I learned a new phrase, and it appears we will have an instant replay of the same scenario in the upcoming months.
"Goldman Sachs Hawks CDOs Tainted by Credit Crisis Under New Name
The 2008 financial crisis gave a few credit products a bad reputation.
Like collateralized debt obligations, known as CDOs. Or credit-default swaps. But now, a marriage of the two terms (using leverage, of course) is making a comeback -- it’s just being called something else.
Goldman Sachs Group Inc. is joining other banks in peddling something they’re referring to as a “bespoke tranche opportunity.” That’s essentially a CDO backed by single-name credit-default swaps, customized based on investors’ wishes. The pools of derivatives are cut into varying slices of risk that are sold to investors such as hedge funds.
The derivatives are similar to a product that became popular during the last credit boom and exacerbated losses when markets seized up. Demand for this sort of exotica is returning now and there’s no real surprise why. Everyone is searching for yield after more than six years of near-zero interest rates from the Federal Reserve, not to mention stimulus efforts by central banks in Japan and Europe.
The transactions offer the potential for higher returns than buying a typical corporate bond, especially if an investor focuses on first-loss slices or uses borrowed money, or both. Obviously, the downside may be much greater, too.
Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment.
The deals are “attractive for credit-savvy investors in the post-QE credit picker’s market,” according to a January U.S. credit derivatives outlook by Citigroup Inc., referring to central-bank bond buying known as quantitative easing, or QE. As much as $20 billion of such transactions were issued last year, up from less than $5 billion in 2013, according to data compiled by BNP Paribas SA. The Paris-based bank has also been arranging the deals -- dubbed collateralized swap obligations by some, bespoke tranches by others -- and predicts issuance will go up in 2015.
It’s clear why banks want to get involved with pulling together these transactions given they offer higher profit margins than plain-vanilla bonds like Treasuries or corporates. Also, underwriters are taking on less risk than the pre-crisis CDOs, since they typically offload almost all the risk to investors on either side of the swaps.
As for investors? Well, just because yields around the world are the lowest they’ve ever been doesn’t mean hedge funds will accept measly returns. Yields on corporate debt globally have plunged to 3.3 percent from as high as 9.05 percent at the 2008 peak, according to Bank of America Merrill Lynch index data.
“A tranche of a bespoke portfolio of credits can offer exposure to diversified risk with the possibility of leverage, credit enhancement and enhanced returns,” according to a Jan. 23 e-mail message from a Goldman Sachs employee, reviewed by Bloomberg News. It went out with the header: “Goldman: BESPOKE TRANCHE OPPORTUNITY.”
In this environment, the words “enhanced returns” are sure to get investors’ attention.
Before it's here, it's on the Bloomberg Terminal.
As much as $20 billion of such transactions were issued last year, up from less than $5 billion in 2013, acc
From Pew Research: "Pew Research Center reports and data on the Millennial generation, those born after 1980 and the first generation to come of age in the new millennium. ... Millennials in Adulthood. Racially diverse, economically stressed and politically liberal."
From my own observations, I see many Millennials as a herd of sheep that will follow almost every media suggested trend, and tend to believe every headline and photo without stopping to examine the CONtent, and make their own decision as to what is fact and what is fiction.
Please do explain how the SPX chart to the upside is in my favor as a buyer at current prices, when the downslide appears deeper., when I had a look at the charts.
I'm open to discussions/debates.
I'm 98% certain it will be, as I invested some of my retirement money on 12-31 at the close. You know the saying about how Retail buys at the top!
She mentioned that 6% mortgage rates and the Milliniums are back in the housing market.
She also stated that it's about the monthly payment, and on that point I agree.
What she didn't say was: If interest rates were actually 6% (and not the 10% plus that I paid for my first home,) housing prices would be about 30% lower. Let's review: under the current USA tax deductions, mortgage interest paid is still tax deductible. Higher interest rates equates to: A 100k house at 3% mortgage is ______ per month, depending on the DP, etc.
That same house at an 8% mortgage is now on the market at about $63,500.
The monthly payment is ballpark the same for the borrower; the seller is weeping. The buyer has a larger tax deduction, and possibly lower taxes and insurance rates.
Thoughts? Comments? Whatever...
What fool would wait to park or leave a mall to spend their money? Says to me that people without money just wanted something to do, or were mall walking for exercise.
CA is the only place to be for Christmas, and the Santa Clause Rally in stocks. Had to bring them down, so that they can be moved up.
I look at my personal debt load, and make my payments. It's not always easy, but I do it.
There are millions of folks who don't have the wherewithall that I do, and default daily. :Let's talk about that sting to the banks.
Nothing new; some of the 3x short boards when grey to dark just when markets were imploding. This SPY board ghosted before a run up earlier this year, as I recall. Tisk Tisk!
Let's not split hairs. My $900 call was the full range, and you know it.
I thought that if Tim were such a good trader on gold, he would have shorted at the $1800 level and would be covering now or a bit before. At ballpark spot $1070 per oz., making a call for gold to $900 isn't exactly calling the top; in retrospect, it's more like almost announcing the bottom, but we shall see. Who audits his positions and trades?
Tell me about that fantasy.
Within the last day or so, a caller on a talk show stated that Las Vegas was the next hit. Of course, some know that more that one state has a city or town with the same name.
Retail shorting equates to an immediate rise, and all brokers and every exchange can see the bid or ask which one sets. It's kinda why stop losses don't work well most of the time, and why they never work in retail FX.
So far, your statement is correct. Disaster is touted as a "buying opportunity."
Do tell, when a dirty bomb hits a major metro area, to what levels the global indices will rise?
I'm disappointed that I missed that newscast(s). The Reality Check is: about 90 million folks are uneployed in the USA. I presume those facts from the BLS are referring to children and adult who meet the minimum age to seek employment
If not, the spread on those stats might be wider than the last....
Do tell me how those numbers are derived.
Isn't it interesting how the actions and financial mismanagement of one stepchild makes headlines, moves markets, and then fades into the shadows?
The problems didn't go away, and the only real solution is a full BK.
Take the airline industry approach--BK today, newly registered stock pps to soar, as the former stock and bond holders are smashed into a mountain of debt and lack of management and receive nothing, not even equivalent shares in the "new" co.; which is actually a SS/DD, but might have a new ticker symbol. What a gig!
Must have folks in the mood to shop. Green close almost a given, or very slightly under flat.
Why would anyone go to a mall or a store when they can buy the same item online and have it delivered? Sometimes the delivery charge is waived, or there isn't one. Otherwise, just visit a store during the year, and select gifts in advance for those to whom you plan to give one. No lines, good prices, and no crummy weather, and no waiting in a line.
Tell me more: "The SDR currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every five years."
A. In the current market situations, five years is too long of a period to wait for an adjustment.
B. When was the last adjustment to the SDR value?
C. Always read the fine print. "The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions."
D. Let's discuss this topic, as I'm sure I'll have more questions.