Surprise? Nah, just meeting the new lower expectations of the market.
Expectations around mud in my mind.
LEND looks dead too, with the revelation that they were technically bk'ed last year. I wonder how many are finding a mark to market yields technical insolvency...
Lake Shore Asset Management Ltd., a hedge fund firm run by a former chairman of the Chicago Mercantile Exchange, had its assets frozen by a federal court after regulators said it overstated its holdings.
Chicago-based Lake Shore purported to manage $1 billion for investors and traded in U.S. commodities futures contracts, according to the Commodity Futures Trading Commission. A review later showed the fund had about $466 million. Lake Shore barred regulators from inspecting its accounts on June 14, a violation of the Commodity Exchange Act, according to the CFTC's complaint.
CHICAGO, June 27 (Reuters) - The subprime mortgage problem will worsen over the next year and the rate of loan delinquencies could rise further, an influential fund manager specializing in mortgage backed securities said on Wednesday.
Jeffrey Gundlach, chief investment officer at the Trust Company of the West (TCW) who oversees about $60 billion in assets, also said the worsening subprime woes would slow the economy down and lead to a cut in interest rates.
"The subprime area is a total unmitigaged disaster and it's going to get worse," Gundlach told Morningstar's annual investment conference in Chicago.
(end quote)
Contained, just in a bigger container, for now.
Check back in one week, one month and one year for the new size of the container.
I can't imagine what circumstances would cause a company to bar regulators from doing their thing. It seems to me that it is asking for the axe to fall.
I have been reading that and pondering in a daze, and the only thing I can come up with is insanity. It's like screaming to the police officer who stopped you for a broken taillight "Don't check the trunk! I know my rights! Don't check the trunk!!! If you open the trunk, I'll sue you and have your badge."
Surprise, eh. It's easy to overdo the Inigo Montoya thing these days, but really folks
I can't imagine what circumstances would cause a company to bar regulators from doing their thing. It seems to me that it is asking for the axe to fall.
One last high-stakes gamble, I guess. In exchange for one little addition to what might turn out to be a cornucopia of charges, they buy two more weeks to hide stuff.
We've all seen drunk or emotionally overwrought people do dumber things MOM. What amazes me is how many intelligent and educated people do stuff like that. However, as a friend of mine once said, "Intelligence is over-rated as a survival skill."
Great! My $20 AHM PUTs expired on the 15th. That's the screwed part about options. You can be confident about the direction but timing is at least partially in the hands of company management.
I'm certain they knew all about their liquidy problems and the loss 2 weeks ago. The financing isn't something they arranged today. I got ripped...
"June 28 (Bloomberg) -- International Monetary Fund Managing Director Rodrigo de Rato will quit his post in October, two years before his term ends, citing ``personal reasons.''
De Rato, a former Spanish economy minister who has led the Washington-based agency since June 2004, will leave after the annual meetings of the fund and the World Bank, the IMF said in a statement. He said he was concerned about his children's education, without elaborating."
The leveraged loan market is threatening to follow in the footsteps of the ABX market.
In contrast to the rather minimal rise in corporate spreads during the past few weeks, the implied spread in the leveraged loan market has surged. Clearly many investors have decided the risks facing the loan market have grown and are perhaps looking to repeat the success of those who shorted the ABX market earlier this year. The blowout in ABX spreads was the result of a deluge in low-quality issuance due to a severe lapse in underwriting standards by sub-prime lenders, closely followed by a severe housing market correction. Arguably, there has been some deterioration in corporate lending standards although not nearly as much as occurred in the sub-prime mortgage market. Meanwhile, leveraged loan issuance has increased substantially, but still accounts for only a fraction of the overall corporate debt burden. Bottom Line: We cannot rule out contagion that sends spreads in the broader corporate bond market wider, due to a flight to quality and a drying up of liquidity. However, healthier balance sheets mean that the corporate bond market is less vulnerable than was the case in late 1998. We remain neutral on corporate bonds until the releveraging phase is further advanced.
as i mentioned in another thread, i only use shorts since they don't involve time pressure and upside is much greater. i don't buy the std rap against shorts that a stock could go to infinity. as long as you watch it carefully you can close it out. i've been short homeys and lenders for over 6 mo and have ridden them up and down since but now i'm way up due to patience. as many have mentioned on this site, this is a slow motion trainwreck with an obvious direction.
