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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: stan_hughes who wrote (1097)	9/21/2007 10:46:04 AM
From: orkrious	Read Replies (1) \| Respond to of 71452

I don't expect the ROW to be raising rates What's ROW?

To: stan_hughes who wrote (1097)	9/21/2007 12:24:24 PM
From: Real Man	Respond to of 71452

We'll see. Their economies are now stronger than US, so some of them can afford to raise or keep the rates steady. The benefit is higher currency, lower commodity prices.

To: stan_hughes who wrote (1097)	9/23/2007 8:52:24 AM
From: ldo79	Respond to of 71452

Things should start to get interesting as we finish the pre-game show and settle in for the 1st inning. Got popcorn? ====== City predicts interest rate cut Heather Stewart, economics editor Sunday September 23, 2007 Observer The Bank of England could be forced to make a confidence-boosting cut in interest rates as soon as next month, to cushion the economy from the credit crunch. As the fallout from America's sub-prime loans crisis spreads, City analysts have been scrambling to slash their GDP growth forecasts to take account of the shutdown in the money markets, which is forcing many banks to push up interest rates and tighten lending criteria. Geoff Dicks, chief UK economist at RBS, said the Bank's nine-member Monetary Policy Committee would be forced to respond within weeks. He is now pencilling in a rate cut in either October or November. 'All the mortgage lenders are raising their rates anyway, and it means that the MPC are left with monetary conditions tighter than they would have wanted,' he said. With personal borrowing at unprecedented levels, economists warn households are exposed to a sudden hike in borrowing costs. Alan Castle of Lehman Brothers now expects two rate cuts in the first half of next year, as GDP growth is predicted to slip to just 1.8 per cent. That would make 2008 the weakest year for UK plc in more than a decade. Castle said he was concerned about, 'the hit to confidence from one of the worst financial crises in many years,' adding that the emergency lifeline offered to Northern Rock would deepen the public's gloom. He added that 58 per cent of new jobs in the last 12 months were in financial and business services - the sectors most at risk from the current downturn. Before the credit crunch, the markets were betting on at least one more increase in interest rates, taking them to 6 per cent. tinyurl.com

To: stan_hughes who wrote (1097)	9/24/2007 10:12:48 PM
From: the navigator	Read Replies (1) \| Respond to of 71452

And once a currency devaluation competition gets going in a race to the bottom, all hell is going to break loose on this planet. cryptogon.com The Alchemy of Mezzanine-CDOs: “One of the Biggest Financial Illusions the World has Ever Seen” September 24th, 2007 Please review my Wall Street Chop Shop piece before you read this jaw dropping report below. I have a sneaking suspicion about which firm this is referring to because I think I used to work for them. I worked for one of the subsidiaries, out on the periphery. This account below sounds like it comes from deep within the Mother Ship. Here’s the part to keep in mind from my essay on this: The firm externalized the financial risks of being in this business by selling all of the paper they generated into the secondary mortgage market at the end of every month. This is an institutional marketplace that trades in commoditized mortgages, “debt paper.” In other words, at the end of each month, the firm had none of the impossible-to-payback-negative-amoritization-no-money-down loans on their books! I handled some issues for the secondary marketing department, even, would you believe, for the person who pulled the trigger on these paper dumps at the end of the month. “Who buys this stuff?” I asked. “Oh lots and lots of people. Well, banks and insurance companies mostly. [Large European Bank name deleted] buys a lot of it.” As usual, it’s not that bad. It’s worse. Via: Deal Breaker: I recently spent some time with a senior executive in the structured product marketing group (Collateralized Debt Obligations, Collateralized Loan Obligations, Etc.) of one of the largest brokerage firms in the world. I was in Roses, Spain attending a wedding for a good friend of mine who thought it would be an appropriate time to put the two of us together (given our shared interests in the structured credit markets). This individual proceeded to tell me how and why the Subprime Mezzanine CDO business existed. Subprime Mezzanine CDOs are 10-20X levered vehicles that contain only the BBB and BBB- tranches of Subprime debt. He told me that the “real money” (US insurance companies, pension funds, etc) accounts had stopped purchasing mezzanine tranches of US Subprime debt in late 2003 and that they needed a mechanism that could enable them to “mark up” these loans, package them opaquely, and EXPORT THE NEWLY PACKAGED RISK TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE!!!! He told me with a straight face that these CDOs were the only way to get rid of the riskiest tranches of Subprime debt. Interestingly enough, these buyers (mainland Chinese Banks, the Chinese Government, Taiwanese banks, Korean banks, German banks, French banks, UK banks) possess the “excess” pools of liquidity around the globe. These pools are basically derived from two sources: 1) massive trade surpluses with the US in USD, 2) petrodollar recyclers. These two pools of excess capital are US dollar denominated and have had a virtually insatiable demand for US dollar denominated debt…until now. They have had orders on the various desks of Wall St. to buy any US debt rated “AAA” by the rating agencies in the US. How do BBB and BBBtranches become AAA? Through the alchemy of Mezzanine-CDOs. With the help of the ratings agencies the Mezzanine CDO managers collect a series of BBB and BBB-tranches and repackage them with a cascading cash waterfall so that the top tiers are paid out first on all the tranches – thus allowing them to be rated AAA. Well, when you lever ONLY mezzanine tranches of Subprime RMBS 10-20X, POOF…you magically have 80% of the structure rated “AAA” by the ratings agencies, despite the underlying collateral being a collection of BBB and BBB- rated assets… This will go down as one of the biggest financial illusions the world has EVER seen. These institutions have these investments marked at PAR or 100 cents on the dollar for the most part. Now that the underlying collateral has begun to be downgraded, it is only a matter of time (weeks, days, or maybe just hours) before the ratings agencies (or what is left of them) downgrade the actual tranches of these various CDO structures. When they are downgraded, these foreign buyers will most likely have to sell them due to the fact that they are only permitted to own “super-senior” risk in the US. I predict that these tranches of mezzanine CDOs will fetch bids of around 10 cents on the dollar. The ensuing HORROR SHOW will be worth the price of admission and some popcorn.