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Friday, June 29, 2007

Bloomberg Gets Negative

There has been and will be very good coverage of the changing debt environment over at Calculated Risk. Deals are being affected daily. And there's a steady drip of bad news; Bloomberg started today out with an extremely negative, but accurate, article:
Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans.
...
``You'll see massive losses from banks, insurance companies and pension managers,'' said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody's and Fitch understate the risks of subprime mortgage bonds. ``The longer they wait, the worse it's going to be.''
...
Executives at New York-based S&P, Moody's and Fitch say they are waiting until foreclosure sales show that the collateral backing the bonds has declined enough to create losses before lowering ratings on some of the $6.65 trillion in outstanding mortgage-backed debt.
If a reader still considers me a nattering nabob of negativity on the credit issue, I strongly recommend that you read the article all the way through. The ratings firms really are waiting too long, pretending that prices on sales are going to improve. They aren't, and you can calculate expected losses at least on the 90 day plus delinquencies. This is one reason why REO sales are not particularly well-priced right now. As soon as prices are knocked down enough to move the stuff, whoever is selling recognizes not just the loss on that home but also impairs the value of holdings.

Comments:
Subprime situation reminds me of Dr. Elisabeth Kubler-Ross 5 stages of death.

We're almost out of the denial phase.
 
As of today, when traders have to tot it up, we might be out of it altogether.
 
When I was 11 or 12 I played with her son. She was a nice lady who drove us around in her mercedes convertable from time to time. It wasn't till much later in life that I figured out who she was.

Probably explains my views on life...
 
Kubler-Ross? Or Ms. Nattering Nabob of Negativity?

Yeah, that could explain a lot!!! You believe in looking disaster in the face.
 
AS Shrinkwrapped likes to say;

"No one's getting out of here alive"
 
There are people who believe that with enough scientific knowledge, we will be able to stop aging and human beings will become immortal. People are sinking millions into it. They have message boards, and websites, and magazines and actual laboratories.

Now, if we ever do, you would want to own some life insurance companies before it was announced....

I think Shrinkwrapped might have a lot more work to do on that heading.
 
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