Friday, March 14, 2008

Pessimism, Good!

WSJ: Standard & Poor's now estimates that subprime write-downs could reach US$285 billion, US$20 billion higher than its estimate just six weeks ago, and is forecasting future pain for financial companies as the credit crisis moves beyond home loans. But the ratings agency also said "the end of write-downs is now in sight for large financial institutions. The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write-downs of subprime asset-backed securities," said S&P credit analyst Scott Bugie, lead author of the report, in a statement.

While the hint of an end in sight helped to buoy the sinking stock market yesterday, Mr. Bugie's report was tempered. "We believe that any near-term positive impact of reducing subprime risk in the financial system via increased disclosure and write-downs will be offset by worsening problems in the broader U.S. real-estate market and in other segments of the credit markets," he said. The write-down estimate was boosted to reflect higher projected write-downs on high-grade collateralized debt obligations of asset-backed securities of 2006 and 2007 vintage.

S&P noted that the largest players have undertaken a "rigorous valuation methodology" in their subprime write-downs but that market forces could bring pressure for even more. The firm said that while there has been some deterioration in the first quarter, "the magnitude of some write-downs is greater than any reasonable estimate of ultimate losses."

Comments: Just like S&P to come out with the pessimism report, albeit 6 months late. It was largely the ratings agencies fault that we had the sub prime mess and over-leveraged effect of a lot of these similar instruments - they are the ones who just took the fees and rated these blardy instruments AAA. When they started collapsing, the ratings agencies were too slow to downgrade them. Now they are saying, well, forget what we said before, now the banks are in for it. What a load of crock-shit. Its good also that S&P came out with the report as it shows that the reversal is coming. Already the markets have factored another US$100bn of write downs from US banks. The rest should be coming from largely European side. Another 3%-5% downside from here and we should be in cherry picking territory. A rough gauge, DJII 11,500-11,750.


pureland said...



Nazri: We may see end of NEP


KUALA LUMPUR: The election results signal the beginning of the possible demise of the New Economic Policy (NEP) and special rights for the Malays, said Datuk Seri Nazri Aziz.

The Umno supreme council member said it appeared that the Malays, especially in the town areas, had become more confident now and felt they could compete with the other races on a level playing field.

“We (Umno) have to really sit down and think. It looks like the educated Malays do not care about Malay rights anymore,” he said when contacted.

“The Malay doctors, lawyers, engineers feel they have made it on their own merit.

“It looks like the NEP is not something that can be used to persuade the Malays to support the Barisan Nasional.

“The Malays are saying ‘you can’t scare us by talking about us losing our rights, because we are here on our own merit’.”

Nazri said it looked like some Malays felt that the NEP was unfair, and questioned why special rights should be given to the Malays.

He described the new confidence among the Malays as good for the Malay psyche.

In the just concluded election, the Barisan only managed a simple majority in Parliament, and lost five states (Kedah, Selangor, Kelantan, Penang and Perak) to the Opposition.

The Opposition had largely said they would dismantle the NEP and put in a place a new affirmative action policy based on need rather than race.

Nazri, who retained his Padang Rengas parliamentary seat by a majority of 1,749 votes, said he barely survived the political tsunami.

He said the youngsters – Chinese, Indians and Malays – who returned from Kuala Lumpur to vote in Perak had tried to persuade their parents, who are Barisan supporters, to either not go out to vote or vote for the Opposition.

“I only survived because of my personal touch with the voters,” he said.

He believed the political landscape in the country had changed irreversibly and that all parties would now have to work harder.

“Every wakil rakyat will have to work to win the hearts of the people. This is good for Malaysia because, at the end of the day, it is the rakyat who benefits,” he said.

yj said...

pls share your views on Bear stern..i'm starting to think that the dow might crash 1000pts soon...what about the rest ? ML, JPM or CG??

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