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Goldfinger

Moody's Downgrades $33.4 Billion Of Subprime Bonds

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http://www.bloomberg.com/apps/news?pid=206...&refer=bond

Oct. 11 (Bloomberg) -- Moody's Investors Service lowered ratings on $33.4 billion of securities backed by subprime mortgages, the biggest downgrade yet, saying losses on delinquent home loans will continue to rise.

...

``This asset class has taken a bullet in the head,'' said Christopher Whalen, an analyst for Institutional Risk Analytics, a research firm in Hawthorne, California. ``The unfortunates who have this will not want to hold the paper any more. These bonds are going to trade like orphans.''

So, how much pension fund selling will we see? How many hedge funds will have to liquefy or go belly-up?

EDIT: link added

Edited by Goldfinger

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http://www.bloomberg.com/apps/news?pid=206...&refer=bond

So, how much pension fund selling will we see? How many hedge funds will have to liquefy or go belly-up?

EDIT: link added

"This asset class has taken a bullet in the head". Like his style, pity he doesn't work for the BBC.

although I'm slightly concerned that he is familiar with the trading of orphans. :o

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This asset class has taken a bullet in the head

It is not an asset class, it is a sodding liability, that is why the lenders dumped it overboard onto anybody that could be conned into buying it.

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There are going to be a lot of forced sell offs now as many pension funds etc are restricted on the assets that they can hold. Assets with crap credit agency ratings will therefore have to be sold immediately.

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"This asset class has taken a bullet in the head". Like his style, pity he doesn't work for the BBC.

although I'm slightly concerned that he is familiar with the trading of orphans. :o

Yup the secret is out!

They're traded on the OrphX and have been going well lately.

But if you want a tip follow me - I'm going to short Orphans and the OrphX into 2008.

America is producing thousands of them across the world at the moment so I'm out for a while.

Aids in Africa and Bombs in Iraq are the main drivers and the market is fast becoming saturated.

I'm gonna go long on 20-year 3rd world revolutionary bonds (RevX) cause when these kids grow up they're gonna Eff-Yoo-See-Kay America for ruining their lives.

Big growth area.

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Guest DissipatedYouthIsValuable
Yup the secret is out!

They're traded on the OrphX and have been going well lately.

But if you want a tip follow me - I'm going to short Orphans and the OrphX into 2008.

America is producing thousands of them across the world at the moment so I'm out for a while.

Aids in Africa and Bombs in Iraq are the main drivers and the market is fast becoming saturated.

I'm gonna go long on 20-year 3rd world revolutionary bonds (RevX) cause when these kids grow up they're gonna Eff-Yoo-See-Kay America for ruining their lives.

Big growth area.

Does RevX use a model-to-mark system?

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I'm gonna go long on 20-year 3rd world revolutionary bonds (RevX) cause when these kids grow up they're gonna Eff-Yoo-See-Kay America for ruining their lives.

:lol:

So, you're going to short tall buildings?!

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So, how much pension fund selling will we see? How many hedge funds will have to liquefy or go belly-up?

Pension fund selling - quite a bit I suspect.

Hedge fund selling, also quite a bit with some big mark downs and some more blow ups.

Hedge fund buying - loads, many of these bonds bought at the current distressed market price will be a really good deal if held to maturity.

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Pension fund selling - quite a bit I suspect.

Hedge fund selling, also quite a bit with some big mark downs and some more blow ups.

Hedge fund buying - loads, many of these bonds bought at the current distressed market price will be a really good deal if held to maturity.

But where will they get enough buyers to give the impression that an actual market exists? None of us has a clue as to how much of this crap is sitting in pension fund coffers, disintegrating.

They can hold it as long as they want and they can value it wherever they please but as soon as it is downgraded below their own mandated levels they must sell. But that's not so easy; no matter the 'discount'.

Hedge funds (this is a pain for investment banks set up 'holding companies' for their zombie bonds and called them hedge funds; so it's confusing to talk about it) will not jump in too early on this and I'm not sure about anyone in their right minds getting involved either; there is a long time to maturity and a lot of these things will simply be worthless. But even if that were not the case how could one know? It is not possible to guage the risk for these things were built without reference to risk. And a key to this is the fact that 'sub-prime' is not about being a mortgage holder on the dole; sub-prime itself is a dynamic state which will engulf more and more debt that we might think should be safe as the economy contracts and jobs are lost and house prices tank. Sub-prime is a self-fulfilling prophecy. We cannot know how far this might go but it is not beyond the realms of possibility that by the time the smoke clears a vast tract of our total mortgage debt may be designated as 'sub-prime', or worthless.

