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crisis 随想

本文发表在 rolia.net 枫下论坛去年六七月,忙着一个USD 700 mm high yield bond private placement deal. 一切就绪,七月十六号周一sales force launched the sale, 周二S&P宣布review all morgage-related securities, and possible downgrading many of them. 市场一片哗然,融资成本急剧上升,client 和 我们最终不得不取消这次融资。现在回过头来看,当时如果get deal done, 不管market pricing 多么高, 完全好于现在完全没有liquity 的市场, no matter how credit-worthy your client is. Consider Canadian Big 5 banks borrowing spread is now 200 bp over 5 year gov't bonds, v.s. 50 bp spread a year ago.

From a perspective of history review:

(Irresponsible borrowing + irresponsible lending) -->subprime morgage crisis --> defaults + foreclosures --> housing prices slump --> Morgage-backed securities MBSs & CDOs priced down --> Mark-to-Market accounting rule forced banks to write down assets dramatically ---> substantial losses and everyone in desperate need to raise cash and shore up Balance Sheet --> no credits, no liquidity, financing closed to everyone --> bankruptcies --> damage to real economy and on edge of recession.

简单的说,最根本的是housing markets. 什么时候房价到了底,stablize 了,才到经济看好的时候。美国人民习惯了house equity=提款机, 而美国经济又是消费主导,一旦consumer 弱了demand, 麻烦就长久了。

现在的financial crisis, 直接的根源是financial institutions 不停的write down assets & report losses. Regulation 对financial institutions 有capital requirements. 融不到资,就是死路一条。解决的办法有两个,1。 change accounting rules. No mark to market any more but historical prices. 2. take toxic assets away from financial institutions' B/S. 两种方法都能避免write down.

但是方法1行不通。用 Ben Bernanke 的话说,不再mark-to-market 对investor confidence 打击太大, 市场需要rely on instituions best estimates of their assets. 用 Jeff Robin (CIBC's chief economist) 的话说,you can't change the rule while the game is in the middle of the play.

那么政府700 billion的 bail-out plan 就能理解了: 政府把所有的toxic assets 都拿走,留给finnaical institutions a clean balance sheet. No further write downs/losses, markets will stablize over time.

Bail out 的作用肯定是有的,至少不会再有大的financial institutions file for Chapter 11. GS and MS will likely survive (Buffet 10% dividend deal is just unbelievably rich). 但是感觉是治标不治本,副作用还挺大。(别的不说,inflation 肯定是上去的,print 那么多的money, Fed has to tight soon, which on the other hand hurtseconomy)。Root cause 还是在housing markets. 怎么让经济好转,人民有钱,房价起稳,才是良药。

就像发高烧的人,仅仅在额头上贴冰块是不行的,还是要找到良药下肚。从美国政府的角度来讲,financial industry 烧得奄奄一息了,还是赶快加冰块降温保命(bail-out plan),至于良药治病(housing), 现在管不着了,慢慢来吧。

个人的一点随想随写,赶紧睡觉,还要上班。。。更多精彩文章及讨论,请光临枫下论坛 rolia.net
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  • crisis 随想
    • "而美国经济又是消费主导,一旦consumer 弱了demand, 麻烦就长久了" - It may not be a bad thing. It is coming now. Consumer behavior and credit behavior will change.
      Couple of days ago I talked to a folk about why oil price will fall down. His point is that OPEC also scares the change of consumer behavior, i.e., people will consider fuel efficiency as one of key factor when they buy a new car. If demand fades out ,OPEC country will be in trouble in the long run.
    • 这才是真人!这是我在Rolia所有坛子里迄今为止看到的有关金融话题的水平最高的一贴。Structured Group?
      A couple of thoughts regarding the bailout:

      1). the $700 bln will be paid by installments ($250/100/350 bln). How much existing "toxic assets" on major financial institutions' B/S now? how much more assets we may expect to be downgraded to be "toxic" in the coming future?

