Societe Generale reports $7.1 bln trading loss from "fraud"

ice internal risk management...... In the end this is probably good news. ( You know that times are really bad when an € 5.5 billion capital infusion at fire sale prices is been widely seen as good news.....) There were rumors crashing the stock and the entire sector that they would have a big write down. But this write down seems (at least that´s what i hope) to be company specific. And some still wonder why banks don´t trust each other.......Probably the most important part is that SocGen is starting to write down some insurance from monolines and from a total of € 550 mio and only € 50 mio is coming from ACA! ( watch page 10 on the presentation )

Nette Risikokontrolle..... Unterm Strich dürfte das aber trotzdem für eine große Erleichterung sorgen ( Der Umstand das eine massive Kaitalspritze von üver 5,5 Mrd € zu Ausverkaufspreisen als gute Nachricht angesehen wird sagt eigentlch schon alles aus...). Speziell in den letzten beiden Tagen hat das Gerücht um eine riesige Abschreibung den ganzen Sektor zerlegt. Das die Abschreibung jetzt größtenteils nur auf einen "Betrug" und damit hoffentlich nur isoliert zu betrachten ist sollte beruhigen. Relativ gesehen natürlich....Kein Wunder das die Banken sich gegenseitig nicht über den Weg trauen..... Ein interessanterter Aspekt ist das auch SocGen damit angefangen ist wertlose Versicherung der Monolines abzuschreiben ( von den 550 Mio stammen lediglich 50 Mio von ACA / Details auf Seite 10 der Präsentation) . Passend zum Thema hier ein Ranking vom Spiegel über die größten Fehlspekulanten Börsenschwindler, Seiltänzer, Hochstapler

You cannot make this up. FT Alphaville is reporting that Societe General has won the award for the " Best Equity Derivatives House" .....

Das ist wirklich kaum zu toppen. FT Alphaville berichtet das ausgerechnet Societe General den Preis fpr das "Beste Derivatehaus für Aktien" gewonnen hat.

“We managed the existing book very well because we decided some time before the crisis to be long volatility and be less sensitive to correlation, so the losses were minimal. We suffered on our statistical arbitrage trading activity, but that was just for one month, and minimal compared to some hedge funds or other banks. Overall, our trading activities will be approximately flat compared to last year, which is a good performance,”

Qutote: Christophe Mianne, SG CIB’s head of market activities, covering equity, derivatives, fixed income, currency and commodities in Paris

Make sure you read the Societe General Presentation for some more interesting details !

Empfehle die Societe General Präsentation für die mehr als interessanten Details zu lesen !

Live blogging the SocGen conference call via FT Alphaville

Marketwatch
French bank Societe Generale loss after an "exceptional fraud" committed by someone who usually trades plain-vanilla and European stock index futures.

It also said it was taking a 2.05 billion euro write-down, with 1.1 billion euros coming from U.S. residential property, 550 million euros coming from the U.S. bond insurers and 400 million euros in additional subprime-related risks. It will earn between 600 million and 800 million euros for the year.

The board rejected the resignation of CEO Daniel Bouton. It's going to issue 5.5 billion euros in preferred securities to J.P. Morgan and Morgan Stanley to boost its capital

The story is reminding of Nick Leeson & Barings

Erinnert mich irgendwie stark an Nick Leeson & Barings

Here is a good take from Barry Ritholtz Fed's Folly: Fooled by Flawed Futures? suggesting ( i think correctly ) that this poor trader has lead to the emergency cut

Hier eine wie ich finde zutrefende Einschätzung von Barry Ritholtz Fed's Folly: Fooled by Flawed Futures? der unterstellt das dieser durchgeknallte Trader es geschafft hat Bernanke zum größten Notzinsschritt seit Jahrzehnten zu bewegengrößten Notzinsschritt

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

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.

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.

ACA "Hypothetical Speaking....."

Four Month after this post the chart doesn´t look good....... What a surprise!

Vier Monate nach diesem Post hat sich die Lage offensichtlich nicht gerade verbessert...... Was für eine Überraschung!

ACA Capital Reports Financial and Economic Results

ACA Capital Holdings, Inc. (NYSE: ACA) today announced a third quarter 2007 net loss of ($1.0) billion, or ($29.42) per diluted share. The net loss was primarily a result of ($1.7) billion, or ($1.1) billion after tax, of net unrealized mark-to-market losses on the Company's portfolio of Structured Credit transactions.

Nice to see that they have still money to buy back shares.....

Schön zu sehen das immer noch genügend Geld vorhanden ist um Aktien zurückzukaufen.....

