This is just more evidence that no one in charge knows what is going on with this mess. These guys are supposed to be in charge of monitoring this stuf and they can't even count.
All the while forclosures keep climbing, housing prices keep falling and mortgage rates keep climbing.
NEW YORK, July 12 (Reuters) - Moody's Investors Service on Thursday said it is raising its expectations for losses on several types of subprime mortgages, which could affect its ratings for securities backed by these risky loans.
Nicolas Weill, team managing director and chief credit officer at Moody's, said Moody's is increasing its loss expectations for newly originated loans by 10 percent, and for other loans to as high as 25 percent.
"Right now we're experiencing unusual market conditions," said Richard Cantor, team managing director at Moody's. The number of subprime mortgage securities downgraded has "no precedent," Cantor said.
Beat me to it Incognitus....this runup is pure speculative insanity. Those runs always end badly. Make your money while you can, and have your shorts ready.
It's not just speculative insanity. Part of it is organized.
Just look at Intel. Estimates went from 0.23 to 0.19. Now wvery week or so a different broker comes out with an upgrade and raises estimates (BofA today, to 0.20, Goldman a few weeks ago, Lehman, etc) ...
... result, Intel still has lower estimates than it had, and yet it behaves like a rocketship.
One other thing, there were 3 "strange" days in the last 4-5 weeks. EVERY one of them was followed by an Intel upgrade by a different broker. You have to wonder.
Incognitus,
Add to that the fact that both stock buybacks and rumors of buyouts hold prices high even in the face of deteriorating profits. This does, by coincidence I'm sure, accrue to the advantage of those in management who make their money through stock options.
There is alot more money out there but it's concentrated in fewer hands...hands that can't buy the products the companies make and actually make their stock rise based upon fundamentals...so they just buy the stocks themselves.
And it's not the average joe buying them...look at new brokerage accounts opened....unlike the last bubble in 2000 or the current one in China, this is driven by a few people with big bucks...the M&A's, the stock buy-backs, the pension and hedge fund managers....because they have tons of cheap money.
The average joe is getting pinched, but as long as they can hide it with upside suprises on REDUCED expectations, they just load up on more.....Frankly, what else do you expect them to do with the money?
i don't know what the actual numbers are but if you do curr/curr the % will be much higher regardless of what the $7.35 represents because the total universe of rated securities will have paid down much more than the B pieces that are the vast majority of the $7.35.
the other number u should look at is the % of rated deals that were touched. that number is huge (45% for Moodys). i don't think moodys will be revising their number of affected securities though (at least not to nearly the same extent). hmmm...
Maybe we're living under the illusion that only the central bank can print money. Maybe we're living under the illusion that bank debts needs to be repaid.
Maybe there are more printing presses than we ever thought possible. Maybe losing billions doesn't really make a difference.
That would explain the lending of millions to unemployed, assetless, incomeless people. And the reason it doesn't seem to make any difference to anybody.
Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel.
Good Luck!!!
That's the whole plan - get the small money out to make room for the big guys.
Seriously, when an article shows up in the Wall Street Journal about how short interest has reached a record high did anybody really think this market wouldn't get slammed higher to squeeze money out of these people?
The more people short the market, the less likely it is to go down.
The shorts basically create a safety net under the market unless something really big happens.
absolutely this manipulation occurs. i've been shorting this post LBO highly leveraged stock since it IPO'd late last fall and have seen numerous sequential upgrades to buy every couple of months. so i got suspicious about the IB's doing the upgrades and decided to look up who did the original underwriting. sure enough it was exactly the same characters pumping the stock. i'm finally making some $ back since in the last month all the major insiders (CEO, CFO, directors) are all dumping their stock i suspect b/c of widening spreads.
i disagree. the shorts are shorting b/c of good reason; fundamentals stink. most of these shorts are in HB's and financials i would bet (like i am) and have made quite a bit of money the last 6 mo. sure there will be squeezes but you've got to stick to your convictions and ride it out. its paid off for me altho it can be gut wrenching
I posted a few days ago about how the market cannot make a meaningful correction anymore. Specifically, I suggested that hedge fund managers have a dramatic personal incentive to take on enormous risk. As long as the assets they buy continue to perform, liquidity will continue to be available to them.
IMHO, until risk is drastically repriced across the board, I don't think we will see a meaningful correction.
Whether S&P is repricing 6,7 or 12 billion in bonds is irrelevant. The Dow Jones is setting up for a record run today.
What do you folks make of this? Specifically, what is causing this massive runup?
If anyone wants to listen to Moody's try to explain their ratings on one of the worst commercial mortgage backed securities I've ever seen they have a conference call at 4pm eastern today (in 2 hours). When you dial in, it is anonymous and muted. It is the same bond blogged about here: Commercial Real Estate Risk: Why rating agencies should be sued - CSF 2007 TFL2
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CSMC 07-TFL2 ($1.5bb CMBS Floater) GROUP CALL
(June 12) @ 4pm
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I'm with idoc. My fairly large put portfolio (inspired by weakness in RE) is up 60% in the last two months and was up 12% on Tuesday. Today the homebuilders, lenders and REITs are barely up and they have been consistently down on slightly up days for the market. I'm happy to see my put portfolio go down only a little (1-3%) on such a strong day for the overall market as today.
In the mean time, I think that it's still good to be long in retirement accounts (with some money market) and my medium term signal for S&P futures is positive and (surprisingly to me) has recovered from Tueday's loss. I follow the signal, not what my gut says.
If we really are getting close to the end, I'd expect the hedge funds to turn their guns on the market and start firing.
Afterall, once the liquidity dries up, a lot of these hedge funds go away, so there's not much to lose by pulling out the heavy ammo and making a last stand.
Remember, the clients take the losses at the end, not the 15% federal income tax paying managers.
We could see some huge volitility where anybody who's heavily leveraged, regardless of direction, gets blown out of their positions.
Everybody can see where we're going, so don't expect it to be easy getting there.
Trillions of dollars around world are looking for a home. That home is the asset markets. Whether it is carry trades, sovereign investment funds, or recycled petrodollars, the dollars have to be parked.
Help me understand a scenario where hedge funds runnning these trillions start to aggressively short the market. Who would be so foolish?
Unless we see a totally unpredictable event, I am having a very hard time imagining any meaningful unraveling of the asset markets.
The stock market and the underlying economy parted ways about a year ago. This market is being driven by record corporate buybacks, record private equity buyouts, record m&a and speculation this will continue for the forseeable future. This is all being underwritten by a hyperactive junk debt market that appears to have more lives than Jason Voorhees. Until the junk bond market finally hits the wall, the stock market will have an underlying bid. Like Jason, the junk bond market appears to have more lives and more sequels than anyone thought possible.
yes, bucking the consensus is difficult. but the pattern has been relatively consistent over the past 5 mo. huge up in dow, small up in HB's, financials. down in dow, way down in HB's, financials. how long this will last i don't know but the fundamentals of RE and mortgages suck and will be so for years. the titanic has turned.
As I understand, the underlying junk market is not the junk market of Michael Milken. Similar to the repacking of Subprime MBS into waterfall-tranches and then finally aggregating them into CDOs, it has become possible to create billions of AAA-rated securities for buying companies. It is not junk. Or so they think.
