No one could have predicted this! BTW recently I worked (consulted) for a year at one of the big mortgage insurers. The place was bizarre--focused on internal politics and denying operating snafus. Bearers of bad tidings were taken out and shot. Guess the bad news can't be suppressed forever...
Along with wanting to know who actually loses money when these big Groups take these big hits, I'd also like to know where these billions and billions of $$ go? Do they just disappear? Do they get recycled into someone's pocket? Are they going to China? Just where will this $9.8B+++ show up?
God, you really have to give it to the Fed and War Shriek. The Fed crammed down rates so hard that traditional safe LTI's used to amortize the reserves provided returns less than inflation. Thus ussually intelligently run insurers like AIG had to go a chasing returns elsewhere. Along comes a War Shriek crack dealer:
WSCD: Hey, I gots some returns for ya homes.
AIG: I can only buy AAA and maybe some A. No returns there these days.
WSCD: Trust me. This is THE KIND. Moody's gives it AAA. Risk? Fuggetahboutit!
AIG: OK sounds good.
"Son, if you really want something in this life, you have to work for it. Now quiet! They're about to announce the lottery numbers."
Homer Simpson
"Along with wanting to know who actually loses money when these big Groups take these big hits, I'd also like to know where these billions and billions of $$ go? Do they just disappear? Do they get recycled into someone's pocket? Are they going to China? Just where will this $9.8B+++ show up?"
It goes POOF! It is fictitious capital. It's value of $9.8B never existed except as mark to fantasy by models at the rating agencies, paid for by the SELLERS not the buyers.
Kinda like if UL did safety reports paid by manufacturers instead of report buyers.
Substitute pension funds for AIG and some of us may be crying, not laughing...
You talk about pension funds... where do state governments put cash they have to invest for educational scholarships (e.g. Bright Futures in Florida, which is core funded from lottery revenues). Are the educational scholarship cash pools at risk from these write downs ?
being self employed there are times when I think it might be better to have a pension and let someone else manage that instead of just managing my own money.
Ding Ding Ding. Money heaven is the correct answer. Where it will take a glorious and exalted seat beside the value of all the index puts I've bought over the last year or so.
So, when it does take the hit how much will the stock go up? $5 a share? $10 a share. When companies take hits it's good for the stock. Works like a charm. More of them should try it. LOL.
The unfolding downturn will bankrupt the big 3 automakers and a few more airlines, devastating whatever's left of PBGC. The remaining private fixed pension plans will all be found to be severely underfunded once estimates of future returns prove incredibly optimistic and all that worthless paper is marked to market. Most 401Ks & IRA will be devastated when the market finally turns south. Home equity will be nothing but a cherished memory. Oh, and hyperinflating food, energy and healthcare costs will take whatever meager amounts are left.
Social Security? Government pensions? Don't even get me started.
Where it will take a glorious and exalted seat beside the value of all the index puts I've bought over the last year or so.
Even though the housing bubble burst 2+ years ago, I waited until earlier this year (when the markets first starting showing cracks) to buy the longest dated index LEAP puts. It's damned near impossible to time these things.
I agree with Troll Brothers. If this AIG writedown relates to subprime only, there might well be another writedown, a la Merrill Lynch, when AIG marks bad "seniors" and "super seniors" to market.
Off Topic, but there is some justice in the world . . . David Brooks, war profiteer, finally indicted for stock fraud (you may remember him from the $10MM bat mitzvah for his daughter that we all indirectly paid for)
Forgive me if this has already been referenced; Sometimes Fleck can be pretty clever and I laughed out loud:
"This week I have another entity of entitlement to add to the list: "SIV Mae" (SIV = structured investment vehicle). That seems a fitting description of the super-duper bailout put together by the Goldman Sachs subsidiary known as the U.S. Treasury Department."
It's things like this that I think will drive a stake through the heart of MLEC. By the time it gets up and running, all the writedowns will have been taken and there will be much more of a f*@# it attitude about selling and taking the hit.
