Oh boy... Here we go again.

graphrix_IHB

graphrix_IHB

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<a href="http://www.ocregister.com/money/securities-county-investment-1935265-structured-vehicles">OC credit crunch again?</a>





<p><em>The credit crunch has taken a tiny bite from Orange County's investment pool.</em></p>

<p><em>Treasurer-Tax Collector Chriss Street said Tuesday he discounted 17 county-owned securities by nearly $14 million after a ratings agency warned it might downgrade the securities. </em></p>

<p><em>The discount amounts to less than half of 1 percent of the $6 billion pool. So far the discount exists only on the county's books. If Street can avoid selling the securities he should eventually get full value for them.</em></p>

<p><em>Street said he doesn't plan to sell the securities because "there's no need. … These investments are still rated triple-A," the highest possible rating.</em></p>

<p>ROFL, dude... there are no bids for this crap, AAA or not. And, how much longer before these are no longer rated AAA? Just keep holding on to it, don't worry, the market will come back.


</p>

<em>The county has been buying structured investment vehicles since at least 2001 but stepped up its purchases two years ago. Today it owns $830 million worth, or 14 percent of the pool's total assets. That's up from 5 to 10 percent two years ago, said Paul Cocking, the treasurer's chief portfolio manager.</em>

<p><em>Street and his staff said they're convinced the assets underlying these securities are healthy. </em></p>

<p><em>For example, while about 15 percent of the assets are mortgages, they're outside the troubled U.S. mortgage market in places like the United Kingdom, the Netherlands and Australia, financial analyst John Byerly said.</em></p>

<p><em>The securities are sold only to big investors who typically must pay at least $500,000 to get a stake. </em></p>

<p><em>Orange County is the sole owner of some of these securities and, in other cases, is among four or five owners, Cocking said.</em></p>

Oh great, that makes me feel soooo much better. So, you have been buying more of this crap as it has become crappier. It's not like the UK is in a housing bubble or anything like that. I mean, they have even less land than we do, and that makes it safe.


<p><em>These securities typically pay about 5.25 percent to 5.65 percent, a fat return for risk-wary government investors.</em></p>

<p>WTF? Are you serious? This garbage isn't worth a 10% return for the amount of risk. And, if an under 6% return is fat, then that better be on a monthly basis, not annual. Risk-wary would have bought treasury bonds when they hit 5%, not toxic waste.</p>

<p><em>Among the skeptics: Pimco, the Newport Beach-based bond trading giant.</em></p>

<p><em>"We didn't think they paid enough for the risk," said Josh Anderson, a Pimco expert on the securities.</em></p>

<p><em>Pimco has bid on assets held by some troubled structured investment vehicles, Anderson said, and "they aren't pretty."</em></p>

<p>That is the most sensible part of the article. My gawd, I am having a deja vu.</p>

<p>Why is Chriss Street still in his position again? Is he taking advice from <a href="http://en.wikipedia.org/wiki/Robert_Citron">Robert Citron</a>?


</p>
 
<p>Well, these people aren't going to come right out and say they did a crappy job.</p>

<p>That is the function of the people who are going to replace the present people in a year or 2.</p>
 
<p>OC, I dub thee Bagholder!</p>

<p>Someone with the time and interest should start a thread listing/linking bagholders, just for historical reference.</p>
 
<p>Speaking of Bagholders and Chriss Street...</p>

<p><a target="_blank" href="http://www.financialarmageddon.com/2007/06/looking_for_mr_.html">Looking for Mr. Bagholder</a></p>

<p>I found this fascinating piece on how the small investor will probably take the biggest hit with subprime mortgage backed securities. </p>

<p>I think my favorite part was: </p>

<p><em>Chriss Street, treasurer of Orange County, California, the fifth-most-populous county in the U.S., says no public fund should invest in equity tranches. He says fund managers are ignoring their fiduciary responsibilities by placing even 1 percent of pension assets into the riskiest portion of a CDO. </em></p>

<p><em>"It's grossly inappropriate to take this level of risk," he says. "Fund managers wanted the high yield, so Wall Street sold it to them. The beauty of Wall Street is they put lipstick on a pig."</em> </p>

<p>I wonder if Chriss will end up with any egg on his face when it's all said and done? </p>

<p>Btw, the article also has a little history on what went wrong in 1994 in OC. </p>

<p> </p>
 
<em>Btw, the article also has a little history on what went wrong in 1994 in OC.





</em>I forget the thread, but I posted a couple of good articles on the 94 CDO debacle. Margin call anyone?
 
