S&P says the 1Q loss won't impact Ambac's rating, claiming that the loss was within their projections. It isn't on their website yet. More commentary as it becomes available.
Wednesday, April 23, 2008
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We used to have fun commenting about the bond market, including Treasuries, Mortgages, Municipals, and Corporates. But that was before the dark times. Before deleveraging. Contact the Author: accruedint at gmail.com
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6 comments:
S&P should go down with Ambac
Reality has a way of interrupting even the most fantastic of dreams and delusions.
Well the credit markets must have bottomed again, because Credit Suisse just wrote off about $5.2 billion, which once again was more than the genius Wall Street analysts were expecting.
Considering that many of these analysts work for the companies doing the write offs, one might expect them to be a little more tuned in to the chaos around them... Evidently, they are still sugar coating their "research"
New home sales are back down to the level they were at before Easy Al Greenspan started spewing excess credit in all directions. New home sales are actually right at their long term average (taken from 1963-1993) -- hardly the disaster of biblical proportions that Bernanke or Wall Street claims.
The question is whether new home sales will continue to fall (to below trend) since we have had 10-15 years of way above trend growth... huge home inventories suggest this is a strong possibility -- but whoops! Bernanke has already fired off almost all his ammo trying to prevent simple reversion back down to the mean. Short of causing a real US dollar crisis, there is not much he can do if (when?) things actually go below long term trend.
And speaking of Ambac -- evidently their "risk officer" has identified what may be "suspicious transactions"; cases where FICO scores and LTV amounts and delinquencies don't conform with Ambac's "models". The implication in the news reports is that there might be fraud involved. Perhaps so, but an even more obvious implication is that Ambac's delinquency models were tuned toward the "standard" risks (reasonable FICO scores and a significant down payment so the borrower has skin in the game). Faced with large numbers of borrowers with 5% down (or less), the model isn't very useful in predicting delinquency.
But even though Ambac was unable to properly model their losses (with access to the underlying paperwork) -- somehow we are to believe that S&P was able to model it without the same access to documentation?
Something smells a little fishy...
quick follow up: apparently one of the "suspicious transactions" highlighted by Ambac is a deal with Bear Stearns from April 2007...
Who wants to bet whether this deal is in the rats nest that the Fed bought a month ago?
...And please don't tell us this is off the Fed's books-- its not even an SIV. The Fed gets the profits and the losses (beyond $1 billion that JPM could take)-- not even the most gullible members of Congress accepted that the Bear assets werent effectively on the Fed's balance sheet.
I think this move was already priced in to S&P's current credibility level.
The credibility of a "AAA" rating on a company with a stock price less than 1/3 of the amount per share they LOST last quarter is nonexistent.
The emperor has NO clothes.
But still the market rises...Buy Buy Buy Boo-yah!
Jimmy did have a good title for his RealMoney piece today though:
"Hope Springs Eternal When You Have No Memory"
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