What's a C.D.O.?

I second what FT Alphaville has to say. Maybe they should send the link to all the "smart money" guys that are holding all this stuff so that they finally understand what they are holding.....

Ich kann mich nur FT Alphaville anschließen. Man sollte diesen Link all denen schicken die Besitzer dieser Papiere sind damit Sie endlich begreifen was für eine halsbrecherische Konstruktion den Weg in die Bücher gefunden haben und warum es täglich vorkommen kann das aus AAA über Nacht Junk werden kann. Ich denke da ganz besonders an ein paar deutsche Landesbänker......

Far and away one of the best graphics we’ve seen. Kudos to Felix Salmon and the people at Portfolio

Make sure you click here to start the interactive beauty!

Laßt euch dieses Schmuckstück nicht entgehen und klickt hier um die interaktive Schönheit zu betrachten.

It remains to be seen if the write down from Royal Bank Of Scotland is enough.... Maybe the age of the CDO portfolio is an explanation why they still value the mezzanine tranche with 70 percent..... The same CDO in 07 would be definitley close to zero....

Bin gespannt ob die Abschreibung der Royal Bank Of Scotland genug sein wird.....Evtl. ist ads bereits fortgeschrittenen Alter des CDO Portfolios ja die Erklärung dafür das die Mezzanine Tranche immer noch mit 70% bewertet wird. Ein CDO mit Baujahr 2007 würde wohl eher bei null notieren......

At 30 November, GBM's exposure to these super senior tranches, net of hedges and write-downs, totalled £1.1 billion to high grade CDOs which include commercial loan collateral as well as prime and sub-prime mortgage collateral, and £1.3billion to mezzanine CDOs based predominantly on residential mortgage collateral. The CDOs are largely based on ABS issued between 2004 and the firsthalf of 2006

And with news like this Surge in Auto-Loan DelinquenciesIs Latest Trouble for the Economy via the WSJ it should be clear that the problem is spreading to all parts of securitisations.

Und mit Meldungen wie diesen Surge in Auto-Loan DelinquenciesIs Latest Trouble for the Economy dürfte auch bald der nächste Pfeiler der Verbriefungskredite mehr als nur leichte Schlgseite bekommen....

First came housing loans and the subprime-mortgage crisis.

Now, signs of stress are creeping into another key consumer area: auto loans.

Delinquencies in the auto-loan market are ticking up to their highest level in several years. Lenders are tightening terms in some cases, and interest rates have risen from the rock-bottom levels of a few years ago. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month,according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month.

Harley Davidson "retail sales have fallen sharply during August"

Another sign that maybe the housing slump isnt´t contained. You better don´t show them the view from the just released Beige Book. Will this perma spinning from officials ever stop ? They are making things only worse. No wonder gold is acting....

Die Einschläge das in den USA etwas aus dem Ruder läuft kommn näher. Es ist wohl keine gute Idee den Leuten von Harley die letzten Aussagen der Fed vom Beige Book zu zeigen. Das permanente schönreden ist wirklich nur noch peinlich. Im Endeffekt wird durch das "Perma Spinning" alles nur noch verschlimmert. Kein Wunder das Gold in Bewegung kommt.....

On top of the slump in sales Harley faces another problem with its financial division.

Zudem hat Harley wie wohl etliche andere noch erhebliche Probleme in Ihrem Finanzierungsarm

Kass: Harley Hogs Feed at the Subprime Trough

In 2006-07, 28% of HDFS loans in its securitized pools had FICO scores below 650, which is considered subprime, which is very close to the 21% subprime market share of total mortgage loans made the previous year.

During the company's investor day on Feb. 28, Harley acknowledged that several of the securitization pools had breached their credit-quality metrics -- like subprime, the most recent pools' credit losses and delinquencies are rising faster than expected and more rapidly than earlier pools.

Harley-Davidson announced today that it expects to ship between 86,000 and 88,000 Harley-Davidson® motorcycles in the third quarter of 2007. Shipments of between 91,000 units and 95,000 units were originally planned for the quarter

"Initial reports about our 2008 model year motorcycles from our dealers and the media have been excellent, but this is a difficult time for the U.S. consumer," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. "Coming off a negative U.S. retail sales trend in the first six months of the year, we ran an effective promotion in July that increased retail sales and reduced inventories of 2007 model motorcycles. However, our U.S. dealers' retail sales have fallen sharply during August.

