funny to see how the reporter tries to defend Freddie & Fannie.... But he is by far better than this must see example from FOX Business News. They even make Mark Haines look smart......

Hier das extrem amüsante Bloomberg Interview mit einem meiner Helden Jim Rogers sowier mein gestriges Post zu diesem Thema Freddie Needs Fresh Capital...... Man kann fast das Gefühl haben das der Reporter sich vor Angst fast überschlägt. Aber in jedem Fall besser als dieses Beispiel vom angeblichen Wirtschaftssender FOX Business News

Freddie, Fannie Shares Will Continue to Slide, Jim Rogers Says
Nov. 20 (Bloomberg) -- Freddie Mac, which today dropped the most ever after posting a record loss, and rival mortgage lender Fannie Mae will continue to tumble because of bad home loans, investor Jim Rogers said.

``I'm still short those companies, they both have a long way to go as far as I'm concerned,'' Rogers said in an interview. ``Neither one has a clue what's on their balance sheets.''

Freddie Mac, the second-largest U.S. mortgage company, warned of a possible cut in the dividend and the need for additional capital. The worst housing slump in 16 years caused ``significant deterioration'' in the third quarter that will continue through year-end, Freddie Mac said after reporting a net loss of $2.02 billion, or $3.29 a share, three times what some analysts estimated.

Rogers, who predicted the start of the global commodities rally in 1999, advised in a Nov. 5 interview with Bloomberg that investors should avoid financial stocks. In March 2006, he said Fannie Mae shares would decline.

Make sure you read Drilling Deeper into the Freddie Fiasco from Greenberg!

Laßt Euch auf keinen Fall Drilling Deeper into the Freddie Fiasco von Herb Greenberg entgehen!

Thanks to Rodger Rafter for the term "Phony Mae and Fraudie Mac"

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