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PrimeX Update: The Rout Continues

Tyler Durden's picture


Stocks may go up, and stocks may go down, but Prime X knows only one direction...

From a bank that is about to announce its EPS handily beat earnings expectations courtesy of its CDS soaring to near all time record highs.

               Cpn    Bid      Offer   Chg from Close  Factor               
PrimeX.FRM.1   442    102-16 / 104-00      -0-171      0.47               
PrimeX.FRM.2   458    91-00  / 92-16         -1-005      0.49               
PrimeX.ARM.1   442    96-24  / 98-08        -2-067      0.41               
PrimeX.ARM.2   458    85-08  / 86-24        -1-233      0.44


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Thu, 10/13/2011 - 11:35 | 1769693 homersimpson
homersimpson's picture

PrimeX sounds like a protein supplement or a Viagra imitation. I can see a Ron Jeremy commercial for PrimeX now..

Thu, 10/13/2011 - 11:37 | 1769709 alien-IQ
alien-IQ's picture

any way you slice it...somebody's getting fucked.

Thu, 10/13/2011 - 11:54 | 1769803 Divided States ...
Divided States of America's picture

Yeah its the people who will be at Occupy Wall Street 2012 and beyond

Thu, 10/13/2011 - 11:54 | 1769804 LawsofPhysics
LawsofPhysics's picture

At least it wasn't any of my puts.

Thu, 10/13/2011 - 11:59 | 1769828 treemagnet
treemagnet's picture

Um, that would be Raj.

Thu, 10/13/2011 - 11:34 | 1769695 kito
kito's picture

not sure i understand real world implications of this

Thu, 10/13/2011 - 11:37 | 1769710 Quadlet
Quadlet's picture

30 year mortgage rates up...

Thu, 10/13/2011 - 11:39 | 1769727 kito
kito's picture

how strongly does this offset bens purchases of mortgage backed bonds?

Thu, 10/13/2011 - 13:17 | 1770107 Pool Shark
Pool Shark's picture



It means Jumbo Prime mortgages are beginning to see defaults.

Just like subprime...


Thu, 10/13/2011 - 15:49 | 1770829 fourchan
fourchan's picture

contraction nation.

Sat, 12/24/2011 - 16:18 | 2009447 haibop
haibop's picture

it may go down again. Power4Home

Thu, 10/13/2011 - 11:39 | 1769720 Scisco
Scisco's picture

Search the more recent threads about Primex and scan the comments. Some great explanations were given.

Thu, 10/13/2011 - 11:45 | 1769759 SignsAndWonders
SignsAndWonders's picture

FT Alphaville did a good overview of PrimeX the other day.

Thu, 10/13/2011 - 12:21 | 1769909 Hansel
Hansel's picture

Thread FYI:  Gary Kaminski on CNBC just said PrimeX is an $11 billion market.  It's a small market.

Thu, 10/13/2011 - 12:50 | 1770026 HelluvaEngineer
HelluvaEngineer's picture

Just the other day I found $2B in my couch cushions.

Thu, 10/13/2011 - 13:47 | 1770208 I Got Worms
I Got Worms's picture

Now that made me laugh.

Fri, 10/14/2011 - 02:45 | 1772594 Hephasteus
Hephasteus's picture

I was going to print 20 billion last weekend but I felt bad for the greeks with their ink shortage.

Thu, 10/13/2011 - 20:54 | 1771926 tom a taxpayer
tom a taxpayer's picture

HelluvaEngineer - Your $2b find intrigues me. I'm a venture capitalist and former upholsterer.  If you can present a decent business model, I'm primed to invest $4B. 

Thu, 10/13/2011 - 13:07 | 1770079 Panafrican Funk...
Panafrican Funktron Robot's picture

Presuming that number is true, that's likely the unlevered "underlying".  It's a bit like saying "Well, the market cap on SPY is only $87.5 billion".  Appears small, yet 10-20% swings in either direction can blow up multi-billion dollar firms in a hurry.   

Thu, 10/13/2011 - 13:08 | 1770082 Panafrican Funk...
Panafrican Funktron Robot's picture

Also, PrimeX holdings are much more concentrated.

Thu, 10/13/2011 - 12:18 | 1769895 sessinpo
sessinpo's picture

Subprime blowup of 2008. Now the credit worthyness of so called prime borrowers (those with supposed better credit) about to blowup in the coming weeks or months. In other words, all standards of credit worthyness is pure BS and all will be taken down.

