Layout:
Home > Ambac stripped of AAA…

Ambac stripped of AAA…

January 22nd, 2008 at 01:55 pm

This was the other shoe I was talking about a few posts ago.

“The seven AAA rated bond insurers place their stamp on $2.4 trillion of debt. Losing those rankings may cost borrowers and investors as much as $200 billion, according to data compiled by Bloomberg. The industry guaranteed $127 billion of collateralized debt obligations linked to subprime mortgages that have plunged in value as defaults by borrowers with poor credit soar to records.”

The article continues….

“MBIA and Ambac both said they were surprised by Moody's decision to start a new review, less than a month after affirming their ratings. The flip-flop by the ratings companies is making investors wary of buying stock or bonds of the insurers, Giordano said.
``You have a market that has zero confidence in anything financial right now,'' Giordano said. ``You have the agencies who, in my opinion, have continued to make a comedy of errors. And you have very complex companies that are very hard to understand. It's easy for investors to just sit on the sidelines.'' “
Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aoQISj8w4Z90&refer=home

I believe that the whole market will be in a panic this week. I believe that the Fed emergency rate lowering is coming from a position of weakness and not strength. I am looking at financials to start bottoming out. Besides a total meltdown of the financial infrastructure, I don’t see much more bad news. I would look at today setting up some lows in the financials and then testing these lows later this quarter.

I am starting to reevaluate my list of financials looking at the strong ones like GS. Not buying yet, but getting closer. I need to make my list and then look at some entry points.

2 Responses to “Ambac stripped of AAA…”

  1. Broken Arrow Says:
    1201014028

    Do you suspect that there will be a total meltdown of financials? Or perhaps I'm taking that out of context? Big Grin Ibought some bond funds earlier this year, primarily to follow my asset allocation, but I certainly wouldn't mind if it performed exceptionally well this year.

    I do agree that an emergency lowering of interest rates is coming as well.

    Finally, I heard an interesting critique regarding GS, not so much because they've made the "right call" regarding their subprime investments... because they've made that play along with everybody else in the financials. Rather, they were skillful or fortunate enough to have evaded most of the damage while taking on riskier investments to shore up their bottom line. Lucky for them, the riskier investments worked out. Otherwise, it would have been a different story.

    I don't know. I'm not an active trader, and I'm contrarian rather than trend or momentum. So, I personally can't see why GS would be a good buy. BUT, that's also just my personal opinion, so by all means, please feel free to disagree. Smile

  2. merch Says:
    1201014825

    I believe that the financials should bottom out over the next month. I don't see any new issues that are yet to come out.

    I see that the existing issue just working themselves out. Right now, I don't believe anyone has any confidence in the financial companies. I believe that the insurers is the last big shoe.

    I believe that now id the time to make your list of financials that have gone down unfairly. I just pointed out GS because they pretty much avoided the mess and always seem like the smartest traders on Wall Street.

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]