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Here We Go Again!
From Bloomberg: Mortgage-Bond Leverage Reaches 10-to-1, Markets Heal
Jan. 19 (Bloomberg) -- Wall Street firms are loosening terms of their
lending to mortgage-bond investors as markets heal, an RBS Securities
Inc. executive said.Repurchase agreement, or repo, lending
against the debt has expanded so much since freezing in late 2008 that
some banks now offer as much as 10-to-1 leverage and terms as long as
one year on certain securities backed by prime jumbo-home loans, said Scott Eichel, the Royal Bank of Scotland unit’s global co-head of asset- and mortgage-backed securities.“It’s
getting very competitive,” Eichel said in a Jan. 14 interview at
Bloomberg headquarters in New York. “We’re at the point where I don’t
think we would feel comfortable if things go too much further.”Increasing
availability of leverage for mortgage-bond buyers was among the reasons
that JPMorgan Chase & Co. and Barclays Plc each said in analyst
reports this month that a record rally in U.S. home-loan securities without government- backed guarantees may continue even amid record foreclosures and further declines in home prices.Stamford,
Connecticut-based RBS Securities was the second- largest underwriter of
structured-finance securities worldwide last year, according to
newsletter Asset-Backed Alert.
It
is interesting that article can state that the mortgage bond markets
are healing while the property markets continue to drop and the
foreclosures behind them continue to rise. The increased use of
leverage against this backdrop make it clear that this market is about
short term trading profits and have absolutely nothing to do with
fundamentals. Additionally, it shows we have learned nothing from the
last 3 years and are quite comfortable being set up for another crash
as long as some short term profit can be had. And where are the
regulators while all of this is going on??? See It's HELOC Deja Vu,All Over Again, A Fundamantal Investor's Peek into the Alt-A Market and If Anybody Bothered to Take a Close Look at the Latest Housing Numbers... to see how well suited the macro and fundamental backdrop is in the application of 10x leverage in this market.
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Additionally, it shows we have learned nothing from the last 3 years and are quite comfortable being set up for another crash as long as some short term profit can be had. And where are the regulators while all of this is going on???
Talk about hitting the nail square on its head. Those 2 sentences are perfect Reggie.
(I promise I won't add a third sentence, something like: "where are the prudent bank leaders that recognize they have a fiduciary responsibility to recapitalize their woefully weak balance sheets?)
Looking forward to what you are willing to share about this quarter's bank fasb 157 induced earnings.
Increasing availability for leverage? Sounds like the last act of a desperate Dr. trying to revive the patient with more morphine. The drug trade HAS worked until now, as the comotose state of the market vibes with the collective status quo. Short term trading profits are all they have left. Long what yield curve? The bond that I am expecting to hold for 30 years? the US is on life support. Comforable for a crach? How about used to it. Every five to seven years. While it gets leveraged up, what will backstop a flood of liquidity into the equity market? A multiple of 10x fits perfectly with how far they will take the gold trade.
I am amazed at how long they have kept this up. The misinformation and nonstop spinning and reformulated formulas for unemployment, GDP, ect.. I thought the same thing that these guys must have some plan everybody doesn't understand then I came to my senses and remembered these are the people that got us into this mess. Just watch these idiots on various news networks right before the crash, and it will be obvious that they are incompetent.
"Healing" = "prices of RMBS going up"
Meanwhile delinquencies are increasing at an "alarming" pace.
Reggie, why would the banks learn anything when it is clear their respective central banks will bail them out?
That prime ABX index can't be developed fast enough for me, I want to short these things badly.
http://www.housingwire.com/2010/01/19/dbrs-prime-mortgage-performance-de...
Y'know, I thought the FED,SEC,PPT and banks weren't that stupid to let this happen all over again-but I think I'm wrong. I'm thinking(since we are talking about parasites and government ding dongs like Tim Geithner) that they ARE that stupid. That gives shorts a whole nother chance to go for the brass ring again.
BUT, the market has to get even more stupid-lke 13,500 stupid, where retailers are crawling on each other to get stock off Goldman and JP. Then... kaplow.
For proof that people who work for the FED are high school dropouts and Ivy League Group thunk hacks. They MADE an math formula for how transparency is bad for the FED. OMG, these guys are stoopid
http://globaleconomicanalysis.blogspot.com/2010/01/steve-keen-on-banking...