# US investment bank fears!



## propro1234 (4 November 2007)

Just read the news from yahoo, and the title said, _"Analysts Suggest New Investment Bank Writedowns of More Than $10 Billion Are Coming Soon"_

Well, it seems to me the bad mortgage debt do hurt some degree of the sector!

do you think so?


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## explod (4 November 2007)

propro1234 said:


> Just read the news from yahoo, and the title said, _"Analysts Suggest New Investment Bank Writedowns of More Than $10 Billion Are Coming Soon"_
> 
> Well, it seems to me the bad mortgage debt do hurt some degree of the sector!
> 
> do you think so?




Well that is small change, the Fed Reserve put in 41 Billion Thursday to prop them up and some analysts say that too is chicken feed and wont' help either


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## noirua (4 November 2007)

All of the financial sector is best avoided until this sub-prime problem works itself out. This may take up to 3 years.

The small Mortgage Bank in the U.K., Northern Rock has now borrowed A$54 billion from the Bank of England and this is expected to rise to A$85 billion by the end of the year. This works out at A$1,600 for every citizen in the U.K.
Barclays Bank stock hit a 2.5 year low as rumours of liquidity problems hit the markets. Mortgage Banks Alliance & Leicester and Bradford & Bingley are also having problems.

U.S. writedowns may well hit US$1 trillion before the mess is finally sorted.

Can we really believe that Aussie Financial Institutions have no problems...?


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## sassa (4 November 2007)

Part of a thread posted in Imminent and Severe Market Correction yesterday.

"The Fed pumped $41 billion into the financial system yesterday…and that’s
probably a terrible thing.

The Fed does not toss out $41 billion lifelines unless someone is actually
drowning. And if our suspicions are correct, a few big financial institutions
might be at risk of slipping under the waves.

As detailed in several recent editions of the Rude Awakening – (in
particular, the October 26 edition, “SIV Positive“  and the October
17 edition “Bail Out Nation“) many large financial institutions are gazing
around desperately for lifelines, but the financial markets stubbornly refuse
to provide them.

The vast community of investors worldwide is refusing to finance mortgage-
backed-securities of any size or description or credit-rating. That’s why the
Federal Reserve is in bail-out mode. The Fed’s $41 billion of repo activity
yesterday was the largest such injection since September 2001 (think 9-11).
Tellingly, the Fed’s maneuver yesterday occurred amidst rumors that Citigroup
might cut its dividend to preserve capital. And – oh by the way – the Dow
tumbled 362 points on the back of a brand new interest rate cut that was
supposed to make everything all better.

But the rate cut did not make everything all better. It did not make anything
better…because it can’t. A rate cut cannot convert a defaulted subprime
mortgage into a valuable asset. It cannot convert a AAA-rated CDO full of
toxic, overpriced garbage into an actual AAA security…and most of all, a rate
cut cannot convert liars into truth-tellers.

We don’t know where all the liars might be; but we’re pretty sure that many
of them draw paychecks from the financial institutions that hold lots of
mortgage-backed securities. As the mortgage market proceeds from bad to worse
to catastrophe, we’re pretty sure that many officers of financial
institutions are not telling the whole truth and nothing but the truth about
the value of their mortgage-backed securities.

Rather than fessing up to massive mark-to-market losses, many finance
companies are resorting to desperate rescue plans of one sort or another.
Citigroup’s “crisis management” strategy, for example, seems to consist of
showing up on the Treasury Secretary’s doorstep with a bouquet, a box of
chocolates and puppy-dog eyes.

Secretary Paulson has responded with sympathy and billion-dollar rescue
plans. But these efforts cannot possibly replace the entire capital markets.
Not even the U.S. Treasury and the Fed combined can replace the capital
markets. (Some folks in Russia tried that tactic a few years back and it did
not work very well). For as long as Treasury and the big banks continue to
play “Hide the CDO,” the capital markets will remain on strike. As long as
governmental agencies and major finance companies collude to conceal the
fair-market value of mortgage-backed securities, the market for these
securities will continue to spiral toward disaster.