But even if we assume that a few hedge funds buy for pennies on the dollar who's going to 'assume' what must be the lion's share of zombies that are about to be thrown out of pension funds? Where are the buyers? Who are the buyers? Why would hedge funds assume such dodgey instruments when there are easier pickings about? Hedge funds will be taking profit for shorting our economy and you can bet that, at some time, politicians will try to blame them. But they will hold that they take profit for putting prices in their rightful places. Zombie bonds can easily be worth zero; why even touch them at all when holding off ensures a chain of events that must yield profit?

We haven't even added a single pension fund meltdown to the mix yet as people are hoping that the bogey man will go away before that happens. But it's hard to see how some kind of sector meldown can be avoided. It will only take one or two to announce distress and everyone will be banging on their doors.

Alistair Darling (sorry, Gordon Brown) simply cannot keep 'saving' everything. Gordon Brown is a big, fat, and rather dim, (I am so pleased that everyone seems to be finally noticing) socialist and he thinks he can go on creating as much money as he pleases. He cannot. If he tries to bully Mervyn King he will be stirring a hornet's nest of negative perceptions.

The real extent of this crunch is still quite a way off and while pundits wait to test the pulse of our economy it is obvious that the disease has been beyond cure for quite some time but they'll try to innoculate after the fact with even more liquidity.

As soon as the idiot stock markets take fright, everyone will start to 'get it' out there. And it cannot be that long now before it becomes apparent that stocks are not going to avoid the pain.

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I'd be interested to see how pension funds behave about this. I'd have thought the most sensible approach given the difficulties in disposing of the assets would be for the board of trustees to communicate their potential exposure and ask to write it off as bad debt but still hold the assets rather than sell.

Even if the assets may be worth nothing, they're still going to have some expected value because you'll get something back on them, but they'll trade well below their expected value, particularly in a forced sale event.

What really surprises me is that there's not been a single article about it in the Actuary magazine, I'd really expected pensions actuaries to be all over it and some consultant to have written a big article setting out strategies for managing CDO investments to drum up some business from nervous pension funds.

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What really surprises me is that there's not been a single article about it in the Actuary magazine, I'd really expected pensions actuaries to be all over it and some consultant to have written a big article setting out strategies for managing CDO investments to drum up some business from nervous pension funds.

As usual, it will be dealt with AFTER the meltdown. My impression is that actuaries are at the moment pretty much ignorant of the bigger (quite dramatic) picture regarding the markets. I know Actuaries who are BTLs. :rolleyes:

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I'd be interested to see how pension funds behave about this. I'd have thought the most sensible approach given the difficulties in disposing of the assets would be for the board of trustees to communicate their potential exposure and ask to write it off as bad debt but still hold the assets rather than sell.

Even if the assets may be worth nothing, they're still going to have some expected value because you'll get something back on them, but they'll trade well below their expected value, particularly in a forced sale event.

What really surprises me is that there's not been a single article about it in the Actuary magazine, I'd really expected pensions actuaries to be all over it and some consultant to have written a big article setting out strategies for managing CDO investments to drum up some business from nervous pension funds.

But surely many will simply be forced to sell by their own articles of association? Indeed, they would do better to stay as quiet as possible about this but it's hard to see how they can do that (indefinitely).

I think maybe you've answered your own question about why nobody is offering strategies. The fact that nobody can come up with a strategy suggests that there isn't one. Outside of writing off losses what could one do? There are no buyers (hedge fund predators, that may not even exist, notwithstanding).

All of the CDO and related instruments seemed to be designed for a single kind of market; one that keeps going up. They simply cannot survive a bear market and this is why I can never describe this whole affair as anything but theft. It was smash and grab investment and my suspicion is that it is big, dumb pension funds who are going to carry the can (sorry, the poor sods who've paid into them for years).

I would love to find a way to introduce a bill to ban pension funds. They are a disgrace. If they should, for whatever reason, decide to steal your money, they can; this is already proven.

I do not have a single penny in any pension fund but if I did I would get as much out as I could for it seems almost impossible that pension funds will be immune. Maybe someone can correct me on this but I cannot see how it won't be the pension funds who 'suffer' most out of this?

