Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (44649)	4/1/2000 5:35:00 PM
From: Saulamanca	Read Replies (1) \| Respond to of 99985

Up and Down Wall Street - Alan Abelson "...Charlie Peabody is a professional worrier (as readers of this space know, he's a bank analyst for Mitchell Securities, and a darned good one). What he's especially worried about now is the Federal Home Loan Bank System, the FHLB, for short. This is the least visible but by no means the least important of the so-called government-sponsored enterprises, the most prominent of which are Fannie Mae and Freddie Mac. The GSEs, as they're called, have lines of credit with the Treasury; but their combined borrowings last year of some $7 trillion dwarf the $2 trillion of the Treasury itself. Recently, Rhonda Brammer chatted with Charlie on why he's worried about the system. And what follows is a distillation of what she found out. He's bothered by the fact that unlike Fannie and Freddie, the FHLB flies pretty much under the radar screen, and its reports are issued only after a sizable lag (the '99 annual, for example, is due in May). That's not the kind of disclosure Charlie would like to see in an enterprise that's huge, highly leveraged, growing rapidly, operates on razor-thin margins and owns a slug of derivatives. More specifically, he estimates that the system was leveraged 21-to-1 at yearend. It boasts assets of $531 billion and derivatives of $410 billion (the notional value of "interest-rate exchange agreements"). In the most recently reported nine months, margins were a meager 24 basis points on interest-bearing funds. Charlie is troubled by the fact that, like the S&Ls in the 'Eighties, the FHLB borrows short and lends long. Its '99 borrowings encompassed over $3 trillion in consolidated obligations, or COs. These are mostly overnight funds that are constantly being rolled over. Of especial concern, he feels, is that despite the 45% rise in advances in the first nine months of last year, spread income rose only 17%. That means margins must be getting squeezed. He also believes the FHLB's derivative position is increasingly under water. Last reported in the '98 annual, the system had a $1.7 billion unrealized loss on some $382 billion in derivatives. And things aren't helped by a bill recently introduced in Congress that would remove the government's lines of credit to the FHLB and the other GSEs. The legislation, Charlie concedes, isn't apt to become law this election year. But 2001 could be a different story. Even the prospect of such changes already has roiled the market for the securities of the affected agencies and prompted one huge fund, PIMCO, to sell its mortgage-backed bonds issued by Fannie Mae and Freddie Mac and put the proceeds in Ginnie Maes, which are fully guaranteed by Uncle Sam. It's Charlie's view that the FHLB has the potential to cause much greater disturbances affecting the entire economy. So if you run into Charlie, no need to ask him why he looks so worried." interactive.wsj.com

To: Haim R. Branisteanu who wrote (44649)	4/1/2000 7:00:00 PM
From: Crimson Ghost	Respond to of 99985

Haim: You are absolutely right on inflation. The official numbers are BS to keep the bubble going a bit longer and screw social security recepients Crashes may or may not be history, but bear markets are anything but extinct. In fact I see a real hum dinger beginning this spring. I am quite bullish on value stocks short-term, but I see this jump in value as the final "hook" that lulls the unwary before the sh...t really hits the fan. My guess is that we will see the spoos move up to the 1600 area this month before we start down again big time. The NAZ may bounce further, but that long overdue bear still is in its very early stages and has a long way to go.