What will the Fed do ?

I have a real concern that Citi might be insolvent?.

Saudi Prince Al-Walid has $10 Billion tied up Citigroup...I think he's probably more than a bit pizzed at the company--but I don't think he'll let it go under. He already bailed them out once in the 90s (also due to their dabblings in RE :roll.


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Shelly I wholehartedly agree with your last two post. So, does Ben and team bail out Citi with taxpayer dollars? This could make the 1500 people screwed by Netbank looks like peanuts, check out how many $100K+ depositors citi has on fdic website. What about the poor fools in citi offshore accounts in other currencies. (Jersey & etc)

Shelly

Thanks for the explanation. IMO, Rule 157 is a good thing. Sunshine is the best disinfectant. Good transparency is what is needed to return confidence to the market place. Let the chips fall where they may.

Wanna bet?

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betting equals stock market

betting equals stock market

....and playing poker and "investing" in RE too. Suffice to say, some of us understand, handle and respect the risk vs. reward aspect of placing our bets much, much better than others.



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I read elsewhere:
Level 1- Mark to market (Solid)

Level 2- Mark to model (suspect right now)

Level 3- Mark to myth

Saudi Prince Al-Walid has $10 Billion tied up Citigroup...I think he's probably more than a bit pizzed at the company--but I don't think he'll let it go under. He already bailed them out once in the 90s (also due to their dabblings in RE :roll.


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If he writes Citigroup a check--what chance they'll rip it up?

This could make the 1500 people screwed by Netbank looks like peanuts, check out how many $100K+ depositors citi has on fdic website. What about the poor fools in citi offshore accounts in other currencies. (Jersey & etc)

The simple answer is to keep one's accounts in the bank within the FDIC limits--why do you think there is a different bank on every corner?

Fools have no concept of "risk," they need to lose a bunch of money before they "get it."




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I would go out and get some shoe boxes, and make sure they are good quality ... not some off the wall brand, maybe a Nike box or Reebok box, line it with the best Saran wrap you can find and bury your money in your backyard .... but be sure that you limit your amount per box to the new FDIC regulated amount of $4575 dollars per box.

If he writes Citigroup a check--what chance they'll rip it up?

Depends...is it on a Wachovia or Barclay's account?




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I would go out and get some shoe boxes, and make sure they are good quality ... not some off the wall brand, maybe a Nike box or Reebok box, line it with the best Saran wrap you can find and bury your money in your backyard .... but be sure that you limit your amount per box to the new FDIC regulated amount of $4575 dollars per box.

....and when you dig up your 'treasure' in a couple of years, you'll understand the concept of "inflation RISK."



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Not to change the subject but..........bank stocks at this moment are either up or way off their earlier lows. the djii is off 180 points now. me thinks the financials have bottomed it is early but they are finally not going down on bad news. the worst may be over and the time to buy may be at hand.

Oh the irony ... how about $1200 for a $100 Gold Certificate Bill

http://search.ebay.com/search/search.dll?from=R40&_trksid=m37&satitle=gold+certificate&category0=

I read elsewhere:
Level 1- Mark to market (Solid)

Level 2- Mark to model (suspect right now)

Level 3- Mark to myth

The best explanation of Level 3 "Mark to Model" comes from the Minyanville website:

What does "mark-to-model" mean? Let's use something even we can understand - a sports card example. Suppose you and I are collectors (investors) in sports cards, but not baseball cards, the "prime" sports card market. No, we collect professional golfer cards - the "subprime" sports card market.

Why would we collect professional golfer cards? Simple, we're looking for an alpha edge - a fancy way of saying "excess return" - and by using leverage we believe we can buy these illiquid sports cards and sell them later to someone else for more money. Ok, ok, there are a couple of problems with this scheme you can see already.


First, the market for professional golfer cards is far, far riskier and smaller (illiquid) than the market for professional baseball player cards.
Second, since they so rarely trade, it's difficult to value the cards on a day-to-day (even week-to-week) basis.

Ok, so back to the sports card market. Let's say that baseball cards are "highly liquid," meaning that, like stocks or U.S. Treasuries, they trade every day. These trades provide a way to instantaneously value our portfolio of baseball cards at any time. To value our baseball card portfolio, we simply look up the most recent trade of, say, our 2004 Derek Jeter card and record the value. This is called "Mark-to-Market."

This "liquidity" is particularly helpful if we are using leverage (meaning, if we are using borrowed money to buy baseball cards with the hope that the borrowed money will increase our return when we decide to sell) since it allows us to closely monitor and track exposure and adjust the amount of leverage we are using accordingly.

So how do we know, at any given time, what our leveraged portfolio of professional golfer cards are worth? They rarely trade, so we can't look up similar cards that have recently traded in the market. Well, unfortunately, in our professional golfer card portfolio we can't mark-to-market because these cards trade so infrequently.

So how do we value our portfolio?

