Tuesday, March 18, 2008

MBIA AMBAC Shares Tell the Future

...these two stocks fell 93 percent on average, in a matter of months….

The past few weeks have provided plenty of fireworks and sideshows on Wall Street, culminating yesterday with the news that the Fed served as the lender of last resort to Bear Stearns by financing JPMorgan Chase's purchase of the crippled securities firm. The Fed followed up today, March 18, by dropping its benchmark interest rate 3/4 of a percentage point to 2.25 percent. And the Dow shot up 420 points. But while these fireworks were going off, the sideshow of bond insurers, Ambac and MBIA, kept playing on. Bob Prechter sees an important story in the shape of the price charts of these two companies. In his latest Elliott Wave Theorist, he discusses how the action of their stocks offers a broad hint of what may come for many stocks as inflation gives way to a steep and rapid deflation. To learn how, click the link.

If banks can't get insurance for the debt business then money will be very hard to come by.

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