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FNMA 4.0 GAINED 31 BPS today... Despite 6billion in T-notes auctioned off today.
Foreign participation: 26.2% today...vs...40% which is normal for the 10 year offering. Hmm.

Dow is DOWN 186 points. The International Monetary fund released a report suggesting that there are FOUR T-R-I-L-L-I-O-N dollars worth of "toxic" bank assets out there. They
estimated that THREE trillion of that value is in the US. WOW.

Perspective: CDO's are included in that. A CDO is essentially ONE asset that is a WHOLE BUNCH of receivables in one BOX. Receivables like student loans, credit cards, mortgages, auto loans are ALL lumped into one box...then "shares" of the box are sold to investors. Based on the "mix" of receivables and the "weighted statistical likelihood" that the types of receivables will "default"...the "BOX" could get a AAA rating...even if there were some totally CRUMMY investments that investors would not otherwise purchase included. This is part of what led to the "blow-up."

Okay: so because these types of derivatives were almost entirely unregulated...we
have NO IDEA what is REALLY in them and when the "toxic" part of the CDOs will
present itself. The "estimate" put out by the IMF is just a best guess...but also is lumping so many other GOOD investments in with "BAD" because of this ambiguity...so the "REAL" toxic assets are likely MUCH less than what is reported. This is actually GOOD news that investors are digesting the scope of the "problem" even if it is overblown somewhat...because as we know
"psychology" is everything in our markets. SO: if the problem is dealt with "emotionally" NOW...when we are "used to this type of news"...it will not be a "surprise" when our markets are further into an apparent turn around.

Have a great day!