The chainsaw catchers who went after these deals "early" - the Wilbur Ross' of the world - are in deep doo-doo.  They are taking it long and hard, having been unable to do any sort of real due diligence, or, in some cases, still operating in the early 00's world where you could take a deal with a cursory look and a handshake!  It will be very interesting to see how many of those "early" folks come back with lawyers and try to unwind their deals via lawsuit, claiming they were misled (at best.)

Oh, and Dicky Bove?  You're not going to believe this:

June 20 (Reuters) - Ladenburg Thalmann analyst Richard Bove widened his 2008 loss estimate for Citigroup Inc and cut his price target on the stock, after the largest U.S. bank said it could have substantial subprime write-downs in the second quarter.

Bove widened his 2008 loss estimate for the company to 36 cents a share from 19 cents and lowered his price target on the stock to $25 from $31.

But I thought it was a "generational buy" Dick?  That we were going to see a 5-bagger?  Now "C" is back below the close on the day you made your call, and if I bought then, I'd be underwater.

As you know my response to your original call was this:

So no, I didn't buy "C".  What I should have done (but didn't) was short the spike you induced.  Ah well, missed opportunities, but the laughing kitty is still good, right?

MBIA and Ambac lost their last AAA ratings yesterday when Moody's stripped them.  That's that.  The ugly here is that this is likely to trigger somewhere between 70 and 200 billion more in writedowns and/or forced asset sales.  This, of course, has not been reserved for by the banks:

"The downgrades end more than seven months of speculation about whether the bond insurers would keep their top ratings at all three firms. Five of seven companies lost their top ratings as projections for losses on securities backed by home loans surged and confidence in the companies collapsed, causing municipalities to shun their insurance. The downgrades span more than $2 trillion of debt sold by issuers ranging from school districts and sewer authorities to Wall Street firms."

That's gonna leave a mark (on your balance sheet!)

The true ugly hits if these downgrades continue and sends the insurers below investment grade.  Such a downgrade threatens to bankrupt virtually any bank that holds covered assets, as the impact would be a reserve requirement that jumps to more than 100 times what it is for AAA paper.  This, obviously, isn't going to be allowed to happen - banks will unload this paper now rather than take the risk of instantaneous insolvency.

I believe that continued downgrades to below investment grade (if these firms survive at all) are inevitable - as such, it is my view that this is a storm that cannot be avoided, and those who have made investment decisions believing that the "credit crunch" was in the 7th or 8th inning are going to be destroyed.