(quote)... it emerged that more European insitutions had suffered losses following the crisis in the US subprime mortgage market. IKB, a German lender specialising in providing credit to smaller companies, and Commerzbank, the countrys second-biggest bank, both warned they would be hit by losses from risky US home loans to borrowers with poor credit histories....
The iTraxx crossover index, which tracks the cost of protecting a basket of risky European companies against default, rose more than 60bp on Monday to trade above 500bp for the first time.
That means it now costs 500,000 ($685,000) to insure against the default of 10m of bonds. Last week it would have cost less than 400,000. This was the largest one-day move yet seen, leaving the index at more than double its level in June.
Similar dramatic swings occurred in US credit derivatives, where the CDX index of investment-grade bonds was quoted 20bp higher to cross 100bp for the first time on Monday, before settling at 87bp.
Analysts warned that the financial markets could stay jittery in coming days, since the credit turmoil could force more financial institutions to offload troubled assets....
The speed of the swing in the credit derivatives markets has shocked many investors, particularly since it has not come amid a sharp deterioration in the macroeconomic background. Some traders consequently blame price swings on hedge funds that may have been rejigging their portfolios before the end of the month.
However, there are also mounting concerns that some investors are being forced into liquidations because prime brokers are trimming credit lines to groups with heavy exposure to subprime mortgages.
(end quote)
bacon dreamz, I'm not trying to defend anybody. I am trying--ineptly--to suggest that we're past the incompetents and well into the competents.
Honestly, I would be quite comforted if what I saw was disasters amongst the marginals and just a touch of pain amongst the serious businesses. Alas, what I think I see is that nobody is safe, and nobody gets to duck out of this.
We all have our own little personal ratings system. I was merely suggesting that I thought this was breaking into the upper A tranches.
Frankly, I think there are better businesses out there than C-BASS, and I am keeping my eye on them. I have no particular interest in attempting to measure the potential depth of this only by looking at the marginal players. Just as I have no intention of remaining fixated on subprime and ignoring prime and Alt-A. It matters to me that different outfits with very different business models, funding structures, and, yes, expertise, are all getting caught up in the same mess. That tells me, I think, something about the nature of the mess.
And why shouldn't I point out that, unlike CFC, for instance, C-BASS and IMB both admitted that they saw this coming? I'm sorry it sounds like exculpation to you. I simply don't believe that a credit crunch is so-called because it spares the sheep as well as the goats; if these were all goats, it would be something more in the nature of a return to normal discipline. I do not think that it is.
That said, do I admire people who grit their teeth, take the loss and report it promptly? Yes, I do. I am not enamored of a business climate in which those who report losses promptly are lumped in willy-nilly with those who refuse to. That mentality is killing more than just my industry.
That said, do I admire people who grit their teeth, take the loss and report it promptly? Yes, I do. I am not enamored of a business climate in which those who report losses promptly are lumped in willy-nilly with those who refuse to. That mentality is killing more than just my industry.
I completely agree with this. i don't have any respect for people who won't stand up and face their problems and take the consequences.
i'm merely trying to suggest that the same thing is killing them both; AHM isn't dying because of incompetence while C-BASS is just getting killed by irrational lenders.
Well, I guess I still wonder whether AHM would be in the mess it's in if it had:
1) been more honest July 19 about its liquidity when the Lehman rumor thing happened and
2) stopped that dividend payment on Wednesday at COB, not Friday at bedtime, assuming it had to hang onto that cash and
3) put out a report on Monday morning 'fessing up and let the shit hit the fan.
That was my whole point about those who face the music and those who keep trying to pretend they can't hear it.
So no, I don't think C-BASS is getting killed by "irrational" lenders. That is, I don't think they're being singled out here: everybody's "irrational" right now.
