http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/ FT Alphaville from FT.com Copyright The Financial Times Ltd 2006. "Alphaville", "FT" and "Financial Times" are trademarks of the Financial Times. help@ft.com Wed, 20 Aug 2008 10:10:08 +0000 Wed, 20 Aug 2008 10:10:08 +0000 5 en http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5888 Sat, 25 Aug 2007 10:11:18 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5888 different delinquency behaviour - It seems obvious to me that "no docs subprimes" will go belly up much sooner than traditional subprimes on average. The IMF graph shows this... **If we agree with the aforementioned blogger that 2004 was back-loaded with "no docs subprimes" then the late breaking sharpe peak superimposed on the regular pattern is easy to explain. Notice how the blogger (writing six months ago) got it completely wrong about the 2004 vintage (and also the 2005 vintage) both of which have improved from their elevated delinquency levels quickly. ***Quicker delinquency for "no docs subprimes" not only implies a sharper peak but also NEAR BY peak!]]> http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5874 Thu, 23 Aug 2007 17:06:05 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5874 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5872 Thu, 23 Aug 2007 16:30:31 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5872 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5871 Thu, 23 Aug 2007 15:04:02 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5871 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5870 Thu, 23 Aug 2007 15:01:53 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5870 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5869 Thu, 23 Aug 2007 14:22:41 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5869 CDO> ABS> pool of mortgages So in the case of a squared CDO there would be an extra layer of leverage. Besides this, I think the point of both the letter and the presentation is that once the market is scared out of structured credit in general, it is going to be very difficult to put together and sell additional CDO's, which in turn will put a end to cheap and easy credit, both a the level of the consumer/homeowner and at the level of the corporation(:read private equity sponsor) This end of easy credit might have far reaching consequences: It might make it very difficult to refinance on better terms, and It might also set in a stagnation of asset prices in all area's where asset prices where mostly fueled by cheap credit. Such a situation of stagnating collateral values and expensive credit will probably result in defaults for the most vulnarable debtors, which might in turn set in a vicious circle of falling collateral values as collateral is sold to meet obligations to creditors, resulting in even more defaults spreading to less vulnerable classes of debtor. This all will become even worse due to the general economic slowdown it might generate. And the real problem for financial markets will come once the above will start showing up in the assets of existing CDO's. Remember that we haven't heard yet of some big CDO blowing up, all the way to the senior tranches. Wat we are witnessing at the moment is some players blowing up because they are highly dependent on short term funding(like SIV's, conduit's) which has become scarce or because the market value of their structured finance portofolio has deteriorated(like hedge funds that face huge amount of redemptions or margin calls because they just announced that their credit trades went wrong) This has mostly left unaffected players that are holding on to their structured credit securities and that do not care about the market value of those as they are not trading but rather holding them till maturity. In other words, CDO's are not blowing up yet, it is only the market value of their securities(their tranches, not their assets off course) that is falling. But the problem is that now that nobody will buy any additional structured credit securities, this will probably result in deteriorations within the protofolio of current CDO in the next year or so. So my guess, the real troubles are only starting, and the question is what will happen to financial markets in general once CDO's start blowing up and even the senior tranches are affected? Think of all the institutions that cannot exit their structured credit position as there is no secondary market liquidity. they are for now holding on to their position, which is probably so far so good unless they hold junior securities of mortgage related paper. But if the assets of the CDO start to deteriorate heavily, and it results in losses on the whole capital structure, there is not much they can do. ]]> http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5864 Thu, 23 Aug 2007 13:09:18 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5864 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5833 Thu, 23 Aug 2007 10:54:05 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5833 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5816 Wed, 22 Aug 2007 14:01:23 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5816 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5815 Wed, 22 Aug 2007 13:47:51 +0000 http://ftalphaville.ft.com/blog/2007/08/21/6727/the-full-subprime-letter-from-haymans-kyle-bass/#comment-5815