International Investing

But not for much longer, and the fallout in the municipal bond sector will have far reaching consequences. At a minimum it will highlight to the general public, more so than the housing crisis, how arbitrary published ratings are. The entire process is corrupt. Read more about this absurdity here:

Last week, credit- default swaps tied to MBIA Insurance Corp.’s bonds were 193 basis points, according to data compiled by Bloomberg. In other words, it cost about $193,000 to buy a contract protecting $10 million of bonds from default for five years. That implies about a 15 percent probability of default — for a company rated AAA.
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By comparison, credit- default swaps for a real AAA company like Johnson & Johnson were 15 basis points, implying the chance of default is a tenth of a percent.
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MBIA Inc.’s stock is down 59 percent this year and trades for 42 percent less than its book value, showing that equity investors don’t believe its balance sheet either.
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If MBIA and its like got cut, so would the AAA-wrapped bonds of just about everything they insure. Their business may vanish. And the rating companies would be looking at issuing press releases announcing downgrades for thousands upon thousands of municipal bonds.