Reddit Posts
Interview of James A. Mai and Ben Hockett from Cornwall Capital
UBS takes $665M hit for RMBS matter in Q1; looks forward to Credit Suisse merger
2023-04-11 Wrinkle Brain Plays - In the style of Abraham Lincoln
Hot Stocks: RV stocks drop; CHGG downgrade; NRGV surges on raised forecast; RMBS climbs
Credit Suisse looks for capital from Middle East, top banker to leave
Wall Street On Parade Jun 30, 2022: Deutsche Bank and JPMorgan Chase Have Been Trading Like Clones for Two Months; Both Are Down Almost 30 Percent Year-to-Date: “Looking like one is tied with an umbilical cord to Deutsche Bank has its perils on Wall Street.”
How to pick up 2 Tax Free Public Companies & join a Future DIVIDEND at pennies per share?
Only Penny stock that can align a new common investor with world class investors with tremendous track record restructuring very similar co
Only Penny stock that can align a new common investor with world class investors with tremendous track record restructuring very similar companies to this Penny Stock.
Holding my AMC, but also diversifying more, thoughts on RMBS?
Still Holding AMC in my diversified portfolio, What’s everyone’s thoughts on RMBS
Does NOVC 2018 14A Proxy hold the real narrative on restructuring NOVC so as to use 730M NOLs + Rights that control most of the collateral assets in $3B RMBS portfolio 600 Bpts WAC? I say YES
$NOVC see massive increase in Short Volume. Who would short a penny stock controlled by Fortress parent SoftBank, EJFcap.com + MassMutual Barings & co investors running Board of Directors. ALL shares out outstanding per 2020 10K are owned by these investors + sm count. Yet > 30M shares trade 1.1.21
$NOVC see massive increase in Short Volume. Who would short a penny stock controlled by Fortress parent SoftBank, EJFcap.com + MassMutual Barings & co investors running Board of Directors. ALL shares out outstanding per 2020 10K are owned by these investors + sm count. Yet > 30M shares trade 1.1.21
$NOVC see massive increase in Short Volume. Who would short a penny stock controlled by Fortress parent SoftBank, EJFcap.com + MassMutual Barings & co investors running Board of Directors. ALL shares out outstanding per 2020 10K are owned by these investors + sm count. Yet > 30M shares trade 1.1.21
SoftBank sits on Billion dollar stock under it's Sub Fortress
Mentions
ALAB and CRDO plus AVGO. If Alab is too high, can get into Labx for exposure. Anything AI that is helping to build data centers is my focus. I've held all of these for a minute, and all are 100 over my buy price. I also love VST and it is currently in a buy zone. RMBS and SNDK with NTNX are low lying stocks beginning their blow up. Data centers are being built everywhere so for the next 5 years expect these companies companies to blow up. Of course I own all the above WSB stock plays but seriously real investors aren't just playing them. Anet and Net and NVDA. I can go on definitely keeping my Sofi and Rddt.
RMBS sliding but I loaded up on long calls
I almost forgot myself. It was a very cool time but I knew a few dudes who got wiped out in the early 2000s. I sold most of my stocks mid 1999. I made a lot of money on INTC, RMBS and COMS.
🫡, have you looked at GRRR, UAMY, RMBS?
RAMBUS($RMBS) to the 🚀🌖(not financial advice-just research it). You need memory (RAM) to run these AI stuff but being left out money wise…
I’m short STX, long RMBS 🤌
Casual 2x on my $RMBS calls fuck yeah
RMBS MSFT HOOD i guess technically also GOOGL
CLS, RMBS, CDNS, and AMKR all look pretty solid
*But my RMBS calls still gonna print tho right?*
$RMBS ahead of earnings
Go with ARM or RMBS.
$RMBS before earnings btw
Kinda gonna do some homework on RMBS. Earnings coming up and strong ties to the advanced Chip market and steady growth.
Meanwhile HIMX QRVO RMBS TXN are sleeping sound with no activity
My opinion is I choose SMH so I don't have to try and divine such subtleties.... If I was to pick a second chip stock after NVDA though, it wouldn't be any of these, with AVGO (and TSM) the obvious choice. Next I'd look at all the big chip equipment stocks, then ALAB, MU, RMBS, CRDO and maybe MRVL. Of your choices tho, I'd go with AMD, as it has a larger fan base that would respond very positively to any really good news.