Thu, 10/13/2011 - 12:20 | 1769897 sessinpo
sessinpo's picture


Thu, 10/13/2011 - 11:35 | 1769696 alien-IQ
alien-IQ's picture

here comes the obligatory 11:30am US dollar shanking to save the markets.

Thu, 10/13/2011 - 11:35 | 1769702 Yen Cross
Yen Cross's picture

 I was on coupons ( sunday ) open.

Thu, 10/13/2011 - 11:38 | 1769715 thatthingcanfly
thatthingcanfly's picture

OK, I give up. What the f is Prime X? The autobot leader's porn stash?

Thu, 10/13/2011 - 11:46 | 1769742 SheepDog-One
SheepDog-One's picture

Just think 'prime real estate, commercial, jumbo loans,' etc.

Thu, 10/13/2011 - 11:51 | 1769791 HD
HD's picture

Indeed.  Ol' Optimus enjoys nothing more than to read the new copy of PrimeX, lubricate his lug nuts then "transform" and "roll out".   There is an appalling shortage of transformable women...

Thu, 10/13/2011 - 11:55 | 1769807 jdelano
jdelano's picture

I hear the Decpticons have a "Don't ask don't tell" policy.  

Thu, 10/13/2011 - 12:33 | 1769963 thatthingcanfly
thatthingcanfly's picture

Arcee was kinda hot. I'da tapped it.

Thu, 10/13/2011 - 11:58 | 1769817 thatthingcanfly
thatthingcanfly's picture

Nevermind. I just found a Primex primer. Yeah, disturbing trend. Does this mean that the time to exchange gold for real estate is approaching more rapidly than Gonzalo Lira predicted?

Thu, 10/13/2011 - 12:15 | 1769883 SheepDog-One
SheepDog-One's picture

Yea sure trade gold for real estate, because rising rates are sure to add value there. ?

Thu, 10/13/2011 - 12:24 | 1769919 thatthingcanfly
thatthingcanfly's picture

"Approaching more rapidly" does not mean "here now." The end result of this is likely to be a collapse of prime real estate values. Assuming the PMs achieve the stratospheric valuations in dollar terms that they are predicted to achieve, there will come a time when the Au - Real Estate swap makes sense. Maybe that time is coming sooner than expected.

Thu, 10/13/2011 - 15:06 | 1770576 DosZap
DosZap's picture



that the time to exchange gold for real estate is approaching more rapidly than Gonzalo Lira predicted?

Under the current regimes, and power players,fiscal/global conditions, I can never see a time to exchange Gold for RE.

One reason,really two.

Eminent Domain, and Taxes.

Either one can SCREW you into the ground on RE like a Chance keep stake anchor.

What do you then use for survival?

Thu, 10/13/2011 - 11:58 | 1769818 fightthepower
fightthepower's picture

The Markit PrimeX is a synthetic CDS index referencing a basket of prime mortgage-backed securities. The intent of the index is to create a liquid, tradeable tool allowing investors to take positions on prime mortgage-backed securities via CDS contracts.  Its liquidity and standardization will allow investors to accurately gauge market sentiment around the asset-class, and to take short or long positions accordingly.

Thu, 10/13/2011 - 12:24 | 1769922 Missiondweller
Missiondweller's picture

Thanks. I'm not familiar with this and its not on the ZH Glossary yet.

Thu, 10/13/2011 - 11:58 | 1769820 Larry Darrell
Larry Darrell's picture

Think back a few short years to Bernank's statements about "sub-prime" mortgage problems being contained.

And sell side people saying, "sub-prime is a mess, but prime mortgages are doing fine"


This instrument, PrimeX, was set up to follow prime mortgages.


As you can see, they are breaking containment.


That's my simple understanding of it anyway.

Thu, 10/13/2011 - 13:55 | 1770253 Smiddywesson
Smiddywesson's picture

PrimeX is going under?  But that means all the McMansions are upside down!

Quick, we need to bail out all the rich people! (Again)

Fri, 10/14/2011 - 02:49 | 1772600 Hephasteus
Hephasteus's picture

It's ok. Trump towers was financed with junk bonds and it's gone bankrupt 3 times. If you say financial pariah around a banker they think you said mariah carry.

Of course all the mcmansions are financed with junk bonds as well. I think they call it a mortage note. LOL

Thu, 10/13/2011 - 11:38 | 1769721 scatterbrains
scatterbrains's picture

so is it that the lower Prime-x goes the higher bank earnings will be ?