During the quarter, ACA Capital Holdings purchased 2.1 million shares or $14.9 million of its outstanding shares of common stock in open market transactions. The stock repurchase program began on July 27, 2007 and may be suspended or discontinued at any time without prior notice.

The quote from ACA and this Q+A “Understanding correlation is critical to everything we do” from a few month ago is just brilliant comedy if you are not a shareholder or even worse have bought billions of insurance from this company.....

Dieses Zitat und dieses Q+A File “Understanding correlation is critical to everything we do” von vor einigen Monaten ist nahe an guter Comedy wenn man nicht gerade Aktionär oder noch schlimmer einer derjenigen ist die Mrd an Absicherung von ACA erworben haben

ACA Capital’s Structured Credit business provides credit protection, using credit default swaps, on tranches of credit portfolios. We are primarily a seller of credit protection on tranches where the risk of loss is greater than that of the “AAA” rated level. We will sell credit protection below the “AAA” rated level but only when we see unusually strong value. The credits that underlie the portfolios on which we sell credit protection include corporate bonds and loans and mortgage and asset-backed securities

What was only a hypothetical question on the Nov. 7 th in the conference call what will happen after a downgrade from the single A rating the management said that ACA would face (hypothetical speaking....) an immediate liquidity call of $ 1.7 billion...... Now after S&P has finally eliminated the "hypothetical" just 2 days later and put ACA on the list for a possible downgrade from A this scenario described from Michael Panzner So Much For Being Hedged could lead to big trouble on balance sheets from banks and insurers.... And with actions like this Fitch Downgrades $37.2B Of CDOs, Slashing AAAs to Junk the pain is spreading fast......

Nachden noch am 07. November in der Telefonkonferenz die vollkommen abwegige Frage diskutiert wurde was denn passieren würde wenn ACA sein A Rating verlieren sollte und das Management daraufhin geantwortet hat das dann sofort eine zusätzliche Geldspritze von 1,7 Mrd $ notwendig wäre kann man nachdem S&P nur 2 tage später AVA auf die WL für ein downgrade gesetzt haben schon mal auf Betteltour gehen. Wahrscheinlich ist das dieses Szenario das Michael Panzner beschreibt So Much For Being Hedged einigen Banken und Versicherungen üble Löcher in die Bilanzen reissen wird. Und mit Meldungen wie diesen Fitch Downgrades $37.2 Billion of CDOs dürfte sich das Problem rapide weiter verschlimmern......

Here is one example from the German insurance giant Allianz. The have hedged one part and bought insurance from monolines for another ( I assume not ACA, they have bought from one the least weaker players like MBIA, I hesitate to rate anyone strong....)

Hier ist ein anschauliches Beispiel der Allianz. Die haben einen ganz gewichtigen Teil Ihrer Engagements entweder durch Shortpositionen und den Kauf einer Garantie abgesichert. Ich bin mir sicher das die Allianz niemals von ACA gekauft hätte. Sie haben sicher von einen der wenigen schwachen Spieler wie MBIA gekauft. Richtig stark auf der Brust ist aber keiner......


The WSJ has a related story Buffett Gets OpeningAs Bond Insurers TurnTo Berkshire for Succor

Das WSJ hat passend dazu heute Buffett Gets OpeningAs Bond Insurers TurnTo Berkshire for Succor eine passende Geschichte

As clear as alphabet soup: banks’ CDO exposures

I think the term "Black Box" is not an understatement....... Maybe some still think their exposue is hedged via MBIA & Co. Good luck...... I also suggest to read From level three to cloud nine from Roubini via the FT & the take from Mish. Keep this in mind when some "experts" are still hyping the high dividend yield and the strong balance sheets.......

Ich denke hier trifft der Begriff der Black Box ziemlich genau ins Schwarze....... Evtl. haben ja einige Ihre Bestände auch durch MBIA & Co abgesichert und sind daher der Meinung nicht tätig werden zu müssen. Viel Glück........ Zudem solltet Ihr Euch From level three to cloud nine von Roubini via der FT und die Beurteilung von Mish nicht entgehen lassen. Behaltet diese Zahlen im Hinterkopf und schaltet am besten die Glotze ab und überspringt den Artikel in denen immer noch auf die starken Bilanzen und die hohen Dividenden hingewiesen wird.....

As clear as alphabet soup: banks’ CDO exposures / FT

Forget the banks’ Q3s. By any account, they’re billions of dollars out of date. For banks holding CDOs - and that’s most of Wall Street - writedowns will have greatly increased in the past three weeks.

The trouble is, no one, not even the SEC, knows exactly what banks’ exposures are. But the losses are beginning to come out of the woodwork: for Citi, in the news Monday, a $8bn-$10bn loss on the value of some assets. For Merrill Lynch, last week, it worked out at $8bn. For UBS, reporting their Q3s last week, $3.4bn.

