June 28, 2007

And then the dominos started to fall, one by one...


PIMCO's Gross: Subprime crisis not 'isolated'

NEW YORK (Reuters) -- Bill Gross, manager of the world's largest bond fund, said Tuesday the subprime mortgage crisis gripping U.S. financial markets was not an isolated event and will eventually take a toll on the economy.

Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS - all of which he considers "toxic waste."

Gross, who manages the $104 billion PIMCO Total Return Fund, said the subprime crisis "may be just what the Fed has been looking for - easy credit becoming less easy; excessive liquidity returning to more rational levels," he added.

According to Gross, the subprime crisis will unfold in these resets. The ultimate impact they will have will be on the impaired prices of homes - "the collateral that's so critical in this asset-backed, and therefore interest-rate-sensitive, finance-based economy of 2007 and beyond."

10 comments:

keith said...

for discussion, one stat I've found odd is Countrywide brgging how they're loan volume is actually going up - 14% last quarter I think I read

Well, now I know why. Like a drunk gambler at the tables in vegas at 5am, they're doubling down, going all in, trying to raise cash, and hey, if it doesn't work out, they just fold up and walk away (after Mozillo sells all his shares)

here's a good article on this:

http://tinyurl.com/ywfugc

CNNMoney.com
Subprime lending: Business as usual

It would appear that subprime lenders have yet to learn from their mistakes. According to a consumer advocate group, abuses persist industry wide, despite the recent subprime mortgage meltdown.


But why should lenders continue to offer subprime loans when they've proven so dangerous?

According to Doug Duncan, chief economist for the Mortgage Bankers Association, troubled lenders are aggressively making new loans for an infusion of cash.

"They're gambling," said Armstrong, "doubling down and that's a recipe for disaster."

Anonymous said...


But why should lenders continue to offer subprime loans when they've proven so dangerous?

According to Doug Duncan, chief economist for the Mortgage Bankers Association, troubled lenders are aggressively making new loans for an infusion of cash.

"They're gambling," said Armstrong, "doubling down and that's a recipe for disaster."


This should scare the bejesus out of any clear-thinking person.

Anonymous said...

Pimco is not an unbiased source. Listening to him is like listening to Yun or Lereah. Of course Pimco's going to say housing's fucked. It is in his best interest for housing to fall as much as possible.

mamma's whipping boy said...

"Subprime crisis not 'isolated'" WTF YOU THINK? Three blind men all describing the same elephant! What there is no elephant in the room - whatchu talking about?

Anonymous said...

one ounce of gold will buy whatever home you want!!!!!!!!

Anonymous said...

all this and yet stock markets are up up up....you think maybe just maybe, the .01% of the fringe that blogs is wrong, paranoid, delusional and sees black helicopters in the middle of the night? And maybe, just maybe the other 99.9%, sane, non- black helicopter seeing, non delusional may be right?

Hmmm

Anonymous said...

"Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS - all of which he considers "toxic waste."

Me not understand. Isn't this the same stuff he has in his fund?

irrationally complacent said...

Sounds like a good reason for the market to rally!

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complacent

Paul E. Math said...

irrationally complacent, i have a thought I'm going to throw out there as a straw man, run it up the flagpole and see who saluts. The market seems to rally on bad news, why? Is it because bad news, cumulatively, would provoke the fed to lower the overnight rate? And the entire system is built on leverage so of course the interest rate is the most important component of your business. Hence bad news = wall st. rally.

Just a thought.

westwest888 said...

Look! Even rich people foreclose. I can't believe HeadlineNews lied to me!

http://tinyurl.com/28ryqa