Remember How Everybody's Earnings Were Slammed Writing Down Real Estate Securities? Now They Might Need Write Them Back UP

Calafia Beach Pundit has noticed a surge in prices for home equity-backed and commercial mortgage-backed securities over the last month.


The top chart shows the price of an index of home equity-backed securities, while the bottom chart shows the price of an index of commercial mortgage-backed securities. Both show strong price gains, and I would note that prices have been rising since last summer. It’s particularly interesting to see these price gains come at a time when the whole world is anticipating a new wave of home foreclosures and widespread distress in the commercial real estate market. These charts are saying the reality is not likely to be nearly as bad as the hype.

Many companies slashed the value of these types of securities on their books in 2009, considering their value impaired.

Thus CBP thinks the prices rises below could mean that U.S. companies holding these types of securities will have to adjust up their asset values. Perhaps it is worth hunting around for companies who had suffered the worst impairments. There might have some good news on their financial statements coming around the corner…


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