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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (50381)	1/20/2006 10:08:55 AM
From: Ramsey Su	Respond to of 110194

Russ, re: RDN biz.yahoo.com Lots of good information and I must say RDN released a very transparent report. Look at the last table at the bottom regarding CBASS and Sherman. RDN and MTG are the majority owners. CBASS and Sherman have been contributing about 25% of the earnings of both MI companies. As you can see from the table, the servicing portfolio and asset have sky rocketed from a year ago. It is worth noting because they primarily purchase and service junk from other lenders. The fact that their volume is spiking could be an indicator that credit quality had deteriorated but miscellaneous lenders have dumped their junk to CBASS and cleaning it off their books. Ramsey

To: russwinter who wrote (50381)	1/20/2006 10:49:09 AM
From: J_Locke	Read Replies (2) \| Respond to of 110194

Russ, the issue is not liquidity provided by the Fed through open market operations, but rather systemic liquidity feeding through a dysfunctional fractional reserve banking system. The central banks are not doing an irresponsible amount of monetizing, but because they all set bank reserve requirements so low in the late 80's, early 90's they have become enablers of what Doug Noland calls the "leveraged speculating community." They have allowed the money center banks to run wild, both in their own trading and in the lending they provide to hedge funds. On this score, the European Central Bank, which generally operates on a sensible, empirical basis (as opposed to the Fed, which is ideology and ego based) is just as bad as the Fed and BoJ. I regard it as a truism that if you set reserve rates at essentially zero (as is now the case) real returns on all asset classes will be driven to zero. Buy a 10-year bond today and you will get a zero real return over the next 10 years. Buy an S&P index and you will get the same. Buy real estate and your real return will be negative over the next 10 years. This is exactly what should be expected when there is no functional limit to speculator borrowing. Attractive returns are quickly arbitraged away because low reserve requirements mean there is never a need for asset class rebalancing. If foreign stocks are more attractively priced than U.S. stocks, you don't sell your U.S. stocks to buy foreign stocks, you borrow more from Lehman Bros., or Deutchebank or Nomura, who borrow it from the central banks.