The main reason shorts are at record highs is because of the proliferation of hedge funds, which, true to their name, are taking on more and more short positions to hedge losses in their longs as the market grows more and more risky. Everyone knows there is tons of risk not priced into this market, they're not talking about it, but they are taking on more short positions to hedge.
The market is getting propped up by manipulation by the big boys and the media. Witness today - Motorola crapped the bed, Macy's bombed, on the heels of numerous other retailers in trouble, yet the lone positive of Wal Mart surprising gets the headlines and sends the market screaming higher. The greater fool theory at work. Then you have ludicrous upgrades to GM and Ford used to prop up the Dow.
They are trying to prop it up until the election. I think that's too tough of a task even for the PPT and friends. But likely they can keep the party going for at least another few months.
As I understand it, the billions of recycled petrodollars and sovereign wealth funds are looking for greater yield, but want AAA rated securities.
In the past M&A boom, they would have been offered and they would have rejected the junk-rated bonds being issued for buying up companies.
Today, an investment bank issuing billions in junk to finance a purchase can aggregate them together into waterfall-tranches and get AAA-ratings. They can further reduce risk by packing them into CDOs.
Alchemy: Junk to AAA with billions in fees in the middle.
Junk to AAA alchemy will stop in its tracks in the same way the subprime->AAA alchemy stopped. When the final bagholder (the acquired companies) become unable to pay back their debts in full, those AAA ratings will look like a bad dream.
If the consumer is indeed slowing down, then corporate earnings will eventually slow down, ....
Nasdaq volume is 8% below average and SP500 is 10% below average. Its all about leverage and margin today, notice the bond market is not very excited seems they can't have it all.
The best way to distract from the collapsing debt markets is to rally the indexes. Completely manipulated. Unsustainable.
And BeachGuy is wrong, there are not trillions looking for a home. His claim sounds like that pent-up demand for actual homes, which is also a media fiction.
Not sure if you guys are talking about it, but ever since S&P did their downgrades, AHM has been getting annihilated and are slashing their workforce. Does anybody have an understanding on whats going on behind the scenes?
Well, I think today is really going to make people who think they can go out and short stocks just because they read some bad news on the Internets think twice about it in the future.
TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.
TCW of Los Angeles and GSC, a New York-based investment firm, manage 12 CDOs that will likely face ratings cut on a portion of the securities they issued, a report by Bear Stearns Cos.
TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 CDO Manager of the Year.
Our transactions have a high subprime percentage and we were affected by the agencies re-rating of subprime, GSC Partners Managing Director Edward Steffelin said in an interview. The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said.
Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.
If it gets worse, the next area to see losses and price declines is the alt-A market, said Bose George, an analyst at Keefe, Bruyette & Woods Inc.
Repeat: "steer away from mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said"
Question: when is NO DOC subprime, no that is Alt A.......
From Bloomberg. TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.
TCW of Los Angeles and GSC, a New York-based investment firm, manage 12 CDOs that will likely face ratings cut on a portion of the securities they issued, a report by Bear Stearns Cos.
TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 CDO Manager of the Year.
Our transactions have a high subprime percentage and we were affected by the agencies re-rating of subprime, GSC Partners Managing Director Edward Steffelin said in an interview. The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said.
Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.
If it gets worse, the next area to see losses and price declines is the alt-A market, said Bose George, an analyst at Keefe, Bruyette & Woods Inc.
repeat: "The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income"
Question? when is No Doc subprime...how much of the CDO is ALT A...they obviously see it.
Rating agencies are likely to review bonds backed alt-A mortgages in the near future, said Scott Valentin, managing director of specialty finance research at Friedman, Billings, Ramsey & Co.
I'm not sure if I should mention this here in the bear's den, but: what is the most unlikely economic scenario for most people right now? (as this is the one coming true)
I would think that it's not on many people's mind that we are in an environment like the mid 50s: strongly performing economy, moderate inflation, moderately raising raw material prices, stronger raising asset prices and very strong productivity gains. Looking back to 2003, that's exactly what happened. Agreed that the rest of the year may be bumpy at times with the current cycle so stretched, there is no indication the general trend will break any time soon. It took until past the mid-sixties to break the general trends towards runaway inflation and a bear market. This time, the bull market may go until 2020. Like in the fifties, people were wetting their pants about a recurring Great Depression and other frenzies at that time like: communist overthrow, global cooling. Today's mania's are: terrorism and global warming. Let me add: they are in as much imaginary as global cooling was in the fifties.
In the fifties, the general public understood the stock market up-trend when it was over. Who bought stocks in the fifties? Nobody. When everybody followed suit in the sixties the party was over. So it is today. I would urge you to reconsider your baerish stance. But always apply good risk management, which is of utmost importance. We are going into a seasonally weak period after in incredible bull run.
"Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel."
I was out all day. only was able to see the highlight number. Dow up 1%, Dow up 1.5%, now dow 2%.....
But now I am near a computer I look at my shorts CFC, DSL, FED, LEN , AHM, SPG (I am in at $120 now it is $93) and they are not doing too bad (from my precpective)
Off course I am still at a loss since getting into the short biz back in Feb but today is not as bad as I thought it would be.
I agree with theroxylander. If you short the homebuilders, real estate and financials, you can make money and then wait for another opportunity once the stocks bounce after a selloff. So SRS, SRPIX, SKF, all good recently. If you go with DXD, PSQ, you get killed.
S&P corrects RMBS volume under review to $7.35 bln
NEW YORK, July 12 (Reuters) - Standard & Poor's has corrected the volume of residential mortgage-backed securities it placed under review for downgrade on Tuesday, to $7.35 billion from $12.1 billion.
S&P said the volume corrected represents 1.3 percent of the $565.3 billion U.S. subprime mortgage market it rated between the fourth quarter of 2005 and the fourth quarter of 2006.
"It was an error and we corrected it," said S&P spokesman Adam Tempkin. "It was human error. It is what it is."
Hey Joe,
One can always pick and choose the points in history to make a point, there are soooo many. This kind of blowoff makes 1929 look tame. But that doesn't mean it isn't 1927 with two more good years still left to rip even higher.
Ya never know. As for the short interest- I have begun to believe much of it is tied up in funding strategies- short the slowpoke and buy the fastgrower-that it has become darn near meaningless. If I am short MSFT and I am long CROX with the proceeds, do I count as a short or a financial genius?
Today I would actually be a goat- but for the last six months I would be up huge- so go figure.
The statistics don't necessarily reflect what you think you see.
Someday this war's gonna end...did you see oil went up again!
In the 1950's people were probably more afraid of debt than commies, given the experience of the great depression. Today, maximum leverage is viewed as prudent corporate and household balance sheet management. I'm afraid if you're looking to make decade to decade comparisons, the 1920's are the best match to the present.
Beachguy, "What causes this alchemy of junk to AAA to stop?"
Here's what I think will make the train come off the tracks - A re-pricing of these securities and then a reflection of that re-pricing in the market-priced rather than model-priced funds. That happens when these ASB, CDOs... whatever, get CUSIPs marked with a real price from a sale on the secondary markets, not just the indexes.
