Saturday Rock Blog: I Fall to Pieces, nostalgic post

Note that these are all old charts I posted here and are not current.

Saturday Rock Blog: Crash (ABK Won't Slow Down)

Ambac (ABK) is a stock that readers have known about for some time. I 've been posting about ABK for about a year and it ended up being a great short. After falling to as low as $1.04 in early July, ABK has been squeezing hard to settle around $7 on Friday. The lyrics of this song by The Primitives comes to mind:

"Here you go way to fast
don't slow down you're gonna crash
you should watch - watch your stay here
don't look out you're gonna break your neck"

Can anyone guess in what movie I heard this song last night?

Another Leg Lower for the "Troubled Bond Insurer"

The "troubled bond insurer" Ambac (ticker: ABK) took another leg lower in its downwards spiral yesterday after reporting earnings. The last two legs cut the stock by more than 75% which would put ABK at $1.13 if it fell that far this time. How long can it be before these guys (ABK, MBI, RDN, MTG, etc) bite the dust? When they do its going to mean a whole nother round of big write downs at financial institutions. Odds are that the feds will step in and bail them out because they insure "$524 billion of municipal and asset-backed debt." Heavy things are falling down on ABK, heavy things they could not see? This one goes out to btb who insures me he will be posting much more often.

What is left for the shareholders? (ABK ceo)

When asked about the maximum loss estimates and if ABK could take those losses since its a requirement of being rated "AAA," Michael Callen, ceo of Ambac (ABK) said on CNBC:

"If you take armageddon then whats left for the shareholders of Microsoft, whats left for the shareholders of any household name on the street down here? When you get into these extreme scenarios we've got much bigger problems i think than any particular company. Uh, and the fact that we're not going to get to that is the responsibility, at the end of the day, of the US government. I think then we need to talk to Hank Paulson."

Yeah, Hank Paulson will get right on that. Well, uh, he'll get on it until he gets fired in November.

skip to 6:30-ish

Baby Got amBack

Deluge of Economic Data (aka The Horror Show)

"The large batch of economic data due out next week reads like a lineup for the soundtrack of a horror show for financial markets.

Track One is falling home sales. Track Two is inflation. Track Three is a manufacturing slowdown. Track Four is flagging economic growth and job losses, and Track Five is the consumer spending drop. All these tunes will play over a drumbeat of retail earnings reports, where the outlook is not upbeat." -source

-source

"The market will be greeted Monday with January existing home sales, which are expected to fall slightly. On Tuesday the February Producer Price Index, a key inflation measure, is due before the open, as is the Case-Shiller home price index for December and the entire fourth quarter.

Tuesday also gets February's consumer confidence reading, followed Wednesday by a report on durable orders from January, new home sales, and the weekly mortgage application figures.

Thursday features perhaps the most important piece of data for the week, a preliminary reading on fourth-quarter U.S. GDP. Economic growth is expected to tick higher after a 0.6% reading in the third quarter but remain slow. Various reports over the past few weeks have shown signs of sluggishness, especially in manufacturing. Soaring commodity prices have also fanned fears of inflation.

Last week was mixed, but mostly negative, for U.S. stocks. Even after a late rally pushed the market to a gain Friday, the Dow still fell 0.7% for the week, the S&P edged 0.4% lower, and the Nasdaq dropped 1.8%.

In corporate news, CNBC reported Thursday that a bailout plan for struggling bond insurer Ambac Financial Group could be announced as early as Monday or Tuesday." -source



Yeah, I'm just going to let other people do the writing and contribute nothing more than another Talking Heads video. We have no shame here at Stock Geometry. Next week should be fun.

Some Quotes

"Ambac Financial Group Inc. is in discussions to effectively split itself up ... A halving of Ambac would create one unit that insures municipal debt and one that would cover rapidly diminishing securities tied to the mortgages in a structure that effectively creates a so-called "good bank" and "bad bank."" -source

"Regulators' plans to break up bond insurers into "good'' businesses covering municipal debt and "bad'' businesses liable to subprime-related losses may trigger "years of litigation,'' Bank of America Corp. analysts said.

