Bailout of Insurers

[Bubblesitter]

This financial crisis seems to be getting increasingly worse.

Cramer is now advocating a government bailout of Mortgage insurers!

http://www.cnbc.com/id/22728371

If you don’t think there is still significant downside risk in the market and in financials in particular, you are living in never-never land.

I’ve been following the recent problems with insurers MBIA, AMBAC. Ambac just had a ratings downgrade in past couple days. It is very likely MBIA (I give it 90% chance) will also see ratings downgrade. These are effectively death sentences for these insurers

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3Xei2RV5MCY

Any bulls out there? I’m nearly all in gold, US treasuries, foreign currency and CDs at FDIC institutions. My small holdings in diversified oil and oil services companies have taken a beating in last few days with all the recession talk. I’m still holding oil, thinking global markets will still drive demand in foreseeable future. I guess the $64K question is whether world also catches the cold when the US catches the flu (recession).

Bubblesitter

[Allan from Fallbrook]

Bubblesitter: I would also pay close attention to the reinsurance community. The debacle at Channel Re is probably just the opening shot there.

As to the world catching the same cold as the US: How could it not? For all the talk of “decoupling”, the world remains not only closely tied to the US, but reacts to the same positives and negatives that we do.

[Allan from Fallbrook]

Bubblesitter: I would also pay close attention to the reinsurance community. The debacle at Channel Re is probably just the opening shot there.

As to the world catching the same cold as the US: How could it not? For all the talk of “decoupling”, the world remains not only closely tied to the US, but reacts to the same positives and negatives that we do.

[Allan from Fallbrook]

Bubblesitter: I would also pay close attention to the reinsurance community. The debacle at Channel Re is probably just the opening shot there.

As to the world catching the same cold as the US: How could it not? For all the talk of “decoupling”, the world remains not only closely tied to the US, but reacts to the same positives and negatives that we do.

[Allan from Fallbrook]

Bubblesitter: I would also pay close attention to the reinsurance community. The debacle at Channel Re is probably just the opening shot there.

As to the world catching the same cold as the US: How could it not? For all the talk of “decoupling”, the world remains not only closely tied to the US, but reacts to the same positives and negatives that we do.

[Allan from Fallbrook]

Bubblesitter: I would also pay close attention to the reinsurance community. The debacle at Channel Re is probably just the opening shot there.

As to the world catching the same cold as the US: How could it not? For all the talk of “decoupling”, the world remains not only closely tied to the US, but reacts to the same positives and negatives that we do.

[Bubblesitter]

Allan, You are probably right that the ROW will also going into recession if the US has a downturn. I do think there is probably smaller correlation than the past. I’m still holding off foreign equities thinking that there still is a good chance they will drop too. Shanghai exchange also has very, very high PE ratios.

Major foreign markets also experienced downturn during the last big US bear market in 2002 timeframe. I might try plotting historical FTSE, CAC, Asia exchanges vs DOW/S&P500 in 2001-2003. So much for diversification with broad foreign equity index funds. There are some good global funds that focus on more recession-proof companies, I’m digging around now for some.

Bubblesitter

[Bubblesitter]

Allan, You are probably right that the ROW will also going into recession if the US has a downturn. I do think there is probably smaller correlation than the past. I’m still holding off foreign equities thinking that there still is a good chance they will drop too. Shanghai exchange also has very, very high PE ratios.

Major foreign markets also experienced downturn during the last big US bear market in 2002 timeframe. I might try plotting historical FTSE, CAC, Asia exchanges vs DOW/S&P500 in 2001-2003. So much for diversification with broad foreign equity index funds. There are some good global funds that focus on more recession-proof companies, I’m digging around now for some.

Bubblesitter

[Bubblesitter]

Allan, You are probably right that the ROW will also going into recession if the US has a downturn. I do think there is probably smaller correlation than the past. I’m still holding off foreign equities thinking that there still is a good chance they will drop too. Shanghai exchange also has very, very high PE ratios.

Major foreign markets also experienced downturn during the last big US bear market in 2002 timeframe. I might try plotting historical FTSE, CAC, Asia exchanges vs DOW/S&P500 in 2001-2003. So much for diversification with broad foreign equity index funds. There are some good global funds that focus on more recession-proof companies, I’m digging around now for some.

