Posted on 07/08/2008 8:18:42 PM PDT by TigerLikesRooster
Bank losses from credit crisis may run to $1,600bn, warns Bridgewater
By Ambrose Evans-Pritchard
Last Updated: 1:59am BST 08/07/2008
Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system.
The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by "mark-to-model" methods of valuing structured credit.
"We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse," said the group in a confidential report, leaked to the Swiss newspaper SonntagsZeitung.
(Excerpt) Read more at telegraph.co.uk ...
I think what could be apocalyptic is not the estimate (1,600bn) of loss, but they are compelled to make such an announcement.
Ping!
Is that US Billions or Imperial Billions?
When the word billion is used … just how much does it matter? ;-)
WASHINGTON, D.C. (June 5, 2008) — The seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.35 percent of all loans outstanding at the end of the first quarter of 2008 on a seasonally adjusted (SA) basis,
up 53 basis points from the fourth quarter of 2007, and up 151 basis points from one year ago, according to MBA’s National Delinquency Survey.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process was 2.47 percent at the end of the first quarter, an increase of 43 basis points from the fourth quarter of 2007 and 119 basis points from one year ago.
The percent of loans on which foreclosure actions were started during the quarter was 0.99 percent on a seasonally adjusted basis, 16 basis points higher than the previous quarter and up 41 basis points from one year ago.
Billion is so 1960s. Trillion is the worrisome figure.
Get to the hell out of debt ASAP.
“Get to the hell out of debt ASAP.”
Why not be a debtor in such conditions?
Yep. We're talking 1.6 trillion dollars here...
That said, you need to protect your capital as much as possible. This means that you cannot take any risks with the money you do have.
Thus, putting it into CDs (certificate of deposit) or a similar fund is the answer. In my case, I have an account with TD Ameritrade, a stock brokerage company. They have a "money market fund" which pays near-CD rates of interest, however the money can be taken out at any time, and the interest earned is computed daily.
I do not believe the banks will close anytime in the next months or years. Stock broker - I would not presume to tell you. Market crash - we have dropped from 14,400 to about 11,100 on the DOW - that is not a crash -perhaps a significant correction.
Find someone in investing who you have a personal relationship with...a person who you trust to give you good advice. I wish you well, but I am not an expert in finance and estate planning.
go to treasurydirect.gov and you can buy 6 month treasury bills paying 2 percent but they are safe and liquid unless the US govt. declares bankruptcy.
or you can buy gold eagles which is a safe and liquid gold coin.
“This whole damn mess is on the Bankers back. They caused it with the writing of unregulated over-the-counter credit derivitives. I won’t say how much they have written because you would not believe it. It is a number used only by astronomers.”
So very correct. BIS reported $470 trillion in credit derivative contracts in early 2007...most recent report is $1.26 trillion...the BUBBLE never mentioned. Some reports recently have stated JP Morgans credit derivative is $96 trillion alone, having absorbed Bear Stearns $36 trillion in credit derivative stuff....but, you already know this. Sorry for the repeat.
Error Correction...the new BIS figure is $1.26 QUADRILLION, not $1.26 trillion.
If you put that money in the bank make sure you do not put more than 100k in any one bank. Deposits up to 100k are insured by the FDIC.
There are some banks that have additional insurance up to 500k and some even higher. Be sure you are covered.
Why not be a debtor in such conditions?
I am not an expert here, but am going to guess that the "Get out of debt now" advice is based on the chance that in the future many people will lose their jobs and there will be no jobs available for quite some time.
So if you owe on a house, you could lose it, for instance.
Still not a perfect solution - the government could raise taxes to the point where anything you own you can afford to pay the taxes on it and lose it anyway, but the avoid getting into debt / get out of debt advice is always good advice.
Oops...The article has the wrong figure..It should read potential losses at $1.6 Trillion, not $1.6 Billion...the latter is a drop in the bucket compared to the $1.6 Trillion figure—which would be equal to nearly 1/6 of the entire US economy...Only a quarter of those losses have been reported-so far...we still have a long way to go..
Read more here at The Daily Reckining
http://www.dailyreckoning.com/
Remember this..."The human heart is deceitful above all things and desperately wicked, who can know it?" This is the nature of bankers. Never forget it. This type of irresponsibility is irredemable. This is very, very bad behavior on those who control the money of people who mostly operate on trust when it comes to the money changers.
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