Smooth Jazz

Crystal River Capital: Deleveraging to Wait Out the Storm

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

investorvillage.co...&...;

Now you're starting to flail about like a small child. Just where in that Novastar post from 2 years ago did I advise buying Novastar???. You are flat out LYING. The post clearly states that a number of posters were asking me for my best guess on Novastar 3Q2006 GAAP and Taxable Income. I provided a detailed response.

I note you didn't post the ACTUAL RESULTS versus my estimate which I followed up with a post a few days later:

www.investorvillage.co...

That seems to be your pattern. Only provide PART of the story. Why didn't you link to my follow up post days later?

And what does your link prove other than the sector has been hammered siince early with many financial companies down 50% - 80% since then. Go research what JRT, ABR, NCT, AMC, C, BAC, LEH, MCGC, ALD, etc. etc etc and you will see they have all suffered the same fate or worse than AFN.

Finally, posters who follow me on Yahoo know that RAS and RSO are my biggest holdings that I picked up in the $5s & $6s respectively. I'm way up on my 2 largest holdings. Since you have so much time on your hands to spend all day on GOOG, how about spending that valuable time and locating the posts where I recommended RAS at $5+ and RSO at $6+.

Peace off.

Crystal River Capital: Deleveraging to Wait Out the Storm

<Your numbers are wrong. Try again.>

Sure the numbers are wrong, at least 2 of them are since the company provided updates yesterday on the unused credit facility and callable repo debt. As of July 7, the unused line is $70M (higher than the $52M reported in the article) and the repo balance is $22M (lower than the $28M reported in the article). Of course, this rebuttal wasn't about numbers and I think you know that. The anchor of the article was the April 8K, and all I was doing was something you didn't alert your readers to. It appears that since the credit line was higher and repo debt lower, the company may have used some of the $45M cash reported in April to pay down one or both. I agree yesterday's PR didn't address the current cash balance and unencumbered assets compared to the numbers reported above.

Indeed, the crux of my complaint with you is not what you said, but what you DIDN'T say. You made some assumptions about CMBS performance, credit metrics and the like. We will not know whether you are right or wrong until the company reports. My complaint was that used the "Bankruptcy" meme in your headline, obviously to get a desired effect, without alerting your readers the company had made some moves a few weeks earlier to avert the cataclysmic scenario essential guaranteed would occur.

Next time I suggest you TRUST YOUR READERS. Tell them EVERYTHING and let them decide. Give them ALL the data points and let them make up their own minds.

Peace out.

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

<The statement was meaningless. If the company reports less than $100 million in equity, it will be in default.>

Greg "Hitman" Weston,

Meaningless?? The company just obliterated one of the the 2 major tenets of your hit piece: Namely that bankruptcy was imminent as they wrote down the value of their assets in 2Q according to you. As Davis and I mentioned to you and the editors of Seeking Alpha a number of times yesterday which you casually omitted from your "objective" article, the liquidity available on a funding line is more than enough to cover the modest $22M of callable debt they have outstanding.

The other major tenet of your article, that negative marks will be material and "might" trip covenants, will not have an answer until CRZ Mgmt officially joins the fray and publishes their numbers. You may eventually be right that they have significant negative marks. I admit that this is a possibility and the one positive aspect of your article was the significant work you put into estimating the potential marks.

But CRZ SP rise late in the day, on an absolutely brutal day for financials, and the $2.60 - $2.65 AH bid/Ask according to Schwab at 6:30pm EST, suggests it MAY start to recover somewhat from your ambush. I think the company shot down your imminent bankruptcy thesis this afternoon. We'll just see where we go from here with credit markets in such terrible shape.

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

As I was saying, the company earlier just released a statement saying they have $70M of available funding to take care of $22M of repo debt and $3. I am even more furious with Mr Weston's blatant omissions in his "Hatchet Job For Profit" article.

