ABX indexes continue to crater

[blue_sky]

You have to click on the links to the individual indexes to get the full effect (graphs) here, but this is UNREAL. I can’t believe we don’t have absolutely huge hedge funds blowing up right now.

http://www.markit.com/information/affiliations/abx

Note that the AA tranch is now selling for 88 cents on the dollar.

[GoUSC]

Investers are dumping them and moving to treasuries and other safe investments. Not surprising but I am not getting excited over it until it starts impacting the rest of the market.

[GoUSC]

Investers are dumping them and moving to treasuries and other safe investments. Not surprising but I am not getting excited over it until it starts impacting the rest of the market.

[DaCounselor]

“I can’t believe we don’t have absolutely huge hedge funds blowing up right now.”
________________________________

Keep in mind that many hedgies were on the leading edge of shorting subprime paper over a year ago via credit default swaps. That sub-market has exploded (and the cost of CDS’s has risen accordingly) in conjunction with increasing demand to place bets against subprime borrowers.

Bottom line being that many hedgies stand to realize massive windfall CDS profits when the defaults occur and the insurance has to pay up.

[DaCounselor]

“I can’t believe we don’t have absolutely huge hedge funds blowing up right now.”
________________________________

Keep in mind that many hedgies were on the leading edge of shorting subprime paper over a year ago via credit default swaps. That sub-market has exploded (and the cost of CDS’s has risen accordingly) in conjunction with increasing demand to place bets against subprime borrowers.

Bottom line being that many hedgies stand to realize massive windfall CDS profits when the defaults occur and the insurance has to pay up.

[betting on fall]

Now, neither Joe Homeseller nor his realtor is checking the status of the ABX market and basing his selling prices on how it moves.

So I think some analysis is in order here: what does this mean for the day to day housing market and when will the impact be felt?

Playing amateur economist (and inviting others to do the same) I think it means that the business model for most lenders- to cheaply package loans and sell them for a big profit on Wall Street- is done. No sane investor is touching mortgage bonds for a while- at least not until there is some confidence that they know what they are really buying. Wall Street moves in herds and the herds are running from anything mortgage related.

So just when more people need to re-finance or find a willing buyer, the mortgage lending market is in a new level of chaos. Easy money being cut off just when its needed to keep things from getting worse.
Demand for homes further reduced, supply of homes further increased.
It does look like the perfect anti-bubble storm is brewing. We might want to remember- “be careful what you wish for”

[betting on fall]

Now, neither Joe Homeseller nor his realtor is checking the status of the ABX market and basing his selling prices on how it moves.

So I think some analysis is in order here: what does this mean for the day to day housing market and when will the impact be felt?

Playing amateur economist (and inviting others to do the same) I think it means that the business model for most lenders- to cheaply package loans and sell them for a big profit on Wall Street- is done. No sane investor is touching mortgage bonds for a while- at least not until there is some confidence that they know what they are really buying. Wall Street moves in herds and the herds are running from anything mortgage related.

So just when more people need to re-finance or find a willing buyer, the mortgage lending market is in a new level of chaos. Easy money being cut off just when its needed to keep things from getting worse.
Demand for homes further reduced, supply of homes further increased.
It does look like the perfect anti-bubble storm is brewing. We might want to remember- “be careful what you wish for”

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

Kind of off topic,

Anyone look at the Australian or Canada Dollar lately..

Glad I took a Vacation to Australia a year ago, It would have been a lot more expensive today..

Wow !! The Dollar seem to be going the way of the ABX market.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

Kind of off topic,

Anyone look at the Australian or Canada Dollar lately..

Glad I took a Vacation to Australia a year ago, It would have been a lot more expensive today..

Wow !! The Dollar seem to be going the way of the ABX market.

[LA_Renter]

I am long on the Australian dollar, I’m lovin it. The US Dollar is down right scary right now. I think the consensus is to see the dollar rally off of its current lows, given that 80 has been the super support level for three decades, right now its hovering at 80.50. It definitely puts the stock market in context.

I found this on Minyaanville
“People seem to be pretty excited about the new all-time high in the S&P500 yesterday.

But it’s too bad that the “new high” wasn’t even a new high for the year (or the month) when we denominate the SPX in a “hard currency” like the euro (see the chart below) instead of the collapsing U.S. peso… errrr… I mean “dollar”.

https://image.minyanville.com/assets/FCK/File/christy/713l1.jpg

This is from Barrons
There is a fundamental difference between a stock market that rises on the back of a falling currency from one that is accompanied by a rising currency, a point made here before (“Is the Dow’s Recovery a Mere Illusion?,” April 17.) A bull market can be seen as a form of money illusion, in which higher share prices can be seen as a reflection as the loss of value of the currency in which they are denominated.

As Dennis Gartman, the eponymous author of the widely read Gartman Letter, has pointed out on several occasions, the best performing stock market in the world is Zimbabwe. In the hyperinflationary hell created Robert Mugabe, stocks are bid up as the public dumps the collapsing currency in exchange for any asset that might have some residual real value.

