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

To: russwinter who wrote (78778)	2/9/2007 9:11:00 AM
From: orkrious	Respond to of 110194

From Doug Kass this morning: thestreet.com Relaxed Behavior of Agencies Is Marked Here is an example of the relaxed behavior of the agencies. This week's Grants Interest Rate Observer calls attention to a 13-month-old $350 million pool of asset-backed pool of mortgages, MABS 2006-FRE1. Foreclosures now stand at 9%, delinquencies at 10.5% and real estate owned at 3.5%. In other words, about 23% of the loans are problematic -- and neither Fitch or S&P has downgraded the issue! No doubt investors in MABS 2006-FRE1 (hedge funds, brokerages, institutions, etc.) mark the issuance to Par (since it has not been downgraded). What happens when the ratings agencies finally downgrade MABS 2006-FRE1 (which seems inevitable, but late!) which is being carried on the books of investors at par? (Answer: Investors Sell). 60 Bid anyone?

To: russwinter who wrote (78778)	2/9/2007 10:10:46 AM
From: redfrecknj	Respond to of 110194

It now costs more than $700k to protect $10 mln worth of the bonds against default.

To: russwinter who wrote (78778)	2/10/2007 7:54:35 PM
From: NOW	Read Replies (2) \| Respond to of 110194

The Secret Bank of Japan Lexicon "Verbal accuracy is a virtue in analysing and ultimately understanding international economic phenomena. The following lexicon should be of great help to earnest investors worldwide, especially thoser who take Media-speak, and bureaucratic Ministry-speak at face vale. ZIRP (c) - The policy of giving away free money in unlimited quantities to any and all comers, for the stated purpose of avoiding deflation, but actually for the purpose of insuring that the YEN remains weak for selfish, mercantilist purpose. nearZIRP(sm)(c) - same as the above only a few basis points higher meant to relieve pressure on the BoJ for the world's most FUBAR policy be creating an anticipation of policy change that will always be "just around the corner". ZIRPtastic - The feeling of joy and bliss that overcomes the borrower of "free money" upon swapping the horrid paper for something with yield. ZIRPflation - The internationally uncivic-minded side-effect of rising asset prices everywhere in the world caused - in reasonable part - by the unecessarily cynical & low discount rate in Japan and the unmitigated ability of foreigners to borrow as much as they want, in order to buy whatever higher-yielding, or greater capitally-appreciating assets they want. (See Private Equity, Hedge Funds). disZIRPflation - The brave new world of very mild falling wage and goods prices in Japan (& Switz!) coincidental to ZIRP, nearZIRP, strongly rising asset prices, and massive demand for the currency to fund leveraged specualtive trades into higher-yielding currencies. ZIRPulation - Leveraged specu-trage predicated upon borrowing YEN at nearZIRP for investment in anything and everything nonZIRP. Presumes continued weakness of the YEN and the dangerous belief that unwinding is possible somewhere near present levels as and when a paradigm short occuers (See "tail risk", and "lognormal") ZIRP-sixed - Losing one's hedge fund by maintaining leveraged short YEN bets. ZIRPcurve Risk - The aggregate embedded yield curve risk in a ZIRPified financial system where the paucity of short-end yield induces investors to "reach for yield" by going farther out on the curve, thereby squashing long-term rates towards ungodly low levels that circularly make it near-impossible to shift policy or paradigms without inducing massive mark-to-market capital losses throught the financial system. ZIRPerrific - Peculiarly un-Japanese celebration of "High-fives all around" in the MoF & BoJ offices every time the YEN ticks new lows versus the dollar and especially the Euro. ZIRPBento - The FreeLunch(c) Box served in the BoJ cafetaria, but available to any and alll comers. ZIRPquake - Colassal dislocation in financial markets due to simultaneous attempted unwinding of ZIRP-related carry trades neoZIRPantilism - Using all manner of monetary policy tools and jawboning about the same to insure that no one gets a competitive "leg-up" over TeamJapan. (See "Beggar-Thy-Neighbor";) ZIRPing-on-a-String" - Economic state describing the ineffective outcome of employing ZIRP monetary strategies but to no avail, because the causes of Japan's disinflation has next-to-nothing to do with the price of money. ZIRP-o-tility - - The phenomena describing the compression of volatilty resulting from ZIRP and the flood of liquidity it spawns that have virtually eliminated risk premiums in global markets. ZIRPlosion - - Eventual market explosion caused by any many manner of unwinding of speculative leveraged carry trades." nihoncassandra.blogspot.com

To: russwinter who wrote (78778)	2/10/2007 11:49:38 PM
From: Tony Starks	Read Replies (1) \| Respond to of 110194