<p><a href="http://www.ocregister.com/news/county-investment-structured-1937816-treasurer-vehicles"><strong>O.C. investments shunned by others.</strong></a></p>

<p><strong>County invested $460 million in securities that the state and other California counties considered too risky.</strong></p>

<p><em>Orange County is the only major government agency in California with public money invested in controversial securities known as structured investment vehicles, or SIVs.</em></p>

<p><em>The state has stayed away from the securities. So have the treasurers of the six largest counties other than Orange. The only major county to invest in SIVs is San Diego, which never bought as much as Orange County and cleared out its last one in November.</em></p>

<p><em>Treasurer-Tax Collector Chriss Street defended Orange County's investment in this type of security, which increased during his year on the job. The investments are suffering from "guilt by association" with subprime mortgages – although none of the county's investments contain subprime mortgages, he said, adding that he's not buying more.</em></p>

<p>Really? I would like to know then, what are these SIVs invested in please? Is it public info for what this knucklehead is investing in? If so, does anyone have the linky?</p>

<p><em>Structured investment vehicles comprise 14 percent of the $6 billion pool that Street invests for the county, schools and special districts.</em></p>

<p><em>By comparison San Diego County never exceeded 1.25 percent of its $6.2 billion pool in these securities before getting out last month, McAllister said.</em></p>

<p><em>"If something yields more than a comparable investment, there's a reason for it, and it's called R-I-S-K," said Bill Pollacek, Contra Costa County's treasurer-tax collector. "And you need to understand the collateral. If you don't understand the collateral, don't buy it."</em></p>

<p><em>"We've had one-on-one meetings with senior management, and we also believe that if there was a liquidity problem, the banks would stand behind them," Street said.</em></p>

<p>ROFL... He is kidding, right?</p>

<p><em>Street said his office has talked with the other issuers of threatened securities, and "we are encouraged by what we've heard."</em></p>

<p>LOL... That is like asking a Realtor if it is a good time to buy.


</p>

<p> </p>
 
<p>Like this earlier article said...</p>

<p>Orange County Funds Hold SIV Debt on Moody's Review (Update3) </p>

<p><a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKC6tqPLIBNw">http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKC6tqPLIBNw</a></p>

<p>``We'll find out real quick if we have a problem,'' said the county's former Treasurer John Moorlach, who is now a county supervisor. ``But for now I need to be patient and wait and see.'' </p>

<p>...</p>

<p>Orange County, home of the Disneyland resort and the fifth most-populous county in the U.S., became the biggest municipal bankruptcy in 1994 after then-Treasurer Robert Citron made a wrong-way bet on interest rates. Moorlach, who warned about Citron's gamble before the bankruptcy, replaced him in 1995 and held the job until he was elected to the county's board of supervisors last year. </p>

<p>..</p>

<p>Moorlach sought to have Street stripped of his authority to manage the county's $6 billion of investments in September amid federal and local corruption probes. He said Street was too distracted by the probes to manage the county's money. </p>

<p>The U.S. Justice Department is investigating Street's spending from a bankrupt trucking company, allegedly for his personal use. He was its court-appointed trustee before taking office. He also faces civil lawsuits associated with his management of the operation. The county district attorney also is looking into whether Street improperly awarded a government contract while treasurer. </p>

<p>The board rejected Moorlach's proposal, instead deciding to consider the issue during the annual review of the treasurer's powers. They will consider changes Dec. 11. </p>
 
<p>I also posted this in Irvine Renter’s blog. If anyone wants a history lesson on the Orange County bankruptcy in 1994 and a current discussion on the turmoil in the money markets and the Orange County Treasurer you can check out this thread. </p>

<p><a href="http://www.fatwallet.com/t/52/756920/11614399#m116144399">www.fatwallet.com/t/52/756920/11614399#m11614399</a></p>
 
<a href="http://www.ocregister.com/news/whistlejacket-county-assets-1998554-sivs-street">Why hasn't Chriss Street been fired yet</a>?





<p><em>Orange County will probably lose some of the $80 million it sank into a defaulted investment, financial experts say.</em></p>

<p><em>It's "very unlikely" that Orange County will get repaid in full when its investments in Whistlejacket Capital mature next January, said Joseph Mason, a finance professor at Drexel University in Philadelphia. "Next January is almost an eternity in terms of how quickly these structures are crumbling."</em></p>

<p><em>Named for a famed 18th-century English racehorse, Whistlejacket Capital is limping into receivership. The structured investment vehicle or SIV has lost most of its value since July. It failed to pay off Wednesday on three notes to other investors totaling $300 million.</em></p>

<p><em>"You should assume you've already lost a significant amount of that $80 million," said Michael Ehrlich, a SIV expert at the New Jersey Institute of Technology in Newark. "Right now, you're stuck."</em></p>

<p><em>But county Treasurer Chriss Street said, "I still think the county will get all its money back."</em></p>

<p><em>After a conference call with Whistlejacket's receivers at Deloitte & Touche Thursday morning, Street said the receiver is protecting the interest of the county and other senior creditors.</em></p>

<p><em>"It's not pleasant being in this situation," Street said. "On the other hand, not facing the music and paying the junior creditors (before the senior creditors) would have been much worse." </em></p>

<p><em>Mark Adelson, a Long Island, N.Y., consultant on structured finance, said the county and other Whistlejacket creditors face a hard choice: Liquidate and lose money, or wait and hope.</em></p>

<p><em>"There's no way to liquidate a pile of securities (now) and not get clobbered," Adelson said.</em></p>

