-- Olivia Thetgyi
The glum mood of conference attendees was revealed during a session on finding relative value in the U.S. asset-backed securities market. Questions posed to the audience showed again and again that industry participants feel the worst is still to come.
During the panel, moderator Charles Schorin of Elliott Management asked the audience when they thought the bottom of the housing market would be reached. Only about 40% of the audience of roughly 150 people thought it would be, with the most voting for 2009.
The audience was also bearish on the future of ABS CDOs. When asked how many people thought an ABS CDO would be launched by the first half of 2008, no one raised their hands. After broadening the time horizon to all of 2008 and 2009, a smattering of people responded in the affirmative. “Do I hear a 2010?” one audience member quipped. One panelist echoed the sentiments of several professionals across different sessions, predicting the market will come back in a few years, albeit in a much different form. “We’ve seen the deals with manufactured housing and aircraft go away, but the market came back. In probably three to four years will be new structures, new products,” he said.
The last question to the audience seemed to provide the most definitive signal of the audience’s bearish mood on subprime bonds. In response to “Who thinks there will be an ABX 08-1?” no hands were raised.