Bubblesitter

[Bubblesitter]

Allan, You are probably right that the ROW will also going into recession if the US has a downturn. I do think there is probably smaller correlation than the past. I’m still holding off foreign equities thinking that there still is a good chance they will drop too. Shanghai exchange also has very, very high PE ratios.

Major foreign markets also experienced downturn during the last big US bear market in 2002 timeframe. I might try plotting historical FTSE, CAC, Asia exchanges vs DOW/S&P500 in 2001-2003. So much for diversification with broad foreign equity index funds. There are some good global funds that focus on more recession-proof companies, I’m digging around now for some.

Bubblesitter

[Bubblesitter]

Allan, You are probably right that the ROW will also going into recession if the US has a downturn. I do think there is probably smaller correlation than the past. I’m still holding off foreign equities thinking that there still is a good chance they will drop too. Shanghai exchange also has very, very high PE ratios.

Major foreign markets also experienced downturn during the last big US bear market in 2002 timeframe. I might try plotting historical FTSE, CAC, Asia exchanges vs DOW/S&P500 in 2001-2003. So much for diversification with broad foreign equity index funds. There are some good global funds that focus on more recession-proof companies, I’m digging around now for some.

Bubblesitter

[Allan from Fallbrook]

Bubblesitter: Latest issue of Economist had an article on how Brazil would fare better now than in the past, if a worldwide recession hits. The article also mentioned, in passing, that other countries are less at risk than in previous downturns as well.

I think those countries that have a vested interest in both the US and the US consumer (think China and India) are likely to take the biggest blow. Look how hard the US toy recall hit quite a few Chinese manufacturers in that market.

On the insurance and reinsurance side, you are looking at companies like MBIA and Ambac that are virtually dead in the water if they don’t arrange a seriously large cash infusion and fast. Channel Re has admitted that their holdings are essentially valueless, and I would bet they are only the first to get caught out in this respect. If the reinsurance market starts taking on heavy water, it will get very ugly quickly in the standard and premium insurance markets.

[Allan from Fallbrook]

Bubblesitter: Latest issue of Economist had an article on how Brazil would fare better now than in the past, if a worldwide recession hits. The article also mentioned, in passing, that other countries are less at risk than in previous downturns as well.

I think those countries that have a vested interest in both the US and the US consumer (think China and India) are likely to take the biggest blow. Look how hard the US toy recall hit quite a few Chinese manufacturers in that market.

On the insurance and reinsurance side, you are looking at companies like MBIA and Ambac that are virtually dead in the water if they don’t arrange a seriously large cash infusion and fast. Channel Re has admitted that their holdings are essentially valueless, and I would bet they are only the first to get caught out in this respect. If the reinsurance market starts taking on heavy water, it will get very ugly quickly in the standard and premium insurance markets.

[Allan from Fallbrook]

Bubblesitter: Latest issue of Economist had an article on how Brazil would fare better now than in the past, if a worldwide recession hits. The article also mentioned, in passing, that other countries are less at risk than in previous downturns as well.

I think those countries that have a vested interest in both the US and the US consumer (think China and India) are likely to take the biggest blow. Look how hard the US toy recall hit quite a few Chinese manufacturers in that market.

On the insurance and reinsurance side, you are looking at companies like MBIA and Ambac that are virtually dead in the water if they don’t arrange a seriously large cash infusion and fast. Channel Re has admitted that their holdings are essentially valueless, and I would bet they are only the first to get caught out in this respect. If the reinsurance market starts taking on heavy water, it will get very ugly quickly in the standard and premium insurance markets.

[Allan from Fallbrook]

Bubblesitter: Latest issue of Economist had an article on how Brazil would fare better now than in the past, if a worldwide recession hits. The article also mentioned, in passing, that other countries are less at risk than in previous downturns as well.

I think those countries that have a vested interest in both the US and the US consumer (think China and India) are likely to take the biggest blow. Look how hard the US toy recall hit quite a few Chinese manufacturers in that market.

On the insurance and reinsurance side, you are looking at companies like MBIA and Ambac that are virtually dead in the water if they don’t arrange a seriously large cash infusion and fast. Channel Re has admitted that their holdings are essentially valueless, and I would bet they are only the first to get caught out in this respect. If the reinsurance market starts taking on heavy water, it will get very ugly quickly in the standard and premium insurance markets.

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