UBS Says "Well It's Not Quite So Contained After All" - Another $10 Billion Bombshell

UBS is starting to look a lot like Citigroup.

Another $10 Billion write down (thats a biggie....)
And foreign investment from both Singapore and the Middle East to provide capital.

I thought this was all 'contained' (no, I didn't - but that's what "they" insisted).... it is amazing to see the US junk inflict it's carnage across the 'pond' to such great effect. $10 Billion is a huge sum - more than double what they wrote off last quarter. This is what happens when you move from 'mark to theory' to 'mark to reality'... while the underlying asset continues to deteriorate by the week. (Did housing prices going up in your neighborhood last week?; they should have according to all the 'good news' coming out of Washington, no?)

• UBS AG, Europe's largest bank by assets, said it will write down U.S. subprime investments by $10 billion and raise 13 billion francs ($11.5 billion) by selling stakes to investors in Singapore and the Middle East.
• UBS reported its first loss in almost five years in the third quarter after the subprime contagion led to about $4.66 billion in markdowns on fixed-income securities and leveraged loans.
• ``The industry has been moving to more aggressive markdown rates'' on subprime-related assets, Kinner Lakhani, a London- based analyst at ABN Amro Holding NV with a ``hold'' rating on UBS shares, said before today's release. UBS's previous writedowns had been ``well below industry benchmarks.''
• ``In the last several quarters, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting,'' Rohner said in the statement. ``These writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation.'' [And how will write downs on securities based on assets that are deflating by the day, and as you stated are unknowable in value "create maximum clarity"? This is just another stop gap until the next round of write offs]
• The bank was expected to write down about 2.6 billion francs in the fourth quarter (oops, only off by a factor of 4-5x), according to the average estimate of five analysts who published forecasts over the past month.

Again, I find it hilarious (in a sad way) that each time these banks assure us, this is it - this is the last write down, the frenzy begins for 'undervalued financial assets' and the chorus of 'thank god, it's contained' begins on the equity markets - when the bond markets just sit there, shaking their head... looking towards the equity markets as a wayward hyper child.

So we've had the kitchen sink (July/Aug), the bathroom sink (Oct/Nov), and now we enter the bedroom sink I suppose... as I stated months ago, we have a whole house full of sinks to go... remember 'they' assured us, this was not a problem and it was all taken care of in the 'kitchen sink' quarters/write offs in July/August 2007. But each time we do this, investors assume "this" time it really *is* the bottom, and (for a while) are happy the banks confessed and we can get back on with the bull market, now that we got "the worst of the news" behind us.

Now perhaps the (equity) market cheers and says, just more fodder for greater rate cuts - HOORAY... who ever knows. But it is just another sign of a 'contagion' and anyone who cheers this is truly not seeing the big picture. It continues to get more dark by the week. I should have made an addendum to my 'Predictions for the coming 6 months' to include large parts of Western Europe... I thought it would be more of a UK condition but apparently the continent itself is not spared from this affliction either. [4 Towns in Norway Take Subprime Hit]

Oh well, I am sure rate cuts will make this all go away. Just hold on for 3 more days and *poof* - nothing more to worry about.... remember bad news is good news.... until it no longer is. For the past 2 weeks, bad news is great since more drugs can be injected (free money) into the patient.