And I’ve worked in CMBS for 7+ years so I’m very familiar with how these deals work too. Go ask your bosses who worked in RMBS before the GFC how those deals lined up compared to the ones today. I guarantee you the credit quality is substantially better. Fannie Mae RMBS default rates have topped 1% since 2009 and for good reason. The industry has much tougher underwriting and credit standards than a generation ago
Just read my original comment, its e x tremble simple and straightforward. I've been working in RMBS for 10+ years and worked on countless shitty deals rated by Moodys so please enlighten me if you think something I said was wrong.
$NXPI Reports Q1 EPS $2.64, consensus $2.60 Reports Q1 revenue $2.84B, consensus $2.83B. Sees Q2 EPS $2.46-$2.86, consensus $2.65 Sees Q2 revenue $2.8B-$3B, consensus $2.85. Sees Q2 gross margin 55.8%-56.8%. "NXP delivered quarterly revenue of $2.84 billion, in-line with the midpoint of guidance. NXP's first-quarter results and guidance for the second quarter underpin a cautious optimism that NXP continues to effectively navigate through a challenging set of market conditions. Sounds like the CEO is stepping down as well. $RMBS Reports Q1 EPS 56c, consensus 50c Reports Q1 revenue $166.7M, consensus $162.83M. "We had an excellent start to 2025, beating revenue and earnings expectations for Q1 with very strong cash from operations and record product revenue from memory interface chips," said Luc Seraphin, chief executive officer of Rambus. "Through our ongoing strategic execution and robust business model, we continued our market leadership in core DDR5 chip products and progress in new products, positioning us well to deliver long-term growth and continued value to stockholders." Sees Q2 adjusted product revenue $77M-$83M Sees Q2 adjusted licensing billings $64M-$70M.
The Chinese economy is relatively bad by some metrics and people are feeling the pressure but it's also quite overblown by western media. On the housing price collapse, China has long built "ghost cities" to meet demand before demand even exists. Chinese policy has always been housing for all and it's why housing ownership is 90% compared to a lot of western countries. China can easily bailout housing via the central bank and Treasury buying RMBS like we saw during GFC and covid but we haven't seen this yet. I'm guessing this will be the last ditch policy if things become worse. On the deflation crisis, it's more a tale of supply side deflation rather than demand side so it's not as bad as the numbers suggest. However China will need to increase domestic demand as the tariffs start to bite as all the goods produced need to go somewhere. Some US exports will be bought by other nations but most will be domestic.
If RMBS goes below $50 I’m buying in big. Also like MU at $85, CNM at $42, and CFLT under $28, if we see any of those prices again soon.
Depends on the parameters of “investing loss”. I purchased $10K of NVDA in 2002. Sold it the next day at a $1000 loss. HAD I held it to this day (like INTC and RMBS), it would have been worth up to $18M. I repurchased it in ‘06, so I don’t dwell too much. Oh, and FUCK INTC!
Sticking with GOOG forever. As for semis, KLAC had great results in the WFE area so AMAT should do fine next week too. RMBS is a good midcap in the semi space and had great results last week as well. Will nibble on AMZN if (big if) it sees $200 again.
RMBS still growing at a great pace. Solid ER.
Most mortgages are pooled into mortgage backed securities. When you package 30 years mortgages into MBS, you end up with something that has duration similar to the duration of a 7 to 10 year Treasury. Most residential mortgages are pooled into RMBS which are guaranteed by Fannie Mae, Freddie Max or Ginnie Mae. These MBS are therefore guaranteed by a quasi-government entities and carry a AAA credit rating similar to that of the US federal government. Therefore, MBS are comparable to 10Yr Treasuries in credit quality and duration and are priced relative to 10Y Treasuries. MBS having more complexity and prepayment/convexity risk are priced at a premium to the Treasury counterpart. Of course this is simplified and individual MBS aren't directly comparable to 10Y Treasury at every instance but rather may be most comparable to 8.5 years Treasuries or so depending on what exactly is being packaged, coupon and so on. But this creates a very strong correlation between MBS and upper intermediate term treasuries yields, and this is what drives the mortgage rates available to consumers. Going further, the MBS market also enables consumers to access 30 year borrowings at a lower rate more comparable to a 10 year borrowing rate (plus premium) without a significant credit spread, due to the quasi government sponsored credit enhancement. Fannie and Freddie were supposed to guarantee the defaults in RMBS profitably and not rely on the government, but they failed to do so in 2008 and were bailed out. Hence the whole politics and controversy around Fannie and Freddie, which were supposed to be independent and profitable corporations. This has resulted in Fannie/Freddie RMBS being considered to be basically US government securities.
