Diane Ritter

US Corporate Debt Default Rate Could Top 23% by 2010

It is bizarrely inappropriate to state that the junk bond "default rate" will be 23%. They are predicting that 23% of the junk bonds in the index would default over 3 years time, 2008, 2009, 2010, which translates to a RATE of default of 6.7% in 2008, 7.8% in 2009, and 8.8% in 2010 (since they are predicting that 200 of the defaults will occur in the second half of 2009 and in 2010). Default rates of 8.8% aren't pretty, but they aren't out of line with other forecasts (I have heard predictions of up to 10% junk bond default rates). But saying that the DEFAULT RATE is 23% is just irresponsible scare mongering.

Roubini Ups Losses Estimate to 3T - Still Smaller Than the Rescue Packages

Well, unfortunately, the banks are lying to us. They are managing their reporting of their write-downs each quarter, reporting as much as they think they can get away with without spooking investors. It will probably take them 3 or 4 years to write down all of it. And that 3 or 4 years is just a guess. Their balance sheets and many of their assets are so opaque that probably the banks themselves don't know how badly they are in the hole. The Japanese banks are still gradually writing down their real estate and stock market losses, 10 years later, making sure each quarter that the write downs are less than total profit. And until real estate prices stop going down, and foreclosures and credit card defaults and auto loans defaults and business bankruptcies stop going up, no one can know how badly off all the banks really are.

The G7 Put vs. the Greenspan Put

"we are not going to return to the days of yore, with too many banks, too much leverage, and too much consumer debt. "

I truly hope you are right. But could you expand on why you don't think so?

Comedy Virus Hits Headline Writers

Thank you for a good laugh

Five Common-Sense Confidence Builders

Yes, my confidence will be restored when we see regulators being fired for their gross incompetence. The banks couldn't have been handing out 0 down loans, liar loans, and teaser rate loans without the permission, and complicity of their regulators. Why haven't the regulators responsible for overseeing IndyMac and Washington Mutual and Wachovia been fired or held up for censure? Where are the Congressional hearings on the gross incompetence of the FDIC?

Britain's 'TARP': Taxpayers Locked in to Potential Upside

And in the United States, Congress enacted a bill that will allow the Bush Administration to buy any security they want, at any price they want, from anyone they want, with as little downside protection against further loss to the taxpayer that they want. This has to be the most poorly designed, irresponsible piece of legislation ever passed into law. The Bailout Bill seems DESIGNED to allow corruption and fraud, pay-off's and insider deals. Paulson has already said that he plans to pay far above market prices for the toxic assets he is going to buy. And the legislation gives him complete liberty to decide who to buy the assets from, and the kind and amount of downside protection to require. 100% of the $700 Billion dollars could be used to pay off political pals and cronies of the Bush Administration. We shouldn't be calling this the Bailout Bil, we should be calling it the $700 Billion Dollar Rip-Off Bill. It's the biggest slush fund in history.

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How Much Will a Wells-Wachovia Deal Cost Taxpayers?

Are you crazy? If the Citi-Wachovia merger had gone through the US would have been on the hook for up to $270 BILLION dollars worth of losses from Wachovia worst crap assets. Assets that are still being carried at far over actual value on Wachovia's books, and declining by the day. Including over $100 BILLION dollars worth of option adjustable-rate mortgages from it's doomed acquisition of Golden Western. 100% guaranteed and backstopped by Uncle Sugar. Wells Fargo is willing to take them for nothing, and you are worried about how it will help their tax write-offs? Catch a clue guy, corporate tax rates are on a sliding scale from 15% to 35%. Which means WORST CASE the US taxpayer just got off the hook for 65% of this fiasco.

