Monday, February 11, 2008
Time to Go Long Subprime?
by Ken Houghton
So when we see at Housing Wire that Bear—the #2 originator of MBS—is short $1 billion worth of securities, after having been long $1 billion in August, is it possible that this is the light at the end of the tunnel?
Or just sleight of hand, as the Bloomberg article notes:
Nor should he. But the implication is that they are short the securities that have a chance of appreciating, and long securities that have nowhere to go but down.
So maybe it's not an indicator at all. 2010 is looking more and more as if it will be something other than The Year We Make Contact. (R.I.P. Roy Scheider)
Yes, this post is snarky, but BSC formed a "work-out" team back in January/February of 2007—and then appears to have downsized most of them just as the HOPE NOW program was initiated.
So when we see at Housing Wire that Bear—the #2 originator of MBS—is short $1 billion worth of securities, after having been long $1 billion in August, is it possible that this is the light at the end of the tunnel?
Or just sleight of hand, as the Bloomberg article notes:
In an interview after Molinaro's remarks, Bear Stearns spokesman Russell Sherman said the New York-based firm's subprime trades are a "hedge" against potential losses on investments in higher-rated mortgages, he said.
"We are using short positions to offset other long positions in our mortgage inventory," Sherman said. He didn't provide details on specific trades.
Nor should he. But the implication is that they are short the securities that have a chance of appreciating, and long securities that have nowhere to go but down.
So maybe it's not an indicator at all. 2010 is looking more and more as if it will be something other than The Year We Make Contact. (R.I.P. Roy Scheider)
Labels: mortgage, subprime, The Old Firm
