Inquiring Mind

4 Comments

    • ON: Mon May 19th 09:00 AM
      Commented on:
      Wall Street Breakfast: Must-Know News
      "Expensive oil is killing oil companies" is not exactly what that article said -- the figures of 26% and 30.2% are for the decline in profit for non-energy companies in the S&P 500, not for oil companies other than XOM, CVX, and COP. Yes, the oil sector is exhibiting declining margins per barrel but it also had the highest total increase in profit of any sector in the index. I appreciate your summaries of other news sources but you got this story totally wrong.
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    • ON: Fri Apr 25th 08:59 AM
      Commented on:
      Capital Source: Analysis and Valuation
      What are your thoughts about the Fremont asset purchase?
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    • ON: Thu Apr 17th 09:20 AM
      Commented on:
      Alesco Financial: Gem in the Garbage Pile
      Assume that all four Kleros CDOs default. They will, they're all crap (the last one is the best, but still not great). Do you still think the stock is a good value?
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    • ON: Mon Mar 10th 18:10 PM
      Commented on:
      Back to the Future in the Credit Derivative Time Machine
      This is a pretty minor point, but the rating agencies don't actually pronounce 70% of the CDO collateral to be AAA -- they determine(d) that 70% of the bonds issued by the CDO and backed by that collateral deserve AAA ratings. And they do that based on their assumptions about the collateral performance, which in the last two years were disastrously wrong.

      More to the point, another reason we haven't seen the end of this is that the major CDO underwriters often held onto large chunks of the supersenior classes of their CDOs and used those bonds as collateral for other deals -- swaps, loans, etc. -- for which there's a certain collateral rating requirement. So when the formerly AAA supersenior CDO class gets torched, they have to pull it back and put up other collateral in the same face amount, forcing them to book the loss on the CDO. This process is still just beginning to happen as the AAA CDO classes get downgraded.
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