Housing Market Tracker - Mortgage/Subprime-Related Stocks

Includes: AMBC, MBI, MTG, RDN
by: Judy Weil
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Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market, homebuilder and housing-related stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.

Quote of the Day

"Any reports on specific numbers are not factual." - Citigroup spokesman, responding to a CNBC report that Citi would be cutting 45,000 jobs in the wake of its massive writedowns. Citi employs 320,000 people worldwide. The company already cut 17,000 jobs this year before the subprime/credit crisis began. (Chron.com, Nov. 26th)

Subprime, Credit and Mortgage-Related Stocks

  • Sector Snap: Bond Insurers (Chron.com, Nov. 26th): "S&P said it is considering whether mounting payment defaults on certain kinds of mortgage debt threaten bond insurers' credit ratings... The worry [is that] losses will spur credit agencies to cut credit ratings for insurers like Ambac Financial Group Inc. (ABK) and MBIA Inc (NYSE:MBI)... . AAA-rated credit is vital to major bond insurers... A bond issuer buys insurance to curb the interest rates paid on a bond. If the insurer guaranteeing a bond does not have top-notch credit, the implied risk escalates and investors demand higher interest rates. Weaker credit ratings would hamper a bond insurer's prospects for attracting new business."

  • WaMu: Executive Privelage Trumps Shareholder Interests (Richard Shaw in Seeking Alpha, Nov. 26th): "Washington Mutual Bank's [WaMu] capital adequacy ratios (Tier 1 and Total) are both below average. Their Tier 1 ratio is at the bottom of the 24 large banks in the Keefe, Bruyette, Woods large bank index. Their stock is down about 55% for the year. Their dividend (currently yielding over 12%) is in question due the possibility of having to raise money to restore capital adequacy. Q4 is likely to bring more unpleasant mortgage write-off news... [Now] they have changed the deferred compensation plan to allow executives to withdraw lump sum assets in July of 2008."

  • Ultra Short Financials Proshares ETF: Profit From the Housing Bubble (Ryan Freund in Seeking Alpha, Nov. 25th): "Many banking institutions have... warned that earnings will take a massive hit in the coming quarters as ARMs reset and foreclosures rise. These warnings have been sugar-coated, though... Actual losses will more than likely be larger... One particular stock... that allows investors to profit from the banking industries demise is the Ultra Short Financials Proshares (NYSEARCA:SKF) ETF. This ETF... simulates the shorting of all financial stocks. For every 1% the financial industry goes down, this ETF goes up 2%. In the past year, this stock has boasted more than a 40% return, doubling the loss of 20% for the financial industry."

  • Wachovia Insiders Are Placing Big Bets on Company (Todd Sullivan in Seeking Alpha, Nov. 21st): "Wachovia (NASDAQ:WB) Director, Lanty Smith... followed up his 100,000 share purchase last week with another 37,000 share purchase on Wednesday (11/15). Since the end of August Smith has purchased almost $8 million dollars of Wachovia stock at prices between $38 and $48 a share. Smith now owns 220,000 shares of the bank. The purchases make Smith the third largest individual shareholder at Wachovia."

  • SEC Launches Probe Of MGIC, Radian (Milwaukee Business Journal, Nov. 21st): "The SEC is seeking additional information from MGIC Investment Corp. and Radian Group Inc. under an investigation into their failed merger and their relationship with a subprime lending affiliate. MGIC (NYSE:MTG) said only that in October, the Division of Enforcement of the SEC requested documents related to Credit-Based Asset Servicing and Securitization LLC (C-BASS), the now-terminated merger with Radian and subprime mortgage assets "in the company's various lines of business." The meltdown of the subprime mortgage industry caused both firms to write off their total investment of more than $1 billion in C-BASS."

  • MGIC Investment Cut to 'A-' on Challenging Market Conditions - S&P (CNN Money, Nov. 21st): "Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Mortgage Guaranty Insurance Corp, MGIC Indemnity Co, and MGIC Australia Pty Ltd [MGIC] to 'AA-' from 'AA'. S&P also lowered its counterparty credit rating on MGIC Investment (MTG) Corp... to 'A-' from 'A'. S&P's credit analyst James Brender: "MGIC will report underwriting losses in 2007, 2008, and 2009... MGIC's excellent capitalization will enable the group to weather this very difficult period in the mortgage insurance industry... We believe... long-term fundamentals will enable MGIC to generate underwriting profits by 2010. The outlook on all these companies is stable."

Tracking the Housing Market and Homebuilder Stocks

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