Thursday, January 17, 2008

Merrill Lynch & Financial Guarantors & Counterparty Risk....

Besides the $ 14.6 billion write down i want to highlight this topic in the release..... When watching MBIA, AMBAC & Co ( see Downgrades ahead: monolines still don’t have enough cash &MBIA, Ambac Tumble, Default Risk Soars After Losses ) i assume the next wave of massive write downs in almost every other bank balance sheet should be coming very soon.... This is to my knowledge the first release from a major institution that views lots of the insurance as "worthless". Unfortunatley they don´t say from wich company thy bought the guarantee ( maybe ACA ? / Update : It´s ACA) . I think we can thank the new CEO for coming clean on this issue. Other will have to follow ....

Neben den 14,6 Mrd Abschreibungen verbirgt sich u.a. auch die nachfolgende Passage in der Veröffentlichung von Merrill . Und das ist eine mit erheblichen Sprenpotential........ Wenn man sich den freien Fall von MBIA, AMBAC & Co ( siehe Downgrades ahead: monolines still don’t have enough cash & MBIA, Ambac Tumble, Default Risk Soars After Losses ) ansieht dürfte hier die nächste gigantische Abschreibungswelle in Stein gemeißelt sein. Der hierfür verantwortliche Versicherer ist ACA ... Das ist meinem Kennnisstand die erste große Bank die klipp und klar sagt das eiin Großteil der abgeschlosenen Absicherung im Prinzip wertlos ist. Ohne neuen CEO wäre das so deutlich sicher nicht gesagt worden. Denke das die anderen nun kaum glaubhaft einen anderen Standpunkt vetreten können.

Merrill Lynch Eranings Report Financial Guarantors:
During the fourth quarter, credit valuation adjustments related to the firm’s hedges with financial guarantors were negative $3.1 billion, including negative $2.6 billion related to U.S. super senior ABS CDOs.

These amounts reflect the write down of the firm’s current exposure to a non-investment grade counterparty from which the firm had purchased hedges covering a range of asset classes including U.S. super senior ABS CDOs. Please see attachment VIII for details of related exposures.

Live-Blogging the Merrill Earnings Call via the WSJ

Adding up Merrill’s $16.7bn writedowns FT Alphaville

Cramer on Monolines Is this really Cramer? This is one of the very rare times he makes sense....MUST SEE!

WSJ on Counterparty Risk

S&P: Bond Insurance Losses Likely Much Higher Calculated Risk

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7 Comments:

Blogger Edgar said...

Stock marker cheers! Jumbo losses mean the fed will cut rates again. Woohoo!

6:53 AM  
Blogger Edgar said...

-r +t

6:53 AM  
Blogger jmf said...

Moin Edgar,

it will be interesting to see if the long rates will follow the deep cuts.

From these levels i have some serious doubts...

6:57 AM  
Blogger jmf said...

More from
Calculated Risk / Brian

7:03 AM  
Anonymous Barley said...

Some thing is seriously wrong we have awful news and the market moves lower...this is not how it should work. Dig the negative 20!

Welcome back.

8:02 AM  
Blogger jmf said...

Moin Barely,

it feels like the damage is too large too hide any longer....

8:12 AM  
Blogger Edgar said...

Yeah, what's up with dat? Why isn't the market soaring on crappy fundamentals? I don't get it.

BTW, yeah, welcome back jmf.

2:38 PM  

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