crashof2008's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/163927/comments http://seekingalpha.com/article/83057-mbia-s-gic-exposure-could-trigger-a-liquidity-crisis?source=feed#comment-195427 195427
In closing however, I must take final exception to this astonishing excerpt from your most recent post:

"...there are quite a few insurers who function quite well with ratings below AAA like AIG for instance."

Are you aware that the CEO of AIG, Mr. Sullivan, was forced out of office a little over a week ago after an emergency meeting of the Board of Directors?

This occurred after they lost 30 billion in 2 quarters based on precisely this reliance on bell-shaped distribution of pricing and behavioral outcomes, coupled with massive overleveraging that is forcing MBIA into bankruptcy before our eyes.

How you could describe such an outcome as "functioning quite well" is beyond me.

That historic debacle is outlined in the Financial Times at:

tinyurl.com/4d8s9u

A couple points to offer you:

1. You might enjoy and benefit from a subscription to the Financial Times of London, the world's finest newspaper.

2. You might also enjoy and benefit from my website listed with this post. I've reviewed hundreds of working papers of the Federal Reserve and have tried to concisely put forth some of these key issues in that venue.

Till our next debate.

Matt]]> Sun, 29 Jun 2008 17:20:28 -0400
In closing however, I must take final exception to this astonishing excerpt from your most recent post:

"...there are quite a few insurers who function quite well with ratings below AAA like AIG for instance."

Are you aware that the CEO of AIG, Mr. Sullivan, was forced out of office a little over a week ago after an emergency meeting of the Board of Directors?

This occurred after they lost 30 billion in 2 quarters based on precisely this reliance on bell-shaped distribution of pricing and behavioral outcomes, coupled with massive overleveraging that is forcing MBIA into bankruptcy before our eyes.

How you could describe such an outcome as "functioning quite well" is beyond me.

That historic debacle is outlined in the Financial Times at:

tinyurl.com/4d8s9u

A couple points to offer you:

1. You might enjoy and benefit from a subscription to the Financial Times of London, the world's finest newspaper.

2. You might also enjoy and benefit from my website listed with this post. I've reviewed hundreds of working papers of the Federal Reserve and have tried to concisely put forth some of these key issues in that venue.

Till our next debate.

Matt]]> http://seekingalpha.com/article/83057-mbia-s-gic-exposure-could-trigger-a-liquidity-crisis?source=feed#comment-195362 195362
Let's be clear. What will unfold over the next few years during The Great Deleveraging is a Chernobyl that will adversely affect billions of innocents worldwide. They did nothing to deserve this.

This catastrophe is largely caused by two critical factors: 1) faulty models that claim stock and derivative prices will be distributed along a bell-shaped curve, rather than having fatter tails associated with a Cauchy distribution of prices and outcomes, coupled with 2) a reckless use of hyperleveraging that amplifies the effect of this deeply flawed price distribution assumption.

MBIA is a prime example of how profoundly bankrupt this lethal combination of false derivative modeling coupled with hyperleveraging can be.

You state that:

"The CDS positions that MBIA holds are not tradable securities and they often have significant protection on the actual portions that they insure. THEY ARE INSURANCE CONTRACTS WHICH THEY WILL HOLD AND PAY INTEREST AND PRINCIPAL ON WHEN THEY COME DUE ON DEFAULTED CONTRACTS." (emphasis added).

This is demonstrably false. If MBI were planning to hold this deeply toxic and radioactive waste to maturity, and pay any and all necessary claims as you so blandly assert, why are they (together with Ambac) so desperate to CANCEL 125 billion dollars worth of them as described just last week in the Financial Times at:

tinyurl.com/5ogde4

MBIA IS placing these on the market, in direct contradiction to your false assertion above. They are NOT holding them to maturity and they are proposing to NOT pay any interest and principal on defaults. And yet you oppose all rational market based accounting, hiding behind methods that conceal the objective reality on the ground.

You either believe in free markets or you don't.

Any attempt to avoid marking these securities to market by pretending that they will never be marketed in any stress scenario, smacks of a socialist lack of faith in the purgative powers of free market pricing.




]]> Sun, 29 Jun 2008 15:39:46 -0400
Let's be clear. What will unfold over the next few years during The Great Deleveraging is a Chernobyl that will adversely affect billions of innocents worldwide. They did nothing to deserve this.

