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Genesis Posts: 71435 Incept: 2007-06-26 
KD^2 
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http://market-ticker.denninger.net/2008/....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-03-12 17:13:09
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Tonyh Posts: 1169 Incept: 2007-12-01 
Spring, TX
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Excellent! Increasing the dry powder last night (probably put to use already today I imagine) will pay for the ticker's bandwidth for years to come... :-) Bring a flashlight for the abyss... 
---------- The following statement is true. The preceding statement was false. Last modified:
2008-03-12 18:02:21 by tonyh
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Stormrunner Posts: 118 Incept: 2008-01-29 OC CA
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KD Spot on analysis as usual. If I may I'd like to pose a question which approaches the issue from the Debt-Based Fiat Fractional lending macro side of the equation for your debunking It is said that the banking system un average employs anywhere between 10 and 20 X levrage against reserves. This infers that on 100K in reserves minimially 900K of credit will be extended at the prevailing interest rate, lets average this to 6%. Back of the napkin this amounts to 9(6%) or 48% return on the reserve which of course they're actually responsible for all credit extended but that about 18 years to break even should this not be enough cash flow to keep the banking system afloat even with large scale defaults if the day of reckoning can be pushed forward very significantly and is maybe this not what is being attempted. Sorry for the rudimentary academicness, its just that internet fork lore claims regarding the extent of this usury, imply that it should provide more than adequate cushion for such an event if losses can be marked over extended periods.
2008-03-12 17:59:56
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Bdh Posts: 925 Incept: 2007-12-16 U.S.
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KD wrote..THAT will trigger the final revaluation of these loans and THEN we will know who goes "boom" and who does not. THAT will mark the bottom of the credit mess I don't understand how you can say that once we go over the waterfall and this somehow forces a mark to market of this paper, then that's the bottom and the credit markets will start working again. As you said in your ticker house prices are still falling and still have a long way down, and until THAT starts rising from a bottom I don't see ANY of this getting resolved. Going over the waterfall will NOT signal an end of the sinking housing market, it will just signal the start of the next, even worse, leg down (whether we have hit the option-arm leg down or not before the waterfall event). Because the waterfall event will cause many bankruptcies, it will signal to the whole world that this is no mere light-recession, and corporate downsizing will start in earnest and consumers will pull-back as if they were dumped in ice-water. This will cause unemployment to sky-rocket. All of these unemployed people, who have little savings and nothing left in their wiped-out 401Ks, will have an impossible time paying their mortgage. Like you said, were still in the first inning. Unless this waterfall event you're talking about is something at the VERY end of all this, years away, and it didn't sound like it was, I don't understand your statement above.
2008-03-12 19:44:08
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Genesis Posts: 71435 Incept: 2007-06-26
KD^2
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I'm talking about when we hit the bottom of the waterfall in house price terms. The period of time from going over the edge until we hit the rocks at the bottom may be a rather long and tumultous ride. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-03-12 19:45:35
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Martin Posts: 748 Incept: 2008-01-23
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Is there a way of going to court to force the rating agencies to rate the AAA junk correctly? Do they ever send out ratings in the mail?
2008-03-12 19:47:58
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Stormrunner Posts: 118 Incept: 2008-01-29 OC CA
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Isn't the point of all this to nefariously and stealthily redistribute current wealth as well as future claims on production. Settling accounts at this jucture kind of puts the plague into the serf so to speak. Whats the likelyhood of that be escalated. All stops will be put in place for the slow burn which is to commence. Rocks certainly do not bleed but can be slowly ground to dust.
2008-03-12 20:33:01
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Rtfg Posts: 1917 Incept: 2007-06-26
Bazookaville
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Martin, unfortunately the likeliest way to get this to court is going to court for an entirely different reason. Client # 9. The MBI/ABK deal not getting downgraded is enough proof of that. The mortgages will not be downgraded because the cops are looking the other way, and have probably even given the wink and nod.
2008-03-12 21:00:22
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Murf Posts: 2814 Incept: 2007-08-28
the surf
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I am ****ed to the point of heartbreak at the idea that the SEC has not rounded up the leadership of Moodys, S&P, MBIA, Ambac, Freddie and Fannie and hauled their sorry asses to jail. Clearly, this ongoing hypocrisy can only mean that the SEC is in collusion with these crooks and thieves in some twisted justification such as "its for the good of the country". Bull****. America's business leadership is crumbling before the eyes of anyone who cares to look twice. Our moral authority and trustworthiness have as much credibility now as Mr. Elliott Spitzer. This sick feeling in the pit of my stomach tells me that the downfall of American business credibility will meet with the same joy abroad as the fall of Spitzer has on Wall Street. Around the world champagne corks are popping at the realization that America the Beautiful has been caught whoring herself down on Wall Street. ---------- The recovery up is losing steam
2008-03-12 21:05:29
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Pikachu Posts: 5074 Incept: 2007-08-24 
Down under
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ironic the greatest damage done to America is being done from within, not without, yet America spends most of her resources protecting herself from without.
2008-03-12 21:21:04
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Interested Posts: 2689 Incept: 2007-10-07
SC
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Before I shorted FNM, I went to the Fannie Mae balance sheet and found that based on a subset of the assets, subprime + Alt-A (liar) loans alone, the common is a short to zero. Fannie went into the market and bought subprime and ALT-A loans and wraps originated elsewhere to the tune of almost $74B. This is 3.5x common equity of $20B which is down a whopping $15B YoY. The equity is melting away. If these subprime assets ALONE are priced to the tune of 50 or 60 cents on the dollar, Fannie Mae equity is worthless. $9B of the total is "subprime wraps", which includes Fannie Mae guaranteed resecuritizations of private-label securities backed by subprime loans. On top of this if you include the $600B+ of conforming balance sheet mortgage assets, $2.1B of Fannie Mae MBS held by other parties, and finally the $2.5B of guaranty business Fannie wrote, then you get to the 200:1 leverage ratio KD discusses. Even before going there though, I would argue that the subprime + Alt-A book they accumulated as an investment portfolio alone, will vaporize the equity. The table is found on page 93 of the 10-K.
2008-03-12 23:41:16
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