Andrew wrote: ...as a friend of mine once said, "Intelligence is over-rated as a survival skill.
Yep. Knowing what's going on is far more important. In theory, intelligence should help one do that, but in practice, it's not as good as street-smarts and savviness. And sometimes intelligence divorced from experience allows a person to become expert at convincing him- or herself that what he or she wants to believe is true.
idoc, I do both. I like the contained losses of PUT options and the leverage - being exposed to a lot of shares at a small price. I like to go out-of-the-money, usually as prices go up or if they're steady as the volatility component of the premium disappears. I know some of my trades will go to zero. The ones that work out for me more than make up the difference, and no short squeeze in a buy-out. You can't rule out buy-outs. I got caught in one of those riding a lot of shares short. Luckily I had a lot of cash in my account to cover my loss. Check your margin agreement.
but, when the pension gets burned, they scream foul, that the mandate wasn't followed, that they weren't diversified...
these are unregulated pools meant for sophisticated (risk takers) investors who understand the underlying risks, so it seems now they wish to take the position that they didn't understand, that they lacked the sophistication necessary to make a fiduciary decision based on the inherent risk in a leveraged pool of assets?
"In one pending lawsuit, the San Diego Employees Retirement Association sued Amaranth Advisors LLC in March for $150 million after the fund suffered $6 billion in losses -- the biggest hedge fund collapse ever. The investors contend that Amaranth violated its investment mandates by not diversifying its portfolio enough or guarding well enough against risk."
De Rato leaves as head of the IMF because he is concerned about his children's education??? WTF?
blink blink blink as I look staringly into my computer screen.. wtf??
He said he was concerned about his children's education. Sometimes you just have to sit and wonder and throw your hands up admitting defeat that you just don't get it. Well that I don't get. How stupid are his kid one has to wonder for him tot quit his job???
Law suits are the next stage. But even before that more news will come out. How far behind AHM can FirstFed (ticker: FED) be? They are in the same market (Ca.) doing the same biz?
The only advantage Fed has is that they started to show pre-payment penalties as part of their "interest spread". With their loan portfolio down almost 4% last month alone no wonder those profits are going up.
But what does this do to the interest they receive?
Together with their rising delinquencies their income should be down by about 5% a month. (decline of 70% per year ????)
Iran building a stock of gasoline because they (ironically enough) are vulnerable to a trade blockade for gasoline. They imported 5 billion dollars of gasoline last year because they don't have enough internal refinery capacity to produce for consumption. This leads to a new course for anti-Iran forces, as it will be seen as an easy way to bring the existing iranian goverment down-aim a strike at the existing refinery and existing storage capacity. It's not good for stability.
Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans.
Bravo to Tanta for her comments back in February and March:
"... I have little voices in the back of my head telling me that AHM's numbers are not what God had in mind when he invented FASB."
"One of my new favorite candidates for the Next Big Explosion, now that we've gotten through NEW and NFI and (apparently) FMT is AHM. I really, really, don't trust them."
plus other more analytic dissections of the company's financial statements.
.
Here are some references to accompany the "panic inducing article" from Bloomberg about the relationship between the rating agencies and the CDO issuers. They are not light reading (especially the first reference, 87 pages long with plenty of footnotes and statistical analyses), but illuminating nonetheless, even if you skip over the statistical stuff.
3) A report from the Authorite des Marches Financiers in Paris (in perfect English), "Is Rating an Efficient Response to the Challenges of the Structured Finance Market":
| http://www.amf-france.org/documents/general/7693_1.pdf
From the abstract of the fourth reference: "Our findings imply that even investment grade rated CDOs will experience significant losses if home prices depreciate."
.
