I’m checking charts after few days away at nature, away from computers – and it’s total, total disaster! I never saw anything like that in my short investment career.
Back in late February panic I was calling ABX.HE index dead. Now it’s not just dead – they dug it from the grave and tortured for a few days until it started screaming!
LCDX and CDX indices are drifting down, which suggests me that corporate LBO mania is very close to the end. You can also observe the crash at the junk bonds markets here.
I don’t know what the stock market guys are smoking. I suppose they are still vacationing, as I did, because we already have enough fundamentals to panic. I suppose they will start to panic as soon as they get back from the beach 
July 10, 2007 at 10:34 am
My blogging partner twist caught that chart, and I sent a flare to Aaron. I searched |ABX-HE-AA| on google news but nothing there yet. Found your July 2 post on a general google. What the &$*#@ is going on out there? The Google News US Biz page is nothing but mega-deals, with pretty strong Dow surge as late as yesterday on all the M&A.
July 10, 2007 at 11:27 am
oxy,
is there a realtime intraday source for the abx index?
July 10, 2007 at 12:11 pm
Moin from Germany,
maybe there was a leak…..
From today
S&P May Cut $12 Billion of Subprime Mortgage Bonds
Standard & Poor’s may cut credit ratings on $12 billion of bonds backed by subprime mortgages, citing expectations that losses will continue.
The bonds are from 612 classes of residential mortgage- backed securities, S&P said today in an e-mailed statement. Ratings on collateralized debt obligations that contain the mortgage bonds are also under review, S&P said.
The amount of $ 12 billion represents only a low single digit percentage of the total
When they will continue with their “downgrading” pace we will hear news like this almost on a weekly basis for quarters to come…
July 10, 2007 at 2:18 pm
jmf,
That could be the reason for the weakness today, although there are so many reasons to panic as theroxylandr pointed out, it’s hard to know what the trigger is.
So S&P cuts the rating on some of this junk AFTER witnessing what happened with the BSC non-auction. As someone said on a blog today, the function of the ratings agencies seems to be to walk the battlefield after the battle is over and shoot the wounded. My question is still the same though: The BSC non-auction has tons of outstanding redemptions that weren’t filled on the mother fund. How long will it be before some of the larger investors (pensions, etc.) start demanding redemption in a more forceful and lounder manner? This mark-to-model junk can’t be hidden forever, and a screaming giant pension is just the thing to bring the whole derivatives market to its knees.
July 10, 2007 at 2:48 pm
On 7/3, AP posted the following news item, which seems to correlate nicely with the cliff on the chart:
Tuesday July 3, 8:32 am ET
By Jeannine Aversa, AP Economics Writer
Late Payments Rise for Home Equity Loans, Fall for Credit Cards, Painting Mixed Picture
July 10, 2007 at 3:04 pm
BTW, when I read the AP article, (http://biz.yahoo.com/ap/070703/late_loans.html?.v=4) I was absolutely amazed at the cluelessness of the wizards over people paying their cards instead of their HE loans. Stop and think: The HE money? It’s gone, Baby! We ripped through that two years ago! Now the fabled American consumer is paying his credit cards so that he can charge next month’s groceries on them! If people are scratching their heads over this, they’d better not scratch too deep.
July 10, 2007 at 4:36 pm
Some answers:
1. I do not know any access to intraday ABX quotes, but I think once per day is enough for our purposes
2. Do not search for ABX-HE-AA, sometimes they just call it ABX or ABX.HE. Usually bloomberg.com is good in tracking those indices, they publish every time something major happens
3. The LCDX index is updated at noon at markit.com, it’s good enough if you need something fresh
4. Today junk spreads are widening, while T-bonds are up, i.e. flight to quality. LBO mania has few weeks to go left.
July 10, 2007 at 7:58 pm
[...] I can’t go to vacations or what? I’m checking charts after few days away at nature, away from computers – and it’s total, total disaster! I […] [...]
July 11, 2007 at 12:13 am
wordpress.com,
hey i was in Cancun the wk BSC’s 2 hedge funds hit the fan. just got my laptop to connect to the wireless hotel network that Monday morning as the news hit the wires. due to great sites like this and over at CR, i knew to double down on my shorts immediately and i haven’t looked back since. it MADE and PAID my vacation! i think yrs from now i will look back and say that was a seminal event.