> Even if you assume that the "promotion" in July has eaten some August sales the wording is pretty clear. And it shows that they were able to sale prior to August only if they have offered big discounts.

> Selbst wenn man einwenden kann das die "Verkaufsoffensive" im Juli wohl einige geplante Augustkäufe vorweggenommen hat zeigt es doch auch deutlich das ohne größere Rabatte offensichtlich nicht mehr viel abzusetzen ist......

Looking ahead to 2008, the Company anticipates the U.S. retail motorcycle environment will continue to be challenging

Kass: Harley Hogs Feed at the Subprime Trough

kass makes a very good point and this is just one more example how widespread the addiction of debt is especially in the us. anybody (including bernanke....) who thinks that the housing subprime mess is an isolated event that won´t infect other sectors will be in for a nasty surprise.


kass trifft es mal wider auf den punkt. harley ist nur einbeispiel von vielen das zeigt wie weit speziell das us wirtschhftswesen mit der versorgung von immer mehr krediten verwoben ist. jeder (schließe da bernanke mit ein) der meint das die subprimeprobleme im immobiliensektor isoliert bleiben wird wohl noch ne weniger schöne überraschung erleben.

Judging by the commentary and the virtual invulnerability of worldwide equity prices, most see only a speed bump in the recent subprime scare. There is still a general belief on the part of the investment community that the mess is a containable fluke.

thanks to http://www.coxandforkum.com/

I have stressed the likelihood of a subprime contagion. After all, subprime is subprime and credit is correlated. Lower-quality, more-levered lending (with less collateral) is not confined to consumer loans, credit cards, homes, recreational vehicles and autos -- as investors might soon find out.

Even motorcycle (loans) are hitting potholes!

Indeed, it appears growing credit losses and delinquencies are beginning to render Harley-Davidson's motorcycle loans, well, increasingly like hogs.

Thirty-day delinquencies (and loss trends) in Harley-Davidson's receivables book offer a clear picture that credit-quality issues are broadening as HOG's receivables experience has begun to trace a pattern of deterioration that we first began to see in subprime mortgage loans during the first half of 2006

Harley-Davidson's 30-Day Delinquencies
4Q2006	5.18%
3Q2006	4.46%
2Q2006	3.61%
1Q2006	3.69%
4Q2005	4.83%
3Q2005	4.07%
2Q2005	3.66%
1Q2005	3.60%

As I have mentioned previously, Harley's finance subsidiary (HDFS) funded almost half of Harley-Davidson's motorcycle loans. Like subprime mortgage loans, HDFS' hog loans are pooled and securitized to institutional buyers. Unfortunately -- in credit trends and terms -- HDFS is also beginning to look more and more like New Century ......

In 2006-07, 28% of HDFS loans in its securitized pools had FICO scores below 650, which is considered subprime, which is very close to the 21% subprime market share of total mortgage loans made the previous year.

During the company's investor day on Feb. 28, Harley acknowledged that several of the securitization pools had breached their credit-quality metrics -- like subprime, the most recent pools' credit losses and delinquencies are rising faster than expected and more rapidly than earlier pools.

This is beginning to force Harley-Davidson to fund additional cushion reserves in the triggered securitization pools, much in the same way subprime mortgage originators have had to buy back bad loans. This takes a hefty bite out of HDFS' profitability by reducing its net interest margin.

Should the recent trend of rising credit losses and delinquencies in Harley-Davidson's loan-receivable book and in the securitization pools of their financial subsidiary (HDFS) continue, tighter lending practices likely will be instituted, and institutional buyers will be less receptive to buying HDFS' securitized pools. This could serve to reduce Harley-Davidson's sales growth and profitability.

> surprisingly harley has almost performed as bad as countrywide.....

> es ist wirklich erstaunlich das das harley fast so schlecht wie countrywider (der größte us hypothekenfinanzierer abschneidet )

Sound familiar?
It is beginning to look like the motorcycle lending markets are no longer "born to be wild." And, not surprisingly, I am still short Harley-Davidson.

More importantly, the fungus of subprime is beginning to spread into asset classes other than housing and mortgages. Don't believe for a moment that Harley-Davidson's dealers or the parent company were any less reluctant than the mortgage brokers to serve up loans for their product.

And last time I looked, a motorcycle is a discretionary item that is far less secure and stable than a home.

disclosure: short cfc and since visiting the "harley days" in hamburg a big harley fan