OT & anecdotal, I was sitting on an aircraft and talking with a securities broker. He entertained me with a story about how the $3.2B was raised to prop up the teetering BSC hedge fund. I foolishly believed that BSC came up with the loot. He indicated that, based on conversations with some character that ran another hedge fund, BSC "extorted" money from other funds to collectiviely do the bail-out - so the securities wouldn't actually get a market price since there would be a lot of panic selling as the contagion starts.
That day is going to come. He thought the party might continue until Oct at the latest. Any large scale re-pricing event will cause the party to end sooner.
Well, I think today is really going to make people who think they can go out and short stocks just because they read some bad news on the Internets think twice about it in the future.
I'm mostly short but I'm about 3% up for this week. Today run was not harmful for my short positions too much. Just back to where I was yesterday morning.
You mean Bear didn't actually put up cash? I'm shocked SHOCKED. That's so unlike BSC
/sarcasm
One thought that keeps getting expressed around here is that the "big boys" somehow "rig the markets." It is almost inexpressable just how far from reality this view is. Who are the big boys? JP Morgan? Goldman? Bear? Morgan Stanley? Fidelity? Wellington? TCW? TIAA-Creef? Putnam? Waddell&Reed? MFS? Citigroup? KKR? Blackstone? CalPers? Cerberus? Principal Mutual? Northwestern Mutual? Prudential? Apaloosa? Apollo? UBP? SocGen? AIG? Lehman? HSBC?
I can go on and on and on. The idea that such a numerically large and diverse group "gets together" with any regularity, is pretty funny for a couple of reasons. First, the trading operations at these sorts of places is so diffuse that you very quickly get to thousands of people. The head of trading of corporate bonds at xyz investment bank (for example) has traders covering each different industry, and distinct credit qualities within that, all of whom run independent desks with credit limits. Call it a 15-25 in corporate bonds depending on the sidze of the firm. Often, even in house traders are taking contradictory positions to the guy across the room. Now add in equity traders (more in many cases), Govvies, Agencies, Mortgages, Eurobonds and on and on and you get some idea how many independent decisionmakers there are just among the large players. Now multiply that for the hundreds of "big boys"and you get some idea how unlikely collusion is. For a specific example of how difficult agreement between just a few investment banks alone when it was most likely to happen, think about Bear's decision not to participate in the bailout of LTCM, one of the major threats to all the capital markets.
Of course if you think the Trilateral Commission really runs the world, well, then I can't help ya.
One more thing. I am speaking about listed stocks and corporate bonds etc. I am certain that in unlisted securities and the "pink sheets" that only a few folks pay attention to in the first place, that market manipulation of individual securities is common.
Banker - what do you call the ridiculous upgrade of GM by GS and JPM? How could that be anything but manipulation of the Dow? There is absolutely no fundamental reason to buy that stock. None. Their balance sheet is a horror show, and with skyrocketing gas prices their only profitable products, the big trucks and SUV's, will no longer sell.
Are you saying that Goldman and JP got together and decided to do that? Where are all the other analysts? Why aren't they on board? Is every ratings change in any direction "manipulating the market?"
You disagree with the upgrade which is of course your right. But an upgrade on a "tactical trading basis" (Goldman's term) based upon the likelihood of union concessions doesn't seem crazy.
But if everyone agreed with you the analysts would have no impact on the price of the underlying security, or do you parhaps think that the portfolio managers at Fido, Eaton Vance, Templeton etc. aren't doing their own work and are all calling each other saying "Goldman upgraded GM! We'd better all buy now!
Banker, I got a call back in 1999 where a GS sales said, literaly, "you can buy anything tech" right at the start of the tech folly (Late October).
Later, another GS sales was pumping Terra Networks having no basis whatsoever to do it.
There is precendent in large brokers getting together in the market, for instance it happened in 1929.
And today's rally was prepared yesterday. Check a futures intraday chart and look at what happened into the close of the market and 15 minutes after that same close: today's rally began right there, vertically.
Also, after 3 similar rallies in the last month alone, 3 different brokers upgraded Intel on the next day (today it was BofA).
You can say these are all coincidences. Of course. But then again, there are e-mails with analysts saying "POS" on them, and upgrading to the public, remember? Think that was a coincidence too?
Also, some kind of social feedback loop makes brokers seemingly all say the same. During 2000 the only broker I remember saying some tech (telco equipment) was NOT a buy, was Dresdner.
ok doucheballs i will give u the answer to what this thread is supposed to be about. u will notice a number of the pools on S&Ps list have 700+FICOs. that report was supposed to be about subprime. they specifically did not comment on alt-a. so if u are an issuer and see your 700+FICO deal on that list, your reaction is to phone S&P and tell them to take your bonds off their fucking subprime list or u will sue them. Now some of them i have spot checked have started to be taken off Rating Watch Negative on S&Ps website. this is the magical disappearing $5B. case closed where's my medal???
"Goldman Sachs, Merril Lynch, Morgan Stanley, Credit Suisse First Boston and Salomon Smith Barney are among the banks involved in the case that began in 1994 after a stock manipulation ring was exposed."
"But top industry execs are off the hook despite almost complete supervisory collapses at several firms."
"No senior executives of any firms were personally cited in the case regarding Nasdaq problems--one of the largest and most widespread Wall Street scandals ever"
And with the Bush-league SEC we have now, I certain that they are aware of rigging, and complicit with it. They are working with the PPT.
Since your joke of a source didn't provide any links, I presume the above this is what you are talking about. This is your evidence the markets are rigged?
BTW, I was working for Sandy Weil when this was happening.
"The tapes, covering trading activity during parts of 1994, show rampant price manipulation and collusion. For example, instead of competing, traders routinely colluded to move prices up before selling to clients, or vice versa."
Joke of a source? What, the university link with multiple quoted sources, or the Raymond James PR? Are you trying to deny this? This was an SEC enforcement.
You are too much, ol' bank-boy. And seeming quite suspicious with the denials.
One thought that keeps getting expressed around here is that the "big boys" somehow "rig the markets." It is almost inexpressable just how far from reality this view is. Who are the big boys? JP Morgan? Goldman? Bear? Morgan Stanley? Fidelity? Wellington? TCW? TIAA-Creef? Putnam? Waddell&Reed? MFS? Citigroup? KKR? Blackstone? CalPers? Cerberus? Principal Mutual? Northwestern Mutual? Prudential? Apaloosa? Apollo? UBP? SocGen? AIG? Lehman? HSBC?
You left out GOD... LOL.
I agree banker, I keep looking on Monster for job openings on the PPT (I want to send them my resume)... and when I keyword 'PPT' all I get are admin openings for somebody who's good at PowerPoint. Well I guess I could do that too.
As banker points out, you have lots of big money managers jockeying for comparative advantage. So movement like today may have been triggered by a some big buys that triggered the uptrend. Perhaps by somebody from overseas. The fast money moved in to support the uptick.
The problem with this market is that the signals are over the place. Nobody KNOWS where it is going.