No, RMBS which is residential side.
What a crock of shit. whoever wrote this article does not fundamentally understand what they are talking about. A lot of banks own RMBS on their balance sheets, mostly through agency guaranteed securities. Yes, these are at lower than market rates since many were bought 2020-2022. They could be an issue if a bank had liquidity issues like First Republic or SVB. But, most banks are well capitalized. The liquidity issues of FRB and SVB were unique to them. So, banks don’t need to sell the underwater securities and since they are agency secured (essentially no credit risk), they can just wait for them to pay off. Also, the article states that “Many of those HTM portfolio loans are approaching maturity…” as if it were bad. This would actually be GOOD for the banks, since debt paid off at lower rates can be invested into higher rated debt. It’s just a poorly written article made to sound sensational in order to get clicks.
Good thing bottom of the barrel office properties aren’t packaged into RMBS then
Dawg, the losses in question relate to RMBS. And CRE properties that back CMBS are primarily class A. Just for context class an offices are still seeing high occupancy and extremely high rents. Not everything is some shitty outdated 1950s office lmao
The underlying assets of an RMBS is not office, idiot.
CMBS is a fraction of the RMBS market.
Stored assets in 2008 were toxic. Like half the home builders went bankrupt following 2008 - market was heavily oversupplied and people were doing anything and everything to sell homes to people who could never afford them that knew nothing of the terms they were signing up for. If and when those people defaulted once their teaser rates were up banks were left holding the bag of homes they gave 500K loans on that were now worth 200K and when you consider the holding costs they were literally better off selling then for 100K. The underlying assets for modern RMBS are new, class A residential properties that are cash flowing, in very high demand, and have holding periods of multiple decades. Their paper losses are 1:1 correlated to interest rates and are only a liquidity problem in the short term, the underlying cash flow is still good it just can’t go as far when cap rates are higher due to COL. If you can’t see the difference between those 2 situations, you should not waste time talking about the topic. These are not bad securities, these are paper losses on long hold high cash flow Class A assets that have single digit vacancy rates and low to mid single digit terminal cap rates.
Yeah but the unrealized losses are on RMBS which is entirely due to interest rates. The underlying assets are occupied, cash flowing, high occupancy, and are in high demand. Irrelevant to this but retail market is extremely low vacancy, high demand right now. Just not in random mid western shitter malls.
Took the market till the open, but then RMBS jumped up. Report looked kinda meh, but valuation intrigues me for growth, they seem to be doing well in their memory end markets atm
My TMDX put gonna print, too bad AMKR and RMBS calls failed
a couple mid caps with actual compounding potential: ACLS CELH RMBS One that is nowhere near a small cap but has all the signs of a huge compounder is PDD Holdings. 50% ROE & 28% ROC. Forward revenue and earnings growing beyond 20%. Trading at only 10x forward earnings.
Have we forgotten how CMBS and RMBS (structured real estate) grew like a bubble and blew up the ocean?
Blistering barnicles; this is so dead; this shit with Cedar; it's like acquiring ABACUS and flying upside while instutitional sits short. Lord this will be painful. Cedar REIT focuses on "primary focus on grocery-anchored shopping centers in the Northeast" Every CMBS owner or RMBS owner I know; sees a decline; and higher insurance prices. With banks not willing to lend. This is dead in the water; let alone bid/ask man. But well done on the profit.
I don't follow RMBS either :( I'm bullish on the semis industry as a whole though, sorry to be so little help lol.
Copy. It's got earnings tomorrow, so too much of a gamble for me anyways. How do you feel about RMBS above $48? Looks like it could be clear sailing. However, everything is contingent on NVDA earnings. I'm hoping this might be a little more in your wheelhouse...?
