Re: DOW Up 416.66 : Financial Groups' Correction?

<stuff_stuff@[EMAIL PROTECTED]
> wrote in message 
news:o56et3p3crjhoqf48sp8bk48srmhkp945s@[EMAIL PROTECTED]
> On Tue, 11 Mar 2008 18:38:29 -0500, "John Galt"
> <whoisjohngalt@[EMAIL PROTECTED]
> wrote:
>
>>> Look at the column "collateral at risk" defined as percentage of a
>>> bonds total collateral that is 90 days delinquent, foreclosed or
>>> repossessed.
>>>
>>> Read this guy on the bonds and fed move. He's the best I think.
>>> http://bigpicture.typepad.com/
>>
>>I get this. From 1983 to 1999, The default rate of any A or better bond 
>>was
>>.1%. The worst rated junk, OTOH, defaulted at 12.2%.
>>
>>Everybody's guessing as to what the history books will show regarding
this
>>move. If those AAA's are really only A or better, then .1% will default,

>>and
>>the taxpayer gets hit with 200M, which is a rounding error for the
federal
>>goverment. If they're ALL BBB (and common sense tells you that what's in
>>there will be a range of stuff between AAA and BBB) the taxpayers get
hit
>>for 22B, which is a 1-year 1% increase in the upper tax quintile.
>>
>>There's no economic immolation here.
>
>
> Look at that collateral at risk figure. You clearly didn't.

Let's work though it:

1) There are six investment grade bonds that aren't going to default.
2) The stuff in the middle band, according to Moody's, will default at 
various rates topping at 2.5%.
3) The crap at the bottom band will crap out at various rates topping at 
12.5%.

The risk to the taxpayers through the window is 200B max.

Where's the immolation?


JG