This catastrophe is largely caused by two critical factors: 1) faulty models that claim stock and derivative prices will be distributed along a bell-shaped curve, rather than having fatter tails associated with a Cauchy distribution of prices and outcomes, coupled with 2) a reckless use of hyperleveraging that amplifies the effect of this deeply flawed price distribution assumption.

MBIA is a prime example of how profoundly bankrupt this lethal combination of false derivative modeling coupled with hyperleveraging can be.

You state that:

"The CDS positions that MBIA holds are not tradable securities and they often have significant protection on the actual portions that they insure. THEY ARE INSURANCE CONTRACTS WHICH THEY WILL HOLD AND PAY INTEREST AND PRINCIPAL ON WHEN THEY COME DUE ON DEFAULTED CONTRACTS." (emphasis added).

This is demonstrably false. If MBI were planning to hold this deeply toxic and radioactive waste to maturity, and pay any and all necessary claims as you so blandly assert, why are they (together with Ambac) so desperate to CANCEL 125 billion dollars worth of them as described just last week in the Financial Times at:

tinyurl.com/5ogde4

MBIA IS placing these on the market, in direct contradiction to your false assertion above. They are NOT holding them to maturity and they are proposing to NOT pay any interest and principal on defaults. And yet you oppose all rational market based accounting, hiding behind methods that conceal the objective reality on the ground.

You either believe in free markets or you don't.

Any attempt to avoid marking these securities to market by pretending that they will never be marketed in any stress scenario, smacks of a socialist lack of faith in the purgative powers of free market pricing.




]]> http://seekingalpha.com/article/83057-mbia-s-gic-exposure-could-trigger-a-liquidity-crisis?source=feed#comment-195122 195122
www.youtube.com/watch?...

www.youtube.com/watch?...

No one has the credibility of Volcker on these issues, save perhaps Janet Tavakoli who has contracted out as a special consultant to the Fed on structured finance issues.

These videos of Mr. Volcker's are a must see and present the scandal of these weapon of mass destruction of the financial world (and their false valuations based on "historical" precedent that go with them) in easy to understand layperson language.

]]> Sun, 29 Jun 2008 10:06:25 -0400
www.youtube.com/watch?...

www.youtube.com/watch?...

No one has the credibility of Volcker on these issues, save perhaps Janet Tavakoli who has contracted out as a special consultant to the Fed on structured finance issues.

These videos of Mr. Volcker's are a must see and present the scandal of these weapon of mass destruction of the financial world (and their false valuations based on "historical" precedent that go with them) in easy to understand layperson language.

]]> http://seekingalpha.com/article/83057-mbia-s-gic-exposure-could-trigger-a-liquidity-crisis?source=feed#comment-195078 195078
Tim does this when he says:

"Why don't you write a column on the assumptions being made in the Asset Backed Securities Market to validate the current pricing? Let's asses how realistic these prices are in relation to various historical precedents."

Tim, historical volatilities being used to input pricing in these derivatives was a major cause of what got us into this mess in the first place!

These are NOT normal times and asset prices are NOT distributed along a bell curve. Check out Volcker's recent speech before the New York Banker's Club that touches on this subject. We are continuing to have MAJOR sigma 4 and sigma 5 events (4 and 5 standard deviations from the norm) every 10 years and each one is worse than the previous one!

Those methods have FAILED the test of the market, as Volcker says.

Stock and derivative price distributions now have MUCH fatter tails, in Cauchy (not Gaussian) distributions and we need to use implied volatilies much more in assessing what these weapons of mass destruction of the financial system are really worth.

And they aren't worth much.

750 TRILLION dollars in derivatives crashing is not a pretty sight.

And to assume that this crash will follow historical price distribution precedents is irresponsible in the extreme, especially in judging how one of the most irrresponsible set of valuations in the monolines will ultimately be valued in the marketplace.

Jingle mail was not in your models. But it is the reality.




]]> Sun, 29 Jun 2008 09:01:47 -0400
Tim does this when he says:

"Why don't you write a column on the assumptions being made in the Asset Backed Securities Market to validate the current pricing? Let's asses how realistic these prices are in relation to various historical precedents."

Tim, historical volatilities being used to input pricing in these derivatives was a major cause of what got us into this mess in the first place!

