we decided to accelerate the sale of the highest risk portions of these portfolios, writing down securities rated lower than double A by more than an average of $0.50 on the dollar. By changing the intent and designation to no longer hold these securities to recovery.
we were talking about when people would stop hoping that the value of securities would recover in the comments on the other post...looks like it's starting now...
Dont forget, they may have written them down by 50%, but they still aren't trading and that might still be way too optimistic an assessment of a market price. But we are getting there...
Actually it could be 50% again, and then we'd still have 25% of the original value left over and possibly still be looking at a value 25% over reality.
Noticed that E-trade just lowered its heavily advertised savings account rates from 5.0 to 4.7. Their CD rates are also down some- still higher than most, but no longer close to CFC's or indymac's rates.
We're opening an equity line for some remodeling. So the credit union calls today and asks if we want the 5.99% rate, or the 3.0% 6 month promotional rate.
Well, duh!
And they service their own loans....
Figured we might as well borrow and spend some, since the money won't be worth anything soon anyway, the way Ben's going!
Actually it could be 50% again, and then we'd still have 25% of the original value left over and possibly still be looking at a value 25% over reality.
Geoff | 10.17.07 - 6:29 pm | #
hhhmmmm. These percentages get tricky. So it is marked down to 50% of its original "value", but maybe it's real value is actually 5% of the original value, so that at the current 50% of original value it is still overvalued by 1000%?
I think I'd pay some price derived by assuming that I could count on 12 months of payments and I'd want a risk factor on that, so if I was figuring on getting $100/month for 12 months, I'd price it at about $900. I'd let anybody else who was bidding pay $950
So, if E-Trade is writing down the value of its "high risk" securities rated lower than double A by more than 50%, and E-Trade's accountants (probably a Big 3 firm) are blessing this... isn't there going to be pressure on the other major accounting firms to force their clients to do likewise for the year-end audits? Or are some firms' MBS and CDOs going to be deemed prettier and more precious than others? I would think that the major accounting firms are going to be trying to treat similar securities in a similar manner from a valuation standpoint... and my guess is that they'll try to tether themselves to more conservative valuations as opposed to more aggressive valuations. Consequently, if the likes of E-Trade are writing these things down... it looks like the dreaded comps are rearing their ugly heads for some major adustments at the year-end audits. Am I reading this correctly?
Thank God I don't have an account with ETrade. I had one with Ameritrade that was thinking of merging with ETrade, and that was enough for me to move that account elsewhere. I have also reduced all my accounts to about the $500,000 covered by SIPC. Who knows what noxious entities these IBs have in their woodwork?
David, your logic on the accounting firms following the precedent set at their other clients makes perfect sense (and is how things work for me in my dealings with PWC).
CR, very nice work on article selection!
Damn plunge protection team/I-bank cabal worked another small miracle today late in the trading day. I hope they burn through their dry powder soon!
Someone needs to tell the Fed that all those securities they're holding at 85 or 90 are worth maybe half that.
Although it looks as if the reason they did it is because they're not trying to sell them, and therefore going to screw up the rest of the market when they get REAL trading prices and force everyone else to recalibrate their models.
I think 50% markdown is too low.....the majority of those 2nds will wind up in the charge off bin. If bankruptcy judges get the ok to modify mortgage loans, you can count on every 20% 2nd to get moved to the unsecured debt side too. And whacking 20% off the mtg balance just might bring the LTV back to reality.
THE VANITY OF HUMAN WISHES
Johnson, Vanity of Human Wishes, 1749
Dont forget about WM...
we were talking about when people would stop hoping that the value of securities would recover in the comments on the other post...looks like it's starting now...
confused
Dont forget, they may have written them down by 50%, but they still aren't trading and that might still be way too optimistic an assessment of a market price. But we are getting there...
Come on Geoff, look on the bright side - any remaining write-down is likely to be less than 50%
confused
Actually it could be 50% again, and then we'd still have 25% of the original value left over and possibly still be looking at a value 25% over reality.
Noticed that E-trade just lowered its heavily advertised savings account rates from 5.0 to 4.7. Their CD rates are also down some- still higher than most, but no longer close to CFC's or indymac's rates.
We're opening an equity line for some remodeling. So the credit union calls today and asks if we want the 5.99% rate, or the 3.0% 6 month promotional rate.
Well, duh!
And they service their own loans....
Figured we might as well borrow and spend some, since the money won't be worth anything soon anyway, the way Ben's going!
Actually it could be 50% again, and then we'd still have 25% of the original value left over and possibly still be looking at a value 25% over reality.
Geoff | 10.17.07 - 6:29 pm | #
hhhmmmm. These percentages get tricky. So it is marked down to 50% of its original "value", but maybe it's real value is actually 5% of the original value, so that at the current 50% of original value it is still overvalued by 1000%?
Who's going to buy these CDO's?
Anyone on this blog willing to pay anything for CDO's?
I think I'd pay some price derived by assuming that I could count on 12 months of payments and I'd want a risk factor on that, so if I was figuring on getting $100/month for 12 months, I'd price it at about $900. I'd let anybody else who was bidding pay $950
So, if E-Trade is writing down the value of its "high risk" securities rated lower than double A by more than 50%, and E-Trade's accountants (probably a Big 3 firm) are blessing this... isn't there going to be pressure on the other major accounting firms to force their clients to do likewise for the year-end audits? Or are some firms' MBS and CDOs going to be deemed prettier and more precious than others? I would think that the major accounting firms are going to be trying to treat similar securities in a similar manner from a valuation standpoint... and my guess is that they'll try to tether themselves to more conservative valuations as opposed to more aggressive valuations. Consequently, if the likes of E-Trade are writing these things down... it looks like the dreaded comps are rearing their ugly heads for some major adustments at the year-end audits. Am I reading this correctly?
Thank God I don't have an account with ETrade. I had one with Ameritrade that was thinking of merging with ETrade, and that was enough for me to move that account elsewhere. I have also reduced all my accounts to about the $500,000 covered by SIPC. Who knows what noxious entities these IBs have in their woodwork?
$.50 on the dollar makes for a nasty benchmark. There's got to be some questions about the last few weeks earnings coming out of this.
Hey,at least it made it easier to value the assets going into that "super-conduit"!
Anyone on this blog willing to pay anything for CDO's?
are they trading in the pink sheets yet ?
David, your logic on the accounting firms following the precedent set at their other clients makes perfect sense (and is how things work for me in my dealings with PWC).
CR, very nice work on article selection!
Damn plunge protection team/I-bank cabal worked another small miracle today late in the trading day. I hope they burn through their dry powder soon!
Anything below AA is "high risk" now, I see.
Someone needs to tell the Fed that all those securities they're holding at 85 or 90 are worth maybe half that.
Although it looks as if the reason they did it is because they're not trying to sell them, and therefore going to screw up the rest of the market when they get REAL trading prices and force everyone else to recalibrate their models.
I think 50% markdown is too low.....the majority of those 2nds will wind up in the charge off bin. If bankruptcy judges get the ok to modify mortgage loans, you can count on every 20% 2nd to get moved to the unsecured debt side too. And whacking 20% off the mtg balance just might bring the LTV back to reality.
Keep in minds that seconds go to zero in exactly the way that firsts don't. And in a market like this, they can get there VERY quickly.