This page has been archived and commenting is disabled.
The One Stop Credit Shop For The New "New Normal"
In the current environment, where the market's Advance/Decline line is swinging with greater daily amplitude than ever before, the only thing glaringly obvious is that nobody has any clue how to trade pretty much any asset class. Which is why the following presentation by Morgan Stanley's Jim Caron does a great job at summarizing at least some of the core fundamentals in this new, "new normal" where corporate risk no longer exists, only to be replaced with unprecedented sovereign risk and pervasive moral hazard. It is a must read for anyone who dabbles in any market even remotely connected to credit (which implies everyone): 112 pages of no-nonsense (if somewhat biased) goodiness.
»
- 6791 reads
- Printer-friendly version
- Send to friend
- advertisements -
i can read this and watch the no volume end of day melt up to green..yipee
Speaking of Credit....
Ms Drury has her MOTO GP look going on & looks great...
Mmmm. Mandy...
Yep. They've been able to cut the day's losses in half, so far.
Very impressive.
Maybe HarryWanger is right? If you can't beat em, join em?
anyone watching SPY real time now?...the last seven minutes were quite interesting
"...nobody has any clue how to trade pretty much any asset class."
Was at a commercial real estate discussion yesterday, and this was what the industry people on the panel were saying about CRE. No one has a clue what assumptions to put into a pro forma. No one has a clue what interest rates will be, what expected return is realistic. Buyers and sellers have widely different cap rates in mind.
They said they anticipate this environment for at least two to three years. They didn't say "paralysis" but it sounded a bit like that.
They did say that banks are slowly working out restructuring deal by deal. So that losses are being booked over time, and one giant "oh crap, we can't roll over" moment in commercial real estate seems less and less likely.
So that's what the banks have been doing with the money they 'borrow' from Ben. They pay ZIRP, lend it out at 3-35%, use the interest to carry their CRE customers until infinity.
Collect their bonuses and splash around in the lap of luxury.
Gotta buy a bank.
Neat.
That's about it. Borrow at 0%, lend at 5%, and pay yourself like a sultan for figuring this out.
I'm hearing some cap rate compression on "A" properties.
ie Prices increasing.
Lotta cabin fever out there, after the Flash Crash REITs have lost some of their charm, better to own real assets than FRNs.
Can somebody summerise this into a little text (20 words max.)?
Happy hour starts in 2 hours and I don't want to be late.
"Moral hazard" is for little prople...
...just like the justice system.
Tha Fed and GSE's backstop everything...with Pixeldust.
Agree, but I'd narrow the scope some: The Fed and GSEs backstop the banks.
Also, tha GSE's will continue to absorb all mortgages that are 120 days unpaid, and the stated expectation is that housing will clear at prices -30/40%.
Having just done a calculation on tha tip of a toothpick I figger that each and every "citizen" owes @*250,000 Motes once I include all of our "national" unfunded liabilities. Someone else can figger tha effect after taking on all tha mortgages.
*Pixeldust
Take heart though, if ya have a family of 4 you are -Millionaires!
very good thx for sharing
Test
you passed
Thanks for the test-tickle, Cheeky.
†
dagger
More high protein content for financial carnivores...
How fitting - DJI is recovering quite nicely based on this report from briefing.com --->
3:00 pm : Stocks have staged a strong rebound to their best levels since midsession. The move comes without any individual catalyst or news item. However, the move has been helped by the light trading volume, which often exaggerates the moves of stocks.
Maybe we should call this the Dead Gary Coleman Bounce?
And in other news...
"May 28 (Bloomberg) -- A U.S. accounting board’s proposal that would require banks to report the fair value of loans on their books is a “destructive idea” that will lead to reduced lending, a former chairman of the Federal Deposit Insurance Corp. said."
"“This is a terribly destructive idea to even propose,” William Isaac said in a telephone interview today. Just by making the proposal, the Financial Accounting Standards Board will lead banks to quit making loans without an easily discernible market value, and keep the ones they do make to shorter maturities, Isaac said. "
http://www.bloomberg.com/apps/news?pid=20601087&sid=aMwC6IS_uHWY&pos=5
William Isaac is a douchebag.
Not as big of a douchebag as Bob Pisani but a douchebag, nonetheless.
Perhaps all those banks that have made terribly bad risk decisions shouldn't be making the loans to start with. It's not as if loan demand is rocketing through the stratosphere while private credit is deleveraging.
Banks are buying Treasuries and other risk assets... they are not making loans. It's time to start writing this crap off...
So, bank lending would go from zero to negative? That means we have to loan money to the banks? But aren't we already doing that? How can this move be a bad thing?
