Wednesday, December 5, 2007

Perimeter ABCP: Market Update

Click here to view Perimeter's newsletter

Perimeter Financial has released a newsletter through their Markteplace Update on the progress that has been made thus far. A few interesting conclusions can be drawn from the information provided:

1) There is still a large discrepancy between the bids and offers. This is likely due to the lack of information available on the assets.

2) A common question being asked is "What do these transactions mean?" This speaks to the fact that investors are still not receiving adequate responses to their questions on the underlying structures. It would be prudent for investors to seek professional advice from individuals who have had a structuring role in the industry to fully understand what they have purchased.

3) Another anonymous comment cited in the newsletter is "All my assets are AAA, I wouldn't accept any haircut beyond 5%." Because investors have purchased AAA investments and those investments continue to be affirmed AAA, investors continue to believe they should not accept any bid too much below par. This comment reiterates that investors are continuing to rely on the AAA rating. My advice for investors is that they need to learn about the assets, methodologies on ratings and figure how to determine for themselves that the assets are still AAA. Without a real understanding of the assets are structured, AAA is a relative term.

If there is one lesson to be learned from this entire situation, it is that investors need to do their own due diligence for all investment decisions.

Daryl Ching
Managing Partner
Clarity Financial Strategy

No comments: