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A new round of Housing Loan problems
Old 03-04-2008, 05:19 PM   #1
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A new round of Housing Loan problems

Take a look at this chart:

Historical ABX Graphs

The double A's are down to 20 cents on the buck.

Also look up tickers TMA and NCT.

What is this indicating?
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Old 03-04-2008, 07:18 PM   #2
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It is indicating that the capital markets have lost their minds.
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Old 03-04-2008, 07:24 PM   #3
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Is it ever a good bet that the bond market has lost its mind?

Here's a pimer on the ABX index:

Tom Brown's bankstocks.com
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Old 03-04-2008, 07:47 PM   #4
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Quote:
Originally Posted by brewer12345 View Post
It is indicating that the capital markets have lost their minds.

and the foreclosure rate isn't that high yet
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Old 03-04-2008, 07:54 PM   #5
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Originally Posted by twaddle View Post
Is it ever a good bet that the bond market has lost its mind?

Here's a pimer on the ABX index:

Tom Brown's bankstocks.com
Interesting link, a little too technical for me, I think the bottom line is it's not really 20 cents on the dollar for the AA's, maybe more like 50 or 60 cents. Regardless, I watch the trend and the trend broke to new lows again recently. It's says to me all is not well and one should be cautious. I'm holding back on adding new capital until I see an improvement in that area, it has correctly kept my powder dry so far. We'll see if this is an early indicator that things are getting better, I am conservative and I intend to use it as an "all clear" indicator. We'll know within a year I would think, whether that was wise.
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Old 03-04-2008, 08:02 PM   #6
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I think the bottom-line is that the price of the ABX reflects the subprime tranche, not the high-quality tranche. So, it reflects the expected default rate of the subprime loans, which is quite high (and growing).
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Old 03-04-2008, 08:08 PM   #7
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I think the bottom-line is that the price of the ABX reflects the subprime tranche, not the high-quality tranche. So, it reflects the expected default rate of the subprime loans, which is quite high (and growing).
I'll buy that, the "subprime AA tranche", now that is enlightening. Some on Wall Street made a lot of money on that invention, some should be going to jail. Sounds like a new Wall Steet movie is warranted.

P.S. I wish I was a securities lawyer at times like this. Of course there may be nothing left to get.
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Old 03-05-2008, 07:51 PM   #8
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It is indicating that the capital markets have lost their minds.
Here is some confirmation on that point.


http://www.bloomberg.com/apps/news?p...1nQ&refer=home
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Old 03-06-2008, 12:57 AM   #9
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Usually I avoid bond funds but maybe I should look at a couple for the fixed income allocation in my IRA. Hum....

I looked at CDs and returns stink.
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Old 03-06-2008, 08:06 AM   #10
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the whole thing is that mortgages were priced too low for the risk. back in 2003 a subprime mortgage was close to 10% interest. by 2005 i was reading on creditboards that people with low 600 FICO were getting 100% LTV loans for like 6% or less. and this is people with at least one foreclosure.

come 2007 and foreclosures start to head back up to historical norms from the lowest rate in history and suddenly everyone realizes they own a lot of bonds that are priced too low for the risk they carry. and when you have stories come out of Goldman shorting securities that it bought for it's managed hedge funds you lose confidence. would you buy a bond from the guys who are shorting what they sell you and who probably lied to you about the risk you are taking on?

bankers got high on prozac and thought everything was sunny and the clouds would never come back
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Old 03-06-2008, 08:14 AM   #11
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What really gets me is that 4 years ago, I (and many other armchair economists) warned loudly about housing bubbles fueled by interest-only, nothing-down, teaser-rate ARMs. Everyone with a pulse and half a brain realized that would likely end very badly.
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Old 03-06-2008, 08:34 AM   #12
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What really gets me is that 4 years ago, I (and many other armchair economists) warned loudly about housing bubbles fueled by interest-only, nothing-down, teaser-rate ARMs. Everyone with a pulse and half a brain realized that would likely end very badly.
Frank told me that several years ago, too. I thought he was exaggerating the problem, but it turns out that he wasn't.

Even I realized that ARM's weren't necessarily a good idea at the time, but I was thinking of the possibility that someone might change their minds and want to stay in their house more than five years in a (possibly) rising interest rate environment.
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Old 03-06-2008, 09:14 AM   #13
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foreclosure numbers just came out

.83% and late payments surged to 5.82% of all loans

just imagine the carnage in the credit markets if half of these late payments became forclosures
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Old 03-06-2008, 09:37 AM   #14
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What really gets me is that 4 years ago, I (and many other armchair economists) warned loudly about housing bubbles fueled by interest-only, nothing-down, teaser-rate ARMs. Everyone with a pulse and half a brain realized that would likely end very badly.
Yeah, hind site is 20-20 ... if I'ld had opened my eyes to couple Joe-kennedy-paper-boy moments, I wouldn't be holding 6 rentals.

1. My neighbor RUNNING down the street waving her arms "IS THIS HOUSE FOR SALE?!?" as the realtor pounds the sign into the ground. Last one I sold; full price; 105% financing; 0 down. Listed employment "Landlord".

2. My tenant, a flooring installer, quits his job to sell subprime mortgages. Lasts 6 months before the bottom comes out of the market.
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Old 03-06-2008, 12:06 PM   #15
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Also look up tickers TMA and NCT.

What is this indicating?
In the case of TMA, it was apparently indicating bankruptcy due to a Big Margin Call.
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Old 03-06-2008, 12:42 PM   #16
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What really gets me is that 4 years ago, I (and many other armchair economists) warned loudly about housing bubbles fueled by interest-only, nothing-down, teaser-rate ARMs. Everyone with a pulse and half a brain realized that would likely end very badly.
Too many intermediaries and a hot-potato mentality. Institutions figured they were immune to the risk because the loan gets bundled and passed off to a bigger sucker, and "look at all the money we can make. When the borrower can no longer afford the loan....we can sell him a refi!"
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