It works the same way: Even with residential mortgages or securities the banks are holding at pandemic lows, they are still being provided the rate of return promised, unless there are defaults. So the return is lower than the current rate, but they would only take a loss of the decide to sell the mortgage or security before maturing which would result it a lower return, no one is buying a 2.5% mortgage at PAR value. If they hold till maturity they'll receive the full value of the mortgage when it was issued. Also, holding RMBS paper is as good as holding a Treasury bond in the Fed's eyes for capital reserve purposes, so it's healthy for banks. Banks do not actively invest in the stock market, I believe they can only do so with clients' money specifically designated for this use, I forget which regulation this is, it was created after the GFC in 2008/2009, I only remember it because I had to do so much training on it.
RMBS pools are intentionally geographically dispersed. You could short the stocks of small and mid sized Florida based banks since regional banks make 80% of commercial real estate loans… but you’ll probably have equally poor luck trying to time the market as I’ve had in Vegas. 🤷♀️
Just curious, what would you have considered without this advice? Index etf set and forget is a pretty basic and successful way of investing. Almost everyone would agree with his advice. And yes. If you’re young it likely ok to pick up individual companies you really like. This is where your appetite for risk would play in. Big difference in buying NVDA v. RMBS v. RXRX. There are levels to the speculation. Being young afford you more risk. You can always tapper back to safer investments as you progress to retirement
Plus 10% of their deposits are escrows from loan servicers (CMBS and RMBS) and lenders, which require the deposit bank to be rated higher than junk. This article explains it: https://www.cnbc.com/2024/03/04/some-nycb-deposits-may-be-at-risk-after-another-moodys-downgrade.html
I wonder how will RMBS play out vs LSCC
You'll get a nice return average to the industry but open yourself to exposure from more cyclical stocks and less financially sound stocks. Instead buy a few of the most financially sound, profitable members of the industry - do detailed due diligence to be sure you're confident in your picks. My best performers: NVDA; AVGO; ASML My worst: RMBS; ON (though ON is now undervalued)
Didn't mean to imply the stock market is zero sum. However the question still remains in my mind, if there's a net of trillions still flowing in the stock market, where is it coming out of? It's a lot of money for some small cap failing companies to equal the balance. Is it big international money coming in, is it sidelined under the mattress money, or just more printing? If residential and commercial real estate is doing badly, which it would be in high interest and low occupancy environment post covid, then the big insurance and pension funds dealing with RMBS and CMBS should be fuked from both sides and crying losses no? Either they are hedged extremely well, will start failing at some point, or they've been bailed out already. Only the last situation lifts the markets. And to your last point, if that's the case inflation will remain high and if the fed is really about their word, interest rates will then remain high as well. The stock markets were high on pricing in cuts starting from March, atleast now we know that won't happen and the Markets went even more ripping. Anyhow I went long on some stuff now so can't complain. Just trying to make sense of it but can't lol.
An oldie company like RMBS shows that the show ends one day.
I wasn’t surprised that the call options price rose as did the stock price. I was just shocked at how much. I wanted to make sure I was correct. I’ve been profitable on CC’s on AMZN, RMBS, PLTR, TSLA, and currently SQ. Besides the CC’s, all of their stock prices increased. I got caught owning TSLA when their stock price took a deep dive mid December, but bought the CC back for nothing and sold another at a lower strike. Then of course the stock roared back and I rolled it up. Each time carefully figuring profit/loss on the CC. I spend hours studying to make sure I pick the right stock to run CC’s on….high premium, solid stock on the rise, stay away from earnings day, etc. So far so good. I’m gonna give ITM calls a shot. Just a little taste first, before I really dive in. When my girlfriend asks me what I’m doing on my phone, I tell her I’m in school studying. Lol! Thanks for the feedback.
fundamentals cut: EXEL +1%, SAIA +3%, RMBS +20%
Fundamentals: HRB RMBS AVGO
Yes, but in order to get a 2008 type of meltdown everthing needs to be tied to commercial real estate. In 2008 you gave companies holding mortgages, RMBS, CDOs with RMBS, Credit Default Swaps on RMBS, and basically bets on a bet on bets that people would make their mortgage payments. It was a house of cards. As far as I understand, Commerical Real Estate has securitization (CMBS), but not at the levels of RMBS, I'm sure some of the loans are held on their books by banks.
