Joined: Apr 27, 2007 Posts: 4262 Location: The Great Sonoran Desert
Posted: Fri Jan 18, 2008 2:40 pm Post subject: Bond Market Goes Kabooooooooooooom!
FITCH CUTS AMBAC RATING TO AA _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Joined: Oct 24, 2006 Posts: 107 Location: Pacific Northwest
Posted: Fri Jan 18, 2008 11:24 pm Post subject: Re: Bond Market Goes Kabooooooooooooom!
Yes, this is a big deal and will have quite a ripple effect.
With this rating cut - their core business is done. Lights out. Sadly... the municipalities who in good faith issued debt that they PAID AMBAC (and MBIA) to insure and provide credit enhancement for ... are also going to be downgraded to their unclerlying credit rating or the insurer's new rating (which ever is greater). This will require certain funds that hold these bonds to liquidate - as they can only hold triple A rated debt. Big slosh of investments to be sold in the secondary market and the big players that want only triple A will not be buying.
Joined: Jun 18, 2005 Posts: 3766 Location: In a van down by the river
Posted: Fri Jan 18, 2008 11:34 pm Post subject: Re: Bond Market Goes Kabooooooooooooom!
This is where it gets real bad.
Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.
Posted: Sat Jan 19, 2008 12:37 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Eli wrote:
This is where it gets real bad.
Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.
How have we come to this point? Even in the great depression, cities managed to scrimp by and get essential tasks done, even survive natural disasters. This whole financial fiasco is just a paper based problem - its not a real problem of assets and resources.
Maybe we are all to hung up on financing and debt schemes. Where there is a will there is a way.
I recall the story of my uncle's father who helped build Maple Leaf Gardens in 1931 in Toronto. He only got a half wage as the owner was impacted by the financial calamity. But, they got it built in eight months, actually record time. The tradesmen received shares in the Gardens which later turned them into wealthy men, if they were prudent enough to not to sell them. To say nothing of the pride element of having one's hands shaping a part of that Carleton Street shrine to hockey.
I'm sure in some city like St. Louis there will be electricians who will donate their time if it comes to that after some tornado so a widow can turn her lights on. And, in turn that widow may bake a pie for the workers. That is the real America.
Posted: Sat Jan 19, 2008 12:44 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Denny wrote:
Eli wrote:
This is where it gets real bad.
Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.
How have we come to this point? Even in the great depression, cities managed to scrimp by and get essential tasks done, even survive natural disasters. This whole financial fiasco is just a paper based problem - its not a real problem of assets and resources.
Maybe we are all to hung up on financing and debt schemes. Where there is a will there is a way.
I recall the story of my uncle's father who helped build Maple Leaf Gardens in 1931 in Toronto. He only got a half wage as the owner was impacted by the financial calamity. But, they got it built in eight months, actually record time. The tradesmen received shares in the Gardens which later turned them into wealthy men, if they were prudent enough to not to sell them. To say nothing of the pride element of having one's hands shaping a part of that Carleton Street shrine to hockey.
I'm sure in some city like St. Louis there will be electricians who will donate their time if it comes to that after some tornado so a widow can turn her lights on. And, in turn that widow may bake a pie for the workers. That is the real America.
The problem is that people have been sowing discord and hate while they've also been greedy.
You reap what you sow. Even if not immediately.
The world is consumed with itself, forgetting how to love.
Certainly, if you can learn to hate, you can also learn to love, but it takes time.
And time is something in short supply...
THAT is the true tragedy. Money is king and captor of the world. And shortly, it will soon prove to have been a grand deception. _________________ "Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so." - Douglas Adams
Posted: Sat Jan 19, 2008 12:53 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Denny wrote:
I'm sure in some city like St. Louis there will be electricians who will donate their time if it comes to that after some tornado so a widow can turn her lights on. And, in turn that widow may bake a pie for the workers. That is the real America.