AHM, though, just did about the worst thing you can do in that situation. If they hadn't, we'd all have moved on to a new train wreck by now.
yes, i'm not trying to say AHM hasn't behaved like weasels and that has exacerbated the problem. but i do think their lenders know more about their situation than the public does and i would guess they'd still be where they are, regardless.
i'm not trying to say you shouldn't blast them for being so weasel-y, that's fine with me. i guess my point was that, to me, there wasn't much clarity that the same thing was happening to both of them, however they behaved in response.
I was waiting all day for the other shoe to drop on AHM. You can call the cycle whatever you choose, but it has the sound of chickens coming home to roost. They are all so amazed when 'it' happens to them.
Tanta, girl. You're annoyance is justified, but you cannot let it take over.
The message of the blog will be a lot harder to communicate if you do not discuss specific companies and their situations at times. You refrain from this at some price of quality.
Now, if you discuss specific companies that has a price too, the price is the
people like grl trying to make this into a stock investment forum.
So both things have risk and rewards. so taking about specific companies is useful and a benefit but is a risk, ...err a "calculated risk" (sorry I couldn't refrain) I hope.
My suggestion is managing that risk. You did well telling grl off. You should also institute a policy of deleting comments of people who are repeat offenders.
I appreciate your blog immensely and it is a high level education for me.
If wishes were horses then beggars would ride.
FT, this morning
(quote)... it emerged that more European insitutions had suffered losses following the crisis in the US subprime mortgage market. IKB, a German lender specialising in providing credit to smaller companies, and Commerzbank, the countrys second-biggest bank, both warned they would be hit by losses from risky US home loans to borrowers with poor credit histories....
The iTraxx crossover index, which tracks the cost of protecting a basket of risky European companies against default, rose more than 60bp on Monday to trade above 500bp for the first time.
That means it now costs 500,000 ($685,000) to insure against the default of 10m of bonds. Last week it would have cost less than 400,000. This was the largest one-day move yet seen, leaving the index at more than double its level in June.
Similar dramatic swings occurred in US credit derivatives, where the CDX index of investment-grade bonds was quoted 20bp higher to cross 100bp for the first time on Monday, before settling at 87bp.
Analysts warned that the financial markets could stay jittery in coming days, since the credit turmoil could force more financial institutions to offload troubled assets....
The speed of the swing in the credit derivatives markets has shocked many investors, particularly since it has not come amid a sharp deterioration in the macroeconomic background. Some traders consequently blame price swings on hedge funds that may have been rejigging their portfolios before the end of the month.
However, there are also mounting concerns that some investors are being forced into liquidations because prime brokers are trimming credit lines to groups with heavy exposure to subprime mortgages.
(end quote)
Stablization will be achieved someday.
Contained, just a bigger container required.
That's yesterday news,this morning the iTraxx crossover traded at 400bp, biggest one day gain ever...
can we please put aside what we may think of the people who run these companies? I generally agree, but there's too much:
C-BASS is an poor unfortunate victim of cruel unjustified lender margin calls.
AHM is and incompetent and stupid and they deserve it.
Really?
Sorry, I still like this one better.
"The models work when they look at history, but not when history is all new."
bacon dreamz, I'm not trying to defend anybody. I am trying--ineptly--to suggest that we're past the incompetents and well into the competents.
Honestly, I would be quite comforted if what I saw was disasters amongst the marginals and just a touch of pain amongst the serious businesses. Alas, what I think I see is that nobody is safe, and nobody gets to duck out of this.
We all have our own little personal ratings system. I was merely suggesting that I thought this was breaking into the upper A tranches.
Frankly, I think there are better businesses out there than C-BASS, and I am keeping my eye on them. I have no particular interest in attempting to measure the potential depth of this only by looking at the marginal players. Just as I have no intention of remaining fixated on subprime and ignoring prime and Alt-A. It matters to me that different outfits with very different business models, funding structures, and, yes, expertise, are all getting caught up in the same mess. That tells me, I think, something about the nature of the mess.
And why shouldn't I point out that, unlike CFC, for instance, C-BASS and IMB both admitted that they saw this coming? I'm sorry it sounds like exculpation to you. I simply don't believe that a credit crunch is so-called because it spares the sheep as well as the goats; if these were all goats, it would be something more in the nature of a return to normal discipline. I do not think that it is.