Look, I'm not a professional but I used to hate on CNBC/Cramer a lot but after years of daily watching I think it's quite clear that it's just a hodgepodge of people giving their opinions - and once in a while there are some really, really great ideas that come from a CNBC guest - LLY and RMBS are a couple that really outperformed the market
Sigh. Are you basing any of this off of actual stats or are you just writing things? There have been so many changes to the mortgage market, those things that caused the crash in 2008 have been regulated. I work in the RMBS market, I can see individual mortgage statistics, the underlying mortgage market is extremely healthy... But please keep talking about the coming "crash and recession", the same one everyone has been talking about for 3 years. At this rate you'll be right eventually right?
Sorry buddy, but he's right. I work in the RMBS market, I can see individual mortgage statistics. The market is extremely healthy, if you're expecting a 2008 crash I've got some very bad news for you. Most homeowners are in very good situations as far as equity, typically over at or over 30%, ARM loans are 7/1 or 10/1, so they'll have plenty of time to refinance.
Would have happened already if the Fed hadn't completely propped up the residential market by becoming pretty much the only buyer of RMBS
No one actually reads what I write. I work in RMBS, yet I have access to UNDERLYING DATA. This data tells me everything about the pool of loans, interest rates, loan amounts, type of housing, Loan to Value Ratio, FICO scores. With this I can see the health of the housing market. You're also ignoring the fact that most mortgages are at or under 3% interest. There is no evidence that a supply dump is coming in the next 6 months, it doesn't make any sense and sounds like wishful thinking. With the equity people have in their homes, they'll work out deals with their services/ lenders well before the threat of foreclosures occurs. No one is trying to get out of a house with a sub 3% interest rate, I'm not sure where your rational is coming from. If you want to wait 20 years for the boomers to die off, go right ahead, most likely their children will inherit those homes and only a small portion will hit the market. The doom and gloom you're looking for just isn't in the cards, unless something extremely drastic happens, like 2008 (which is extremely unlikely to occur given the increased regulations in the housing market) the market will remain healthy.
Ah yes, the RMBS market, which has always been a great predictor of the housing market being healthy or not... There is a lot of equity, but rates are slowly choking the market. There is also a huge amount of supply coming in 6 months or so(can't remember the exact time-frame). Price pressure will mount, and more people will try to get out of the market. With soaring credit card debt, and student loans coming back on soon, more people will be pressured on their mortgages. And when unemployment starts to tick up, more delinquency and default will rise. Also, more and more supply will hit the market, as boomers die off.
I work in RMBS so I can see the underlying data. Housing is healthy as far as the statistics go, you're not going to see large amounts of foreclosures or short sales because most homeowners have substantial equity, ARM loans are heavily regulated and most people are opting for 7/1 or 10/1 ARMs. If you're referring to agents who want to do more business, well that's neither here nor there.
I see it as a "things were never really that bad for REITs as a whole". REITs typically operate in the world of stabilized assets, so it's really a long term cash flow and cost of capital game. They are hurt when cap rates get really high not only because of valuation for sales but also on the loans they put in their properties. The 10-year Treasury getting so high keeps pushing cap rates higher. That stable cash flow is still there though, as most REITs have credit quality tenants on long term leases. When rates stabilize, valuations will stabilize and increase. Homebuilders look for margin on quick turns and a low carry cost on subdivision infrastructure and land development. They benefit from scarcity/housing policy, capital markets/RMBS, demographics, and commodity pricing. Because it's just a (big) slice of the housing market it's hard to really use homebuilders to say all that much about real estate in general. At least REITs reflect all the asset classes
They disappeared by the end of 2020 when they dropped interest rates to zero and the Fed became the only buyer of RMBS
I think you're discounting 2 things. -Most homeowners now have significant equity in their homes. Those who purchased their homes several years ago have paid down principal and have had their home values increase substantially. Those who recently purchased probably put down a minimum of 20% of the purchase price to make an attractive offer in such a tight housing market. -The most popular ARM loans has been 7/1 or 10/1. It's given people time to refinance if rates drop. 3/1 ARMs aren't popular unless a person isn't planning on living in a home for very long. Source: I work in the RMBS market and can see underlying loan data
Since you didn’t guess upper right, they figured you’d be a real HR liability at Centaur Capital. If you can’t nail this, how could you possibly apply Black Sholes option pricing to model a Satyr RMBS investment? Pricing triple put credit default swaps for Cerberus Capital? Forget it, they made the right call, sorry buddy.