9 Bil and still no layoffs and more importantly, no exec's getting laid off. WTF. What would happen if one day we all said= I don't need insurance it does'nt work anyway. I don't need any stock- the market's rigged. I don't need any bonds-after inflation and taxes- I'm better of putting it under the mattress. We really don't have it in us to fight back anymore, consequently, we get what we deserve.
ot to disappoint all of you, but AIG earns approximately $15B per year. it manages ~ $700B of fixed income investments that represent the float generated by its insurance businesses.
a $10B write off is roughly 8 months of income for AIG. they would recognize at least that much in losses were a category 5 hurricane were to strike miami.
management and shareholders may be disappointed by a write-off of this magnitude, but it hardly imperils the financial position of the company.
now, this isn't to say that there isn't risk on the balance sheet that we should be worried about. they have a financial products business that is very opaque and a P&C business with concentrated catastrophe risk. but a $10B write off - if that's all there is - isn't going to be a material long-term issue for the company.
a $10B write off is roughly 8 months of income for AIG. they would recognize at least that much in losses were a category 5 hurricane were to strike miami.
I thought those type of losses were spread around with Re insurance. Do they have some way to hedge this type of loss ?
To hear CNBC tell it the earnings and growth bandwagon could go on forever. Now it turns out that losses in the billions are manageable and people are saying a week dollar is not a bad thing....Ever read Candide Tanta? Its always the best of all possible worlds! Yep when we are up we are great and smart and when down its manageable.....Yeah right....
Anon investor: Isn't there a difference between a loss due to a hurricane and the current losses?
In other words, I'd expect that AIG understands that a hurricane could hit Miami and has planned accordingly. That's how they earn their money and I am sure that they are very good at it.
On the other hand, I don't think that AIG understood the risk associated with their "investment grade" investments. This type of loss what not in their playbook and they probably didn't consider it at all in their planning. AIG is simply not in the business of questioning the ratings given by the ratings agencies.
Although I don't think that this is enough to trash the company, it does make me wonder about their ability to handle the hurricane and other risks that they are paid to handle.
AIG is simply not in the business of questioning the ratings given by the ratings agencies.
If that is true they are unfit to be running even a small portfolio. In reality they have over 100 analysts just in their fixed income area. These folks are in the business of questioning the rating agencies, among others.
I like the guy a lot, but Stan O'Neal is a dead man walkin'
Mr. ONeal broached the possibility of a merger with Wachovia, the bank based in Charlotte, N.C., without first getting the approval of Merrills board, a major breach of corporate protocol at a time when directors were already concerned about the companys performance, these people said.
Ten years ago, you could get away with that, not anymore. The big problem is Merrill has to go outside to replace him. There is no internal successor and an outsider getting his arms around things at Merill now? Very tough to do quickly. This is also a sign of panic on O'Neal's part. I wonder if he feels like he doesn't have a handle on things? Ordinarily this kind of talk would spike a stock price, this time? I wonder.
If that is true they are unfit to be running even a small portfolio. In reality they have over 100 analysts just in their fixed income area. These folks are in the business of questioning the rating agencies, among others.
Banker - you know a little about the insides on this, I really don't... Is there a revolving door for these folks & say the RA's? I remember you once said there was quite a difference in talent between RAs & IBs w/ RAs being at best Triple A and the IBs being the 'The Show'... And that the good ones down on the farm get called up to the show if they keep their nose clean.
Same thing going on with the likes of AIG? If so what's the possibility of incestuous relationships between the RAs and say AIG? Would a budding young superstar at one of the RAs make a career limiting call? Would somebody fresh from the farm and now in the Bigs really question it?
Is there a revolving door for these folks & say the RA's?
I don't really know, but it may be more likely than the RA-IB jump. Here's a link to AIG's senior fixed income team, there doesn't seem to be any RA background there.
And that the good ones down on the farm get called up to the show if they keep their nose clean
Somebody else asserted that. I don't believe that happens with any regularity.
If so what's the possibility of incestuous relationships between the RAs and say AIG? Would a budding young superstar at one of the RAs make a career limiting call?
I can't say never, but the RA's aren't AAA ball, they are class A. The AAA guys come from the better buyside firms. When squirrelly things happen, more often it happens among peers. Junior, talented IB and hotshot law firm associate start trading info, that sort of thing.
In a series of emails to senior bank executives, a former Royal Bank of Canada trader alleged that some of his colleagues intentionally "mismarked," or improperly valued, plain-vanilla government agency and corporate bonds in a bid to boost profits at the firm's New York-based investment-banking unit.
So far a simple case of bad guys, right? But wait, agency bonds? Those trade on a screen! How the heck you gonna get away with mispricing that?