Why should it stop? I mean, why does it have to stop? Stuff like this has been going on forever. Everybody involved has had a good "scare" now. The ratings agencies, the issuers and the "end-users" are all taking some heat, which will cause them all to be more circumspect.
That will eventually wear off, of course, and the powerful play will go on.
It IS absolutely rigged... rigged like sport betting & 'the numbers' at a casino is rigged.
The casino skims - it makes money if you win, it makes money if you lose. The odds are adjusted (the 'spread') so that equal money lines up across from each other as much as possible guaranteeing a complete take.
The only difference is the 'skim' in the markets are called commissions & fees and are more certain than the profits at a casino... In sports betting it is possible to have the money NOT line up and the house lose on that bet... not so on Wall Street.
Only state run paramutual gambling & Lotto are more of a sure thing than Wall Street.
The reason for Wall Streets bullish tone is the same reasons casinos have 'optimistic' tones... you won't walk in with you 'fees & commissions' unless you think there is a chance you walk out with winnings.
Wall Street LOVES short selling bears... and margin to the eyeballs bulls... KA CHING both ways.
They hate money on the side and buy-n-hold alike. Soooooo unprofitable.
You don't have to 'rig' anything if you can collect your commission up front at every transaction.
Remember there is an equal dollar value EACH WAY on EACH TRADE... $1 dollar buy, $1 dollar sell... but commissions on both with the only really NEW money being IPO money.
[Can you guess that I've made my living off commissions a few times in my life?]
The plunge protection team is a suspected consortium consisting of the the Federal Reserve, the White House, the SEC, the large wall street brokers, and possibly others.
Founded in 1988 after the 1987 stock market crash, it theoretically ensures the stability of the financial markets, prevents liquidity problems, and ensures that stock market hiccups do not cause bank runs. Some Wall Street bears believe that it buys stock index futures or uses other methods to help keep the American stock markets afloat.
Upon that suspicion, Plunge Protection Team or PPT for short, has become a catch phrase among those who warn about the danger of monetary inflation being used as a tool to more or less directly support stock market prices.
your list was indeed long and diffuse but didn't incl the PPT mentioned by others above. only consists of 4 guys who could direct a team of traders say at GS (who btw has an unlimited bank acct over at the Fed) to buy the dow index at every dip during "sensitive" times. all they have to do is stem the downswings. my sense is that all the other "big boys" know these guys are out there (or at least think they're there) thus they pile in at the dips propagating a self fulfilling objective. certainly Ron Paul thinks there is a PPT in questioning BB and in a YouTube interview a few months back.
The affected classes total approximately $12.078 billion in rated securities, which represents 2.13% of the $565.3 billion in U.S. RMBS rated by Standard & Poor's between the fourth quarter of 2005 and the fourth quarter of 2006.
This is what the revised version, dated July 11, says:
The affected classes total approximately $7.35 billion in rated securities, which represents 1.3% of the $565.3 billion in U.S. subprime RMBS rated by Standard & Poor's between the fourth quarter of 2005 and the fourth quarter of 2006.
July 12, 2007, 12:01AM EST
More Subprime Woes to Come
The ratings changes were small. S&P put $12 billion worth of mortgage-backed securities, just 2.1% of the total issued from late 2005 to late 2006, on watch for downgrades, while Moody's cut its ratings on just $5.2 billion worth.
What is few billions between friends? I don't think it was worth to mention...
Love to trace those phone calls...
Tanta,
There are at least two possibilities:
1 -- They had the kid who flunked remedial math add up the tape for these securities for the original press release, or
2 -- the $565.3B is now priced at somewhere between 99 and 61 (we'll let you know later what figure to use in valuing your portfolio).
No reason to panic, stay in your seats until you see the door close behind us.
This is just more evidence that no one in charge knows what is going on with this mess. These guys are supposed to be in charge of monitoring this stuf and they can't even count.
All the while forclosures keep climbing, housing prices keep falling and mortgage rates keep climbing.
I'm sure someone will figure it out eventually.
Might be something like the Bear Stearns bailout: announce large number, reduce large number "ahhh ... it's better than expected!".
CR: but what is the current balance when, as we know by now, the securities are "illiquid" and difficult to price? Who has done the revaluation?
Easy: They were supposed to be worth $12B a few weeks ago. Now they're supposed to be worth $7B. True value? Fifty bucks as novelty wallpaper...
From Reuters:
Moody's raises loss expectations on subprime loans
UPDATE 3-Moody's raises loss expectations on subprime loans
| Reuters
NEW YORK, July 12 (Reuters) - Moody's Investors Service on Thursday said it is raising its expectations for losses on several types of subprime mortgages, which could affect its ratings for securities backed by these risky loans.
Nicolas Weill, team managing director and chief credit officer at Moody's, said Moody's is increasing its loss expectations for newly originated loans by 10 percent, and for other loans to as high as 25 percent.
"Right now we're experiencing unusual market conditions," said Richard Cantor, team managing director at Moody's. The number of subprime mortgage securities downgraded has "no precedent," Cantor said.
Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel.
Good Luck!!!
It's stupid to add "subprime" everytime they talk about this problem. The problem is FAR from being present only in subprime.
Alt-A hasn't blown up simply because the minimum payments on all those option ARMs, and the IO's coupons, are low.
"Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel."
I wonder how much margin debt went up in June. In May it went up by 35 billion dollars, the most ever.
This IS amazing, margin debt is far from being the only form of debt buying stock, yet the 35bn pace is more than $400bn annualized!
Beat me to it Incognitus....this runup is pure speculative insanity. Those runs always end badly. Make your money while you can, and have your shorts ready.
It's not just speculative insanity. Part of it is organized.
Just look at Intel. Estimates went from 0.23 to 0.19. Now wvery week or so a different broker comes out with an upgrade and raises estimates (BofA today, to 0.20, Goldman a few weeks ago, Lehman, etc) ...
... result, Intel still has lower estimates than it had, and yet it behaves like a rocketship.
One other thing, there were 3 "strange" days in the last 4-5 weeks. EVERY one of them was followed by an Intel upgrade by a different broker. You have to wonder.
Incognitus,
Add to that the fact that both stock buybacks and rumors of buyouts hold prices high even in the face of deteriorating profits. This does, by coincidence I'm sure, accrue to the advantage of those in management who make their money through stock options.
volatility and variance swaps
understand the Power...
COllARed, inching higher
STAGFLATION!
There is alot more money out there but it's concentrated in fewer hands...hands that can't buy the products the companies make and actually make their stock rise based upon fundamentals...so they just buy the stocks themselves.
And it's not the average joe buying them...look at new brokerage accounts opened....unlike the last bubble in 2000 or the current one in China, this is driven by a few people with big bucks...the M&A's, the stock buy-backs, the pension and hedge fund managers....because they have tons of cheap money.
The average joe is getting pinched, but as long as they can hide it with upside suprises on REDUCED expectations, they just load up on more.....Frankly, what else do you expect them to do with the money?
STAGFLATION.
"This is just more evidence that no one in charge knows what is going on with this mess."