These are NOT normal times and asset prices are NOT distributed along a bell curve. Check out Volcker's recent speech before the New York Banker's Club that touches on this subject. We are continuing to have MAJOR sigma 4 and sigma 5 events (4 and 5 standard deviations from the norm) every 10 years and each one is worse than the previous one!

Those methods have FAILED the test of the market, as Volcker says.

Stock and derivative price distributions now have MUCH fatter tails, in Cauchy (not Gaussian) distributions and we need to use implied volatilies much more in assessing what these weapons of mass destruction of the financial system are really worth.

And they aren't worth much.

750 TRILLION dollars in derivatives crashing is not a pretty sight.

And to assume that this crash will follow historical price distribution precedents is irresponsible in the extreme, especially in judging how one of the most irrresponsible set of valuations in the monolines will ultimately be valued in the marketplace.

Jingle mail was not in your models. But it is the reality.




]]> http://seekingalpha.com/article/83057-mbia-s-gic-exposure-could-trigger-a-liquidity-crisis?source=feed#comment-194912 194912
There are different ways to calculate "average rating" here. That is MBIA's wiggle and weasel word of choice.

As I understand most of these contracts, they demand a minimum of AA collateral to meet a margin call.

Given MBI's history of deceptive practices, I note the following about that rather odd phrase "average rating":

If i had:

100 bonds with a $1000 coupon rated one notch ABOVE AA
AND
100 bonds with a $1,000,000 coupon rated one notch BELOW AA

I would have over one hundred million dollars in securities that "averaged" a AA rating.

Because I had 100 bonds ABOVE AA and 100 bonds below AA.

Of course that would be terribly misleading.

And I would only have 100,000 dollars in bonds that could be used as collateral. But I could proclaim I had over 100 million dollars of bonds with an "average" rating of AA.

The words "average rating" are highly suspicious here. I smell a rat.

Matt]]> Sat, 28 Jun 2008 18:31:02 -0400
There are different ways to calculate "average rating" here. That is MBIA's wiggle and weasel word of choice.

As I understand most of these contracts, they demand a minimum of AA collateral to meet a margin call.

Given MBI's history of deceptive practices, I note the following about that rather odd phrase "average rating":

If i had:

100 bonds with a $1000 coupon rated one notch ABOVE AA
AND
100 bonds with a $1,000,000 coupon rated one notch BELOW AA

I would have over one hundred million dollars in securities that "averaged" a AA rating.

Because I had 100 bonds ABOVE AA and 100 bonds below AA.

Of course that would be terribly misleading.

And I would only have 100,000 dollars in bonds that could be used as collateral. But I could proclaim I had over 100 million dollars of bonds with an "average" rating of AA.

The words "average rating" are highly suspicious here. I smell a rat.

Matt]]> http://seekingalpha.com/article/82840-help-for-the-guarantors-from-an-unexpected-source?source=feed#comment-193260 193260
Did it ever occur to you that one of the key reasons MBI is tanking today is because of their 8-K they filed with the SEC yesterday?

It's a felony to lie to the SEC, so they are usually more accurate in their filings with them than with what they tell their bloggers acting in their behalf.

READ THE 8-K FILED WITH THE SEC yesterday.

Looks like the fallout from the initial stages of implementation of FASB 163 is REALLY starting to bite!

]]> Thu, 26 Jun 2008 10:26:52 -0400
Did it ever occur to you that one of the key reasons MBI is tanking today is because of their 8-K they filed with the SEC yesterday?

It's a felony to lie to the SEC, so they are usually more accurate in their filings with them than with what they tell their bloggers acting in their behalf.

READ THE 8-K FILED WITH THE SEC yesterday.

Looks like the fallout from the initial stages of implementation of FASB 163 is REALLY starting to bite!

]]> http://seekingalpha.com/article/82525-monolines-trying-cdo-buyouts?source=feed#comment-192016 192016
In terms of MBI and ABK attempting to cancel 125 billion in credit default swaps in intense negotiations with Citibank, Merrill and UBS. Most accounts put MBI's share at 80 billion of this.

Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.]]> Tue, 24 Jun 2008 15:33:21 -0400
In terms of MBI and ABK attempting to cancel 125 billion in credit default swaps in intense negotiations with Citibank, Merrill and UBS. Most accounts put MBI's share at 80 billion of this.

Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.]]> http://seekingalpha.com/article/82296-the-end-of-the-monoline-bond-insurance-business?source=feed#comment-191688 191688
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> Tue, 24 Jun 2008 09:48:49 -0400
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> http://seekingalpha.com/article/82400-insurer-cut-hurricane-hits?source=feed#comment-191687 191687
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> Tue, 24 Jun 2008 09:48:25 -0400
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> http://seekingalpha.com/article/82413-ambac-mbia-the-rating-shoes-drop?source=feed#comment-191685 191685
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> Tue, 24 Jun 2008 09:48:00 -0400
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> http://seekingalpha.com/article/82452-whitman-s-q2-letter-and-disclosure-requirements?source=feed#comment-191684 191684
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> Tue, 24 Jun 2008 09:47:42 -0400
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> http://seekingalpha.com/article/82455-rating-agencies-target-guarantors-to-deflect-subprime-blame?source=feed#comment-191683 191683
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> Tue, 24 Jun 2008 09:47:26 -0400
Any negotiations to cancel the 80 billion in insurance contracts that MBI wrote will be extraordinarily problematic, especially in this environment of collapsing bank profits.

To understand why, you need to master the difference between a CDO and a CDS. The difference between these two is an absolutely VITAL distinction that so many overlook.

I'll keep it short and sweet. But you need to master this distinction. Read carefully for just 30 seconds and it will serve you well.

Think of a CDS (credit default swap) as an insurance policy. MBI insured 80 billion of largely worthless paper to various banks. They are, after all, an insurance company and thought this would be a logical extension of their insurance business.

Now MBI wants the banks such as Merrill and Citi and UBS to cancel the insurance policies. MBI is basically offering to simply refund the premiums paid.

This would leave the banks holding 80 billion dollars of collateralized debt obligations (CDOs) that had been insured and guaranteed by MBI.

It's like if your house is destroyed in a fire. The insurance company, instead of reimbursing you for the value of the home (say $400,000) offers instead to rebate you the $1200 you have paid in premiums.

Would you take it?

This is what MBI is offering.
]]> http://seekingalpha.com/article/82413-ambac-mbia-the-rating-shoes-drop?source=feed#comment-191577 191577
Duh.

Maybe if you had taken more than elementary algebra you would understand that MBI is truly, irrevocably bankrupt.

See you in January, when FASB 163 takes full force.]]> Tue, 24 Jun 2008 07:17:23 -0400
Duh.

Maybe if you had taken more than elementary algebra you would understand that MBI is truly, irrevocably bankrupt.

See you in January, when FASB 163 takes full force.]]> http://seekingalpha.com/article/82452-whitman-s-q2-letter-and-disclosure-requirements?source=feed#comment-191576 191576
Duh.

Maybe if you had beyond college algebra you would understand that MBI is truly, irrevocably bankrupt.

See you in January, when FASB 163 takes full force.]]> Tue, 24 Jun 2008 07:15:09 -0400
Duh.

Maybe if you had beyond college algebra you would understand that MBI is truly, irrevocably bankrupt.

See you in January, when FASB 163 takes full force.]]> http://seekingalpha.com/article/82296-the-end-of-the-monoline-bond-insurance-business?source=feed#comment-191076 191076
What does that hedge word "average" mean here? There are many ways to compute an "average".

For example, 10 bonds worth only 10,000 dollars each that are rated just one notch above AA "averaged" with 10 bonds worth 100 MILLION dollars rated just one notch BELOW AA would constitute such an "average" under this statement, even though the practical result would be that the vast majority of the alleged "collateral" is rated below AA.

Given MBI's record of dissembling, it seems highly likely that a large part of that 10.2 billion figure they cite is BELOW AA and will therefore be insufficient as collateral.

The key weasel fudge word MBI uses here is "average". Precisely HOW are they doing this "averaging"?]]> Mon, 23 Jun 2008 13:52:27 -0400
What does that hedge word "average" mean here? There are many ways to compute an "average".

For example, 10 bonds worth only 10,000 dollars each that are rated just one notch above AA "averaged" with 10 bonds worth 100 MILLION dollars rated just one notch BELOW AA would constitute such an "average" under this statement, even though the practical result would be that the vast majority of the alleged "collateral" is rated below AA.

Given MBI's record of dissembling, it seems highly likely that a large part of that 10.2 billion figure they cite is BELOW AA and will therefore be insufficient as collateral.

