First Marblehead's Demise Effectively Closes the Bear Case

The denouement of First Marblehead's (FMD) stock saga effectively ended with the stunning collapse of the stock on Wednesday in a 200 point up-day for the DOW. The bear case is de-facto proven unequivocally and the the bull case left in shreds.

The bearish argument, initiated in December 2006, and repeated in a variety forums and venues throughout most of 2007 was a textbook case in contrarian investing. The fact that the most consistent bulls supplying the opposing "long" views draped their claims for even higher prices with academic type rhetorical flourishes, and scholarly detailed analysis of the securitization process, residuals, and AA tranches, made the exercise that much more comical, were it not for the fact that serious money was lost by what are now incredulous investors. In a market of high single digit return expectations, avoidance of a 60% loss in one stock can make or break performance.

The point is not to dance on the grave of FMD, but to prove to intellectual sparring partners (the knowing and unknowing alike) the relevance of understanding the ROE-price book metric and its relationship to risk and returns.

Comments

[fxtrader07:]

???
so effectively, you state that the bears made money and the bulls sit on losses (on paper, at least)
what else of wisdom from your side??

2007 Dec 13 08:41 AM

[FIG trader_:]

Another bag-holder sleeps through this thing. Mine is one of many bear cases. My own original piece, written December 2006 on figtraderintelligence.... (at $50+) includes repeated responses to Bankstocks.com bullish "case" (all the way down to high teens (price target reduced in late November). right here on seekingalpha. Are you still in the bull camp? If you are still "holding" the bag, perhaps you would like to share your "thoughts" for all here to hear.

2007 Dec 14 07:53 AM

[trlblzr:]

are *you* "holding" the bag?

www.seekingalpha.com/a...

*yawn*

2007 Dec 14 12:39 PM

[FIG trader_:]

One would have thought the posse would have been called home by now; Its been weakened, but reinforcements seem everywhere these days. Perhaps you didn't see the stop loss on SLM. You embarrass yourself less often when you take this approach. But of course you have so much conviction about your "idea", you don;t feel the need to. As a result, you are left....

2007 Dec 14 07:25 PM

[trlblzr:]

did you stop loss on IMB as well?

2007 Dec 18 01:01 PM