"It is the equivalent of going to a casino and trying to keep only the winning bets,'' said Tim Mercer, chief investment officer at Hong Kong-based hedge fund Musashi Capital Ltd. "This would be a straightforward case of fraudulent conveyance and everyone involved would be liable for damages from deprived creditors.''" -source

"Australia & New Zealand Banking Group Ltd. fell to a 2 1/2-year low in Sydney trading after Chief Executive Officer Michael Smith said the "bloodbath'' in debt markets will erase profit growth this year.

"Credit costs are going up, well above underlying earnings growth,'' said Smith, who joined ANZ from HSBC Holdings Plc last year, in a webcast briefing. The Melbourne-based bank, Australia's third largest, will also take a $200 million charge for derivatives linked to U.S. debt insurer ACA Capital Holdings Inc." -source

"Chancellor of the Exchequer Alistair Darling said the U.K. government will nationalize Northern Rock Plc (Bank) because bids from private companies didn't ensure taxpayer loans to the struggling lender would be repaid quickly enough." -source

This clip is from last September:


"Bank of America Corp. will join the Dow on Feburary 19th... Coincidently, analysts at investment researcher Morningstar Inc. made a bold prediction for the Dow to rise 50% by this time in 2011 -- more than 6,000 points -- just as Dow Jones & Co., publisher of MarketWatch, announced the index changes." -source (lol)

"The housing market continues to fall deeper into recession,'' said Michelle Meyer, economist at Lehman Brothers Holdings Inc. in New York. -source

"I don't see a housing market recovery right now,'' said Mason, 43, who predicts Treasury yields will fall as investors continue to buy the debt as a haven from losses in higher risk markets. "People can't get a mortgage'' because "banks are restricting access to credit,'' he said.

Declining property values are also making it harder for a growing number of homeowners to refinance. By year-end as many as 15 million households may owe more on their mortgages than their homes are worth, according to an estimate from Jan Hatzius, chief U.S. economist of New York-based Goldman Sachs Group Inc."-source

"Guy de Blonay, Philip Gibbs and Kokkie Kooyman, the managers of Europe's three best-performing funds focused on financial companies, say they're buying bank shares after an 11 percent decline in a benchmark index in 2007.

"We never saw the collapse in subprime happening to the extent it did,'' said Kooyman, who's based in Cape Town and whose fund is registered in Dublin. "But we'll always find shares somewhere that we think are cheap.''" -source (lol)

"Former Federal Reserve Chairman Alan Greenspan said the U.S. economy is on the verge of its first recession in six years as falling home values hurt consumer spending. "We are clearly on the edge,'' he said.

"Home prices will continue to weaken,'' the 81-year-old former Fed chief said. "When a bubble breaks, you go to primordial fear.''"-source

Feel free to add quotes xerxes, btb and indigo.

Nightmare on Wall Street 2: Credit's Revenge

Scary stuff was going down today, I hope everyone was being safe. Rather than talk about it, I've just got a few charts for you that are simply breathtaking. For commentary, I think Tim brings up some excellent points today.

Lets start with the Dow Jones etf over the last two days (5 min time scale):

Then CROX over the last five days on a 15 minute time scale:

My goodness, MBI over the last two months:

Then theres DSL, a "savings and loan" corporation over the last two months :

And the current king of carnage is bond insurer ABK on a six month daily time scale:
With people focused so much on tech stocks these days its easy to not notice the recession/bear market already occurring in some sectors of our economy.

Disclosure: I own DIA puts
A Nightmare On Elm Street 2 - Freddy's Revenge..... Trailer

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Musical Costume

The fed lowered interest rates by .25% today, as expected, adding further to upside inflationary pressure on commodities and other currencies. The stock market's reaction has thusfar been confused with some wild action in both directions. Clearly the leaders (ICE, LULU) popped big and the weakest stocks fell hard (ABK, MBI).

On a Halloween related note, here is something phish used to do on their 10/31 shows called a musical costume. They would play another band's entire album all the way through or in some cases just a few songs. The show that this clip is from was performed in Las Vegas on October 31st, 2005 where they played the entire White Album (The Beatles).

This one goes out to Ben Bernanke...