The key weasel fudge word MBI uses here is "average". Precisely HOW are they doing this "averaging"?]]> http://seekingalpha.com/article/82194-on-the-monolines-brown-vs-tilson-round-2?source=feed#comment-190298 190298
It's payback time now. If he thinks that he can spin off a AAA unit and provide huge bonuses in the process for him and his henchmen, he is seriously, seriously mistaken.

]]> Sun, 22 Jun 2008 14:18:21 -0400
It's payback time now. If he thinks that he can spin off a AAA unit and provide huge bonuses in the process for him and his henchmen, he is seriously, seriously mistaken.

]]> http://seekingalpha.com/article/82194-on-the-monolines-brown-vs-tilson-round-2?source=feed#comment-190049 190049
The safe harbour language which he cites are about public statements offered in the connection with trading of registered securities. Nothing more, nothing less.

But to use this safe harbour language to defend MBI's completely unacceptable betrayal of its pledges to the ratings agencies is pathetic.

Earlier this year, MBI was intent on keeping its AAA rating. During the negotiations with the ratings agencies, Spitzer and Dinallo, MBI pledged that they would deploy the proceeds of various securities to be offered as a buffer to risky assets in various subsidiaries.

In exchange for this pledge, promise and commitment, all the other parties in the negotiation agreed to keep MBI's AAA rating intact on a provisional basis, pending periodic review required by the continuing collapse in key sectors of the derivatives market, including the term option bond sector used in short term muni financing, of which MBI is a market maker.

Simply stated, MBI broke that pledge they made during the negotiations. Now the ratings agencies are furious. They have been betrayed.

And to claim that somehow safe harbour language routinely issued in the issuance of securities issuance excuses their betrayal of the firm commitments they made to a number of key regulatory and quasi-public actors during critical negotiations is simply absurd.

Who are you trying to kid?

And the gibberish in this article goes on. I'll elaborate more fully shortly.

Matt]]> Sun, 22 Jun 2008 09:14:41 -0400
The safe harbour language which he cites are about public statements offered in the connection with trading of registered securities. Nothing more, nothing less.

But to use this safe harbour language to defend MBI's completely unacceptable betrayal of its pledges to the ratings agencies is pathetic.

Earlier this year, MBI was intent on keeping its AAA rating. During the negotiations with the ratings agencies, Spitzer and Dinallo, MBI pledged that they would deploy the proceeds of various securities to be offered as a buffer to risky assets in various subsidiaries.

In exchange for this pledge, promise and commitment, all the other parties in the negotiation agreed to keep MBI's AAA rating intact on a provisional basis, pending periodic review required by the continuing collapse in key sectors of the derivatives market, including the term option bond sector used in short term muni financing, of which MBI is a market maker.

Simply stated, MBI broke that pledge they made during the negotiations. Now the ratings agencies are furious. They have been betrayed.

And to claim that somehow safe harbour language routinely issued in the issuance of securities issuance excuses their betrayal of the firm commitments they made to a number of key regulatory and quasi-public actors during critical negotiations is simply absurd.

Who are you trying to kid?

And the gibberish in this article goes on. I'll elaborate more fully shortly.

Matt]]> http://seekingalpha.com/article/81818-more-alarmism-over-mbia?source=feed#comment-187737 187737
1. the monoline industry as a whole is dying as previously lucrative customers such as New York, New York City, California and Florida now do not purchase monoline insurance at horribly inflated prices but instead now issue their bonds more cheaply on the full faith and credit of the issuer, just as the Federal Government does and

2. that if MBI uses the 900 million it pledged as collateral to spin off a new entity Moody's and others are likely to downgrade MBIA two full notches or more, which would in fact be the end of MBI.

]]> Wed, 18 Jun 2008 11:46:40 -0400
1. the monoline industry as a whole is dying as previously lucrative customers such as New York, New York City, California and Florida now do not purchase monoline insurance at horribly inflated prices but instead now issue their bonds more cheaply on the full faith and credit of the issuer, just as the Federal Government does and

2. that if MBI uses the 900 million it pledged as collateral to spin off a new entity Moody's and others are likely to downgrade MBIA two full notches or more, which would in fact be the end of MBI.

