wndysrf Posted August 26, 2004 Report Share Posted August 26, 2004 Wall Struck Shills and Alan Greenspan are constantly touting the ?Resilient Consumer?, the lynchpin of the Global Economy. The stock market depends on it. China depends on it. But most important, the JPM/One Derivatives Colossus depends on it. So far, so good. The Speculative Sphere measures the safety and soundness of this house of cards by watching the deal flow in the mortgage-backeds and credit card deals. The Securitization Bonanza continues. Check out the latest in Structured Exotica and the fantastic yields to be earned on this risk-free, AAA-rated paper. Last time I checked the 30-day LIBOR rate was 1.6%, up from 1.1% earlier this spring. Most of this garbage is priced at just a hair over the LIBOR rate, since thousands of pension fund managers are staring bug-eyed at their computer screens, hoping for the slightest downtick in price so they can jam their leveraged Repo liabilities into some ?safe investments? in order to earn a measly spread over their cost of funds. But we are going to dig deeper. The paper is flying out the door, no problem. But what kind of high caliber ?Resilient Consumers? are in these loan pools to justify such a low yield? I have profiled some of these AAA-rated borrowers. A summary of deals closed this week: Home-equity lines of credit continued to account for the largest deals. A $2.8 billion securitization of assets originated by Long Beach Mortgage, structured by RBS Greenwich Capital, which lasts one year and yields 18 basis points over the London Interbank Offered Rate (LIBOR). 1.78% Typical Borrower Profile: Applicant is a 27-year old shaved head and heavily tattooed Best Buy car stereo installer, and 24-year old spouse is employed by Verizon as a consumer call center supervisor in Long Beach, CA. Combined income: $65,000. Education: High school only. Credit Report: 605 FICO, 2 auto leases, 5 active credit cards, each slightly delinquent, and all credit cards are near or at credit limits. Just purchased first home, after being evicted from apartment building for failing to pay rent on time. No downpayment or first and last month required for the new home. Countrywide Securities put together a pool of home-equity lines of credit totaling $2.3 billion originated by Impac Mortgage. It lasts for one year and pays 20 basis points over LIBOR. 1.80% Typical Borrower Profile: Applicant is a Roto-Rooter plumbing technician. Co-applicant is a housewife living in Calabasas, CA. Education: High school only. Two small children. Paying bills on time, but future medical and education expenses are looming. That is being ignored for now, new Boston Whaler fishing boat and matching trailer being purchased from loan proceeds. Bank of America is pooling $2.1 billion in home-equity lines from Wells Fargo, a mixture of fixed- and floating-rate notes. Duration and starting yields have yet to be finalized. Typical Borrower Profile: Applicant is a 32-year old middle manager working at a CPA firm. Co-applicant is a marketing anal cyst for a major beverage distributor in Costa Mesa, CA. Combined income: $175,000. Heavily indebted due to repeated home upgrades, remodels, and lavish vacations. Both lease $60,000 European sedans as required by all professionals living in Orange County. Borrowing up now to install a pool and refurnish the house from the Pottery Barn catalog, in anticipation of hockey stick wage growth as predicted by Alan Greenspan?s Productivity Model. Union Bank of Switzerland securitized $2 billion in home-equity lines purchased from Ameriquest's Park Place Securities. The one-year transaction offers a yield of 15 basis points over LIBOR. 1.75% Typical Borrower Profile: Applicant is a 40-year old junior partner at a major law firm in Century City, CA. Annual income of $225,000. Excellent credit, but still paying off $125,000 balance of law school student loan and $65,000 IRS penalty for failing to make estimated tax payments. Spends most of discretionary income on vacations to Asia and attending local strip clubs. Using the housing ATM to pay down credit card balances and finance required payoff to mail order bride?s family in Singapore. Two big auto-loan securitizations priced this week, each totaling $1 billion. Using assets originated by Daimler Chrysler, Morgan Stanley assembled a three-year deal paying two basis points over LIBOR. Using its own auto loans, Wachovia put together a one-year deal paying three basis points over LIBOR. 