Dale
I don't know who "Flagstone Securities" are, or what relationship caused them to write the evaluation of NFI. However, the language can hardly be said to be objective, which leads me to wonder what else might not be.
Knowing that you are quite successful as an investor/speculator, I know that you believe in this opportunity and have, perhaps, a better chance of being right because of your previous experience with the company's price movement and your daily attention to the market and your almost instantaneous reaction time to changing perceptions would get you out of this company before you got hurt too badly. However, I would argue that you might be the exception, rather than the rule.
"Sub-prime" lending means lending to folks who have demonstrated history of being problematic for creditors. While there is definitely profitability in servicing this market, it must be done with care and careful screening. A 65% surge in NFI's production volume in the 4th quarter alone suggests quite a bit of pressure on that screening process.
There have been other "sub-prime" lenders that have flared brightly for a while (Green Tree and Flagship Mortgage come to mind). The reports written about them by some were just as glowing as the one you referenced. However, both entities are now defunct, their investors badly burned.
The main problem with success for the "sub-prime" lender, is that it usually comes at the expense of underwriting standards.
I have not investigated NFI, and I saw that you believe they have insurance and rate hedges to cover exposures, but it is amazing how quickly these "supports" fail when the company starts going south. The "wiggle room" for the insurers is the claim of fraudulent practices.
I believe that any money put into these type of financiers might be appropriately called "speculative" money rather than "investing". But that is my opinion only and might be worth as much as what you paid for it (nothing) or it might be worth much less than that.
Timba |
