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Thursday, March 13, 2008

AAA isn't AAA

74 of 80 AAA Bonds in ABX Index Fail Tests for Investment Grade.

Click on the link. Read it carefully.
This came out a couple of days ago and has been posted elsewhere... BUT because of the importance and significance of implications consequences, I had to post it.

U.S. Home Foreclosures Rise 60% in February as Mortgages Reset: "U.S. home foreclosure filings jumped 60 percent and bank repossessions more than doubled in February as rates on adjustable mortgages rose and property owners were unable to sell or refinance amid falling prices.

More than 223,000 properties were in some stage of default, or 1 in every 557 U.S. households, Irvine, California-based RealtyTrac Inc. said today in a statement. Nevada, California and Florida recorded the highest state foreclosure rates. "

Well, those numbers may help explain just how ridiculous these AAA ratings are.

"About $460 billion of adjustable-rate mortgages are scheduled to reset this year and another $420 billion will rise in 2011, according to New York-based analysts at Citigroup Inc. Homeowners faced higher payments as fourth-quarter home prices fell 8.9 percent, the biggest drop in 20 years as measured by the S&P/Case-Shiller home price index."

Honestly, there really is no stopping this... In two days the Fed has effectively offered $400 billion in temporary liquidity. All of which the market has now shrugged off. Back into the abyss we go.

You could go bottom fishing, like this guy.

Related Headlines:
Carlyle Capital Nears Collapse as Rescue Talks Fail (Update4)
Dollar Falls to 12-Year Low of 100 Yen on Carlyle Fund Failure

Related Blog Posts:
Ratings Fraud and Structured Credit?


Anonymous said...

I've been tracking your blog for some time now and you seem very negative...are there any positives on the horizon.

Ben Bittrolff said...


Not gonna lie... I dont' see very many positives? Do you?

The Fed cutting rates at the fastest pace ever is how they say, "Oh shit."

The Fed creating the TAF is how they say, "Oh crap, THAT didn't work. We need something stronger."

The Fed creating the TSLF is how they say, "Oh sweet baby Jesus. We are sooo screwed."

Let me ask you this: How are you doing? Is your house paid down to a reasonable level? Did you over pay for it? How is your personal debt level holding up? How many years are you from retirement? How is your equity portfolio holding up? Having fun putting gas in your SUV? Is your job secure? Are you gonna go spend some serious bling because you can, or are you too cutting back?

I'm not negative. I'm realistic. There IS a difference.

(Wow, that was harsh. But it had to said. My apologies in advance.)

Anonymous said...

I've posted here several times and enjoy learning about things and I must admit, I do enjoy watching the chickens come home to roost. I'm 41 and my wife 33 so we have some time to weather this storm.
My wife and I have about 50K to go on our 150K house outside Atlanta(hope to get that done by mid 2010). We may have lost sev. percent on a small intown condo we have, but it was only 90K to start so kinda like an expensive car, not like getting into some 2-300K spec place. I did an 80-20, 80 fixed and my 20 is only on about $16,000 (~$115/mnth payment)so even a 50% reset I think I can handle. As before, I went ~80% to cash in Oct/Nov. 2007 (I was soooo lucky). Yes, dollar losing, but about the only place I wanted my 401K/IRA stuff could go. Also, my wonderings about gold. Unless one actually has PHYSICAL touching of coins/bullion, I don't see it any better than cash. ~70 years ago, FDR in a sense named cash as the "APPROVED" token of trade by outlawing ownership of gold. Who's to say that down the road, the gov't again doesn't say cash is only approved method and offers to exchange peoples gold for cash. Offering them a "you better accept it" 50-70 cents on the dollar. I would imagine by that time we would really be in the tank, but a desperate situation would call for desparate action. Probably totally fictitious to happen, but alot of stuff has happened and looks to be going to happen in the months to come. Was it here I read that they are trying to hold it together till after the election so nothing wild/weird goes on for either party.

Brant, Atlanta, GA

Anonymous said...

That was's almost like you think the world is going to end. You might almost think that you are predicting a permanently bear market. I think you should change your name from Financial Ninja to Permabear.

My debt is just SUV and plenty of bling to buy grey goose on a saturday night. I'll be just fine, my job is secure and it pays to be positive.

Anonymous said...

I see a headline...

Fear burns Bear Stearns

Anonymous said...

I take a much more spiritual approach to investing. I'm a strong believer in the power of positive thinking. If you stay negative, you will always be disappointed with life's outcomes. Life is too short to think the glass is half empty.

Anonymous said...

wow... it seems like the financial ninja is predicting quite a negative outlook. Almost seems like the sky is falling. Are the Financial Ninja and Chicken Little plotting a scheme?

Anonymous said...

Speaking of negativity, How many TRILLIONS ( and TRILLIONS) of dollars in derivatives was Bear Stearns a counterparty to?

How's that for negativity?

My question is, how will that play out now?

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