Hank Paulson is and he got a lot a pull.
i don't know what the actual numbers are but if you do curr/curr the % will be much higher regardless of what the $7.35 represents because the total universe of rated securities will have paid down much more than the B pieces that are the vast majority of the $7.35.
the other number u should look at is the % of rated deals that were touched. that number is huge (45% for Moodys). i don't think moodys will be revising their number of affected securities though (at least not to nearly the same extent). hmmm...
Maybe we're living under the illusion that only the central bank can print money. Maybe we're living under the illusion that bank debts needs to be repaid.
Maybe there are more printing presses than we ever thought possible. Maybe losing billions doesn't really make a difference.
That would explain the lending of millions to unemployed, assetless, incomeless people. And the reason it doesn't seem to make any difference to anybody.
Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel.
Good Luck!!!
That's the whole plan - get the small money out to make room for the big guys.
Seriously, when an article shows up in the Wall Street Journal about how short interest has reached a record high did anybody really think this market wouldn't get slammed higher to squeeze money out of these people?
The more people short the market, the less likely it is to go down.
The shorts basically create a safety net under the market unless something really big happens.
incog,
absolutely this manipulation occurs. i've been shorting this post LBO highly leveraged stock since it IPO'd late last fall and have seen numerous sequential upgrades to buy every couple of months. so i got suspicious about the IB's doing the upgrades and decided to look up who did the original underwriting. sure enough it was exactly the same characters pumping the stock. i'm finally making some $ back since in the last month all the major insiders (CEO, CFO, directors) are all dumping their stock i suspect b/c of widening spreads.
ac,
i disagree. the shorts are shorting b/c of good reason; fundamentals stink. most of these shorts are in HB's and financials i would bet (like i am) and have made quite a bit of money the last 6 mo. sure there will be squeezes but you've got to stick to your convictions and ride it out. its paid off for me altho it can be gut wrenching
p.s. doesn't S&P look like a bunch of boners???
but you've got to stick to your convictions and ride it out.
If you stick to your convictions with shorts you'll go bankrupt.
Not many people can stand to lose 300% of their portfolio.
today is all about setting a new record. thats all.
if you look closely, the HB's i'm short are down today and the XHB is only up 0.74%. financials (FED, DSL, CFC) are only barely up.
Obviously the market is celebrating the fact that it's $7.35 Billion instead of $12.078 Billion.
Trade deficit ---Thanks be to BA
good work guys... hope that PO "occult" are all wrong
I posted a few days ago about how the market cannot make a meaningful correction anymore. Specifically, I suggested that hedge fund managers have a dramatic personal incentive to take on enormous risk. As long as the assets they buy continue to perform, liquidity will continue to be available to them.
IMHO, until risk is drastically repriced across the board, I don't think we will see a meaningful correction.
Whether S&P is repricing 6,7 or 12 billion in bonds is irrelevant. The Dow Jones is setting up for a record run today.
What do you folks make of this? Specifically, what is causing this massive runup?
If anyone wants to listen to Moody's try to explain their ratings on one of the worst commercial mortgage backed securities I've ever seen they have a conference call at 4pm eastern today (in 2 hours). When you dial in, it is anonymous and muted. It is the same bond blogged about here: Commercial Real Estate Risk: Why rating agencies should be sued - CSF 2007 TFL2
--
CSMC 07-TFL2 ($1.5bb CMBS Floater) GROUP CALL
(June 12) @ 4pm
Domestic 888-875-5850
International 706-679-9615
Call Code 0979409
Call WILL NOT be recorded
There is nothing behind this run, it was simply something that a few people decided to do yesterday before the close.
It's amazing that such power exists.
I'm with idoc. My fairly large put portfolio (inspired by weakness in RE) is up 60% in the last two months and was up 12% on Tuesday. Today the homebuilders, lenders and REITs are barely up and they have been consistently down on slightly up days for the market. I'm happy to see my put portfolio go down only a little (1-3%) on such a strong day for the overall market as today.
In the mean time, I think that it's still good to be long in retirement accounts (with some money market) and my medium term signal for S&P futures is positive and (surprisingly to me) has recovered from Tueday's loss. I follow the signal, not what my gut says.
Hint: How does u define subprime? that $5B of vanishing bonds is not a mark to market.
If we really are getting close to the end, I'd expect the hedge funds to turn their guns on the market and start firing.
Afterall, once the liquidity dries up, a lot of these hedge funds go away, so there's not much to lose by pulling out the heavy ammo and making a last stand.
Remember, the clients take the losses at the end, not the 15% federal income tax paying managers.
We could see some huge volitility where anybody who's heavily leveraged, regardless of direction, gets blown out of their positions.
Everybody can see where we're going, so don't expect it to be easy getting there.
Trillions of dollars around world are looking for a home. That home is the asset markets. Whether it is carry trades, sovereign investment funds, or recycled petrodollars, the dollars have to be parked.
Help me understand a scenario where hedge funds runnning these trillions start to aggressively short the market. Who would be so foolish?
Unless we see a totally unpredictable event, I am having a very hard time imagining any meaningful unraveling of the asset markets.
The stock market and the underlying economy parted ways about a year ago. This market is being driven by record corporate buybacks, record private equity buyouts, record m&a and speculation this will continue for the forseeable future. This is all being underwritten by a hyperactive junk debt market that appears to have more lives than Jason Voorhees. Until the junk bond market finally hits the wall, the stock market will have an underlying bid. Like Jason, the junk bond market appears to have more lives and more sequels than anyone thought possible.
ac,
yes, bucking the consensus is difficult. but the pattern has been relatively consistent over the past 5 mo. huge up in dow, small up in HB's, financials. down in dow, way down in HB's, financials. how long this will last i don't know but the fundamentals of RE and mortgages suck and will be so for years. the titanic has turned.
I don't understand this market. It seems crazy to me. The handwriting is on the wall, but the money just keeps pouring in.
As I understand, the underlying junk market is not the junk market of Michael Milken. Similar to the repacking of Subprime MBS into waterfall-tranches and then finally aggregating them into CDOs, it has become possible to create billions of AAA-rated securities for buying companies. It is not junk. Or so they think.
What causes this alchemy of junk to AAA to stop?
What worries me is that bonds aren't selling off more in response to the rally today.
Low bond yields were an enabler for both the housing bubble and this recent M&A thing.
If yields don't keep rising with these rallies, stocks could resume their flight back to the moon and bring the junk bond market back to life with it.
The party could just be beginning.
Dow 25,000 here we come.
holy damn stay on topic u bastards.
re: shorting
The main reason shorts are at record highs is because of the proliferation of hedge funds, which, true to their name, are taking on more and more short positions to hedge losses in their longs as the market grows more and more risky. Everyone knows there is tons of risk not priced into this market, they're not talking about it, but they are taking on more short positions to hedge.
The market is getting propped up by manipulation by the big boys and the media. Witness today - Motorola crapped the bed, Macy's bombed, on the heels of numerous other retailers in trouble, yet the lone positive of Wal Mart surprising gets the headlines and sends the market screaming higher. The greater fool theory at work. Then you have ludicrous upgrades to GM and Ford used to prop up the Dow.
They are trying to prop it up until the election. I think that's too tough of a task even for the PPT and friends. But likely they can keep the party going for at least another few months.
