vvvvviking

Whitney Tilson Gets Defensive

It depends on where they entered their shorts on RDN and PMI - they are both now trading at half of their recent highs a few months ago. I myself made a ton of money buying puts on RDN when they hit double digits. Even if those companies do survive (a big IF), their current equity is going to be wiped out. I will be re-shorting any run up in those stocks.


On Dec 08 06:22 PM Legacy Investments & Development, LP wrote:

> I, too, am interested when funds discuss their short book.
>
> In this instance though (and I'm a fan of both Whitney Tilson and
> Glenn Tongue, as they're WAY smarter than I am), their short book
> is unimpressive.
>
> - IOC, HLF and VPRT are all at or near year, multi-year or all time
> highs, although I agree with Tilson's thesis that IOC is a scam.
>
> - PALM, RDN and PMI made pretty good runs this year and, depending
> on where he entered the position, these trades may be upside as well.
>
> - RF and MBI, well, these are real dogs and I trust T2 is in "the
> black" with these trades.
>
> The bone I have to pick is one wonder's, rhetorically, when do performance
> and meritocracy over shadow a "named brand?" The T2 guys are studs,
> no doubt, but these trades are average to below average in terms
> of returns, in other words, thoroughly unimpressive. Einhorn's another
> one that rows this same boat.
>
> Nevertheless, keep up the great posts and thanks for keeping your
> eye on the short book for some of these "named brands" - it allows
> some of us to hop on the trade at a better cost basis than "the big
> boys."
>
> Disclosure - No position in any of the named securities. I have
> previously traded IOC from the short side and gotten my hat handed
> to me. I probably need a helmet because I'll likely fade it again.

Does a ‘New Normal’ Include Millions of Homes Forever in Foreclosure?

Gee, this guy is long PMI, possibly the single most leverage name to a housing recovery, you think he is talking his book?

Four Reasons We're Headed Even Higher

FNM was profitable? Try again.

The Case for Shorting Bank of America

John Paulson is a one-trick pony. Other than getting one massive bet correct, what else has he done?


On Aug 19 04:01 PM market mojo wrote:

> is John Paulson smart money enough for you? He now owns 2% of BAC.
>

Has President Obama's Mortgage Modification Plan Failed?

I agree the program is, and will be, a failure, but one point you miss is that the option with the highest expected value for the bank is foreclosure. Why do you think the government has to pay servicers? To tip the balance a bit. But ultimately it won't be enough.. Principal forgiveness is the only way out of this mess.

Big New Housing Problem: Mortgage Insurers Back Off

To paraphrase your description (which is correct), MGIC, through a very kind decision by their regulator (who by the way allowed Ambac to do exactly the same thing), will shuffle what little capital they have around different companies and be allowed to lever up beyond what the law currently allows. Great solution - allow more leverage, at a time when unemployment is still rising, and many of their current borrowers are severely underwater. This regulation deserves to lose his job.

As for your analogy, quite simply, it sucks. Just because something has been around for a long time, doesn't mean we should continue to allow it.

Though I don't have a problem with >80LTV lending, or even 200LTV lending, as long as the fool lending the money is on the hook for the credit risk.

the current MI/GSE/Lender menage a trois is broken, and it needs to be ended, now. the MI industry needs to be abolished.


On Jul 16 01:45 PM Gtarras wrote:

> Karl
> I dont even know where to start to critique your thesis. First of
> all, MGIC IS NOT EXITING the business. Quite to the contrary. They
> are restricted by the regulator to write new business if their risk-to-capital
> ratio exceeds 25:1 and anticipate that that will happen at the end
> of this year. So they decided to set-up a new entity called MIC,
> with fresh capital, through which they will continue writing. of
> course, the funding will come from the old entity, which will make
> the RTC to jump there, and might at the end hurt the clients, but
> thats different subject (see MBIA, for example).
>
> As for your point that LTV > 80 loans need to go away, this model
> has been around for as long as mortgage market existed. you want
> to kill it NOW? Just because cars have accidents sometimes, does
> it mean we have to stop using them?

Big New Housing Problem: Mortgage Insurers Back Off

Unfortunately in the MI business the free market was not at work.

MI is required for any loan over 80LTV that Fannie and Freddie buys.

The mortgage originator determines which MI company is used on each loan.

So the MI companies were squeezed by the lenders on one side and the GSEs on the other, and forced to take risks they shouldn't have taken.

I do agree with your argument that the market should determine the risk taken, but any free marketer needs to acknowledge that we can have market failures. The Lender/MI/GSE setup was one of them.

The only sustainable solution is to require the lenders to keep some "skin in the game".

The GSE charters allow lender participation as an alternative to mortgage insurance on loans over 80LTV. the mortgage insurance industry should be shut down, and lenders forced to retain the risk on loans over 80LTV. This would result in "the market" making more intelligent decisions on what loans to advance.