So do you get long before Mutual Fund Tuesday or do you get out before the three-day weekend?
I'll answer my own question: Apparently there was little interest in being long over the extended weekend, much to the dismay of Bob Douchebag Pisani.
From page 6:
"For a country to reduce its level of indebtedness, it needs to run a surplus on its primary balance and/or have a nominal GDP growth in excess of the interest rate it pays on its debt. The level of its debt/GDP ratio primarily affects the rate of change with which the ratio changes in response to changes in growth and primary balance, i.e., higher levels of indebtedness amplify the size of the move due to the leverage in the national accounts."
????????????????????????
It should read: "For a country to reduce its level of indebtedness, it needs to pay off its debts."
Oh, come on. That's too obvious. You'll have to do better than that. Your solution is way too simple. Couldn't possibly work. And, besides, how can the banks make any money that way.
There's no corporate risk because the market has been designated as a corporate ATM for backdoor bailouts.
With record secondary issuance this year that dilute the float but never the price or the EPS (gross under reporting has been cited). All supported by the taxpayer via the Fed via Goldman and a few primary dealers using HFT.
I read like 40 pages of this. It's basically arguing higher rates everywhere, but more so on the long end of the yield curve. (And tons of volatility in between)
This kinda kills my intention of buying 30 year Zeros to protect against deflation...
Thoughts? ZH is all about the deflation camp. How do you guys justify both deflation and rising rates?
Are the rate rises coming first? followed by deflation? or will deflation be so weak its a no-story.
Actually, a lot of ZH is in the hyperinflation camp. Recently, there has been some "deflation for six months, followed by hyperinflation" camp. Many others are in the "it's all going to zero, bury spam in your backyard" camp.
See the next post and comment thread re: hyperinflation
Agreed. Most of the ZH camp is on the side of hyperinflation in the longer term.
Deflation. The hyperinflation.
I wish we all knew the timing...
Timing is irrelevant, Gordon, when one's assets are in precious metals. There is no counter-party risk, no interest to compute, and besides, it looks good. The only problem is that you can't eat it -- or is that a problem?
How did you know my real name was Gordon?
Sorry, I was thinking of Mr. Gekko. That would be a compliment.
Sal-right. I was yanking your chain.
I've never been mistaken for a Gekko.
If you want a good indicator of what will happen with credit, MBS, GSEs and derivatives you only need to look at this.
Thanks, Cheeky, but could you thumbnail an explanation? Not being conversant in the securities involved (and not knowing where to look to get the info) I'm at a loss to stand in awe of your reporting. Thanks.
Yes sorry.
http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070225
Cheeky
Do you have a current chart for this, like in tha chart in tha link?
Thanx
DAMN, charts are big around here‡
thinking we all need help, cheeky.
you can be a little overwhelming, sometimes.
it's ok, just sayin.
Duuude.
No, sorry, I usually read the report and calculate the contract delta and net notional delta [remember delta here is not the same as in options pricing and price movement] myself and save it in Excel. I mostly rely on that, not on the price of Index or Single Name per se. Also, if you hop to Markit you can subscribe to their daily credit wrap where all closing prices of all indexes are reported. On the right side under the CDS data on Markit you will find all the daily movements for all sovereign and corporates.
If you want to have a more broader picture of the derivatives market go to DTCC page and all is there. HY and IG bond prices and movements are available on FINRAs web page as are the indexes. BIS is good for providing a semi-annual overview of the derivatives market in their report. That is what you need to know data-wise.
Next, if you need some literature on this let me know and i will link you books and papers which will be of great help. Also if you are trading CDS you will rarely do it via asking the price to be as the one calculated by the data provider. You will deal mostly with DT desks individually. You can call 10 biggest ones and let them know that you would like to recieve their offering price via e-mail. You can also name the reference entities whose spread you would like to receive. The data i list here is the average of what DTD offer to the prospective buyers. For example GS can offer you 275bps/10M-5y on lets say Portuguese debt, while JPM could offer you 280. It works the same when you are trading spreads on reference entities. Basically you do arb [and that takes most of your time] and are engaged in price exploration.
So, if you need help or something, just say, and i will see what i can do.
More brain cells Scotty!!!
Ah'm be geeven eet awl Ah'v goht Captaiin!!!
totally flummoxed†
Interesting EURO chart :
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
Is it at all possible that when you abuse the small individual investor over a period of years, and take a big crap dump on his head and then turn around to urinate on the remaining dry parts, and all you have left is institutional investors, that daily price swings will become more dramatic??? I leave it to the "market-makers" to come to their best conclusions.