Thu, 10/13/2011 - 11:40 | 1769728 traditionalfunds
traditionalfunds's picture

Wells was bragging last quarter that it's portfolio was doing relatively well due to high composition of prime mortgages.



Thu, 10/13/2011 - 11:43 | 1769736 SheepDog-One
SheepDog-One's picture

Expect everything to get more bizarre and totaly untradeable from here on out as we approach kickoff to WW3 with Iran. The retail trader has been barred from the markets, but theyll still be happy to steal your money if youre brave enough to actually place an order with an HFT robot. 

Thu, 10/13/2011 - 12:16 | 1769887 sabra1
sabra1's picture

bunker buster bombs were recently shipped to israel, war within two weeks according to inside sources!

Thu, 10/13/2011 - 12:23 | 1769914 scatterbrains
scatterbrains's picture

If true are  there any publicly traded blood bank stawks I can buy ?

Thu, 10/13/2011 - 13:48 | 1770214 I Got Worms
I Got Worms's picture

Blood ETF?

Thu, 10/13/2011 - 12:46 | 1770008 itchy166
itchy166's picture


Thu, 10/13/2011 - 11:42 | 1769743 wombats
wombats's picture

Is this bullish for BAC, GS?  That's all that really matters.

Thu, 10/13/2011 - 11:44 | 1769753 Aunty Christ
Aunty Christ's picture

Hard to tell what's really going on, considering the bid/ask spread is wide enough to let several trucks through

Thu, 10/13/2011 - 11:46 | 1769763 RobotTrader
RobotTrader's picture

Meanwhile, the Riverboaters continue to pile into the absolute worst crap imaginable in a vain attempt to "make their year".

Chinese Junkers like JKS up 70% in 5 days.

What a freaking casino.

Thu, 10/13/2011 - 11:53 | 1769800 SMG
SMG's picture

You know if you posted this stuff BEFORE they go up and not after, people around here might appretiate you more.

Thu, 10/13/2011 - 12:01 | 1769833 kito
kito's picture

no way, robo is the best hindsight trader around. cant beat his after the fact calls.

Thu, 10/13/2011 - 12:14 | 1769880 adr
adr's picture

and it is still down what 80% from July?

At least you said the word casino.

I just want to see Deckers take a giant crap on the trading floor. That would make my year.

Thu, 10/13/2011 - 13:13 | 1770098 Panafrican Funk...
Panafrican Funktron Robot's picture

Gave you a thumbs up just because you mentioned a chinese solar company that Leo probably dumped a bunch of money in on margin.  

Thu, 10/13/2011 - 23:11 | 1772191 ceilidh_trail
ceilidh_trail's picture

Whatever happened to Leo and Harry?

Thu, 10/13/2011 - 11:48 | 1769772 huckman
huckman's picture

Too bad that commercial real estate loans have "yeild maintenance" prepayment penalties. 

Thu, 10/13/2011 - 11:52 | 1769773 Mercury
Mercury's picture

One wonders how hard it would be to manipulate the underlying debt on these things.

How many Jumbo loans would actually have to be in technical default (or simply in arrears) to move the needle on certain CDS and/or the PrimeX index which is composed of such?

In other words, could you 1. lay doen some CDS/index bets then 2. (at the appropriate arm's length) buy up a bunch of McMansions (with cheap, borrowed money of course), 3. stop paying the mortgages, 4. realize the gains on your CDS/index position (which will have responded to the loans' non-performance) and turn a handsome profit?

Just sayin'...

Thu, 10/13/2011 - 11:57 | 1769815 jdelano
jdelano's picture

if you could hand select the tranches to bet against like Paulson did, but have a feeling that wouldn't fly anymore given the increased scrutiny....

Thu, 10/13/2011 - 12:27 | 1769857 Mercury
Mercury's picture

Maybe.  I'm talking about manipulating the actual individual mortgages though and I'm sure someone could figure out how to adequately obscure the activity between the left hand and the right hand....or just go for it anyway.  PrimeX is pretty complex and (at least) three removes away from the original, underlying commercial activity to begin with.

I'm not trying to play D. Evil here but it just seems like there has to be an inherent (and exploitable) weakness in situation where a huge notional amount of derivative instruments surround a relatively small amount of unique, illiquid assets.  If that's the case, disaster (beyond the spheres of the "accredited investors" directly involved) is inevitable.

