Mr. Pink's Picks: selected event-driven value investments Message Board

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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments

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To: Gary105 who wrote (3289)	9/26/1998 3:32:00 PM
From: Mr. Pink	Read Replies (3) of 18998

First Plus is a shyster shop that makes loans to people with huge credit card debts low income but own a home. These dirtbags take down First Plus's 14% interest rate loans which are tax deductible and use the proceeds to pay off 18% credit card debt. The problem is, in the coming recession, said dirtbags will be laid off and won't be able to pay off their loans and default. IO strips are bad as this is the toxic waste left from the securitizations that no one is stupid enough to buy. The little stubbie left over is what gets paid back to FP after and if all the seniour pieces of the securitiztion are paid back. The amount is booked as a profit based on assumptions of credit quality and prepayment patterns. Only problem is these matters can change abruptly. FYI Firms such as Lehman Brothers write off the entire amount of the IO strips and book a gain if cash is later realized. In the case of FP the io strips are worth far less than the face amount. This is a fact, not the opinion of Mr. Pink, kind of like the statement that Dan Philips is a scum bag. Mr. Pink

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