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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: CalculatedRisk who wrote (15962)	6/28/2004 10:31:51 PM
From: Ramsey Su	Read Replies (1) of 110194

This press release was a huge surprise to me. No, not that WM is going to warn, or miss earnings big time when they report July 22, but rather the way that they sounded like it was a surprise to them, and how little they have done to prepare for it. Now I wonder about their portfolio. They were swamped by the big refi mania that peaked July 2003, as well as the mini refi mania that ended around Jan 2004. As a result, they funded an unknown amount of loans that has to be at a loss since rates had moved up since then. If they sold these loans, what is the loss? If they decided to portfolio these loans, they are sitting on a paper loss. Regarding staffing, biz.yahoo.com the story was supposed to be that they had cut staff, decided not to add staff during the mini refi mania so they should have already downsized enough. That is clearly not the case. Having heard the last few conf calls, Killinger impressed me as a hard selling shoot from the hip CEO, with more noise than substance. Now the guidance is $3 to $3.60 for the year? I am willing to bet that they will miss $3. Unfortunately, WM has an out. They would probably put themselves up for sale if it gets really tough. It is tough to short, without having a good understanding what the takeover value may be.

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