On Jul 16 01:42 PM Mike Sanborn wrote:

> I thought the free market could determine risk and reward and an
> investor who wants to lend 100% of a collateral's value to you would
> have every right. If another investor wants to offset the risk by
> insuring a portion of the loss for a fee, he/she has every right.
> (You do have life insurance, car insurance, health insurance, long-term
> disability insurance, homeowner's insurance, etc., right?) They risk
> their own money and therefore they make their own rules, which are
> to minimize loss. (Try working for a portfolio lender and then you'll
> understand how this works) The problem with the mortgage industry
> is not the loose lending guidelines, it is the free money that the
> government provides to banks and large investment firms that has
> eliminated the accurate assessment of risk. All of these 'greedy'
> investors and lenders are simply generating fees lending the governments
> money. There needs to be real loss at risk for these investors so
> they will revert to proper assessment of risk. If that balance is
> found at 95% LTV or 80% LTV, then so be it. The monetary policy of
> the government is the sole cause of the mortgage debacle. Whoever
> gets to the money first, wins. You cannot tell me that the solution
> to the problem is 80% max financing as that only reveals your complete
> ignorance of the big picture.

9 Stocks Giving Dividend Raises in Q209

MFA? Try again.

The issue is not credit risk, as Old Trader implies, since these guys buy only agency MBS from what I can tell. But don't count on that yield staying in the double digits, remember these guys are a REIT.

Is There a Problem Looming with FHA Loans?

Simple, as Ben said, FHA is where all the garbage loans are going, there is no other outlet in this market. It is the next subprime, and of course the taxpayers will be on the hook to save it.

Market's P/E Ratio Surges: What Does This Mean?

Operating earnings are a joke. Like all those writeoffs are "one time" events. until they happen again next year,and next year...

Why Do CNBC and Bloomberg Report Operating Earnings?

S&P doesn't use their own number, they use a number from Birinyi Associates, which is their (Birinyi's) version of operating earnings.

Though I agree SA should not help the spread of that number.


On May 28 08:53 AM David Van Knapp wrote:

> I agree that "As Reported" earnings (i.e., GAAP earnings) should
> be used consistently. There is too much room to manipulate "operating"
> earnings, and subjective judgements from company to company (and
> even within the same company over time) make them non-comparable
> over time.
>
> Respectfully disagree as to what the P/E of the S&P 500 is at
> the moment, as Standard & Poor's does not weight earnings the
> way they weight prices in computing the index. Your own website has
> a "PE Ratios-Stock Indexes" link, which takes one to the Wall Street
> Journal Market Data Center page. There the P/E of the S&P 500
> is shown as 14.9. I assume you disagree with that number...why then
> do you refer people to it?

A Portrait of the Mortgage Ax, Not Falling

You're reader is wrong - if Chase is just the servicer, they are advancing payments to the owner of the loan (often an MBS trust) so DO care about initiating the foreclosure.

Odds are they are just backed up. I have seen loans that are many years delinquent. Yes, years. Usually there was some glitch in the foreclosure situation and the servicer never circled back around to deal with it.

Ongoing Observations on NYSE Volume

No question in my mind the Fed was buying index futures to prop up the stock market.


On May 08 06:17 AM Economic Lens wrote:

> What is the chances that the government is either directly buying
> equities or having a few of their crony vehicles like GS doing the
> buying for them. This stinks of a very orchestrated event from the
> banks to the stock market.

It's Lost Jobs, Not Mortgage Payments

why not, as long as the Chinese are still willing to buy our debt.

Banker CEOs Lied to Congress

The ignorance of a lot of posters on this story amazes me. So an underwater option is worthless? Since when? If so, you have better tell people buying and selling options on the CBOE, cause they are buying and selling out of the money options every day.

WFC is currently trading at 16.34. You mean if someone gave you options to buy WFC at $17 any time in the next year you would view them as worthless?

Clueless.


On Apr 05 09:52 AM User 388979 wrote:

> Mr. Olagues apprently have never been granted a option to purchase
> stock. The idea behind a ESO is that the employee is granted the
> opportunity to purchase stock in the company he works for at a guaranteed
> price, generally determined by the stock price at the time of the
> grant. The employee then can (within a specifed time period) either
> purchase the stock and retain it or can buy and sell the stock on
> the same day netting a profit. If you look at the stock options
> that were granted for example to Mr Stumpt of Wells Fargo in 2007
> you will see that the price of the stock options ranged from 13 to
> 26 dollars a share. The price of Wells Fargo Stock at the time the
> CEOs testified was well below 13.00 a share therefore if Mr Stumpt
> had not yet exercised his option to purchase these shares he would
> be a fool to buy them for 13 dollars a share when he could purchase
> the same number of shares on the open market for less. Therefore
> these stock options are worthless to him.