Get Ready For Act II
Sung to Aerosmiths Dude Looks Like A Lady... Do the hanky skanky... click your heels 3 times and repeat the mantra... there is no spillover.
From Bloomberg, Reuter's & MSN with a large sprinkling of Nattering LOVE, cuz I care man.
Get on UP... Last night, China RAISED one year deposit rates by 27 basis points and its lending base rate by 18 points.
See a history of recent PBOC raises here. Last raise included a revaluation of the RMB or Yuan.
Said PBOC raise on 05/17 precipitated a carry trade unwind which led to our current market downturn. Why? The Yuan due to Forex sterilization is a proxy for the Yen.
Think China will ride in on a white horse to save the day by purchasing more bonds? No happy ending... You finish outside, Joe.
Last 3 months, PBOC China net seller of US Treasuries, and holder of $100 Billion in soon to be worthless sub prime ridden MBS... talk about "getting porked".
Get DOWN, Get DOWN... even the Fed's decision to LOWER the discount rate that it charges banks has failed to revive ABCP demand.
So get ready, So get ready... The $1.1 trillion market for commercial paper used to buy assets from mortgages to car loans has seized up.
Over half of the market, $550 Billion in asset backed paper comes due in the next 90 days.
If the debt does not get placed or sell, which it won't because no one is touching it with a ten foot pole...
It ain't gonna be pretty when the banks that lent the money call the loans. The companies who cannot sell their debt will have to liquidate their assets and possibly file BK to meet the loan calls.
The commercial banks that lent the money will suffer large losses or go under themselves as the debts get partially repaid or not at all. And heres why...
Many commercial banks will not be able to meet their reserve requirements which will jump exponentially as the debt they now must seize and carry on the books gets downgraded.
Forcing them to liquidate the seized paper in fire sales at pennies on the dollar. The losses will be in the EXTREME.
You say NO WAY NAYBOB, guess again, this three card monty and leveraged ponzi scheme dance is over and its time to pay the piper...
PRIME, can't touch this... Ottimo Funding has the highest possible credit rating and doesn't own subprime mortgage bonds. Ottimo's bonds are backed by mortgages to people with credit scores of 708 and higher.
The company's commercial paper has an A1+ rating from Standard & Poor's and P1 from Moody's, the highest available.
That made no difference to investors who refused to buy Ottimo's $3 billion of short term debt.
Aladdin Capital Management, which oversees about $20 billion, including Ottimo, wasn't forced to immediately shutter Ottimo...
Because the company exercised an option to extend the maturities on its commercial paper, providing 30 to 45 more days to find buyers.
Only the 4th company ever to exercise an extension on ABCP. The Nattering One senses many more extensions to come in the next 90 days.
Yaw Rawhide... Harry Markowitz, winner of the Nobel Prize in economics in 1990: "The herd is stampeding, and somewhere it will stop."
Seeking stability... Instead of commercial paper (corporate debt that comes due in nine months or less) money fund managers are running for the safety of government securities.
Naomi Fink, senior currency strategist at BNP Paribas: "I don't think that the unwind of the carry trade is over by a long shot, the subprime issues remain."
Repeat the mantra... there is no spillover. Christopher Low, chief economist for FTN Financial:
"This has moved beyond temporary. It's gotten beyond bailing out some hedge fund and into the broad economy."
It's getting better all the time... according to Realtytrac:
Almost 180,000 notices of default in July raising the foreclosure rate up 93% over last year. California, Florida, Michigan, Ohio and Georgia accounted for over 50% of the country's total filings.
California foreclosures up 300% over last year and led the nation for the 7th straight month. Florida was second with a 78% increase.
The economy is robust... Ohio, Michigan and Georgia were driven by the decline in manufacturing and automotive jobs.
Even sin city is doing well... Nevada still ranked the worst per capita with one filing for every 199 homes, about three times the national average.
Don't worry, be happy, emerging economies will come to the rescue... Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School in Philadelphia:
"Home equity has been a major factor in consumer spending, and the major concern is we'll go into a recession as that equity dries up.
Consumer spending drove us out of the last recession in 1991, and we might see a reversal of that now."
