An interesting article about the recent purchase of subprimre mortgages from UBS. Note that Blackrock, a very smart bunch of operators, is paying 68 cents on the dollar for these supposedly “garbage” mortgages.
Could it be that the purchase draws a line under the crisis and sets a floor for sub-prime asset prices?
It’s too early to say definitively, but the signs are very good. Larry Fink, BlackRock’s founder and chief executive, is known to be an arch-bear and has stepped away from the wholesale lending markets because he has not wanted any more mortgage or bank debt. That he is returning was heralded as a bright spot in the otherwise overcast pall of the past nine months.
Jon Peace, banks analyst at Lehman Brothers, speculated that the deal “could lift sentiment”. Credit Suisse’s Jonathan Morton said it was “positive” and “could suggest we’ve hit a low point”. Jim Reid, a credit strategist at Deutsche Bank, added that “it proves there is probably value out there” for those brave enough to take the plunge.