Bonds Backed by Mortgages Regain Allure

[Eugene]

Source: New York Times

February 18, 2012, 1:30 pm Hedge Funds

Bonds Backed by Mortgages Regain Allure
By AZAM AHMED

Some Wall Street investors made money as the mortgage market boomed; others profited when it fell apart.

Having reaped big gains during both of those turns, Greg Lippmann, a former star trader at Deutsche Bank, is now catching the next upswing: buying the same securities built from mortgages that he bet against before the financial crisis erupted.

Mr. Lippmann is joined by other big-money investors — mutual funds like Fidelity as well as hedge funds — in riding a wave of interest in the same complex loan pools that nearly washed away the financial system.

The attraction is the price. Some mortgage bonds are so cheap that even in the worst forecasts, with home prices falling as much as 10 percent and foreclosures rising, investors say they can still make money.

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Read more: http://dealbook.nytimes.com/2012/02/18/bonds-backed-by-mortgages-regain-allure/

[DJ13]

1. Thats like saying theres a renewed interest in the ice concession on the Titanic

Those financial 'geniuses" never learn.

[lastlib]

2. PIMCO has been buying 'em by the billions for months now.

Several days I have seen $3-4 billion in FNMA/GNMA trades go over my desk. Not quite as fast as they unloaded 'em in 2008, but still buying in massive amounts.

I don't guess they got rich by being stoopid....

[elleng]

3. This was discussed here:

http://www.democraticunderground.com/11166472

[toddwv]

4. And nobody wants to remove the repeal of Glass-Steagall.

Every election, we should clear any incumbent out of Congress until we get people who stop acting like idiots.

[unblock]

5. you could hold elections every day. no shortage of people willing and able to act like idiots!

[westerebus]

7. Hasn't happened in 200 + years..

just saying, you need a really long time line or other means to effect such a change.

[unblock]

6. finding allure in old bonds at 10 cents on the dollar is not the same as new bonds!

nor is there much to be read into the exact price of manure.
yes, one can profit by buying manure low and selling high.
but but for the rest of us, it's still manure.

new bonds are a bad buy mainly because interest rates are so low that the inevitable eventual interest rate increases will kill most bonds.