<p><em>The county briefly considered selling Whistlejacket and its other SIVs last autumn, county portfolio manager Paul Cocking said. But the closest thing it could get to an offer was a distress bid. </em></p>

<p><em>Several Wall Street firms – among them Merrill Lynch and Credit Suisse, which sold the county Whistlejacket – <strong>made an informal offer to buy the county's SIVs for 15 cents to 25 cents on the dollar, Cocking said. The county passed.</strong></em></p>

<em>Whistlejacket's monthly reports – released by the treasurer under the California Public Records Act – show how the company dramatically expanded and then imploded, all in a matter of months. </em>

<p><em>Disastrous timing played a critical role.</em></p>

<p><em>Last June Whistlejacket merged with White Pine, another SIV. The move doubled its assets to $18 billion. The merger also significantly increased its stake in collateralized debt obligations (CDOs) and "monoline" bond insurers – just as the market was starting to sour on both.</em></p>

<p><em>"The monolines and CDOs certainly were not the place you wanted to be investing heavily in June 2007," said Ehrlich.</em></p>

<p><em><strong>By July the SIV was leveraged a dizzying 15-to-1</strong>, owning $15 in assets for every $1 in capital. It was financing assets, which typically matured in five years, with an endless series of four- to six-month unsecured loans. </em></p>

<p><em>The scheme worked so long as Whistlejacket could "roll over," or renew its loans.</em></p>

<p><em>But when the worldwide credit crunch began in August, Whistlejacket and other SIVs suddenly found short-term loans much, much harder to get. As the months dragged on and credit tightened, Whistlejacket had to settle for shorter- and shorter-term loans covering fewer of the securities it had bought when credit was easy.</em></p>

<p><em>It was a classic liquidity trap, similar to the "lending long and borrowing short" business model that bankrupted many savings-and-loans during the mid 1980s, Ehrlich said.</em></p>

<p><em>Whistlejacket took two steps to try to avoid default.</em></p>

<p><strong><em>First it started trading assets to junior creditors for cash. Between July 2007 and January, Whistlejacket shed $11 billion in assets, 61 percent of its peak value.</em></strong></p>

<p><em><strong>It is unclear precisely what assets Whistlejacket gave up. <u>But it is clear that junior creditors were claiming assets ahead of senior creditors such as the county – the opposite of the normal pecking order.</u></strong> </em></p>

<p><em>Cocking, the portfolio manager, was happy about the asset sales: "The more the better," he said, because it generated cash for the SIV.</em></p>

<p><em>As the market for its short-term notes dried up, Whistlejacket began financing its operations with repurchase agreements, or repos. These notes are secured by highly liquid securities, by definition the best securities in Whistlejacket's portfolio.</em></p>

<p><em>The shift from unsecured notes to repos carried "huge" implications for senior creditors, Mason said. "We call that jumping the creditor queue. … You go to seize assets, and there's nothing there."</em></p>

<p><strong><em>"They clearly have been selling their best assets, repo-ing their best assets," Ehrlich said. "You've skimmed off all the good stuff, and what you've got left is the sludge at the bottom of the barrel."</em></strong></p>

<p><em>Street and his team dispute this. They argue that Whistlejacket has plenty of good assets left. Cocking said the use of repos is actually a good sign –because it shows that "the market thinks these are pretty good assets."</em></p>

<p><em>On Feb. 20, just three weeks after promising a bailout for Whistlejacket, Standard Chartered abandoned it. The big SIV stopped paying investors. </em></p>

<p><em>"Standard Chartered is a large and respected bank," said Ehrlich. "What do they know that we don't know? That's a hugely negative signal."</em></p>

<p>What a f*cking idiot! And, he has the balls to say, that OC will get all of it's money back, because they will pay the senior creditors first, when they have been paying the junior creditors first. My gawd, how can you possibly believe a word that comes out of his mouth?


</p>

<p>He is a liar, a moron, and he takes the public for fools. He should be fired immediately


</p>
 
Sadly, the only people that can fire him are the voters. It's an elected position. But I do appreciate that John "He called the Bankruptcy before it happened" Moorlach, put his seal of approval on him during the last election.
 
Oh, what the heck am I talking about? Everyone knows that the County = Government, and that if the government doesn't have any money it will be reduced to the size it should be.
 
Eh, why is it that EvaL is the only one, that I knew would make a comment about this?





Impeach Chrissy "I lie like a motherf*cker, and have no clue what I am investing in" Street is seriously on my radar. Yeah, Moorlach is all over it like Citron.





Hell, I will take the job, for half the salary, and bonuses. But, the bonuses will be dependent on the performance of the investments, like how other "pension" manager's salaries are determined.





BTW, I really can't stand this lying a-hole, and he should be fired. Moorlach needs to find his balls.
 
Per <a href="http://blogs.ocweekly.com/navelgazing/main/no-street-cred-1/">this</a>, we would need to get about 170,000 signatures of OC residents. That's a lot of party throwing and walking around. Will you put your money and time where your mouth is?
 
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