"In these circumstances, the committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
That is the bull case: everything is okay, except inflation might still be a problem. We look at economic growth, but we're really concerned about inflation.
And, you know, the unbelievably informative discussion about inflation versus deflation in these comments awhile ago succeeded in making me fear inflation a lot more than deflation.
Yes, deflation favors the rich. And, yes, deflation combined with an Executive like Hoover or Bush leads to starvation for a considerable portion of the population. But inflation leads to worse stuff. Much worse stuff. Hitler, for example.
I'm still waiting for a new Sub-Core inflation metric that simply excludes all items that rise in price.
Significant deflation of home values places even prime traditional loans at risk. Even if you started out with 10 or 15% down, deflating home values cut a hole in that quickly.
If you think of circumstances such as layoffs, divorces and medical crises, it's obvious that prime conforming mortgageholders are sometimes forced to sell. In some markets that I know of, values have already dropped 15-20%. I don't see a change for a few years, so with every passing six months, the risk on prime mortgage portfolios in these areas is still rising. It's not a pretty picture.
The Bloomberg article directly blames S&P, Moody's and Fitch for causing Bear's problems. What a hoot.
What this whole thing has lacked so far is a villain... a Keating or a Kenny-boy. I though Cioffi might take the hit... but it looks like the crosshairs are still moving. We can't blame the consumer - too vague. We should implicate Greenspan, but he is still revered in some quarters. Can't blame Bear... everybody knows their reputation anyway. When the music stops, who will be without a chair?
Yal, I have a suggestion... fire up a word processor and do a spell check on your comments before posting. While I can sympathize with the second (or third or whatever) language issue and would not flame over it, I also can sympathize with those that find it tough to see posts totally mangling every other word. Please, Don't take this as a slam. Think of the word processor as a spelling/grammar tutor...
Surprise? Nah, just meeting the new lower expectations of the market.
Expectations around mud in my mind.
LEND looks dead too, with the revelation that they were technically bk'ed last year. I wonder how many are finding a mark to market yields technical insolvency...
Someday this war's gonna end...
Tanta,
Here is some insider video from Bear Sterns this past week.
It'll give you better understanding into "Surprise!".
YouTube -
-Bad Man Jeers
My mistake, CR.
Apologies!
jb
Is this bad?
Lake Shore Asset Management Accounts Frozen by U.S. (Update4) - Bloomberg.com
Lake Shore Asset Management Ltd., a hedge fund firm run by a former chairman of the Chicago Mercantile Exchange, had its assets frozen by a federal court after regulators said it overstated its holdings.
Chicago-based Lake Shore purported to manage $1 billion for investors and traded in U.S. commodities futures contracts, according to the Commodity Futures Trading Commission. A review later showed the fund had about $466 million. Lake Shore barred regulators from inspecting its accounts on June 14, a violation of the Commodity Exchange Act, according to the CFTC's complaint.
Posted earlier today but even more relevant:
CHICAGO, June 27 (Reuters) - The subprime mortgage problem will worsen over the next year and the rate of loan delinquencies could rise further, an influential fund manager specializing in mortgage backed securities said on Wednesday.
Jeffrey Gundlach, chief investment officer at the Trust Company of the West (TCW) who oversees about $60 billion in assets, also said the worsening subprime woes would slow the economy down and lead to a cut in interest rates.
"The subprime area is a total unmitigaged disaster and it's going to get worse," Gundlach told Morningstar's annual investment conference in Chicago.
(end quote)
Contained, just in a bigger container, for now.
Check back in one week, one month and one year for the new size of the container.
"will likely suffer a surprise second-quarter loss"
The only surprise here would have been if they didn't.
The problems are CONTAINED. There will be no SPILLOVER. It's different THIS TIME.
I can't imagine what circumstances would cause a company to bar regulators from doing their thing. It seems to me that it is asking for the axe to fall.
I have been reading that and pondering in a daze, and the only thing I can come up with is insanity. It's like screaming to the police officer who stopped you for a broken taillight "Don't check the trunk! I know my rights! Don't check the trunk!!! If you open the trunk, I'll sue you and have your badge."