It's not just about reducing risk via lowering the std deviation of your returns, it has to do with diversification. Historically bond prices have had very low correlation with equity prices (this was not true for 2010-2020 but I digress). If your equity portfolio takes a large hit, it will take a disproportionately large move in the other direction to make up for it. For example, a 50% loss this year will require a 200% return the next year to get to even -- not to even mention the two years' opportunity cost. It's tempting to look at absolute return over the 'long term" but you must realize our investment horizons are far, far shorter than the so-called long term. If you are in your mid-40's, a 100% equity portfolio has a high chance of suffering catastrophic losses. You are at risk of having to delay your retirement hoping the market recovers, or accepting your losses and accepting a lower withdrawal rate. I have a 100% equity portfolio too but I'm looking to rebalance to include about 10-20% fixed income, especially things like RMBS and floating rate notes.
Actually love how under the radar SMCI and RMBS are, semi names that have much more growth potential than NVDA 🤫😎
IBD is _extremely_ good at identifying stocks to keep an eye on. At the same time, during the Covid era, their choices of when to buy are nothing short of idiotic. I've seen them write many, many times that a stock "was approaching the buy zone" even though it was up 75%+ from a low point. FFTY is up 8% year to date, about the same as VOO, but if you shifted around their buying... essentially they buy things way too late. And then they also hold until losing a principle. Very odd philosophy, which I think is largely due to them using rules from decades ago rather than ones understanding 1) pandemic 2) FEDinflation policies 3) lack of a recession lots of people wrongly assumed would occur. Again, they have been outstanding in identifying winning stocks (like TGLS, ACLS and RMBS) but act very illogically in terms of buying and selling. Anyway, very good tool _to give you ideas_, but don't do what they say.
SMCI and RMBS basically going parabolic
Pre-market tech gainers: $RMBS +4%, $CSIQ +3.3%, $DT +2.5%, $SNPS +2.3%
$RMBS absurd relative strength in semis
The CMBS market is a fraction of the size that the private RMBS market was prior to 2008 it'll never be as big of a crisis for that reason alone. Banks also don't hold them for the most part. The actual composition of what can be put into a CMBS also varies a ton. It's not just office properties or storefront real estate space but also industrial real estate and multifamily properties among other things. It almost goes without saying that we've got 15 years of economic growth since things fell apart in 2008 at this point too on top of all that. There will be some asset write downs and there's probably some pension funds and Chinese insurance companies that will see some losses but it's not going to be anywhere near as bad as 2008.
Truist is tits deep in RMBS. PacWest is very similar to SVB and FRC. BNY Mellon is also deep in crap.
Other than DB and CS who are European and contrary to Reddit get to do a little thing called "I'm only competitive because of illegal shit" that banks can't do in the US, I don't see how many of the big American banks fail unless shit gets way worse. Regional banks sure because they don't have the same degree of regulations and are basically wedded to retail banking and RMBS generation, but until we have a real estate bubble crush RMBS in general, I don't see how this contagion gets to big banks in the US unless companies literally take their cash and put it in safes lol. We are dealing with a liquidity crisis largely caused by poor risk management of duration of extremely credit worthy securities. The coupon will get paid they're just less valuable. In 2008 we had the actual credit collapse in the underlying assets and shit actually went to zero and the shock was so great the hedging couldn't work. Given how much lower interest rates have been on mortgages in general, I don't see a wave of defaults even if housing prices collapse - and if start up tech God forbid finally dies or is forced to actually have a pathway to cash generation, we already saw from the SVB fallout ahead of knowing if assets would be protected or not that the broader banking community and the markets in general couldn't really give a fuck. So hit me with the "remind me in 8 months" but unless Wells tries to pull a Euro move and do a little fraud again, I think we're good with the big banks. In fact they'll buy up the little guys who die to increase their Too Big to Fail for the next time they really fuck up!