]]> http://seekingalpha.com/article/80443-research-zeitgeist-bank-capitalization-concerns-heat-up?source=feed#comment-181188 181188
A loan is not a gift.

It must be repaid.

]]> Sun, 08 Jun 2008 09:41:03 -0400
A loan is not a gift.

It must be repaid.

]]> http://seekingalpha.com/article/80431-mbia-and-ambac-edge-of-the-cliff-ratings-wise?source=feed#comment-180664 180664
California, New York, New Jersey, New York City and now Florida have all decided not to use monoline insurance anymore. That trend is growing rapidly. Those are huge clients.

Soon all 50 states will simply issue bonds on their own full faith and credit just like the US government does.

It's far cheaper that way.

Monolines will default long before states do.

Why does MBI refuse to give an open accounting of what's actually going on in their offshore subsidiaries? What are they trying to hide?]]> Fri, 06 Jun 2008 20:16:28 -0400
California, New York, New Jersey, New York City and now Florida have all decided not to use monoline insurance anymore. That trend is growing rapidly. Those are huge clients.

Soon all 50 states will simply issue bonds on their own full faith and credit just like the US government does.

It's far cheaper that way.

Monolines will default long before states do.

Why does MBI refuse to give an open accounting of what's actually going on in their offshore subsidiaries? What are they trying to hide?]]> http://seekingalpha.com/article/79980-muni-defaults-triple?source=feed#comment-179078 179078 Wed, 04 Jun 2008 10:10:23 -0400 http://seekingalpha.com/article/73883-monolines-all-important-debt-rating-threatened?source=feed#comment-160050 160050
All the wild rosy scenario projections for ABK and MBIA that they are touting are heavily based on revenue streams from new writings, but in actuality they have fallen off a cliff.

Stay tuned.

Not to mention the Tender Option market!

Crash of 2008]]> Thu, 01 May 2008 10:30:14 -0400
All the wild rosy scenario projections for ABK and MBIA that they are touting are heavily based on revenue streams from new writings, but in actuality they have fallen off a cliff.

Stay tuned.

Not to mention the Tender Option market!

Crash of 2008]]> http://seekingalpha.com/article/71796-mbia-credit-where-credit-is-due?source=feed#comment-148266 148266 Thu, 10 Apr 2008 10:51:18 -0400 http://seekingalpha.com/article/71796-mbia-credit-where-credit-is-due?source=feed#comment-148255 148255 Thu, 10 Apr 2008 10:42:53 -0400 http://seekingalpha.com/article/68929-will-lehman-follow-bear-into-the-woods?source=feed#comment-127991 127991
I am filming a documentary entitled "The Crash of 2008". Portions of
what will be used in parts of the film are now available at:

www.youtube.com/user/C...

I was a market maker in derivative securities and have read hundreds of
research papers published by individual Federal Reserve branches. I
found the most informative ones to be from Kansas City and Atlanta.

Additionally, I have reviewed scores of research papers by various
Federal Reserve branches prior to publication.

Matt Dubuque
The Crash of 2008]]> Tue, 18 Mar 2008 00:21:35 -0400
I am filming a documentary entitled "The Crash of 2008". Portions of
what will be used in parts of the film are now available at:

www.youtube.com/user/C...

I was a market maker in derivative securities and have read hundreds of
research papers published by individual Federal Reserve branches. I
found the most informative ones to be from Kansas City and Atlanta.

Additionally, I have reviewed scores of research papers by various
Federal Reserve branches prior to publication.

Matt Dubuque
The Crash of 2008]]> http://seekingalpha.com/article/68917-fed-s-strategy-to-halt-debt-meltdown-is-not-working?source=feed#comment-127978 127978 what will be used in parts of the film are now available at:

www.youtube.com/user/C...

I was a market maker in derivative securities and have read hundreds of
research papers published by individual Federal Reserve branches. I
found the most informative ones to be from Kansas City and Atlanta.

Additionally, I have reviewed scores of research papers by various
Federal Reserve branches prior to publication.

Matt Dubuque
The Crash of 2008


]]> Mon, 17 Mar 2008 23:32:34 -0400 what will be used in parts of the film are now available at:

www.youtube.com/user/C...

I was a market maker in derivative securities and have read hundreds of
research papers published by individual Federal Reserve branches. I
found the most informative ones to be from Kansas City and Atlanta.

