Quote of the Day: Bill Gross on Monolines
Bill Gross, in the FT, asks some rather intriguing questions late last week:
"How could Ambac (ABK), through the magic of its triple-A rating, with equity capital of less than $5bn, insure the debt of the state of California, the world’s sixth-largest economy? How could an investor in California’s municipal bonds be comforted by a company that during a potential liquidity crisis might find the capital markets closed to it, versus the nation’s largest state with its obvious ongoing taxing authority?"
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The alchemy identified by Gross: Wrapping high risk paper in a high risk derivative / insurance contract does not eliminate any of the risk, nor does it make high risk paper investment grade.
This is slowly being realized for what it actually is: Massive fraud on a widespread structural basis.
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Source:
Rescuing monolines is not a long-term solution
William Gross
Published: February 7 2008 18:14
http://www.ft.com/cms/s/0/bb7e80c8-d58c-11dc-8b56-0000779fd2ac.html
Monday, February 11, 2008 | 12:30 PM | Permalink
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Comments
Pimco talking it's book.
He should just come out and say what he WANTS to say but can't or won't.
Ciao
MS
Posted by: michael schumacher | Feb 11, 2008 12:36:49 PM
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