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I have no respect for any person who mistreats his domestic workers.
BUYING DISTRESSED DEBT --- SOON
The sequence from counterpary default to contrarian opportunity.
We will buy distressed debt because we see the following sequence of events:
1. Credit rating downgrades
2. Counterparty defaults and abandonment
3. Further price weakness in distressed debt
4. Buying opportunity at deep discounts
5. Modest recovery in tranches and individual mortgage paper followed by material recovery in most of the acquired portfolio
Recent entry into the bond guaranty sector by a high profile investor suggests that buying the lender / or counterpary at a deep discount might be a preferred strategy for the very well endowed investor.
We want to talk to others who share our enthusiasm for this contrarian investment strategy on a smaller scale.
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While the sheer volume of bubble/hedge fund/MBS-CDO implosion stories appearing in the news daily nowadays, it can be difficult to pick out the "pearls" among the pebbles, or the truly extraordinary items from the mundane "yet another Wall Street multi-billion-dollar write-down". (Btw, amazing to see bubble implosion lead headlines every day on Bloomberg, MSNBC & CNNMoney, etc. compared to just 2-3 years ago, isn't it? Any long-timers remember Face Reality, Fake P, MarinaPrime, CuriousCat, DAiryQueen, etc. brushing off our concerns as Chicken Little, doomster hand-wringing?).
This one recently caught my eye, and stayed in the back of my mind (via Tanta with Calculated Risk):
I've often read MSM quotes from Wall Street outfit bigwigs (Goldman Sachs, Merrill Lynch, Morgan Stanley, Chase, Citibank, etc.) to the effect that, "Even if all these MBSs/CDOs, derivatives, swap agreements & $Trillions in other financial Dark Matter go 'boom!', we're ok, dude. 'Cuz we, like, hedge 'n stuff."
Apparently, (if I'm reading Jim Keegan correctly), if your "insurance company" goes belly-up, then you "may" have a problem collecting on that insurance policy. So, I guess it comes down to a case of gambling --even on the bearish/short side-- is *still* gambling?
Am I interpreting this correctly?
Discuss, enjoy...
HARM
#bubbles