John Paulson : Buy Homes

[patb]

[quote=davelj]I’m not saying he’s wrong, but… I’m filing this under: I’m Talking My Own Book, By the Way.[/quote]

i think with the destruction of asset prices?

no sign of inflation for a while

[davelj]

[quote=patb][quote=faterikcartman][quote=davelj] Furthermore, they can’t find places to loan out the money where they have much comfort.
[/quote]

I’ve wondered if the government bailouts insulate them from having to loan out the money to make money.[/quote]

yes, they are borrowing for free short and buying treasuries. they borrow at 0.25% and get 4.2%.

of course the shock when short rates rise?[/quote]

Well, you’re half right, anyway. They’re borrowing at 25 bps and re-investing at rates averaging about 175 bps these days. Banks have this little thing called asset-liability management and they don’t invest their liquidity in long-term securities – they generally go out a few years at most. And the yields on 2-4 year securities are pretty paltry. Hell, the GSEs are issuing 2-year securities to yield 50 bps (of course, they’re now guaranteed by us). But, still, 150 bps of risk-free spread isn’t bad after accounting for leverage.

http://www.foxbusiness.com/markets/2010/10/06/fannie-mae-sells-billion-year-issue-yield/

So,yes, the bailouts take a little pressure off of having to take risk in underwriting loans, but they’d surely rather make adjustable rate loans with 5.50% floors… if they could find more that they liked. One of the problems with our economy is that there’s too much leverage – don’t we all agree on that? – so why folks would be clamoring for the banks to make more loans is beyond me.

[davelj]

[quote=patb][quote=faterikcartman][quote=davelj] Furthermore, they can’t find places to loan out the money where they have much comfort.
[/quote]

I’ve wondered if the government bailouts insulate them from having to loan out the money to make money.[/quote]

yes, they are borrowing for free short and buying treasuries. they borrow at 0.25% and get 4.2%.

of course the shock when short rates rise?[/quote]

Well, you’re half right, anyway. They’re borrowing at 25 bps and re-investing at rates averaging about 175 bps these days. Banks have this little thing called asset-liability management and they don’t invest their liquidity in long-term securities – they generally go out a few years at most. And the yields on 2-4 year securities are pretty paltry. Hell, the GSEs are issuing 2-year securities to yield 50 bps (of course, they’re now guaranteed by us). But, still, 150 bps of risk-free spread isn’t bad after accounting for leverage.

http://www.foxbusiness.com/markets/2010/10/06/fannie-mae-sells-billion-year-issue-yield/

So,yes, the bailouts take a little pressure off of having to take risk in underwriting loans, but they’d surely rather make adjustable rate loans with 5.50% floors… if they could find more that they liked. One of the problems with our economy is that there’s too much leverage – don’t we all agree on that? – so why folks would be clamoring for the banks to make more loans is beyond me.

[davelj]

[quote=patb][quote=faterikcartman][quote=davelj] Furthermore, they can’t find places to loan out the money where they have much comfort.
[/quote]

I’ve wondered if the government bailouts insulate them from having to loan out the money to make money.[/quote]

yes, they are borrowing for free short and buying treasuries. they borrow at 0.25% and get 4.2%.

of course the shock when short rates rise?[/quote]

Well, you’re half right, anyway. They’re borrowing at 25 bps and re-investing at rates averaging about 175 bps these days. Banks have this little thing called asset-liability management and they don’t invest their liquidity in long-term securities – they generally go out a few years at most. And the yields on 2-4 year securities are pretty paltry. Hell, the GSEs are issuing 2-year securities to yield 50 bps (of course, they’re now guaranteed by us). But, still, 150 bps of risk-free spread isn’t bad after accounting for leverage.

http://www.foxbusiness.com/markets/2010/10/06/fannie-mae-sells-billion-year-issue-yield/

So,yes, the bailouts take a little pressure off of having to take risk in underwriting loans, but they’d surely rather make adjustable rate loans with 5.50% floors… if they could find more that they liked. One of the problems with our economy is that there’s too much leverage – don’t we all agree on that? – so why folks would be clamoring for the banks to make more loans is beyond me.

[davelj]

[quote=patb][quote=faterikcartman][quote=davelj] Furthermore, they can’t find places to loan out the money where they have much comfort.
[/quote]

I’ve wondered if the government bailouts insulate them from having to loan out the money to make money.[/quote]

yes, they are borrowing for free short and buying treasuries. they borrow at 0.25% and get 4.2%.

of course the shock when short rates rise?[/quote]

Well, you’re half right, anyway. They’re borrowing at 25 bps and re-investing at rates averaging about 175 bps these days. Banks have this little thing called asset-liability management and they don’t invest their liquidity in long-term securities – they generally go out a few years at most. And the yields on 2-4 year securities are pretty paltry. Hell, the GSEs are issuing 2-year securities to yield 50 bps (of course, they’re now guaranteed by us). But, still, 150 bps of risk-free spread isn’t bad after accounting for leverage.

http://www.foxbusiness.com/markets/2010/10/06/fannie-mae-sells-billion-year-issue-yield/

So,yes, the bailouts take a little pressure off of having to take risk in underwriting loans, but they’d surely rather make adjustable rate loans with 5.50% floors… if they could find more that they liked. One of the problems with our economy is that there’s too much leverage – don’t we all agree on that? – so why folks would be clamoring for the banks to make more loans is beyond me.