Where are the CDOs? We know that the mortgages were pumped enthusiastically into the system and those mortgages were packaged and lobbed into the City, thus cleaning up the fingerprints from the counters at the banks and building societies.

We know that the ratings agencies were complicit in rating this crap (and until we see criminal trials we will not get to the truth about this) and everone knew that the only way to creat an infinite market for hungry pension funds was to make sure this stuff was investment grade.

Therefore, we must assume that the lion's share is sitting in pension funds. There are plenty of banks that underwrote this stuff and we know there were a few investment banks that got carried away in the recent past and actually set up funds to carry it (they were jealous of the money others were making).

But that still leaves vast amounts of worthless shit out there. CDOs; where are yoooooooo?

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there is a long time to maturity and a lot of these things will simply be worthless

By George, I think I've got it. Let just parcel them up, call it a National Lottery, and give every newborn for the next two decades a free ticket. ERNIE's vastly overspecced for the job, I'm sure he could do this between adding up Members expense claims.

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What really surprises me is that there's not been a single article about it in the Actuary magazine, I'd really expected pensions actuaries to be all over it and some consultant to have written a big article setting out strategies for managing CDO investments to drum up some business from nervous pension funds.

How much longer does the actuary profession have before it gets put under the offshore spotlight? Actuary apprentices have almost always been seriously intelligent mathematically, but entirely green graduates, with firsts in purely numerical subjects. Sounds perfect for an Indian incursion.

This concern might also be why the professions focus is apparently elsewhere?

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As usual, it will be dealt with AFTER the meltdown. My impression is that actuaries are at the moment pretty much ignorant of the bigger (quite dramatic) picture regarding the markets. I know Actuaries who are BTLs. :rolleyes:

I'd say many are ignorant of many things. I'd be surprised if every single consulting pensions actuary was ignorant of the potential to convince companies that they should give them money though, it's what consultants are meant to do.

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How much longer does the actuary profession have before it gets put under the offshore spotlight? Actuary apprentices have almost always been seriously intelligent mathematically, but entirely green graduates, with firsts in purely numerical subjects. Sounds perfect for an Indian incursion.

This concern might also be why the professions focus is apparently elsewhere?

Depends on the line of work, a lot of the number crunching aspects of the actuarial profession are already being taken over by far cheaper statisticians, whether UK or foreign.

Contrary to general perception of actuaries though, communication is a really key part of it. It's not just about understanding the complex mathematical concepts, it's about getting other important people in the company who aren't really mathematically minded to understand the concepts and the risks and uncertainties.

Admittedly we still come across as all weird and geeky, but if we can make that weird geekiness accessible to normal people who can use it to make better informed decisions then we've done our job well.

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I'd be interested to see how pension funds behave about this. I'd have thought the most sensible approach given the difficulties in disposing of the assets would be for the board of trustees to communicate their potential exposure and ask to write it off as bad debt but still hold the assets rather than sell.

Even if the assets may be worth nothing, they're still going to have some expected value because you'll get something back on them, but they'll trade well below their expected value, particularly in a forced sale event.

What really surprises me is that there's not been a single article about it in the Actuary magazine, I'd really expected pensions actuaries to be all over it and some consultant to have written a big article setting out strategies for managing CDO investments to drum up some business from nervous pension funds.

I think it depends what sort of pension funds are holding this.

A lot of them have closed their DB (defined benefit/final salary) schemes and moved people over to a DC (Defined Contribution/Personal Pension type arrangement).

DC schemes aren't so much of a problem to companies or pension funds, because the shite debt is held* by the members of the scheme (the likes of you and me) and that doesn't matter, does it! :ph34r:

I guess there are still a load of DB schemes closed to new members, and if these are still going, and the holdings are large, and the funds are not allowed to hold anything other than AAA grade bonds, then as said, they will have to be sold off.

If the values are extremely low (which obviously they will be), then the fund is going to go from being in surplus to being in deficit and the company running that scheme will have to make up the difference.

So they will have to take money out of jobs and business investment to prop up their schemes, although probably the biggest DB scheme is the civil service one, so more taxes then. :(

And going back to DC schemes, once the bonds are marked to market and have a price, our pension fund will go down drastically and prudent people will have to try and make up the shortfall themselves I guess. Most people in DC schemes will probably be advised to hold equity funds when younger and move to bonds and cash over time in order to reduce the volatility as they near retirement. So it will probably be those that can least afford to have a big drop in their pension pot that will get the most problems.

