Administrative Note/Open Thread

January 30th, 2009 9:50 am | by John Jansen |

Today is a travel day for me a I return to New York from beautiful and chilly Chicago and Evanston Illinois. So I will not be blogging today. So please use this post as an open thread which worked quite well when I travelled in December.

Thanks for your patience and loyalty and I will be at the plush corporate headquarters of Across the Curve on Monday.

And thanks for all the good wishes that many sent on the birth of Charlotte Anne Jansen Preall. 

So blog away as I head east.

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  1. 21 Responses to “Administrative Note/Open Thread”

  2. By Keith Wright on Jan 30, 2009 | Reply

    GDP: -3.8%

    http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

  3. By texalope on Jan 30, 2009 | Reply

    I’d appreciate opinions- Anally Mortgage employs a barbell approach with relatively conservative leverage. They buy basically MBS. Since they are a Reit the goal is maximum dividend. As spreads closed, my expectation was for appreciation in the stock price . While I waited I collected a healthy dividend. My feeling is that as long as short term rates are low this company has limited downside. The price appreciation has not materialized to date.

  4. By Dave in SV on Jan 30, 2009 | Reply

    I’m not a bond guy, but supply overwhelmed the buyers resulting in yesterday’s treasury debacle.

    Won’t this be a recurring theme for 2009? (and 2010, 11, 12, ……)

  5. By Alex on Jan 30, 2009 | Reply

    Quarterly refunding announcement due on February 4th.

  6. By HF Brian on Jan 30, 2009 | Reply

    @texalope

    The risk at NLY is an increase in funding costs, or at worst, a complete end to the ability fund via repo agreements backed by the mtg assets. Given that they are in the conforming space the latter has become increasingly less likely (but it’s what had the stock stair-stepping a few months ago like it was going to zero). The increase in funding costs, however, is real and will pressure the margin. The current yield is probably fair given the gov’t risks in the mtg market that are currently very hard to handicap. Just my two cents.

    disclosure: my fund is long a small amount of MFA (nearest comp to NLY).

  7. By M on Jan 30, 2009 | Reply

    Russia Sold All Freddie, Fannie Bonds, Interfax Says

    By Denis Maternovsky
    Jan. 30 (Bloomberg) — Russia’s central bank sold all
    its mortgage bonds of U.S. agencies Freddie Mac and Fannie Mae
    for a profit, Interfax reported, citing Sergey Ignatiev, the
    bank’s head.

  8. By JD on Jan 30, 2009 | Reply

    Does anyone have a sense of the PBoC purchases in the latest fundings? With global trade in free fall and China’s huge stimulus package, I would like to know if they are still buying.

  9. By jonathan on Jan 30, 2009 | Reply

    Thought I’d pass on this tidbit: as the world tries to pump in money and we’ve just partly cleared our giant bill, Ireland is looking to raise taxes. They’re considering an extra property tax of 1k Euros per home plus others. Gee, I wonder what that will do for demand in Ireland.

  10. By Nathaniel C on Jan 30, 2009 | Reply

    Am I the only one that is disgusted by all of these bailouts? Acooring to Bloomberg the total amount of bailouts is approx. 8.5 trillion. This not even including the “good bank, bad bank” scenario which is another 1-2 trillion and the latest stimulus package of $900 billion. All of this to “save” a 14 trillion economy. Whatever happened to creative destruction and the free market? It worked for so long. It seems that the solution to the financial crisis will bankrupt the country. No problem I guess, the Federal Reserve will just print some money and magically reduce the national debt. The average person will never know why the price of living skyrockets. The perfect crime!!!

  11. By texalope on Jan 30, 2009 | Reply

    Hi HF Brian. Thanks for your input.

  12. By Steve on Jan 30, 2009 | Reply

    The 30 year is go for lift off once again, Bernanke vs. the Vigilantes!

  13. By JD on Jan 30, 2009 | Reply

    Once the commercial market catches up with residential, there will be precious little time for banks to realize that their plight is dire. The asset prices on the books are dramatically inflated. Many banks are failing. Repeat, many banks are failing.