Thu, 10/13/2011 - 11:53 | 1769787 Yen Cross
Yen Cross's picture

 Prime  (X) , is a derivative, that trades off of the over all market! If you look @ the chart. The close is like a P/L close on a weekly ?   bULLSHIT DERIVATIVE CONTRAct.


   WTF is the spin in the multi layered contract movement? So .47 is a (sell) signal?


Thu, 10/13/2011 - 11:51 | 1769793 junkyardjack
junkyardjack's picture

I'm not too worried about this. Stocks don't trade on fundamentals, this is irrelevant to markets.  It'll be at least a year before anyone trading stocks knows what a PrimeX is

Thu, 10/13/2011 - 11:53 | 1769797 PulauHantu29
PulauHantu29's picture

Does PrimeX also come in liquid, the 32 oz bottle...or solamente powder?

Thu, 10/13/2011 - 12:16 | 1769892 M.B. Drapier
M.B. Drapier's picture

It may be about to come as a suppository.

Thu, 10/13/2011 - 11:54 | 1769805 virgilcaine
virgilcaine's picture

Thks for the PrimeX info link 

Thu, 10/13/2011 - 11:55 | 1769808 Mark123
Mark123's picture

Could someone put this on a graph so we can see how it is perfroming over time?  Also, are there other indicators that would substantiate that prime real estate loans are in trouble (and maybe indicate if there is some regional bias). 


This is a really big deal if true.  I have been watching some areas like Seattle where home prices for the upper end seem to have held up quite well.  There have been some suggestions that banks are not forclosing on the more expensive properties to protect their "investments".

Thu, 10/13/2011 - 12:22 | 1769913 hack3434
hack3434's picture

Could someone put this on a graph so we can see how it is perfroming over time?


Also, are there other indicators that would substantiate that prime real estate loans are in trouble (and maybe indicate if there is some regional bias). .

Most Prime and Option ARM mortgages originated in CA and FL. I use Thousand Oaks, CA as a barometer since I used to live there and somewhat understand the econometrics of the area. Housing HAS taken a beating in the area but certainly not enough...

Thu, 10/13/2011 - 12:23 | 1769916 WonderDawg
WonderDawg's picture

Exactly. Particularly true if the more expensive properties are underwater or have big ol' HELOCs behind them.

Thu, 10/13/2011 - 11:57 | 1769813 Aunty Christ
Aunty Christ's picture

Yen Cross: the factor of .47 means that on average, there's only 47% of the original loan balance outstanding; in other words: these are somewhat seasoned jumbo's

Thu, 10/13/2011 - 12:13 | 1769877 Yen Cross
Yen Cross's picture

 I'm well aware. Thanks for having 1/2 a brain!?

Thu, 10/13/2011 - 12:02 | 1769832 afdestruction
afdestruction's picture

On a related note... SRS ultrashort real estate just recently crossed into bullish territory on the weekly MACD for the first time since late 2008.

Thu, 10/13/2011 - 12:11 | 1769871 Yen Cross
Yen Cross's picture

 I liked MACD. I like over sold  ( oscillator'[s more)...

Thu, 10/13/2011 - 13:01 | 1770061 Yen Cross
Yen Cross's picture

You go ahead and hit those "REIT's" , dip shit!

  Hey? did you catch bond yields yesterday? (10's)

Thu, 10/13/2011 - 12:17 | 1769865 vast-dom
vast-dom's picture

Jesus WTF is going on? When will this motherfucker correct? Great Purge immanent for last 4 months!!!!


(PS: Give the ADHD WHORE enough time and she will revert and re-friend her old VD-infested scumbag stealing pals and her old dirty ways; INVERTED STOCKHOLM SYNDROME ain't gonna work with high IQuit so you know who you are and you know this is the best your bedouin whore ass will ever get: FUCK YOU and thanks for the rel cheap pussy, stress and cheap tattoos notwithstanding! Trash is as Trash does; if it dresses like a whore and acts like a whore, then......)

Thu, 10/13/2011 - 12:19 | 1769903 SheepDog-One
SheepDog-One's picture

Yea, its crazy theyre going all-out to fool the retarded. Keeping things 'looking OK' until one morning we've got ICBM's flying. Its all a big 'whatever to me.

Thu, 10/13/2011 - 12:11 | 1769870 rumblefish
rumblefish's picture

What is prime x?

Thu, 10/13/2011 - 12:15 | 1769885 vast-dom
vast-dom's picture

It's a special lube to protect you against market/whore STDs, but it may actually make you contract faster....

Thu, 10/13/2011 - 12:23 | 1769915 Mike2756
Mike2756's picture

Well that's just prime!

