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Let bond insurers to fail,better before than to be late.
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Under these market circumstances, I believe it is time to stop bailing out banks and bond insurers by cutting the rates.Now it is time to see who is going to fail and who is not.
Sooner is better...
Stocks fell on Monday on renewed worries about credit losses after insurer American International Group Inc received a rebuke from its auditors for how it valued some credit derivatives.
In addition, the first shake-up in the composition of the Dow Jones industrial average in four years added to the turbulence. The blue-chip index replaced Honeywell International Inc and Altria Group with Chevron Corp and Bank of America Corp AIG's shares fell 10.5 percent to $45.37, its worst one-day percentage drop since the 1987 stock market crash.
But tech share losses were limited as deal news lent the sector some support. Yahoo Inc rejected Microsoft Corp's takeover bid as too low, raising the possibility of a higher offer.
Motorola Inc and Nortel Networks Corp ) may combine their wireless networking units, according to the Wall Street Journal.
AIG, the world's largest insurer, disclosed that its auditors said the company failed to account properly for derivatives related to risky debt, known as collateralized debt obligations.Economic jitters persisted after finance leaders from the Group of Seven major economies said during the weekend problems in the U.S. housing market may lead to worsening conditions as debt-laden banks clamp down on credit.
American International Group Inc., the world's largest insurer by assets, said auditors found a ``material weakness'' in how the company values its credit- default swap portfolio. The stock fell the most in 20 years.
The contracts declined by about $4.88 billion in October and November, according to data in a regulatory filing today. The drop was confirmed by company spokesman Chris Winans. AIG had said in December that the value of the ``super senior credit derivatives'' fell by about $1.1 billion in those two months. The stock retreated 11 percent to $45.16 as of 10:19 a.m. in New York Stock Exchange composite trading.
AIG has lost about a third of its market value in the past year on concern that the U.S. housing slump will reduce earnings and the value of its holdings. The company has units that originate, insure and invest in subprime loans or securities. AIG hasn't yet fully determined the decline in value of the swaps in the fourth quarter, the New York-based insurer said in the regulatory filing today.
``AIG is still accumulating market data in order to update its valuation'' of the portfolio, it said in today's filing. The insurer said it believes it presently has ``procedures to appropriately determine the fair value'' of the portfolio for the yearend financial statements.
AIG's third-quarter net income declined 27 percent to $3.09 billion on losses linked to the U.S. housing slump.
For this week ,I expect credit jitters to continue and test the Dow under 12,000.The process of coming crisis,emerging market crisis might give the signals starting from this week.I am inclined to stay in treasury bonds although I see some opportunities in big pharma and some financials. |
| Tarih
: 11.02.2008 |
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© 2006 Mert TOKER All Rights Reserved. |
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