Pie or no pie, they won't even stop their van without the permits. It will be the last pie they ever eat, assuming they have the presence of mind to ask for payment up front. Critical national infrastructure does not survive on goodwill. You either have a central authority, or you have nothing at all in short order. By bet is it survives, but there is no compromise between the two extremes. People have better ways of making a living which let them see tomorrow. _________________ "The American people are watching the numbers climb higher and higher at the pump and they're waiting to see what the Congress will do." - George W Bush
Joined: Dec 02, 2005 Posts: 6284 Location: Oil-addicted Southern Californucopia
Posted: Sat Jan 19, 2008 1:24 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Eli wrote:
Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.
The failures of some bond insurers could open the door for those who do not get downgraded, as municipalities look to minimize borrowing costs.
"Survivors will get long-term benefit from the near-term volatility," said Steve Stelmach, an analyst at Friedman, Billings, Ramsey & Co.
Warren Buffett's Berkshire Hathaway (BRK.A) could be one company that gets a boost. Buffett launched a new bond insurance business in December that has a "AAA" credit rating and a solid balance sheet. Buffett's new company also has the benefit of having no questionable loans on its books.
Boy, ol' Warren saw this coming, didn't he? Is anybody surprised? _________________ "Thank you for attending the oil age. We're going to scrape what we can out of these tar pits in Alberta and then shut down the machines and turn out the lights. Goodnight." - seldom_seen
Joined: May 13, 2005 Posts: 2615 Location: The Urban Village
Posted: Sat Jan 19, 2008 1:33 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Zardoz wrote:
Warren Buffet to the rescue???
Quote:
Buffett's new company also has the benefit of having no questionable loans on its books.
Boy, ol' Warren saw this coming, didn't he? Is anybody surprised?
No questionable loans ? That's a pretty bold statement. But, buffet is the man. He and I love the railroads. So far they aren't doing that great though. But Buffet has a bazillion more shares than I!
Posted: Sat Jan 19, 2008 2:54 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Denny wrote:
Eli wrote:
This is where it gets real bad.
Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.
How have we come to this point? Even in the great depression, cities managed to scrimp by and get essential tasks done, even survive natural disasters. This whole financial fiasco is just a paper based problem - its not a real problem of assets and resources.
Actually this financial fiasco is the direct result of a very real problem with our assets and resources. This is not 1930 when there was nothing wrong with our factories, our minefields, our environment, and the places we work in live.
When I first started talking about peak oil in 2003 I talked to some people in the banking industry that responded that a second great depression could never happen. The magic hand of the market would adjust and we the banks would work our way around these resource issues. The greatest misallocation of resources in history of man has occurred. We spent it on oversized houses made out of cardboard and plastic located them as far away as possible on what was once productive farmland. We filled those houses with junk made in China and India while motoring in our oversized cars and suvs that run on oil pumped from the bottom of the sea, the arctic, and from countries that hate us.
All of this was financed by the banks. There is nothing wrong with the banks this time around. This time the resources and assets ARE to blame.
Posted: Sat Jan 19, 2008 6:26 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
Twilight wrote:
Critical national infrastructure does not survive on goodwill.
I have to disagree with you here.
My background is Serbian, and while I was born, raised and reside in Canada, I still have a lot of relatives in the old country with whom I keep in close touch, along with the sizable emigre community here in Toronto.
Putting Balkan politics aside for a moment, during the worst of the times of the past twenty years, a very large number of civil employees in Yugoslavia/Serbia went months without getting a paycheque. I know a nurse who, along with entire staff at her hospital in Belgrade, including the doctors, went a full six months without any pay. They still showed up to work every day and did their jobs.
And again, putting Balkan politics aside for the moment, there were, I believe, two major factors that kept them going through such times. Number one, they felt a very strong community bond further strengthened by the extremity of the crisis. Number two, it's an often-repeated and I'd say largely true adage in that part of the world that everyone in the city has at least one relative in the country, and thus urbanites always have someone to share food with them in the worst of times.