Thu, 10/13/2011 - 12:29 | 1769942 Missiondweller
Missiondweller's picture

See above. Someone was nice enough to explain for those of us who don't work on a FI desk.

Thu, 10/13/2011 - 12:15 | 1769884 Ruffcut
Ruffcut's picture

Doesn't redwood trust do mostly jumbos, from the short the mortgage space days in 2007 and on?

I haven't had that chart up for a long time. They still have very small held option chains.

Thu, 10/13/2011 - 12:16 | 1769886 adr
adr's picture

I really like the Nasdaq chart today it looks like a Vietnamese jungle booby trap

Thu, 10/13/2011 - 12:16 | 1769889 americanspirit
americanspirit's picture

Prime-X is a new brand of explosive - next generation Semtex. Doesn't need a source of ignition - blows up all on its own.

Thu, 10/13/2011 - 12:25 | 1769924 Mike2756
Mike2756's picture

So that's what the navy came up with!

Thu, 10/13/2011 - 12:16 | 1769890 thetruth
thetruth's picture

can we get a chart?

Thu, 10/13/2011 - 12:20 | 1769898 tallen
tallen's picture

JPM now -6.5% for the day (Just broke 31). Let this house of crap fall down already.

Thu, 10/13/2011 - 12:32 | 1769960 GeneMarchbanks
GeneMarchbanks's picture

Funny you bring this up because JPM just figured out a way to make money on its own demise.

Thu, 10/13/2011 - 12:42 | 1769996 T-roll
T-roll's picture

Which means silver is sure to follow.

Thu, 10/13/2011 - 12:46 | 1770013 GeneMarchbanks
GeneMarchbanks's picture

Nope. The end of the quarter not the beginning.

Thu, 10/13/2011 - 12:27 | 1769933 vote_libertaria...
vote_libertarian_party's picture

Maybe the selling isn't so much a red flag for prime mortgages.  Maybe it is a red flag that some large hedge funds are getting margin calls and need to raise cash.  Trying to do some under the radar selling.

Thu, 10/13/2011 - 12:28 | 1769938 golfrattt
golfrattt's picture

So, PrimeX is a small market, 1/10th the size of the sub-prime index back in 2008..

How does the action in PrimeX affect other, much larger indices and eventually the broader markets...??

Thu, 10/13/2011 - 12:28 | 1769940 virgilcaine
virgilcaine's picture

Coincides with the drop in CA re prices, the bubble is really being pricked now.

Thu, 10/13/2011 - 12:38 | 1769982 AldoHux_IV
AldoHux_IV's picture

An indication that says pretty much what any rational realist would say: you can manipulate the market up, you can point to inventory rebuilding, but at the end of the day you can't fake the economy into a recovery that isn't there. This along with sovereign issues are prime indicator of 'shifting the risk' whereby no one admits the utter failure and insolvency of the global monetary/fiscal system until they have fully thrown it onto the backs of those who have no political power (the taxpayer).

Thu, 10/13/2011 - 12:43 | 1769997 Yen Cross
Yen Cross's picture

 The shit just gets deeper. these cnbs,ers are a joke. Dingle/berries and all...

Thu, 10/13/2011 - 13:20 | 1770115 t0mmyBerg
t0mmyBerg's picture

i know <table> as a web design element is like so 1998, but that tabular data up in the article really could have benefitted from one.  just saying.

Thu, 10/13/2011 - 13:46 | 1770205 FinalCollapse
FinalCollapse's picture

Maybe they just started to be serious foreclosing the expensive coastal California houses. When coastal California blowes up - watch it. 

Thu, 10/13/2011 - 17:35 | 1770587 Shirley Wilfahrt
Shirley Wilfahrt's picture

Anyone else drinking??


Cheers Bitchez!

Thu, 10/13/2011 - 21:06 | 1771956 zorba THE GREEK
zorba THE GREEK's picture

I wasn't going to drink tonight, but I hate to see someone drink alone.

Bottoms up!

Thu, 10/13/2011 - 18:47 | 1771566 hambone
hambone's picture

PrimeX blowup coincides w/ generational low mortgage rates (ie, int rates will only get worse from here for all ARM rollovers, refi's, refi booms are no more.  Interesting.

Tue, 10/18/2011 - 12:07 | 1785535 Fix It Again Timmy
Fix It Again Timmy's picture

Ahh, PrimeX, I love it when you talk dirty to me... smooch

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