Posts Tagged ‘commercial mortgage-backed securities’

A Tsunami of Red Ink

A Tsunami of Red Ink

red inkCourtesy of Michael Panzner at Financial Armageddon

Just over a week ago, Bloomberg revealed in "Geithner Says Commercial Real Estate Woes Won’t Spark Crisis," that the U.S. Treasury Secretary did not appear to be overly concerned about the threat posed by brewing problems in the commercial property sector:

U.S. Treasury Secretary Timothy Geithner said commercial real estate woes won’t set off a new banking crisis, in remarks to the Economic Club of Chicago.

“I don’t think so,” Geithner said, when asked whether commercial real estate could set off another banking meltdown. “That’s a problem the economy can manage through even though it’s going to be still exceptionally difficult.”

The global economy has accelerated since the worst of the recession and banking crisis last year, Geithner said, noting a U.S. Commerce Department report today showing the economy expanded 3.5 percent in the third quarter.

“You can say now with confidence that the financial system is stable, the economy is stabilized,” Geithner said. “You can see the first signs of growth here and around the world.”

Is he serious? All you have to do is spend about 15 minutes reading through just a few of the reports that were published recently and it quickly becomes apparent that a tsunami of red ink is forming in the sector, ready to come crashing down on the whole of the banking sector — as well as the economy — in the immediate period ahead:

"Why This Real Estate Bust Is Different" (BusinessWeek)

Unrealistic assumptions, layers of investors, sky-high prices, and possible fraud will make it hard to clean up the mess in commercial real estate

When Goldman Sachs (GS) sold complex bonds backed by the Arizona Grand Resort and other commercial properties in 2006, it suggested the returns would be strong. The 164-acre luxury Arizona Grand, set against the Sonoran Desert in Phoenix, boasted an award-winning golf course, deluxe spa, and several swank restaurants. The on-site water park was named one of the best in the country by the Travel Channel. With the resort’s new owners planning to refurbish hotel rooms and common areas, Goldman told investors that the renovations would help boost cash flow.

As was so often the case during the real estate boom, the lofty projections didn’t pan out. When the economy softened and business travel


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S&P To Downgrade Most Of 2005-2008 CMBS Classes, Derails TALF For CMBS

Courtesy of Tyler Durden at Zero Hedge

S&P To Downgrade Most Of 2005-2008 CMBS Classes, Derails TALF For CMBS

The lives of the CMSA and Chris Hoeffel are about to get a whole lot more complicated. In a report issued today by S&P, titled "U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools" Standard & Poors is issuing a Request For Comments on ‘its proposed changes to its methodology and assumptions for rating U.S. commercial mortgage-backed securities." Aside from the RFC, S&P goes into detail what the changes to its rating methodology will be, and the impact from these on CMBS. The latter will immediately cause many headaches for all who rode the CMBS AAA train from 1,200 bps to 600 bps, and potentially start a selling puke shortly. In S&P’s own words:

Impact On Ratings

It is likely that the proposed changes, which represent a significant change to the criteria for rating high investment-grade classes, will prompt a considerable amount of downgrades in recently issued (2005-2008 vintage) CMBS. Classes up through the most senior tranches of outstanding deals (so-called "A4s," "dupers," or "super-duper seniors") are likely to be affected. Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded. We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages. Furthermore, recent vintage CMBS, particularly those issued since 2006, were originated during a time of peak rents and values, and as such, may be more affected by the proposed rental declines discussed in this RFC. We are currently evaluating the impact of the potential criteria changes on conduit/fusion CMBS transactions from all vintages. Once we evaluate the potential impact on existing ratings, we expect to issue a follow-up publication to this RFC.

And all this just days after the government had finally drafted what it hoped was the last and final version of its TALF term sheet. Lets rewind: in the May 19th version of TALF, in order the be eligible, CMBS "must not have a rating below the highest investment-grade rating category from any TALF CMBS-Eligibile Rating Agency." Throw in a downgrade of 90% of the 2007 vintage and it’s time to go back to the drawing board.

Basically, the impending


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Phil's Favorites

Nuclear weapons and Iran's uranium enrichment program: 4 questions answered

 

Nuclear weapons and Iran's uranium enrichment program: 4 questions answered

United Nations Security Council members listen to Iranian Deputy Ambassador to the United Nations Eshagh Al-Habib, left, during a meeting on Iran’s compliance with the 2015 nuclear agreement, Dec. 12, 2018, at UN headquarters. AP Photo/Mary Altaffer

Courtesy of Miles A. Pomper, Middlebury

Editor’s note: Iranian leaders have threatened to withdraw from a ...



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Zero Hedge

Global Bond Yields Are Crashing(er)

Courtesy of ZeroHedge. View original post here.

Between Draghi's promises, Trump's threats, and the stock market's pressure on Powell, global bond yields are collapsing this morning.

Let's start with US Treasuries. 10Y yields have crashed to a 2.01% handle... (lowest since Nov 2016, Trump's election)

Completely decoupled from stocks...

10Y Bund yields have plunged to -32bps!! (a rec...



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Kimble Charting Solutions

Consumer Staple and Yields about to send key message to stocks?

Courtesy of Chris Kimble.

Could the Staples sector and the yield on the 10-year note be on the verge of sending an important message to the stock and bond markets? It sure looks that way.

Staples ETF (XLP) is currently attempting to break above the January 2018 highs at (1). If it does, it would be a breakout of the trading range that has been in play for the past 18-months, as it looks to have created a double bottom last year.

The yield on the 10-year note (TNX)  has declined nearly 35%, since pea...



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Insider Scoop

30 Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga.

Gainers
  • Moneygram International Inc (NASDAQ: MGI) rose 128.3% to $3.31 in pre-market trading after the company reported a strategic partnership with Ripple. Blockchain payments firm Ripple has made an investment in MoneyGram and will also allow the group to use its XRP cryptocurrency as part of the cross-border payments process. Ripple made an initial investment of $30 million in the money transfer company, made up of common stock and a warrant to purchase common stock. Ripple purchased newly-issued common stock including the shares underlying the warrant from MoneyGram at $4.10 per share.
  • Blue Apron Holdings, Inc....


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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Chart School

Silver Review

Courtesy of Read the Ticker.

The folks in the federal reserve will debase the US dollar currency to an extreme degree silver will finally lift off the floor.. 

Note: Readers should re watch the silver back screen news video, here.

The following video looks at price action and Wyckoff logic.

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If gold moves, silver wi...

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Digital Currencies

Cryptos Are Crashing As Asia Opens, Bitcoin Back Below $8k

Courtesy of ZeroHedge. View original post here.

Having survived the day's bloodbath in US tech stocks, cryptos are crashing in the early Asian session, apparently playing catch-down to the day's de-risking.

While no catalyst is immediately evident, there are some reports noting 13 large global banks are preparing to launch digital versions of major global currencies next year, though we suspect this drop was more algorithmic that fundamental-driven.

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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