More than in terms of other paper currencies or assets, the dollar’s decline is most evident in terms of gold. The barbarous relic gained another 0.9% based on the streetTRACKS Gold Shares exchange-traded fund, which closed at 66.02. (Each share of the ETF represents ownership of 1/10 of an ounce of gold, making its price equivalent to $660.20 an ounce.)

In other words, the Dow’s Thursday increase in real terms was about half what met the eye. And much of those gains were the result of short-covering. All of which makes the rally rather less impressive than the hyperventilating cheerleaders would have you believe.

[LA_Renter]

I am long on the Australian dollar, I’m lovin it. The US Dollar is down right scary right now. I think the consensus is to see the dollar rally off of its current lows, given that 80 has been the super support level for three decades, right now its hovering at 80.50. It definitely puts the stock market in context.

I found this on Minyaanville
“People seem to be pretty excited about the new all-time high in the S&P500 yesterday.

But it’s too bad that the “new high” wasn’t even a new high for the year (or the month) when we denominate the SPX in a “hard currency” like the euro (see the chart below) instead of the collapsing U.S. peso… errrr… I mean “dollar”.

https://image.minyanville.com/assets/FCK/File/christy/713l1.jpg

This is from Barrons
There is a fundamental difference between a stock market that rises on the back of a falling currency from one that is accompanied by a rising currency, a point made here before (“Is the Dow’s Recovery a Mere Illusion?,” April 17.) A bull market can be seen as a form of money illusion, in which higher share prices can be seen as a reflection as the loss of value of the currency in which they are denominated.

As Dennis Gartman, the eponymous author of the widely read Gartman Letter, has pointed out on several occasions, the best performing stock market in the world is Zimbabwe. In the hyperinflationary hell created Robert Mugabe, stocks are bid up as the public dumps the collapsing currency in exchange for any asset that might have some residual real value.

More than in terms of other paper currencies or assets, the dollar’s decline is most evident in terms of gold. The barbarous relic gained another 0.9% based on the streetTRACKS Gold Shares exchange-traded fund, which closed at 66.02. (Each share of the ETF represents ownership of 1/10 of an ounce of gold, making its price equivalent to $660.20 an ounce.)

In other words, the Dow’s Thursday increase in real terms was about half what met the eye. And much of those gains were the result of short-covering. All of which makes the rally rather less impressive than the hyperventilating cheerleaders would have you believe.

[bsrsharma]

Can someone paraphrase what this event means to MBS/CDO/CMO etc., markets? Can some hedge funds be expected to melt down? Any impact on non-mortgage debt markets? can it unwind treasuries? push $ over the edge? Stock market seems not to be noticing any of this turmoil.

[bsrsharma]

Can someone paraphrase what this event means to MBS/CDO/CMO etc., markets? Can some hedge funds be expected to melt down? Any impact on non-mortgage debt markets? can it unwind treasuries? push $ over the edge? Stock market seems not to be noticing any of this turmoil.

[kewp]

Can someone paraphrase what this event means to MBS/CDO/CMO etc., markets? Can some hedge funds be expected to melt down? Any impact on non-mortgage debt markets? can it unwind treasuries? push $ over the edge? Stock market seems not to be noticing any of this turmoil.

As I understand it, ABX is just an index of the securities you’ve mentioned. So it is reflecting their loss of value, not driving it.

Regarding hedge funds, thats a catch-all phrase for a class of funds that are open to accredited investors only and not significantly regulated. They can follow any number of investment strategies and do not necessarily have to be exposed to REI related risks. In fact, as has been mentioned elsewhere, some hedge funds have been shorting the MBS market and stand to make a killing.

But, as we saw with the BearStearns fiasco, others are highly leveraged (another common hedge fund trick) in the MBS market and stand to be totally wiped out.

Regarding treasuries, the dollar and stock market, who can say. I would think treasuries would become more popular (stable investment), the dollar will continue to tank and the stock market keep going up.

[kewp]

Can someone paraphrase what this event means to MBS/CDO/CMO etc., markets? Can some hedge funds be expected to melt down? Any impact on non-mortgage debt markets? can it unwind treasuries? push $ over the edge? Stock market seems not to be noticing any of this turmoil.

As I understand it, ABX is just an index of the securities you’ve mentioned. So it is reflecting their loss of value, not driving it.

Regarding hedge funds, thats a catch-all phrase for a class of funds that are open to accredited investors only and not significantly regulated. They can follow any number of investment strategies and do not necessarily have to be exposed to REI related risks. In fact, as has been mentioned elsewhere, some hedge funds have been shorting the MBS market and stand to make a killing.

But, as we saw with the BearStearns fiasco, others are highly leveraged (another common hedge fund trick) in the MBS market and stand to be totally wiped out.

Regarding treasuries, the dollar and stock market, who can say. I would think treasuries would become more popular (stable investment), the dollar will continue to tank and the stock market keep going up.

[Author]

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