Does that make sense, or am I just re-hashing old ground here?

Benedict, as I see you are an Actuary, you will probably be well placed to comment.

Edit to add:

*in trust

Edited by bobthe~

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But surely many will simply be forced to sell by their own articles of association? Indeed, they would do better to stay as quiet as possible about this but it's hard to see how they can do that (indefinitely).

I'm not 100% sure of the legal aspects, on a quick wikipedia "Articles typically cover the issuing of shares (also called stock), the different voting and dividend rights attached to different classes of share, restrictions on the transfer of shares, the rules of board meetings and shareholder meetings, and other similar issues."

As far as I'm aware while pension funds can get in trouble if they stray away from their stated investment guidelines, they can with the consent of the trustees and other stakeholders alter their stated investment guidelines. Not 100% sure though, but a pensions actuary (particularly a consultant) should know.

I think maybe you've answered your own question about why nobody is offering strategies. The fact that nobody can come up with a strategy suggests that there isn't one. Outside of writing off losses what could one do? There are no buyers (hedge fund predators, that may not even exist, notwithstanding).

There are always strategies. I'm sure no strategies that completely mitigate the pain, but there must be different ways of doing things or at the very least different timings for doing the same things that will be better or worse, and consultants should be out there giving the impression that only they have the answers.

Could a company buy new investments and package them with the bad investments to dilute them enough that they can still hold them? Could they buy it from themselves with free assets (useful for a combined life & pensions fund)? Could they set up a new fund and rather than selling at the punitive market rate (and incurring all the costs associated) sell them from the original funds to that fund, offering stakeholders in the original schemes the opportunity to buy in there with the expectation that market rates are unfavourable and they might get the chance to make a lot of that loss back, making up the rest of the money with fresh speculators? Is it all so doomed that they're definitely going to make a loss and should cash in now before the rush? Can they set up a residential property fund and put all the reposessions in there at rock bottom prices?

There must be something they can do other than holding it until it all blows up in their faces.

We know that the ratings agencies were complicit in rating this crap (and until we see criminal trials we will not get to the truth about this) and everone knew that the only way to creat an infinite market for hungry pension funds was to make sure this stuff was investment grade.

I had an actuarial conference last week, they did have one interesting presentation about rating agencies and how bad they are . . .

One VERY interesting point about rating agencies and the ratings they provide that I wasn't aware of - they are NOT absolute indicators of likelihood of default, they are instead RELATIVE indicators compared to the rest of the market for that asset type.

An A rated corporate bond is A rated compared to its peers and the same for an A rated CDO, but an A rated CDO is not the same as an A rated corporate bond, nor is it meant to be. example link

Take government bonds, Japan is only a1 rated but I'd feel a lot more confident investing in japanese government bonds than in an a1 rated CDO.

And one significant upshot of that - if the whole CDO market is in trouble then ratings won't change, where ratings are downgraded it's not because the whole market is ******ed, it's because particular CDOs are turning out to be more ******ed than the others.

I think that's the case anyway, my understanding of the lecture and what I've found from googling, anyone else able to clarify further?

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I guess there are still a load of DB schemes closed to new members, and if these are still going, and the holdings are large, and the funds are not allowed to hold anything other than AAA grade bonds, then as said, they will have to be sold off.

As far as I'm aware it'd be easier for DB schemes to invest how the hell they want. Stakeholder schemes pass all the investment risks to the policyholder so there have to be strict rules on investment so that the policyholder can choose the appropriate fund allocation and know what he's getting. DB schemes keep all investment risk with the company as they're an obligation on the part of the company to pay no matter how investments turn out, so they can keep things. At the least they could buy out in company and try to recoup losses from having to make additional contributions.

And going back to DC schemes, once the bonds are marked to market and have a price, our pension fund will go down drastically and prudent people will have to try and make up the shortfall themselves I guess. Most people in DC schemes will probably be advised to hold equity funds when younger and move to bonds and cash over time in order to reduce the volatility as they near retirement. So it will probably be those that can least afford to have a big drop in their pension pot that will get the most problems.

Does that make sense, or am I just re-hashing old ground here?