1.63% Typical Borrower Profile: Applicant is a 28-year old production assistant for a major motion picture studio in Burbank, CA. Income is sporadic, estimated to be $50,000 a year when working. Currently driving a $62,000 Mercedes E500 sedan in order to make a proper appearance in Hollywood. Uses cash advances off of credit cards to make auto loan payments when cash is tight. Traded in used 1997 Honda Accord, $6,000 upside down loan balance was tacked on to the new Mercedes loan. JP Morgan securitized $550 million in credit-card receivables from its own Bank One unit, setting up a five-year deal paying a fixed rate of five basis points over what Thomson Financial calls the "interpolated swaps rate." Typical Borrower Profile: Applicant is a 23-year old graduate from University of Phoenix, currently working part time as a waitress at P.F. Chang?s. Hopes to use her online degree in Fashion Merchandising to land a high profile designer job for a major clothing label company in Los Angeles. Current job search requires ultra high fashion wardrobes of the highest quality. Now carrying maximum allowable credit card balances on private-label credit cards from Nordstrom?s, Talbots, Ann Taylor, Victoria?s Secret, Bloomingdales, Macy?s, and Coach. Long night hours requires extra caffeine, so she just applied for a new Starbucks credit card. In a seven-year transaction with a floating rate currently at 15 basis points over LIBOR, Barclays Capital and Morgan Stanley put together a $500 million pool with receivables purchased from MBNA. 1.75% Typical Borrower Profile: College students with no job, no income, but are currently being financed by parents. Deemed to be ?customers of the future? since they will soon be entering the workforce and approaching the prime demographic of maximum consumer spending. Considered low credit risks, since credit card statements are mailed to parents address. Bear Stearns did a $550 million pool of home-equity credit lines originated by Fremont Mortgage, creating a 1.5-year tranche paying 27 basis points over LIBOR. 1.87% One of the higher risk pools. Borrowers are homeowners with previous divorces, bankruptcies, judgments, with poor credit carrying adjustable rate, interest-only first mortgages. Home equity lines are considered ?safe? for now, since property values are rising faster than the rate of credit deterioration of the borrowers. Interest rates and duration have yet to be set on a $287 million securitization by Citigroup Capital of Carrington Mortgage home equity lines, and for a $211 million securitization by Wachovia Securities of Greenpoint Mortgage home-equity lines. These are smaller, unique mortgage pools from boutique subprime lenders. Borrowers have myriad problems, including repossessions, past due doctors bills, overlimit credit card balances, and a high frequency of bail bond liens. However, they own their homes, which are located in San Diego County, where prices are going parabolic. Interest rate and duration to be determined via Dutch Auction as thousands of pension fund managers bid online, reaching for ?yield?. ????????????? Now we must brace ourselves for the NVLS mid-quarter update. Anyone else notice how these tech rock stars are so important to the U.S. economy, that mid-quarter updates are required??? When was the last time you heard a mid-quarter update from XOM or CVX, whose quarterly profits far exceed the annual revenues of these tech bombs??? Proof that sex and sizzle sells in the HedgeFund Economy. High beta Supermodels must be kept ?abreast? at all times?.. But most importantly, we have the Jackson Hole FOMC Steering Committee tomorrow. And a revised GDP report. Any coincidence that they pick a Friday afternoon at the end of the summer when there is no trading volume??? No doubt, in that environment, ?words? will be able to move trillion dollar markets with ease. Watch out???. Link to comment Share on other sites More sharing options...
Grand Poopercycle Posted August 26, 2004 Report Share Posted August 26, 2004 Speaking of Starbucks...... Link to comment Share on other sites More sharing options...
rog Posted August 26, 2004 Report Share Posted August 26, 2004 Hey, I just got one of those pre-approved starbuck credit cards too. No annual fee, doubles up as a latte debit card and annual rewards are paid in lattes. Pre loaded with two free lattes. Got the waitress' number? Link to comment Share on other sites More sharing options...
seamus Posted August 26, 2004 Report Share Posted August 26, 2004 Mark - that Bank One deal is the issue I mentioned a few days ago about being hung up. Don't know how they pushed that through. Very poor credit metrics Link to comment Share on other sites More sharing options...
wndysrf Posted August 26, 2004 Author Report Share Posted August 26, 2004 Hey, I just got one of those pre-approved starbuck credit cards too. No annual fee, doubles up as a latte debit card and annual rewards are paid in lattes. Pre loaded with two free lattes. Got the waitress' number? Hey Rog, I just graduated from University of Phoenix. You seem well connected. Can you get me a job with Guess?, No Fear, or Calvin Klein?? I'll make it worth your while............ Link to comment Share on other sites More sharing options...