In this context, Citibank’s prospective dividend cut assumes a mock-heroic
stature. The dividend assumes a seeming importance much greater than its
actual importance. Citi’s dividend is more symbol than substance. Why?
Because Citigroup is probably facing a crisis far more serious than whether
to pay its shareholders 5.6% per year or 4.6% or zero percent. All totaled,
Citigroup dispenses almost $10 billion per year in dividends. So a modest
dividend cut would only yield two or three billion dollars. That’s real
money. But the big bank might need even “realer” money – the kind that only a
complete elimination of the dividend would yield.

Best case, Citibank will not be extending vast amounts of credit any time
soon, nor will Bank of America or Countrywide Financial or any other major
American lending institution. Worst case? Don’t even ask.

This is where the real problems begin.

Without fresh credit, what will become of the American consumer? How will the
American consumer continue to over-leverage himself? And what will become of
the American economy without millions of over-leveraged consumers?

Play is safe, dear investor. Play it safe. These are not the days that will
reward investment heroism."


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## Temjin (4 November 2007)

sassa said:


> Part of a thread posted in Imminent and Severe Market Correction yesterday.
> 
> "The Fed pumped $41 billion into the financial system yesterday…and that’s
> probably a terrible thing.




http://www.dailyreckoning.com.au/citigroup-bailout/2007/11/02/

Another article here as well.

I was a little surprised to see it yesterday as well. 

Well, got gold anyone?


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## Kauri (5 November 2007)

Something else that has popped up recently... still trying to interpret it me..   
Cheers
.........Kauri



> November 04: Marketwatch is predicting a rough ride ahead this week for Wall Street. Marketwatch states that the market will fall due to concern over poor earnings, oil heading to 100 dollars per barrel and more turmoil in the banking and broking industries. The article states that Citigroup will be at the centre of the turmoil on Monday after an emergency weekend board meeting reportedly ousted Citigroup CEO Charles Prince. The WSJ reported after the market closed on Friday that besides asking for Prince's resignation at the weekend emergency meeting, *Citigroup may report further losses on Monday, reflecting continued declines in the value of some mortgage-linked securities since the third quarter ended Sept. 30,* people familiar with the matter said.
> The article also notes that "The SEC is reviewing how Citigroup accounted for certain off-balance-sheet transactions that are at the heart of a banking- industry rescue plan, according to people familiar with the matter. The review is looking at whether Citigroup appropriately accounted for 80 BLN USD in structured investment vehicles, or SIVs, these people said. SIVs are off- balance-sheet entities that have invested heavily in mortgage-backed securities. A plan pushed by Citigroup and other banks would set up a new "superconduit" to buy assets from SIVs."
> Citigroup shares flew higher in after-hours trading and made back more than it lost when the WSJ originally reported that Prince was likely to resign at the emergency board meeting on Sunday. But that was before this second WSJ report.
> *The worsening state of quarterly results from Corporate America may pull stocks lower as well, with a 1.6% decline in earnings, down from a 1% decline last week,*


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## Kauri (5 November 2007)

Just breaking now via WSJ...
 Cheers
.........Kauri



> Citigroup to Take 8 to 11 BLN USD In Additional Writedowns- WSJ


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## sassa (5 November 2007)

Kauri said:


> Just breaking now via WSJ...
> Cheers
> .........Kauri




So the truth is finally coming out or appears to be.Citigroup's Prince made misleading statements at 3rd.Q reporting by saying that the 4th.Q would be back to .....There are plenty of reports on financial sites today about the misleading of the markets.Here is one link.
http://money.cnn.com/2007/11/03/news/newsmakers/Citi_Prince.fortune/index.htm
No wonder our market is falling again.What other institutions have to report further bad news that wasn't forecast in their 3rd.Q results?


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## Kauri (6 November 2007)

*Rumours* that U.K's Alliance & Leicester may be in a bit of strife...  
 Cheers
........Kauri


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## ithatheekret (6 November 2007)

The homefront has a few obstacles to encounter yet .

Credit growth here at home is nearing 16% , this surely has the Reserve Bank well behind the inflation curve , with ore prices already in a frenzy , the result I see is 25 basis point rise now and another to follow , or they could bite the bullet and go the whole hog and jump straight into a 50 basis point hike . That's too scary a contemplation , so I'm deferring to fear and hoping for a muted 25 point rise , in the feint hope that the board decides not to fill emergency wards with heart attack victims . In the meantime I expect the market to whipsaw until the shudders have been dealt with enough to restore some form of confidence , within the market sectors affected by interest rate changes .


