tvb's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/189949/comments http://seekingalpha.com/article/176547-shorting-u-s-treasuries-the-best-trade-of-the-next-decade?source=feed#comment-793245 793245

On Dec 05 05:29 PM tvb wrote:

> As others have said, PST is expensive when factoring in a considerably
> headwind from the negative carry and management fees...chart the
> 10 year treasury yields versus the price of PST over the past 12
> months and you'll see what I mean. Intuitively, the price of PST
> should have skyrocketed as they yields rose this year, but that's
> far from the case.]]> Sun, 06 Dec 2009 19:39:09 -0500

On Dec 05 05:29 PM tvb wrote:

> As others have said, PST is expensive when factoring in a considerably
> headwind from the negative carry and management fees...chart the
> 10 year treasury yields versus the price of PST over the past 12
> months and you'll see what I mean. Intuitively, the price of PST
> should have skyrocketed as they yields rose this year, but that's
> far from the case.]]> http://seekingalpha.com/article/176547-shorting-u-s-treasuries-the-best-trade-of-the-next-decade?source=feed#comment-791916 791916 Sat, 05 Dec 2009 17:29:04 -0500 http://seekingalpha.com/article/106070-high-yield-corporate-spreads-not-yet-at-great-depression-levels?source=feed#comment-306107 306107
1.) Your chart show yields not spreads. Spreads are the difference between risk-free rates (Treasuries) and corporate bonds and are the relevant metric to consider when evaluating risk-premiums for high-yield bonds. A lot of the large yield movements you see in your chart are largely driven by moments in Treasury/risk-free rates (which were in the teens in the early 80's) and NOT not spreads.

2.) High-yield bonds are considered those rated Ba1/BB+ and below and your graph shows yields of investment grade bonds.]]> Fri, 14 Nov 2008 11:31:13 -0500
1.) Your chart show yields not spreads. Spreads are the difference between risk-free rates (Treasuries) and corporate bonds and are the relevant metric to consider when evaluating risk-premiums for high-yield bonds. A lot of the large yield movements you see in your chart are largely driven by moments in Treasury/risk-free rates (which were in the teens in the early 80's) and NOT not spreads.

2.) High-yield bonds are considered those rated Ba1/BB+ and below and your graph shows yields of investment grade bonds.]]> http://seekingalpha.com/article/97547-bailout-talks-lose-sight-of-the-cost-question?source=feed#comment-266860 266860
I'll give you a ancedotal comparison. High yield bond funds were selling below 200bps at the height of the credit bubble in 2007)...today that spread is closer to 700 basis points (500bps above where they were at the peak). That reflects the yield on the PERFORMING bonds...an apples to apples comparison to the yield a the peak. On top of the higher yield, the value of the principal (of the remaining loans) is now about 20% lowe, giving you higher recovery prospects on the bonds that do default in the future. The same would be true for a MBS...you would have a yield on the remaining performing secuirities which is I expect is al least 500bps wider than it was at is peaks (so you are talking a runiing yield of maybe not 18%, but at least 11% and I suspect actually closer to 18% given the liquidiy and technical factors currently impacting the market).

As for "why the distressed buyers sitting on cash aren't buying these if they offer such great return". Technicals...every bank in the world is over exposed and trying to reduce exposure. Furthermore, there are few true-long buyers on WallStreet...most are chasing headlines and momentum as they have to mark to market their positions daily and their investors don't have the patiernce to just sit and watch their investments fall because they are told they are "good long term value"...particularly for securities that the underlying investors, a step away from the market, don't understand.

What's happening in many credit markets, today, is like a reverse bubble...everyone knows they are oversold/cheap but can't afford to go long (or are often even short these securities) because they feel that short-term technicals will lower prices further...irrespective of the long-term value. It's like the reverse of what happened in early 2000, when many smart investors were long TMT stocks even though they knew they were vastly overvalue (they simply had to chase momentum and trends).

