Tuesday, June 17, 2008

Cluelessness on the News Hour

Last night Ray Suarez was chatting breezily with a youngish Wall St broker type. They traded market jargon back and forth and sounded very hep. Then the broker guy said something like "Of course the market for mortgage backed securities froze up last fall and still hasn't unfrozen" Wow. Understatement of the year. A better description of the situation is that investors wised up last fall and won't touch mortgage backed securities with a ten foot pole. And there is no reason to believe investors will ever buy them again.
Buried in the fine print of mortgaged backed securities is language that means "If the mortgages "backing" this security default it will cost you, the security owner. The security will loose value and/or reduce dividend payments. And by the way, said mortgages are all sub prime. "
Now that investors understand the fine print (burned investor hand teaches best) they have resolved never to get mixed up in them again.
I expect Hell to freeze over before that market "unfreezes".
Ray Suarez never called him on it. Was Ray merely being polite (he is a nice guy) or was he clueless too?

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