Cool! Residential Mortgage Backed Securitization Process
How awesome is this info-porn of the Residential Mortgage Backed Securitization process via Credit Suisse?
This puts into context exactly how the various mortgage flavors (Prime, Alt-A, Sub-prime) get packaged and resold.
Graphic courtesy of the Credit Suisse U.S. Mortgage Strategy Group
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Here's an even bigger GIF version
Friday, July 27, 2007 | 11:30 AM | Permalink
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Comments
Wow it feels like the end of the world today..... I hope we dont crash:(
Posted by: andrew755 | Jul 27, 2007 11:59:12 AM
I like it! I think I'll make it my Christmas card this year.
Posted by: Christopher Laudani | Jul 27, 2007 12:00:32 PM
Schwing!
Posted by: KP | Jul 27, 2007 12:02:32 PM
In the end, the problem isn't with the financial instrument itself, but the leverage used to enhance a "safe" bet, a la LTCM.
In hindsight, it was pretty dumb to lever up to buy Alt-A's or etc....but some 30-something financial engineering quant's model said it was a sure thing and "stress tested." A model is only good as the underlying assumptions.
I'm waiting to hear word of a carry trade fund or covered call fund collapsing.
Anyone willing to hold over the weekend? The worst is over, right? hahaha, isn't that how Black Tuesday, 1998, etc. happened.
Posted by: johntron | Jul 27, 2007 12:05:03 PM
looking for a forced liquidation in IBM LMT GD....perhaps that'll be the all clear sign.
good luck everyone
Posted by: johntron | Jul 27, 2007 12:07:07 PM
the problem isn't with the financial instrument itself, but the leverage used to enhance a "safe" bet
Well, um, yah.
Investment trusts and holding companies weren't in themselves big villains in 1929 either.
But if you were Goldman Sachs or Sam Insull you used them as "leverage to enhance safe bets".
The rest is (apparently forgotten) history.
Posted by: Hedley Lamarr | Jul 27, 2007 12:12:52 PM
I dont think we are ever going to see another green day again....... I've sold everything I own. I give up!
Posted by: dying bull | Jul 27, 2007 12:15:46 PM
Not yet a bull slaughter, but definitely a good pantsing.
Posted by: KP | Jul 27, 2007 12:18:26 PM
What's funny is the people yesterday, after the market giving up 300 points out of 14000 calling for diaper change from the Fed. Seriously....what happens if something substantial actually happens?
Posted by: KP | Jul 27, 2007 12:20:28 PM
Something has happened, look at this market it is a nitemare.
People are just throwing stocks out the window and look at the vix heating up. It is scary!!!
Posted by: dying bull | Jul 27, 2007 12:27:46 PM
scary will be when/if EEM IBM AAPL GD and carry trade correct hard. (look at DBV pull back but still well off lows)
We're still in correction, pause-that-refreshes mode, but a lot of people are sitting on hefty gains.
Time to be soiling yourself is if you see SPX making continuous quarterly lows.
Posted by: johntron | Jul 27, 2007 12:33:58 PM
I have to agree with KP there. People calling it over underestimate the ability of the powers that be to control events. Bush has talked up Al Queda more and more over the last several weeks while talking up the economy.
If an "event" occurs the PPT will be on the job however they can't stem panic selling, which most people have not even seen on a relative scale for about 7 years now.
That 30 something money manager related in an above post has no clue on how to moderate risk...just to take it.....and leverage it, because in the end it's not his/her money and that bonus sure looks good at the end of the year.
Ciao
MS
Posted by: michael schumacher | Jul 27, 2007 12:34:20 PM
Dying bull,
You must be pretty young. This market isn't scary at all. Until very recently, this sort of thing (~5% selloff) was perfectly normal, expected, and even seen as healthy. It moves stock from weak hands to strong, and puts some whackage into unrealistically priced momo stocks.
This selloff has been pretty orderly. In a truly scary market, bids just disappear. Margin calls happen en masse. Maidens aren't thrown into the volcano single file, they line up those massive dump trucks like they use in mining. Then they close the exchange, and everyone flies blind.
Nope, this is just another day at the office (so far).