Most younger people will be predominantly invested in equities and property and can ride out any storms, as always it's those closest to retirement who'll get hit worst. My greatest sympathies for those who've prudently moved all their funds to "Safe" bond funds close to retirement to be careful when they should just have kept the lot in equities.

Benedict, as I see you are an Actuary, you will probably be well placed to comment.

I'm in general insurance, so while probably better placed to comment than most I'm by no means an expert in pensions. If anyone's got a general insurance question though (particularly Lloyds & the London market) ask away though.

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<_< Not so sure about that. Inflation?

I don't think inflation is directly an issue in this case although, it may be an indirect point. When not in default, these instruments are just like normal bonds in terms of cash flows, there's a stream of payments during the life of the bond ending up with a final repayment at the end. When people invest in bonds, they have to factor in potential erosion of returns due to inflation and attempt to price them accordingly - they do this by taking the present value of all future cash flows discounted using an appropriate yield curve which can be assumed to take inflation into account (i.e. the market expects that higher inflation will produce higher base rates and the yield curve reflects that). Where they differ is in what happens on default - a normal bond goes bang all in one one, an MBS may just start paying out less as more people stop paying their mortgages. Estimating the rate at which people will start to default over time is the hard part of valuing these things. There's two obvious, and probably many less obvious, indirect ways that inflation could come into play: it goes up so people on floating rate mortgages get hit for higher payments (assuming base rates go up at the same time) and start to default more often or it goes up and people on fixed rates find it easier to pay their mortgages because their pay goes up as well.

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One VERY interesting point about rating agencies and the ratings they provide that I wasn't aware of - they are NOT absolute indicators of likelihood of default, they are instead RELATIVE indicators compared to the rest of the market for that asset type.

Jeezus, I didn't know that. That is very very important indeed. I feel embarrassed that I didn't know that. I suppose it seems obvious now that you've pointed it out. I should have known that but never thought about it. How could crappy companies have anything like the rating of bonds backed by tax revenues (i.e. bonds backed by armies that will do bad things to you if you do not pay)?

I was always so focussed on my main gripe which was that rating bonds is, in effect, pricing them and that I never met a single employee of an agency that I believed had any idea how to price bonds. It all looked so standard and arbitrary at the same time. Thus they were and always will be, behind the curve and if they are always to be behind the curve then their prognostications are entirely worthless.

But whilst they should disappear when it all comes out in the wash; they will flourish, they will get even stronger. Someone will intimate that their models are more robust than they used to be and that will be that.

I have, though, a niggling feeling that there were conscious, and therefore potentially criminal, decisions made regarding these products. For example, if I had worked at an agency I would have been fired for I would have concluded that these products are too one-dimensional to survive in the real world (outside of a bubble).

But then that why I've been fired so many times.

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Using italics rather than quote blocks due to system limitation....

But where will they get enough buyers to give the impression that an actual market exists? None of us has a clue as to how much of this crap is sitting in pension fund coffers, disintegrating.

Well, there is no market at current asking prices that's for sure. I've seen the books of a couple of big with-profits life funds and, proportionally, they didn't own much of this stuff (1-2% of the total assets). For the most part, at that scale, they would not be forced to sell - usually the limits apply in bands rather than to everything (e.g. no more of the fund can be in BBB or below etc.).

They can hold it as long as they want and they can value it wherever they please but as soon as it is downgraded below their own mandated levels they must sell. But that's not so easy; no matter the 'discount'.

I think we're a way from that at this point, if there was a more general downturn and mainstream corporate debt started to be downgraded, then things would be different. It's not clear to me that, whilst there is essentially no market for these CDOs, that most fund managers would choose to sell them ahead of formerly investment grade, now junk, bonds though.

Hedge funds (this is a pain for investment banks set up 'holding companies' for their zombie bonds and called them hedge funds; so it's confusing to talk about it) will not jump in too early on this

Not en-masse, you're right. However, some funds are already active in this area - Citadel being the biggest example having bought the Sowood Capital book a month or so back. Looking back to the savings and loans scandal shows how it might play out though, once the prices have stabilised (and fallen far enough) a genuine market is likely to emerge at which point many more will get involved.

and I'm not sure about anyone in their right minds getting involved either; there is a long time to maturity and a lot of these things will simply be worthless.