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## rub92me (7 November 2007)

sassa said:


> So the truth is finally coming out or appears to be.Citigroup's Prince made misleading statements at 3rd.Q reporting by saying that the 4th.Q would be back to .....There are plenty of reports on financial sites today about the misleading of the markets.Here is one link.
> http://money.cnn.com/2007/11/03/news/newsmakers/Citi_Prince.fortune/index.htm
> No wonder our market is falling again.What other institutions have to report further bad news that wasn't forecast in their 3rd.Q results?



They'll hide it as long as they can get away with it. Looks like time is running out a bit though. Markets are still nervous. If we get 2 or more big downgrades/write down announcements close together a bit of panic may set in again. I'll be ironing my shorts, ready to get them on when needed.


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## Kauri (7 November 2007)

Not really anything to do with US banks but has ramifications none the less..?
 Cheers
..........Kauri

November 07: 


> Comments made by a top Chinese adviser saying that China should diversify more
> of their 1.4 TLN USD reserves into the Euro sparked a huge jump in the EUR/USD
> from 1.4565 to 1.4665 in very quick time. The comments have weighed on the US
> dollar across the board and helped push gold ever higher.


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## Kauri (7 November 2007)

Kauri said:


> Not really anything to do with US banks but has ramifications none the less..?
> Cheers
> ..........Kauri
> 
> November 07:




  I see...  
Cheers
.........Kauri



> November
> 07: The EUR/USD hit a fresh all-time high at 1.4665 and quickly retreated back
> to 1.4620 in a very whippy fashion after Chinese official Chieng said his
> comments were misinterpreted and that he didn"t mean that more Euro should be
> ...


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## bean (7 November 2007)

A video on subprime and investments banks
http://uk.youtube.com/watch?v=SJ_qK4g6ntM


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## Kimosabi (7 November 2007)

Jim Rogers Interview on Bloomberg 2nd November 2007

Talks about the weak dollar etc.

Part 1 - http://www.liveleak.com/view?i=e68_1194351704

Part 2 - http://www.liveleak.com/view?i=a9e_1194352374

I love the last part when she asks Jim what he want the Fed to do going forward.

He says "If he was Ben Bernanke he would abolish the Fed and Resign. That would be the best thing for the country."

According to Mish Shedlock's analysis, Citigroup is effectively insolvent.

http://globaleconomicanalysis.blogspot.com/2007/11/citigroup-fighting-for-its-financial.html


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## acouch (14 November 2007)

of some interest..


http://www.contraryinvestorscafe.com/guest_article.php?id=125&aid=427

ac


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## glenn_r (14 November 2007)

This may be of interest to Etrade clients...

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=ETFC:US&sid=a.6FztQryIRo


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## bvbfan (14 November 2007)

ETrade USA and ETrade Australia are different companies.

ETrade Australia is now owned by ANZ


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## Kauri (16 November 2007)

It seems that liquidity is still needed... please excuse the "cut and paste".  



> Nov. 15. USD/JPY and JPY crosses have bounced sharply off their lows as stocks pared losses but the DJIA is still down 111 pts and this is capping any bounce with USD/JPY at 110.32 currently. Traders are paying more attention to the cash injections made by central banks today with the BoC making a second add this afternoon totaling $C1.57 bln into the financial system. Similarly, the Fed injected over $47 bln today and the largest since September 2001. Also, the Bank of England data showed that Northern Rock may have increased borrowings from the bank by GBP2 bln to over GBP25 bln in the week to Sept 14th.  This is fuelling more risk aversion and the rumors of a spike in Libor rates tomorrow.
> Also seen weighing on sentiment are the comments from Fed"s Hoenig which showed much more concern over the US economy.


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## dhukka (16 November 2007)

Every week we hear the same crap from the media. This is just poor journalistic reporting. There were *NO* new injections of money pumped into the system, what the *$47* billion injected by the Fed represents are rollovers of repos of different durations. Repeat there is *no* new liquidity being added to the system. John Hussman of Hussman Funds explains it best. Below relates last week's so-called massive injection of liquidity. 



