Holders of investment-grade portions of collateralized debt obligations may lose all of their money in the securities, which have been dressed up in ``six-inch hooker heels,'' according to Bill Gross, manager of the world's biggest bond fund. ---------------------------------- I've been telling you for years that they were lending to toothless trailer trash. Now the big man agrees.
Funny. ``AAA? You were wooed Mr. Moody's and Mr. Poor's by the makeup, those six-inch hooker heels and a `tramp stamp,''' Gross said in his monthly commentary posted on Pimco's Web site today. ``Many of these good looking girls are not high-class assets worth 100 cents on the dollar.'' http://www.bloomberg.com/apps/news?pid=20601087&sid=aQOUukpyniLU&refer=home
Duped, my foot, it was all part of the pump up the economy so the Republicans could keep control of congress. How many time 18 months ago did you hear George Bush say " more americans than ever own their own home" its the american dream come true for everyone, hahaha everyone was in on this pump and dump.
Slamdown coming. CDO market near halt amid deeper subprime worries Tue Jun 26, 2007 5:27PM EDT Email | Print | Digg | Reprints | Single Page [-] Text [+] Featured Broker sponsored link By Jennifer Ablan NEW YORK, June 26 (Reuters) - The market for collateralized debt obligations, or CDOs, has slowed to a crawl, weighed down by the turmoil over subprime mortgages that has deepened dramatically over the last two weeks. Only $3 billion of new high-grade CDOs were marketed to investors in the latest week, down dramatically from just one month ago when the pipeline stood at over $20 billion, according to J.P. Morgan Securities Inc. Since that time, $18 billion of those CDOs have priced, the firm added. Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. A change in foreign taste would be disruptive across many asset classes since this pooling of debt assets, including subprime mortgages, have resulted in a tremendous compression of yield spreads. "If investors start dumping them, oh boy, watch out for some massive credit widening," said Dan Fuss, vice chairman at Loomis Sayles in Boston, where he helps oversee $77 billion in fixed-income assets. "This is just the beginning of ugly things to come," Fuss added. Already, investors have taken a defensive stance. Activity in the structured finance CDO segment has slowed "considerably" as investors assess the fallout from the crisis over subprime asset-backed mortgage securities, Chris Flanagan, head of asset-backed research at J.P. Morgan, said in a report Monday. For his part, Fuss of Loomis says he has increased his exposure to long-dated Treasury bonds of 15 percent as well as scaled back his stake in high-yield, or junk-rated, debt. On Tuesday the head of the U.S. Securities and Exchange Commission told lawmakers that the agency has opened 12 enforcement investigations into matters surrounding CDOs. The turmoil in the subprime mortgage market intensified last Thursday when Bear Stearns put on sale $4 billion of mortgage bonds, mostly top-rated assets to lure buyers, in an effort to help cover reported losses by one of its hedge funds, fund managers and other sources told Reuters. They said the sale had been related to losses sustained in subprime mortgages by at least one hedge fund managed by the investment bank. The sale came just as New York-based Bear Stearns said its quarterly earnings fell by a third, citing stress in the mortgage market that hurt bond trading revenue and as it wrote down assets at a stock trading venture. Bill Gross, the chief investment officer of Pacific Investment Management Co., or PIMCO, on Tuesday lambasted rating agencies for failing to warn investors about the riskiest segments of the U.S. credit markets, saying they were wooed by "the makeup" and "six-inch hooker heels." Calls to Moody's and McGraw Hill's Standard & Poor's were not immediately returned. Gross said the collateralized debt obligations lured investors like "good-looking girls" but were not "high-class assets" worth 100 cents on the dollar. Currently, 7 percent of subprime loans are in default and some CDO holders "will lose all of their moolah because of the significant leverage," he said. Indeed, banks doubled the amount of CDOs outstanding in the past two years to $2.6 trillion, including a record $769 billion sold last year, according to J.P. Morgan. These figures include funded and unfunded issuance. Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS -- all of which he considers "toxic waste." "There has been some push back across the board and I think that would apply to both domestic and international investors," added Marc Schnitzer, chief executive officer at Centerline Capital Group, which invests in collateralized mortgage-backed securities. © Reuters 2007. All rights reserved.
This whole thing is as predictable as a Cop Show on TV. The only variable is, you can't look at your watch, see there is only ten minutes left, and know the bad guy is going down in 6 minutes, allowing four for the commercials. Guys like Gross tell you what you know, but the Street lies for their pals, Bear Stearns will rally here while everyone believes it should crash, and then, like a freshman hazing a fraternity, we'll all wake up one morning wondering "wha hoppen id????" Or, maybe it all works out.
"she's a hiiiiiiiiiiigh class whore!" sounds like too many of my NY compatriots have taken their Scores expertise to a new level in CDO's