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How to Succeed in Life and Secondary Marketing

How to Succeed in Life and Secondary Marketing. Speaker: Tom Millon. Success in Life and Secondary. Find a good woman/man and treat her/him right. Find an arbitrage and turn it in to a a sustainable competitive advantage. The Second Important Step to Success: Find an Arbitrage!.

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How to Succeed in Life and Secondary Marketing

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  1. How to Succeed in Life and Secondary Marketing Speaker: Tom Millon

  2. Success in Life and Secondary • Find a good woman/man and treat her/him right. • Find an arbitrage and turn it in to a a sustainable competitive advantage.

  3. The Second Important Step to Success: Find an Arbitrage! • Arbitrage: Profit from a Pricing Anomaly • My First Arbitrage: Practice Round Tickets • Most Mortgage Arbitrages result from Secondary Execution Strategies

  4. Mortgage Industry Arbitrage:A Long and Profitable History • 1985: The First and Biggest Mortgage Arb (Ranieri’s Fortune) • 1990: Govt Guaranty Arb begins (Fannie and Freddie) • 1995: Credit Arb (Headlands to Greenpoint to The World) • 1997: Information Arb (Plain Vanilla to Anything But) • 1999: Service and Technology Arb (Ohio Savings) • 2003: Aggregators’ Delivery Arb • 2004: ???? (What arb will you exploit?)

  5. Or Could Someone Be Arb-ing You? • The Poker Analogy: If you look around the table and can’t find the sucker – it’s you. • Making Mortgage Payments to Your Own Retirement Plan (Note Rate = 6%; PIMCO Fund = 5%) • The Mortgage Banking Money Ladder: The lower you are on the ladder, the more you are getting arbitraged.

  6. Mortgage Banking Money Ladder Capital Markets (treasuries and mortgages) GSEs and Conduits Large Mortgage Bankers Correspondents, banks, thrifts, mortgage bankers Brokers Borrowers

  7. Arbitrage All Around Us • “Bubba Security” -- Higher coupons, pays off slowly, low loan balance, from Texas, Florida • Buy Up/Down Multiples versus the Real World (4 for me, 2 for you!) • FHLB versus Fannie/Freddie • “Down on the Farm” Pricing • Best Execution • Agencies arb the little guy: Size Matters!

  8. Make The Arb Work For You • Build an execution strategy to sell as high on the ladder as possible. • Find the best investors and prices for your products (best execution) – and offer a lot of products. • Reduce the spread between your borrowers and the capital markets (before your competitors do). • Keep it simple along the way: avoid the salesmen selling snake oil for risk management.

  9. Success in Life and SecondarySpeaker: Tom Millon • Find a good woman/man and treat her/him right. • Find an arbitrage and turn it in to a a sustainable competitive advantage. • Wear sunscreen.

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