> *Pump it up*
> 
> Last week, the Associated Press reported: “The Federal Reserve pumped $41 billion into the U.S. financial system Thursday, the largest cash infusion since September 2001, to help companies get through a credit crunch… it was the largest single day of operations since $50.35 billion was pumped into the system on Sept. 19, 2001, following the terror strikes on New York and Washington. Since August, the Fed has been pumping cash into the financial system to help ease strains from the credit crunch.”
> 
> ...


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## Sean K (16 November 2007)

dhukka said:


> Every week we hear the same crap from the media. This is just poor journalistic reporting. There were *NO* new injections of money pumped into the system, what the *$47* billion injected by the Fed represents are rollovers of repos of different durations. Repeat there is *no* new liquidity being added to the system. John Hussman of Hussman Funds explains it best. Below relates last week's so-called massive injection of liquidity.



Dhukka, I defer to your undertanding of 'new money' but I have the impression, from a 'lay perspective', that there are institutions around the place with vaults full of cash, who are pumping money into the system. It is not 'new' money, but just other people's savings. So, it's only reducing the total savings that have been accumulated. 

The developed world has a LOT of money in the bank to be distributed...

Maybe I'm way off track...


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## dhukka (16 November 2007)

kennas said:


> Dhukka, I defer to your undertanding of 'new money' but I have the impression, from a 'lay perspective', that there are institutions around the place with vaults full of cash, who are pumping money into the system. It is not 'new' money, but just other people's savings. So, it's only reducing the total savings that have been accumulated.
> 
> The developed world has a LOT of money in the bank to be distributed...
> 
> Maybe I'm way off track...




Kennas,

You are right that banks (other than the Fed) have the ability to create new money. However it is not in the form of cash, they create more debt. My point above relates to the Fed and the weekly rollovers of repurchase agreements which are falsely reported as injections of new liquidity. Pure nonsense.


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## ithatheekret (16 November 2007)

........ and .......... they also go to the market and borrow it in the way of bonds , ergo , Citi group , taking up their latest spread at historical levels in relation to yield . The cost of borrowing has goneup , but now the same borrowers will have to pay a higher yield ........ except / probably for Australian banks  , who will more than likely , just pass on the costs to established borrowers . 
Money has just got expensive , like everything else , afterall .... it is an asset . 

Isn't it ..... ? 

I always thought cash is King , and we know royalty is expensive .


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## Sean K (16 November 2007)

dhukka said:


> Kennas,
> 
> You are right that banks (other than the Fed) have the ability to create new money. However it is not in the form of cash, they create more debt.



This is the little bit in the global picture I'm struggling with, because I know (perceive) that the generation of the years 50 - 80's have  SAVED. It's not 'new' money. They OWN their houses and now have generous pensions coming in. Maybe this is Australian biased, but this equity position has massive implications for the rest of us left behind who will inherit it. Australian house prices are still going up.

Are we being too US centric with the economic position of Aus?

Having said the above, I am a Bear about the human being, which you might have picked up through my general posting....

So, I wait for our implosion, but not right now.


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## noirua (16 November 2007)

kennas said:


> This is the little bit in the global picture I'm struggling with, because I know (perceive) that the generation of the years 50 - 80's have  SAVED. It's not 'new' money. They OWN their houses and now have generous pensions coming in. Maybe this is Australian biased, but this equity position has massive implications for the rest of us left behind who will inherit it. Australian house prices are still going up.
> 
> Are we being too US centric with the economic position of Aus?
> 
> ...




Australia is set to grow and grow for the next two hundred years at least. In two hundred years time, I forecast, that Alice Springs will be a City with a population of 500,000 and major towns and Cities will be built all the way from Adelaide to Darwin. 
Not feasible yet, but as the water problem is solved by mega deep wells, desalination plants and adapting power from sunlight, all this is achievable.

"Implosion", no chance, until the year 21,000 for Australia. Expected eventual population 250 million.


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## dhukka (16 November 2007)

kennas said:


> This is the little bit in the global picture I'm struggling with, because I know (perceive) that the generation of the years 50 - 80's have  SAVED. It's not 'new' money. They OWN their houses and now have generous pensions coming in. Maybe this is Australian biased, but this equity position has massive implications for the rest of us left behind who will inherit it. Australian house prices are still going up.
> 
> Are we being too US centric with the economic position of Aus?
> 
> ...