I see you have at least one Cinderella team going deep in Wells. I just don't buy into any rebuilding hype at such a Mickey Mouse ass program. They specialized in the RMBS and that shit done for figured out and is worthless right now at this high level. Citi though understands how to slow the game down, win with mediocrity and then focus on niche things in the wings like A&D and Metals and Mining IB cash flows. But it doesn't matter cus my boy Jamie fucking Dimon is continuing the dynasty and cutting down the nets in the Fed baby! Dudes like Coach K plus Pop - you ain't stopping his game
Hoping this comment sticks as I hardly ever post on Reddit but I'm a CFA holder and work in real estate private equity placement alongside former MBS traders and live and breathe this world; I feel like I need to add my two cents to this rising comment that I find both an oversimplification and missing the bigger picture of what's happening in real time. I do like the house analogy, but a primary residence is NOT a pure financial investment (although that can be a nice benefit of owning property) while the hold to maturity bonds on a bank or other loan institution's balance sheet ARE pure financial investments. The hard truth is that as soon as the institution needs that liquidity (and at this point it's obvious that these institutions WILL need to access additional liquidity), the market value of the asset is all that matters. Even if in a perfect world where these institutions are able to hold to maturity, they are in effect losing money because inflation and the risk free rate far exceed the coupon of their current MBS, treasury and other 'safe' investments. One clarification on 'safe': the media seems to believe that the only relevant risk to consider something safe is default risk. Anyone who works in fixed income understands that there are multiple risks to consider: default risk (risk that the loan doesn't get paid back/measure of creditworthiness), interest rate risk (risk that interest rates rise, reduce the investments spread to the risk free rate, and in turn lower the value of the asset), duration risk (duration = time to maturity, i,e,. more time for confounding factors to make what is now a good investment a bad investment for a variety of reasons including the other risks listed here; more confidence in what next year will look like than what 10 years from now will look like) and inflation risk (risk that inflation erodes the return profile of your investment). Those are the textbook risks but there are even more risks to consider around currency, geopolitics, consumer behavior, cash availability and more. Too much emphasis has been placed on default risk because of the scars of 2008 (where default risk was the primary contagion) which is precisely why banks were caught off guard and are going under despite having the safest possible assets on their books from a default risk perspective. We're in an environment where agency MBS (not to be confused with the non agency RMBS that spelled trouble during 2008 GFC; agency MBS is very 'safe' in that it has close to 0 default risk) has seen market value tumble as a result of increased interest rates, and will be further stressed as FDIC unloads and other institutions are forced to seek liquidity as a result of deposits and other liquid cash equivalents being withdrawn. This is a SERIOUS downward spiral (death spiral, self fulfilling prophecy, whatever analogy you prefer) that has only just started and is hard to imagine reversing without major government intervention aka money supply increases that will only extend the long term credit cycle and make for harder to solve problems in the future.
So was everyone that wasn't a big bank highly regarded with not unwinding their 10-Years after like a year of the Fed explicitly messaging their rate plan and the yield curve reflecting that, or is there broader contagion with how RMBS was broadly packaged during COVID that is making it so sensitive to rising rates (from a value perspective, not an actual credit perspective)?
Yeah the Fed was trying to offload some MBS off their sheets, i doubt they can do that anymore. From a 2022 feb report on MBS i found “Agency residential MBS trading activity dwarfs the other segments of the market, with $288bn of daily trading volume, compared to $2.7bn for CMBS and only $0.5bn for nona- gency RMBS.” This is all USD-income securities with treasury being 600B DTV. So it will probably have to spread out if sold off.
Sorry but no, its completely different. The issue in 2008 was defaults of CDOs of non-agency RMBS bonds. These are agency MBS bonds, which are AAA and money good. This has nothing to do with MBS specifically really. MBS just "happened" to the type of fixed-rate bond they were holding SVB's portfolio of MBS could have been entirely in US Treasuries (*that had a similar mod dur*), and the same thing would have happened. The only commonality is the liquidity issue.
These dudes hold $58B in residential MBS as of 12/31. $14B in CMBS. Those are hold to maturity assets. Almost $7B more RMBS in avail for sale. That’s not an insignificant amount of mortgages they hold. Especially in relation to daily volume. Do they have to sell these things quickly or what?