Additionally, I have reviewed scores of research papers by various
Federal Reserve branches prior to publication.

Matt Dubuque
The Crash of 2008


]]> http://seekingalpha.com/article/68331-spitzer-the-monoline-angle?source=feed#comment-126719 126719
How is that good for business?

If MBIA is such a AAA stock, why are they forced to pay 15% on their newly issued debt? Isn't that the rate firms with terrible prospects are required to pay?

Or do you know far more than those who would lend money to MBIA in the capital markets?

Have you taken the time to read the 10K and the 10Q that MBIA recently filed with the SEC? You would serve yourself well to read both and attempt to understand them.

These are what MBIA is saying about their prospects, not me!

Why don't you read (and try to understand) what they are saying to the Feds (in the forms of their recent 10K and 10Q) under penalty of perjury?

My, my.

Oh well. Best of luck to you. Be sure to check back in a year!

Matt]]> Fri, 14 Mar 2008 19:01:10 -0400
How is that good for business?

If MBIA is such a AAA stock, why are they forced to pay 15% on their newly issued debt? Isn't that the rate firms with terrible prospects are required to pay?

Or do you know far more than those who would lend money to MBIA in the capital markets?

Have you taken the time to read the 10K and the 10Q that MBIA recently filed with the SEC? You would serve yourself well to read both and attempt to understand them.

These are what MBIA is saying about their prospects, not me!

Why don't you read (and try to understand) what they are saying to the Feds (in the forms of their recent 10K and 10Q) under penalty of perjury?

My, my.

Oh well. Best of luck to you. Be sure to check back in a year!

Matt]]> http://seekingalpha.com/article/68349-the-municipal-bond-dilemma?source=feed#comment-126676 126676
Are you saying that because we live in a socialist society we are not allowed to short the stock?

My, my.

If MBIA is such a wonderful AAA company, why do they have to pay 15% to borrow money in the capital markets? That's junk bond rate and is what they borrowed money when they raised emergency capital in the debt markets earlier this year.

Should that fact also be kept secret?

Matt

]]> Fri, 14 Mar 2008 16:47:02 -0400
Are you saying that because we live in a socialist society we are not allowed to short the stock?

My, my.

If MBIA is such a wonderful AAA company, why do they have to pay 15% to borrow money in the capital markets? That's junk bond rate and is what they borrowed money when they raised emergency capital in the debt markets earlier this year.

Should that fact also be kept secret?

Matt

]]> http://seekingalpha.com/article/68448-mbia-management-s-a-safe-short-bet?source=feed#comment-126675 126675
This doesn't sound like a particularly creditworthy rate to me. It seems much more like junk. Yet this is the average price MBIA they paid when they borrowed money recently as part of their restructuring.

Are the markets lying here?

Additionally, the largest bond issuer in the muni market is the State of California. Last week they said that they will no longer insure their new municipal bond issues.

Are you alleging that this dramatic decline in critical new muni business will have a salutary effect on MBIA's bottom line? Apparently New Jersey is now following California's lead.

This of course does not even address the tens of billions (minimum) that MBIA is exposed in the area of CDSs (credit default swaps)!

But then again, you are probably hard pressed to intelligently discuss the dramatic differences between a CDO (Collateralized debt obligation) and a CDS (credit default swap). They are completely different animals.

This is why we are short and you are long.

Best of luck to you.

Care to touch base in a year?

Let the markets decide!

Matt]]> Fri, 14 Mar 2008 16:46:32 -0400
This doesn't sound like a particularly creditworthy rate to me. It seems much more like junk. Yet this is the average price MBIA they paid when they borrowed money recently as part of their restructuring.

Are the markets lying here?

Additionally, the largest bond issuer in the muni market is the State of California. Last week they said that they will no longer insure their new municipal bond issues.

Are you alleging that this dramatic decline in critical new muni business will have a salutary effect on MBIA's bottom line? Apparently New Jersey is now following California's lead.

This of course does not even address the tens of billions (minimum) that MBIA is exposed in the area of CDSs (credit default swaps)!

But then again, you are probably hard pressed to intelligently discuss the dramatic differences between a CDO (Collateralized debt obligation) and a CDS (credit default swap). They are completely different animals.

This is why we are short and you are long.

Best of luck to you.

Care to touch base in a year?

Let the markets decide!

Matt]]>