    Keep your eye on the bond market. Bond prices on financials are pricing in significant government bailout. It is absurd to expect the federal government purchase these asset at any level. Even if bought at ‘toxic values’ many will fall to zero. If the individuals that created and priced these securities in the first place cannot value them now, how does the government expect to find a ‘fair value’. The bad bank idea is a massive subsidy to Wall Street.

    Unless, the federal government, likely FED, agrees to purchase any security that cannot go ‘negative’ (meaning the security cannot fall below zero and create liability) for ZERO. Repeat ZERO. The FED isolates the pool by bank, services them for a percentage of the upside and returns the balance. Now, removing inflated assets from a balance sheet requires an equal reduction of liabilities or infusion of equity capital. The overwhelming majority of Americans are adamantly opposed to further capital infusion in banks that are not lending. NO NEW CAPITAL. Bond holders must face the reality that they are going to take a haircut one way or another.

    Until now, all banks have been bought or hastily merged to prevent full liquidation. Imagine the carnage in the bond market if just one of these banks went into liquidation. Bond holders would get pennies on the dollar in a true fire sale. The FED needs to show bond players the downside. Then perhaps they will decide to take a haircut and banks can mark these assets down to their true value….in many cases ZERO.

  14. By esb on Jan 30, 2009 | Reply

    What disturbs me most from the events of January is the simple fact that Barack Obama was unable to find a Treasury Secretary who was not a tax evader.

    A tax evader Treasury Secretary.

    Yes friends, we are in real trouble,

    and a little less genius and a little more ethics is a part of the cure.

  15. By Gary on Jan 30, 2009 | Reply

    JD – in a “fair” world this is what would happen – banks get what they deserve. The Lehman ending has significantly changed this thinking – like it or not.

    Lehman’s collapse magnified the economic effects of the credit crunch (deleraging, risk avoidance, etc), I belieive authorities now rightly fear that a repeat Lehman blowout on that scale or even slightly smaller cannot be seen again. The system will collapse.

    Net result – CDS pricing on banks (very close or even under the soveriegn CDS) is probably about right.

    With 1-5yr CDS curves inverted (in siginficant cases) a long financials (economically significant baks, insuerers, etc) mezzanine tranche synthetic CDO with a 1yr tenor

    Could risk manage any downside risk through equity index shorts, periodic in down markets.

  16. By Dr.Dan on Feb 1, 2009 | Reply

    JD,Gary – Excellent set of points.

    I think its just a matter of time before treasury auctions become a bit iffy and that will lead to the end game.

    Its all about T..I..M..E

  17. By Steve on Feb 1, 2009 | Reply

    Does anyone other than me see the likelihood of rising defaults on corporate debt, munis, commercial mortgages, etc. How will such defaults potentially impact pension funds, insurance companies, etc.?
    Does anyone really expect that this latest stimulus/spending that Washington is preparing will work?
    I found this interesting:
    http://www.hoisingtonmgt.com/pdf/HIM2008Q4NP.pdf

  18. By Steve on Feb 2, 2009 | Reply

    Treasury futures for 10-year and 30-year are higher overnight. Is the Fed fulfilling its pledge to buy them? I’m curious if the Fed posts data regarding its treasury purchases somewhere, and if it is possible to know for certain. Or was the verbal intervention sufficient to tame the bond vigilantes?

    Thoughts anyone?

  19. By John Jansen on Feb 2, 2009 | Reply

    They release their balance sheet every Thursday and it reflects positions held at the close of business on Wednesday. I do not have the link handy and I am busy editing my morning post. If no one else posts it I will post it a little later.

  20. By John Jansen on Feb 2, 2009 | Reply

    And when they start buying Treasuries it will not be done in a vacuum but the action will be announced with trumpets blazing.

  21. By Alex on Feb 2, 2009 | Reply

    It’s more of a cacophony than a fanfare at the moment. Let me know when the cavalry arrives.

  22. By Sharon on Feb 2, 2009 | Reply

    “#

    By esb on Jan 30, 2009 | Reply

    What disturbs me most from the events of January is the simple fact that Barack Obama was unable to find a Treasury Secretary who was not a tax evader.

    A tax evader Treasury Secretary.”

    Or an HHS Secretary who is an even worse tax evader. Neither of these men would have owned up had they not been nominated.

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