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Commentary

ABX Home Equity indices sliding again

The ABX HE indices, which basically shows prices at which home asset backed securities are quoting, are sliding downwards again.

ABX Home Equity indices sliding again

This is the ABX-HE-AAA-07-2 index – approximates prices of AAA rated securities against home mortgages, sold in the second half of 07.

This is AAA, and quoting at 54 cents to the dollar. The subprime indices of nearly all of the last two year mortgages are quoting at less than 10 cents. All the values are at or near all time lows, and the slide is apparent in the last week or so.

The first set of dips was noted in July 07, and in Nov 07 I wrote about it. Heck I was scared of a fall to the 83 levels at that time – today it’s literally lost 40% more.

In Feb the next serious dip happened, and soon, Bear Stearns was bust.

Since then we’ve had the fed reducing rates, some recovery, a fall again, further reduction by the fed, providing more and more liquidity, and even allowing such AAA securities to be pawned to the fed in exchange for money.

The Fed rate is at all time lows, and still, foreclosures stay very high – and home prices are going south.

Is this the beginning of the third wave? Should we prepare for more bad news? How do we get impacted in India? Let’s wait for it to unravel. The answer is always apparent in the price first, and then in the news.

  • SM says:

    >Seems like your kid is also keeping you awake during nights 🙂 I have been myself blessed with a boy very recently…

    That’s July’07 and Nov’07, not ’08..

    Cheers
    SM

  • Deepak Shenoy says:

    >SM: THanks for that, fixed. And congratulations! All the very best, and enjoy the time – it’s more fun than people give it credit for 🙂

  • Anonymous says:

    >Seems the massive deleveraging taking place in the Hedge Fund World and Banking Space, if affecting the ABX Index. Since assets are being sold in the deleveraging process and procceds being brought back to the lenders (banks) I think the next phase in the credit crisis is just beginning.

  • Mumbai Journo says:

    >Hi Deepak,

    Needed you views on a certain point on the Notes to Accounts of Kamat Hotels.

    “b) Prior Periods expenses include direct expenses of Rs 75.304 million incurred in earlier years for marketing timeshare membership, which have been charged to revenue during the period net of equivalent amount transferred from advance timeshare membership fees received in earlier years as per modified method of accounting time share income as advised.”

    Could you tell me what this means for the health of the company? How will this impact future earnings?

    On the whole, the results of KHIL has been good though fourth quarter results were dull.

  • Anonymous says:

    >Latest ABX-AAA index has come down to 52.5. Seems to be a good guage to predict Global Credit Crisis. Watch out for another one if it goes down below 50.