No-one in their right mind ever gets involved in finance! It's speculation to say that they will be worthless though, some will be (the very worst US sub-prime MBSs backed by Ninja loans quite probably will be) but most won't, they'll just be worth a lot less than hoped for. I mean, for most of these CDOs to be genuinely worthless, 100% of American mortgage holders of all types would have to default right now. Don't forget that pension funds are not generally using leverage, so a 10% fall means just that, not total wipeout as it would be for 10% margin hedge-fund.

But even if that were not the case how could one know? It is not possible to guage the risk for these things were built without reference to risk. And a key to this is the fact that 'sub-prime' is not about being a mortgage holder on the dole; sub-prime itself is a dynamic state which will engulf more and more debt that we might think should be safe as the economy contracts and jobs are lost and house prices tank. Sub-prime is a self-fulfilling prophecy.

Valuing a CDO is very hard, that's certainly true and I doubt most pension funds have the ability to do it. Hedge funds probably can and do. There has been a great deal of research over the years into the valuation of MBSs which, if applied correctly to CDOs, will give a much clearer idea of true value. Ultimately, it's based on calculating the probability of an individual borrower defaulting along with the likely recovery value from selling their house once they do. Granted, most of this won't work with miss-sold sub-prime loans but, even for them, a recovery rate of 50% is quite likely - that's a long way from worthless.

We cannot know how far this might go but it is not beyond the realms of possibility that by the time the smoke clears a vast tract of our total mortgage debt may be designated as 'sub-prime', or worthless.

Now you're sounding like cgnao :) Agreed that a real economic downturn could have some devastating consequences of that sort, particularly here in the UK where mortgage debt is far greater than the US.

But even if we assume that a few hedge funds buy for pennies on the dollar who's going to 'assume' what must be the lion's share of zombies that are about to be thrown out of pension funds?

Thing is, I don't think they are about to be thrown out, unless the details I've seen of funds holding this stuff are unrepresentative, most don't hold enough to be forced to sell just yet. Hedge funds will certainly buy anything that they're certain they can make money on. Hell, I'd buy almost any mortgage debt offered to me at 60% of face value, hedge funds would buy this stuff by the bucket-full if it was actually on offer for pennies in the pound anywhere.

Where are the buyers? Who are the buyers? Why would hedge funds assume such dodgey instruments when there are easier pickings about? Hedge funds will be taking profit for shorting our economy and you can bet that, at some time, politicians will try to blame them. But they will hold that they take profit for putting prices in their rightful places. Zombie bonds can easily be worth zero; why even touch them at all when holding off ensures a chain of events that must yield profit?

One thing hedge funds are rubbish at is cooperating with each other! They'll jump in as soon as they see something they can make some money off over the shortest period it takes for the head trader to secure his next bonus.

We haven't even added a single pension fund meltdown to the mix yet as people are hoping that the bogey man will go away before that happens. But it's hard to see how some kind of sector meldown can be avoided. It will only take one or two to announce distress and everyone will be banging on their doors.

I'd say not, at least not because of this. Pension funds were already locked down so tight by the rule changes a few years back that most of them have the bulk of their assets in dull stuff - AAA corporate, sovereign debt, commercial property and listed equities. There could be plenty of them that find they can't pay the full amount promised but real meltdowns are quite unlikely (fraud aside).

Alistair Darling (sorry, Gordon Brown) simply cannot keep 'saving' everything. Gordon Brown is a big, fat, and rather dim, (I am so pleased that everyone seems to be finally noticing) socialist and he thinks he can go on creating as much money as he pleases. He cannot. If he tries to bully Mervyn King he will be stirring a hornet's nest of negative perceptions.

Yep. Although I don't think either of them has the intellectual capacity of many real socialists (e.g. Benn).

The real extent of this crunch is still quite a way off and while pundits wait to test the pulse of our economy it is obvious that the disease has been beyond cure for quite some time but they'll try to innoculate after the fact with even more liquidity.

Agreed.

As soon as the idiot stock markets take fright, everyone will start to 'get it' out there. And it cannot be that long now before it becomes apparent that stocks are not going to avoid the pain.

It'll take more of a real economy downturn than we have at the moment for that. Stocks are probably a bit over-valued but, by historical standards, the dividend yield is high and corporate debt is falling not rising. Those don't seem like the conditions for a prolonged crash to me - I wouldn't rule out a 30% correction at some point, particularly if the takeover stream dries up (which it doesn't really appear to be given Pearl's recent 4.5B bid for Resolution for example) but a real slump requires more than that.

Edited by tbatst2000

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