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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (88460)	11/5/2007 12:53:59 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 110194

what is a credit deflation?

To: orkrious who wrote (88460)	11/5/2007 1:24:49 PM
From: Perspective	Read Replies (1) \| Respond to of 110194

Ork, good to have you back. I think the biggest development of the past couple of weeks is the pressure on credit insurance, particularly MBI. If the con game falls apart, there is a mountain of debt approaching $1T that has a AAA rating thanks to their alchemy and the blessing of the ratings agencies. I think an enormous liquidity event will occur if (when?) MBI loses the Midas touch for transforming risky debt into AAA gold. The stock and debt insurance are trading as if their business is about to disappear. It's sort of a Ponzi scheme, in that incoming cash flows are used to pay off claims from earlier premiums written. If the value of their franchise is questioned, the whole ball of wax melts. How many forced sellers would there be if all that insured debt reverted to the issuers' credit rating? BC