      2). the answer to the first question depends largely on the housing market, as you elaborated. Maybe more accurately, depends on the Default rate and Delinquent rate. Here comes three factors for the Default rate: housing price, unemployment rate, and the housing inventory absorption rate. To make things even more complicated, we don't know how many % of the mortgage payers are for pure investing/speculating, and how many % for self-occupancy.

      3). above are just RMBS (maybe some CMBS). How much other ABS, underlying assets of credit card receivables/car loans/student loans, are under the danger of downgrading? How serious it is about that pool of "toxic assets candidates"?

      Any comment?
      • 他要是能在今年6月份前随想出来的那才是有水平. 现在也就是个马后炮. 你的问题现在世界上没有人能回答因为连制造者自己都不知道.
        • 1.人家是“随想”,随便写写;不是“猜想”“预测”。就算人家有本事在半年前预测到这些,也不会跑到这么个公众论坛里来发表吧? 2. 能语言流畅,思路清晰地把这一大堆事写出来,就是水平了。给一篇得A的文章挑刺要比自己写一篇得B的文章容易得多。
          要不我Challenge 你一把:你也写一篇看看?

          我问的问题应该还是有人知道的,只是一者不会愿意公布出来,二者数据本身也在变化中。
      • I got some free time to answer your question
        本文发表在 rolia.net 枫下论坛1, Nobody knows exactly how much "toxic waste" there are on the Bank's balance sheet among US Banks or around the world. Some banks are not forth coming on their exposure, others are financed through off-balance sheet funding vehicle, therefore, the the exact number is a mystery. However, according to Mr. Bill Gross, another $500billion seems to be need to calm the market.

        2, In terms of US housing market. There are two things need to be considered. a) the Asset value keeps falling. When the asset value reaches the bottom, that's when we will start seeing the recovery of the debt/credit related financial crisis. b)stress tests on existing mortgage debts, two street conventions are based on UBS and JP Morgan methodology, Intex and Markit seems to be the only two data source provide necessary data for analysis. However, due to complexity of the underlying asset classes are not simply subprime, alt-a or prime mortgages, but also include RMBS, CMBS, CDO, CDO Squares. Information related to complex ABS are difficult to help analyst to figure out whether these are subprime, alt-a or prime related products. Different assumptions are utilized for delinquency rate, and default rate. However, honestly speaking, when Merrill sold their "toxic waste" for 22cents on a dollar back in Aug, everyone was shocked on the street. Fortunately, no such fire sales were followed by other banks.

        3, Seems like the trouble related to the Mortgage related ABS has spilled over into other asset classes. GM selling GMAC, big three suspended their leasing options for new vehicles. The ripple effect is yet to be seen on the main street.更多精彩文章及讨论,请光临枫下论坛 rolia.net
        • 说的有点道道. 不过Merrill 22cent 贱卖其实已经给了一个市场价. 现在别的银行想卖都卖不到这给价. 就等着BAIL OUT. Merrill 的CEO极其聪明, 在后来及时的将自己卖给BAC, 要不然就死的更难看.
          • 是被指婚的. 反弹也不用等了,直接在万点以下见了
            • 还允许卖空吗?
              • 反向ETF
        • Thanks for your time.
          1.Those originators and mortgage services should have those data. So, for Fed and those major originators, they may at least have a ballpark figure of the defaulting & potentially defaulting data.

          2. In terms of stress test, I am quite interested in how bad the situation would be if: a). the housing price falls another 10-15%; b). unemployment rate increases another 2%.

          3. I think I was wrong in terms of other ABS. As ppl default car lease and credit card before defaulting their house mortgages, maybe that field is not as detrimental as the MBS does.