For instance, Mr. O'Connor said, one $45 million position in Federal Home Loan Bank bonds due March 7, 2022, was valued on one trader's books nearly $100,000 above where a trader offered the bonds for sale on Feb. 23, 2007. Even that price didn't attract buyers. On March 2, the same bond was valued at $145,000 above where it was offered, again failing to sell.
A couple of strange things here. First, time of year. There is no way to hide this position long enough to get to "bonus time" (6 months at least)without a position that old being questioned by someone. Also, $100k on a $45 million position is, um, carry the one, less than a 1/4 of a point mismark. Yet later they got marked down over 30 points?
Either the story is poorly written, my reading skill has deteriorated more than I thought or there is more to come.
These distressed sales placed downward pressure on market values of all residential mortgage securities, including agency issued and guaranteed securities such as those that comprise over 99% of Capsteads mortgage securities and similar investments portfolio.
And here's a funny comment by the CEO:
Having successfully negotiated the turbulent markets of late summer, we are even more confident that our core investment strategy of conservatively managing a leveraged portfolio of agency-guaranteed residential ARM securities can produce attractive risk-adjusted returns over the long term while reducing but not eliminating sensitivity to changes in interest rates. While in future periods we may augment this core portfolio with commercial real estate-related assets that can further reduce our sensitivity to rising short-term interest rates, in the near term we intend to focus our efforts on growing our core ARM securities portfolio with the expectation that earnings and dividends on our common shares will improve in the coming quarters.
Tanta or CR, please send them a complementary subscription to CR!
Question: can banks invest in MBS that are not guaranteed by the government? Can they invest in non-agency MBS? I read somewhere that they could not. I am thinking of a small bank in Nebraska that has MBS in its assets and I wonder if these are government insured or not. So I would like an expert here in banking to tell me yes or no. Thanks.
Standing by here in PA waiting patiently for Countrywide's EPS to come out this morning prior to the market opening at 9:30 am EDT . . . . . . . . that's likely to be the major event of the day and week. Conference call to follow at 12:00 EDT.
Yes but they expect start start earning tons of money again next quarter. Someone please pass the crack pipe, but the short squeeze is going to be on big time today.
Countrywide Financial Corp., the nation's largest mortgage lender, said Friday it swung to a loss of more than $1 billion in the third quarter on to rising loan-loss provisions, writedowns and dwindling origination volume.
But the company insisted it will be profitable in this quarter and in 2008, as it restructures its business to take advantage of the current market.
This one is as clear as it can possibly be: Mozilo and other top executives still have shares to cash out, hence the shameless line about soon becoming profitable. There is no way that this company is financially healthy; its financial situation is clearly deteriorating, and the sole objective of the PR is to buy enough time for the executives to get out with their ill-gotten gains.
conference call starts at 12 pm edt; should make for an interesting tone among the analysts tuned in - we'll see whether skepticism is in or out of vogue, I suppose.
What do you expect CFC to say?
Our losses are going to get worse?
They, like everyone else, report MBS prices are going to rebound. They're no different than the banks and AIG. From looking at the ABX indexes, there's no rebound. If anything, prices are getting lower.
I don't recall ever seeing a bond priced at 28 (like the BBB ABX) that didn't eventually default. I guess the hope is that the purchasers can collect enough dividends to break even before they default.
"Having successfully negotiated the turbulent markets of late summer, we are even more confident that our core investment strategy of conservatively managing......."
No wonder one of the biggest US export items to China is scrap paper. American CEO bullshits much better than a French husband to his wife after getting caught with his mistress.
So, if you had advance notice of CFCs stunning losses and decided to trade on this inside information how would you have done done it? Would you have purchased the stock and made 25% overnight ? Would you have purchased deep out f the money calls for pennines making instant multihundred percent gains? You don't have to be crazy to trade this market but is helps.
So, when AIG takes a 10B hit who actually loses money?
Analyst said MER writedown would be 2B. This may not be the first time they are wrong.
Seems like lights may go out on MTG PMI and ABK ranches but AIG denied the numbers....this should be fun.
So, when AIG takes a 10B hit who actually loses money?
Your dad's pension fund.
OT: Is the California fire 'contained' now?
I want to hear it from Paulson that the fire is contained.
"So, when AIG takes a 10B hit who actually loses money?"
You. As in your "Insert type here" Insurance premium is going WAY up.
Cheers,
Gosh I wish I could find a $10B write down manageable. That would be Sooo coool.
