Friday, December 16, 2011

The Beginning of the End

If you have not gotten enough of Kyle Bass about the capital flight from Europe, go here for an interview two days ago on CNBC.

Now speaks another voice, Michael Platt, founder of BlueCrest Capital Management, a $30 billion hedge fund. Over the past eleven years, BlueCrest has returned nearly 14% on an average annual basis and has never had a down year. John Paulson, eat your heart out! Platt tells Bloomberg [below] about the sovereign debt crisis and the serial insolvency of most European banks:

Late yesterday one of the Big Three ratings agencies, Fitch, issued downgrades for eight global banks, including our beloved Bank of America. BofA's Viability Rating was dropped from a- ("strong") to bbb ("good") and its long-term Issuer Default Rating from A+ to A, still a couple of notches above Johnny B (Goode). The calls follow similar moves from Standard and Poor's last month and Moody's in September, thus completing a tricky trifecta for BofA. Such downgrades can trigger collateral calls, reducing a firm's liquidity. In extreme cases a downgrade can put a company out of business (witness MF Global).

Go here for a refresher from Gary Shilling on why all these banks are such a miserable investment.

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