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Wakum Mata!
Politcally Incorrect Musings
Another set of dominoes poised to fall 
2nd-Aug-2009 11:56 am
Money
Aw crap... this can't be good.


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Billions in Lehman Claims Could Bury an Elusive Insurer
Published: Friday, 31 Jul 2009 | 12:51 PM ET
By: Zachery Kouwe
The New York Times

Next to a Chinese restaurant in Burlington, Vt., lurks a quiet guardian of Wall Street — an obscure insurance company that is supposed to protect big-money investors in the event of a catastrophic failure of a major brokerage firm.

A failure, for instance, like the one that brought down Lehman Brothers nearly 11 months ago. Now, after years in the shadows, the insurer, the Customer Asset Protection Company, could finally be put to the test, and questions are starting to swirl.

The worry is that the company, which has never paid out a claim, might be unable to cope with the Lehman bankruptcy.

If it were overwhelmed by claims, the banks and brokerage companies that own Capco, as it is known, could end up owing billions of dollars.

Capco representatives dismiss such concerns, but state insurance regulators are keeping an eye on the company. Officials at the New York State Insurance Department are concerned about the company’s ability to withstand the Lehman bankruptcy, the largest in history.

By some industry estimates reviewed by the insurance department, Capco could face nearly $11 billion in claims but has only about $150 million with which to meet them. The state is examining whether the company sold policies without the means to cover them, according to a person with direct knowledge of the inquiry who had signed confidentiality agreements. [...]


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I have been telling you it isn't over... this stock rally? Yeah... temporary. It won't last. People will want to get paid for their loss. When they don't... well. You know the answer.

And just to throw another log on the fire, we have this:

U.S. Recession Worst Since Great Depression, Revised Data Show

By Bob Willis
Bloomberg

Aug. 1 (Bloomberg) -- The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.

The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression. [...]


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I am thinking of shifting to overseas institutions and bond funds... China's economy is too closely tied to the USA's for my comfort so I am thinking Western Europe. Time to rejigger my portfolio.
Comments 
7th-Aug-2009 04:46 pm (UTC)
Let me clarify: I believe that China's economic success is heavily wedded to the USA. We have stopped buying. Pacific shipping container traffic is down. Rail is down. We just aren't importing much these days and the improving trade deficit with China reflects this.

Eventually all this lack of US cash flow will hit China. Combine that with China owning large amounts of US debt, which we will default on soon enough, I am keeping my money out of China if possible.

Edited at 2009-08-07 04:46 pm (UTC)
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