U.S. Credit Markets Collapsing
Jupiter, Fla. (PRWEB) February 20, 2008 -- Martin D. Weiss, Ph. D. takes a closer look at the U.S. credit markets and how they are rapidly declining. Dr. Weiss examines the collapsing credit markets and what that means for bond insurers.
The U.S. credit markets are collapsing with few credit sectors spared from damage, few investors escaping losses, and little hope of federal action that's quick or strong enough to make a major difference. And now, the collapse of the bond insurers' triple-A ratings has occurred. Without the triple-A rating, they cannot enhance the credit of bond issuers nor do more business. The facts:
? Financial Guarantee Insurance Co. (FGIC) just lost its triple-A rating last week.
? At the same time, Moody's warned that unless FGIC can raise the needed capital, it's ready to cut FGIC's rating again.
? Moody's has already downgraded FGIC's senior debt to junk, threatening to drop it deeper.
? Ambac's triple-A rating was zapped by all three major rating agencies in late January.
? Next, MBIA is on the chopping block, slated to lose its triple-A rating within a matter of days.
All three of the largest bond insurers are engulfed in the mess. And all three are trapped between two major business lines: Their traditional business of insuring municipal bonds against default, which is supposedly still stable, and their newer business of insuring mortgage and debt backed securities, which is in total disarray. Meanwhile, the nation's banks and other big investors, the last hope for bond insurers, have so far failed to come forward with the needed capital.
In a surprise announcement on Friday, February 15, New York Governor Eliot Spitzer threatened to intervene with massive, radical action. He said he would:
? Take over the two bond insurers which are regulated by New York State.
? Strip out all their supposedly good assets.
? Pack away those assets in newly formed separate companies, and
? Leave behind strictly the bad assets.
Meanwhile, at least five more credit market sectors are expected to collapse.
? The nation's largest mortgage insurers are being ravaged by losses. MGIC Investment Corp., swamped with claims, just posted a $1.47 billion loss. Triad Guaranty, a much smaller mortgage insurer, reported a $75 million loss.
? Municipalities, public hospitals and other institutions have been slammed by the failure of nearly 1,000 auctions for their "auction-rate" securities.
? Low-rated corporate bonds, which had fueled a wave of leveraged corporate buyouts in recent years, are being abandoned by investors. Their prices are plunging to the lowest levels in history. Property and casualty insurers, among those loaded with corporate bonds, are taking it on the chin.
? More hedge funds are getting slammed. CSO Partners, for example, has lost so much money and suffered such a massive run on its assets, its manager (Citigroup) was recently forced to shut the hedge fund's doors to further withdrawals by investors.
? Commercial real estate credit is collapsing. Regional and super-regional banks are taking big hits. Life and health insurance companies will get smacked.
"Even some sectors of the short-term money markets are affected. Treasury-only money funds are safe. But beware of market funds that put your money in commercial paper, CDs and other non-Treasury instruments," Dr. Weiss states.
To read this issue online, please visit:
http://www.moneyandmarkets.com/Issues.aspx?US-Credit-Markets-Collapsing
About MARTIN D. WEISS & MONEY AND MARKETS
Martin D. Weiss, Ph.D., founder and president of Weiss Research, Inc. and a leading advocate for investor safety, is a nationally recognized expert on domestic and international financial markets. With more than 35 years of experience, including many years in Latin America and Asia, Dr. Weiss has helped empower millions of investors to make better financial decisions through his monthly Safe Money Report and daily Money and Markets.
Dr. Weiss' keen understanding of foreign markets and the global economy has earned him a reputation for thoughtful, in-depth analysis that investors can rely upon to make informed financial decisions. Regularly called upon by the media for his independent investing guidance, he has been featured in publications nationwide, including The Wall Street Journal, The New York Times, Chicago Tribune, Investor's Business Daily, and Forbes and has also appeared on CNN and CNBC.
Throughout his career, Dr. Weiss has been an advocate for consumers and investors in the insurance, banking and brokerage industries, dedicating his time and resources providing analysis and data for Congressional testimony, constructive proposals for reforms in the securities industry and legislation for full financial disclosure as well sound accounting and fiscal policy. In November 2004, he launched the Sound Dollar Committee, a nonprofit organization dedicated to building a network of investors seeking to protect the nation's future by demanding honesty in government accounting, a balanced budget and sound economic policy.
Dr. Weiss is author of The New York Times best-seller, The Ultimate Safe Money Guide, which gave baby boomers a road map to grow their wealth safely. It was listed on the New York Times Business, Wall Street Journal, and BusinessWeek best-seller lists, as well as the Barron's Roundup for 2002.
Dr. Weiss holds a bachelor's degree from New York University, a Ph.D. from Columbia University and is fluent in eight European and Asian languages.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.
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