| View previous topic :: View next topic |
| Author |
Message |
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
 Posted: Wed Jan 30, 2008 1:45 pm Post subject: |
 |
|
Gross vindicated. Went all wrong last year but now has nailed dramatic call for Fed cuts.
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
 |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
| Posted: Wed Jan 30, 2008 4:41 pm Post subject: |
|
|
In other news, the head of the ISDA sounds off on Gross' $250 billion projection in losses related to CDS:
http://www.ft.com/cms/s/0/80f0e842-ce0c-11dc-9e4e-000077b07658.html
| Quote: | Focus on the net exposure of these transactions, many of which hedge or offset one another. A recent Fitch Ratings survey estimates net exposure at less than $1,000bn. Factor in a probability of default of 2 per cent and a 25 per cent recovery rate and protection sellers would have to settle an aggregate $15bn of losses. None of these amounts would be "lost" to the system; a credit derivative simply transfers a potential gain/loss from one party to another. Clearly, while $15bn is not trivial, it is a small fraction of aggregate write-offs to date on loans and securities; and less than a 10th of Mr Gross's suggestion.
And our figures are conservative: we use a slightly higher ($50,000bn) figure for the total reference amounts; we round up the net exposure figure; we use a higher default rate than the 1.25 per cent used elsewhere; and our projected recovery rate is much lower than the 50 per cent used by Mr Gross.
Also, defaults in a downturn are usually considered to eliminate a much higher proportion of lower-rated companies, whereas surveys show that only about one-third of credit derivatives are written on subinvestment grade credit. So the impact of default would not necessarily be the same for credit derivatives as for credit markets as a whole. And such trading losses would be unlikely to hit simultaneously.
Even if default rates prove higher than those used here, settlement flows in credit derivatives would likely be much lower than in Mr Gross's assumptions. This is not just theory. Settlement has occurred on this basis for several "credit events" where participants have organised net settlement through ISDA, with wide-ranging support, including from major bond funds. |
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
| Posted: Tue Feb 26, 2008 10:23 am Post subject: |
|
|
Bill Gross' latest monthly commentary. Rehashes some old points - but also discuss what sounds enticing (given higher inflation) at the end of his commentary:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+March+2008.htm
| Quote: | This leads me to #3 on my list of action plans. What should an investor do – desperately trying to avoid the Old Maids, yet trapped with good Treasury cards at yields inappropriately low in a mildly inflationary future environment? The answer lies in managing a transition to riskier assets while being acutely aware, as my CIO partner Mohamed El-Erian is quick to point out, that such a transition will be characterized by technical purges of Old Maid and even higher quality assets that in many cases produce price levels significantly below what might at first seem reasonable. Minsky moments – the unwinding of levered assets – produce as many surprises on the downside as do $5 million dollar homes in Silicon Valley and NASDAQ 5,000 point stocks on the upside. Patience and cognizance of flows, El-Erian counsels, are as critical to the equation as is the recognition of the Old Maids in the first place.
Still, we would both agree that value is returning to many parts of the bond market. If an investor requires 5%+ yields to compensate for future inflation, then they can increasingly be found in authentic AAA assets – not disguised Old Maids. There’s not a hint of plastic surgery in agency-backed FNMA and FHLMC mortgages at 5¾%, although their actual ages (average lives) may be somewhat in doubt. Similarly, SBA government-guaranteed loans at LIBOR+ 125 basis point yields are beginning to entice, as are some of those bank loans when priced in the high 80s as opposed to 95 cents on the dollar. If capitalism is a going enterprise – and we think it is – then investors will eventually return to play similar, perhaps more conservative games – much as they have in the past. And if Washington gets off its high “moral hazard” horse and moves to support housing prices, investors will return in a rush. PIMCO wants to sit at this more attractive return table – to provide an attractive return on your money (no matter what the asset class) as well as a return of your money. No Old Maids. No silicone AAA ratings. And ladies – no crotchety old bachelors either. The game, as well as the name of the game, is changing. It’s no country for Old Maids anymore. |
|
|
| Back to top |
|
|
lmrhoades
Senior Poster
Joined: 17 Jan 2008
Posts: 92
|
| Posted: Tue Feb 26, 2008 10:36 am Post subject: |
|
|
Henry...
Would you suggest buying in leverage loan portfolio such as hflax fund or a cef such as nsl?
_________________
LMR |
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
| Posted: Fri Mar 07, 2008 1:21 pm Post subject: |
|
|
Bill Gross on CNBC calls for "Operation Twist II"--from the sixties, taking mortgages for treasuries. --And punching the gas pedal.
How times have turned for this man since Brazilian bonds almost got him.
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
| Posted: Tue Apr 01, 2008 7:09 am Post subject: |
|
|
| Quote: | | As well, because of the retreat of securitization, risk spreads – from corporate bonds to equities, to commercial and residential real estate – will settle at permanently higher levels. The U.S. asset-based economy will morph into a more expensive hybrid that will reign supreme for years to come. |
The weight of the EEM has been lifted off his shoulders... Other than that, I'm not sure what he's talking about??? Hybrid is what defines every other nation's strcture. Inflation? Ours is better??? --Or, money come back to its rightful home.
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 6707
Location: Sunny California
|
| Posted: Tue Apr 01, 2008 7:13 am Post subject: |
|
|
Investment grade corporates selling:
http://www.bloomberg.com/apps/news?pid=20601087&sid=at9yBsJsTjns&refer=home
It's not just a cycle play. Note the last line:
| Quote: |
``In this environment, all things being equal, a company would probably just as soon issue as long as it can in the bond market, just because of all the uncertainty,'' said Wilmer Stith, who manages about $3 billion in fixed-income assets for MTB Investment Advisors in Baltimore. ``It's better to have a bird in the hand.'' |
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7244
Location: Houston, Texas & Los Angeles, California
|
|
| Back to top |
|
|
Please log in to view without the ad banners |
|
|
FAQ
Search
Memberlist
Usergroups
Statistics
Register
Profile
Log in to check your private messages
Log in