That said, do I admire people who grit their teeth, take the loss and report it promptly? Yes, I do. I am not enamored of a business climate in which those who report losses promptly are lumped in willy-nilly with those who refuse to. That mentality is killing more than just my industry.
I wonder about the TXU falling apart rumor - should we get a formal news on it ?
in the mean time are we seeing flight to Q after the bond were down more earlier today ?
That said, do I admire people who grit their teeth, take the loss and report it promptly? Yes, I do. I am not enamored of a business climate in which those who report losses promptly are lumped in willy-nilly with those who refuse to. That mentality is killing more than just my industry.
I completely agree with this. i don't have any respect for people who won't stand up and face their problems and take the consequences.
i'm merely trying to suggest that the same thing is killing them both; AHM isn't dying because of incompetence while C-BASS is just getting killed by irrational lenders.
Well, I guess I still wonder whether AHM would be in the mess it's in if it had:
1) been more honest July 19 about its liquidity when the Lehman rumor thing happened and
2) stopped that dividend payment on Wednesday at COB, not Friday at bedtime, assuming it had to hang onto that cash and
3) put out a report on Monday morning 'fessing up and let the shit hit the fan.
That was my whole point about those who face the music and those who keep trying to pretend they can't hear it.
So no, I don't think C-BASS is getting killed by "irrational" lenders. That is, I don't think they're being singled out here: everybody's "irrational" right now.
AHM, though, just did about the worst thing you can do in that situation. If they hadn't, we'd all have moved on to a new train wreck by now.
viscous? or vicious?
Although I do like the metaphor of the Blob slowly overcoming the poor unfortunates at AHM....
actually with the Brooklyn accent it comes out more like coicle.
Viscous, like the great molassas flod of 1919.
yes, i'm not trying to say AHM hasn't behaved like weasels and that has exacerbated the problem. but i do think their lenders know more about their situation than the public does and i would guess they'd still be where they are, regardless.
i'm not trying to say you shouldn't blast them for being so weasel-y, that's fine with me. i guess my point was that, to me, there wasn't much clarity that the same thing was happening to both of them, however they behaved in response.
I like viscous. Implies nothing's moving, which is what's happening in the credit market.
You might even call it "illiquid".
PS i'm not sure what's going on here. i'm not trying to argue with you, i agree with what you're saying. i just think the point was confused.
Sorry, b.d., I am profoundly annoyed. Not with you, but annoyance is annoyance and it shows. Check the comments under the IndyMac thread below.
It is just so incredibly difficult to talk about these things without having the discussion taken over by everybody and his putz. Puts. Whatever.
viscous:
"...it resembles a constipated owl: absolutely nothing is moving."
Bill Gross
"American Home needs the secondary credit markets to stabilize, so the company can re-sell its loans for a profit [emphasis mine]"
Those are two separate things. If the first were to happen, there's no reason to assume the second would be true.
I was waiting all day for the other shoe to drop on AHM. You can call the cycle whatever you choose, but it has the sound of chickens coming home to roost. They are all so amazed when 'it' happens to them.
Perp walk anyone?????
Tanta, girl. You're annoyance is justified, but you cannot let it take over.
The message of the blog will be a lot harder to communicate if you do not discuss specific companies and their situations at times. You refrain from this at some price of quality.
Now, if you discuss specific companies that has a price too, the price is the
people like grl trying to make this into a stock investment forum.
So both things have risk and rewards. so taking about specific companies is useful and a benefit but is a risk, ...err a "calculated risk" (sorry I couldn't refrain) I hope.
My suggestion is managing that risk. You did well telling grl off. You should also institute a policy of deleting comments of people who are repeat offenders.
I appreciate your blog immensely and it is a high level education for me.
Dramabomb dropped: AHM can't access credit facilities or fund loans.
Expired
Well, I guess that's that. AHM is going to die.