I saw a discussion this week about the position of baby boomers in the US. A large proportion of them do not have sufficient assets for retirrment. This is not a new revelation but one that has been tossed around for while. It is my perception that many Australian boomers are in the same boat though not as  bad as the US. 

IMHO the inheritance of wealth is great, however I would say it is more important that that wealth be put to productive use. Look at what happened to Spain. 

You also have to be careful what you call equity. The US had the biggest real estate boom in history yet based on the Fed's flow of funds report, the percent of homeowner equity was at a record low of 51.7% at the end of Q2 2007.   

I definitely have to reign in my own thinking in from being too US centric. The Australian economy looks very sound at the moment. However I still think we have been infected by the US mentality of not thinking twice about running up large sums of debt. The US is now in the process of realizing that is not sustainable.


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## Sean K (16 November 2007)

dhukka said:


> I definitely have to reign in my own thinking in from being too US centric. ..... However I still think we have been infected by the US mentality of not thinking twice about running up large sums of debt..



dhukka, I don't think that you are not right in thinking that we have not being too infected by the US. We definately  have been, I just question the impact. 

Capitalism has not proven to fail yet. It will go through corrections, as should occur, but modern capitatist societies have yet to be proven failures in the long term....


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## noirua (16 November 2007)

ithatheekret said:


> ........ and .......... they also go to the market and borrow it in the way of bonds , ergo , Citi group , taking up their latest spread at historical levels in relation to yield . The cost of borrowing has goneup , but now the same borrowers will have to pay a higher yield ........ except / probably for Australian banks  , who will more than likely , just pass on the costs to established borrowers .
> Money has just got expensive , like everything else , afterall .... it is an asset .
> 
> Isn't it ..... ?
> ...




Yes indeed, Infact the problems of the Bank of England show it's not worth bailing out any Bank, how ever large or small. They've now hit real problems over Northern Rock, a Banking minnow, having now lent it the equivalent of A$62 billion including nearly A$7 billion in unpaid interest. 

Two consortiums that looked like making a bid are now trying to arrange a deal providing the interest is waived. Other Banks and Institutions are waiting on the sidelines like vultures to pick up the pieces. 

Hopefully this will not happen to an Aussie Bank. If it does, my view is, let it go under.


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## dhukka (16 November 2007)

kennas said:


> dhukka, I don't think that you are not right in thinking that we have not being too infected by the US. We definately  have been, I just question the impact.
> 
> Capitalism has not proven to fail yet. It will go through corrections, as should occur, but modern capitatist societies have yet to be proven failures in the long term....




Firstly Capitalism is an ideology that doesn't really exist today in any pure sense (if it ever did) just as Communism as Marx saw it never really existed. The problem is there so much economic activity that goes on today that is claimed as capitalistic that has nothing to do with capitalism. 

Look at currency trading for example, the trade in currencies actually dwarfs real trade. However currency trading is little more than unproductive speculation. You hear cheerleaders of free market capitalism heralding this as the result of financial innovation in a capitalistic society. It has absolutely nothing to do with capitalism. Money is meant to grease the wheels of trade, however now money is treated as a trade good in itself.


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## Uncle Festivus (16 November 2007)

The offspring of creative accounting and derivatives - carnage not finished yet, contagion continues? Australian money shufflers are feeling the pinch of more expensive funds too, but who will make the first move higher?



> Shares of Citigroup Inc, the No. 1 US bank, dropped more than 4 percent, while those of Bank of America Corp, the No. 2 US bank, declined more than 3 percent.
> "There's just too much fear in the financials," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland, Ohio.
> "The fear is back again that the write-downs are kind of a mystery and no one really knows what the bottom is or what the outcome is going to be."


