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wilson
Posts:669

11/24/2008 8:09 PM	Alert
Great article by Jim Jubak: http://articles.moneycentral.msn.com/Investing/JubaksJournal/the-markets-crystal-ball-is-broken.aspx?page=1 Part of the artcle: Some "toxic" financial assets are turning out not to be so toxic after all. A $30 billion portfolio of mortgage-backed securities that BlackRock (BLK, news, msgs) is managing for the U.S. government is delivering almost exactly the cash flows that BlackRock had anticipated, the investment bank told the Reuters Financial Summit. That's significant because the portfolio is composed of assets the government guaranteed when Bear Stearns went under in March. It was market pressure from investors who doubted the value of the assets on Bear Stearns' balance sheet that led to the company's collapse. A number of the financial companies that have followed the trail that Bear Stearns blazed -- Lehman Bros. (LEHMQ, news, msgs) and American International Group (AIG, news, msgs) perhaps most prominently -- have argued that the market was undervaluing the assets in their portfolios. With time, they said, the market would come to realize that these impaired assets were worth 90 cents or more on the dollar and not 40 cents or so. Of course, time was exactly what the markets wouldn't give these companies. It's certainly too early to tell, and the sample is very small, but it does make me ask, "Could Lehman and AIG have been right?" When investors panic, markets can deliver totally misleading prices, the BlackRock portfolio certainly suggests.

ilivehere
Posts:165

11/25/2008 12:57 PM	Alert
wilson, nobody here is going to believe you. real estate is the worst investment ever. please stop posting this hogwash. all in good fun.

wilson
Posts:669

11/25/2008 1:19 PM	Alert
mea culpa, mea culpa, mea maxima culpa

Goingup?
Posts:167

11/25/2008 9:01 PM	Alert
Real Estate is in a catch 22 situation at the moment. Until prices stablize and start moving higher interest rates will continue to be high and hard to get (extra risk priced in). But prices stand no chance of stablizing until interest rates come down (especially jumbos) and loans become available to those with less than perfect credit. The ten year treasury bond currently stands around 3%. If these were normal times a 30 year fixed conforming loan would be going for around 3.5% and jumbos for around 4%. 3 and 5 year ARMS would be under 3%. But you won't see those rates until real estate prices start moving back up. The bottom line is at some point prices will become so compelling buyers will step in and buy at current rates and credit conditions. When that happens is anyone's guess, but it will happen. And when it does you'll see a dramatic move up, probably in the neighborhood of at least 20% the first year (and maybe up to 40% in the hard hit areas). As a secondary effect you'll see banks put all those write offs right back on their books. Making it look in the long run like nothing ever happened.

artist
Posts:114

11/25/2008 10:26 PM	Alert
Yawns.

ElPato
Posts:378

11/26/2008 8:43 AM	Alert
>> A $30 billion portfolio of mortgage-backed securities that BlackRock (BLK, news, msgs) is managing for the U.S. government is delivering almost exactly the cash flows that BlackRock had anticipated Some MBS will perform, no doubt. But no detail is given on the type of MBS being referenced. But some MBS will not perform. MBS are based on real estate prices. And real estate prices are unquestionably falling like a rock. For example, see here: Inflation Adjusted House Price History. So more data (aka transparency) is needed. But transparency seems to be in short supply. Once we get the transparency, I think the market will clear. But until that point, fear and rumor will rule the day.

bluejay
Posts:3

11/27/2008 11:38 AM	Alert
Well, without knowing the details of these MBS one cannot comment as to whether it has more general applicability to the housing market. One of the things that happened to Lehman, Bear Stearns, etc. was the change in accounting rules that required them to mark their assets to market. Many had marked assets at unrealistically high levels (what Warren Buffet calls "mark to myth" - see his comments in the 2002 Berkshire Hathaway Annual Report where he lays all this out) and then want the market panicked there was no market for certain types of securities and so the Banks had to value them at zero dollars even though if they could have waited it out, there was a positive residual value. But when the market froze, the zero value put the banks into bankruptcy.

tpc
Posts:624

11/28/2008 11:11 AM	Alert
The standard "old fashioned" MBS where the first mortgage was not "sliced and diced" should be less of a mystery about valuing. It is the CDOs which are a problem. In a CDO they of each individual first mortgage and slice them into 4 or 5 parts and then included those slices into 4 or 5 different mortgage securities along with a hodge podge of slices on car loans, installment loans, etc. By slicing the mortgages into separate parts they, in effect, created a first mtge, 2nd mtge, 3rd mtge, 4th mtge and 5th mtge out of what initially was a single first mtge. Who is smart enuf to figure out what an individual mtge is worth or an individual CDO is worth which has been chopped up into 5 different pieces and contains 3rd, 4th and 5th mortgage exposures???? How stupid or how greedy were these people-especially the institutions that bought this crap???? And how complicit were the ratings agencies that graded some of this crap with an A rating??? If this wasn't WHITE COLLAR THEFT, then what was it???

David_K
Posts:70

11/28/2008 11:53 AM	Alert
My agent expects housing prices to fall back to 1970's levels after all the foreclosures come on the market. I'm waiting to buy until I see them. Its coming soon.

wilson
Posts:669

11/28/2008 5:31 PM	Alert
Let's start an auction: Do I hear 1960s prices? !950s? Going, going, gone!

wilson
Posts:669

11/28/2008 6:59 PM	Alert
by the way: THE SKY IS FALLING!!!!!!! THE SKY IS FALLING!!!!!!!!!

glass steagall II
Posts:27

11/28/2008 8:43 PM	Alert
Who is smart enuf to figure out what an individual mtge is worth or an individual CDO is worth which has been chopped up into 5 different pieces and contains 3rd, 4th and 5th mortgage exposures???? noboby is- computers are used. that's why things are going to get ugly. How stupid or how greedy were these people-especially the institutions that bought this crap??? i'll tell you how stupid/greedy. they created synthetic cdo's that weren't even based on mortgages - they were based on the credit default swap premiums "investors" were paying to "insure" other cdo's

BGinRB
Posts:72

12/01/2008 10:32 AM	Alert
BlackRock? Ah,they fancy a CEO well known for the accuracy of his predictions: 01/08/08 NEW YORK, Jan 8 (Reuters) - BlackRock Inc global equities chief investment officer Bob Doll on Tuesday forecast U.S. stocks will reach record highs again in 2008 as the U.S narrowly escapes a recession. (http://www.reuters.com/article/marketsNews/ idUKN0848157120080108?rpc=44)

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