As I understand it, the billions of recycled petrodollars and sovereign wealth funds are looking for greater yield, but want AAA rated securities.
In the past M&A boom, they would have been offered and they would have rejected the junk-rated bonds being issued for buying up companies.
Today, an investment bank issuing billions in junk to finance a purchase can aggregate them together into waterfall-tranches and get AAA-ratings. They can further reduce risk by packing them into CDOs.
Alchemy: Junk to AAA with billions in fees in the middle.
How does this stop?
The runup is mostly basic materials, oil, miners and stuff like that.
The real-estate related stuff is underperforming.
You must never short the whole market. It makes no sense. You short a lot of good stuff.
Responding to my own post (how rude!)...
Junk to AAA alchemy will stop in its tracks in the same way the subprime->AAA alchemy stopped. When the final bagholder (the acquired companies) become unable to pay back their debts in full, those AAA ratings will look like a bad dream.
If the consumer is indeed slowing down, then corporate earnings will eventually slow down, ....
If the consumer is indeed slowing down, then corporate earnings will eventually slow down.
That's the key, and it is happening, slowly but surely. We're on artificial life support but the bill for that is enormous...
Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel.
It will be interesting to see if Ron threw in the towel at the exact peak of the market.
Nasdaq volume is 8% below average and SP500 is 10% below average. Its all about leverage and margin today, notice the bond market is not very excited seems they can't have it all.
Eat it, shorties.
So much cheerleading here.
spu peak was days ago
itsallgreek is exactly correct in his 2:37 post.
It couldn't have been stated any better.
Alcoa? C'mon. Excuse me, but didn't they miss?
The best way to distract from the collapsing debt markets is to rally the indexes. Completely manipulated. Unsustainable.
And BeachGuy is wrong, there are not trillions looking for a home. His claim sounds like that pent-up demand for actual homes, which is also a media fiction.
How does this stop?
Beachguy | 07.12.07 - 2:39 pm | #
with blood
when? WFK
How does this stop?
When AAA becomes A and/or defaults.
It's coming. Haven't you seen Exhibit 42? Yes, the Credit Suisse ARM reset schedule over the next 6 years.
That is what's coming, and it will cause the above.
It will be interesting to see if Ron threw in the towel at the exact peak of the market.
That's always their goal.
Russ Winter posted a copy on his blog several months back:
Exhibit 42: ARM Reset Schedule
Not sure if you guys are talking about it, but ever since S&P did their downgrades, AHM has been getting annihilated and are slashing their workforce. Does anybody have an understanding on whats going on behind the scenes?
Thank you for any insights
S&P made a simple error. They totted up the face values incorrectly (added bonds that shouldn't have been included).
Whoops indeed, considering this was obviously an attempt to preempt mounting criticism.
Well, I think today is really going to make people who think they can go out and short stocks just because they read some bad news on the Internets think twice about it in the future.
In fact, I suspect that's the whole point.
Indeed it is. Since yesterday this thing got cooked up before the close.
Still, one wonders why only the shorts get pain, after all margin debt is at a record as well.
from the CDO managers mouth..Bloomberg
TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.
TCW of Los Angeles and GSC, a New York-based investment firm, manage 12 CDOs that will likely face ratings cut on a portion of the securities they issued, a report by Bear Stearns Cos.
TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 CDO Manager of the Year.
Our transactions have a high subprime percentage and we were affected by the agencies re-rating of subprime, GSC Partners Managing Director Edward Steffelin said in an interview. The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said.
Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.
If it gets worse, the next area to see losses and price declines is the alt-A market, said Bose George, an analyst at Keefe, Bruyette & Woods Inc.
Repeat: "steer away from mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said"
Question: when is NO DOC subprime, no that is Alt A.......
- Bloomberg.com
It will be interesting to see if Ron threw in the towel at the exact peak of the market.
I wasn't short the market today I don't know why ac mentioned me. What's up with that ac?
From Bloomberg. TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.
TCW of Los Angeles and GSC, a New York-based investment firm, manage 12 CDOs that will likely face ratings cut on a portion of the securities they issued, a report by Bear Stearns Cos.
TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 CDO Manager of the Year.
Our transactions have a high subprime percentage and we were affected by the agencies re-rating of subprime, GSC Partners Managing Director Edward Steffelin said in an interview. The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said.
Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.
If it gets worse, the next area to see losses and price declines is the alt-A market, said Bose George, an analyst at Keefe, Bruyette & Woods Inc.
repeat: "The firm has steered away from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income"
Question? when is No Doc subprime...how much of the CDO is ALT A...they obviously see it.
Rating agencies are likely to review bonds backed alt-A mortgages in the near future, said Scott Valentin, managing director of specialty finance research at Friedman, Billings, Ramsey & Co.
ahhhh the ol' round to it.....
I'm not sure if I should mention this here in the bear's den, but: what is the most unlikely economic scenario for most people right now? (as this is the one coming true)
I would think that it's not on many people's mind that we are in an environment like the mid 50s: strongly performing economy, moderate inflation, moderately raising raw material prices, stronger raising asset prices and very strong productivity gains. Looking back to 2003, that's exactly what happened. Agreed that the rest of the year may be bumpy at times with the current cycle so stretched, there is no indication the general trend will break any time soon. It took until past the mid-sixties to break the general trends towards runaway inflation and a bear market. This time, the bull market may go until 2020. Like in the fifties, people were wetting their pants about a recurring Great Depression and other frenzies at that time like: communist overthrow, global cooling. Today's mania's are: terrorism and global warming. Let me add: they are in as much imaginary as global cooling was in the fifties.
In the fifties, the general public understood the stock market up-trend when it was over. Who bought stocks in the fifties? Nobody. When everybody followed suit in the sixties the party was over. So it is today. I would urge you to reconsider your baerish stance. But always apply good risk management, which is of utmost importance. We are going into a seasonally weak period after in incredible bull run.
Just food for thought.
Joe, there's every indication debt is blowing up. You didn't have this amount of debt in the 1950s, and it was not provided on today's terms either.
Same goes for 2003 ... debt was being extended then. It's blowing up now.
"Sorry guys and gals, but if this stock market closes at a new high, I'm throwing in the towel."
I was out all day. only was able to see the highlight number. Dow up 1%, Dow up 1.5%, now dow 2%.....
But now I am near a computer I look at my shorts CFC, DSL, FED, LEN , AHM, SPG (I am in at $120 now it is $93) and they are not doing too bad (from my precpective)
Off course I am still at a loss since getting into the short biz back in Feb but today is not as bad as I thought it would be.
I agree with theroxylander. If you short the homebuilders, real estate and financials, you can make money and then wait for another opportunity once the stocks bounce after a selloff. So SRS, SRPIX, SKF, all good recently. If you go with DXD, PSQ, you get killed.
Too funny..
S&P corrects RMBS volume under review to $7.35 bln
| Reuters
S&P corrects RMBS volume under review to $7.35 bln
NEW YORK, July 12 (Reuters) - Standard & Poor's has corrected the volume of residential mortgage-backed securities it placed under review for downgrade on Tuesday, to $7.35 billion from $12.1 billion.
