DOW down 223 points in 1st hour of trading

NEW -> Contingent Buyer Assistance Program
<em>"Mmmm... swaps. Nobody learned from Orange County, huh?"





</em>Obviously not as OC recently let Merrill back in for investment advice. Hopefully they don't try to sell us the same crap again.
 
<p>Here is a nasty advance to the collapse of some of the paper floating out there.</p>

<p><img height="288" alt="Ambac Financial Group, Inc. (ABK)" width="512" border="0" src="http://chart.finance.yahoo.com/c/1y/a/abk" /></p>

<p>This is the company that handles the Insurance on those instruments. The crowd is heading for the exit fast.</p>

<p> </p>
 
<p>^^ Holeycrap! OMGWTFBBQ! "Abondon Ship!" "Abort!" "Abort!" "Abort!" </p>

<p>That's quite a change there. The more I read about CDS's the more they look like a good piece of swamp land. If everybody is on the up and up, then it will be ok. This is money we're talking about, nobody is going to be ont he up and up. They are going to cheat you blind. Anyway just my .02$ ....</p>

<p>good luck</p>

<p> </p>
 
<p>Hoo boy. And Ambac insures not just exotic securitized instruments, they insure muni bonds. I wonder if the IRS will grant a one time waiver for multiple advance refundings for bonds that will be in default when the insurer collapses? There are a whole lot of public entites that are going to be in a world of hurt when their A bonds get rated as a C, based on the entity's own finances. </p>
 
<p>Per the municipal bonds - if someone was in a CA money market fund (ex. municipal bonds) and the ratings on those bonds then tanked ... would it even matter? The debt is so short term, and you'd imagine, worse case, you get 0% return instead of a puny 3% or so when the company that owns the money market fund makes it whole ...</p>
 
<p><em>>>The debt is so short term</em></p>

<p>I'm not sure we're talking about the same thing. There are some short term munis (e.g., TRANs), but many are 30 and 40 year bonds, albeit with shorter maturities within each issue. My concern was not so much the bondholders, but the issuers.</p>
 
Doug Kass, founder and president of Seabreeze partner, joined the Fast Money crew to discuss his take on the mortgage insurers. Kass thinks names like Ambac Financial Group Inc. (ABX), The PMI Group Inc. (PMI) and MBIA Inc. (MBI) simply dont have enough capital to keep running. He reminded viewers that these firms are not banks and they have no access to the discount window. He thinks if the market takes out private market insurance business it will crush Fannie Mae (FNM), Freddie Mac (FRE) and Washington Mutual Inc. (WM).
 
Awgee, Kass has been a housing bear for quite a while. I don't know how familiar you are with him, but seeing that you also subscribe to Fleckenstein's site, I am sure you would be philosophically comfortable with his ideas.
 
<p>As far as Kass, </p>

<p>I am sure he is short and just fueling the fire. But it looks odd for this big of dip on these big cap firms. Its is a red flag as compared to the rest of the market. AMBAC has lost over half its cap in a couple weeks ??</p>
 
<p>I am completely comfortable with Kass. And I agree with him also and am familiar with him.</p>

<p>I apologize. It was a sippy remark. Fleck has been saying the same exact thing for many months and occured to me that Kass was repeating Fleckenstein's ideas and not giving him credit.</p>

<p>But, like I said. It was snippy. I bet Fleck doesn't care, and is probably flattered.</p>

<p>Sorry.</p>

<p>Speaking of gold, silver, and a shovel: Did you see what gold closed at today? I thought for sure the USD was going to take a breather and bounce up a bit and gold would take a breather and head down, but boy, was I wrong.</p>
 
<p>Awgee re: the dollar. I don't usually look for signs, but when was the last time that Lufthansa, or any other European carrier except Virgin, was advertising on California pop radio? I can't recall such a time, and nearly fell over in my chair when I heard it. I would call is a symptom rather than a sign, but a very telling symptom nonetheless.</p>

<p>BTW, if anyone wants to go to Europe, Lufthansa is offering some good deals right now. Budapest for $399(?) each way.</p>
 
Eva - I am ignorant of advertising and it's signals. Are you saying that European carriers are advertising on US radio because they can offer cheap fares as a result of the dollar collapsing?
 
Actually it has been well over a year for both Fleck and Kass. I am not sure who was first, but I respect and read both men regularly. Kass is one of the few people that makes Realmoney.com worth anything, and at $120 a year, Fleck is a bargain.





As for advertising, I assume that dollar collapse gives European carriers a need to drive revenue on those routes. Even though the bargain fairs buy less Euros, getting more people on the plane is better than flying back empty. (Also, if you cancel flights, it increases the fixed cost per flight) I would imagine that loads are light on those routes because a dollar doesn't go as far as it used to over there. (Or anywhere for that matter)
 
<p>My take on Eva's comment was that the European flier cannot offer low fares because of the collapse of the dollar since they operate in the currency of their home country. Thus, the fare of a plane ticket ithat s steady in Euros had increased substantially for an American.</p>
 
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