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Saturday, November 17, 2007

TRowePrice tries to reassure me with a bad graph

Mutual fund manager T Rowe Price' Fall Report attempts to explain the subprime mortgage situation.

I'm not reassured, although that may not have been Mary Miller's point:

...keep in mind that 80% of subprime mortgages outstanding are not in delinquency


T Rowe Price money funds ... had no direct exposure. Having said that, we can't totally insulate ourselves ... it is impossible to give investors the assurance that there are no risks in any money market fund.

The problem I have is with the graph. There are 3 lines: light for adjustable rate, dark for fixed rate, and red for all loans. One would therefore think that the red line would be the average of the other two. What other kinds of mortgages are there besides adjustable and fixed? But from 2001 to 2003, "all loans" is actually below both adjustable and fixed. In 2005, "all loans" is above the other two.

So there's something going on here that I don't understand (and that isn't explained in the 3 page article. But it doesn't make me feel better.