Yeah, its different this time, its global... I'm waiting to see all those highly paid skilled workers in China and India, refi their thatch and abobe huts, or run out and buy Ipods and Starbucks lattes...
Better yet, line em all up and they couldn't bail water fast enough to save this sinking ship called the TITANIC. When will people wake up and smell the coffee?
Movin on up... Rick Sharga, RealtyTrac: "We are estimating that we will see about 2 million foreclosure filings this year."
Let's just cut our losses and get out... Capital One bought Alt A lender GreenPoint Mortgage less than a year ago in a $13.2 billion deal.
GreenPoint originated $18.3 billion in Alt-A mortgages last year, making it the seventh-largest Alt-A lender Today, Capital One shut GreenPoint eliminating 1,900 jobs, and lowered its earnings forecast.
More Anarchy in the UK... After costs to borrow in the short-term market surged to the highest in more than six years...
HBOS Plc, the U.K.'s largest mortgage lender, will repay commercial paper for its Grampian Funding division.
Grampian, the biggest issuer of ABCP asset backed commercial paper in Europe, will use funding from HBOS to repay short-term IOUs.
Grampian sells ABCP and uses the proceeds to invest in longer dated assets such as MBS mortgage backed bonds or CDO collateralized debt obligations, which package other securities.
About 35% of its holdings are home loans and 31% are CDOs. Grampian had $35.41 billion in debt outstanding at the end of May.
Home loan companies and firms that rely on the commercial paper market for funding will be forced to sell $75 billion of assets unless they can find buyers for the debt.
Is it soup yet?... Campbell & Co. borrowed in yen to buy high-yielding Australian dollars enjoyed a return of 11% this year through June 5; the gains have since been wiped out.
Campbell's biggest fund, with $9 billion in assets, lost 10.8% in July, the most since 1990.
In the Red, Sox... In currencies, John W. Henry's largest loss in July was in the yen. Assets at the firm...
which is owned by John W. Henry, who also controls the Boston Red Sox baseball team, have plummeted by 75% since November to $479 million. Thats right they lost $1.437 Billion in 9 months.
Folks, this could turn into a real HORROR show worth the price of a ticket and a box of pop corn, the prologue and Act I are complete.
Just sit back and watch as Act II opens shortly. We now return you to your regular programming...
From Bloomberg, Reuter's & MSN with a large sprinkling of Nattering LOVE, cuz I care man.
Get on UP... Last night, China RAISED one year deposit rates by 27 basis points and its lending base rate by 18 points.
See a history of recent PBOC raises here. Last raise included a revaluation of the RMB or Yuan.
Said PBOC raise on 05/17 precipitated a carry trade unwind which led to our current market downturn. Why? The Yuan due to Forex sterilization is a proxy for the Yen.
Think China will ride in on a white horse to save the day by purchasing more bonds? No happy ending... You finish outside, Joe.
Last 3 months, PBOC China net seller of US Treasuries, and holder of $100 Billion in soon to be worthless sub prime ridden MBS... talk about "getting porked".
Get DOWN, Get DOWN... even the Fed's decision to LOWER the discount rate that it charges banks has failed to revive ABCP demand.
So get ready, So get ready... The $1.1 trillion market for commercial paper used to buy assets from mortgages to car loans has seized up.
Over half of the market, $550 Billion in asset backed paper comes due in the next 90 days.
If the debt does not get placed or sell, which it won't because no one is touching it with a ten foot pole...
It ain't gonna be pretty when the banks that lent the money call the loans. The companies who cannot sell their debt will have to liquidate their assets and possibly file BK to meet the loan calls.
The commercial banks that lent the money will suffer large losses or go under themselves as the debts get partially repaid or not at all. And heres why...
Many commercial banks will not be able to meet their reserve requirements which will jump exponentially as the debt they now must seize and carry on the books gets downgraded.
Forcing them to liquidate the seized paper in fire sales at pennies on the dollar. The losses will be in the EXTREME.
You say NO WAY NAYBOB, guess again, this three card monty and leveraged ponzi scheme dance is over and its time to pay the piper...
PRIME, can't touch this... Ottimo Funding has the highest possible credit rating and doesn't own subprime mortgage bonds. Ottimo's bonds are backed by mortgages to people with credit scores of 708 and higher.
