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Citigroup Business Update Call - Seeking Alpha: Gary Crittenden: The way I would think about that is these were super senior securities, right? So they were in theory better than investment grade securities. If you track that index, at least the numbers that I have, just as an example, the AAA ABX, just to pick one, the O-62, had very, very little deterioration during the course of the first nine months of this year. I think in total it was off about 4%, so it dropped about 05% a month. If you go into the month of October, after the first seven or eight days -- I don't know exactly when it was -- you see a very significant crack and it drops from 96 down to about 88 and losses 8% of its value in a very short period of time. I am talking about the As, the BBBs, had been down during the course of the year; the big movement there was a reduction by about half during the course of October so they have had movements but again you had significant movements in those. But it's really at the high investment grade end where the values had held up very well during the course of the year but obviously you see that movement now. Now, when we had thought about taking these marks, we have obviously if you look at what the ABX would imply in terms of real estate price reduction, it starts to imply very, very high numbers of price reduction in real estate. I guess our view is that it's unlikely that those very high levels of price reduction in real estate will take place. So what's actually happening is implicitly the market is saying that the cash flows associated with those securities have become more risky and so as we have thought about valuing those cash flows, we have put different discount rates on those cash flows and that's reflecting the range that you see in the estimate here. We'll see, obviously, how that actually plays out over time. With that higher discount rate, looking at those cash flows in essentially or actually exactly the same way we did in the third quarter, you come up with a much larger reduction in revenue than we saw during the course of the third quarter. The actual real realized cash flow will work out over time. I mean it depends on how the underlying mortgages actually get paid, how that cash actually flows. As you know, as a result of the rating agency downgrades the cash flow gets redirected from the subordinate tranches to the more senior tranches in the structure. We'll see how that all get realized over time and the valuation I suspect of the super senior tranches will go up and down and we may liquidate some of these if market prices come back. We wanted to give you a sense of what we thought the impact would be during the course of the fourth quarter, but it really is very dependent on how the market evolves here now over the next eight weeks or so... When Crittendon says that "if you look at what the ABX would imply in terms of real estate price reduction, it starts to imply very, very high numbers... will take place" the sentence should not come to an end. There should be a comma, and after the comma the sentence should continue "therefore Citigroup is sponsoring and investing in a new hedge fund to take advantage of the undervaluation of the ABX and similar market opportunities, and we are now raising capital." Shouldn't the very next sentence be: * We are moving to profit from this mispricing? Now it is true that Citigroup cannot be patient Graham-and-Dodd capital: it is leverage 15 to 1, for Jeebus's sake. But it can sponsor and contribute talent to vehicles that are patient Graham-and-Dodd capital, can't it?
seems like an important point: But there is a difference between doing everything in our power to keep America safe and a reckless, belligerent policy that actually makes us less safe. The preventive war doctrine was a stunning departure from the policy that had kept America safe during both world wars and during the Cold War. It is wrong on the merits, wrong on the morals, and wrong for America. I've found it infuriating how little the leading Democrats seem inclined to engage with the key strategic elements of Bush's response to 9/11 and this is the biggest nail that needs hammering down. Bush replaced decades of non-proliferation policy, to say nothing of centuries of good sense and basic morality, to decide that unilateral preventive military action should be at the center of our approach to dealing with the world. The United States has long got along fine without waging such wars, and our effort to wage one has been a disaster. And yet somehow Bush has managed to recenter the American political debate so that an idea that would have seemed shocking ten years ago -- waging aggressive unilateral warfare against countries that haven't attacked us or anyone else -- is now meekly accepted by all as a vital part of the toolkit.
the teenage effect becomes small (on the order of 10% of the baseline risk). See: Arlene Geronimus (1987), "On teenage childbearing and neonatal mortality in the United States," Population & Development Review 13:323-334....
he factor stressed by Mankiw turns out to be less important than the ones he claims are not critical when they go head to head in a regression. You are, of course, correct that difference across developed countries in teenage fertility are not explained by differences in sexual activity (which are small: median age of first intercourse is around 16 everywhere) but rather in contraceptive use. Of course you are much more expert than Mankiw on the first topic you discuss (sorry I really really couldn't resist). More generally, Mankiw seems to be blaming the uninsured for their lack of insurance. Odd that he is opposed to mandating insurance given that view.
If the principal market failure in health care is indeed (as Mankiw seems to say) that people can freeload off of others and still get treated when they get sick, then mandated insurance purchase is the efficiency-maximizing road to take.
Chairman and Chief Executive Charles Prince, beset by the company's billions of dollars in losses from investing in bad debt, resigned Sunday and is being replaced as chairman by former Treasury Secretary Robert E Rubin. The nation's largest banking company announced Prince's widely expected departure in a statement following an emergency meeting of its board. Citi also said Sir Win Bischoff, chairman of Citi Europe and a Member of the Citi management and operating committees, would serve as interim CEO. A remarkably large number considering that nothing terrible has happened to any of the underlying--nothing to interest rates, nothing to GDP, nothing to employment, and only a little so far to Riverside County, CA housing prices. But the total is still less than ten percent of Citi's book capital.
Robert's Stochastic thoughts: Sometimes You Just Can't Overcome the Left Wing Balance of the Facts: Robert Pear has an interesting article in the New York Times on SCHIP. Pear covers the debate between Republicans and Republicans. As a result, it is unsurprising that many of the people he quotes assign some of the blame to Democrats. Pear manages the difficult feat of claiming Rockefeller is even more out of it than he is, presenting Rockefeller's claim that he was confident that Bush wouldn't veto the bill as a sincere prediction and not standard politics. The substance of the article is that the Bush administration refused to compromise and lied: Representative Michael R Turner, an Ohio Republican who voted for the bill, said, "The administration did not come forward with any real offer of a solution or a compromise that would break the logjam." and Explaining why he vetoed it, Mr Bush said "we weren't dialed in" to the negotiations. But after checking their calendars, lawmakers said they and their aides had had more than 35 meetings and telephone conversations on the issue with Mr Hubbard, Mr Hennessey and Ms Goon from January through September. The second is, by the standards of the Times, like screaming "pants on fire". I think he introduced a new kind of anonymity -- the anonymous target: "I was told last January or February by Democrats that their game plan was to send the ...
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