CDO is a general category which broadly encompasses CLOs, CBOs, RMBS, CMBS, CC backed securities as well as autos. Regardless as to name, the underlying concept is the same
Agnc focus on govt backed products meaning that despite a rising rate environment, the principal and interest is relatively safe. By providing capital to homebuyers they get to capitalize on a rising rate environment. " leading provider of private capital to the U.S. housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the U.S. We invest primarily in Agency residential mortgage-backed securities ("Agency RMBS") for which the principal and interest payments are guaranteed by a U.S. Government-sponsored enterprise ("GSE") or a U.S. Government agency. " From the 10q.
PI, RMBS and AEHR are the top performing semis right now
You’re conflating institutions with investors. An investor can be Blackrock or someone who owns two rental properties. I work in mortgage finance for an institution with an emphasis on RMBS/MBS/ABS. I’m not sucking Blackrock or vanguards dick but y’all are being played to think they are this massive boogey man.
One thing nobody has mentioned, and may become relevant in the coming year… index funds and ETFs aren’t guaranteed if they fold or have massive liquidity problems. If they go boobs up, you’re basically out of luck. No FDIC, no magic bailout. You’re trusting them to have not looted the cookie jar. Of course, that would never happen where an investment bank or Prime Broker knowingly sells worthless products at “Fair Market Value.” Goldman Sachs certainly wouldn’t do that with massively toxic RMBS & CMBS products they want someone else to hold the bags on. Probably.
ORC is a 3-6x play on shares. Options will be fun too. Leveraged RMBS REIT. Currently, their profits are getting squeezed due to interest rates. 15% share buyback, only 50% of credit used in open MBS contracts. FInancials are good, and they're on a downtrend. When 7.0%-9.0% RMBS come online for purchase, their average yield will jump 50%+, and then when the fed rate cools in a year or so, the profit margin will be insane. I expect the dividend to double or triple and the stock price to 5-6x by mid 2024. Beware, I think the dividend will be cut on the 13th, so I expect a 10-15% drop in price and I will be short for it. Calls for 06/2023 will be dirt cheap in the days following. Positions: Swing trading, Currently long 17k shares, and short 8k shares. Up 16.5% realized profit in 30 days or so.
Residential Mortgage Backed Securities were a time bomb. Banks reduced their positions in RMBS to manage risk. So they jumped into Commercial Mortgage Backed Securities instead. Not like the economy will ever shut down, and people definitely will have money to continue buying things. Humor aside, I was thinking about how the Fed's monetary policy may have been deliberately bad. Drop rates to 0 so everyone refinances debt, reducing the "fuse" that is mortgage holders defaulting on loans with impending economic shift. Just a conspiracy
You guys know that old 1990’s-2000’s RMBS scheme? Bundling subprime loans and selling them as premium bonds. Remember that? Let’s start a business that does that, but with used cars. - Carvana
>Thanks for a wall of non-sequiturs. I shared several factors that brought me to my conclusion about CMBS failing, specifically in 3-4 years. I'm not sure how or why this doesn't follow what I originally presented. There generalized issues that will impact paying down commercial loans. If I'm missing something, I'd love to hear it. ​ >Could you tell me how CMBS fared during 2008 vs RMBS in 2008? They became extremely volatile with massive amounts of selling taking place. Data shows a tremendous amount of defaults for commercial real estate which ultimately impacted the CMBS and it's value. Even though the two are separate in terms of standards for the loans, MBS ultimately impacted CMBS. Are you asking this because you see MBS in the same light as CMBS over the next few years? My forecast revolves largely around interest rates and supply. I don't think demand is as much of an issue as fixing supply is and if supply gets worse, inflation will continue to go up putting more pressure on those with commercial loans. There would need to be a serious level of unemployment for MBS to enter a critical state like suggested for CMBS in 4-5 years. ​ >Would also be interested to know why CMBS today, will fare like RMBS did in 2008. As of today, CMBS are fine. Even with rates where they are at, the rate of defaults for commercial loans is at it's vertex if not just past it (moving upward). This will raise as rates go up, especially if supply lessens. Now, if the fed truly does begin it's pivot around December, then I don't think we will have a problem. All depends on how much we can correct supply and maintain commodities that support individuals with commercial loans. If I'm mistaken with my theory behind CMBS and where I theorize it to be in the coming years, I would love to hear why.