Surprise, eh. It's easy to overdo the Inigo Montoya thing these days, but really folks
I can't imagine what circumstances would cause a company to bar regulators from doing their thing. It seems to me that it is asking for the axe to fall.
One last high-stakes gamble, I guess. In exchange for one little addition to what might turn out to be a cornucopia of charges, they buy two more weeks to hide stuff.
We've all seen drunk or emotionally overwrought people do dumber things MOM. What amazes me is how many intelligent and educated people do stuff like that. However, as a friend of mine once said, "Intelligence is over-rated as a survival skill."
Great! My $20 AHM PUTs expired on the 15th. That's the screwed part about options. You can be confident about the direction but timing is at least partially in the hands of company management.
I'm certain they knew all about their liquidy problems and the loss 2 weeks ago. The financing isn't something they arranged today. I got ripped...
LEND looks dead too, with the revelation that they were technically bk'ed last year
Where did you see this? Is the Lone Star buy-out @$15.10 per share dead?
How do you go from making statements that you have 1B to 446M?
Yeah, let's put our pension assets with hedge funds. I wonder if they were billing 2 and 20 on 1B?
How do you go from making statements that you have 1B to 446M?
Yeah, let's put our pension assets with hedge funds. I wonder if they were billing 2 and 20 on 1B?
"June 28 (Bloomberg) -- International Monetary Fund Managing Director Rodrigo de Rato will quit his post in October, two years before his term ends, citing ``personal reasons.''
De Rato, a former Spanish economy minister who has led the Washington-based agency since June 2004, will leave after the annual meetings of the fund and the World Bank, the IMF said in a statement. He said he was concerned about his children's education, without elaborating."
IMF Chief De Rato to Leave, Citing `Personal Reasons' (Update4) - Bloomberg.com
Run while you can, Rat!
The last time I looked the Implode-o-meter stood at 89, and it will soon be at 100.
more on ahm, the real story is the toxic convert-
Business & Financial News, Breaking US & International News | Reuters.com
contained landing.
A Warning From U.S. Leveraged Loan Spreads
The leveraged loan market is threatening to follow in the footsteps of the ABX market.
In contrast to the rather minimal rise in corporate spreads during the past few weeks, the implied spread in the leveraged loan market has surged. Clearly many investors have decided the risks facing the loan market have grown and are perhaps looking to repeat the success of those who shorted the ABX market earlier this year. The blowout in ABX spreads was the result of a deluge in low-quality issuance due to a severe lapse in underwriting standards by sub-prime lenders, closely followed by a severe housing market correction. Arguably, there has been some deterioration in corporate lending standards although not nearly as much as occurred in the sub-prime mortgage market. Meanwhile, leveraged loan issuance has increased substantially, but still accounts for only a fraction of the overall corporate debt burden. Bottom Line: We cannot rule out contagion that sends spreads in the broader corporate bond market wider, due to a flight to quality and a drying up of liquidity. However, healthier balance sheets mean that the corporate bond market is less vulnerable than was the case in late 1998. We remain neutral on corporate bonds until the releveraging phase is further advanced.
BCA Research
barely,
as i mentioned in another thread, i only use shorts since they don't involve time pressure and upside is much greater. i don't buy the std rap against shorts that a stock could go to infinity. as long as you watch it carefully you can close it out. i've been short homeys and lenders for over 6 mo and have ridden them up and down since but now i'm way up due to patience. as many have mentioned on this site, this is a slow motion trainwreck with an obvious direction.
Andrew wrote: ...as a friend of mine once said, "Intelligence is over-rated as a survival skill.
Yep. Knowing what's going on is far more important. In theory, intelligence should help one do that, but in practice, it's not as good as street-smarts and savviness. And sometimes intelligence divorced from experience allows a person to become expert at convincing him- or herself that what he or she wants to believe is true.
idoc, I do both. I like the contained losses of PUT options and the leverage - being exposed to a lot of shares at a small price. I like to go out-of-the-money, usually as prices go up or if they're steady as the volatility component of the premium disappears. I know some of my trades will go to zero. The ones that work out for me more than make up the difference, and no short squeeze in a buy-out. You can't rule out buy-outs. I got caught in one of those riding a lot of shares short. Luckily I had a lot of cash in my account to cover my loss. Check your margin agreement.