Cheers,
Banker, a friendly reminder that when dusting off the key to the Bankerdome, do not release the prisoner.
But I hope you're at least feeding him. I'd hate to imagine him slooowwwly starving to death in there.
No one could have predicted this! BTW recently I worked (consulted) for a year at one of the big mortgage insurers. The place was bizarre--focused on internal politics and denying operating snafus. Bearers of bad tidings were taken out and shot. Guess the bad news can't be suppressed forever...
Along with wanting to know who actually loses money when these big Groups take these big hits, I'd also like to know where these billions and billions of $$ go? Do they just disappear? Do they get recycled into someone's pocket? Are they going to China? Just where will this $9.8B+++ show up?
God, you really have to give it to the Fed and War Shriek. The Fed crammed down rates so hard that traditional safe LTI's used to amortize the reserves provided returns less than inflation. Thus ussually intelligently run insurers like AIG had to go a chasing returns elsewhere. Along comes a War Shriek crack dealer:
WSCD: Hey, I gots some returns for ya homes.
AIG: I can only buy AAA and maybe some A. No returns there these days.
WSCD: Trust me. This is THE KIND. Moody's gives it AAA. Risk? Fuggetahboutit!
AIG: OK sounds good.
"Son, if you really want something in this life, you have to work for it. Now quiet! They're about to announce the lottery numbers."
Homer Simpson
Cheers,
Misean, too true. Substitute pension funds for AIG and some of us may be crying, not laughing...
"Along with wanting to know who actually loses money when these big Groups take these big hits, I'd also like to know where these billions and billions of $$ go? Do they just disappear? Do they get recycled into someone's pocket? Are they going to China? Just where will this $9.8B+++ show up?"
GS
GS
Breakout
Ermm...Cryptic. If you mean Goldman...how?
Outsider,
It goes POOF! It is fictitious capital. It's value of $9.8B never existed except as mark to fantasy by models at the rating agencies, paid for by the SELLERS not the buyers.
Kinda like if UL did safety reports paid by manufacturers instead of report buyers.
Cheers,
Substitute pension funds for AIG and some of us may be crying, not laughing...
You talk about pension funds... where do state governments put cash they have to invest for educational scholarships (e.g. Bright Futures in Florida, which is core funded from lottery revenues). Are the educational scholarship cash pools at risk from these write downs ?
Once again, Harold Lloyd dangles by his fingertips from the minute hand. It's still a long way down, but don't count on another happy ending.
"So, when AIG takes a 10B hit who actually loses money?"
The shareholders of course. The share price is down from $72 to 61 already. Insurance policies will be paid. They are financially very strong.
being self employed there are times when I think it might be better to have a pension and let someone else manage that instead of just managing my own money.
this isn't one of those times.
[Outsider]"I'd also like to know where these billions and billions of $$ go?"
In the early 1960s, my Dad used to tell me that it goes to Money Heaven.
I want to borrow $10B somewhere and write them down. Just write them down...
"Just where will this $9.8B+++ show up?"
Ding Ding Ding. Money heaven is the correct answer. Where it will take a glorious and exalted seat beside the value of all the index puts I've bought over the last year or so.
So, when it does take the hit how much will the stock go up? $5 a share? $10 a share. When companies take hits it's good for the stock. Works like a charm. More of them should try it. LOL.
Pensions? LOL!
The unfolding downturn will bankrupt the big 3 automakers and a few more airlines, devastating whatever's left of PBGC. The remaining private fixed pension plans will all be found to be severely underfunded once estimates of future returns prove incredibly optimistic and all that worthless paper is marked to market. Most 401Ks & IRA will be devastated when the market finally turns south. Home equity will be nothing but a cherished memory. Oh, and hyperinflating food, energy and healthcare costs will take whatever meager amounts are left.
Social Security? Government pensions? Don't even get me started.
As in,
"This write-down leaves your company soft, silky and manageable even if you use a blow dryer, curling iron or hot rollers."
Where it will take a glorious and exalted seat beside the value of all the index puts I've bought over the last year or so.
Even though the housing bubble burst 2+ years ago, I waited until earlier this year (when the markets first starting showing cracks) to buy the longest dated index LEAP puts. It's damned near impossible to time these things.
I agree with Troll Brothers. If this AIG writedown relates to subprime only, there might well be another writedown, a la Merrill Lynch, when AIG marks bad "seniors" and "super seniors" to market.