The company's commercial paper has an A1+ rating from Standard & Poor's and P1 from Moody's, the highest available.
That made no difference to investors who refused to buy Ottimo's $3 billion of short term debt.
Aladdin Capital Management, which oversees about $20 billion, including Ottimo, wasn't forced to immediately shutter Ottimo...
Because the company exercised an option to extend the maturities on its commercial paper, providing 30 to 45 more days to find buyers.
Only the 4th company ever to exercise an extension on ABCP. The Nattering One senses many more extensions to come in the next 90 days.
Yaw Rawhide... Harry Markowitz, winner of the Nobel Prize in economics in 1990: "The herd is stampeding, and somewhere it will stop."
Seeking stability... Instead of commercial paper (corporate debt that comes due in nine months or less) money fund managers are running for the safety of government securities.
Naomi Fink, senior currency strategist at BNP Paribas: "I don't think that the unwind of the carry trade is over by a long shot, the subprime issues remain."
Repeat the mantra... there is no spillover. Christopher Low, chief economist for FTN Financial:
"This has moved beyond temporary. It's gotten beyond bailing out some hedge fund and into the broad economy."
It's getting better all the time... according to Realtytrac:
Almost 180,000 notices of default in July raising the foreclosure rate up 93% over last year. California, Florida, Michigan, Ohio and Georgia accounted for over 50% of the country's total filings.
California foreclosures up 300% over last year and led the nation for the 7th straight month. Florida was second with a 78% increase.
The economy is robust... Ohio, Michigan and Georgia were driven by the decline in manufacturing and automotive jobs.
Even sin city is doing well... Nevada still ranked the worst per capita with one filing for every 199 homes, about three times the national average.
Don't worry, be happy, emerging economies will come to the rescue... Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School in Philadelphia:
"Home equity has been a major factor in consumer spending, and the major concern is we'll go into a recession as that equity dries up.
Consumer spending drove us out of the last recession in 1991, and we might see a reversal of that now."
Yeah, its different this time, its global... I'm waiting to see all those highly paid skilled workers in China and India, refi their thatch and abobe huts, or run out and buy Ipods and Starbucks lattes...
Better yet, line em all up and they couldn't bail water fast enough to save this sinking ship called the TITANIC. When will people wake up and smell the coffee?
Movin on up... Rick Sharga, RealtyTrac: "We are estimating that we will see about 2 million foreclosure filings this year."
Let's just cut our losses and get out... Capital One bought Alt A lender GreenPoint Mortgage less than a year ago in a $13.2 billion deal.
GreenPoint originated $18.3 billion in Alt-A mortgages last year, making it the seventh-largest Alt-A lender Today, Capital One shut GreenPoint eliminating 1,900 jobs, and lowered its earnings forecast.
More Anarchy in the UK... After costs to borrow in the short-term market surged to the highest in more than six years...
HBOS Plc, the U.K.'s largest mortgage lender, will repay commercial paper for its Grampian Funding division.
Grampian, the biggest issuer of ABCP asset backed commercial paper in Europe, will use funding from HBOS to repay short-term IOUs.
Grampian sells ABCP and uses the proceeds to invest in longer dated assets such as MBS mortgage backed bonds or CDO collateralized debt obligations, which package other securities.
About 35% of its holdings are home loans and 31% are CDOs. Grampian had $35.41 billion in debt outstanding at the end of May.
Home loan companies and firms that rely on the commercial paper market for funding will be forced to sell $75 billion of assets unless they can find buyers for the debt.
Is it soup yet?... Campbell & Co. borrowed in yen to buy high-yielding Australian dollars enjoyed a return of 11% this year through June 5; the gains have since been wiped out.
Campbell's biggest fund, with $9 billion in assets, lost 10.8% in July, the most since 1990.
In the Red, Sox... In currencies, John W. Henry's largest loss in July was in the yen. Assets at the firm...
which is owned by John W. Henry, who also controls the Boston Red Sox baseball team, have plummeted by 75% since November to $479 million. Thats right they lost $1.437 Billion in 9 months.
Folks, this could turn into a real HORROR show worth the price of a ticket and a box of pop corn, the prologue and Act I are complete.
Just sit back and watch as Act II opens shortly. We now return you to your regular programming...
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