S&P said the volume corrected represents 1.3 percent of the $565.3 billion U.S. subprime mortgage market it rated between the fourth quarter of 2005 and the fourth quarter of 2006.
"It was an error and we corrected it," said S&P spokesman Adam Tempkin. "It was human error. It is what it is."
Hey Joe,
One can always pick and choose the points in history to make a point, there are soooo many. This kind of blowoff makes 1929 look tame. But that doesn't mean it isn't 1927 with two more good years still left to rip even higher.
Ya never know. As for the short interest- I have begun to believe much of it is tied up in funding strategies- short the slowpoke and buy the fastgrower-that it has become darn near meaningless. If I am short MSFT and I am long CROX with the proceeds, do I count as a short or a financial genius?
Today I would actually be a goat- but for the last six months I would be up huge- so go figure.
The statistics don't necessarily reflect what you think you see.
Someday this war's gonna end...did you see oil went up again!
" Joe, there's every indication debt is blowing up. You didn't have this amount of debt in the 1950s, and it was not provided on today's terms either.
Same goes for 2003 ... debt was being extended then. It's blowing up now."
By debt blowing up, do you perchance mean margin calls/short covering?
In the 1950's people were probably more afraid of debt than commies, given the experience of the great depression. Today, maximum leverage is viewed as prudent corporate and household balance sheet management. I'm afraid if you're looking to make decade to decade comparisons, the 1920's are the best match to the present.
it was indeed a human error. but the key point is what the error was...
Beachguy, "What causes this alchemy of junk to AAA to stop?"
Here's what I think will make the train come off the tracks - A re-pricing of these securities and then a reflection of that re-pricing in the market-priced rather than model-priced funds. That happens when these ASB, CDOs... whatever, get CUSIPs marked with a real price from a sale on the secondary markets, not just the indexes.
OT & anecdotal, I was sitting on an aircraft and talking with a securities broker. He entertained me with a story about how the $3.2B was raised to prop up the teetering BSC hedge fund. I foolishly believed that BSC came up with the loot. He indicated that, based on conversations with some character that ran another hedge fund, BSC "extorted" money from other funds to collectiviely do the bail-out - so the securities wouldn't actually get a market price since there would be a lot of panic selling as the contagion starts.
That day is going to come. He thought the party might continue until Oct at the latest. Any large scale re-pricing event will cause the party to end sooner.
Holy Cow!
Can someone translate this in English (for those people who are financialy illitrate).
Sudden Debt
wawawa,
I wonder if this "margin" include short sales as well ? or is it all really shorts bought on credit ?
Apparently, somebody forgot to tell the ABX that everything is fixed and great.
New closing lows reached today
ABX-HE-AA 07-1-----93.05
ABX-HE-A 07-1------75.00
ABX-HE-BBB 07-1----55.00
ABX-HE-AAA 06-2----99.01
ABX-HE-AA 06-2-----95.09
ABX-HE-A 06-2------79.18
ABX-HE-BBB 06-2----63.00
ABX-HE-AA 06-1-----98.91
ABX-HE-A 06-1------92.70
I'm mostly short but I'm about 3% up for this week. Today run was not harmful for my short positions too much. Just back to where I was yesterday morning.
Never short S&P500. Short only bad stuff.
Can someone translate this in English?
Uhhh...run for the hills? Hurry, yesterday if possible.
It's a Brookstreet world.
Strangely, the debt deterioration continued unabated even during today's market folly !
Sucks to be right and still have your rear handed to ya.
I feel your pain. Well, more in spirit since my portfolio is kicking butt and takin' names.
barely,
You mean Bear didn't actually put up cash? I'm shocked SHOCKED. That's so unlike BSC
/sarcasm
One thought that keeps getting expressed around here is that the "big boys" somehow "rig the markets." It is almost inexpressable just how far from reality this view is. Who are the big boys? JP Morgan? Goldman? Bear? Morgan Stanley? Fidelity? Wellington? TCW? TIAA-Creef? Putnam? Waddell&Reed? MFS? Citigroup? KKR? Blackstone? CalPers? Cerberus? Principal Mutual? Northwestern Mutual? Prudential? Apaloosa? Apollo? UBP? SocGen? AIG? Lehman? HSBC?
I can go on and on and on. The idea that such a numerically large and diverse group "gets together" with any regularity, is pretty funny for a couple of reasons. First, the trading operations at these sorts of places is so diffuse that you very quickly get to thousands of people. The head of trading of corporate bonds at xyz investment bank (for example) has traders covering each different industry, and distinct credit qualities within that, all of whom run independent desks with credit limits. Call it a 15-25 in corporate bonds depending on the sidze of the firm. Often, even in house traders are taking contradictory positions to the guy across the room. Now add in equity traders (more in many cases), Govvies, Agencies, Mortgages, Eurobonds and on and on and you get some idea how many independent decisionmakers there are just among the large players. Now multiply that for the hundreds of "big boys"and you get some idea how unlikely collusion is. For a specific example of how difficult agreement between just a few investment banks alone when it was most likely to happen, think about Bear's decision not to participate in the bailout of LTCM, one of the major threats to all the capital markets.
Of course if you think the Trilateral Commission really runs the world, well, then I can't help ya.
One more thing. I am speaking about listed stocks and corporate bonds etc. I am certain that in unlisted securities and the "pink sheets" that only a few folks pay attention to in the first place, that market manipulation of individual securities is common.
Banker - what do you call the ridiculous upgrade of GM by GS and JPM? How could that be anything but manipulation of the Dow? There is absolutely no fundamental reason to buy that stock. None. Their balance sheet is a horror show, and with skyrocketing gas prices their only profitable products, the big trucks and SUV's, will no longer sell.
itsallgreek,
Are you saying that Goldman and JP got together and decided to do that? Where are all the other analysts? Why aren't they on board? Is every ratings change in any direction "manipulating the market?"
You disagree with the upgrade which is of course your right. But an upgrade on a "tactical trading basis" (Goldman's term) based upon the likelihood of union concessions doesn't seem crazy.
But if everyone agreed with you the analysts would have no impact on the price of the underlying security, or do you parhaps think that the portfolio managers at Fido, Eaton Vance, Templeton etc. aren't doing their own work and are all calling each other saying "Goldman upgraded GM! We'd better all buy now!
Banker, I got a call back in 1999 where a GS sales said, literaly, "you can buy anything tech" right at the start of the tech folly (Late October).
Later, another GS sales was pumping Terra Networks having no basis whatsoever to do it.
There is precendent in large brokers getting together in the market, for instance it happened in 1929.
And today's rally was prepared yesterday. Check a futures intraday chart and look at what happened into the close of the market and 15 minutes after that same close: today's rally began right there, vertically.
Also, after 3 similar rallies in the last month alone, 3 different brokers upgraded Intel on the next day (today it was BofA).
You can say these are all coincidences. Of course. But then again, there are e-mails with analysts saying "POS" on them, and upgrading to the public, remember? Think that was a coincidence too?
Also, some kind of social feedback loop makes brokers seemingly all say the same. During 2000 the only broker I remember saying some tech (telco equipment) was NOT a buy, was Dresdner.