Off Topic, but there is some justice in the world . . . David Brooks, war profiteer, finally indicted for stock fraud (you may remember him from the $10MM bat mitzvah for his daughter that we all indirectly paid for)
Daily Kos: Body armor execs finally indicted for stock fraud, tax evasion
Good night all. Looking forward to CFC's report.
Beano,
ROFLMAO
You'll love this:
YouTube -
Cheers,
Forgive me if this has already been referenced; Sometimes Fleck can be pretty clever and I laughed out loud:
"This week I have another entity of entitlement to add to the list: "SIV Mae" (SIV = structured investment vehicle). That seems a fitting description of the super-duper bailout put together by the Goldman Sachs subsidiary known as the U.S. Treasury Department."
A super-duper bad-loan bailout plan - MSN Money
Har! I LOVE this administration! I haven't enjoyed this much to hate since Watergate.
Mish: When will housing bottom?
Mish's Global Economic Trend Analysis: When Will Housing Bottom?
It's things like this that I think will drive a stake through the heart of MLEC. By the time it gets up and running, all the writedowns will have been taken and there will be much more of a f*@# it attitude about selling and taking the hit.
So, what's everyone crying about? It's big, but it's manageable, and it's not OUR money, it's THEIR money.
9 Bil and still no layoffs and more importantly, no exec's getting laid off. WTF. What would happen if one day we all said= I don't need insurance it does'nt work anyway. I don't need any stock- the market's rigged. I don't need any bonds-after inflation and taxes- I'm better of putting it under the mattress. We really don't have it in us to fight back anymore, consequently, we get what we deserve.
Asia Times Online :: Middle East News - Attack Iran and you attack Russia
in case your money problems are really getting to you
Chubasco- "...we get what we deserve."
Indeed.
Oops, sorry, that was BIGchubasco, not just chubasco.
ot to disappoint all of you, but AIG earns approximately $15B per year. it manages ~ $700B of fixed income investments that represent the float generated by its insurance businesses.
a $10B write off is roughly 8 months of income for AIG. they would recognize at least that much in losses were a category 5 hurricane were to strike miami.
management and shareholders may be disappointed by a write-off of this magnitude, but it hardly imperils the financial position of the company.
now, this isn't to say that there isn't risk on the balance sheet that we should be worried about. they have a financial products business that is very opaque and a P&C business with concentrated catastrophe risk. but a $10B write off - if that's all there is - isn't going to be a material long-term issue for the company.
and that's just this year...
last bond bull market ever... then what?
That's why I think 10B is only 1/10th of the actual writedown they will have.
How does that sound?
a $10B write off is roughly 8 months of income for AIG. they would recognize at least that much in losses were a category 5 hurricane were to strike miami.
I thought those type of losses were spread around with Re insurance. Do they have some way to hedge this type of loss ?
anon investor:
Why don't you go back to fooling yourself? At some point, not even the greediest soul can keep pace with runaway nimbers.
$10 billion would be a big hit to WAL-MART, okay?
To hear CNBC tell it the earnings and growth bandwagon could go on forever. Now it turns out that losses in the billions are manageable and people are saying a week dollar is not a bad thing....Ever read Candide Tanta? Its always the best of all possible worlds! Yep when we are up we are great and smart and when down its manageable.....Yeah right....
The optimist believes this the best of all possible worlds; the pessimist fears that is true.
The rest of us laugh at the idea of an FBR Analyst trash-talking AIG's subprime exposure.
Anon investor: Isn't there a difference between a loss due to a hurricane and the current losses?
In other words, I'd expect that AIG understands that a hurricane could hit Miami and has planned accordingly. That's how they earn their money and I am sure that they are very good at it.
On the other hand, I don't think that AIG understood the risk associated with their "investment grade" investments. This type of loss what not in their playbook and they probably didn't consider it at all in their planning. AIG is simply not in the business of questioning the ratings given by the ratings agencies.
Although I don't think that this is enough to trash the company, it does make me wonder about their ability to handle the hurricane and other risks that they are paid to handle.
did we already use this for SRB? Land of Confusion
There's too many men
Too many people
Making too many problems
And not much love to go round
...
Ooh Superman where are you now?
When everything's gone wrong somehow?
The men of steel, the men of power
Are losing control by the hour.
