I heard two significant comments.
First from Bill Seidman: he oversaw the clean-up and resolution of the commercial real estate mess of the early 1990s. He said that (1) banks are probably overstating write-downs for their mortgage backed securities and CDOs, and (2) the losses on the Aaa/AAA classes of mortgage backed securities are not going to be large, or any. The fact that there is a house as collateral for the loan supports that. These are not junk bonds - subordinated debt. They have solid collateral that reduces the loss realized upon default.
If a home first mortgage loan had 80% LTV and the Aaa/AAA classes are 80% of the pool, then the average losses on the entire pool would need to be 1 - 80% x 80% = 1 - 64% = 36%. That is not going to happen, except for rare cases. So most of these bank holdings will eventually suffer no losses. Most of the write-offs will be reversed unless they sell now.
Second, Bernanke: He definitely signaled more rate cuts overnight.
We get the PCE inflation numbers today. Those are important. We need to core inflation number to stay low.
Be patient. Buy dips.
About Me
- Bunkerman
- I have a pioneer mentality. My wife & I live in the woods - neighbors aren't visible except slightly in winter. Our "bunker" - hehe, really a fine home & barn - has plenty of security. We have four dogs: Krypto (age 9, Kelpie), Ava (age 13, Rat Terrier), Sky (Kelpie, age 5) and Lucky Star (age 1, kelpie). I don't take crap from anyone anymore, having enough resources & gear stocked up to survive in any circumstance. I have three degrees from Harvard including a Ph. D. in a physical science, and an MS in Management from MIT. I worked as an investment banker for about 25 years, mainly in secured finance, at three major Wall Street firms and for the last 17 years with my partners at our own firm. I'm semi-retired now, managing some private corporations and business interests and doing my own trading & investing. This is not to boast, but to give you an idea I know a little about some subjects from experience. The photo is my 1943 M16 half-track which I am restoring. These armored vehicles were ubiquitous in the US Army in World War II and Korea. It's driveable.
10 comments:
I figured out how to put "DOW 15,000" onto the helmets. I think they'll look great. hehe now we need the event.
Core PCE was OK - 0.1% uptick in the core, but still in the comfort zone at 1.9% year over year.
CFC atta boy bunky...ridem' cowboy...virtual indeed...well done.
The close will be interesting. I suspect the beefers are shorting this AM gap bigtime, especially in the XLF.
Bunkerman...starting a position in KO today 62.50, would luv to add down to 60...think this is a must own for funds and new money next month will find it's way into KO...hard to find something that acts much better, 70 next year could well be a lock...it is coiled and think it resolves upward soon.
I like that one, frosty. Mrs. B has PEP from 65, by the way, in her Sky Fund. Those type of stocks really performed in the 1980s disinflation
it looks very undervalued in a low inflation, moderate growth trajectory.
If C can hold this gain, that will break the downtrend line.
Bunkerman...hell of a week young man...GOLD MIST INDEED...CFC very virtual beefer of you, you make us proud...have a good week end and enjoy an 007 cocktail :)
I was hoping to kick Bud around the blog today, but I think he's scared of you now.
True frosty. My scintillating logic can be intimidating ;-)
Thanks - I am looing forward to my modified Bondini ;-)
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