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No More Friday Happy Print


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One of the folks over on CR's blog made the Bloomberg screenprint shown below available today. I know some of you understand this stuff already, but for me, the following comment from two of CR's crew were especially helpful:

WaMu trading at 380/400 in 5Y, implies around a 30% chance of default over the next 5 years compares to WFC which is around 70bps implying around 6% chance...and good old RESCAP at 30% upfront (~1650bps) implies around a 69% chance of default on the next 5 years and RESCAP at 22%upfront mids (~3300bps) for 1Y or around a 46% chance of default in the next year!

and

Just to make it clear for non-cds folk, with Wamu trading at 382bps on the 5y contract, that means to get $10mm protection you would pay $382,000 every year for 5 years.

 

If they actually defaulted, you would get paid $10mm but have to deliver $10mm notional of defaulted senior WaMu bonds (that's senior unsecured). Now, if the recovery value of WaMu's debt was 40% (ie. bondholders got back 40 cents on the dollar), those bonds would be worth $4mm, so you'd net receive $6mm. And the payment of your premium stops on the day they default.

 

As CreditTrader said, you can caluculate default probabilities from this. Pretty simply, if you are paying $382k for 5 years, which is $1.91mm. However in Present Value (PV) terms it's a bit lower, something like $1.6mm. So, using the recovery value we used earlier, the default probability is 1.6/6 = 27%.

 

(Since you getting $6mm with a 27% probability is worth the same as $1.6mm which you know you have to pay.)

 

Despite today's bounce, my guess is that there's lots of downside ahead for the banksters.

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The times they are a changin'

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I've seen unhappy Fridays a few times this year.

___________

 

http://www.nytimes.com/reuters/business/bu...son-dollar.html

 

Treasury Secretary Henry Paulson on Friday defended the dollar's status as the world's reserve currency, saying the economy's strength, openness and competitiveness would "shine through" the current market turmoil.

 

"The dollar has been the world's reserve currency since World War II and it's been that for a reason.

 

___________

 

 

Paulson continued, "I just can't happen to remember what that reason is. Let me consult my aides on this one."

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WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Friday defended the dollar's status as the world's reserve currency, saying the economy's strength, openness and competitiveness would "shine through" the current market turmoil.

 

"The dollar has been the world's reserve currency since World War II and it's been that for a reason. We are the biggest economy in the world, we are as open as any economy to investment, to trade and we've had stable economic policies...we've had good productivity," Paulson told reporters at an impromptu news briefing on Friday.

 

Well, if you say so

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aNDSO LIBERTARIAN ARE WE THAT WE''ve opened up a prison outreach broker training program where proprietary desks are provided to some of he most dangerous criminals on earth,sociopaths whose restless ,consciounceless, ever inquiring minds are given some peace by allowing them to serve as part-time salesmen for the greater banksters..

 

Besides a healthy and vigorous aggresiveness they are content to work free, they recognising their rewards are in the future. They fully understand the education we give them is for future their employment when they are released.

 

In order to insure their being well trained we exclude those prisoners (clients) whose sentences have lesss than 25 years to go....We anticipate our labor costs dropping a thousand percent as our current non-imprisoned staff steadily march towards retirement and die..

 

beardrech :ph34r: :ph34r: What profiteth a man if he regains his soul and loses a million dollar a year income????

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WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Friday defended the dollar's status as the world's reserve currency, saying the economy's strength, openness and competitiveness would "shine through" the current market turmoil.

 

"The dollar has been the world's reserve currency since World War II and it's been that for a reason. We are the biggest economy in the world, we are as open as any economy to investment, to trade and we've had stable economic policies...we've had good productivity," Paulson told reporters at an impromptu news briefing on Friday.

 

Well, if you say so

622936[/snapback]

 

aNDSO LIBERTARIAN ARE WE THAT WE''ve opened up a prison outreach broker training program where proprietary desks are provided to some of he most dangerous criminals on earth,sociopaths whose restless ,consciounceless, ever inquiring minds are given some peace by allowing them to serve as part-time salesmen for the greater banksters..

 

Besides a healthy and vigorous aggresiveness they are content to work free, they recognising their rewards are in the future. They fully understand the education we give them is for future their employment when they are released.

 

In order to insure their being well trained we exclude those prisoners (clients) whose sentences have lesss than 25 years to go....We anticipate our labor costs dropping a thousand percent as our current non-imprisoned staff steadily march towards retirement and die..

 

beardrech :ph34r: :ph34r: What profiteth a man if he regains his soul and loses a million dollar a year income????

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The Bernanke Cycle

 

 

http://themessthatgreenspanmade.blogspot.c...anke-cycle.html

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If we use this as our standard we are getting closer....

 

post-1110-1194646050_thumb.jpg

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Personally, I prefer to see single digit New Highs before seeing a significant tradeable intermediate term bounce.

 

Tradeable for me, that is. I'm just not cut out for the shorter term stuff that goes around here :lol:

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Friday 4:30 Finagler Follies.

 

 

J.P. Morgan, B. of A. warn of more mortgage hits

By Alistair Barr, MarketWatch

Last Update: 4:39 PM ET Nov 9, 2007

Print E-mail Subscribe to RSS Disable Live Quotes

SAN FRANCISCO (MarketWatch) -- Banking giants J.P. Morgan Chase & Co. and Bank of America Corp. said Friday that turbulent credit markets will likely dent fourth-quarter results.

Bank of America (BAC:, , ) announced that dislocations in the market for

collateralized-debt obligations, or CDOs, will knock earnings for the fourth quarter.

MarketWrench

 

 

 

BofA: "Market Dislocations" to Hurt 4Q

 

By IEVA M. AUGSTUMS – 54 minutes ago

 

CHARLOTTE, N.C. (AP) — Bank of America Corp. said Friday that continued "market dislocations," including those related to the value of securities it owns that are backed by loans, will hurt its fourth quarter results.

 

But the nation's second largest bank did not provide an estimate of how large the impact will be.

AP

 

 

 

Before 4 Follies

 

Wachovia Credit-Loss, Loan Reserves Reach $1.7 Bln (Update6)

 

By David Mildenberg

 

 

Nov. 9 (Bloomberg) -- Wachovia Corp., the fourth-biggest U.S. bank, said mortgage-related losses and reserves for bad loans total $1.7 billion so far this quarter, more than the lender reported for the previous three months.

Bloomers

 

I wonder how many blowups will come out buried in the weekend press? They can bob and weave and dodge, but they can't hide. It's is sweet payback to have the Pigmen's nuts in the crusher for a change.

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Wow.? This week for the NDX was even worse then several of the bear market weeks.

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Bloombox reporter said it was the worst week for Nasty since April '02. The Hidey Holes are disappearing.

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