Some 20-30 others ALL pumped tech.
ok doucheballs i will give u the answer to what this thread is supposed to be about. u will notice a number of the pools on S&Ps list have 700+FICOs. that report was supposed to be about subprime. they specifically did not comment on alt-a. so if u are an issuer and see your 700+FICO deal on that list, your reaction is to phone S&P and tell them to take your bonds off their fucking subprime list or u will sue them. Now some of them i have spot checked have started to be taken off Rating Watch Negative on S&Ps website. this is the magical disappearing $5B. case closed where's my medal???
Everyone is calling anything not performing "subprime", so as to seem that it's all "subprime" and nothing else.
It's a Joke.
But soon corporate debt will be "subprime" as well. You can't issue CCC debt like there's no tomorrow and expect it to perform.
wait some are also being downgraded...but some have definitely been taken off the list. i dont know.
Banker,
In 1999, a settlement was reached on collusion among price fixing from market makers from 1994-1998.
The settlement included 31 firms.
Yes, 31 firms. How could they possibly have such a large conspiracy?
Price fixing settlement Jan 1999
"Goldman Sachs, Merril Lynch, Morgan Stanley, Credit Suisse First Boston and Salomon Smith Barney are among the banks involved in the case that began in 1994 after a stock manipulation ring was exposed."
Nice try, banker, you always give it your best.
Sorry, but your best isn't good enough.
The market is absolutely rigged.
More on price fixing settlement Jan 1999
"But top industry execs are off the hook despite almost complete supervisory collapses at several firms."
"No senior executives of any firms were personally cited in the case regarding Nasdaq problems--one of the largest and most widespread Wall Street scandals ever"
And with the Bush-league SEC we have now, I certain that they are aware of rigging, and complicit with it. They are working with the PPT.
Cox is as big a crook as Paulson.
maybe my speculation was wrong i don't have time now to check into this
Banker, you claimed you were working for Bear during that period. Are you trying to claim ignorance on that price-fixing scandal?
31 firms, all working in collusion against the investor.
Why do you protest so much?
People have very short memories.
Commie,
More on price fixing settlement Jan 1999
Since your joke of a source didn't provide any links, I presume the above this is what you are talking about. This is your evidence the markets are rigged?
BTW, I was working for Sandy Weil when this was happening.
Another stunning quote from the second link.
"The tapes, covering trading activity during parts of 1994, show rampant price manipulation and collusion. For example, instead of competing, traders routinely colluded to move prices up before selling to clients, or vice versa."
Joke of a source? What, the university link with multiple quoted sources, or the Raymond James PR? Are you trying to deny this? This was an SEC enforcement.
You are too much, ol' bank-boy. And seeming quite suspicious with the denials.
One thought that keeps getting expressed around here is that the "big boys" somehow "rig the markets." It is almost inexpressable just how far from reality this view is. Who are the big boys? JP Morgan? Goldman? Bear? Morgan Stanley? Fidelity? Wellington? TCW? TIAA-Creef? Putnam? Waddell&Reed? MFS? Citigroup? KKR? Blackstone? CalPers? Cerberus? Principal Mutual? Northwestern Mutual? Prudential? Apaloosa? Apollo? UBP? SocGen? AIG? Lehman? HSBC?
You left out GOD... LOL.
I agree banker, I keep looking on Monster for job openings on the PPT (I want to send them my resume)... and when I keyword 'PPT' all I get are admin openings for somebody who's good at PowerPoint. Well I guess I could do that too.
rigged may be a strong term.
As banker points out, you have lots of big money managers jockeying for comparative advantage. So movement like today may have been triggered by a some big buys that triggered the uptrend. Perhaps by somebody from overseas. The fast money moved in to support the uptick.
The problem with this market is that the signals are over the place. Nobody KNOWS where it is going.
Beachguy asked: "How does this stop?"
The "junk-to-AAA" alchemy?
Why should it stop? I mean, why does it have to stop? Stuff like this has been going on forever. Everybody involved has had a good "scare" now. The ratings agencies, the issuers and the "end-users" are all taking some heat, which will cause them all to be more circumspect.
That will eventually wear off, of course, and the powerful play will go on.
Sebastia
The market is absolutely rigged.
It IS absolutely rigged... rigged like sport betting & 'the numbers' at a casino is rigged.
The casino skims - it makes money if you win, it makes money if you lose. The odds are adjusted (the 'spread') so that equal money lines up across from each other as much as possible guaranteeing a complete take.
The only difference is the 'skim' in the markets are called commissions & fees and are more certain than the profits at a casino... In sports betting it is possible to have the money NOT line up and the house lose on that bet... not so on Wall Street.
Only state run paramutual gambling & Lotto are more of a sure thing than Wall Street.
The reason for Wall Streets bullish tone is the same reasons casinos have 'optimistic' tones... you won't walk in with you 'fees & commissions' unless you think there is a chance you walk out with winnings.
Wall Street LOVES short selling bears... and margin to the eyeballs bulls... KA CHING both ways.
They hate money on the side and buy-n-hold alike. Soooooo unprofitable.
You don't have to 'rig' anything if you can collect your commission up front at every transaction.
Remember there is an equal dollar value EACH WAY on EACH TRADE... $1 dollar buy, $1 dollar sell... but commissions on both with the only really NEW money being IPO money.
[Can you guess that I've made my living off commissions a few times in my life?]
PPT links for the naive:
PWG
The Plungers
The plunge protection team is a suspected consortium consisting of the the Federal Reserve, the White House, the SEC, the large wall street brokers, and possibly others.
and more here:
Plunge Protection Team
Founded in 1988 after the 1987 stock market crash, it theoretically ensures the stability of the financial markets, prevents liquidity problems, and ensures that stock market hiccups do not cause bank runs. Some Wall Street bears believe that it buys stock index futures or uses other methods to help keep the American stock markets afloat.
Upon that suspicion, Plunge Protection Team or PPT for short, has become a catch phrase among those who warn about the danger of monetary inflation being used as a tool to more or less directly support stock market prices.
Good pdf here: Move over Adam Smith: The Visible Hand of Uncle Sam
If you think Bob Rubin and Sandy Weill aren't a part of this, then you are more than naive.
banker,
your list was indeed long and diffuse but didn't incl the PPT mentioned by others above. only consists of 4 guys who could direct a team of traders say at GS (who btw has an unlimited bank acct over at the Fed) to buy the dow index at every dip during "sensitive" times. all they have to do is stem the downswings. my sense is that all the other "big boys" know these guys are out there (or at least think they're there) thus they pile in at the dips propagating a self fulfilling objective. certainly Ron Paul thinks there is a PPT in questioning BB and in a YouTube interview a few months back.
I see the visible hand link is halo'd.
Try this - a very good read on the PPT:
The Visible Hand of Uncle Sam
dotcommunist
that really is an incredible article from Sprott
July 12, 2007, 12:01AM EST
More Subprime Woes to Come
The ratings changes were small. S&P put $12 billion worth of mortgage-backed securities, just 2.1% of the total issued from late 2005 to late 2006, on watch for downgrades, while Moody's cut its ratings on just $5.2 billion worth.
More Subprime Woes to Come