The down side of high yield-- lower lows for sub-prime lenders
New Century, or symbol: NEW, the company who's head of IR/PR called me to tell me that she was shocked, shocked, to think that gambling was going on with there mortgage pools, dropped another 50% this morning, which I kind of suspected would happen at 3am when the Asian markets were dumping. I would be happy to take her call today to follow up about what percentage of their pools were funky paper, since she told me it was a very small percentage and that I was factually wrong about NEW a few months back, about the time Businessweek did a front page story about sub-prime lending, and Barrons explored the calls, puts and longs of investing in NEW. I left a message last week to ask if they were going to cut their yield, which seems necessary; but they never called back.
If you've been following the knitting we do here at Theyieldhoe.com, you know the time to load the boat with Put contracts (maybe the LEAPS in 2008's) was last week, along with the Puts on a few other companies with Sub-prime loan portfolios that were underwritten by 23 year old "rock star" brokers over the last few years. Is anyone sick of the adjective "rock-star" yet? Maybe we will be when the mortgage companies finish their dance of the falling knifes.
The good news is, many of them are no doubt riding in Lexis in heated seats; the bad news is, a lot of people will be moving out of the homes that were bought with these adjustable mortgages, which were syndicated and sold around the world as high yielding, scecuritized paper.
Speaking of hell, what the hell does the underlying business have to do with anything, right?
Thus, today is a great day to look at what some of this Sub-prime toilet paper stocks did in the market, and how their Puts are trading, which are the equivalent of a short sale for those who are new to the great game. Here is the spreadsheet I am maintaining to show the gains or losses on "the down side of high yield" so to speak, including NEW, Indymac and LEND.
If you've been following the knitting we do here at Theyieldhoe.com, you know the time to load the boat with Put contracts (maybe the LEAPS in 2008's) was last week, along with the Puts on a few other companies with Sub-prime loan portfolios that were underwritten by 23 year old "rock star" brokers over the last few years. Is anyone sick of the adjective "rock-star" yet? Maybe we will be when the mortgage companies finish their dance of the falling knifes.
The good news is, many of them are no doubt riding in Lexis in heated seats; the bad news is, a lot of people will be moving out of the homes that were bought with these adjustable mortgages, which were syndicated and sold around the world as high yielding, scecuritized paper.
Speaking of hell, what the hell does the underlying business have to do with anything, right?
Thus, today is a great day to look at what some of this Sub-prime toilet paper stocks did in the market, and how their Puts are trading, which are the equivalent of a short sale for those who are new to the great game. Here is the spreadsheet I am maintaining to show the gains or losses on "the down side of high yield" so to speak, including NEW, Indymac and LEND.
If I have the time, I'll included Countrywide, and HSBC (love that theme song on there TV commercials, don't you? But maybe it they'll have to pick something even more blue and melancholic after this quarter and next).
Labels: high yield investment, Indymac, new century, sub prime lending, symbol LEND
posted by TheYieldHoe at
7:15 AM
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