Russ, Here's a blog you'd probably enjoy: nihoncassandra.blogspot.com A sample post: Saturday, February 10, 2007 The Secret Bank of Japan Lexicon Verbal accuracy is a virtue in analysing and ultimately understanding international economic phenomena. The following lexicon should be of great help to earnest investors worldwide, especially thoser who take Media-speak, and bureaucratic Ministry-speak at face vale. ZIRP (c) - The policy of giving away free money in unlimited quantities to any and all comers, for the stated purpose of avoiding deflation, but actually for the purpose of insuring that the YEN remains weak for selfish, mercantilist purpose. nearZIRP(sm)(c) - same as the above only a few basis points higher meant to relieve pressure on the BoJ for the world's most FUBAR policy be creating an anticipation of policy change that will always be "just around the corner". ZIRPtastic - The feeling of joy and bliss that overcomes the borrower of "free money" upon swapping the horrid paper for something with yield. ZIRPflation - The internationally uncivic-minded side-effect of rising asset prices everywhere in the world caused - in reasonable part - by the unecessarily cynical & low discount rate in Japan and the unmitigated ability of foreigners to borrow as much as they want, in order to buy whatever higher-yielding, or greater capitally-appreciating assets they want. (See Private Equity, Hedge Funds). disZIRPflation - The brave new world of very mild falling wage and goods prices in Japan (& Switz!) coincidental to ZIRP, nearZIRP, strongly rising asset prices, and massive demand for the currency to fund leveraged specualtive trades into higher-yielding currencies. ZIRPulation - Leveraged specu-trage predicated upon borrowing YEN at nearZIRP for investment in anything and everything nonZIRP. Presumes continued weakness of the YEN and the dangerous belief that unwinding is possible somewhere near present levels as and when a paradigm short occuers (See "tail risk", and "lognormal") ZIRP-sixed - Losing one's hedge fund by maintaining leveraged short YEN bets. ZIRPcurve Risk - The aggregate embedded yield curve risk in a ZIRPified financial system where the paucity of short-end yield induces investors to "reach for yield" by going farther out on the curve, thereby squashing long-term rates towards ungodly low levels that circularly make it near-impossible to shift policy or paradigms without inducing massive mark-to-market capital losses throught the financial system. ZIRPerrific - Peculiarly un-Japanese celebration of "High-fives all around" in the MoF & BoJ offices every time the YEN ticks new lows versus the dollar and especially the Euro. ZIRPBento - The FreeLunch(c) Box served in the BoJ cafetaria, but available to any and alll comers. ZIRPquake - Colassal dislocation in financial markets due to simultaneous attempted unwinding of ZIRP-related carry trades neoZIRPantilism - Using all manner of monetary policy tools and jawboning about the same to insure that no one gets a competitive "leg-up" over TeamJapan. (See "Beggar-Thy-Neighbor";) ZIRPing-on-a-String" - Economic state describing the ineffective outcome of employing ZIRP monetary strategies but to no avail, because the causes of Japan's disinflation has next-to-nothing to do with the price of money. ZIRP-o-tility - - The phenomena describing the compression of volatilty resulting from ZIRP and the flood of liquidity it spawns that have virtually eliminated risk premiums in global markets. ZIRPlosion - - Eventual market explosion caused by any many manner of unwinding of speculative leveraged carry trades.

To: russwinter who wrote (78778)	2/11/2007 12:18:27 AM
From: elmatador	Read Replies (1) \| Respond to of 110194

Who’s hurt by cheap money? The British! They aren't in the Euro to profit from handling money from currency to currency and they are good at it. And I have nothing against making money. With capital spreading more evenly, the British cannot charge what they used to, for a product that is widely available. Japan is flooding the market with capital. The British, however, are salivating for a flight to “quality”, where by a crisis in a poor country triggers capital flight and they gorge in moolah. But continuing like this carry trade status quo, pretty soon the British will have to think about working and making stuff to earn a living. They are taking a cut of every money that moves from place it is plenty to places where it is scarce. This is not longer a way to make a living. Priting money, as Japan does, hurts the lender. The lender doesn't have the upper hand. Compare that when capital was hoarded and scarce. It was spread only under a very controlled manner and only to governments. Globalization changed that. If you want to invest in Brazil you're welcome to take the risk. But the whole country will not be at risk from loans it would have taken to feed state-owned enterprises that practice political pricing and can never pay the principal, defaulting and creating a crisis every ten years. Japan is fighting not to return to the insignificance it came from. It does with the only two things it has. Capital and an industrial base. Combining the two to keep going. It needs countries to buy its Toyotas cars and NEC microwave equipment. Its sogo shosha no longer operate in products, they operate in services. They brought Japan to where it is and will try to keep is up there. Blame countries with high interest rates for carry trade. Countries such as Brazil, keep an interest rates high to attract money to fund the public deficit. The Turkish lira has strengthened some 25 percent, despite a large current account deficit, slowing growth, a partial suspension of European Union entry talks, anxieties about this year's elections and persistent inflation Investors now enjoy benchmark interest rates of 17.5 percent - some of the highest in emerging markets and 4.5 points higher than in Turkey's closest rival market Brazil. Why the G7 do not lambast Lula to keep interest rates too high?