Misean,
LOL, Cheers!
Anon,
So far, initial numbers in write-down rumours were the tip of the iceberg (BSC, MER, C).
8 months could very well be 3 years of income - if that's all there is.
"Estimates of future profits or losses are not facts, but speculative anticipations. There are no facts about future profits."
.
4runner,
AIG is simply not in the business of questioning the ratings given by the ratings agencies.
If that is true they are unfit to be running even a small portfolio. In reality they have over 100 analysts just in their fixed income area. These folks are in the business of questioning the rating agencies, among others.
BTW,
I like the guy a lot, but Stan O'Neal is a dead man walkin'
Mr. ONeal broached the possibility of a merger with Wachovia, the bank based in Charlotte, N.C., without first getting the approval of Merrills board, a major breach of corporate protocol at a time when directors were already concerned about the companys performance, these people said.
Ten years ago, you could get away with that, not anymore. The big problem is Merrill has to go outside to replace him. There is no internal successor and an outsider getting his arms around things at Merill now? Very tough to do quickly. This is also a sign of panic on O'Neal's part. I wonder if he feels like he doesn't have a handle on things? Ordinarily this kind of talk would spike a stock price, this time? I wonder.
Merrill's Chief Is Said to Float A Bid to Merge - NY Times
If that is true they are unfit to be running even a small portfolio. In reality they have over 100 analysts just in their fixed income area. These folks are in the business of questioning the rating agencies, among others.
Banker - you know a little about the insides on this, I really don't... Is there a revolving door for these folks & say the RA's? I remember you once said there was quite a difference in talent between RAs & IBs w/ RAs being at best Triple A and the IBs being the 'The Show'... And that the good ones down on the farm get called up to the show if they keep their nose clean.
Same thing going on with the likes of AIG? If so what's the possibility of incestuous relationships between the RAs and say AIG? Would a budding young superstar at one of the RAs make a career limiting call? Would somebody fresh from the farm and now in the Bigs really question it?
Not sayin' it is, just askin'...
Dryfly,
Is there a revolving door for these folks & say the RA's?
I don't really know, but it may be more likely than the RA-IB jump. Here's a link to AIG's senior fixed income team, there doesn't seem to be any RA background there.
And that the good ones down on the farm get called up to the show if they keep their nose clean
Somebody else asserted that. I don't believe that happens with any regularity.
If so what's the possibility of incestuous relationships between the RAs and say AIG? Would a budding young superstar at one of the RAs make a career limiting call?
I can't say never, but the RA's aren't AAA ball, they are class A. The AAA guys come from the better buyside firms. When squirrelly things happen, more often it happens among peers. Junior, talented IB and hotshot law firm associate start trading info, that sort of thing.
But I can't say never.
CR, what do you make of the charts on the Mish page that TJ and the Bear linked to above at 11:05pm?
If you see this, I'd appreciate your thoughts.
Sorry Dryfly,
Default
Jeez, Banker, you'd think those guys could afford better haircuts. They look like insurance salesmen. Oh, wait a minute . . .
Here's a bizarre story,
In a series of emails to senior bank executives, a former Royal Bank of Canada trader alleged that some of his colleagues intentionally "mismarked," or improperly valued, plain-vanilla government agency and corporate bonds in a bid to boost profits at the firm's New York-based investment-banking unit.
So far a simple case of bad guys, right? But wait, agency bonds? Those trade on a screen! How the heck you gonna get away with mispricing that?
For instance, Mr. O'Connor said, one $45 million position in Federal Home Loan Bank bonds due March 7, 2022, was valued on one trader's books nearly $100,000 above where a trader offered the bonds for sale on Feb. 23, 2007. Even that price didn't attract buyers. On March 2, the same bond was valued at $145,000 above where it was offered, again failing to sell.
A couple of strange things here. First, time of year. There is no way to hide this position long enough to get to "bonus time" (6 months at least)without a position that old being questioned by someone. Also, $100k on a $45 million position is, um, carry the one, less than a 1/4 of a point mismark. Yet later they got marked down over 30 points?
Either the story is poorly written, my reading skill has deteriorated more than I thought or there is more to come.
Bonds' Pricing Is Questioned In Email Trail - WSJ.com
Capstead Mortgage confesses:
Expired
Their gov backed MBS didn't do well, either:
These distressed sales placed downward pressure on market values of all residential mortgage securities, including agency issued and guaranteed securities such as those that comprise over 99% of Capsteads mortgage securities and similar investments portfolio.
