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OnlyMe

Carnage On The Abx, Again

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I'm trying to think of an analogy for some of these charts, chucking dead bodies out of the loading bay at 10,000 feet seems apt.

Yesterday's trading must have been quite a day, up until then the daily changes were a mere rolling over.

Has another blow-up occured? Is Bear Stearns about to be publicly joined by another giant zombie?

http://www.markit.com/information/affiliations/abx

29-Jun-07 Overview

Index Series Version Coupon RED ID Price High Low

ABX-HE-AAA 07-1 7 1 9 0A08AHAC6 99.49 100.09 99.15

ABX-HE-AA 07-1 7 1 15 0A08AGAC8 99.13 100.09 98.71

ABX-HE-A 07-1 7 1 64 0A08AFAC0 84.27 100.01 84.27

ABX-HE-BBB 07-1 7 1 224 0A08AIAC4 62.43 98.35 62.43

ABX-HE-BBB- 07-1 7 1 389 0A08AOAC1 54.54 97.47 54.54

ABX-HE-AAA 06-2 6 2 11 0A08AHAB8 99.53 100.12 99.15

ABX-HE-AA 06-2 6 2 17 0A08AGAB0 99.33 100.12 97.53

ABX-HE-A 06-2 6 2 44 0A08AFAB2 88.15 100.12 88.15

ABX-HE-BBB 06-2 6 2 133 0A08AIAB6 70.00 100.59 70.00

ABX-HE-BBB- 06-2 6 2 242 0A08AOAB3 60.84 100.94 60.84

ABX-HE-AAA 06-1 6 1 18 0A08AHAA1 100.09 100.38 99.54

ABX-HE-AA 06-1 6 1 32 0A08AGAA9 99.76 100.73 99.54

ABX-HE-A 06-1 6 1 54 0A08AFAA7 95.46 100.51 94.06

ABX-HE-BBB 06-1 6 1 154 0A08AIAA4 86.00 101.20 84.50

ABX-HE-BBB- 06-1 6 1 267 0A08AOAA2 77.95 102.19 77.81

Edited by OnlyMe

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I'm trying to think of an analogy for some of these charts, chucking dead bodies out of the loading bay at 10,000 feet seems apt.

Yesterday's trading must have been quite a day, up until then the daily changes were a mere rolling over.

Has another blow-up occured? Is Bear Stearns about to be publicly joined by another giant zombie?

http://www.markit.com/information/affiliations/abx

29-Jun-07 Overview

Index Series Version Coupon RED ID Price High Low

ABX-HE-AAA 07-1 7 1 9 0A08AHAC6 99.49 100.09 99.15

ABX-HE-AA 07-1 7 1 15 0A08AGAC8 99.13 100.09 98.71

ABX-HE-A 07-1 7 1 64 0A08AFAC0 84.27 100.01 84.27

ABX-HE-BBB 07-1 7 1 224 0A08AIAC4 62.43 98.35 62.43

ABX-HE-BBB- 07-1 7 1 389 0A08AOAC1 54.54 97.47 54.54

ABX-HE-AAA 06-2 6 2 11 0A08AHAB8 99.53 100.12 99.15

ABX-HE-AA 06-2 6 2 17 0A08AGAB0 99.33 100.12 97.53

ABX-HE-A 06-2 6 2 44 0A08AFAB2 88.15 100.12 88.15

ABX-HE-BBB 06-2 6 2 133 0A08AIAB6 70.00 100.59 70.00

ABX-HE-BBB- 06-2 6 2 242 0A08AOAB3 60.84 100.94 60.84

ABX-HE-AAA 06-1 6 1 18 0A08AHAA1 100.09 100.38 99.54

ABX-HE-AA 06-1 6 1 32 0A08AGAA9 99.76 100.73 99.54

ABX-HE-A 06-1 6 1 54 0A08AFAA7 95.46 100.51 94.06

ABX-HE-BBB 06-1 6 1 154 0A08AIAA4 86.00 101.20 84.50

ABX-HE-BBB- 06-1 6 1 267 0A08AOAA2 77.95 102.19 77.81

Any chance of a translation? What on earth does that all mean...?

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I don't know exactly what this ABX stuff is. It seems to be about debt (ratings) and prices for it.

But from what I see, I would not like to be in it!!

Edited by Goldfinger

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Guest DissipatedYouthIsValuable
I don't know exactly what this ABX stuff is. It seems to be about debt (ratings) and prices for it.

But from what I see, I would not like to be in it!!

