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No Reindeer games for the gold bugs.....
So, gold hit $953 overnight in Asia, however, as is par for the course, it came into NY up $1, and soon after got trounced for a quick $10 as oil took a little spill and the market got beat up. However, gold found some sack and made a nice little comeback to only down a few dollars, and in fact at one point was up a few bucks. However, this being gold, it didn't last and we were back down $5. The market was getting hammered when CNBC broke the story that Jesus Christ hisself was coming either Monday or Tuesday of next week, I mean that Ambac might be getting bailed out one of those two days. Well, like an illegal running for the border, the market reversed some 200 points in about half an hour, while gold managed to only be down $1.70. I guess that in itself wasn't terrible, but when you compare it to almost every other commodity out there that was higher, it is. Gold stocks which sucked the big one hard early, closed down a few points.
Sigh. I am getting tired of this. Why doesn't the CRIMEX just chop $300 off the POG and call it a day. It would be a lot quicker, a lot less painful, and this way they wouldn't have to pretend anymore that the market is fair and equitable. Really, I mean it. On Monday, lets just start with gold at $648 and go from there.
The gold stocks just officially suck monkey balls. Never in my years of trading have a seen such a sorry bunch of companies who's underlying commodity screams higher, while the stocks do shit. It would be laughable if it wasn't so sad.
So, if Ambac gets the bailout plan on Mon or Tues. all is well with the financial world correct? The suprime exposure will just go away as will the credit derivatives? Please, our problems are just beginning. Suprime has now affected almost every aspect of the economy from the mortgage exposure to the Auction Rate Security failures. And I am supposed to believe just because a few billion get pumped into Ambac, all is well? The bottom line is that because Ambac and MBIA get to keep their AAA rating, all this derivative shit won't go kablooey and the banks can value them at whatever rate is believable. That in a nutshell is why it's important for the mono line insurers to keep the fabled AAA rating. It is a myth.
Oh, but what about the municipal market, don't they need the insurers? No! Municipal insurance is a croc of shit[ why do you think Buffet wants in so bad on the business? Most muni bonds that are insured really don't need the insurance. Do you really think NYC is going to default on their debt? Or California. You can read all you want about municipality disasters, but the bottom line is General Obligation debt does not default. Neither do Sewers, Municipal Utility Authority's or other type government sponsored vehicles (in the muni world, that is).
Where muni insurance is needed, is in the private purpose sector, insuring bonds such as hospitals or for corporations that may want to issue tax free debt under a state's economic developments' authority.
For 15 years, I was a bond salesman selling mostly to a retail clientelle. Retail clients love insurance as they truly believe the AAA crap. No matter how hard I tried to convince them about buying state or city issued G.O's, they had to have the insurance. Let me tell you, when there was a major city like Detroit, Philadelphia, Bridgeport CT or Washington D.C., I couldn't sell enough of their G.O. bonds. I remember selling Philly G.O.'s at 9% triple tax free for PA residents. At the time, these bonds were CCC, which is about as shitty as they get. I had no worries as the smart money knew the state of Pa would not let the biggest city in the state go belly up. I was selling D.C. paper at 8% under the same premise. Would the Federal Gov't really let it's own capital declare ch 9 which is the municipal equivalent of ch 11. Of course not.
That is why everything you hear about munis is a crock. Believe me, the smart money was buying the Port Authority of NY ARS bonds at 20%. Why wouldn't they? The Authority is rated AA on their own. The bonds are dollar good. If I was still selling bonds, and the quality paper had a very nice yield on it, I would be selling it like it was going out of style. Munis are nto the problem, that situation will get itself worked out one way or the other. It is the subprime shit that has everyone freaked out, and is the reason why we need to pretend that MBIA and AMBAC are still AAA. It's to save the banks. But the banks may be beyond saving at this point.
Sigh. I am getting tired of this. Why doesn't the CRIMEX just chop $300 off the POG and call it a day. It would be a lot quicker, a lot less painful, and this way they wouldn't have to pretend anymore that the market is fair and equitable. Really, I mean it. On Monday, lets just start with gold at $648 and go from there.
The gold stocks just officially suck monkey balls. Never in my years of trading have a seen such a sorry bunch of companies who's underlying commodity screams higher, while the stocks do shit. It would be laughable if it wasn't so sad.
So, if Ambac gets the bailout plan on Mon or Tues. all is well with the financial world correct? The suprime exposure will just go away as will the credit derivatives? Please, our problems are just beginning. Suprime has now affected almost every aspect of the economy from the mortgage exposure to the Auction Rate Security failures. And I am supposed to believe just because a few billion get pumped into Ambac, all is well? The bottom line is that because Ambac and MBIA get to keep their AAA rating, all this derivative shit won't go kablooey and the banks can value them at whatever rate is believable. That in a nutshell is why it's important for the mono line insurers to keep the fabled AAA rating. It is a myth.
Oh, but what about the municipal market, don't they need the insurers? No! Municipal insurance is a croc of shit[ why do you think Buffet wants in so bad on the business? Most muni bonds that are insured really don't need the insurance. Do you really think NYC is going to default on their debt? Or California. You can read all you want about municipality disasters, but the bottom line is General Obligation debt does not default. Neither do Sewers, Municipal Utility Authority's or other type government sponsored vehicles (in the muni world, that is).
Where muni insurance is needed, is in the private purpose sector, insuring bonds such as hospitals or for corporations that may want to issue tax free debt under a state's economic developments' authority.
For 15 years, I was a bond salesman selling mostly to a retail clientelle. Retail clients love insurance as they truly believe the AAA crap. No matter how hard I tried to convince them about buying state or city issued G.O's, they had to have the insurance. Let me tell you, when there was a major city like Detroit, Philadelphia, Bridgeport CT or Washington D.C., I couldn't sell enough of their G.O. bonds. I remember selling Philly G.O.'s at 9% triple tax free for PA residents. At the time, these bonds were CCC, which is about as shitty as they get. I had no worries as the smart money knew the state of Pa would not let the biggest city in the state go belly up. I was selling D.C. paper at 8% under the same premise. Would the Federal Gov't really let it's own capital declare ch 9 which is the municipal equivalent of ch 11. Of course not.
That is why everything you hear about munis is a crock. Believe me, the smart money was buying the Port Authority of NY ARS bonds at 20%. Why wouldn't they? The Authority is rated AA on their own. The bonds are dollar good. If I was still selling bonds, and the quality paper had a very nice yield on it, I would be selling it like it was going out of style. Munis are nto the problem, that situation will get itself worked out one way or the other. It is the subprime shit that has everyone freaked out, and is the reason why we need to pretend that MBIA and AMBAC are still AAA. It's to save the banks. But the banks may be beyond saving at this point.
posted by Neal | 9:51 PM
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