Showing posts with label CDO. Show all posts
Showing posts with label CDO. Show all posts
Wednesday, March 25, 2009
Singapore Economy: How does Derivatives work?
Watch CBS Videos Online
The world is becoming an interconnected place. Problems in 1 country quickly spread to other parts of the world especially so when international trade creates so much interlinked investments that allows problems to be passed onto other countries in an unfettered way. This is the scary part.
It is time the US resumes leadership in this area.
Sunday, August 31, 2008
Sub-PRIME FATIGUE
quote: "Success is a thought process"
I have a personal conjecture. Sub-prime losses total an estimated 350billion or about 50% of total US$700 billion estimated sub-prime borrowings. So far, about 250 billion of losses has been announced as attributed to Sub-Prime. So I estimate that there is about another 100 to 150 billion of losses still hiding in someone's closet. Assuming that Sub-prime contagion does NOT cross over and affect the PRIME borrowers (due to the impending slow down in the US economy), the losses will be well absorbed. Additional provisions that the losses are well spread out and the huge losses do not hit a single bank or financial institution. Also if derivatives, a market that is being viewed as dangerous and risky by some, do not explode and become a crisis, (i.e. the mark-to-model derivatives that banks hold are held to maturity and do not need to be liquidated), I suspect the market just gets on with it. The market has seen rallies and falls with each good and bad news, but increasingly, the market seems to be stabilizing. I can only conclude that sub-prime fatigue has set in.
We all know the global economy is slowing, it is not something new, we all know sub-prime is bad, but after almost US$250 billion of announced and declared losses, the financial meltdown did not happen. The key financial institutions are still standing.
We all know it's bad, it's very very bad. Many have perhaps factored in these bad news. But as long as it doesn't kill you, it cannot be that bad enough. The market is tired of Sub-prime, they want something new to talk about.
June 2008
http://paulhokangsang.blogspot.com
I have a personal conjecture. Sub-prime losses total an estimated 350billion or about 50% of total US$700 billion estimated sub-prime borrowings. So far, about 250 billion of losses has been announced as attributed to Sub-Prime. So I estimate that there is about another 100 to 150 billion of losses still hiding in someone's closet. Assuming that Sub-prime contagion does NOT cross over and affect the PRIME borrowers (due to the impending slow down in the US economy), the losses will be well absorbed. Additional provisions that the losses are well spread out and the huge losses do not hit a single bank or financial institution. Also if derivatives, a market that is being viewed as dangerous and risky by some, do not explode and become a crisis, (i.e. the mark-to-model derivatives that banks hold are held to maturity and do not need to be liquidated), I suspect the market just gets on with it. The market has seen rallies and falls with each good and bad news, but increasingly, the market seems to be stabilizing. I can only conclude that sub-prime fatigue has set in.
We all know the global economy is slowing, it is not something new, we all know sub-prime is bad, but after almost US$250 billion of announced and declared losses, the financial meltdown did not happen. The key financial institutions are still standing.
We all know it's bad, it's very very bad. Many have perhaps factored in these bad news. But as long as it doesn't kill you, it cannot be that bad enough. The market is tired of Sub-prime, they want something new to talk about.
June 2008
http://paulhokangsang.blogspot.com
Singapore Private Property Prices Trend - Guesstimates
quote: "Success is a thought process"
Merrill Lynch & Co., Inc. Sells Collateralized Debt Obligations For Lone Star-The New York Times
Tuesday, 29 Jul 2008 07:20am EDT
The New York Times reported that Merrill Lynch & Co., Inc. has sold Lone Star almost all of its troublesome collateralized debt obligations, once valued at nearly $31 billion, for the fire-sale price of $0.22 on the dollar. (Source Google finance/Reuters)
Collaterised Debt Obligations are debt that are mixed with Sub-prime debt and packaged and sold as grade AAA debt/bonds. Obviously these bonds (CDOs) are not as safe as they seemed. I am puzzled by why Merrill Lynch sells their CDOs at S$0.22 to the S$1 dollar. Why such fire sale? It could indicate that they know something that we don't, it's much worst than we think it is.
Which is which?
Merrill thinks CDOs are worth 0.22 for the dollar
Blackrock thinks Sub-prime, Alt-A and some prime debt are worth 0.68 for the dollar.
If we use Blackrock as a benchmark, they have bought at a discounted 32% rate for US property loans which are backed by "in-troubled" property assets, then Singapore's case is no where as bad.
1. Property Supply and demand in Singapore is still fairly balanced (supply is still tight, equilibrium will likely be reached in 2011).
2. There is a lot of liquidity in the market, measured by M3 money supply.
3. The cost of financing a property has been reduced, marked by reduced Sibor, SOR rate.
4. While the economy is expected to slow down quite a bit due to the bleak US economic outlook, it is no where near dire.
5. The major banks are all well capitalized.
If someone holds me at gun-point to make a prediction, I would say private property prices will drop no more than 20% from current 2008 Q3 levels.
Your thoughts?
Merrill Lynch & Co., Inc. Sells Collateralized Debt Obligations For Lone Star-The New York Times
Tuesday, 29 Jul 2008 07:20am EDT
The New York Times reported that Merrill Lynch & Co., Inc. has sold Lone Star almost all of its troublesome collateralized debt obligations, once valued at nearly $31 billion, for the fire-sale price of $0.22 on the dollar. (Source Google finance/Reuters)
Collaterised Debt Obligations are debt that are mixed with Sub-prime debt and packaged and sold as grade AAA debt/bonds. Obviously these bonds (CDOs) are not as safe as they seemed. I am puzzled by why Merrill Lynch sells their CDOs at S$0.22 to the S$1 dollar. Why such fire sale? It could indicate that they know something that we don't, it's much worst than we think it is.
Which is which?
Merrill thinks CDOs are worth 0.22 for the dollar
Blackrock thinks Sub-prime, Alt-A and some prime debt are worth 0.68 for the dollar.
If we use Blackrock as a benchmark, they have bought at a discounted 32% rate for US property loans which are backed by "in-troubled" property assets, then Singapore's case is no where as bad.
1. Property Supply and demand in Singapore is still fairly balanced (supply is still tight, equilibrium will likely be reached in 2011).
2. There is a lot of liquidity in the market, measured by M3 money supply.
3. The cost of financing a property has been reduced, marked by reduced Sibor, SOR rate.
4. While the economy is expected to slow down quite a bit due to the bleak US economic outlook, it is no where near dire.
5. The major banks are all well capitalized.
If someone holds me at gun-point to make a prediction, I would say private property prices will drop no more than 20% from current 2008 Q3 levels.
Your thoughts?
Subscribe to:
Posts (Atom)
Posts
