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World's Largest Bond Insurers Collapsing! Martin D. Weiss Ph.D. Martin here with an urgent update on the rapidly unfolding credit crack-up: Ambac and MBIA, the two largest bond insurers in the world, are careening toward collapse. Barring a miraculous rescue, their demise could promptly deliver a massive blow to the U.S. bond market ... severely damage America's already shaken big banks ... and largely trash the net worth of millions of investors. Yet, strangely, except for investors who owned Ambac and MBIA shares themselves — and who have now driven those shares into the gutter — few are paying attention. And fewer still are taking appropriate defensive action.
Look. If this crisis were just a theoretical possibility, like it was when I first wrote about the fatal fallacy of bond insurance years ago, I might understand the stubborn complacency of most investors.
Similarly ... If I were still one of the only ones talking about the collapse of bond insurance, I could also understand the complacency of most investors.
Next, Brace Yourself for the Other First, the other two leading rating agencies — Moody's and S&P — are likely to follow Fitch's lead and also downgrade Ambac. In fact, on Thursday, Moody's already warned it could do so very soon. Second, the other major bond insurers, such as MBIA and FGIC, will get smacked with downgrades. Third, the ratings massacre now taking place in Ambac-insured bonds will spread to $2.3 trillion worth of municipal bonds, mortgage-backed bonds, plus asset-backed bonds packed with credit card and auto loans.
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