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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (9220)	2/26/2003 3:17:45 PM
From: ild	Respond to of 306849

Another good rant from the same guy. Date: Wed Feb 05 2003 00:11 trotsky (the global insurance industry) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved is a victim of TWO bubble implosions at once...1. the collapse in global stock markets...and 2. the collapse in the weakest corporate debtors ( like Enron, Worldcom, Global Crossing, etc.etc. ) . the stock market thingy is easily understood - as is the fact that the plunge in govt. bond yields means that returns on 'riskless' interest bearing instruments have withered. but what about corporate debt? it isn't that the insurers actually owned most of the debt paper - they wrote the credit derivatives insuring it instead. there was a gigantic blow-off in credit derivatives shortly before the wave of bankruptcies accumulated some $600 BILLION in defaulted paper in the US over the past two years alone. German banks also were big players in this game, and are tottering on the brink as a result. we are now slightly past the point at which forced liquidation of securities may become a reality for many players , which could result in a vicious cycle type avalanche of plunging paper asset values. note in this context that structured finance of all sorts, i.e. securitizations of various types of private sector debt ( i.e. credit card receivables, car leases, etc. ) , as well as mortgage debt haven't imploded yet - but are beginning to look somewhat frayed at the edges ( which is how the corporate debt implosion began as well ) . in addition to all this, there are numerous countries - yes, entire countries, out there that can not be characterized as anything but insolvent - de facto bankrupt, just as Argentina is, only they haven't yet been declared de iure bankrupt. everything south of the US border can be safely considered to be totally f*cked up financially for instance. insurance cos. and alarmingly, pension funds, are the main bag holders. the only reason why Greenspan & Co. and the FDIC still dare to brag about the solidity of the US banking system is that a plethora of credit risks have been sold to these other constituencies. which goes to show, once again, that contrary to Sir Alan's claims ( which are echoed by polyannas around the globe ) derivatives have NOT just 'mitigated risk' - they have merely shifted the risk to other parts of the system, and have in fact vastly increased overall systemic risk. the market knows of course that CBs around the world will react to this oncoming tide the same way the BoJ has: by printing gobs and gobs of money. and there you have the true reason ( imo ) for the flight to gold. the geopolitical tensions play their part of course - they're the 'excuse'.