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Politics : Welcome to Slider's Dugout

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To: redfish who wrote (6)	6/11/2005 11:48:15 AM
From: SliderOnTheBlack	of 50399

ahhhhh Subprime Lenders.......... redfish; I had a pretty good short position in the Subprimes, along with Fannie & an off & on Homebuilder Trading-Short Position... all closed out a while back....as it looks like this low, if not lower rate environment is going to be with us for a while... for reasons well explained in Hoy's Kitco Piece linked earlier. Subprimes are basically in the business of taking a POS and putting nice wrapping paper and a pretty bow upon them and then reselling them. Gain on Sale Accounting...which is required; is a recepie for disaster. Once rates normalize... and or the economy rolls over....they joing the pedigree of their predecessors like Cityscape, Greentree, Conseco et al...as no more perfect recepie for disaster exists for subprimes than a Housing Value Bubble - which adds a Nitrous/Turbo Booster to an already Industry Wide embedded problem of grossly Inflated & Bogus Appraisal Value's... add the escalation of Fast & Loose - grow the topline Underwriting Standards and Incredible Loan Programs encompassing No Income Qualification & High LTV for Subprime borrowers... and no greater POS sector has ever existed. Subprime prior to the mid/late 1990's had some solid longterm players who properly priced risk and had great internal underwriting and origination standards. But, when the CEO's of these companies started focusing on their Stock Price instead of their Business... they fell to the pressure to run fast & loose and keep the stock moving up. The middle-late 1990's saw the Explosion onto the Markets Radar of former SubPrime High-Flyers like Cityscape Financial which at it's peak was among Fidelity Magellan Funds largest holding & one of the Fund Managers Michael Price's favorites...and let's not forget who the highest paid CEO in America was at that time... it was the CEO of Greentree Financial which just took Conseco down into Bankruptcy a while back... These are creative accounting vehicles... nothing more, nothing less... and anytime we see volatility in interest rates, or a rollover into recession... these are sitting ducks...and the worst - always go to "zero" ...as SubPrime bones liter the Bankruptcy graveyard. I've seen it from both the inside and the outside... and it aint pretty from either view... they are always amongst some of the best risk:reward shorts given the right market environment.

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