User 68127

Financials: The Dangers of Zero Weight

Ultraman,

If there are home equity loans or piggyback loans in the portfolio, they are probably worth zero. Simply put, if the borrower is underwater on their home, the first lien takes a loss but gets whatever they can for the property and the second lien gets nothing.

Also, what if the appraisal was unrealistically or fraudulently high? In that case, even a first lien could get next to nothing. Are you beginning to get the idea?

Roger: a ten-fold move in C would imply $180/sh some time in the next ten years. Of course, with a lower earnings base now, there is no guarantee that C will even reach its prior peak in EPS within ten years...much less have the kind of PE expansion that would be necessary to reach this level...