Are Americans (and Canadians) up to carrying on in such extreme economic circumstances? I don't know. As one anonymous poster remarked on another board two years ago during a discussion of peak oil and the upcoming crisis, "the softest generation ever raised in America is about to get thrown to the wolves."
Posted: Sat Jan 19, 2008 8:12 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
DoubleD wrote:
With this rating cut - their core business is done. Lights out. Sadly... the municipalities who in good faith issued debt that they PAID AMBAC (and MBIA) to insure and provide credit enhancement for ... are also going to be downgraded to their unclerlying credit rating or the insurer's new rating (which ever is greater).
Ouch indeed. Of course, I'd say debt issued 'in good faith' is sadly stretching the truth in many cases. Often enough, the cities issued 20 year notes on the basis of 20 future years of 2% annual population growth and 3% annual assessment growth. The former isn't happening. The latter... well, the city employs the assessor, so it will for a while, and I guess they're hoping for inflation, just like the rest of Debtor America. _________________ At 1% annual growth, human bodies will incorporate every gram in the observable universe in approximately 10,170 years.
Posted: Sat Jan 19, 2008 9:35 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
drgoodword wrote:
Are Americans (and Canadians) up to carrying on in such extreme economic circumstances? I don't know. As one anonymous poster remarked on another board two years ago during a discussion of peak oil and the upcoming crisis, "the softest generation ever raised in America is about to get thrown to the wolves."
Joined: May 10, 2007 Posts: 2745 Location: The Entropisphere
Posted: Sat Jan 19, 2008 9:44 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
drgoodword wrote:
Twilight wrote:
Critical national infrastructure does not survive on goodwill.
I have to disagree with you here.
My background is Serbian, and while I was born, raised and reside in Canada, I still have a lot of relatives in the old country with whom I keep in close touch, along with the sizable emigre community here in Toronto.
Putting Balkan politics aside for a moment, during the worst of the times of the past twenty years, a very large number of civil employees in Yugoslavia/Serbia went months without getting a paycheque. I know a nurse who, along with entire staff at her hospital in Belgrade, including the doctors, went a full six months without any pay. They still showed up to work every day and did their jobs.
And again, putting Balkan politics aside for the moment, there were, I believe, two major factors that kept them going through such times. Number one, they felt a very strong community bond further strengthened by the extremity of the crisis. Number two, it's an often-repeated and I'd say largely true adage in that part of the world that everyone in the city has at least one relative in the country, and thus urbanites always have someone to share food with them in the worst of times.
Are Americans (and Canadians) up to carrying on in such extreme economic circumstances? I don't know. As one anonymous poster remarked on another board two years ago during a discussion of peak oil and the upcoming crisis, "the softest generation ever raised in America is about to get thrown to the wolves."
did your serbian friends need to buy fuel to drive to the hospital? Were they 100% dependent upon the grocery stores being stock with food that consumed a very small part of their paycheck? Did they have savings or were they living paycheck to paycheck?
I think there are some americans who would demonstrate the spirit you describe but they have to get to work. With some notable exceptions alot of nurses I know either would not be able to make it to work without a paycheck, (the bus system doesn't go out to their suburbs) or would not be able to keep themselves fed over a few months without a check. _________________ "Against stupidity the gods themselves contend in vain."
-Friedrich von Schiller
"What I try, may not work. It may be ineffective. It might even turn out in the pages of history to be the exact wrong thing to do, but I'm going to try to do what I c
Posted: Sat Jan 19, 2008 9:54 am Post subject: Re: Bond Market Goes Kabooooooooooooom!
This thread over at Ticker Forum essentially lays out the grim details, especially from the posters Genesis, BW8472 and Nothing. It's well worth your time. Bottom line: there is no solution, no backstop, available. IT'S TOO LATE! :
Edit: fixed link (I think)
Ticker Forum Thread _________________ Civilization: the biosphere's skin disease
Last edited by firestarter on Sat Jan 19, 2008 4:45 pm; edited 1 time in total
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