Citi have painted the most comprehensive picture to date. But rather than making things clearer, it simply casts doubt on the other banks’ disclosures. Citi, for example, are reporting $8-10bn writedowns on a portfolio containing $10bn of high-grade CDO paper - which has been the principal faller in the past two weeks. But UBS only report writedowns of $3.4bn. And they hold $20bn of high-grade CDO paper.

There are very few proxies which can be used to judge banks’ CDO holdings. Even a league table of CDO deals arranged is a pretty poor indicator:

An added complication is the fact that banks are using wildly different estimates on the pricing of CDO assets. Although indices such as the ABX and TABX are valuable proxies for the market’s prices as a whole, they don’t necessarily reflect where banks individually are pricing their debt.

As reported in today’s FT, for example, Merrill Lynch, has written down mid-quality ABX debt to 63 cents in the dollar, even though the bank’s own analysts say its worth only 40. UBS, meanwhile, assumes the same debt to be worth 90 cents in the dollar. “Simple math would imply that UBS needs an additional $8bn write-down [on its $15.4bn holdings] if the ABX pricing is correct,” Merrill themselves had the cheek to point out in a report on their rival.
Here’s a breakdown of the main CDO exposures:

Citi
$10bn senior rated CDO debt
$8bn mezzanine CDO debt
$2.7bn “warehoused” CDOs
£200m CDO squared


Merrill Lynch
$8.3bn senior rated CDO debt
$5.3bn mezzanine CDO debt
$1bn “warehoused” CDO debt
$600m CDO squared


UBS
$20.2bn senior rated CDO debt
$1.8bn warehoused CDO debt

Total exposure undisclosed:

Bank of America
Undisclosed

Barclays
Q3s due November 27

Deutsche
$1.6bn on “trading activities in relative value trading in both debt and equity, CDO correlation trading and residential mortgage-backed securities.”

JPMorgan
$339m (net of hedges) “on collateralized debt obligation (CDO) warehouses and unsold positions.”

Lehman Brothers
Undisclosed

Morgan Stanley
Undisclosed

Wachovia
$534m writedown on CDOs

Citi Has Found Another $11 Billion....But Has No Plans To Reduce its Dividend level....LOL!

Thank god they don´t cut the dividend.... What a farce.... Maybe they will pimp this at CNBC and try to dance around the $ 11 billion overnight "adjustment" like the former deaf & ingorant CEO Prince. Maybe someone should tell MBIA & Co that their view on billions of CDO´s with only a low single percentage haircut is looking more and more like David Lereah during the years 2003-2006 . Maybe this guy is running their internal "models".......

Gottseidank wrd die Dividende nicht gekürzt......Da kann man natürlich leicht über die 11 Mrd $ an zusätzlichen Abschreibungen hinwegsehen. Es würde mich nicht wundern wenn es die Crew bei CNBC schafft die Dividenstory als Headline zu promoten. Besonders freut mich zudem das der ehemalig taube und ignorante CEO Prince inzwischen Geschichte ist. Evtl. sollte mal einer die letzten Abschreibungen von Citigroup mit denen von MBIA & Co ins Verhältnis setzen. Deren Sicht der Dinge mit Abschreibungen in niedrigen einstelligen Bereich sieht immer mehr wie ein verspäteter Aprilscherz aus . Evtl. ist ja dieser Typen für die Berechnung der Schadenmodelle zuständig.....

Slicing and dicing Citi’s subprime exposure / FT

Citi announced on Sunday night it was currently facing writedowns of between $8bn and $11bn, on top of the dismal numbers already reported in its Q3 statement.

What is truly shocking, however, is the speed at which these losses have been realised. Barely a month ago, Citi’s pre-Q3 trading statement, warned that it expected to realise $1.3bn on subprime-related writedowns. Which means that figure has now increased at least sixfold. To put it another way, on average Citi’s subprime-linked assets lost more that $2bn in value each week.

Citi has now disclosed it’s estimated total subprime exposure. Of the $55bn total, some $11.7bn is in its lending and structuring business and a staggering $43bn lies in exposures to collateralized debt obligations (CDOs) - huge baskets of mortgage securities.

CDOs have seen prices crash in the past two weeks, as rating agencies have slashed ratings on hundreds of mortgage backed securities. As FT Alphaville reported last week, banks could be expected to reveal more writedowns as the market tanked.

Of the $11.7bn subprime exposure Citi estimates it has in its lending and structuring business, $2.7bn lies in a “warehouse inventory” of unsold CDOs, $4.2bn in actively managed subprime loans intended for securitization and $4.8bn in financing transactions which have subprime collateral.

