James Biringer

The Anatomy of a Bear Market

Good article, Eben. Here's a blurb I sent out kinda along the same thoughts you had. I'm no expert or guru, but I think I'm smart enough to think for myself and make my own decisions.


>>>>
Dear Investors,

Maybe it's me, but I got a nagging thought
rolling around in my head the last few months.
And I heard a quick mention of a similar thought
on Fast Money tonight.

Let me see if I got this right. I'll try my best to put
my thoughts into some type of cohesive essay.


----------------------...


The investment banks are marking down drastically
their assets in the CDO and CMO funds they put together.
Investors bought into these vehicles through bonds and
bond funds made up of all these SIV's.

Alright, let's see now. I got a slice of a bond fund made
up of a mix of prime, alt a, and subprime mortgages.
There's all kinds of hullabaloo going around, and I have
to mark to market my bond fund CMO's.

Wait a minute. There's no market for my bond fund of CMO's
because of a high level of fear by investors. Shoot. I have to
market to a market that barely exists at this point. Alright.
I mark to market my fund of CMO's and find I'm 70% down
right now. This asset, according to the market is worth 70%
less than what it was worth last year, or whenever.

But...is it really worth 70% less?? I would argue no. Because,
if I ride this out, that same market, imho, will give me true value
in a year or two. And not for nuthin', true value, not market value,
is the real worth of the asset I'm holding right now.

For instance, if I put a real negative number on my CMO, I'd have
to say that 20% of my mortgages in the CMO are non performing.
But the market is marking down my bond fund of CMO's by 70%.
And another thing, those NPA's are still worth something. This is
real estate. Okay, let's say it's devalued by, I don't know, 20%
for pete's sake. Well 20% ain't 70%. That's a lot different.

I know, to unscramble the NPA's out of the bond fund of CMO's is
gonna bear some cost for admin, foreclosure, and general nuisance
fees.

But 70%??

I'm not seeing it.


----------------------...


I guess what I'm saying is some of this is getting overblown
in my book. Could be wrong. But I think, that at the margin,
there's definately two sides to this plug nickel. If that makes
any sense.



Thank You,
James Biringer
Co - Moderator - Intelligent Investors Group
finance.groups.yahoo.c.../
Owner - Verizon401k Newsgroup
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