          4. A good news is: some lenders are renegotiating the mortgage agreements with the borrower to avoid delinquency. Though we don't know how positive impact this move could be, it's benefiting the problem-solving.
      • 过奖了。这儿牛人多多,我也就随便想想,随便写写。不是structure group, 在investment banking. As to your post, good thoughts and good questions.
        本文发表在 rolia.net 枫下论坛Like Zuluking mentioned, no one know the exact size of the taxic waste. Two reasons: 1. The complexitiy of the securities. For many MBS, CMBS, CDOs, they were sliced and re-packaged N times that nobobody knows exactly what's the underlying assets are, let alone the intrinsic values. 2. The disfunctioning markets makes valution extremely difficult if not impossible.

        Two methods of valuation: intrisic value approach that discounts future cash flows to the present value. For a MBS, for instance, as you said, future payments are unpredictable because of the unknown default rates and delinuent rates. Those inputs are contingent on the economy - on a macro level, the GDP growth rate, inflation and unemployment rates; on a micro level, how consumer feels of their pockets, therefore the willingness to spend, as well as how corporates feels of the profit prospects in intermediary or long term, hence the willingness to invest/expand. In short, in a world filled with high uncertainty, the best maybe creat senarioes to get a sense of how bad it could be.
        Even the discount rate is changing dramaticlly because of the dramatic change of availability of liquidity and the degree of risk aversion of the market. Therefore, intrisic valuation even using complex simulation models do not work well in current situation. Garbage in, garbage out.

        The market relative valuation works only if market is functioning. In fact, asset pricing is a pivatal role of capital markets. but now markets totally disfuncting - no liquidity, no flow, no trade, no financing. Everything is still, no trading to give a fair market value of assets. What a terrible situation it is. JP Morgan acquired WaMu. The latter has $176 billion exposure to mortgage markets, including more risky ones with payment deferral options . JPM write them down 31 billlion. This latest transaction will provide a benchmark to gauge the value of similar assets. JPM may derived the 20% mark down based on current available information. But things will and are changing. Maybe 40% write down is appropriate 3 months from now.

        Back to your topic, is $700 billion enough? Some say the first tranche may be $350 bn that's far from enough. Like you and Zuluking said, if mortgage trouble spill over to other security classes via the deterioration of economy, this could be only the begining of the end.

        we are in an uncharted era, everthing is experimental in nature. Let the smart guys like Paulson and Benanke to cope with the tough situation. We just carefully observe, think and learn.更多精彩文章及讨论,请光临枫下论坛 rolia.net
        • Well said. It's indeed a great timing for us to experience and witness this scenario. Years later, I could use this line to pick up my girl -- "you know, actually I did that when the market collapsed in 2008". BUM!!
          • hehe, that's funny. BTW, which firm and group you are in? PM me if you don't mind to tell.
            • 哈哈,网上就是消遣调侃的,高兴过了也就完了。山水有相逢。
    • 闲come no事, read你的article, This 帖子,狠bull, look 完了, man 也 down了.
      • 兄弟:你更bull!
    • 金融危机是怎么来的... (zt)
      • 不值一看,真要了解,看看时代杂志,讲得浅显又清楚。
        • 给个链接吧
          • 没有电子版。对不起。
        • 你看的是那个月的时代周刊啊?
          • 有空帮你找。
            • 想看那篇文章, 找到了的话能麻烦告知一下吗? 要负责任啊. :)
    • 不太同意通货膨胀那段。起码不是7000亿国债就是印7000亿美元钞票那么简单。这要看7000亿卖给谁?这是问题的关键。国债的发行对象,不外两个渠道:
      • 国内老一辈的,象我,哈哈,财政金融是一回事。很多朋友看问题还是抱着这个观念。在中国,当年发债券,骗人的,赤字财政直接用印钞机搞定。LZ也还是这个观念,发债印钞分不清。美国应该不能这么操作,但黑幕之下也难说。美国货币发行增量是绝密吗?那位解释一下。中国是。
        • 中国货币发行增量是绝密。怎么来的? 现在网上不是每年公布出来吗?
      • 7000亿的来源基本就是中国。