OT: This how stocks come back � government corporations paying 10 and 12%!

[oldtimer]

Not all of the mortgages have been walked away from. Not all are worthless. The idea was to have a reverse auction where the government would take the the low bid. Plus, once the government owns the paper they can adjust, reset, and otherwise modify them in order to get them performing. There has been a lot of rhetoric, and a lot of posturing, but not a lot of understanding of just what a "credit freeze" really does mean to main street. It is not about any certain institutions failing or not. It is about jumpstarting a system that is not functioning right now. There may be more than one way to do it, but it needs to be done.

[merkin]

Artto, I'm completely uninformed,

"

What about “foreclosures today are less than 3 percent?”

“Home prices … still about 50 percent higher than at the start of the decade?"

I don't care who said it. I don't care if Captain Kangaroo said it. Are these facts even close to reality?

I don't even know where to look to check these facts, would you please help for my understanding.

[Jeff Matthews]

I am not understanding the comments speculating that mortgage-backed securities are paper worth $0.00. A mortgage is a document of collateral, and upon non-payment, foreclosure can occur. Property sells to highest cash bidder. This is real estate. It might have fallen in value, but not THAT much.

[JJkizak]

One of the reasons they have no value is nobody knows who owns what. First the mortgage is sold to another bank then they sell the principle to another entitiy and the interest to another entitiy and these items might be sold 100 times over. After 100 transactions I declare that I am the owner of the interest part of that mortgage. Who now owns the principle? Maybe it's the Chinese Bank of Who Hoo. No, the Chinese Bank of Who Hoo has sold 50% of the principle to the Bank of Iran. The Bank of Iran has sold it's piece to Wahovia.

Now I ask you, how the hell are you going to value this mortgage?

JJK

[Colin]

Pimco, the world's largest bond fund, said they will manage the sale of the mortgage backed securities, whihc is what they do, for free. They said the debt will sell for 60 to 65 cents on the dollar.

[JJkizak]

Well, I'm glad they are worth something which is better than nothing. I would also like to see what kind of computer mathematics and chaos principle diagrams that are used to compute the final owner of the mortgage.

JJK

[Guest " "]

" Property sells to highest cash bidder. This is real estate. It might have fallen in value, but not THAT much."

Negative equity is a factor in the sell off of morgages. In markets where there is steep property value declines, the worth of carrying morgages on the books that are not fully secured thru the point were funds are recoverable, becomes questionable.

There are federally back partners at play here, but their collapse is what this is all about.

Unlike prior generations, who borrowed little and had quite a bit of reserve equity, the current generation is pretty much tapped out , and the reserve equity that remained on the books, was lost as a result of falling property values.

[Colin]

Mark, you only say this because we put a Wall St. investment banker in charge of the Treasury, only two years after he and buddies lobbied the SEC to lift their leverage limit and police their debt themselves!

[johnyholiday]

http://www.milkeninstitute.org/events/events.taf?cat=Forums&id=246&function=detail

[artto]

This how stocks come back – government corporations paying 10 and 12%!

While FEE and FNM are NOT government guaranteed, rescuing them may cost as much as $1T! Yet the U.S. federal government can not let them go out of business. If one or both these federal firms can’t function, the result is depression-era chaos.

Although FRE and FNM prices were stable for a decade (!), they crashed recently. I believe they will stabilize again in the next several months, possibly a year or two, and recover much of their original price. In the meantime, even if they cut their dividends, I expect them to continue to pay income 2 to 3 more than jumbo CDs!

Income values like these will attract investors back from commodities into stocks.

nice try Colin

[Colin]

yup, I was wrong and admidted it, meanwhile DOw touches 8,000 today and FRe and FNM stay at about a buck...

[Colin]

…and people a long way from retiring. Here are some good growth bets, but several come to mind: GOOG is actually reasonably priced here at 17 P/E I bet kids would like to know they own McDonalds (on list attached), Coke, Pepsi, Nike, Wrigleys, Mattel, maybe Del Monte Foods (also on list) or a network like CBS… http://moneycentral.msn.com/investor/StockRating/srstopstocksresults.aspx?sco=10

[artto]

I agree Colin. The million dollar question though is how cheap will it get? And if or when it does, how long will it (the actual bottom) last? Five minutes? A minute? A few seconds? Will there be another chance?

