Contributing Editors' Blog Entries
UK Weekend Focus: 19 July 2009
Submitted by Raymond Shaw on 07/19/2009 - 17:40 Here is a set of articles worth reading and pondering about over the weekend. It seems that Swine Flu has shifted into high gear with an increasing number of people conking out and GSK to make heavy dough in the process. The UK government is lining up vultures banks to flog off its Llyods and RBS stake; handsome cheddar has already been distributed to the punters managing these stakes.
S&P: "Mea Culpa. Here's a cookie."
Submitted by nickbarbon on 07/17/2009 - 19:12 Summaries of the "causes of the crisis" usually devote a trenchant bullet point to the conflicted, procyclical role of the rating agencies in the whole mess. Like the SATs, everybody acknowledges the serious shortcomings of the agencies, but grudgingly accept the need for a common ruler to objectively measure disparate claims of quality.
Option ARMs: The Most Misleading Mortgage Product Ever Devised. Worst Than Subprime? You Bet. Looking at Wells Fargo, JP Morgan, and Bank of...
Submitted by drhousingbubble on 07/17/2009 - 17:01 Bank of America Bank of America Wells Fargo If you had to create a mortgage that was more toxic and more destructive than a subprime loan, you would have a very hard time creating that product. Yet leave it to creative finance to spawn a devilish product with the unique name of option ARMs.
The Real Story Behind the June Housing Starts and Prices
Submitted by J.D. Swampfox on 07/17/2009 - 11:30 Housing Starts June held good news for Housing, unless one looks at the full story.
Jumbo Mortgage Defaults on the Rise in the Sun Shine States?
Submitted by Bruce Krasting on 07/16/2009 - 17:03 Big buck foreclosures trump green shoots."The Future Refinancing Crisis in Commercial Real Estate"
Submitted by nickbarbon on 07/16/2009 - 12:24 Commercial Real Estate Real estate Surprisingly this isn't the title of an alarmist book by an obscure author urging you to buy krugerrands and remote arable property. Instead it's a sober, substantive quantitative analysis series by Deutsche Bank's very smart Richard Parkus.In Which the Civic Conscience of Rating Agencies Becomes Evident (CMBS)
Submitted by nickbarbon on 07/14/2009 - 23:44 Rating Agencies Today saw fully $1.5 billion in CMBS bonds out for the bid from bank portfolios and insurance companies and CMBX AAAs down 2 points. Sellers were locking in price improvements, while buyers were loading up on bonds they think will tighten into a TALF/PPIP bid. But the real fun came from the rating agencies which downgraded or warned of downgrades all the way up the capital structure. S&P took several AAA-rated classes down tosingle-A or below, and Moodys was making noises about its own bout of upcoming downgrades. Given that AAA/Aaa ratings are needed for TALF eligibility, market...Checking-in on the Quantity Theory of Money
Submitted by nickbarbon on 07/14/2009 - 19:29 The classic formulation of the link between money supply and output (MV=PY) suggests that an increase in nominal output requires an increase not only the monetary base (which we’ve certainly seen), but also an increase in the money multiplier and the velocity of money. Even then, Y needs to broadly close the output gap before pricing power is reintroduced and P can rise. Does the Feds balance sheet really justify 2-year inflation levels of roughly 0%? Read on...The Stagflation Hedge
Submitted by nickbarbon on 07/10/2009 - 23:05 Stagflation Reconciling Slack + Deficits: The spread between the 2-year and 10-year points on the US yield curve has been unusually steep since May, when supply fears and convexity hedging caused a back up in rates. As the 10yUST backed up, the steepeness of the 2s10s curve reached a high of over 250 basis points. The same can't be said for forward curve spreads which have remained stubbornly flat. The 2s10s yield curve in swaps is currently ~222 basis points; meanwhile 1yForward is at ~150 and 2yrs forward is at ~87bps. Read on...
Socialist Shocked to find "Speculation" in the commodity futures pits
Submitted by Jack H Barnes on 07/07/2009 - 19:29 In an opinion piece submitted to The Wall Street Journal, U.K. Prime Minister Gordon Brown and French President Nicolas Sarkozy wrote that governments need to act to curb a "dangerously volatile" oil price that defies "the accepted rules of economics" and "could undermine confidence just as we are pushing for recovery." Hours earlier in Washington, the Commodity Futures Trading Commission, the main futures-market regulator in the U.S., announced it would hold hearings on whether to introduce tougher regulation of oil-futures markets. The rules, which drew immediate criticism from traders,...Commodity ETF UNG Halted to issue new shares
Submitted by Jack H Barnes on 07/07/2009 - 13:26 UNG the equity ETF symbol that is the largest holder of NG contracts by size, had its symbol halted today, while they issued new units.Going Gilligans Island
Submitted by Jack H Barnes on 07/06/2009 - 22:02 “Title IV, Subtitle B, Part 2, Section 426, of the American Clean Energy and Security Act of 2009 states: ‘An eligible worker (specifically, workers who lose their jobs as a result of this measure) may receive a climate change adjustment allowance under this subsection for a period of not longer than 156 weeks…80 percent of the monthly premium of any health insurance coverage…up to a maximum payment of $1,500 in relocation allowance…and job search expenses not exceed[ing] $1,500.’”Leveraged Finance, like a bad Rocky Movie, is making a comeback
Submitted by Jack H Barnes on 07/06/2009 - 10:10 “This is the world of smart securitisation,” said Geoff Smailes, managing director of global credit solutions at BarCap. “It’s not securitisation for leverage and arbitrage purposes any more. This is all about restructuring portfolios of assets to achieve risk, capital and funding efficiency in a transparent and less complex way.”Alternative A-Paper Mortgages: The Next Trillion Dollar Housing Problem.
Submitted by drhousingbubble on 07/04/2009 - 12:32 Anytime someone tells you that a mortgage is less risky than “subprime” you know you have a problem. The Alt-A mortgage is largely absent from the current mainstream housing debate but is really the next wave that will further depress housing prices. Data produced from a June 2009 OTS and OCC report highlighting market conditions for 64 percent of U.S. mortgages finds that some 3.5 million loans are categorized as Alt-A. California issuing IOUs is home to many of the Alt-A mortgages.