Disclosure: I do not follow or analyse these MBS securities and I am simply extrapolating from what I have seen in the corporate credit markets. I do not ruly know if these MBS securities are oversold, but strongly suspect that this is the case.]]> Sat, 27 Sep 2008 12:02:35 -0400
I'll give you a ancedotal comparison. High yield bond funds were selling below 200bps at the height of the credit bubble in 2007)...today that spread is closer to 700 basis points (500bps above where they were at the peak). That reflects the yield on the PERFORMING bonds...an apples to apples comparison to the yield a the peak. On top of the higher yield, the value of the principal (of the remaining loans) is now about 20% lowe, giving you higher recovery prospects on the bonds that do default in the future. The same would be true for a MBS...you would have a yield on the remaining performing secuirities which is I expect is al least 500bps wider than it was at is peaks (so you are talking a runiing yield of maybe not 18%, but at least 11% and I suspect actually closer to 18% given the liquidiy and technical factors currently impacting the market).

As for "why the distressed buyers sitting on cash aren't buying these if they offer such great return". Technicals...every bank in the world is over exposed and trying to reduce exposure. Furthermore, there are few true-long buyers on WallStreet...most are chasing headlines and momentum as they have to mark to market their positions daily and their investors don't have the patiernce to just sit and watch their investments fall because they are told they are "good long term value"...particularly for securities that the underlying investors, a step away from the market, don't understand.

What's happening in many credit markets, today, is like a reverse bubble...everyone knows they are oversold/cheap but can't afford to go long (or are often even short these securities) because they feel that short-term technicals will lower prices further...irrespective of the long-term value. It's like the reverse of what happened in early 2000, when many smart investors were long TMT stocks even though they knew they were vastly overvalue (they simply had to chase momentum and trends).

Disclosure: I do not follow or analyse these MBS securities and I am simply extrapolating from what I have seen in the corporate credit markets. I do not ruly know if these MBS securities are oversold, but strongly suspect that this is the case.]]> http://seekingalpha.com/article/97547-bailout-talks-lose-sight-of-the-cost-question?source=feed#comment-266505 266505
Wall Street needs to learn some basic math skills. Well, if you are the Treasury and receiving (hypothetically) 18% in annual returns (which incorporates expected interest payments less expected default losses) on your investment and your cost of capital is 3.5%, is the present value of your annual payments really 0? Also, I believe the statement was that they would make 1 billion -- that is an absolue amount, not the NPV of future earnings.

Maybe NPV is more relevant, but get your facts straight and get off your condesending high horse. Actually, strike my last comment, I agree that most analysts on Wall Street are morons and need some basic math lessons. ]]> Fri, 26 Sep 2008 19:48:25 -0400
Wall Street needs to learn some basic math skills. Well, if you are the Treasury and receiving (hypothetically) 18% in annual returns (which incorporates expected interest payments less expected default losses) on your investment and your cost of capital is 3.5%, is the present value of your annual payments really 0? Also, I believe the statement was that they would make 1 billion -- that is an absolue amount, not the NPV of future earnings.

Maybe NPV is more relevant, but get your facts straight and get off your condesending high horse. Actually, strike my last comment, I agree that most analysts on Wall Street are morons and need some basic math lessons. ]]> http://seekingalpha.com/article/97564-us-corporate-debt-default-rate-could-top-23-by-2010?source=feed#comment-266480 266480 Fri, 26 Sep 2008 18:50:54 -0400 http://seekingalpha.com/article/97547-bailout-talks-lose-sight-of-the-cost-question?source=feed#comment-266385 266385
I am not a distressed structured bond analyst, so I can't say for certain what is behind the price of these bonds or what is the fair price. What I can say, though, as a corporate credit analyst/trader, is that the corporate credit market is currently substantially impacted by many technical facotors (banks having to sell down risk, hedge funds liquidiating, indiscriminate selling of any risk assets on headline fears, and momentum-chasing considerations.

I suspect (but don't know) that these factors are substantially worse in the more illiquid MBS market. I suspect that yields and credit spreads for these assets reflect a liqidiy and risk premium substantially higher than what is actually justified from current or expected default rates.

