market makers not quoting anymore. nobody picking up the phone. oh dear oh dear July 24 (Bloomberg) -- The Wall Street money-machine known as collateralized debt obligations is grinding to a halt, imperiling $8.6 billion in annual underwriting fees and reducing credit for everyone from buyout king Henry Kravis to homeowners. Sales of the securities -- used to pool bonds, loans and their derivatives into new debt -- dwindled to $3.7 billion in the U.S. this month from $42 billion in June, analysts at New York-based JPMorgan Chase & Co. said yesterday. The market is ``virtually shut,'' the bank said in a July 13 report. Investors are shunning CDOs after the near-collapse of two hedge funds run by Bear Stearns Cos. that owned the securities. Standard & Poor's downgraded bonds from 75 CDOs as mortgages to people with poor credit defaulted at record rates. Concern about losses on home loans are rattling investors across the credit spectrum. ``We're walking on thin ice,'' said Alexander Baskov, a fund manager who helps oversee $25 billion of high-yield debt for Pictet Asset Management SA in Geneva. ``People are trying to find value and the right price and right now nobody knows what it is. Pretty much everyone is in the dark.'' FULL STORY BELOW: http://www.bloomberg.com/apps/news?pid=20601103&sid=aG18rnNeuGxc&refer=us
Yes, but anyone who read about it before knew it was coming. The people who said this wasn't a big deal are supreme idiots of course and all the "liquidity" that would save the day has dried up in certain pools and as ARM loans reset there will probably be even less liquidity sloshing around. Thanks for sharing.
i think this will ultimately prove to be ten times worse than the savings and loans crisis, the asian crisis , the junk bond meltdown and the ltcm debacle. this is serious stuff and when the market wakes up to the reality and sheer scale of this its gonna be fun. a lot of the problem is the fact huge profits were made out of this by leveraging up all the way and other counterparties leveraging of the already leveraged market. now we are de-leveraging there will be huge losses. no two ways about it. you cannot leverage up and make billions but deleverage and lose nothing. the trades do not work like that.
How do you capitalize? I'm trying to figure it out. Luckily two of my biggest plays are small cap gold plays and I feel like I can skate by unaffected for the most part. But the lenders and builders have been nailed. Trying to figure out what banks take the biggest hit is next to impossible. It's a hard patch of deciphering to figure out where to bet the most ugliness shines. Did you read that article about the dollar hitting fresh lows today from Bloomberg?
how do you capitalize? this is how. dollar certainly looks like it would get hit but currencies have a mind of their own. stocks will go down if it gets nasty but who knows. again very hard to call. one thing for sure is that credit spreads will widen. this is a fact. i have been calling this on elite trader for a few weeks now and even gave specific trades to put on. quite simple this. you can put on some easy trades here most of them spreaded as well. sell june 08 eurodollars ( interest rates not currencies ) and buy 2 year or five year bonds. ratio roughly is 50 eurodollars to 30 five years. there you have the credit spread on. you are selling corporate interest rates against goverment rates. in a crisis they will go for the bonds over corprates. i have had this trade on in europe for a few week and its very profitable. if this blows up even further you may come in on a monday morning and find these spreads have moved anywhere from 50 to a 100 ticks. you maybe putting these trades on at the highs but unless this all turns around very quickly i think they will still widen further.
one way to capitalize is short regional S&L's (DSL, FED, CORS....),homebuilders that focus on lowerpriced moveup buyers/1st time buyers......this debacle will of course lead to tighter lending standards and higher rates as the risk premium demanded will be higher....spreads on the commercial cdo's have started to accelerate over the past wk if no one has noticed yet *i'm short DSL RYL KBH LEN
I'm short CTX and DSL. Made about $10k on DSL for the last few weeks on August Puts but traded them in for November Puts I think, $55 strike...that thing is going to meltdown with CFC reporting such ugly numbers. Cramer's pumping of DSL is disgusting.
nice gains on dsl, i'm short from 67....yeah cramer only pumping to get someone out kinda like he did with CFC, considering that 85% of their loans on option arms with a huge chunk stated all in southern cali, its a ticking timebomb, i can't wait for the restatements to happen their reo's grew quite a bit but are still small time to CFC's 10k properties lol
Jim Cramer should be indicted for saying that Downey is in a "growth industry" which I think is a bit of bullshit since they hold almost all Alt-A loans in California...that's the exact opposite of a growth industry.