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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: ggersh who wrote (29473)	8/5/2010 2:20:19 PM
From: Real Man	Read Replies (2) \| Respond to of 71454

Maybe worse, farewell dollar, but it will take time. Ben and the govt. are not shy inflating away debt. The devaluation they keep bottled up for now is already very substantial, GD FDR stuff is peanuts. This is Ben's key philosophy, of course. It will cure the debt problem, and drop the real gdp & US standard of living as a side effect. -ng-

To: ggersh who wrote (29473)	8/6/2010 8:28:00 AM
From: Amelia Carhartt	Read Replies (1) \| Respond to of 71454

Good-bye America. What a travesty.

To: ggersh who wrote (29473)	8/7/2010 8:57:54 PM
From: Real Man	1 Recommendation Read Replies (1) \| Respond to of 71454

-g-

To: ggersh who wrote (29473)	8/8/2010 4:29:25 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 71454

Citi weighs in Citigroup mortgage strategists said the chance of this program coming to fruition was "remote" and highlighted the costs. Citi says a program that would refinance all GSE loans with a 5.75% or higher coupon into a 4.50% coupon could provide about $30 billion in stimulus from consumers. But It would also cause a $30 billion premium loss to the GSEs retained portfolio, raise Treasury borrowing costs by $5-10 billion ayear as yields rose, and mortgage rates might rise by 100 bps. Citi says the rise in mortgage rates would be due to higher Treasury yields, higher negative convexity, higher implied volatility and massive gross issuance which would be a significant short-term problem. The "free lunch" refi programs that some are advocating "are actually very expensive and would result in more indigestion than thegovernment can stand," the Citi said in a research report. They also reminded that 90% of the loans that would be allowed to refinance are not delinquent loans. Delinquent loans are getting betterand more appropriate help from other government programs. Mortgage strategists at Nomura Securities said the odds of such a plan are only 10% if there is no double dip in the economy. If there isa double dip, the odds rise to about 30%. If the plan was adopted, most mortgage investors would suffer "meaningful" losses in the short-term. However, the $1.3 trillion in mortgage securities owned by Treasury and the Federal Reserve would suffer less because their costs are lower, they are not marked to market and any losses would be offset by the interest the government has already received, Nomura said. But Nomura also pointed out that if such a plan was instituted because of a double dip in the economy, the effect on bond yields and mortgage spreads would likely be reduced. And the government might convince originators to reduce primary/secondary spreads to more normal levels. Because of these factors, Nomura thinks primary mortgage rates would only rise to 5.00-5.25% which is still attractive. Finally, Nomura says mortgage investors might complain about government interference in private affairs, but the government could make a few good arguments of its own. For example, where would the markets be now if the Treasury and Fed had not bought $1.3 trillion MBS foster lower mortgage rates. And the government would indeed be helping people who are not delinquent and are still making their mortgage payments at much higher than current market rates.