WSJevons

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    • Mon May 19th 17:29 PM | Rating: 0 0
      Commented on:
      The Impending Mortgage Crisis: Part Two
      I am late to the game, but jcrash . . . what happens when interest rates go up? Does the value of the home go up, down or stay the same?


      The Hypothesis:

      I suspect higher interest rates depress affordability and consequently depress home values or curb appreciation. While lower interest rates increase affordability, inflate values and accelerate appreciation. This suggests that purchasing a home at the 'height' of affordability is a dumb move because there is no room for affordability to increase. (This smell like a differential equation . . . )

      A quick correlation of the housing price data illustrates strong negatively correlation between home prices and interest rates: -.60 using Real Home Price Index and -0.75 Nominal HPI to 30y bond prices. (www.irrationalexuberan...)


      The Sniff Test:

      Your normalization suggests the late 1993 was a good time to be in property. It clearly wasn't.



      Alternate Test:

      If I differentiate the payment equation wrt interest rate and solve for the change in principal, I should approximate the effect of a change of interest rates to change in home prices, no? If no one has done this yet, I will get one of my internmonkeys busy . . .
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    • Fri May 2nd 06:13 AM | Rating: 0 0
      Commented on:
      State Street Press Release Ain't Straight
      BTW, richlapin1, great trade. Braggart!

      Jealously, WSJ
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    • Fri May 2nd 06:13 AM | Rating: 0 0
      Commented on:
      State Street Press Release Ain't Straight
      BTW, richlapin1, great trade. Braggart!

      Jealously, WSJ
      View article »
    • Fri May 2nd 06:12 AM | Rating: 0 0
      Commented on:
      State Street Press Release Ain't Straight
      Your post is almost as misleading as the press release.

      Their MBS portfolio is well seasoned. MTM the assets is required, but it is reasonable to expect seasoned bonds to pay off through maturity. (Did CFO mention if they were in the trading, AFS or HTM accounts?)

      50% of downgrades in their portfolio were because of insurance company downgrades. Directly from the transcript

      49% of the MBS portfolio is insured. The loss scenario would be the first three (or more) tranches get hit, then the recovery is less than 59%. (Although I can't tell to what extent they are insured by insurance companies that have been downgraded. )

      Their cost of funding is low. While they will bristle at this: They are a bank or generously bank-like. Deposits fund the investment portfolio.
      View article »
    • Sun Apr 13th 17:08 PM | Rating: 0 0
      Commented on:
      State Street Hires Chief Risk Officer After Derivatives Index Losses
      I do not see any reference to "derivatives index losses" as the explanation for SSgA's problems; that Miskovic will address off balance sheet exposure and/or sub-prime market exposure; and that this is in response to angry investors.

      I can't substantiate your posting/blog with any FT article or otherwise.

      Will you point us to it?
      View article »
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