The company statement reinforced my entire point regarding my problems with his article: The he OMITTED germane information such as the company only had $22 of Repo exposure that could be more than covered with adequate liquidity to prevent bankruptcy. And to make matters worse, his hit job appears on a day when financials are being taken to the woodshed and shot yet again, excascerbating CRZ's drop.

I sincerely hope this short pays for this!

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

Mr Weston,

Obviously you were able to get away with this. If the stock keeps falling, at some point the company will HAVE to respond at the urging of either the NYSE or on its own initiative. It is really sad that someone of the blue can use a respected public blog to manipulate stocks in this manner using dubious assumptions and omitting key elements of a contrarian thesis. A bullseye is now on you. IF you profit from this manipulation and IF it is proven you were malicious, at least you'll have some profits to put towards legal fees in defending yourself when you are sued.

Best Regards & peace out.

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

<Here is a post from him advising people to investing the now-bankrupt company NovaStar Financial.

209.85.173.104/search?...

Greg Weston,

This is getting almost comical. You reference a post of mine from 11/5/2006 where I estimate Novastar's GAAP and Taxable for 3Q2006, without pointing on the post 2 days later which showed my estimates were almost dead on:

www.investorvillage.co...

And what does Novastar 2006 have to do with anything? These stocks go in cycles and I traded in an out of Novastar (Including the Preferred) about 15 times between 2004 and 2007. A GOOG search of my Yahoo NFI posts going back a few years clearly shows that. I have no idea why my trading philosphy on Novastar in 2006 had to do with their status in 2008 or CRZ today.

Get a grip and stop being so defensive. Just try to include data points that go against your these next time and let the reader decide what is germane.

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

<As for the "SmoothJazz,"... it appears he is unwilling to have his name associated with his low quality writing. I don't blame him, he is consitently wrong, and no doubt is bitter from having believed the dividends on failing REITs would continue indefinately.>

Greg Weston,

How can you say I am consistently wrong when you don't even know me. On the other hand, I believe you are shark trying to manipulate markets and a well known blog site. As previously stated, my problem is not so much what you wrote (even though I see quite a few inaccuracies), it is what you DIDN'T say, namely:

1. The company recently deleveraged away repo risk, and recently enhanced liquidity up to approx $200M including unencumbered assets; and,

2. The company recently declared a 30cents dividend. Companies going bankrupt

By leaving out these critical data points, you did not provide your readers with a "complete" picture and calls into question your motives.

In any event, the editors from Seeking Alpha have contacting me about rebutting you. I intend to do so by reminding the readers of Seeking Alpha of CRZ recent liquidity actions which you omitted from your "article". We'll see if the editors can get it up on the site quickly enough so that investors get a balanced view and can make up their own mind.

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

<I read where you think they are paying the dividend to get money to shareholders before they go under? I believe as an attorney that you know this would be fraud.>

Can you believe the hubris of this guy?? He said that to me when I asked him the "Why would they declare a 30cents divvy if they were going bankrupt" question. I think he is getting a little too arrogant after his takedown of RWT. This CRZ hit job was too blatant.

I tend to be very level headed on these things. I've seen quite a few negative articles like this in nearly 30 years of investing, but the ones I've seen at least pretend there is a counter argument to their thesis. The obfuscations, ommisions and dubious facts in this CRZ article are so disturbing, that I have for the first time decided to simultaneously write to the Seeking Alpha editors, The SEC TIPs line, CRZ Investor Relations and Brookfield Investor relations (See below).

This guy may yet laugh all the way to the bank with this dubious hit job, but, at a minimum, I want him on the radar of a few folks. Peace out all.

messages.finance.yahoo...

messages.finance.yahoo...

CRZ Article 7/4 by Greg Weston‏
From: [e-mail]
Sent: Sat 7/05/08 9:34 PM
To: contact-editorial@seek...

Hello There,

I am very disturbed by a 7/4 article written by Greg Weston entitled "Crystal River’s Q2 Write-Downs Could Bankrupt the Company" because he left out some key points that would be germane to his readers. I have no problems with writers on your blog posting negative articles on struggling companies in out of favor sectors. I also have no problems with your writers having a vested financial interest in the articles they post. What I do have a problem with is the veracity of writers who leave out critical information in their articles that run counter to their thesis, especially when they can profit handsomely when the stock falls.