Of the remaining $43bn exposure, Citi estimates it has $18bn in CDOs: $10bn of which is in high grade tranches, almost $8bn in mezzanine tranches and some $200m in CDO squared structures. The remaining $25bn, says Citi, is in exposure to subprime CDOs through commercial paper. But Citi does not say what issues that CP: whether it is through off balance sheet vehicles, such as SIVs, is unclear.

MBIA, AMBAC & ACA Update

I suggest to read MBIA / Denial ? from the day MBIA released its earnings before you continue. Since then the stock has lost over 25 percent.

I find some numbers & comments from the MBIA earnings release quite interesting. MBIA has rushed into the RMBS/Commercial Real Estate market. All deals are including 2006 and 2007 commercial loans. Can´t help but i´ve heard some scary things about Commercial Real Estate and looking at CMBS Markit isn´t giving me much comfort either.......

The multi sector CDO´s are also including subprime. The spiking business comes in large part from banks that want to hedge their CMBS and CDO exposure on their balance sheets (after they failed to unload it.....). MBIA believes that their underwriting and their premiums earned are overcompensating their risk (based on their models....) .......They assumed that their worst case for their RMBS ( largely subrime) exposure with a buffer of 22-28 percent was enough when they signed the exposure in the recent years!!!!!!...... Mhhhh........

What will happen to the balance sheets from these banks if MBIA & Co won´t be able to pay the claims..... Just from looking at the chart it feels like at least some have some doubts...... It looks like the report from the short seller Pershing Square Capital Management, L.P. and the post about comon sense wasn´t so far of the mark....
Ich empfehle dringend sich zuvor MBIA / Denial ? durchzulesen. Seitdem hat die Aktie deutlich über 25% nachgegeben.

Ich finde diese Zahl aus der Ergebnisveröffentlichung von MBIA interessant. MBIA ist mit Schaum vorm Mund in den Bereich des gewerblichen Immobilienmarktes gerannt. Alle Papiere basieren Kredite aus den Jahren 2006/2007. Nachdem was ich gehört hat genau dieser Zeitraum den Peak markiert.

Die Multi Sektor CDO´s beinhalten zudem noch Subprimebestandteile. Das explodierende Geschäfft kommt fast ausschließlich von den großen Banken die verzweifelt versuchen die Papiere die sich in Ihren Bilanzen befinden abzusichern ( Nachdem Sie das in den Vorjahren nicht nötig hatten, dort wurden diese Papiere schnell weitergereicht ohne die Bilanzen zu belasten).

MBIA behauptet das die Risikoprämien mehr als ausreichend für die garantierten Risiken sind. Das war bis zu diesem Quartal allerdings auch das Argument für den Rest des Portfolios..... Immerhin haben diese Modelle vorhergesagt das Ihr Puffer von 22-28 % bei den gegebenen Garantien im Immobiliensektor (davon Großteil Subprime) mehr als ausreicht um nicht zur Zahlung herangezogen zu werden....... So kann man sich irren...... Im Nachhinnein sieht der Report vom Shortseller Pershing Square Capital Management, L.P. und über den gesunden Menschenverstand doch nicht so aus der Luft gegriffen aus...... :-)

Unschwer auszurechnen was in den Bilanzen der Banken los ist wenn MBIA sich erneut "verrechnet" hat . Und wenn man sich die Charts ansieht scheinen das zumindest einige zu glauben......

In the third quarter, U.S. structured finance ADP increased 294 percent compared with 2006 ( makes over 50 percent of earned premiums!) Several sectors contributed to the increase in global structured finance production, with particularly strong increases from CMBS pools (over 50 percent!), Collateralized Debt Obligations (CDOs) of investment grade corporate credits, commercial mortgage-backed securities pools and multi-sector (including subprime) CDOs ( 35 percent!) , as well as a whole business securitization, which generated the largest ADP for the quarter

Adjusted Direct Premiums (dollars in millions)
		Three Months Ended September 30									Nine Months Ended September 30
			2007			2006		% Change				2007		2006		% Change
Global Public Finance
United States		$	109.6		$	67.5		62	%		$	259.1		$189.2		37	%
Non-United States			66.9			31.6		112	%			187.7		133.8		40	%
Total			176.5			99.1		78	%			446.8		323.0		38	%
Global Structured Finance
United States			291.0			73.8		294	%			612.5		163.4		275	%
Non-United States			46.7			37.2		26	%			175.2		123.2		42	%
Total			337.7			111.0		204	%			787.7		286.6		175	%
Total		$	514.2		$	210.1		145	%		$	1,234.5		$609.6		103	%

If you have enough time i think it is well worth listening to the call. Scary! At least a large part from the anaylst are asking the right questions. Remembering that they are on the hook for over $ 600 billion it makes me want to buy more gold......

