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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (71775)	11/28/2007 2:52:45 PM
From: Incitatus	Respond to of 116555

CDO sellers including Merrill (MER), Citigroup (C), UBS AG (UBS) and Deutsche Bank AG (DB) are taking losses on the "super-senior," or safest, pieces of the CDOs, according to JPMorgan. Writedowns on that debt should be between 20 and 80 percent, the analysts wrote. If the very safest of the AAA CDOs are being written down 20% to 80%, and even that probably underestimating the true value lost, one can only imagine what's happening to the rest of the CDOs!

To: mishedlo who wrote (71775)	11/28/2007 3:34:12 PM
From: KyrosL	Read Replies (1) \| Respond to of 116555

The big difference between banks owning CDOs and insurers insuring CDOs is that banks must immediately recognize the losses and take them off the balance sheet, insurers only need to pay interest and principal of the insured mortgages, typically over the course of 30 years. So, the losses for insurers are spread out over a long period, during which they can jack up their rates, and presumably make up those losses. Already, bond insurance rates have skyrocketed. So, if that industry follows the example of the property insurance industry, it should do fine. Property insurers also get hit hard during natural disasters but the rise in the rates following the disasters more than makes up for their losses in the long term.