Posted by: Estragon | Jul 27, 2007 12:40:04 PM
By historical standards, the down days recently we've seen really aren't that special or uncommon. However, it's been so long since we've seen it like this, the herd actually believed that things have changed, it becomes more stable, recessions won't occur all because financial engineering and market globalization has altered the marketplace so that "it's different this time"! Just because the market hasn't reacted the same way as it has in the past doesn't mean that it's not eventually going to react...it'll just react in a way that you don't expect!
Posted by: W.Edwards | Jul 27, 2007 12:46:17 PM
Anyone who thinks the current stock market is scary or a nightmare needs to do some homework.
Study a chart of the S&P500 that goes back several decades; you can go back to 1970 on BigCharts.com. You will see that it is NORMAL to have a 10% correction on average about every 1-1/2 years (calling the 2000-02 period as one decline). This is true for the 1970's, 1980's, and 1990's, which had very distinct economic and market environments.
What is NOT normal is the very long absence of such corrections since March of 2003.
Sorry, 5% drops are NOTHING, even if they occur in just a few days. Those who are bothered by this don't know what they are doing and need to change their attitudes and/or asset allocations. Investors who are truly investing for the long term (at least a decade and not just next quarter) should actually WELCOME lower prices and higher volatility.
Posted by: John | Jul 27, 2007 1:33:38 PM
Just a little observation.....you absolutley know that the market will par back this loss because if it does not in about an hour's time the margin calls will hit and take it down further.
And as I write that it will do the exact opposite I'm sure and I'll be wrong......
They are trying really hard to get oil over that hump in the last half an hour.
Ciao
MS
Posted by: michael schumacher | Jul 27, 2007 2:03:57 PM
Thank you for the BIG gif-only way I could read!
Posted by: babygal | Jul 27, 2007 2:21:58 PM
"Sorry, 5% drops are NOTHING, even if they occur in just a few days. Those who are bothered by this don't know what they are doing and need to change their attitudes and/or asset allocations."
Many of us are not as bothered by the recent drop in the markets, as much as we are with the underlining fundamentals that support the economy. To ignore the storm that is brewing in the credit & housing markets is just foolish. What's happening now in the market is simply a derivative of what is becoming more obvious in the economy each day. In other words, many of us "investors" believe the smoke that once gave us cover to participate on the long side of this bubble economy, is blowing away ... and the wind is getting stronger each week.
Posted by: Donny | Jul 27, 2007 2:26:12 PM
The economy is doing fine!
http://optimist123.com/
Posted by: Eddie | Jul 27, 2007 2:41:35 PM
The end state problem is not the subprime market. Nor is the ultimate problem the leverage used to "manage" risk or lever these products. Now, that does not mean financial markets will not shudder if some type(s) of financial market event occurs. They surely will. But, those are simply symptoms.
The real problems aren't being talked about. And, there are many.
Posted by: BDG123 | Jul 27, 2007 2:43:12 PM
Donny,
Excellent point with which I fully agree. My comment was in response to those who react with disbelief that markets actually go down at all, let alone in response to a brewing storm that is there for all to see.
Posted by: John | Jul 27, 2007 2:47:15 PM
Hank Paulson reassuring investors and calming the markets:
http://aofg.blogs.com/photos/aofg_pictures/anim15.jpg
Posted by: Pool Shark | Jul 27, 2007 2:52:14 PM
And right on cue the market gives up it's loss right before the margin calls hit big time.
Too funny.....
Pool shark-
I searched for that video and could'nt find it....I gather you could'nt either??
Ciao
MS
Posted by: michael schumacher | Jul 27, 2007 2:58:59 PM
It is interesting how heavily agencies weight towards fixed rates. Not much resetting risk there though falling prices will take their toll. On the other hand, the non-agencies are heavily into adjustables and subprime adjustables at that, and often as much IO and Option stuff as non-IO.
Posted by: Lord | Jul 27, 2007 3:20:27 PM
Let's face it--the stock market is a ridiculously stupid entity. I get sick of the idiots in the media who give it credit for "discounting" the future --that is so much crock. I describe it as a place where millions of relatively intelligent people gather to produce really stupid decisions.
Here is my solution: shut the stock market down. Take all the out of work Wall Streeters, brokers, and other financial barnacles and have them bus tables and cut lawns. Then deport all illegal immigrants, as we won't need them any more. Two problems solved with one stroke! LOLLL
Probably a good time for me to go on vacation!!
Best to all!
Posted by: Jay Weinstein | Jul 27, 2007 3:21:18 PM