Wenn Ihr genügend Zeit habt kann ich empfehlen sich den Call anzuhören. Immerhin stellen einige Analysten die richtigen Fragen. Wenn man aber bedenkt das diese Firma über 600 Mrd $ an Garantien ausstehen hat möchte man doch am liebsten gleich seien Goldpsoition aufstocken.....

Replay
of MBIA Inc. Third Quarter 2007 Earnings Conference Call

This is one of the rare things were i am with Cramer Cramer: MBIA Is Toxic

Und das dürfte eine der wenigen Umstände sein das ich mit Carmer übereinstimme Cramer: MBIA Is Toxic

via Mish Downward Spiral of Deep Junk

At Thursday's close, Ambac's swaps implied a rating of "Caa1," seven levels below investment grade and 14 notches below its actual rating.

MBIA Inc's default swap spreads, meanwhile, are trading as though they carry a rating of "B2," five levels below investment grade, and 12 notches below the company's "Aa2" rating, according to Moody's data.Ambac was down another 20% on Friday.

MBIA was down another 6.7%. Clearly the market is beginning to wonder just how much those "guarantees" are worth.

> Looks like the rating agenciues are as usual way behind the curve......

> Sieht mal wieder so aus als wenn die Ratingagenturen mal wieder hoffnungslos der Musik hinterherrennen....

MBIA / Denial ?

I´m no expert on this kind of financial alchemy. But the common sense tells me that with over $115 billion in CDO & $ 49 billion in RMBS exposure ( see pfd Subprime RMBS Conference Call Presentation ) and after some of the news we have heard on a daily basis from all over the world for months now the view from MBIA doesn´t sound "conservative"..... The fact that MBIA insures well over $ 600 billion in total with just $ 7 billion in capital and their bonds are traded as junk doesn´t give me much comfort either....

Ich bin definitiv kein Experte in Sachen Finanzakrobatik. Ader der gesunde Menschenverstand sagt mir das mit Engagements von 115 Mrd $ in CDO´s und 49 Mrd $ im Hypothekenmarkt ( siehe PDF Subprime RMBS Conference Call Presentation ) und unter dem Eindruck der ganzen Horrormeldungen die uns jetzt seit Monaten heimsuchen die Auslegung von MBIA nicht sonderlich konservativ anmuten.....Das MBIA insgesamt für über 600 Mrd $ and Krediten mit knapp 7 Mrd$ an Kernkapital gerade steht & die deren eigene Anleihen mit junk gehandelt werden ist auch nicht gerade vertrauenserweckend....

MBIA Inc. Reports
The decline was due to a pre-tax net loss of $352.4 million, or $1.80 per share, that the Company recorded in the third quarter on financial instruments at fair value (“marked-to-market”) and foreign exchange.

The loss was a consequence of wider spreads affecting the valuation of the Company’s structured credit derivatives portfolio. Compared with the previous quarter, spreads widened significantly on Commercial Mortgage-Backed Securities (CMBS) collateral and on other asset-backed collateral in the Company’s structured credit derivatives portfolio.

The Company believes that the “mark-to-market” loss does not reflect material credit impairment.

> Lets hope the rating agencies are on top of this......

> Bleibt zu hoffen das die Ratingagenturen diesesmal auf der Höhe sind......

Got gold.....?

UPDATE:

I have just listened to the 120 minues conference call. Maybe it is not bad to have common sense.......

Ich habe mir gerade knappe 2 Stunden den Conference Call angetan. Nach dieser Erfahrung muß ich sagen das ich doch lieber beim gesunden Menschenverstand bleibe.....

MBIA Plunges After Stock Buyback Halted, First Loss

``I'm still trying to understand how the guarantors can take such low levels of mark-to-market losses relative to what the rest of the Street is taking on securities,'' said Ken Zerbe, an analyst with Morgan Stanley in New York said during the call.

Naked Capitalsim Worries About Monoline Insurers Grow

> It looks i´m not the only one wondering........

> Sieht ganz so aus als wenn ich nicht der einzige bin der sich verwundert die Augen reibt.....

MBIA, Ambac Risk Trades at Junk Levels on Subprime Defaults

Isn´t it nice to see when companies like MBIA are insuring over $600 billion with under $7 billion in capital.....This at the same time when the spreads are indicating that they have some "problems".....It gives me not much comfort when they put out a report where they try to downplay there subprime exposure and are saying that their "models" have factored in the worst case ....Have heard this from the rating agencies just a few days ago....until their model went bust!

