"There's Some Crap Getting Done": BlackRock Scared We Are Going Back To "Ponzi Finance Excesses" Of 2007
We have now officially gone full circle. Even as CMBS delinquencies are at all time highs, Wall Street's scramble to generate yield on other people's money (which will be completely lost once the liquidity tsunami ends) is back in 5th gear, as securitizations backed by commercial mortgages are flying off the shelves. It is so bad, that even S&P (!) is questioning the sanity of all those using LP capital to sign the dotted line in pursuit of a few quarters of yield. “There’s some crap getting done,” David Jacob, an executive managing director at credit-rating company S&P, said today during a panel discussion at the American Securitization Forum trade group’s annual meeting in Orlando, Florida. “It’s surprising to me this early in the cycle that some of that could be happening.” Don't be surprised David, after all it is your company that is rating it AAA (we realize you, too, have to eat), and never ever forget that if this was merely an indication of unseen market exuberance the Chairsatan would have long since popped the latest (and luckily last - after this one, there will be no one left to bail out the world) bubble. And someone else scratching their head at the current round of irrational exuberance that would make the dot com era look like dress rehearsal for "Spiderman: The Musical" is none other than some guy from Blackrock. "It’s been surprising how quickly investors have returned to
accepting transactions with numerous AAA rated classes, said
Blewitt, co-head of securitized assets at BlackRock, the world’s
largest money manager. Some bond buyers may not be scrutinizing
offering documents closely enough to find “hidden” dangers, he
said. “I don’t think we’re going back to the Ponzi finance
excesses that we had in 2006 and 2007 just yet, but when I get a
little bit scared is when I see the old game of, ‘These are not
your droids, look over there, not over here." Blewitt is right: the current round of 'Ponzi finance excesses' is like nothing ever seen before. But then again we have QE2 (then 3, 4, 5, 6, 7, 8, etc) to mask just how enamored with droid chasing we all are. When this last bubble pops, it will be monumental.
More from Bloomberg on the biggest and most naked emperor the world has ever seen.
Sales of commercial-mortgage backed securities will rise to $45 billion this year after banks arranged $11.5 billion of the debt in 2010, according to JPMorgan Chase & Co. Issuance plunged to $3.4 billion in 2009 compared with a record $234 billion in 2007, according to data compiled by Bloomberg.
“Commercial banks and Wall Street firms are building out platforms that will feed the beast,” said Martin Hughes, chief executive officer of Redwood Trust Inc., which in April completed the only private residential-mortgage deal in almost three years and last year began lending in the market.
The market for securities backed by automobile debt is in many ways now no different than in 2007, before the financial crisis, said Scott Krohn, director of asset-backed securities and long-term funding at Ford Motor Co.’s finance arm.
The company will probably sell $12 billion to $16 billion of the bonds this year, up from $11 billion last year, in part reflecting growing car sales as the economy strengthens, he said.
“In my estimation the auto ABS market is all the way back in terms of spreads and liquidity,” he said during the panel. “In our last transaction, we had subordinate classes that were as many as six times oversubscribed,” he said later.
When the music ends, many will part with their careers, cushy paycheks, momo trading accounts, imported sport cars, imported wives, imported cocaine and, yes, lives. Until then, as the poet and the corrupt CEO said (before he blew up his company), we must all dance. So be it.
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