America Needs a Turnaround Plan

How about repealing the bail out bill? or amending it to remedy some of its more striking defects? We've got a choice between Tweedledum and Tweedledee for President, but we can use this campaign to make a BIG
change in Congress. Seems like it is about time for a REAL grass-roots campaign. If you don't know if your Congressman voted yes or no, FIND OUT, here's a link that you can use if you want, housingdoom.com/2008/1.../. But if he voted for it, don't be content to "just vote NO in November", take a minute and find out who is running against him, and send him a check for a few bucks. Money is the life-blood of politics. And write across it in big letters "Repeal the Bail Out Bill", so he'll know exactly where his new found support is coming from.

The U.S. Economy After the Bailout

That's funny. The think I don't like most about the plan is that it doesn't require Bush and Paulson to get any kind of downside protection for the taxpayers money. Tuesday's takeover of Wachovia shows us what we can expect: The FDIC got 12B dollars worth of stock options in exchange for an absolute guarantee on $270B dollars worth of bad debt. That is just exactly 4 cents on the dollar. And Bush and Paulson both personally signed off on the deal. Tough negotiators, huh? I figure that is just about what we should expect to get back on the $700B Congress is gearing up to give him right now.
Bush is going to turn this 700B into the biggest slush fund in the history of the world. What do you bet he can spend the whole thing before he leaves office? And what do you bet he manages to funnel ALL of it to his pals and cronies? 4 cents on the dollar to us, 96 cents on the dollar to them. Such a deal.

Don't Get Sanguine About This Bill

9 out of 10 people I know are against this bill. If you let Congress pass it over your objections you have no one to blame but yourself. Call your congressman today and tell him exactly how you feel. And be sure to let him know that you will vote him out of office in FOUR SHORT WEEKS if he votes for this bill.

Corporate Bonds: When Safe Asset Classes Become Risky

It is pretty dishonest to say LQD "is not a bank". The only reason it is considered investment grade is that S&P and Moody's ratings are so irresponsible as to be criminal negligence. It is stuffed full of bonds from troubled banks. It hasn't dropped like a rock because "increasing fears that companies will not be able to sustain interest payments on bonds". It has dropped like a rock because people have JUSTIFIABLE concerns about the accuracy of the balance sheets of many of these banks. At this point I have stopped believing anything they say anymore on their balance sheets. It is all lies. They aren't marking to anything. They are letting the bad news out a little bit at a time in the hopes that somehow they won't be caught out in their lies. No one should invest in these bonds until these banks start honestly reporting on the value of their assets. Don't hold your breath though, for a lot of them this isn't an option. If they did, they would be admitting they were bankrupt.

Looking for Hope

We don't need to nationalize the banks. The only way to solve this problem is to deal with all banks too weak to lend in the exact same way that the FDIC dealt with Washington Mutual. Anything else than that is going to condemn us to repeat Japan's 10 long years (and counting) of slow/no growth. Until the government stops trying to prop up banks that are to weak to lend, the economy, and the stock market are going to continue going down or sideways. As soon as the weak banks are forced into bankruptcy, and their assets are placed in the hands of strong banks with responsible management, the economy will get going again. Anything else than that is going to condemn us to repeat Japan's 10 long years (and counting) of slow/no growth.

Fear Goes Hand in Hand with Drama

Of course it is going to be an L shaped recovery. Until the government stops propping up banks that are to weak to lend, the economy, and the stock market are going to continue going down or sideways. The only way to solve this problem is to deal with all banks too weak to lend in the exact same way that the FDIC dealt with Washington Mutual. As soon as the banking assets are placed in the hands of strong banks with responsible management, the economy will get going again. Anything else than that is going to condemn us to repeat Japan's 10 long years (and counting) of slow/no growth.

Fear Goes Hand in Hand with Drama

Hooray!!! The people have spoken. I talked to a congressional aide. He said the calls and letters had been running about 100 to 1 against.

Global Stock Markets: The Deleveraging Process Continues

Call your Congressman and Senator's people, or reap the consequences. Rumor has it that the vote on the Bailout is going to be Monday in the House, and Wednesday in the Senate. You need to call now if you want to have any influence on their votes.