Make sure you read Fitch Discloses Its Fatally Flawed Rating Model from Mish.

Also it is not convincing when they say they only have the smartest CDO managers that are out there....I think that Bear Stearns told their hedge fund clients the same....

Beschleicht Euch nicht auch ein mulmiges Gefühl wenn Firmen wie MBIA mit unter 7 mrd$ Kapitalbasis mal eben über 600 Mrd$ an Krediten garantieren.... Das zur selben Zeit deren Risikoprofil vom Markt als sagen wir mal vornehm ausgedrückt "problematisch" eingestuft wird macht die Sache nicht gerade angenehmer.

Da hilft es auch nichts wenn Sie in einem Report den Anteil Ihres Subprimeportfolios herunterzuspielen versuchen und darauf hinweisen das Ihre "Modelle" selbst den schlimmsten Fall berücksichtigt haben....Dumm nur das wir genau das auch von den Ratingagenturen bis vor einer Woche gehört haben....bis Ihr Modell implodiert ist. Selbstverständlich behaupten zur Zeit alle die cleversten CDO Manager angeheuert zu haben um Ihr Portfolio zu managen....Dasselbe hat wohl auch Bear Stearns noch vor kurzem über Ihren Hedge Fonds Manager gesagt....

Hat tip to Mike Larson

July 18 (Bloomberg) -- The perceived risk of holding the bonds of MBIA Inc. and AMBAC Financial Group Inc., owners of the two largest AAA rated bond insurance companies, has jumped to speculative grade on worries about subprime-mortgage defaults.

Credit-default swaps based on $10 million of MBIA's bonds more than doubled in the past month to $114,000, while Ambac contracts tripled to $91,000, according to CMA Datavision in London. Those levels imply a credit rating of Ba2 for MBIA and Ba1 for Ambac, the two highest junk ratings, according to the credit-strategy group at Moody's Investors Service.

> Thanks to Mish . Here comes an eyeopening pdf report titled Who´s holding the bag ? from Pershing Square Capital Management, L.P. It should be pointed out that Pershing is short the stock.

> Ihr solltet Euch damit man die Dimension dieser offensichtlichen Schieflage vor Augen führt unbedingt den o.g. report zu MBIA von Pershing Suare Capital Management ansehen. Der Fairnesshalber sollte erwähnt sein das Pershing eine short MBIA ist

Armonk, New York-based MBIA and Ambac guarantee the repayment of bonds issued by cities and states to finance the building of schools and roads. They also insure bonds backed by consumer loans and other financial assets, including collateralized debt obligations or CDOs.

``MBIA does not expect its insured CDO portfolio to pose a risk to its ratings nor does it expect that it will represent a material risk to the company's financial condition,'' MBIA said in the report.

> From the report MBIA’s CDO Strategy, Portfolio Analysis and Subprime Exposure

> Compare this with the Pershing report. The stock and credit market has voted so far in favour of pershing....Surprise, surprise!

> Vergleicht das mit dem Pershing Report. Der Aktien und Kreditmarkt hat sein Urteil anscheinend zugunsten von Pershing bereits gefällt.....Was Wunder!

MBIA undertakes extensive cash flow and quantitative modeling for each CDO transaction using internal models and the Moody's and S&P models to confirm the rating analysis and proposed attachment points

MBIA evaluates the quality of the collateral manager through extensive on-site due diligence. MBIA considers the quality of the collateral manager as essential to the successful performance of a managed CDO

As of March 31, 2007, the Company’s total direct portfolio consists of $5.5 billion of par exposure in subprime mortgage securitizations of which $1.6 billion of that exposure was originated in 2006. All 2006 originations were guaranteed at the Triple-A level

MBIA’s $108.8 billion CDO portfolio comprised 17% of MBIA’s total insured net par of $635.2 billion at 3/31/07

In February, MBIA's 5-year credit default swaps traded at $19,000 while Ambac Financial traded at $11,000. Moody's rates MBIA and Ambac at Aa2, both two notches below their insurance companies. That's because claims against MBIA's insurance company have priority over claims against the holding company.

``In less than one percent of our observations, we find companies with CDS gaps of five or greater,'' said Michael Love, an analyst in the credit-strategy group at Moody's. ``This is highly unusual.''

> Mabye this guy from Moddy´s should ask himslef if their model is way behind the curve and needs an imminant major makeover....... I have heard that this is common these days...... ;-)

> Das mag unter Umständen daran liegen das Moody´s in Ihrer Einschätzung mal wieder meilenweit daneben liegt...... Mir ist zu Ohren gekommen das so etwas in letzter Zeit häufiger vorkommen soll... ;-)

MBIA had insured $957 billion of debt payments as of the end of the first quarter while Ambac reported $803 billion of insured debt service as of the end of 2006, according to Securities and Exchange Commission filings. Credit-default swaps were created to protect bondholders against default and pay the buyer face value in exchange for the underlying securities or the cash equivalent should the company fail to adhere to its debt agreements.