Simple, we have some mathematicians build us a model that values the cards based on how each golfer performed last year, the tournaments in which they made the cut, their overall earnings and rankings among their peers, and a rating that a separate "professional golf card agency" that follows the golfers posts.

Wait, did you say, "a model that values the cards based on how each golfer performed last year"? Yes.

But what if a professional golfer's card in our portfolio is a guy who last year ranked fourth overall in earnings and won two tournaments, but suddenly gets injured this year, fails to finish a few tournaments, and slips down to 40th in overall earnings?

Hmmm, good question. For that we would rely on that separate "professional golf card agency" we mentioned to "re-rate" this card. Then we would simply input that revised rating into our models and adjust the value accordingly.

But what if the rating agency, for a variety of reasons, chooses not to re-rate the card?

Then we have a situation where the value of the card that is being spit out by our model is in no way even close to the true market value of the card.

Wouldn't that be a problem if we suddenly feared that all the ratings of our cards were too high? Wouldn't our model be insufficient? Might we not be over-leveraged in cards that have very little real market value? Yes, yes and yes.

And that is precisely where we are right now with respect to CDOs. (EDITOR'S NOTE: "Right now" meaning the date this column was originally written - June 27, 2007).

The credit ratings agencies' ratings are key in the mark-to-model values, and so far very few CDOs have been re-rated in a way that reflects the surging subprime default rates.

There's an old investment saw that says "Paper losses don't exist until you sell." That old saw is being tested in real time, right now.

Oh the irony ... how about $1200 for a $100 Gold Certificate Bill

http://search.ebay.com/search/search.dll?from=R40&_trksid=m37&satitle=gold+certificate&category0=

I've got a better deal....forget the paper note!--I'll sell you $100 in gold for only $1,000!!!


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Not to change the subject but..........bank stocks at this moment are either up or way off their earlier lows. the djii is off 180 points now. me thinks the financials have bottomed it is early but they are finally not going down on bad news. the worst may be over and the time to buy may be at hand.

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i am being serious. one of the techniques of recognizing a bottom is when stocks stop going down on bad news and actually start to go up. i am just making an observation which may or may not be helpful

i am being serious. one of the techniques of recognizing a bottom is when stocks stop going down on bad news and actually start to go up. i am just making an observation which may or may not be helpful

Goofer,

I think we're just seeing the tip of the iceburg. Ya know how you pull a single thread on a sweater and whole thing starts to unravel....well this just might be that thread:

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TOKYO, Nov 9 (Reuters) - A collateralised debt obligation (CDO) managed by State Street Global Advisors has started selling assets, ratings agency Standard & Poor's said late on Thursday, raising worries that a wider array of structured securities may do the same.

S&P said it slashed its ratings on Carina CDO Ltd's top tranche of securities by 11 notches to the junk level of BB from the top-notch triple-A. S&P also chopped its ratings on the subordinate levels of the CDO, eight all the way to CC.


The trustee of the Carina CDO has started selling the asset-backed securities making up the CDO at the direction of the structure's noteholders, S&P said.

"We believe the liquidation process has begun," S&P said in its press release.

I disagree as far as the stock prices are concerned. The financials are down 40% in the last 2 months......I think the whole iceburg has been discounted. Watch how the stocks trade from here.

I disagree as far as the stock prices are concerned. The financials are down 40% in the last 2 months......I think the whole iceburg has been discounted. Watch how the stocks trade from here.

So you're buying?

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i doubled all of my financial positions yesterday.......i am hemorhaging (sp) money the last month. my game plan is to wait at least 31 days to avoid the wash rule and take the tax loss on the first lots. This dovetails nicely with the next fed meeting which is dec 11 (?). I expect they will lower by 25 bps which won't matter. But I like the way the stocks are trading today on more bad news. I think the selling has exhausted itself on the financials. The homebuilders, imo , are dead for the foreseeable future.


I chose yesterday to double down because I was shaking with fear and that is the best time for me to plow in on a contrarian bet. I am usually emotionally detached when investing so when I am scared s***less it usually is the right thing to do. We will see in the next 5 weeks how it plays out.

Goofer:

I happen to agree with your comment that the Banks should begin to stabilize shortly. With today's announcement from Wachovia that they will write down another $1.1B to account for additional CDO losses, one would expect the stock price to deteriorate. In fact, today the stock price is up 1%. We are near the bottom.

Little Fish

I chose yesterday to double down because I was shaking with fear and that is the best time for me to plow in on a contrarian bet. I am usually emotionally detached when investing so when I am scared s***less it usually is the right thing to do. We will see in the next 5 weeks how it plays out.

Goofer,

Might I suggest 'recreational drugs' as an alternative?


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Goofer,

Might I suggest 'recreational drugs' as an alternative?


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I just got the shakes reading all this. I am glad my money is safe in the mattress where many folks keep their guns.