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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (28776)11/4/2007 1:06:51 AM
From: Spekulatius  Read Replies (1) of 78705
 
Financials
reading the WSJ over the weekend does not make me more optimistic about financial stocks
per WSJ article, and index of AAA rated mortgages trades now at 79c on the Dollar, down from 95c in August. if that is correct there is going to be a tremendous amount of bloodletting for all participants.
online.wsj.com

Another datapoint: th Korean bank Woori wrote of 1/3 of the value of their mortgage holdings (we do not know the rating of those). Now I am hearing that Citi is holding 80B$ of those. that would mean that the 5B$ they wrote off so far are only the beginning. i think they have to write off at least 20% of the principle for high quality CDO's and more for others, which would mean 10-15B$

E*trade has 16B$ in mortgage papers AA or AAA rated. this would mean a writeoff of at least 3B$ per above comps, which would remove ETFC entire tangible equity. And this would not even address ETFC's home own equity loans and mortgages which are certainly worth less as well.

Merril's attempt to remove commercial paper exposure from the books with help of an hedge fund and a buy back provision is clearly balance sheet fraught. Are all Enron lessons forgotten. Somebody should do time for this in my opinion.

Mortgage insurers: Wait for the credit downgrades. Once an insurance company rating is below A they are toast (at least with long tail insurance like mortgages) because who wants to do business with an insurer with junky credit rating? They will have to raise capital in this case or they will go out of business.

End of my rant. I am creeping back into my hole. LOL
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