ACA Drops
Shares of ACA Capital Holdings Inc., which owns a single-A rated bond insurance company, have fallen more than 20 percent since July 12 after the company, which also sells credit derivatives, updated information on its Web site about its subprime exposure.

>Looks my take on ACA wasn´t far off the mark....

> Sieht ganz so als wenn meine Einschätzung zu ACA doch nicht so weit hergeholt war....

A $1.5 billion private-equity fund run by New York-based Bear Stearns owned 27 percent of ACA as of November, according to Bloomberg data.

got Gold....?

ACA Capitals "Preferred Measurements Of Income" or "Blue Pill Accounting"

Oh Boy! Read the comments from the company which use their own measure of accounting and the analysts and you know how rotten the market has become. I think it is no coincidence that Bear Stearns is again involved. Needles to say that all 4 analysts have buy ratings on the stock! It gives you a good feeling when companies like ACA are providing insurance for billion of paper, doesnt´t it.....This number is taken from the 2006 annual report (large pdf ) titled "Understanding The Value" making allusions to the "enigma". This pdf could be real fun to revisit when the company runs into further trouble .......

ACA Capital’s Structured Credit business provides credit protection, using credit default swaps, on tranches of credit portfolios. We are primarily a seller of credit protection on tranches where the risk of loss is greater than that of the “AAA” rated level. We will sell credit protection below the “AAA” rated level but only when we see unusually strong value. The credits that underlie the portfolios on which we sell credit protection include corporate bonds and loans and mortgage and asset-backed securities

At the end of 2006, we had $39.4 billion of notional exposure in our Structured Credit business, with over 99% attaching at greater than “AAA” rated levels. ( End of Q1 already over $ 50.2 billion...)

Here is more from Mish on this topic

Das ist wirklich kaum zu fassen. Lest Euch bitte die Kommentare des Unternehmens durch die mal eben eine eigene Art der Buchführung benutzen. Dazu kommen einmal mehr vollkommen nutzlose Analysten die entweder wirklich nicht begreifen was Sie den ganzen Tag analysieren oder ..... Das verkneife ich mir lieber :-) Es ist sicher auch kein Zusfall das Bear Sterns erneut involviert ist. Überflüssig zu erwähnen das alle 4 Analysten Kaufempfehlungen haben. Zudem gibt einem das ganze doch gleich ein gutes Gefühle wenn Firmen wie ACA Mrd. von Papiern "versichern". Der o.g. Jahresbericht könnte in der Rückbetrachtung wenn ACA komplett implodiert ist recht lustig werden. Titel ist "Understanding The Value" und macht Anspielungen auf die Enigma....

By its own measures, everything looks good at ACA Capital Holdings, a financial management and insurance company. But other numbers do not look so good, and the stock price is falling rapidly. The company will not comment on what is going on.

In New York Stock Exchange trading yesterday, ACA shares fell 22 percent, dropping $1.87, to $6.59, on the heaviest volume in the company’s brief history. The shares have lost a third of their value since Thursday, and are trading at less than half of their value a month ago.

ACA has written billions of dollars worth of insurance on the value of financial assets, and it manages collateralized debt obligations, or C.D.O.’s — investment vehicles that invest in bonds backed by risky mortgages and other debt — on billions more. Some of the C.D.O.’s it manages for others were mentioned by bond rating agencies last week as candidates for downgrading.
But it is not clear how much pain ACA could suffer from the subprime market. In detailing its exposure to subprime mortgage loans on its Web site last week, the company said that nearly all of its direct exposure to subprime mortgage debt came through securities rated AAA by at least one bond rating agency. Such securities have generally held their value even as others have plunged in market value amid turmoil in the subprime market.
> "generally hold their value" ..... this comment is almost criminal

> der Kommentar das die AAA Papiere ihren Wert gehalten haben ist schon fast kriminell

Late yesterday, Standard & Poor’s, the rating agency, said it was considering lowering ratings on various securities issued by 19 C.D.O.’s, including 4 managed, though not owned, by ACA. The agency said the moves “reflect the increased probability of default” of underlying mortgages.

Until last month, ACA’s assurances had satisfied investors, although the stock suffered briefly on May 10, when it reported first-quarter earnings. Under normal accounting rules, those results showed that profits were down sharply, and that book value had plunged because of declines in market value of some assets.

