fed needs to stop wallstreet from endangering financial system and economy

Quote from flytiger:

Check this out. Is this Armageddon, or what????

Liz Rappaport
CDOs Marked To Market
6/29/2007 3:23 PM EDT

I hear the dropoff this afternoon is partially due to CDOs of all qualities being marked to market, so to speak, a.k.a. repriced, because funds are doing quarter-end reviews and reports. The repricing is ugly and could spell pain for more than the Bear Stearns hedge funds.
According to one reliable source, high-quality AAA CDO paper is marked down by about 6 points, but lower AA and A by 20 to 30 points, and some BB and equity tranches (the lowest-rated and riskiest paper) are being marked down as much as 80 points


With 22:1 leverage, what's a markdown of 6 points worth?? 80 points??? I think the days of Hedge Funds have peeked.

sounds potentially very severe. i hope i eventually get the opportunity to trade under more natural leverage conditions. this phenomenon has gotten a little ridiculous

better not be a bailout by the taxpayers
 
I just reread my own post = 80 pts???!!!!!

How do you guys see it playing outnext week?

Three day settlement. Thursday should be hell day for these guys.
 
Quote from trefoil:

Raise rates into a possible liquidity crisis???
1929 is not going to happen again. Forget it.

we're in worse shape than in '29.....

let's say you need to dump some BBB- paper and no one bids....

what's it worth?
 
A contact spoke to an exchange official. The markdowns are real, and there isn't enough equity in the CDO's to cover the debits. THat means, it flows to equities.

We now find out if a plunge protection team exists.

I told Byrne to prepare an "I told you so" speech. He has spoken about a systemic problem. This is it. It might end naked shorting. I doubt the Prime Brokers will be in the mood to hold more debits.
 
Well, <b>daddyeaux</b>, it may or may not be worse than '29, but all I was saying is the Fed isn't so stupid that it would raise rates into the teeth of a liquidity crisis, like it did in '29. That lesson's been learned. A lot of people on this board don't seem to like that lesson, but regardless. It's simply not going to happen again, not that way anyway.
 
Quote from flytiger:

A contact spoke to an exchange official. The markdowns are real, and there isn't enough equity in the CDO's to cover the debits. THat means, it flows to equities.

This doesn't even make any sense. Do you know how cdos work?
 
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