My problem with Mr Weston's article is two-fold:

1. The author failed to disclose to readers CRZ recently raised $100M via the sale of their Agency MBS portfolio and had another $100M of unencumbered assets. This is significant because as of June 2008, CRZ had only $20M in callable, margin debt that could easily be paid down with their current liquidity. Unlike TMA, NEW & AHM which all went bankrupt in an instant because they financed their business with $billions of margin debt, CRZ doesn't have that problem. Please see the "First Quarter 2008 Update" slide below:

files.shareholder.com/...

I find it truly disturbing that he would not mention that perhaps as $200M in CRZ avialable liquidity in an article about bankruptcy. Was this a lack of research on his part or something more nefarious? He has not responded to my question about why he left out their recent liquidity moves in the comments section of his article. If he cashes in his puts for big profits if the stock tanks and his thesis was wrong, I suggest he be prepared to answer the question.

2. When I asked him why a company would declare a 30cent dividend a few weeks before he claims they are insolvent, he responded with the following (Please see his reponse in his 7/4, 9:44pm post):

seekingalpha.com/artic...

"So you think companies that are doing very poorly never try to make it look like everything is honky dory? Besides the obvious reason of "keeping up appearances" I can give you two other plausible explanations.

(1) suspending the dividend would cause the stock to drop at a time when management is considering an equity offering.

(2) if the company is clearly on its way to insolvency or already there, paying a dividend is a way to return money to shareholders rather than creditors. In this sense the company was acting in the best interest of its shareholders by paying a 30 cent dividend, despite its gigantic Q1 loss."

In other words, his reponse is Mgmt is dishonest.

In conclusion, your site has become very popular for investors looking for BOTH short and long ideas. But NO site can prosper if it is demonstrated that contributors with a financial interest deceive investors by only presenting "part" of the story.

Best Regards,
Smooth Jazz

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

<Greg Weston - 7/4, 9:44pm:

Again, I hope the company does pay a dividend, because it will decrease the stock price by about the amount of the dividend. If I were short I would be indifferent since the stock would go down but I would have to pay the dividend, however holders of puts do not have to pay for regular dividends.

Relax - 7/5, 9:37pm:

Dividend payout is already in the stock price>


Glad other people are noticing how careless this writer is. He appears to be completely oblivious to the fact that CRZ just declared a 30cent dividend a few weeks ago, and already went XDividend on Jun 28. Maybe that explains why he shrugged off my "Why did the company declare a divvy on Jun 17" question with unintelligible babble about company officers being crooks. Perhaps he wasn't aware they just declared a divy and that is why he didn't mention it in his article.

Just like he when he mistated when the Russell delisting would occur. These misstatements and omissions from his article are starting to pile up. As more people comment and call this guy out on his sloppy and self serving work, more people will take notice and it WILL eventually have an impact if enough people catch these errors.

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

<"Smooth Jazz" was posting for years in defense of NFI, which is down more than 99.5% from the prices where he was pumping it up.
A few more minutes with Google with find many more examples. They appear to be committed to going down with the ship yet again on yet another failing REIT. That's their right, but discount their arguments accordingly.>

Greg Weston,

Touchy, Touchy are we. I was about to leave your forum for good but couldn't resist. WHAT DOES MY POSTING HISTORY FROM A FEW YEARS AGO HAVE TO DO WITH THE POSSIBILITY THAT YOU ARE PERPETRATING A FRAUD BY NOT TELLING YOUR READERS THE COMPANY YOU SAY IS INSOLVENT HAD $200M OF AVAILIABLE LIQUIDITY AND $20M IN SHORT TERM DEBT AS OF A MONTH AGO.

