"It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit."
"It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit."
If people really start to panic over this thing and we have a stock market rout, I think this could rapidly degenerate into a Q3 or Q4 recession.
But that's a big if.
Still, when you have articles with titles like Mortgage Rate Increase Pushes U.S. Housing Market, Economy to `Blood Bath' on Bloomberg, there's the potential for things to rapidly fall apart.
Get your credit- red hot credit get some fast before it is all gone...
What should the world do without access to oceans of easy money?
Well, tighten the belt and make with the Japanese of course!!!
Buy low and sell high- not buy high and sell low;-}
Hey Tanta, want to peek at the MER bidsheet and then toss in a 5 mil bid on the whole thing? Give them their heartattack now!!!
CDO built on a CDO- Here is a lottery ticket based on another lottery ticket payout;-}
This is going to be fun!
I picked up some really cheap puts on LEND yesterday, and today the market started pricing in a busted deal! Sometimes it is better to be lucky than smart!!!
"If people really start to panic over this thing and we have a stock market rout, I think this could rapidly degenerate into a Q3 or Q4 recession. But that's a big if." [ac]
What about a Q2 recession? As I recall Q1 was on the cusp. Then consumer spending fell sharply in April, and hasn't been very good since. And consumer spending is the biggest factor in GDP.
I think the important point is that we haven't reached a bottom and we're very near recession territory. The conventional wisdom is that Q1 was the bottom, but I don't think it will take a panic to prove that wrong. Of course, we may get a panic when more people realize the conventional wisdom is wrong.
Commercial is going down the same path as mortgage lending. People loosening up standards because they are trying to make up for drop in revenues in other areas and are trying anything to keep business growing. The "models" say it is ok because they are only looking at recent history and defaults are low. And it seems everyone is pilling on leverage on top of leverage to keep returns high.
The rating agencies are a sham. They'll end up being hauled in front of Congress in a year to be questions why they rated this stuff so highly and how did they get paid. Sort of like the sell-side got hit after the dot.com bubble.
I wouldn't buy shares in Moody's, S&P or bond insurers such as MBIA. Trouble ahead.
What should get really fun is when the bond mutual funds start to puke up this "high grade" toxic waste. Their mandates won't allow them to hold non-investment grade crap so the run for the exits will be fun to watch. The icing on the cake is that plenty of funds "hand price" the paper they own since their is no accurate quote. Wait until the leveraged hedgies have to actually mark-to-market some paper that finally has a market traded price attached to it. Fun times!!!
Cal -- You see the performance of commercial REIT shares lately? Looking pretty sick. Maybe the smart money smells a rat (like the fact liquidity is going to tighten there too). I think it's a safe bet that Sam Zell, a true genius in commercial RE, truly did get out at a "bell-ringing" top.
Wow!
Did you see how fitch described the self-perpetuating cycle of low default rates, low standards, easy refinancings, lower default rates... That was textbook Doug Noland narrative!
Yes, fitch is indeed more conservative than its peers.
(p.s. this narrative kind of ressembles the subprime refinancing racket)
Cal's comments are on the money; the "models" are pure crap that the bankers have on hand for CYA purposes when these loans default. "The models looked OK", and the shareholders/board have to throw up their hands. It is the height of absurdity to loosen lending standards when it is obvious that interest rates banks can charge don't reflect the true risk of loans.
"The worst is yet to come " - this is the 1st one NOT to call bottom:
Rate Rise Pushes Housing, Economy to `Blood Bath' (Update2) - Bloomberg.com
From the article Yal linked to above:
"It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit."
Sounds right to me...
Is it just me or does Fitch seem a little more conservative than its siblings?
Well, the S&P has now gone down. And the euro has gone down.
That's a liquidity phenomenon: fewer dollars all around.
"It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit."
...so you better buy bonds!
cr and tanta, u should start a "comment of the day" thingie.
Interest rates are going way, way up. Not so sure this is the time to buy bonds.