Guest libertas Posted August 26, 2004 Report Share Posted August 26, 2004 Mark, you have outdone yourself. I hope you are saving these for a book. Link to comment Share on other sites More sharing options...
wndysrf Posted August 26, 2004 Author Report Share Posted August 26, 2004 Tech Data skying AH on an Yearnings Enema............. Up 4% Link to comment Share on other sites More sharing options...
Calculus Posted August 26, 2004 Report Share Posted August 26, 2004 Now we must brace ourselves for the NVLS mid-quarter update. Mid-Quarter update. C'mon that's taking the piss. Link to comment Share on other sites More sharing options...
rog Posted August 26, 2004 Report Share Posted August 26, 2004 Novellus "In last 30 days we have seen push outs" mostly from Asia Lowering bookings revenues shipments Earnings remain on track Link to comment Share on other sites More sharing options...
wndysrf Posted August 26, 2004 Author Report Share Posted August 26, 2004 fxfox: I deleted that last one. Watch your language.............. Link to comment Share on other sites More sharing options...
Bearman Posted August 26, 2004 Report Share Posted August 26, 2004 good stuff mark loans are not what they used to be is what I take from your rant. everything is not simple and forrest gump said simple does what simple is or sumthin like that all the plates are spinning Link to comment Share on other sites More sharing options...
machinehead Posted August 26, 2004 Report Share Posted August 26, 2004 Typical Borrower Profile: Applicant is a 27-year old shaved head and heavily tattooed Best Buy car stereo installer, and 24-year old spouse is employed by Verizon as a consumer call center supervisor in Long Beach, CA. Combined income: $65,000. Education: High school only. Credit Report: 605 FICO, 2 auto leases, 5 active credit cards, each slightly delinquent, and all credit cards are near or at credit limits. Just purchased first home, after being evicted from apartment building for failing to pay rent on time. No downpayment or first and last month required for the new home. It's a mystery to me why the issuers' lawyers don't hire Mark to write stuff like this for the prospectus. Then next year when the credit crunch hits and the lawsuits start, the plaintiffs can be laughed right out of court. "Did you read the prospectus, sir? You realized you were lending to total deadbeats, did you not? Then why are you here in court today?" Link to comment Share on other sites More sharing options...
DrStool Posted August 26, 2004 Report Share Posted August 26, 2004 Hi everyone! Madame Stool and I have arrived safely at Stoolbase Florida. I also have my new super duper extra special dsl set up. Indeed it does seem even faster than my previous cable broadband. After trying to log in from an AOL dialup several times over the last few days, it became clear to me that it takes the patience of Job to wait for the Stool to load if you do not have broadband. There are a number of ways dialup users can speed things up; Chiefly, disabling graphics in your message control panel (registration required) and reducing the number of posts per page. I also recommend downloading an internet accelerator such as the one offered by Earthlink. I have tried this and it really does speed up the loading of the page to less than 10 seconds. It's not broadband, but it's acceptable. If your ISP does not offer one, change ISP's! Trying to access this site AOL dialup on a slow connection is frustrating to say the least. I will post a brief Anals update later tonight after we do some unpacking, settling in, watering and feeding. Many tanks for your patience and support! Link to comment Share on other sites More sharing options...
Guest libertas Posted August 26, 2004 Report Share Posted August 26, 2004 "As co-heads of Lazard's restructuring group, which handled the bankruptcies of WorldCom, Adelphia Communications and Owens Corning, Ridings and Savage believe Wall Street's growing thirst for high yields is setting the stage for another round of corporate collapses, perhaps as soon as next year. ... To prove their belief that a high-yield wave is a strong predictor of future restructurings, Ridings and Savage cite the most recent spate of collapses. High-yield issuances spiked in 1997 to 1998. The failures of WorldCom, Adelphia and Global Crossing came four years later in 2002. (Enron filed for bankruptcy in December 2001.) The trend is beginning anew. Ridings excitedly points to a graph showing 2003 as the strongest in years for high yield issuances. "High yield this year is running really strong. It's creating a backlog of two to three years out," Ridings said." CBS Marketwatch Link to comment Share on other sites More sharing options...
Guest bullseatshitndie Posted August 26, 2004 Report Share Posted August 26, 2004 Novellus "In last 30 days we have seen push outs" mostly from Asia Lowering bookings revenues shipments Earnings remain on track and there she goes Link to comment Share on other sites More sharing options...
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