InvestingFrom my perch, this is proof positive that the housing/subprime problem has morphed into a credit disaster unprecedented in the annals of modern financial history.
Kass: Next Shoe to Drop in Subprime Mess
By Doug Kass
RealMoney Silver Contributor
11/5/2007 12:00 PM EST
The following blog posts originally appeared on RealMoney Silver on Nov. 5.
7:51 a.m. EST
Pain Cannot Be Contained
The writedowns at Citigroup and Merrill Lynch represent the largest charges in the history of Wall Street and the commercial banking industry.
It is also proof that the housing/subprime contagion can no longer be "ring-fenced," and that the U.S. non-export economy has been the "greatest story ever sold."
With the added problem of a retrenchment in overall credit associated with the fallout and after years of unprecedented credit/debt generation, the economic pain will be broad and not contained to the domestic economy.
Further compounding the multiplying credit issues is the precarious state of the financial guaranty industry, which includes monoline insurers such as MBIA (MBI) , Ambac Financial Group (ABK) , PMI Group (PMI) , MGIC Investment (MTG) and Radian Group (RDN) .
Should that industry fail or become even more materially capital-impaired -- a possibility I have suggested throughout all of 2007 -- the credit problems will cascade and produce even more massive writedowns in the first half of 2008.