But the stock quickly recovered to above $14 a share after the company pointed to its own adjusted measures of earnings, which showed rapid increases in both profits and book value.

In June, the shares began to slide again after the company said that insiders, primarily private equity firms that owned the company before it went public last November, wanted to sell 3.9 million shares, more than a tenth of the shares outstanding.

The proposed offering by insiders was quickly withdrawn after the stock came under pressure, but the selling intensified last week.

The company’s largest shareholder, with a 27.6 percent stake, is a fund managed by Bear Stearns Merchant Banking, an affiliate of the Bear Stearns Companies, whose own shares fell $2.58 yesterday, to $140.31. Last month, Bear Stearns was forced to bail out a hedge fund it managed that had suffered losses in subprime mortgage securities.

After ACA disclosed the extent of its subprime exposure last week, Craig Siegenthaler, an analyst at Credit Suisse, said the disclosure increased the risk profile for ACA, and reduced his price target on the stock to $12, from $17.

In a report yesterday morning, Geoffrey Dunn, an analyst at Keefe, Bruyette & Woods, reduced his earnings forecast, saying that ACA’s price had fallen because it “has no real comparable peers in the publicly traded markets, is very complex and seems to operate in areas that are at the heart of the market’s current concerns.”

But, Mr. Dunn said in an interview, “in our worst-case scenario, we think the stock has a double-digit valuation.” He said the price decline was not caused by “fundamentally legitimate concerns.” > What is this guy smoking? Worst case scenario and still double digit?

Under generally accepted accounting principles, ACA was required to take a loss for the fall in value of some derivative securities it owned, and to reduce its book value for the decline in other securities. A result was that profits were down 17 percent from a year earlier, although the company still reported profits of $11.4 million, or 31 cents a share. Its book value fell to $11.62 a share, from $13.96 at the end of 2006.

But ACA told investors that those numbers were misleading, and its chief executive, Alan S. Roseman, said the results “underscore our ability to produce significant growth throughout changing market conditions.”

Thanks to Randy Glasbergen

Mr. Roseman said that ACA’s preferred measurements of income, called net economic income and base economic income, were each up 41 percent from a year earlier. That was largely because those measurements ignored losses in derivative securities owned by the company. Assuming, as the company does, that those derivatives return to original value, there will be no long-term losses, the company explained.

In computing its adjusted book value, the company not only excludes those derivative losses but also adds in the value of future fees it will collect for managing C.D.O. portfolios. By that measure, adjusted book value rose to $24.91 a share, from $22.93.

ACA’s competitors in insuring C.D.O. values generally have AAA ratings from the rating agencies. But ACA has only an A rating, indicating a financial position that is less solid, although still good. In affirming that rating in June, Standard & Poor’s said ACA had insured $10.3 billion in C.D.O.’s that invested heavily in subprime mortgage bonds. While that made up nearly a quarter of all bonds insured by the company, S.& P. said that the bonds ACA insured were themselves rated AAA.

>Thank God for the always up to date rating agencies and the prudent due dilligence from buyers of this safe securities.....

> Gott sei Dank haben wir ja die stets aufmerksamen Wächter der Bonität und eine genaue Prüfung der Käufer der mit AAA besucherten Papiere..........

More from Bloomberg
ACA's statement showed that for $6.1 billion of ACA's contracts, the company would start taking losses even before all of the low-rated subprime-mortgage bonds from 2006 and 2007 defaulted

For another $2.8 billion of contracts linked to higher- rated debt, the company may lose money before all the derivatives on CDO securities within them defaulted. Analysts such as ones at Wachovia Corp. say among ``high grade'' CDOs, those made up of many CDOs may face the most losses. ACA also had $444 million in exposure to a CDO containing only CDO bonds, compared with $911 million of adjusted book value, Credit Suisse analysts said.

>If someone knows more about this company and has some insights about the insurance business please leave a comment. I still having problems how it is possible to insure tens on billion with equity under 500 mio and still get an AAA rating. I was a long time shareholder from Depfa (German stock) that is also involved in the financial guaranteed business. But they only provide the guarantee on state backed underlyings / public sector finance. Quite a difference to what ACA is doing.... I hope that i´m missing a point here...Otherwise this is even worse than i could have imagined it.....

>Wenn einer von Euch mehr Hintergrundinformationen hat wie es möglich sein kann das eine kleine Klitsche mit unter 500 mio an Kaiptal bei etlichen Mrd an Papieren als AAA Versicherer auftauchen kann laßt es mich wissen. Kenne hier als langjähriger Depfa Aktionär die gleiche Konstruktion mit dem Unterschied das die ausschließlich staatliche Underlyings garatnteirt haben. Ein nicht ganz zu unterschätzender Unterschied.......

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