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## Kauri (16 November 2007)

This is only a *RUMOUR*.... but a goodie none the less... maybe someone else out there knows something???? or not???
Cheers
.........Kauri



> November 16. Nothing has been confirmed but vague rumors of massive withdrawals from a fund run by Carlyle looks to be behind the push lower in the Nikkei into the morning close and the drops in USD/JPY, EUR/JPY and other JPY crosses. The talk is that the fund needs some $1 bln to stay afloat


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## numbercruncher (16 November 2007)

> Wells Fargo (nyse: WFC - news - people ) isn't expecting the housing market to make a comeback anytime soon.
> 
> "We have not seen a nationwide decline in housing like this since the Great Depression," said Wells Fargo Chief Executive John Stumpf.
> 
> ...




http://www.forbes.com/home/markets/2007/11/15/wells-fargo-closer-markets-equity-cx_er_ml_1115markets37.html


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## dhukka (16 November 2007)

ithatheekret said:


> ........ and .......... they also go to the market and borrow it in the way of bonds , ergo , Citi group , taking up their latest spread at historical levels in relation to yield . The cost of borrowing has goneup , but now the same borrowers will have to pay a higher yield ........ except / probably for Australian banks  , who will more than likely , just pass on the costs to established borrowers .
> Money has just got expensive , like everything else , afterall .... it is an asset .
> 
> Isn't it ..... ?
> ...




Citi and Merrill are now paying more than the average company:



> *Citigroup, Merrill Push Financial Borrowing Costs to Records *
> 
> For the first time, the world's biggest financial institutions are paying more to borrow in the corporate bond market than the average company.
> 
> ...


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## Kauri (19 November 2007)

By pressing my trembling ear firmly to the ground I have picked up rumblings that sound like Citigroup are looking at writing off another 11Bn odd in their 4th Qtr... of course they are only rumblings at the moment...
Cheers
..........Kauri


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## dhukka (20 November 2007)

Kauri said:


> By pressing my trembling ear firmly to the ground I have picked up rumblings that sound like Citigroup are looking at writing off another 11Bn odd in their 4th Qtr... of course they are only rumblings at the moment...
> Cheers
> ..........Kauri




A report out today from Goldman Sachs downgraded Citi to a sell and estimated up to *$15 billion* in write-downs from collateralized debt obligations over the next two quarters.

source:


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## ithatheekret (20 November 2007)

noirua said:


> Hopefully this will not happen to an Aussie Bank. If it does, my view is, let it go under.






To bl**dy right ! That's called a free and fair market . 

Banks never rescue defaulters , so why should we help banks that need to default ?

If they can't meet their repayments , fold them . If the boards have stuffed up , fine them . If they have not reported correctly to the market .........

LOCK THEM UP !


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## numbercruncher (20 November 2007)

ithatheekret said:


> To bl**dy right ! That's called a free and fair market .
> 
> Banks never rescue defaulters , so why should we help banks that need to default ?
> 
> ...





I agree, but Individuals should have deposits guaranteed and first right of withdrawl imho.


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## ithatheekret (20 November 2007)

numbercruncher said:


> I agree, but Individuals should have deposits guaranteed and first right of withdrawl imho.




Now there's an interesting concept !

Unfortunately ........ we would have to get that past the bankers lobbyists .

The side news lately on forex markets is the carry trade linked to sophisticated Japanese housewives and their forex accounts .

Theses housewives have had to adapt to government policies that will not see bank deposits guaranteed , in fact they have been withdrawn .

But I have always suspected that the policy was enacted to force cash stashers into hoarding government bonds as the only sure bet .

I would suspect that this trend will inevitably spread across the globe eventually , seeing only those with an appetite for risk and rewards partcipating in any market , not the mix we currently have .

The risk reward crowd may have peaked already , it certainly grew quickly and government policies steered well clear of abating it . 

I can remember one comment by a Fed representative in regards to throwing cash out from a helicopter if he had to . 

These type of comments sparked a lending and investing phase never seen before on the planet and it was only a few years prior that a certain bubble had taken care of the first wave of pioneers of this investment method . 

And they wonder why people run to gold for safety ...........

In fact they are almost burnt at the stake as heretics , a big taboo as seen by many of the spinners  . Comments like it has no use etc. , whilst the globe is booming and rattling at the same time , banks funds no longer guaranteed , fraudsters acquitted or given get out of gaol free cards ....... Presidential pardons . 

if it wasn't so bad , it would have to be a whopping joke .

Come to think of it , after analysis , I'm on the side of the Japanese housewives . You go girls !


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