Blackstone Now Bullish on Subprime?

Not all the bears on subprime believe, as many seem to, that the housing crunch will lead inexorably to financial meltdown of biblical proportions. Take Blackstone (BX), for instance:

Blackstone, the private equity group, has raised $2bn for Bayview Financial, a distressed-mortgage servicer and fund manager in which it holds a stake, to buy portfolios of ailing mortgage assets. . .

The decision to buy packages of troubled mortgages is a signal, Blackstone's executives say, that the worst problems in the subprime market could be over. This recalls Blackstone's successful strategy two years ago to use its hedge fund investment business to short subprime.

Tony James, Blackstone's president, said: "We started to cover our shorts on subprime in late 2007 and early 2008." 

He expected the subprime market to bottom out in the coming months. . . . [Emph. added]

Good! Also, John Paulson, the $3.7 billion man, is looking to invest in capital-starved banks, recall. . .

Comments

[Paula Rush:]

One thing not mentioned here that is the main jist of the reasons for purchasing-these are distressed asset funds, everyone is doing it including big players like Goldman Sachs. Why? They are buying the assets for pennies on the dollar. Anywhere from 4cents on HELOCS -20-30 cents on the dollar for non performing loans and REO'S - and then ENFORCING THEM AGAINST THE BORROWER FOR 100 CENTS on the Dollar. Once again the WALL STREET CRIMINALS prosper at everyone elses expense. So New Century, Aegis, American Home, Merrill Lynch and many others, at the same time they REFUSE to modify loans and refuse to work with borrowers, sell off the same loans to "friends" and former financing partners`. In some cases it is the executives who created the crap forming LLC's to buy up the same crap. The investors on the front end got screwed, but the execs know how to turn their lemons into lemonade! So it has nothing to do with being bullish or bearish
(maybe BULLSHIT) it has everything to do with simple math. At pennies on the dolllar they see a profit no matter what they buy.

2008 Aug 08 10:30 AM

[E Nuff Sed:]

Sub-prime debt may have become very attractive. It is now selling literally 15 cents on the dollar. For a small investor, a closed end fund which has invested in sub-prime asset may be attractive. Example is RMK Advantage fund - RMA. It pays an attractive monthly dividend has the potential to double or triple as sub-prime markets recover.

2008 Aug 09 01:35 PM