Subprime Shakeout Claims Another Fund
From MarketWatch.com, "Caliber Global, which controlled almost $1 bln in assets, to shut down"
Subprime mortgage shakeout claims another fund - MarketWatch
As CRE investors begin to balk, pensions step up to the plate glad to have less competition (who is the greater fool?)-
Commercial real estate investors tap on brakes
| Reuters
but, when the pension gets burned, they scream foul, that the mandate wasn't followed, that they weren't diversified...
these are unregulated pools meant for sophisticated (risk takers) investors who understand the underlying risks, so it seems now they wish to take the position that they didn't understand, that they lacked the sophistication necessary to make a fiduciary decision based on the inherent risk in a leveraged pool of assets?
"In one pending lawsuit, the San Diego Employees Retirement Association sued Amaranth Advisors LLC in March for $150 million after the fund suffered $6 billion in losses -- the biggest hedge fund collapse ever. The investors contend that Amaranth violated its investment mandates by not diversifying its portfolio enough or guarding well enough against risk."
Expired
Does 2 and 20, or 220 have any relationship to the term 420?
Like, you only need to be half-baked to get those rates?
I spoke to soon, the Implode-o-meter now stands at 91.
Life is good, debt means wealth.
Where is my beer ??
De Rato leaves as head of the IMF because he is concerned about his children's education??? WTF?
blink blink blink as I look staringly into my computer screen.. wtf??
He said he was concerned about his children's education. Sometimes you just have to sit and wonder and throw your hands up admitting defeat that you just don't get it. Well that I don't get. How stupid are his kid one has to wonder for him tot quit his job???
Why is Iran rationing gas? Are they hoarding? Is someone going to throw the first rock?
RiskC:
Law suits are the next stage. But even before that more news will come out. How far behind AHM can FirstFed (ticker: FED) be? They are in the same market (Ca.) doing the same biz?
The only advantage Fed has is that they started to show pre-payment penalties as part of their "interest spread". With their loan portfolio down almost 4% last month alone no wonder those profits are going up.
But what does this do to the interest they receive?
Together with their rising delinquencies their income should be down by about 5% a month. (decline of 70% per year ????)
Off Topic,
Both Dollar General and Can West media priced junk deals today. Both were restructured. Total of over $2 billion.
Iran building a stock of gasoline because they (ironically enough) are vulnerable to a trade blockade for gasoline. They imported 5 billion dollars of gasoline last year because they don't have enough internal refinery capacity to produce for consumption. This leads to a new course for anti-Iran forces, as it will be seen as an easy way to bring the existing iranian goverment down-aim a strike at the existing refinery and existing storage capacity. It's not good for stability.
S&P, Moody's Hide Rising Risk on $200 Billion of Mortgage Bonds
S&P May Cut $12 Billion of Subprime Mortgage Bonds (Update6) - Bloomberg.com
Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans.
"S&P, Moody's Hide Rising Risk on $200 Billion of Mortgage Bonds"
Holy crap. That is the most bearish, panic inducing article I've ever seen from a major financial.
Bravo to Tanta for her comments back in February and March:
"... I have little voices in the back of my head telling me that AHM's numbers are not what God had in mind when he invented FASB."
"One of my new favorite candidates for the Next Big Explosion, now that we've gotten through NEW and NFI and (apparently) FMT is AHM. I really, really, don't trust them."
plus other more analytic dissections of the company's financial statements.
.
In case you wondered.
4$ galon (and 4$ galon of milk) is not inflation.
Infaltion is something to eb faught against and once you decalre victory it is disapearing from sight.
