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Tuesday, November 6, 2007

Today We Try To Bounce


Fitch May Downgrade Bond Insurers After New Test (Update2): “Fitch Ratings may lower the AAA credit ratings on one or more bond insurers after a new review of the companies' capital takes into account downgrades of collateralized debt obligations that they guarantee.

Fitch said it will spend the next six weeks reviewing the capital of insurers including MBIA Inc., Ambac Financial Group Inc., CIFG Guaranty and Financial Guaranty Insurance Co. to ensure they have enough capital to warrant an AAA rating. Any guarantor that fails the new test may be downgraded within a month unless the company is able to raise more capital, New York- based Fitch said today in a statement.

CIFG and FGIC, the bond insurer whose owners include Blackstone Group LP, have the highest probability of suffering erosion in the capital because of the falling value of CDOs, Fitch said. Ambac has a “moderate probability” and MBIA is at “low” risk, Fitch said.”

I’ve put up charts of some of these guys in the past. Tickers: ABK, MBI.
Keep an eye on these guys. Should there even be a rumor that they can’t make good on the insurance they’ve written…

IndyMac Reports $202.7 Million Loss as Mortgages Sag (Update1): “IndyMac Bancorp Inc., the second- largest independent U.S. mortgage lender, reported its first loss in more than eight years in the third quarter as the company made fewer loans.

The company lost $202.7 million, or $2.77 a share, compared with a gain of $86.2 million, or $1.19, a year earlier, Pasadena, California-based IndyMac said today in a statement. The average estimate of seven analysts surveyed by Bloomberg was a 46-cent loss, and IndyMac had forecast as much as 50 cents.

IndyMac today cut its dividend in half and said it eliminated more than 1,500 jobs to help weather the worst housing slump in 16 years. The company told investors last March they were confusing its business with purveyors of low-quality mortgages that had the highest default rates.”

While this may be the first loss in eight years, expect many more.

Citigroup's Stuckey to Run Subprime Unit After Losses (Update3): “Citigroup Inc. named Richard Stuckey to manage most of its $43 billion of subprime mortgage assets, choosing the same executive who helped unwind Long-Term Capital Management LP's bad bets nine years ago.

Stuckey, 51, will run the Sub-Prime Portfolio Group, created after the largest U.S. bank by assets said Nov. 4 that it will write down as much as $11 billion of subprime debt and Chief Executive Officer Charles O. ``Chuck'' Prince III resigned. Stuckey will oversee most of the bank's securities linked to homeowners with poor credit, according to a memo sent to employees and confirmed by Citigroup spokesman Dan Noonan.”

Shittybank is scrambling to fix things. An oversold bounce may be in order at these levels… even if its just the shorts locking in some gains.

Dollar Falls to Record Low Against Euro; Fed May Lower Rates: “The dollar fell to a record low against the euro on speculation financial-company losses from subprime-mortgage defaults will grow, prompting the Federal Reserve to cut interest rates a third time this year.

The U.S. currency declined versus all 16 of the most- actively traded currencies except the yen after Fed Governor Randall Kroszner said conditions for subprime-mortgage borrowers may worsen. It dropped the most against the South African rand, falling 1.2 percent.”

This morning the dollar was pushing lows pretty aggressively… even setting off a few stops. The dollar is now at levels that should start to really be a concern for equities.

Oil Rises to Record on Forecast U.S. Supplies Fell, North Sea: “Crude oil rose on speculation that U.S. inventories declined for a third week and as a storm closed production in the North Sea.

An Energy Department report tomorrow will probably show crude inventories fell 1.7 million barrels last week, according to an analyst survey. Oil reached a record $96.24 a barrel on Nov. 1 after supplies unexpectedly dropped. ConocoPhillips and BP Plc said they will start evacuating workers from some North Sea platforms before a storm forecast for later this week.”

Oil is getting into the ‘oh shit’ range. At these prices any move in the crack spread to more normal levels will provide the knockout blow to the reeling US consumer. Another bad inventory number tomorrow and we get that much closer to $100...