Silver Penny Plays

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Huge run coming in precious metal market! And explosive run in junior minors.

Here is why.


Ambac files for Chapter 11 protection

http://www.examiner.com/finance-examiner-in-national/ambac-files-for-chapter-11-protection


Ambac Financial has filed for chapter 11 bankruptcy to protect itself from bond restructuring this afternoon after the market closed.

Bloomberg was the first to report this story, and here are the particulars of the filing.

The petition for Chapter 11 protection filed in Manhattan today listed assets of $394.5 million and liabilities of $1.68 billion. The Vanguard Group Inc. was listed as the largest shareholder, with 5.46 percent of the company’s stock.

The case is In re Ambac Financial Group Inc., 10-15973, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

What are the ramifications of this bankruptcy filing?

First off, the Federal Reserve is one of the owners of Ambac Bonds through its Maiden Lane holdings. Second, this is the beginning of the derivatives crisis implosion. The amount of financial centers tied to the derivative bonds issued through Ambac are uncountable, and are a portion of the 100's of trillions in derivatives still in the global system.

Thirdly, this will be the destruction of the municipal bond market, and lead to states running into massive budget crisis. In a blog article from 2008 John Galt FLA wrote on the eventuality of Municide, and the bond issuers who would be a part of it.

This rapid growth has been well documented and the crisis we find ourselves in is now the huge ticking time bomb which has everyone terrified that their demise or crash will destroy the financial markets. According to a news report the largest insurers, MBIA and Ambac, would both need $30 billion each to become fully capitalized and thus the flurry of activity from Bill Ackman and Warren Buffett to perform nature’s role as vultures except this time they want the carcass still warm, not dead cold and frozen.

Lastly, this could be the event that shoots the metals into the stratosphere. Just a week ago, Coin Update News wrote an article on the probability of Ambac's bankruptcy, and what it would mean for gold and silver.

If Ambac does not make this interest payment within 30 days or reach a negotiated settlement with senior bondholders, then it will automatically enter Chapter 11 bankruptcy protection. If the company does go into bankruptcy, that would unleash a new tidal wave of financial chaos that would ripple through the housing and municipal bond markets. The almost certain result would further reduce residential housing values and hurt the ability of governments to issue new debt.

Almost certainly, as bond and derivative values plummet, that would scare more investors away from owning paper assets and toward owning physical gold and silver and shares in gold and silver mining companies.

Look for more on this filing soon, and the repercussions that will stem from it.


Orca
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Monday, November 08, 2010 10:25:03 PM