Spare a nugget for a small pawn, guv?

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On 19 January 2006, ABX.HE, a new group of credit default swap (“CDS”) indices linked to subprime RMBS securities, began trading. Collectively, the ABX.HE indices form a subgroup of the ABX index family, which is expected to eventually extend to other asset classes in the ABS market. The index has transparent rules and relies on dealers for pricing. ABX.HE is owned and administered by CDS IndexCo and Markit, the same entities that manage the well-established CDX family of indices for corporates. In the first week of its launch, trading on the indices was extremely active, with some sources estimating traded volume as high as $10 billion. This report discusses the relevant features of the ABX.HE index, as well as the implications of indexing on the ABS and CDO markets.
Composition of the ABX.HE indices
ABX.HE indices represent the home equity market subset of the ABX index family. The first series, ABX.HE 06-1, was launched on 19 January 2006. A new index will be created every six months on the roll date. Each new index represents the “on-the-run” until the next series is created, at which point the old series becomes “off-the-run.” We expect that the trading for on-the-run indices will be considerably more active than for the off-the-run.
The ABX.HE series will have five sub-indices representing references to securities issued within five rating categories. These are triple-A, double-A, single-A, triple-B and triple-B-.

I've had a look at the individual graphs. Can anyone explain the dramatic fall in values that happened in mid-February 2007?

http://www.markit.com/information/affiliations/abx

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WOW - I heard the Prime brokerage guys were pretty fearful of this friday because of the end of quarter 'Mark'

I guess the 'Mark' got em bad.....

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Any chance of a translation? What on earth does that all mean...?
I've had a look at the individual graphs. Can anyone explain the dramatic fall in values that happened in mid-February 2007?

http://www.markit.com/information/affiliations/abx

No-one has a way of knowing exactly what these things are really worth, since they dont know how much will be defaulted on, like credit spreads everyone is second guessing the true value.

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WOW - I heard the Prime brokerage guys were pretty fearful of this friday because of the end of quarter 'Mark'

I guess the 'Mark' got em bad.....

That will explain the concentration of falls yesterday then. The ABX seems to be useful as it is a visible window into the shadowy depths of the rest of the MBS market as a whole. Unles of course hedge fund activity itself and the pools of mortages on which it is based are somewhat unrepresentative.

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I've had a look at the individual graphs. Can anyone explain the dramatic fall in values that happened in mid-February 2007?

http://www.markit.com/information/affiliations/abx

That was around the time when the subprime mess was first discovered by the broader markets.

The index represents the cost for insuring securities against default. It should be interpreted as the greater the difference between 100 (par value) and the value, the greater the cost of insuring them against default. E.g. a value of 90 represents a cost of 10% roughly.

It's easy to imagine what happens if the cost of insuring against default goes above the yield on the securities. They become virtually unsellable. Noone would invest in something that has a higher risk of defaulting than what it pays out - you may as well burn your money.

If you look at the lowest rated BBB tranches you'll see that their values are through the floor. Hence why sub-prime lending in the US has ground to a halt and a large part of the firms have gone bankrupt. What we're seeing now is this phenomenon spreading to higher quality mortages, such as the Alt-A.

In essence, a bloody mess!

Edited by nic

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Check out the 'A' rated class of 2007....

I smell blood a lot of it too.......

Lots more to come......

Will they be able to liquidate in time?

HEDGE HELL'S SPELL

http://www.nypost.com/seven/06292007/busin..._roddy_boyd.htm

Also at month's end, hedge funds that have, or are perceived to have, subprime-mortgage bond exposure are going to have to begin to return the capital of investors who have requested it back.

Edited by OnlyMe

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It amused me that Bear Stearns were afraid that the assets in their collapsing hedge fund would be sold off, because that would set a price on them.

Obviously they're blatantly worth a lot lot less, and there is no way in hell it can be kept a secret in the long run.

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It amused me that Bear Stearns were afraid that the assets in their collapsing hedge fund would be sold off, because that would set a price on them.

Obviously they're blatantly worth a lot lot less, and there is no way in hell it can be kept a secret in the long run.

You would think that a bank with Bear Stearns' experience in trading would know how to do it !!??!

"A loss never bothered me once I had taken it" "If I sell them for a fall I sell them low or not at all" Bear stearns had literally the best opportunity to sell these "assets" they were the first "big" fund to see the loss and get margin called. After this fridays 'Mark' the 'other' funds will want to liquidate too.

who will buy them ? ?

