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Hopeful investors clearly should have picked the known evil (I-Bonds) over the unknown evil (AIG) if today is any indicator.
S&P cuts AIG's rating on larger-than-expected loss
AIG's shares fell 5.8 percent in after-market electronic trading after closing down 2 percent in the regular session to $44.15. Its credit default swaps widened to 110 basis points, or $110,000 to insure $10 million of debt, versus 99 basis points on Wednesday, according to Phoenix Partners Group. AIG's CDS widened 5 to 10 basis points after it posted its largest ever loss, a trader in New York said.
What's a ratings downgrade plus a 5.8% loss plus a 2% loss when inflation is running hot? That's just a flesh wound. The stock was already down 38% from its 52-week high and 57% from its all-time high in 2000.
See Also:
Gold vs. 0% I-Bonds
This is turning out to be a relatively fun (gallows humor) series for me. It will be interesting to see just how many unknown evils a known evil can beat.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
17 hours ago
11 comments:
Stag,
I've been wondering when the insurance companies would start having big write downs. In hot markets (think late 90s), insurers damn near give away the insurance just to get the investment dollars. I'm curious about BRKB too.
One more thought. This is one of the first large derivative based write downs to date. As leverage unwinds and debt defaults rise, derivative losses will start floating to the surface. SHould be a nice feedback loop.
It's not a 1 or 2 quarter event imo. Still well anchored here.
MAB,
It's not a 1 or 2 quarter event imo.
Surely March's shrinking trade deficit is a good thing though. That's what I'm told. The weaker dollar is finally working.
http://afp.google.com/article/ALeqM5iPqi-44GHwoVKC73c-vF8zdKQAlA
WASHINGTON (AFP) — The US trade deficit shrank to 58.2 billion dollars in March from a revised 61.7 billion a month earlier, as the weak dollar fueled a surge in exports, the Commerce Department said Friday.
Sweet. Exports are surging.
Although the value of US exports slipped marginally in March from the prior month by 1.7 percent to 148.5 billion dollars, the volume of exports remained at historical highs.
It seems exports are down even as they surge higher. So what the heck made the trade deficit narrow then?
Imports declined a heavier 2.9 percent during the month to 206.7 billion dollars, suggesting Americans cut back on foreign purchases which have become more costly due to the weak dollar.
Looks to me like we're in the 4th quarter and our quarterback just got sacked.
Stag,
Looks to me like we're in the 4th quarter and our quarterback just got sacked.
http://video.google.com/videoplay?docid=7750929965682686999&q=always+look+on+the+bright+side+of+life+monty+python&ei=AOAkSL-8JI6qrgK0jY37CQ
Just remember to always look on the bright side of life. And blessed are the cheese makers.
And blessed are the cheese makers.
Blessed are the "reformulated" cheese makers!
As food costs soar, restaurants swap ingredients to get by
http://ap.google.com/article/ALeqM5g4aOK0HuId1Q6oWOGzIM5h9Rtf_QD90GD7R80
Chuck E. Cheese restaurants recently began using a "reformulated" pizza cheese at its 490 locations, helping the company cut costs and turn in positive first-quarter earnings.
Stag,
In general, I don't see cheese swaps as a problem . Especially if they are backed by a strong counter party.
Just stay away from the equity tranches (slices). And don't drink the water.
http://en.wikipedia.org/wiki/Tranche
In French, tranche means slice. BTW, I've been fighting a tranche in my golf swing for years.
MAB,
I bought some powdered water, but I don't know what to add to it. - Stephen Wright
You have to use powdered water around Ice nine or you could end up with the big FAWOOM.
Kurt Vonnegut.
Stag,
Oops, forgot the link.
http://en.wikipedia.org/wiki/Ice-nine
MAB,
Can I assume that the big FAWOOM is a perfectly balanced deflationary implosion combined with a perfectly balanced inflationary explosion?
If so, it seems I'll have no problem wallowing and muddling along, never the wiser.
Stag,
The big fawoom was the noise made when Ice Nine caused the world's oceans/waterways to suddenly freeze/solidify. If any Ice Nine fell into a stream, the stream would freeze as would the river it runs into as would the ocean it runs into, etc. The freezing is sudden and violent.
A veritable WMD. It doesn't bode well that Buffett described derivatives as WMDs.
Our credit markets are frozen and it's not just housing. So much for contained. Maybe we could use some global warming after all.
MAB,
Perhaps our next wave of protectionism (should we do it) could be called Plan Ice Nine from Outer Space. The theory being that it could completely freeze global trade.
That way if the plan didn't work out so well we wouldn't have anyone to blame but the spacemen.
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