John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: Augustus Gloop who wrote (8407)	11/14/2007 9:17:07 AM
From: Hawkmoon	Read Replies (1) of 33421

Good thing he has cash because we aren't done yet. Well, it depends upon the assets you're referring to.. Since there is almost NO liquidity in the CDO/CMO markets, it's pretty clear that high-quality "babies" are being tossed out with the "bathwater" and I'm sure that these are the ones that Buffett would be looking to re-insure in order to rehabilitate the pricing mechanism for those assets. That's been a large part of the problem, IMO. When the banks packaged these sub-primes and Alt-A's together with the AAA bonds and resold them (depending upon the rating agencies to give them credibility as financial instruments), it left the entire mortgage/asset bond market vulnerable to contagion. I think that will be one of the solutions; separating bonds into their distinct risk categories and re-marketing them that way. Investors might be shy about having their AAA diluted with Alt-A and subprime paper. But re-insurance is critical to restoring the "bid" under the mortgage/asset backed bond market. Hawk

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