If people really start to panic over this thing and we have a stock market rout, I think this could rapidly degenerate into a Q3 or Q4 recession.
But that's a big if.
Still, when you have articles with titles like Mortgage Rate Increase Pushes U.S. Housing Market, Economy to `Blood Bath' on Bloomberg, there's the potential for things to rapidly fall apart.
Get your credit- red hot credit get some fast before it is all gone...
What should the world do without access to oceans of easy money?
Well, tighten the belt and make with the Japanese of course!!!
Buy low and sell high- not buy high and sell low;-}
Hey Tanta, want to peek at the MER bidsheet and then toss in a 5 mil bid on the whole thing? Give them their heartattack now!!!
CDO built on a CDO- Here is a lottery ticket based on another lottery ticket payout;-}
This is going to be fun!
I picked up some really cheap puts on LEND yesterday, and today the market started pricing in a busted deal! Sometimes it is better to be lucky than smart!!!
Someday this war's gonna end...
"If people really start to panic over this thing and we have a stock market rout, I think this could rapidly degenerate into a Q3 or Q4 recession. But that's a big if." [ac]
What about a Q2 recession? As I recall Q1 was on the cusp. Then consumer spending fell sharply in April, and hasn't been very good since. And consumer spending is the biggest factor in GDP.
I think the important point is that we haven't reached a bottom and we're very near recession territory. The conventional wisdom is that Q1 was the bottom, but I don't think it will take a panic to prove that wrong. Of course, we may get a panic when more people realize the conventional wisdom is wrong.
Steve?
my rates prediction:
If they will cross 5.15% they will go to 5.25%
If they will cross 5.25% they will reach 5.31% (resietance is at 5.319%)
If they will cross 5.35% they will JUMP to 5.65%-5.70%
I would only buy bonds at 5.70% and above but I have been wrong many times.
Commercial is going down the same path as mortgage lending. People loosening up standards because they are trying to make up for drop in revenues in other areas and are trying anything to keep business growing. The "models" say it is ok because they are only looking at recent history and defaults are low. And it seems everyone is pilling on leverage on top of leverage to keep returns high.
The rating agencies are a sham. They'll end up being hauled in front of Congress in a year to be questions why they rated this stuff so highly and how did they get paid. Sort of like the sell-side got hit after the dot.com bubble.
I wouldn't buy shares in Moody's, S&P or bond insurers such as MBIA. Trouble ahead.
What should get really fun is when the bond mutual funds start to puke up this "high grade" toxic waste. Their mandates won't allow them to hold non-investment grade crap so the run for the exits will be fun to watch. The icing on the cake is that plenty of funds "hand price" the paper they own since their is no accurate quote. Wait until the leveraged hedgies have to actually mark-to-market some paper that finally has a market traded price attached to it. Fun times!!!
Cal -- You see the performance of commercial REIT shares lately? Looking pretty sick. Maybe the smart money smells a rat (like the fact liquidity is going to tighten there too). I think it's a safe bet that Sam Zell, a true genius in commercial RE, truly did get out at a "bell-ringing" top.
More thoughts:
Interest Rate Roundup: Commercial REITs rolling over
SRS, the inverse Real estate ETF, that mirrors REITS was up over 4% today, which means that the average REIT was down 2% or so.
Wow!
Did you see how fitch described the self-perpetuating cycle of low default rates, low standards, easy refinancings, lower default rates... That was textbook Doug Noland narrative!
Yes, fitch is indeed more conservative than its peers.
(p.s. this narrative kind of ressembles the subprime refinancing racket)
Fitch is generally viewed as the third horse in a two-horse race. And with good reason.
Cal's comments are on the money; the "models" are pure crap that the bankers have on hand for CYA purposes when these loans default. "The models looked OK", and the shareholders/board have to throw up their hands. It is the height of absurdity to loosen lending standards when it is obvious that interest rates banks can charge don't reflect the true risk of loans.