Yeah, tell your readers to GOOG smoothjazz0204 on Yahoo. They may see upwards of 20 profitable trades in companies such as NFI, NCT, JRT, RAS, RSO, MCGC, LEND PFD A, NRF, ABR, etc, over the past few years. Like I said earlier: You left out critical liquidity information about CRZ that has nothing to do with me, and now you are in a dither and lunging at straws now that you been called on your omission.

If I were you, I would spend less time on GOOG and more time coming up with an answer regarding why your bankruptcy hit job did not mention up to $200M of liquidity identified by the company in April. I would also look to profit from your puts while your hit piece is "hot".

Peace out.

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

<"Smooth Jazz" was posting for years in defense of NFI, which is down more than 99.5% from the prices where he was pumping it up.
A few more minutes with Google with find many more examples. They appear to be committed to going down with the ship yet again on yet another failing REIT. That's their right, but discount their arguments accordingly.>

Greg Weston,

Tocuhy, Touchy are we. I was about to leave your forum for good but couldn't resist.

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

<By the way CRZ has been selected for deletion from the Russell 2000 and 3000. That means the Russell 2000 and Russell 3000 ETFs/index mutual funds will automatically be selling shares of CRZ when the deletion officially happens.>

Greg Weston,

You have got to be kidding me. You are posting articles about companies going bankrupt, and you make such a grevious error. The Russell deletions occurred on June 27 (You're more than a week late), and most of the selling was done PRIOR to that date so that Russell based index funds are out of the stock by the day of the deletion. Good grief. That blatant error about the Rusell rebalancing suggests maybe you are careless and might not do exhaustive research all of the time.

mreits.blogspot.com/20...

As for your most recent comment, I couldn't care less whether you respond to my legit questions or not, but I can almost surely guarantee you this: If you profit from a situation where you were careless and you turn out to be wrong, you will need to explain to someone how you excluded from your hit piece the convenient fact that the company reported approx $200M in available liquidity in an April 8K ($43M cash from sale of Agency MBS, $50 availabale funding line and $100M in unencumbered assets) when they only had $20M+ in repo debt.

I got a feeling that this one will end nasty given the vast difference between your bankruptcy storyline, and the company's reported $200M liquidity backstop. If Mgmt turns out to be sheisters, you're home free. But if you were wreckless and wrong, responding to legit questions from board "trolls" will be the least of your worries.

Peace out.


and a company that reported $200M in available liquidity

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

<Apparently many have trouble handling a falling market; like Smooth Jazz they lash out at the bearers of bad news. Smooth Jazz, get a grip>

theskeptic,

Stop patronizing me, and insist that the writer answer the basic questions. I know full well the sector stinks and that CRZ's business model is currently broken primarily because they cannot easily raise money in these turbulent credit markets. I also know the difference between a CRZ, which as of April funded 98% of its income with long term, non recourse CDO funding, and NEW/AHM/TMA/etc. which funded their entire business with repo, margin debt and taken down when lenders called in that debt.

The author needs to answer one basic question for me to consider him anything but a huckster using a well known public forum to make a quick buck: How can a company which had $100M of liquidity and about as much in encumbered assets as of April (See "First Quarter 2008 Update" slide from the following presentation) suddenly implode and go belly up when it only has $20 in repo debt. This makes absolutely no sense and it is disturbing he did not let his readers know about the company's actions in April to shore up liquidity. This has nothing to do with a "falling market" or "fundamental shifts in the US Economy" and very much to do with the veracity of one writer with an agenda who leaves out pertinent facts in his thesis.

files.shareholder.com/...

Maybe Mgmt is dishonest and lying. It is also possible the writer did not properly research or due adequate DD in this one instance, his other "good" calls, including FED, notwithstanding. I will not go as far as to call him dishonest. Yet.

