anz 15 bucks place your bets, page-16

BnH

weve had this discussion/debate before but from memory the price was at $22-23, claiming its 30% under value and then accusing me of making numbers up from thin air is a bit "pot calling the kettle black" on your part

my speculative contention is that ANZ hold substantial mortgage and corporate debt backed CDO counter party risk off balance sheet based on monoline AAA bond insurance, as these bonds and the mono line insurers themselves get progressively downgraded over the coming months ANZ will be forced to self insurer these bonds .

The Case/Shiller data has us about halfway through the US housing downturn with prices expected to drop as much as they have done already

http://bp3.blogger.com/_nSTO-vZpSgc/SGHhhyixfHI/AAAAAAAAC1o/06s1eACgDHM/s1600-h/case-shiller-apr2008TC.png

The bonds that ANZ hold are based on mortgages in these markets

Alt A markets are deteriorating rapidly with Standard and Poors placing 567 AAA-rated tranches on negative ratings watch.

http://www.housingwire.com/2008/06/26/alt-a-performance-gets-much-worse-in-may/

worse many of the AAA rated bonds have tsunami of write downs coming the monoline insurers will be virtually wiped out and these monolines are very likely to be counter parties to ANZ (ANZ or any of the other Australian banks do not disclose their counterparty exposure so exposure discussions remain speculative)

http://globaleconomicanalysis.blogspot.com/2008/06/is-inflation-scare-over-yet.html

ANZs exposure to notional credit derivatives is $47,702 M (page 71 of the annual report) compared to say NAB 24,373M or $5928M for CBA (all numbers straight from annual reports)

Notional only becomes actual when you have either a counterparty or bond insurer failure

in the event of a global credit derivative meltdown ANZ has twice the exposure of nab x9 times the exposure of CBA

it is true we do not know which monoline credit insurers , which bonds or which end companies ANZ is exposed to but we do know their exposure is by far the highest of any Aussie bank notionally

since we do not know the couterparties involved, in fact we dont know any of the players involved we should show caution where there is apparent systemic weakness in the credit default swap market

$47,702M is our only clue, the fact that ANZ hold such a large notional position tells us they were very active in the credit default market, the fact that this notional exposure exists is undeniable (its in their accounts)

all of this risk is being held off balance sheet by increasingly flimsy credit ratings further deterioration these bond and monoline ratings COULD be of extreme concern to ANZ shareholders