And here's a funny comment by the CEO:
Having successfully negotiated the turbulent markets of late summer, we are even more confident that our core investment strategy of conservatively managing a leveraged portfolio of agency-guaranteed residential ARM securities can produce attractive risk-adjusted returns over the long term while reducing but not eliminating sensitivity to changes in interest rates. While in future periods we may augment this core portfolio with commercial real estate-related assets that can further reduce our sensitivity to rising short-term interest rates, in the near term we intend to focus our efforts on growing our core ARM securities portfolio with the expectation that earnings and dividends on our common shares will improve in the coming quarters.
Tanta or CR, please send them a complementary subscription to CR!
Either the story is poorly written, my reading skill has deteriorated more than I thought or there is more to come.
Banker
I guess the Page 6 writers have already been reassigned.
Recession Meme Revisited
An historical comparison of keyword count for "recession", 2001 versus 2007.
Just because I feel kooky tonight.
Question: can banks invest in MBS that are not guaranteed by the government? Can they invest in non-agency MBS? I read somewhere that they could not. I am thinking of a small bank in Nebraska that has MBS in its assets and I wonder if these are government insured or not. So I would like an expert here in banking to tell me yes or no. Thanks.
The euro reflects abandonment of the US.
Broward Horne,
Very interesting. I notice it ends in 2006 though. I tried running a current one but didn't have much luck.
Google Trends: Recession
Standing by here in PA waiting patiently for Countrywide's EPS to come out this morning prior to the market opening at 9:30 am EDT . . . . . . . . that's likely to be the major event of the day and week. Conference call to follow at 12:00 EDT.
"Son, if you really want something in this life, you have to work for it. Now quiet! They're about to announce the lottery numbers."
Classic...thanks for the chuckle..
Cr
I know you love Graphs..check these out quite interesting to say the least.
Where Was The Bubble: Houses, Rates or Credit? -- Seeking Alpha
Anarchus:
CFC's numbers are out. They were bad.
but I think the stock is jumping, so perhaps not as bad as traders thought it would be?
CFC:
loss of $1.2 B, or $2.85 a share
Projected loss was $1.28/share.
Yes but they expect start start earning tons of money again next quarter. Someone please pass the crack pipe, but the short squeeze is going to be on big time today.
CFC is up because they're projecting a profit in Q4 2008; no, that is not a typo, that would be the current quarter. Story here:
Countrywide Financial Swings to 3Q Loss
Countrywide Financial Corp., the nation's largest mortgage lender, said Friday it swung to a loss of more than $1 billion in the third quarter on to rising loan-loss provisions, writedowns and dwindling origination volume.
But the company insisted it will be profitable in this quarter and in 2008, as it restructures its business to take advantage of the current market.
This one is as clear as it can possibly be: Mozilo and other top executives still have shares to cash out, hence the shameless line about soon becoming profitable. There is no way that this company is financially healthy; its financial situation is clearly deteriorating, and the sole objective of the PR is to buy enough time for the executives to get out with their ill-gotten gains.
conference call starts at 12 pm edt; should make for an interesting tone among the analysts tuned in - we'll see whether skepticism is in or out of vogue, I suppose.
What do you expect CFC to say?
Our losses are going to get worse?
They, like everyone else, report MBS prices are going to rebound. They're no different than the banks and AIG. From looking at the ABX indexes, there's no rebound. If anything, prices are getting lower.
I don't recall ever seeing a bond priced at 28 (like the BBB ABX) that didn't eventually default. I guess the hope is that the purchasers can collect enough dividends to break even before they default.
"Having successfully negotiated the turbulent markets of late summer, we are even more confident that our core investment strategy of conservatively managing......."
No wonder one of the biggest US export items to China is scrap paper. American CEO bullshits much better than a French husband to his wife after getting caught with his mistress.
How many billion dollars do these firms need to lose before it's not "manageable"? Just curious.
So, if you had advance notice of CFCs stunning losses and decided to trade on this inside information how would you have done done it? Would you have purchased the stock and made 25% overnight ? Would you have purchased deep out f the money calls for pennines making instant multihundred percent gains? You don't have to be crazy to trade this market but is helps.
The MBS presentation circulated by AIG suggests they have nothing short of a BIG mess on their hands.