Those of us who pointed out problems with NovaStar (NFI) back in the day were laughed off the stage as the market for securitized mortgages grew to be so large that it ignored quality in favor of quantity.
Of course, as we all heard at the time, the ratings agencies had given NovaStar’s securitizations their Triple-A stamp of approval. “Put bluntly,” wrote Howard Hill, the unofficial chief commentator at NFI-Info.com, which later became NFI-Info.net when it lost its dot-com status, “the credit quality question is a pure red herring.” Hill, a long-time vocal critic of yours truly, was responding to something I had written. He later went on to become the a portfolio manager at Babson Capital, where this past summer he led Babson into an apparent ill-fated, last-ditch, life-saving investment at NovaStar.
NFI-Info.com and dot-net, now defunct, was officially created to correct alleged misinformation about NovaStar and discredit its critics. But its real purpose was to serve as a launching pad for attacks on naked-short-selling, which in turn attempted to blur the lines between legitimate criticism and illegal activity in a Joe McCarthyesque effort to destroy the reputations of anybody who dared attack the emperor. Patrick Byrne of Overstock (NASDAQ:OSTK) joined the fray. The emperor, as NovaStar shows, really did have no clothes.
If you missed my piece on how you could have seen the mortgage mess coming by watching NovaStar (no stranger to long-time readers), you can read it here on MarketWatch.