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You would think that a bank with Bear Stearns' experience in trading would know how to do it !!??!

"A loss never bothered me once I had taken it" "If I sell them for a fall I sell them low or not at all" Bear stearns had literally the best opportunity to sell these "assets" they were the first "big" fund to see the loss and get margin called. After this fridays 'Mark' the 'other' funds will want to liquidate too.

who will buy them ? ?

No-one until the price is right!

I guess it is dependant on how much they think they can get on the pound out of them.

Supply and Demand = price :), its not a question of will someone.... its a question of how little they will pay for them.

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You would think that a bank with Bear Stearns' experience in trading would know how to do it !!??!

"A loss never bothered me once I had taken it" "If I sell them for a fall I sell them low or not at all" Bear stearns had literally the best opportunity to sell these "assets" they were the first "big" fund to see the loss and get margin called. After this fridays 'Mark' the 'other' funds will want to liquidate too.

who will buy them ? ?

It will happen eventually, but at seriously discounted prices. And once that happens the cat will be out of the bag - the other funds can no longer hide their losses. And considering that hedge funds are leveraged losses will be amplified. It'll end in tears.

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Just imagine, in the recent Bear Stearns case, they had put $600m of their own cash in, and borrowed so the fund was worth $6bn. Then they incur a serious loss. Had they gone bust someone would be sitting with a $6bn loss. Now what if that investor goes bust as a result, or even worse if they had leverage built in too. It'll be a chain reaction.

In this case they didn't go bust - Bear Stearns saved their skin by injecting cash into the collapsing fund.. but I wonder how long it'll be before it happens. They can't all be bailed out.

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Mind you. I guess maybe the Market had already crashed. Imagine that an entire Market just crashed without anyone selling a single security it just gaps down! wicked.

I guess we should be thankfull that the holders of these securities are the big players. and not households families and busnisses. Although we will all bear the consequences of the flallout.

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Just imagine, in the recent Bear Stearns case, they had put $600m of their own cash in, and borrowed so the fund was worth $6bn. Then they incur a serious loss. Had they gone bust someone would be sitting with a $6bn loss. Now what if that investor goes bust as a result, or even worse if they had leverage built in too. It'll be a chain reaction.

In this case they didn't go bust - Bear Stearns saved their skin by injecting cash into the collapsing fund.. but I wonder how long it'll be before it happens. They can't all be bailed out.

The "Enchanced Levarage fund" which has 15yards of these things IS going bust.......I wonder how many funds of funds (typically highly levered) have exposure...

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Mind you. I guess maybe the Market had already crashed. Imagine that an entire Market just crashed without anyone selling a single security it just gaps down! wicked.

I guess we should be thankfull that the holders of these securities are the big players. and not households families and busnisses. Although we will all bear the consequences of the flallout.

The end of Feb dip people seem to be confused about was the day Shanghai dropped 9%, and the yen jumped up causing lots of positions to be liquidated in lots of markets.

Feverish trading ensued in the following weeks to recover the loses from february.

And you may think it's only the big players invovled in this eventual fall out, but where is your pension fund? Where are your current account deposits?

Pension funds, insurance brokers, banks all the institutes who potentially owe you money have that money invested in these markets.

.

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Just imagine, in the recent Bear Stearns case, they had put $600m of their own cash in, and borrowed so the fund was worth $6bn. Then they incur a serious loss. Had they gone bust someone would be sitting with a $6bn loss. Now what if that investor goes bust as a result, or even worse if they had leverage built in too. It'll be a chain reaction.

In this case they didn't go bust - Bear Stearns saved their skin by injecting cash into the collapsing fund.. but I wonder how long it'll be before it happens. They can't all be bailed out.

That's not right. The equity investors may be looking at a total loss, but the maximum they can lose is $600m.

The banks, who advanced the $6bn would only lose the lot if the underlying assets were worth nothing.

Now, I'm not saying they are looking particularly healthy, but given 90% are in AAA and AA allegedly, a full loss is unlikely.

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The end of Feb dip people seem to be confused about was the day Shanghai dropped 9%, and the yen jumped up causing lots of positions to be liquidated in lots of markets.

Feverish trading ensued in the following weeks to recover the loses from february.

And you may think it's only the big players invovled in this eventual fall out, but where is your pension fund? Where are your current account deposits?

Pension funds, insurance brokers, banks all the institutes who potentially owe you money have that money invested in these markets.

.

Oh yes I agree. The ultimate loosers could well be far far removed from this complex web of credit. Chaos Theory and all that...

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