Cerebus

Did the SEC Shaft Mortgage REITs?

JohnKing:
Looks like someone needs a refresher as to what illiquid means. Direct from investopedia:

"The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset. The lack of ready buyers also leads to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity.

Some examples of inherently illiquid assets include houses, cars, antiques, private company interests and some types of debt instruments. On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, funds, bonds and commodities are very liquid, and can be sold instantaneously during regular market hours at fair market price.

Illiquid securities carry higher risks than liquid ones; this becomes especially true during times of market turmoil when the ratio of buyers to sellers may be thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing a lot of money."

Since the credit markets are pretty much frozen at the moment due to the turmoil mentioned in para 3 above, even well seasoned performing mortgage paper is illiquid at the moment. I don't have a problem with the "high quality yet illiquid assets" statement. Whether or not the companies mentioned do own high quality assets is a seperate issue and definately open to debate.

My Porsche is pretty nice, but I don't think that I can use it to pay my dinner tab. I'd call it a "high quality yet illiquid asset..."

Hitting the Reset Button On Home Mortgages

Right on Daffy. I get pretty agravated every time I hear about the possibility of out tax dollars going to bail out homeowners who never should have gotten a loan in the first place. There is a reason why people have sub-prime credit scores, it's because they don't pay their bills...