Some interesting stuff from an investments professional--but it's not cheery stuff.
Quoting from an industry newsletter written by an admitted bear, he posts:
Turning to the subprime industry, once again I heard from my friend who has been staggeringly accurate. He continues to feel that things are about to really get worse. In an email to me, he wrote: "Scratch and dent loans are killing everybody. Bids that were 92 or 93 are now low to mid-80s. It is a bloodbath, and is pressuring even strong companies to buckle. NO ONE is making any money in the market right now. We are at a point of no return for many. The next two weeks will be wild."
Another industry insider comments on the above:
“Scratch and Dent” is a real industry term. The approximate meaning is “loan with incurable defect.”
...[X's] informant is saying that scratch & dent is getting nuclear waste bids. This implies that nuclear waste is probably heading for “no bid.” [Nuclear Waste is the term covering loans in foreclosure, or where the owner is bankrupt.]
How bad is it? We don't know yet.
One reason it’s so hard to tell at the moment how bad this might get is that it’s hard to tell how many more “pending” repurchases we have out there. ...The current one seems to be more like “close the gates of mercy, shoot the wounded, and sink the lifeboats.” That does imply—as JPMorgan also implies—that the Big Dogs have more cooties on the balance sheet than they’re prepared to tolerate. Looks like total war to me.
A word to the wise.
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