Comments on: The Value of Having a Deposit Franchise (or a Printing Press) http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Mon, 13 Feb 2012 16:41:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Tomxphttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-3223 Tomxp Sun, 19 Aug 2007 22:36:12 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-3223 I had the enormous good fortune to be away from constant exposure to the market this last week. No WONDER you weren't feeling well! I tremendously enjoy your blog and your insights. NONE of us, save the Almighty, can know everything! You're doing a fine job and I've touted your blog to others of my acquaintance. Hope the Friday rally improved your mood and that your health is good. And, most importantly, remember that God's blessing and love is more important than ALL of this other stuff! I had the enormous good fortune to be away from constant exposure to the market this last week. No WONDER you weren’t feeling well!

I tremendously enjoy your blog and your insights. NONE of us, save the Almighty, can know everything! You’re doing a fine job and I’ve touted your blog to others of my acquaintance. Hope the Friday rally improved your mood and that your health is good. And, most importantly, remember that God’s blessing and love is more important than ALL of this other stuff!

]]> By: PaulinKansasCityhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-3042 PaulinKansasCity Fri, 17 Aug 2007 03:11:09 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-3042 Great commentary Gentleman! In terms of the panic I had several high maintenace individuals call and give me a hard time; and two pulled their money out of the stock market. As good a signal as any for the short term anyway. I really like HCBK in this environment with their surplus capital for bank/thrift exposure; Great commentary Gentleman! In terms of the panic I had several high maintenace individuals call and give me a hard time; and two pulled their money out of the stock market. As good a signal as any for the short term anyway. I really like HCBK in this environment with their surplus capital for bank/thrift exposure;

]]> By: amccabehttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-3009 amccabe Thu, 16 Aug 2007 06:08:36 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-3009 I hope you feel better, too. This has been a tough summer. I hope you feel better, too. This has been a tough summer.

]]> By: KSmithhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-3008 KSmith Thu, 16 Aug 2007 05:44:30 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-3008 David -- thanks for the heads up on my blog -- very thoughtful. A few points on DFR that I thought were relevant and some questions: 1. DFR said on their call that they do not have another major repo refunding until the end of the August and that will only be a portion of their repo base. Seems like the rolling refunding will either give them time to increase the cushion or will turn this into a slow motion car crash. 2. The deal with Deerfield -- IF they are able to get the cash to do the deal and it closes in the next few days as promised, how does that change their liquidity situation? Would it all be legally separate or could the additional assets and income stream help the portfolio (I recognize the size differential is huge but at this point every bit helps right?) 3. If the REIT portfolio becomes insolvent, what happens to the management company? Would there be something left over for equity holders or would any equity in the management company be used to pay off the portfolio creditors? great analysis on the markets -- thanks for writing. Kyle David — thanks for the heads up on my blog — very thoughtful. A few points on DFR that I thought were relevant and some questions:

1. DFR said on their call that they do not have another major repo refunding until the end of the August and that will only be a portion of their repo base. Seems like the rolling refunding will either give them time to increase the cushion or will turn this into a slow motion car crash.

2. The deal with Deerfield — IF they are able to get the cash to do the deal and it closes in the next few days as promised, how does that change their liquidity situation? Would it all be legally separate or could the additional assets and income stream help the portfolio (I recognize the size differential is huge but at this point every bit helps right?)

3. If the REIT portfolio becomes insolvent, what happens to the management company? Would there be something left over for equity holders or would any equity in the management company be used to pay off the portfolio creditors?

great analysis on the markets — thanks for writing.

Kyle

]]> By: Josh Sternhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2995 Josh Stern Wed, 15 Aug 2007 23:58:08 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2995 Following up my own question, this piece suggests part of the strength in high yield, besides piggybacking on Treasuries, could be more unwiding: http://www.cnbc.com/id/20278980 Unwinding is the best explanation for most of the stuff I see from day to day. Following up my own question, this piece suggests part of the strength in high yield, besides piggybacking on Treasuries, could be more unwiding: http://www.cnbc.com/id/20278980

Unwinding is the best explanation for most of the stuff I see from day to day.