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

<I guess I'm going to jail too,for publishing a comment about my position in RWT. .. with as much bs going on with Wallstreet and the financial media,its going to take a lot of mind police to catch up with all of us!!You're safe Greg..>

Fatcat,

Cut the BS. This isn't about you, RWT or some imaginary Wall Steet mind police. This guy could be the sharpest guy in the kitchen. Or he could be a sheister looking to cash in some puts for a quick buck. I agree it would be tough to put the guy in jail without absolute proof, but he did leave out 3 critical points from his article which would call into question his entire thesis:

1. The company gave a presentation barely 8 weeks ago where they said they freed up approx $100M (cash & a credit line) via the sale of their Agency MBS. Why didn't the writer mention this. Or explain how a company that just freed up $100M in liquidity in April and had only $20M in callable repo debt is insolvent by the end of June.

2. He doesn't satisfactorily explain why the company would declare a 30cents divvy on Jun 17, 2 weeks before he claims they are insolvent. Telling me that Mgmt is just dishonest without proof doesn't cut it. Perhaps they have the liquidity to pay the divvy given they just freed up $100M (See Point #1 above), and his "Mgmt are crooks because they want to pay the divy to shareholders and not creditors before they go bankrupt " (See his 7/4, 9:44pm response) makes absolutely no sense.

3. He doesn't discuss how SFAS 159, which allow companies to mark their CDO debt to match asset writedowns, would call into question his entire thesis by allowing CRZ to offset the CMBS & RMBS writedown he is estimating will bankrupt them with similar debt writedowns.

I do not have much skin in this game, but the more I think about this author's ommisions, non explnanations and duplicity, I get more disturbed when I see that he is trying to use a well known blog for financial gain, without the company having an opportunity to respond beforehand. Yeah, He's safe alright! He could always use the "I was careless" explanation long after he has banked his puts.

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

<Jazz, your comments are increasingly nasty and personal, so this will be my last response to them, or any other such comments.

"1. An explanation for why would the company declare a 30cents divy weeks before beoming bankrupt"

So you think companies that are doing very poorly never try to make it look like everything is honky dory? Besides the obvious reason of "keeping up appearances" I can give you two other plausible explanations.

(1) suspending the dividend would cause the stock to drop at a time when management is considering an equity offering.

(2) if the company is clearly on its way to insolvency or already there, paying a dividend is a way to return money to shareholders rather than creditors. In this sense the company was acting in the best interest of its shareholders by paying a 30 cent dividend, despite its gigantic Q1 loss.>

Greg Weston, Regarding your 7/4, 9:44pm post:

So let me get this straight: This company would knowingly go ahead and declare a dividend on Jun 17, 2 weeks before it was insolvent, because it was in the process of raising money via an equity offering and was acting in the interest of shareholders in spite of a huge 1Q loss???? Good god. You do realize that the divy is paid out of REIT income (Which was 63cents in 1Q and does not include MTM losses) not GAAP income, which reflect MTM losses correct. Your answer makes absolutely no sense.

Furthermore, your minor blurb mentioning SFAS 159 near the end of the article does not address the question I was asking: Whether CRZ will be able to mark their CMBS & RMBS related CDO debt to offset the asset marks you are saying will bankrupt them. You barely touch on this by noting "the company will try some tricks such as writing down the value of its debt" at the end of your piece without really discussing SFAS 159 at all and how it may affect your thesis.

Finally, and perhaps most important, did you have a chance to review the "First Quarter 2008 Update" slide from the following presentation before you published your CRZ is bankrupt article. If so why did you not tell your readers they raised $45M in April by selling assets and freed up another $52M.

files.shareholder.com/...

You will note on that slide, the company stated:

1. It raised net cash of $45M from the sale of its Agency MBS
2. It freed up $52M on their funding line
3. Has $100M of unencumbered assets as of mid April

And you claim they are going bankrupt 8 weeks after saying this? Are you stating flatly this Mgmt team is lying when it said it raised $45M in cash and freed up $52M in funding as recently as April? Mr Weston, Did you thoroughly research this company before publishing this article or is this a get rich quick scheme. If you do cash in your puts for big bucks and your article turns out to be sloppply written and proven false, I hope you eventually have to cough up your profits somehow someway.