OK, schizophrenia is a bit too strong a word, but it got your attention, right? “Dissonance” is closer to the mark, and differing points of view in a plugged-in, market-savvy paper like the Financial Times is an interesting sight to behold. Both stories address the same general topic, namely, whether the current mess in subprimes […]
Read more...A Wall Street Journal article, “Subprime: Point to Where It Hurts,” endeavors to clarify the issues in modifying loans to try to save defaulting mortgage borrowers. Previous stories have mentioned that the fact that most residential mortgages go into mortgage backed securities makes it harder to change terms than in the old days, when the […]
Read more...Another day, another subprime casualty? The Caliber hedge fund was heavily exposed to 2005 subprimes, which is a new cause for pause, since heretofore, it was the 2006 subprimes that had shown the worst performance. But now troubles are showing up in the 2005 cohort. The UK fund isn’t as big as either of the […]
Read more...Barry Ritholtz gave some helpful tidbits about CDOs on his blog, The Big Picture. The source is the Bloomberg magazine (unfortunately only for those with terminals can subscribe). From Ritholtz (quoting Bloomberg); “Worldwide sales of CDOs—which are packages of securities backed by bonds, mortgages and other loans—have soared since 2003, reaching $503 billion last year, […]
Read more...For those of you who are relatively new to the complexities involved in the pricing of collateralized debt obligations (CDOs), this Financial Times article, “Worries grow about the true value of repackaged debt,” gives a good overview. Since the article is lengthy, and the first part covers largely familiar ground, I’ve excerpted the second half. […]
Read more...A page one story in the Wall Street Journal, “Market’s Jitters Stir Some Fears For Buyout Boom,” discusses how creditors are suddenly rediscovering that they can say no to deals that don’t offer them reasonable terms. This is coming as quite a shock to private equity firms, who were used to getting their own way […]
Read more...All the usual suspects are reporting that the SEC is planning to investigate the failed Bear Stearns hedge funds and CDOs generally. The Financial Times provides a succinct account: The Securities and Exchange Commission on Tuesday said it had initiated a broad-based investigation into the troubled subprime mortgage market. Christopher Cox, chairman of the SEC, […]
Read more...Warning: this post is only for those with sound constitutions. Tim Lee, head of a financial economics consultancy, tells us in a Financial Times article what a carry trade unwind will look like (answer: very nasty) and what it would take to prevent it (the Japanese have to allow a high enough level of inflation […]
Read more...Either it’s a horribly slow news day, or the Bloomberg people are besotted with the Bear Stearns story. I imagine journalists enjoy schaudenfreude as much as the next guy. From late afternoon until now, even after the Asian markets have opened, the top story on its “Breaking News” section is, “Bear Stearns Enlists Mortgage Chief […]
Read more...We’ve been skeptical of inflation targeting, no doubt as a result of seeing Paul Volcker use monetary targets very effectively. Witness the proof of the pudding, namely, asset bubbles, deteriorating credit quality, and increasing inflation (at least in overall CPI, although core CPI is better behaved). But serious economists have only started looking into this […]
Read more...Felix Salmon commented on an intriguing and colorful post by Steve Waldman that argues that it’s in China’s best interest to buy a few CDOs and save the Street and the hedge fund industry from a meltdown and possible jail time. Here is the meat of Waldman’s argument: Here’s where the dragon comes in. Several […]
Read more...By way of background, Bill Gross is something of a legend in the fixed income world. He founded Pimco, one of the biggest and most highly respected fixed income firms, with nearly $700 billion under management. Gross is also its chief investment officer and is considered very savvy (and as important for the purposes of […]
Read more...Credit Slips highlighted a recent Hudson Institute paper by Joseph Mason and Joshua Rosner, “Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions.” It’s an excellent piece of work, and I recommend it to anyone who wants to understand more about the risks of mortgage […]
Read more...Ooh, when it rains, it pours. First Bear, now this. However, readers of this blog will know we have been posting for some time on rampant liquidity, inadequate risk premia, lax lending, and overvalued assets every where you look. We thank Michael Panzner of Financial Armageddon for pointing out this story from the UK’s Telegraph. […]
Read more...The Wall Street Journal, in “Bear’s Stock is Acting Like It’s Name,” adds surprisingly little of substance to what’s already been reported on Bloomberg (see here and here), but the story’s downer tone is the last thing Bear needs at this juncture. One element that has been missing from the mot press coverage but picked […]
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