]]> By: Josh Sternhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2990 Josh Stern Wed, 15 Aug 2007 21:03:14 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2990 I forgot to mention my question. What do you make of the fact that high yield corporate bonds sold off before the equity market and now seem to be rallying? I'm looking at HYG, for example. I forgot to mention my question. What do you make of the fact that high yield corporate bonds sold off before the equity market and now seem to be rallying? I’m looking at HYG, for example.

]]> By: Josh Sternhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2989 Josh Stern Wed, 15 Aug 2007 21:01:56 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2989 I like to think of two competing views of the market; one is an analogy to a swimming pool where the flow of money/liquidity in and out moves the level up and down. The other is a meter where prices reflect opinions of the underlying equity/asset values regardless of the money flow. In the short term, imbalances in money flow dominate price movements and price movements influence people's perception of the values. But eventually the flows change direction, and objective opinions about the underlying values act as an attractor for market prices. In terms of portfolio positioning, I think one has to go with your strong suits. If you are good at predicting money flows, then use that edge. If you are good at judging dislocations in value (both where they are now and where they are going), then use that edge. If no edge, then use index funds. If one has a lot of risk tolerance in a portfolio, then that is an edge also, and one can use it by gradually increasing virtual leverage as prices fall down (e.g. gradually increase exposure to the most value dislocated stocks with the highest beta). I like to think of two competing views of the market; one is an analogy to a swimming pool where the flow of money/liquidity in and out moves the level up and down. The other is a meter where prices reflect opinions of the underlying equity/asset values regardless of the money flow. In the short term, imbalances in money flow dominate price movements and price movements influence people’s perception of the values. But eventually the flows change direction, and objective opinions about the underlying values act as an attractor for market prices.

In terms of portfolio positioning, I think one has to go with your strong suits. If you are good at predicting money flows, then use that edge. If you are good at judging dislocations in value (both where they are now and where they are going), then use that edge. If no edge, then use index funds. If one has a lot of risk tolerance in a portfolio, then that is an edge also, and one can use it by gradually increasing virtual leverage as prices fall down (e.g. gradually increase exposure to the most value dislocated stocks with the highest beta).

]]> By: Steven Miloshttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2983 Steven Milos Wed, 15 Aug 2007 15:53:48 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2983 To all, Typo in my message to David; I take Jesus at His word, not "his", sleep deprived typo, forgive me. And AA is right, this too shall pass. Steve P.S. - Bank of Canada issued statement regarding acceptable repo collateral up here, and seems to have staunched the CP worries up here, so one less thing for the global capital markets to worry about for now. To all,

Typo in my message to David; I take Jesus at His word, not “his”, sleep deprived typo, forgive me.

And AA is right, this too shall pass.

Steve

P.S. – Bank of Canada issued statement regarding acceptable repo collateral up here, and seems to have staunched the CP worries up here, so one less thing for the global capital markets to worry about for now.

]]> By: Doughttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2971 Doug Wed, 15 Aug 2007 12:21:17 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2971 One mortgage REIT that may ride out the storm is Redwood Trust (RWT). It has lots of liquidity, and its (mostly prime) portfolio is doing very well. Trading at GAAP book value and below "core" book value (i.e. ex-FAS-115 for you insurance types) Long RWT One mortgage REIT that may ride out the storm is Redwood Trust (RWT). It has lots of liquidity, and its (mostly prime) portfolio is doing very well. Trading at GAAP book value and below “core” book value (i.e. ex-FAS-115 for you insurance types)

Long RWT

]]> By: AAhttp://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/comment-page-1/#comment-2970 AA Wed, 15 Aug 2007 12:10:23 +0000 http://alephblog.com/2007/08/14/the-value-of-having-a-deposit-franchise-or-a-printing-press/#comment-2970 Dear David, Feel better! This too shall pass. Dear David,
Feel better! This too shall pass.

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