People are throwing out the baby with the bath water, the tub, and pulling the plumbing out too.

Case in point: If you look closely enough you'll find stocks that you can buy where the share price is 15-20% less than the company's cash on hand per share!!! You can essentially buy a dollar of cash for 80 cents. Try that at your bank. [H]

[Colin]

Such as which stocks?

[artto]

Rest assured I'm not prone to just giving out this kind of information. But since I'm really a nice guy in disguise........

Here are two examples. Obviously the conditions I was speaking about occurred over the last week and are not quite as "tasty" at the moment. It was one of those intraday volatility things. The point is there are plenty of stocks of different kinds that can had for their cash-on-hand value (or less)..........now that's cheap!!!

Alcoa (AA) for a large cap

USEC (USU) for a speculative small cap

[Y]

[Colin]

Bought new 3 x leverage ETFs on Russell 1000 oil, small cap, large and fin services this week…

Also bought MCD, UST and DV recently

I am down on FRE and FNM 80%, making them 2 of the three worst stock investments I have ever made (not including some options, which I let expire worthless)

AA and USU look like they are holding up under pressure, a good siog for recovery when...

[Coytee]

(not including some options, which I let expire worthless)

I would suggest that purchasing options should never be viewed as an 'investment' of any kind but more rather, simply as gambling and tossing of the dice.

I am a big fan however, of selling covered calls & puts.

[Colin]

made 1300% selling unceovered yen and Crude calls years ago

Buying too soon, probably, no evidence of recovery any time soon, but many things are too cheap, buying 5% of portfolio in NLY

Company ANNALY MORTGAGE MANAGEMENT at Limit Price $16.00 for juicy 12% yield and resumption of uptrend someday…

[Coytee]

I'm asking for more clarification here, not challanging your comment.

made 1300% selling unceovered yen and Crude calls years ago

This was in different type print than your second statement so I'm wondering if this was your comment or perhaps a copied comment (quote) from someone else and you were responding to it somehow?

reason I'm asking is...(in case it was you)

As you know, when someone sells naked, you don't own the underlying interest nor something which can cover your trade. You make the trade and deposit "cash" without buying anything. What I don't understand is, if you sold some naked calls, how do you calculate a 1,300% rate of return?

Did you in fact, buy them back to cover them (and if you did, WHY would you do that when they were evidently going to expire worthless I presume??) This is the only answer that fits your comment though so I presume you DID buy them back.

If you did NOT buy them back to cover, then if % return is calculated as "sell price-cost/cost" and you sold naked, you had NO "cost" and therefore, calculating rate of return is a bit problematic since there is nothing to divide by as it would be zero.

If I misunderstand or misquote your point of view, I apologize... This is just one of those things that "Mr. Retentive" in me always likes to clarify. Very similar to when someone who let's say, has a salary of $100,000 and is offered a job somewhere else at $50,000.

(this is a true story) I overheard the guy say on the phone, "why would I want to take a 200% cut in pay?"

When he hung up, I casually said he was wrong because if he went from $100,000 to ZERO then that alone was only a 100% reduction. To take a 200% "reduction" in pay, using his logic, he would have to pay THEM to work there. He finally got it.

Same thing in retail sales when someone says "this item costs 20 times LESS than the other item".... no it doesn't. It's mathematically impossible for something to cost 20 times less. Something can cost 20 times MORE but not less.

I know what they THINK they are saying but it is just displaying their misunderstanding of the math.

Signed...

Anal Retentive

[]

[JJkizak]

Saw on the latest 60 minutes that the amount of resets slated for 2009, 2010 are huge compared to those already in the can. The economy they said looks bleak for the next two years and may take 10 years to correct. They also said the big hedge funds jumped out of the oil market and that was the reason it has returned to sanity. Remember---they said it, not me. My boat is stuffed full of styrofoam so it hopefully won't sink.

JJK