Bernanke Is Unwilling to Declare Inflation Victory (Update1) - Bloomberg.com
Here are some references to accompany the "panic inducing article" from Bloomberg about the relationship between the rating agencies and the CDO issuers. They are not light reading (especially the first reference, 87 pages long with plenty of footnotes and statistical analyses), but illuminating nonetheless, even if you skip over the statistical stuff.
1) Mason & Rosner, "Where Did the Risk Go? How Misapplied Bond Ratings Cause MBS and CDO Market Disruptions"
| http://faculty.lebow.drexel.edu/MasonJ/mason_rosner_v8nrl.pdf
2) An powerpoint slide presentation with pretty colored graphs:
| http://www.hudson.org/files/publications/mortgageFeb07.ppt
3) A report from the Authorite des Marches Financiers in Paris (in perfect English), "Is Rating an Efficient Response to the Challenges of the Structured Finance Market":
| http://www.amf-france.org/documents/general/7693_1.pdf
4) An earlier report from Mason & Rosner, "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?"
| http://www.criterioneconomics.com/docs/MasonPaper.pdf
From the abstract of the fourth reference: "Our findings imply that even investment grade rated CDOs will experience significant losses if home prices depreciate."
.
"S&P, Moody's Hide Rising Risk on $200 Billion of Mortgage Bonds"
With a title like that, Bloomberg is out for bear. No pun intended.
Bernanke:
"In these circumstances, the committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
That is the bull case: everything is okay, except inflation might still be a problem. We look at economic growth, but we're really concerned about inflation.
And, you know, the unbelievably informative discussion about inflation versus deflation in these comments awhile ago succeeded in making me fear inflation a lot more than deflation.
Yes, deflation favors the rich. And, yes, deflation combined with an Executive like Hoover or Bush leads to starvation for a considerable portion of the population. But inflation leads to worse stuff. Much worse stuff. Hitler, for example.
I'm still waiting for a new Sub-Core inflation metric that simply excludes all items that rise in price.
Something just happened to the euro. It's skyrocketing. What's up?
For the euro to climb suddenly, one would invoke lowered US interest rates and more dollars in circulation...and a much higher US stock market.
U.K. Economy Grew Faster Than Expected Last Quarter
U.K. Economy Grew Faster Than Expected Last Quarter (Update3) - Bloomberg.com
In case you wondered.
4$ galon (and 4$ galon of milk) is not inflation.
Infaltion is something to eb faught against and once you decalre victory it is disapearing from sight.
Obviously Spelling was not one of your best subjects in Grade School.
Significant deflation of home values places even prime traditional loans at risk. Even if you started out with 10 or 15% down, deflating home values cut a hole in that quickly.
If you think of circumstances such as layoffs, divorces and medical crises, it's obvious that prime conforming mortgageholders are sometimes forced to sell. In some markets that I know of, values have already dropped 15-20%. I don't see a change for a few years, so with every passing six months, the risk on prime mortgage portfolios in these areas is still rising. It's not a pretty picture.
and to think that they had to do a study to come to this conclusion-
MarketWatch.com
Euro still going up. Otherwise, all quiet on the Western Front.
Isolated climb by the euro.
Any ideas?
The Bloomberg article directly blames S&P, Moody's and Fitch for causing Bear's problems. What a hoot.
What this whole thing has lacked so far is a villain... a Keating or a Kenny-boy. I though Cioffi might take the hit... but it looks like the crosshairs are still moving. We can't blame the consumer - too vague. We should implicate Greenspan, but he is still revered in some quarters. Can't blame Bear... everybody knows their reputation anyway. When the music stops, who will be without a chair?
JSP, no need for that. Yal is an extremely valuable contributor. Apologize. Thank You.
Yal's native language is not English.
JSP, in how many foreign languages can you write and spell as well as Yal?
I second JoeMortgage.
Yal, I have a suggestion... fire up a word processor and do a spell check on your comments before posting. While I can sympathize with the second (or third or whatever) language issue and would not flame over it, I also can sympathize with those that find it tough to see posts totally mangling every other word. Please, Don't take this as a slam. Think of the word processor as a spelling/grammar tutor...