Having said that, yes my 18% yield comment is simplistic, but you get the point: there is a running yield on these bonds that I suspect is substantial (maybe not 18%, maybe less, maybe more). 18% would be consistent with the yield of many high-yield bonds which currently have strong cashflow (after servicing their debt) and solid businesses, but are oversold for fear/liquidiy reasons.]]> Fri, 26 Sep 2008 17:13:05 -0400
I am not a distressed structured bond analyst, so I can't say for certain what is behind the price of these bonds or what is the fair price. What I can say, though, as a corporate credit analyst/trader, is that the corporate credit market is currently substantially impacted by many technical facotors (banks having to sell down risk, hedge funds liquidiating, indiscriminate selling of any risk assets on headline fears, and momentum-chasing considerations.

I suspect (but don't know) that these factors are substantially worse in the more illiquid MBS market. I suspect that yields and credit spreads for these assets reflect a liqidiy and risk premium substantially higher than what is actually justified from current or expected default rates.

Having said that, yes my 18% yield comment is simplistic, but you get the point: there is a running yield on these bonds that I suspect is substantial (maybe not 18%, maybe less, maybe more). 18% would be consistent with the yield of many high-yield bonds which currently have strong cashflow (after servicing their debt) and solid businesses, but are oversold for fear/liquidiy reasons.]]> http://seekingalpha.com/article/97547-bailout-talks-lose-sight-of-the-cost-question?source=feed#comment-266013 266013 Fri, 26 Sep 2008 11:55:30 -0400 http://seekingalpha.com/article/97159-curing-the-credit-crisis-a-better-alternative-plan?source=feed#comment-263622 263622 Wed, 24 Sep 2008 11:54:19 -0400 http://seekingalpha.com/article/92849-gold-train-all-aboard?source=feed#comment-240618 240618 Thu, 28 Aug 2008 03:20:23 -0400 http://seekingalpha.com/article/92932-will-mccain-s-vice-presidential-selection-help-the-markets?source=feed#comment-240343 240343 Wed, 27 Aug 2008 15:28:18 -0400 http://seekingalpha.com/article/92932-will-mccain-s-vice-presidential-selection-help-the-markets?source=feed#comment-240321 240321 Wed, 27 Aug 2008 15:08:33 -0400 http://seekingalpha.com/article/92849-gold-train-all-aboard?source=feed#comment-239848 239848 Wed, 27 Aug 2008 07:06:28 -0400 http://seekingalpha.com/article/92855-the-real-secret-to-fractional-banking?source=feed#comment-239839 239839 Wed, 27 Aug 2008 06:19:20 -0400 http://seekingalpha.com/article/92111-sirius-retail-sales-questions-left-unanswered?source=feed#comment-236192 236192 Fri, 22 Aug 2008 03:55:11 -0400 http://seekingalpha.com/article/91364-money-managers-and-the-berkshire-hurdle?source=feed#comment-232978 232978 Mon, 18 Aug 2008 09:11:07 -0400 http://seekingalpha.com/article/91364-money-managers-and-the-berkshire-hurdle?source=feed#comment-232842 232842 Mon, 18 Aug 2008 05:17:41 -0400 http://seekingalpha.com/article/82797-don-t-try-to-fix-the-rating-agency-model-get-rid-of-it?source=feed#comment-193319 193319 Thu, 26 Jun 2008 10:58:45 -0400 http://seekingalpha.com/article/82797-don-t-try-to-fix-the-rating-agency-model-get-rid-of-it?source=feed#comment-193104 193104 Thu, 26 Jun 2008 08:29:48 -0400 http://seekingalpha.com/article/81838-rbs-predicts-global-market-crash-what-s-in-it-for-them?source=feed#comment-187796 187796 Wed, 18 Jun 2008 12:54:34 -0400 http://seekingalpha.com/article/76024-buffett-s-soggy-logic-on-guarantors-ratings?source=feed#comment-163190 163190 Wed, 07 May 2008 06:09:44 -0400