Greg Weston

Crystal River’s Q2 Write-Downs Could Bankrupt the Company

CRZ announced today they will be delisted.

I made my short call at 3.50, and the stock is now around 50 cents, down 85% in less than 5 months.

A Short Update on My Four Short Ideas

Bogey: thanks for the update from NY

Matt: Bear market rallies are to be expected.

As for the reason why, I am no good at explaining short term market movements, which is why all of my articles deal with fundimentals.

That said, FED is one of the most heavily shorted stocks on the market, so short squeezes can always happen. I think current prices are a great opportunity to short FED.

A Short Update on My Four Short Ideas

Thank you Groty for the response. I typically give up responding to someone after more than one post that seems to show either gross or willful ignorance of a topic, or that asks me to do research for others.

A Short Update on My Four Short Ideas

tquill: I am a lawyer, not a financial adviser, so I can't talk to you via e-mail about investments (unless you have a real estate investment issue or financial fraud case).

Probably the best thing you can do to learn about options is open up a "practice account" using Yahoo or Google's "portfolio" option (other sites have this too) and see how you do.

Or perhaps open an options account with just a few thousand of real money.

A Short Update on My Four Short Ideas

Tquill: If you've got the stomach for FED's volatility, yes I do think today's run-up presents a good time to short FED calls.

Steve: My financial short calls have fallen a lot more than the average financial stock. You are wrong, my number is correct, and comes right from the mouth of the company:

"This loss includes $60 million (negative $1.84 per share) of net negative market valuation adjustments."

A Short Update on My Four Short Ideas

SRS asks:

Isn't it more accurate to say that CRZ "breached loan covenants" rather than saying that CRZ [was] "in default"?
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No, it would not. *In default* is more precise, because a breach may be minor or immaterial. There is no such thing as a *immaterial default.*

You don't have to be a lawyer to know this, I would expect these terms to be familier to anyone in finance.

A Short Update on My Four Short Ideas

Matt C: DSL/FED/BKUNA/CRZ/RWT puts are expensive for a reason of course, and I have not done much of this lately.

Shorting the calls on the stocks when they have their random bear market rallies, however, has worked quite well for me.

A Short Update on My Four Short Ideas

Portfolio Manager: By paying a premium as you did, or else in the options market.

Or you can short some of the larger financials, But profits may be lower since they are pretty well covered by independent sources, and there is always the hard to value premium they may have from potential too big to fail bailouts.

The smaller near-dead financials are a great way, however, to make a large profit just if current trends continue, and even bigger if they get worse.

A Short Update on My Four Short Ideas

Value Dope: predicting a trend in the PPS of a stock will continue is no more or less valuable than predicting the trend will reverse.

Shorting a stock that goes down is no more or less profitable whether the stock had been going up or down before you made your trade. So I don't understand what point you are trying to make. My articles are not attempts at expose, they are attempts to analytically value companies and make informed near-term and long-term estimates of their future value using the best available data.

A Short Update on My Four Short Ideas

General Update: CRZ was able to get its loan covenants reduced to a minimum equity of $40 million.

It will probably violate this new covenant by the end of the current quarter. CMBX junior tranches have fallen to new record lows lately, and suffer from much higher spreads than in the close of Q2.

SBG: I made a variety of estimates based on different accounting assumptions. This estimate you reference was of -reported book value ex income from continuing operations-. And this makes sense, because I did not attempt to estimate earnings from operations.


User: Some of these stocks it is mostly too late for anyone to ever go short because of transaction costs. So some of my article was intended for those in my situation of considering when to cover.

For current shorts with higher entry points (like me), there is no reason to cover, because the stock will almost certainly go lower.

Crystal River’s Q2 Write-Downs Could Bankrupt the Company

SR9Web: The line of the credit has the same $100M equity requirement.

The speculation among the longs is that BAM will waive the terms of the credit line in order to save its $5 million or so investment in CRZ.

The problem with this argument is (1) If you investment relies on a bank waiving terms on a loan in default, it probably isn't a good investment (2) It is illogical for a company to extend $100 million in credit to protect an _illiquid_ investment of about $5 million.

Crystal River’s Q2 Write-Downs Could Bankrupt the Company

LOL @ labeling a company whose stock is down 90% -ahead of the curve- and financial stock shorts -naive-.

Crystal River Capital: Deleveraging to Wait Out the Storm

WEZ:

I'm sure they would. And also accuse you of -naked don'ting.-

Crystal River’s Q2 Write-Downs Could Bankrupt the Company

sr9:

The line of credit and the repos default if the company's equity goes below 100M. Remember a lot of the prices CRZ reports for its assets are theoretical values that are probably above the price they would fetch if actually sold.

Further, if the pace of write-downs continues at the Q1 and my predicted Q2 rate (which are about the same), the company will have negative book value fairly soon. You could argue things are going to get better later this year, but I don't think this will happen, in fact I think commercial RE in particular is going to get much worse in Q3 and Q4.

Crystal River Capital: Deleveraging to Wait Out the Storm

This guy, Brian King aka SmoothJazz, has a hilariously bad track record. For one thing, he has been long this stock even as it has dropped more than half.

And here he advising a purchase of NovaStar, a company that soon after went bankrupt:

www.investorvillage.co...

Here he is saying on a board for AFN that "MARK TO MARKET LOSSES BEING EXAGGERATED"

Maybe you should buy then? Oops, maybe not, the stock fell 60% since March 2008 when he posted this.

www.investorvillage.co...