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Genesis Posts: 71431 Incept: 2007-06-26 
KD^2 
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http://market-ticker.denninger.net/2007/....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-16 16:40:22
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Early_retirement Posts: 1843 Incept: 2007-06-26 
Burlington, Vermont
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Those ABX charts are unreal!
---------- "You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else."
2007-07-16 16:46:04
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Genesis Posts: 71431 Incept: 2007-06-26
KD^2
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The ABX charts are the known quantity. What nobody is talking about is the CMBX. Yet. But that's the real story here, because it is conclusive evidence that this is not contained and that just like every previous housing-led downturn, this one is going to infest the commercial R/E space too and from there into the broader economy. There is no escape from reality here. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-16 16:49:05
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Ilikethehype Posts: 573 Incept: 2007-06-26 
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Quote:The dollar continues to be in the trashcan over the weekend, trading around 80.55, but the moves are somewhat muted. People appear to be holding their breath, seeing if there's anything to set off another plunge. Or maybe 80 will hold... Of course the nasty part of this is that if you priced your stocks in Euros, you haven't made anything this year! What's worse is the inflationary impact this has on us - there's a delay on that impact, but it is as unavoidable as the sun setting in the evening. Do you think anyone will point out the good news about international stocks driving the DOW higher is really just a sign of inflation (deflation of the dollar)? Nah! ---------- Bernanke himself revealed the various policy measures the Fed might take in response to a crisis: buying government bonds, providing overdrafts and other short-term credits to banks, currency swaps (to boost the dollar), and "securities lending," that is, lending money to institutions to buy stocks. URL htt
2007-07-16 16:52:47
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Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
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people seem to be buying into the "higher earnings because of the deflated dollar" scenario. Its going to take a turn downward from the leading stocks to bring the markets down. So far only the brokerages have been hit. Other market leaders have been on a euphoric teflon rise. However in the last 2 days CPA got wacked. I'm curious to see if a few other market leaders will follow. When that happens there will likely be a serious change in sentiment. ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out)
2007-07-16 17:13:12
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Nasdevelopment Posts: 198 Incept: 2007-06-27 Nashville
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Bear said they were going to "unwind" in an "orderly" fashion. This must be epic. No news is a darker omen for BSC than news that is merely bad. The highly leveraged fund is for sure a total wipeout. The other fund might get 20 cents on the dollar.
2007-07-16 17:56:57
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Uncleoxidant Posts: 1704 Incept: 2007-07-10 Stumptown
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This makes absolutely no sense: "Indexes based on the value of securities backed by the mortgages fell, with some making new lows. The benchmark 10-year note's yield last week touched a one-month low amid speculation the losses will eventually prompt the Fed to cut interest rates for the first time since 2003." (quoting your quote) Why would the FED lower because the value of securities backed by mortgages are falling (including the ABX)? Wouldn't be more likely that they'll have to raise rates? ---------- I am NOT a consumer, I am a Citizen! Last modified:
2007-07-16 18:02:18 by uncleoxidant
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Nasdevelopment Posts: 198 Incept: 2007-06-27 Nashville
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uncleoxidant: the reason the ABX is falling is because delinquency and foreclosure rates are up. Lower fed fund rates mean lower mortgage rates. If rates are lower struggling borrowers have more opportunity to re-finance or sell to another bag holder. Also people with adjustable rater mortgages are in better shape if rates are lower when their mortgage resets. They are more likely to make their payments and foreclosures rates will in theory tick down. That helps the ABX
2007-07-16 18:17:46
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Sandra Posts: 3730 Incept: 2007-06-27
New York, NY
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uncleoxidant, prices and rates/yields move in opposite directions, so when the ABX falls, it means ABS yields have risen. If the benchmark Treasury rate has stayed the same, that implies that the spread has widened. Look at it like this, say the current rate on the 10 year is 5% and the mortgage spread is 100 bps. That leaves the rate for a new mortgage at 6%. If spreads widen 100 bps to 200, that give the homeowner a 7% rate. If the Fed lowers rates, say the 10 year moves to 4.5%, then the homeowner pays 6.5% thus providing some relief probably too little too late....
2007-07-16 18:35:11
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Geoffrey Posts: 132 Incept: 2007-07-16
Los Angeles
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Are the European equivalent of the ABX charts also breaking down?
2007-07-16 18:59:30
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Uncleoxidant Posts: 1704 Incept: 2007-07-10 Stumptown
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nasdevelopment and sandra: But doesn't the ABX crash basically mean that it's becomeing more risky to lend? If that's the case, then rates should go up. "If spreads widen 100 bps to 200, that give the homeowner a 7% rate." Right, but that's a good thing in this case because it means we're getting the correct risk premium being priced in - it means that rates need to be higher to cover the increased risk. Chucky isn't the US Gov, so it should cost Chucky a lot more to borry than it does for the US Gov. In recent years there hasn't been that much of a spread between the 10 and the rate on a 30 year mortgage - what is it, 1 or 1.5%? It seems to me that we need to see a bigger disconnect between the 10 and 30 year mortgage rates and an even bigger disconnect (I suppose 'spread' is the correct word to use here, but in some sense I actually mean disconnect because maybe the two shouldn't be as tied together as they have been in recent years) between the 10 and the various exotic ARMs/IOs. "If the Fed lowers rates, say the 10 year moves to 4.5%, then the homeowner pays 6.5% thus providing some relief probably too little too late...." But if the Fed lowers rates to 4.5% we can kiss the dollar goodbye. ---------- I am NOT a consumer, I am a Citizen! Last modified:
2007-07-16 19:05:35 by uncleoxidant
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Otc_buzzard Posts: 655 Incept: 2007-07-13
Denver
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Here's an interesting angle... ACA, take a look at a company the most of their entire business model revolves around CDO's and insuring them. Can anyone convince me this thing is not a GTZ short? I know it's already down pretty hard, but how do they survive when they really get hit and their CDO insurance gets hit? ---------- Wallstreet is a corrupt insiders game. When they ask for a bailout tell them to **** off!! --- Everything I post is JMHO, take it as such.
