ABX Indices stuck @ lows
- Thread starter Cdntrader
- Start date
Agree, if you know what you are doing there has to be mispricing in the better securities, but maybe mispricing in the worse ones also. My guess is that distressed investors are already on the case and know which ones to bid for - just a matter of the bid being accepted.
Has to be some kind of super diversified exposure so gains in the ones that are mispriced offset losses from the ones that fail. Only problem is that distressed investors will probably bid for individual good tranches leaving any diversified vehicle with the worse stuff. If real value is 30% that is only at max ~300% gain on those that rebound - likely they will not recover to par as even the good tranches will have losses. If bought at 5% of par there is a 20x max recovery potential in the good tranches offset by an unknown bankruptcy rate.
Might be better off buying a super diversified portfolio of homebuilders and small regional banks.
Has to be some kind of super diversified exposure so gains in the ones that are mispriced offset losses from the ones that fail. Only problem is that distressed investors will probably bid for individual good tranches leaving any diversified vehicle with the worse stuff. If real value is 30% that is only at max ~300% gain on those that rebound - likely they will not recover to par as even the good tranches will have losses. If bought at 5% of par there is a 20x max recovery potential in the good tranches offset by an unknown bankruptcy rate.
Might be better off buying a super diversified portfolio of homebuilders and small regional banks.
Wow didn't think it was possible but...yes boys and girls NEW LOWS! across the board AAA's to BBB's!
http://markit.com/information/products/category/indices/abx.html
http://markit.com/information/products/category/indices/abx.html