Monday, January 28, 2008


I'm gonna rely on you to read Traffic Court again to catch up on some not-so-great news on CMBS, including a huge spreads over Treasuries and a 48% rise in yield over swaps. Thoughts appear to be that even the highest-rated tranches may be affected and that more defaults are on the horizon. I don't know how upset I will be with a possible 4% default rate in real terms. We've been at historic lows, and 4% is not awful. But defaults can just create more panic in the market and that troubles me more. And, honestly, Fed intervention may or may not matter. It'll be interesting to see how this is going to be playing out.


BawldGuy said...

David -- I'd be interested in your take on Buffet going big time into insuring bonds, and Wilbur Ross also moving into the bankruptcy organization of American Home Mortgage Investment.

Seems market corrections begin to turn around, albeit at the speed of an aircraft carrier in a storm, when the 'big' money starts pushing their chips into the pot.

I wrote of this over at BloodhoundBlog last week.

Your take? Thanks

David Stejkowski said...

Usually, the day they announce a recession is when the turnaround is already well underway. Personally? I anticipate things being better by Q3. The big boys are not stupid.

The market has to adjust to more rational pricings, risk and underwriting and lenders need to adjust their tolerances a little too.

And the beauty of the the market is that it always does adjust.

Excellent observations, as always, Jeff.