The mainstream media has done a pretty good job covering the Thornburg Mortgage (TMA) dust-up over margin calls related to its jumbo loan holdings. I recommend the Marketwatch piece for more information on the story.
If you ask me, Thornburg is a great buy on this dip -- as long as they face margin calls and not collateral seizures. If TMA is allowed to sell assets "selectively" (as the Company put it), they won't have to sell distressed securities and can raise cash using their more liquid MBS. If TMA gets hit with collateral seizures again, back to the 7s we go.
If you ask me, Thornburg is a great buy on this dip -- as long as they face margin calls and not collateral seizures. If TMA is allowed to sell assets "selectively" (as the Company put it), they won't have to sell distressed securities and can raise cash using their more liquid MBS. If TMA gets hit with collateral seizures again, back to the 7s we go.
2 comments:
Patrick the margin calls are a killer. TMA and most MREIT were not modeled to with stand margin calls, which start by taking marks or valuation off prices that are at depression like levels. Goldman Sachs and JP Paulson John at the time a small hedge fund with less than 100 ee made $4B and over $14B shorting the ABX Index that GAAP marked off of. John Paulson personally made 4B last year shorting the ABX Index (which did not exist before 1/1/07 well what timing all hell broke loose one month after introducing this ABX index (now there going after CMBX for comm Mgt BS) for sub prime not really an index like S&P or Dow because it is not based on stock prices but (CDS credit default swaps) or insurance contracts used to trade off Sub prime). GAAP missed the boat forcing these non liquid investments to be valued qtrly off indexes that could be shorted to hell. NO MAIN STREAM JOURNALIST IS SMART OR BRAVE ENOUGH TO WRITE ABOUT.
Hi poolblue. Thanks for reading the blog. Miss the good old days at the NovaStar board. I agree that the forced marking-to-market of assets to a distressed sale price is ridiculous. Hopefully the adoption of FAS 159 will reduce some of the volatility. I agree that the ABX indexes were ill-conceived and that they could be easily manipulated for illegal purposes due to their illiquidity.
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