2007-07-16 19:19:19
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Sandra Posts: 3730 Incept: 2007-06-27
New York, NY
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uncleoxidant, "But doesn't the ABX crash basically mean that it's becomeing more risky to lend? If that's the case, then rates should go up." Yes, and they have. That is, the rates that the consumer pays (which equal the "risk free rate" (Treasury or LIBOR) plus the credit spread). But, there is currently a flight to quality and people end up buying treasuries instead of the risky stuff which actually keeps treasury rates down. In fact, sometimes the risky stuff is hedged by selling treasuries short, so when funds sell the bonds, they buy the treasuries at the same time. So, you get higher consumer rates and flat to lower Treasury rates during events like the one that's starting. This doesn't automatically mean the Fed will lower rates. There are so many other things in the mix like inflation and the dollar, so it is not a given that it would happen soon, but, I think Karl is predicting a recession. and the gov't usually reacts to something like that by pumping money into the economy through lower rates. What you call the "disconnect" between the 10 and 30 is a bad sign and it has been going on for a while. It implies that the economy is not expected to grow in the future, and nobody is getting paid much premium to invest for longer periods of time. Banks are in the business of borrowing short term and lending long term and reaping that spread which is called the Net Interest Margin, and it has been just slowly eroding their profits. Last modified:
2007-07-16 19:30:52 by sandra
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Lucianij Posts: 1089 Incept: 2007-06-27
NKW
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on price inflation... I have been back in the U.S. for a few days now.... how do you guys afford groceries at the market ??? Talking about cheese.... I thought I was buying a block of silver... about the same price. And gasoline... ~ $3.07 per gallon... (and rising ?)... well, I guess if you keep repeating to the consumer that there is no inflation then they will eventually believe it.
---------- John Dillinger - "My buddies wanted to be firemen, farmers or policemen, something like that. Not me, I just wanted to steal people's money!"
2007-07-16 20:58:26
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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"But doesn't the ABX crash basically mean that it's becomeing more risky to lend? If that's the case, then rates should go up." It really means that it WAS very risky to lend in the way that they were lending then. Here is the problem - there is still a few trillion US$ washing around in the world that has to end up somewhere. So the premium for risk should go up, but the good ole 20% down on a full doc loan in, say Omaha, to a high FICO borrower should still get a pretty good interest rate. ---------- The truth is out there
2007-07-16 21:25:26
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Genesis Posts: 71431 Incept: 2007-06-26
KD^2
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Yeah, but the big problem is whether anyone can AFFORD a house on that good old 20% down, 30/fixed loan! In many parts of the country those terms prevent 90% of the population from buying. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-16 21:26:36
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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Bingo. So the homeownership rate will start to slowly decline as this mess unwinds. Single family housing rentals will become ever more common. I have a few.
---------- The truth is out there
2007-07-16 21:29:33
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Stoney707 Posts: 1082 Incept: 2007-07-12
costa rica
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I am new to reading your posts, blogs or for an older guy like me, I like reading another mans opinions based on intelligent facts. I'm short big the manipulated four horsemen Q's, but I believe I will bear fruit. No pun intended actually. Watch Japan. This quake is very serious and theres more tremors to come. Quakes have a way of scaring and changing the psyche of people. Let me just say this. I live in Costa Rica, in an earthquake tremor zone. Friday, Saturday, SUnday, and this morning around the time that the markets >NAS 100< starting turning down, well we had one big jolt in my third floor apartment, and then for 2 minutes, several rolling tremors.. The world is connected. What I am saying is, is that it is possible that the japanese people might be asking for money out of their investments. Like a little security in their own pockets for a rainy earthquake day, like yesterday. I'm watching that market closely. Well anyway, I live in a world similar to DEADWOOD, the HBO show. I'm out the door to one of my favorite real DEADWOOD saloons with live music and over a hundred young attractive ladies to dance with and feel alive, even at 60. I'm a lucky man at night, now if the short position in the Q's would just start to break in my favor, and not be propped up by Cramer and his criminal buddies and the PPT. Its sad. bye.
2007-07-16 23:53:26
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Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
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I think we finally have some additional tremors from the post bear stearns collapse period. http://www.nytimes.com/2007/07/17/busine.... ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out)
2007-07-17 01:37:16
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Jubber Posts: 4242 Incept: 2007-07-05
UK
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what companies are similar to this one in the US, PMI, MGIC? cannot short ACA in the UK
---------- "War is God's way of teaching Americans geography." Ambrose Bierce "The Emperor realized that the people were right but could not admit to that. He though it better to continue the procession under the illusion that anyone who couldn't see his clothes was either stupid or incompetent." Hans Christia
2007-07-17 02:14:36
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Hiphopapotamus Posts: 373 Incept: 2007-07-11
Burbank, CA
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it looks like ACA already took a big hit (22%)today and is down from over $15 just a month ago. do you think they're going lower or maybe due for a dead cat bounce?
2007-07-17 02:32:26
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