THE DOT - if this turns orange or red be alert

Tuesday, April 7, 2009

4 trillion toxix assets will by far not be the end

The IMF is moving closer to reality but I rather put the low end of the benchmark at 10 trillion.
Its quite easy to calculate as of the 10 tril CDO market 4 tril. alone is Subprime and Alt A and we can expect them to default altogether. Furthermore we have commercial real estate home loans credit cards car loans and plenty of up to 700 tril in derivatives. + tril can not do the trick the critical mass is much higher and now market has hit a low extreme neither stocks nor house prices. House prices need to drop another 20% to reach the average income ratio for house prices and usually you have an extreme exaggeration so look rather for 30% just to make one example - that's why I take 4 tril in CDO losses for granted. It adds up to double digit numbers easily and no government in the world has that kind of money. we can print it as we are doing already but that will ultimately trigger hyperinflation at some point.
The consequences will be unbelievably severe as big countries will default as well but that's not the ugly part as the ruling elite will send commoners into war to distract them before they get lynched. As Armstrong said correctly that's the common strategy since watching soccer or football games can not absorb the aggressions people will have accumulated and need to unload.

Excerpt

Banks' Toxic Debts Could Hit $4 Trillion: Report

Toxic debts racked up by banks and insurers could spiral to $4 trillion, new forecasts from the International Monetary Fund are set to suggest, British daily The Times reported on its website without citing sources.

The IMF said in January that it expected the deterioration in U.S.-originated assets to reach $2.2 trillion by the end of next year.

But it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21, the newspaper reported.

In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia, the Times said.

Financial Woes

Bank stocks came under pressure on Monday after Michael Mayo, a former Deutsche Bank analyst who now works for CLSA's Calyon Securities, highlighted the risks in the sector in a research note.

Mayo, who is widely respected for his timely calls in the sector, remains negative on the sector and is starting coverage at Calyon with "sell" or "underperform" ratings on 11 traditional U.S. bank stocks. His earnings forecasts for the sector also are below the average estimates of other Wall Street analysts.

"While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset class," Mayo says, in the research note.

"New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average," he added.

Mayo expects the recession to persist and to put further pressure on commercial real estate loans.

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