29 replies to this topic

[Tor]

very funny semi. i think it will be good for stocks. common equities.

[SemiBizz]

CDOs are now part of the Milky Way.

You mean I'm going to need a telescope now to see the future??? Better hold off on those sunglasses...

[ogm]

What does CDO crisis have to do with stocks ?


If anything its GOOD for stocks. Since money will stop flowing into CDO's

CDOs represented credit flows that are now seized up and deemed largely worthless. It means that there is l less overall liquidity for stocks since few are willing to accept CDOs as collateral for loans. Between CDOs illiquidity and yen carry trade slowdown, there is going to be a lot less funds available for Wall Street to jam stocks with. CDOs were accretive as far as liquidity was concerned as they were readily convertible and treated as money markets -----part of M2, M3. Of course, CDOs are now part of the Milky Way.

What about pension funds, insurance companies and other large investors ?

They used to absorb a lot of those CDO's. Now they won't, but they still need to invest somewhere.

Also don't forget their allocation models are starting to point to stocks, as bond rates keep coming down.

Hedge funds aren't the only game in town.

[Tor]

pension funds are underweight stocks fwiw.

[ogm]

pension funds are underweight stocks fwiw.

Who isn't ? Thats the point.

[linrom1]

What does CDO crisis have to do with stocks ?


If anything its GOOD for stocks. Since money will stop flowing into CDO's

CDOs represented credit flows that are now seized up and deemed largely worthless. It means that there is l less overall liquidity for stocks since few are willing to accept CDOs as collateral for loans. Between CDOs illiquidity and yen carry trade slowdown, there is going to be a lot less funds available for Wall Street to jam stocks with. CDOs were accretive as far as liquidity was concerned as they were readily convertible and treated as money markets -----part of M2, M3. Of course, CDOs are now part of the Milky Way.

What about pension funds, insurance companies and other large investors ?

They used to absorb a lot of those CDO's. Now they won't, but they still need to invest somewhere.

Also don't forget their allocation models are starting to point to stocks, as bond rates keep coming down.

Hedge funds aren't the only game in town.

Yes, but we may need to fund our own debt to a larger extend and long term rates may start to go higher despite Fed Fund rate cut.

[hiker]

ogm deserves much credit. he has named some of his stock holdings, and one of his tech stocks is the second best performer today on a long list of tech names. up from a recent swing low near $9.00 to over $15 today. not an easy accomplishment for a stock picker.

Edited by hiker, 10 September 2007 - 12:29 PM.

[SemiBizz]

A trillion here, a trillion there...



Banks Sell 'Toxic Waste' CDOs to Calpers, Texas Teachers Fund

Worldwide sales of CDOs -- which are packages of securities backed by bonds, mortgages and other loans -- have soared since 2003, reaching $503 billion last year, a fivefold increase in three years. Bankers call the bottom sections of a CDO, the ones most vulnerable to losses from bad debt, the equity tranches.



Many pension funds, facing growing numbers of retirees, are still reeling from investments that went sour after technology stocks peaked in March 2000.

Now, the problem is ... We had a phenomena called the "Baby Boom" ... those boomers are now withdrawing from those pension funds at a fast pace...



The pool of contributions are slipping as well because the younger participants are not paid as well as the retiring labor force. Add to that the fact that the inflation we supposedly don't have is also putting pressure on contributions... So, it's distribution plus smaller contribution complicated by capital losses...

[ogm]

ogm deserves much credit.

he has named some of his stock holdings, and one of his tech stocks is the second best performer today on a long list of tech names. up from a recent swing low near $9.00 to over $15 today. not an easy accomplishment for a stock picker.

Thanks, hiker. That one has sex appeal, its going higher.

Surprzingly its not even the best performer in my portfolio, though its one of my largest positions.
Look what TNH did since 80s. Or LDK since mid 30s.


YTEC and SMCI are great value here. Look at growth and cash to debt / cash to market cap. I think both will be good performers too.
CMED has a lot of sex appeal too, and is pretty cheap.

Not to say I have a few underpeformers too, but nothing more then 5% loss.

Edited by ogm, 10 September 2007 - 12:41 PM.

[arbman]

What does CDO crisis have to do with stocks ?


If anything its GOOD for stocks. Since money will stop flowing into CDO's

OGM I think you are a bit comical here, I mean you showed up right at the top and told us everything about the debt markets, and then you forgot about them like a fish only 6-7 weeks later as if all the problems went away now. Well they didn't and it doesn't appear to be getting quickly better actually...

It is true that the debt markets are slowly getting back to normal, but some of the debt segments are permanently gone now --like sub-primes, and its impact is still effecting the growth basically or the stock market in general. The debt related sell offs basically effected even the highest quality issues in the stock market since July...

The bond market is exponentially bigger than the stock market, saying that the money will flow into the stocks immediately is simply too optimistic. It is usually the excess liquidity via buybacks or stock based financing (secondary IPOs etc) that will go into the stocks directly and the money has to be still created in the bond market first...

So, I think the growth might sustain to keep the indices where they are until the credit growth rate improves again, however I really do not think the stocks will be able to rally much without the bonds. This only happens under the exceptional conditions that we can discuss more like an inflationary blow off, but I don't think we are in one of those hyperinflationary periods right now or a few months more, especially while the central banks are trying to push billions just to save the markets from collapsing only a few weeks ago...

- kisa

Edited by kisacik, 10 September 2007 - 01:29 PM.