"Con-Duets" or Donut Holes?
In yesterday's missive Alchemy? Part II, the Nattering One mused... Initial conservative estimates for MBS losses over next 5 years $200 - $300 Billion.
Total outstanding value of MBS $6.6 Trillion, the underlying real estate keeps declining, a 5% haircut means this year $330 Billion in MBS losses.
Not far off, and in the last 90 days... according to S&P/Case-Shiller: Q2 YOY Home values declined 3.2% and the YOY 10-city composite index...
declined 4.1%. The largest drop since 1987... Homebuilders plunged 5%... YTD down 50%.
But, thats not all folks... Boston Globe: an institutional bond fund managed by State Street's investment arm lost about 37% of its value during the first three weeks of August.
"Con-duets"... State Street Corp. has exposure to $22 billion of asset-backed commercial paper conduit, accounting for 17% of all its assets.
State Street has the highest exposure to conduits of any European or American bank, TO DATE.
Ich Bin Ein Berliner? .... Aug. 17 German bank Sachsen LB said that disruption in the ABCO market left doubt..
about whether one of tis investment conduits called Ormond Quay could repay 17.3 billion euros in debt that it owed.
A group of German banks and regulators lent $17.3 billion to the conduit so it could repay what it owed. Thats TWO major German banks getting bailed out in a month.
Today, Sachsen LB is selling itself to Landesbank Baden-Württemberg, as an investment in a hedge fund turned sour.
Sachsen has an estimated $271 million stake in a 20 to 1 leveraged fund run by Synapse Investment Management, a London-based fixed-income hedge fund firm.
The fund has received margin calls from British bank Barclays (another major with a solvency issue) and faced a seizure of collateral.
Pick up the pieces.. After beginning to pare back high-yield purchases late last year...
MFS Investment Mgmt, Loomis Sayles & Co and Nuveen have been buying "ridiculously" priced bonds for the past two or three weeks,
KKR and Blackstone Group are leading leveraged buyout firms that need to sell more than $320 billion in bonds and loans to finance purchases this year.
Pimco's Bill Gross said last week that the high yield gains may have peaked because of the anticipated onslaught of financing for LBOs next month.
Private equity firms are lining up $232 billion of loans and $89 billion of bonds to finance buyouts.
Nuveen may buy LBO-related debt if it comes at the right price and on the right terms.
Bottom? No where in sight... Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University:
"The pullback in the U.S. residential real-estate market is showing no signs of slowing down."
How much? Haseeb Ahmed, an economist at JPMorgan Securities:
"Inventories are high, so house prices are going to take the hit. They are going to go down further. The recent credit crunch is going to hurt but it's too early to determine by how much."
Good Meds... Mark Mobius, who oversees $30 billion at Templeton Asset Management:
"The global economy is very healthy and the credit crunch stemming from U.S. mortgage losses has almost passed."
And the cheerleaders disclaimer: "Markets are probably going to surge ahead to new highs barring any other unforeseen circumstances."
Mark can obvoiusly see that light at the end of the tunnel...
A realist... Boris Schlossberg, senior currency strategistat DailyFX.com: "The housing data suggests that the U.S. economy may start to bleed.
That is not good for risk appetite. The market is thinking about the potential for a recessionary outcome of the housing and credit crisis"
Kettle calls Pot's Black... Lehman Brothers., Bear Stearns and Citigroup were downgraded to neutral from buy.... by Merrill Lynch.
Total outstanding value of MBS $6.6 Trillion, the underlying real estate keeps declining, a 5% haircut means this year $330 Billion in MBS losses.
Not far off, and in the last 90 days... according to S&P/Case-Shiller: Q2 YOY Home values declined 3.2% and the YOY 10-city composite index...
declined 4.1%. The largest drop since 1987... Homebuilders plunged 5%... YTD down 50%.
But, thats not all folks... Boston Globe: an institutional bond fund managed by State Street's investment arm lost about 37% of its value during the first three weeks of August.
"Con-duets"... State Street Corp. has exposure to $22 billion of asset-backed commercial paper conduit, accounting for 17% of all its assets.
State Street has the highest exposure to conduits of any European or American bank, TO DATE.
Ich Bin Ein Berliner? .... Aug. 17 German bank Sachsen LB said that disruption in the ABCO market left doubt..
about whether one of tis investment conduits called Ormond Quay could repay 17.3 billion euros in debt that it owed.
A group of German banks and regulators lent $17.3 billion to the conduit so it could repay what it owed. Thats TWO major German banks getting bailed out in a month.
Today, Sachsen LB is selling itself to Landesbank Baden-Württemberg, as an investment in a hedge fund turned sour.
Sachsen has an estimated $271 million stake in a 20 to 1 leveraged fund run by Synapse Investment Management, a London-based fixed-income hedge fund firm.
The fund has received margin calls from British bank Barclays (another major with a solvency issue) and faced a seizure of collateral.
Pick up the pieces.. After beginning to pare back high-yield purchases late last year...
MFS Investment Mgmt, Loomis Sayles & Co and Nuveen have been buying "ridiculously" priced bonds for the past two or three weeks,
KKR and Blackstone Group are leading leveraged buyout firms that need to sell more than $320 billion in bonds and loans to finance purchases this year.
Pimco's Bill Gross said last week that the high yield gains may have peaked because of the anticipated onslaught of financing for LBOs next month.
Private equity firms are lining up $232 billion of loans and $89 billion of bonds to finance buyouts.
Nuveen may buy LBO-related debt if it comes at the right price and on the right terms.
Bottom? No where in sight... Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University:
"The pullback in the U.S. residential real-estate market is showing no signs of slowing down."
How much? Haseeb Ahmed, an economist at JPMorgan Securities:
"Inventories are high, so house prices are going to take the hit. They are going to go down further. The recent credit crunch is going to hurt but it's too early to determine by how much."
Good Meds... Mark Mobius, who oversees $30 billion at Templeton Asset Management:
"The global economy is very healthy and the credit crunch stemming from U.S. mortgage losses has almost passed."
And the cheerleaders disclaimer: "Markets are probably going to surge ahead to new highs barring any other unforeseen circumstances."
Mark can obvoiusly see that light at the end of the tunnel...
A realist... Boris Schlossberg, senior currency strategistat DailyFX.com: "The housing data suggests that the U.S. economy may start to bleed.
That is not good for risk appetite. The market is thinking about the potential for a recessionary outcome of the housing and credit crisis"
Kettle calls Pot's Black... Lehman Brothers., Bear Stearns and Citigroup were downgraded to neutral from buy.... by Merrill Lynch.
Comments