[davelj]

[quote=patb][quote=faterikcartman][quote=davelj] Furthermore, they can’t find places to loan out the money where they have much comfort.
[/quote]

I’ve wondered if the government bailouts insulate them from having to loan out the money to make money.[/quote]

yes, they are borrowing for free short and buying treasuries. they borrow at 0.25% and get 4.2%.

of course the shock when short rates rise?[/quote]

Well, you’re half right, anyway. They’re borrowing at 25 bps and re-investing at rates averaging about 175 bps these days. Banks have this little thing called asset-liability management and they don’t invest their liquidity in long-term securities – they generally go out a few years at most. And the yields on 2-4 year securities are pretty paltry. Hell, the GSEs are issuing 2-year securities to yield 50 bps (of course, they’re now guaranteed by us). But, still, 150 bps of risk-free spread isn’t bad after accounting for leverage.

http://www.foxbusiness.com/markets/2010/10/06/fannie-mae-sells-billion-year-issue-yield/

So,yes, the bailouts take a little pressure off of having to take risk in underwriting loans, but they’d surely rather make adjustable rate loans with 5.50% floors… if they could find more that they liked. One of the problems with our economy is that there’s too much leverage – don’t we all agree on that? – so why folks would be clamoring for the banks to make more loans is beyond me.

[waiting hawk]

I have a bias as I posted about him July 2006 about shorting subprime with 1.8 billion and been following him since. This guy is not dumb and puts a ton where his mouth is. His position of 80% of his money in gold is amazing to me. He states 2500-4000 an ounce. If he is right then we are screwed. Heres a little about what I posted and what happened later from 06-07.
http://inlandempirecrash.blogspot.com/2007/04/broken-clock-right-twice-day-i-think.html

edit:
Gold will not do well in high rate environment as it never has unless in a bubble. So there would have to be a “this time is different” scenerio he must be looking at or maybe just a frenzy.

[waiting hawk]

I have a bias as I posted about him July 2006 about shorting subprime with 1.8 billion and been following him since. This guy is not dumb and puts a ton where his mouth is. His position of 80% of his money in gold is amazing to me. He states 2500-4000 an ounce. If he is right then we are screwed. Heres a little about what I posted and what happened later from 06-07.
http://inlandempirecrash.blogspot.com/2007/04/broken-clock-right-twice-day-i-think.html

edit:
Gold will not do well in high rate environment as it never has unless in a bubble. So there would have to be a “this time is different” scenerio he must be looking at or maybe just a frenzy.

[waiting hawk]

I have a bias as I posted about him July 2006 about shorting subprime with 1.8 billion and been following him since. This guy is not dumb and puts a ton where his mouth is. His position of 80% of his money in gold is amazing to me. He states 2500-4000 an ounce. If he is right then we are screwed. Heres a little about what I posted and what happened later from 06-07.
http://inlandempirecrash.blogspot.com/2007/04/broken-clock-right-twice-day-i-think.html

edit:
Gold will not do well in high rate environment as it never has unless in a bubble. So there would have to be a “this time is different” scenerio he must be looking at or maybe just a frenzy.

[waiting hawk]

I have a bias as I posted about him July 2006 about shorting subprime with 1.8 billion and been following him since. This guy is not dumb and puts a ton where his mouth is. His position of 80% of his money in gold is amazing to me. He states 2500-4000 an ounce. If he is right then we are screwed. Heres a little about what I posted and what happened later from 06-07.
http://inlandempirecrash.blogspot.com/2007/04/broken-clock-right-twice-day-i-think.html

edit:
Gold will not do well in high rate environment as it never has unless in a bubble. So there would have to be a “this time is different” scenerio he must be looking at or maybe just a frenzy.

[waiting hawk]

I have a bias as I posted about him July 2006 about shorting subprime with 1.8 billion and been following him since. This guy is not dumb and puts a ton where his mouth is. His position of 80% of his money in gold is amazing to me. He states 2500-4000 an ounce. If he is right then we are screwed. Heres a little about what I posted and what happened later from 06-07.
http://inlandempirecrash.blogspot.com/2007/04/broken-clock-right-twice-day-i-think.html

edit:
Gold will not do well in high rate environment as it never has unless in a bubble. So there would have to be a “this time is different” scenerio he must be looking at or maybe just a frenzy.

[Anonymous]

Why would any big time manager announce their strategy to the world? Not gonna happen. If you’d read the book about Paulson (Greatest Trade Ever) you’d know that he was very secretive about all of his credit default swap dealings. If too many other people were in on his side of the trade it wouldn’t have worked.

[Anonymous]

Why would any big time manager announce their strategy to the world? Not gonna happen. If you’d read the book about Paulson (Greatest Trade Ever) you’d know that he was very secretive about all of his credit default swap dealings. If too many other people were in on his side of the trade it wouldn’t have worked.

[Anonymous]

Why would any big time manager announce their strategy to the world? Not gonna happen. If you’d read the book about Paulson (Greatest Trade Ever) you’d know that he was very secretive about all of his credit default swap dealings. If too many other people were in on his side of the trade it wouldn’t have worked.

[Anonymous]

Why would any big time manager announce their strategy to the world? Not gonna happen. If you’d read the book about Paulson (Greatest Trade Ever) you’d know that he was very secretive about all of his credit default swap dealings. If too many other people were in on his side of the trade it wouldn’t have worked.

[Author]

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