Wild Day... Make That Week

I remember when I was following Ambac early in the year, practically every day was wild. Well, now the whole market is wild. There is so much happening--many of which reek of desperation and I don't approve of--that you can literally read stories all night long. Here are some I find useful to know about...


  • Moody's may downgrade Ambac and MBIA: Ratings don't matter to the monolines anymore since they aren't writing any business, with one exception. That exception is that rating downgrades generally require collateral posting for their investment business... I have been so busy with non-bond-insurer information that I don't even know what happened today. MBIA was up 40% today on no published news. Could be short covering but it's not clear.
  • Some American pension funds stop lending shares: CALPERS, a large California pension fund, and others are supposedly refusing to loan shares of selected financial companies like Morgan Stanley and Goldman Sachs. Recall that short sellers have to borrow shares from someone who owns it.
  • Presidential candidate, John McCain, would fire SEC Chairperson Cox: This is a totally misguided move. SEC has very little control over what is happening and clearly McCain doesn't understand the root cause of the problems. The problem really stems from the mortgage sector and the SEC has little control over it. Some of the banks are failing because they own bad mortgage assets and the market doesn't trust them. SEC is quite limited and whatever they can do, like limiting short selling, accomplishes very little in the long run.
  • China lets its SWF buy Chinese bank shares: Another attempt to prop up the stock market that is bound to fail.
  • The big news is the rumour that the US government is planning to buy up the bad mortgage assets: This can work but won't stop some from going bankrupt.

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