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Strategies & Market Trends : Anyone following Capstead (CMO)??
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To: Dawgfool who wrote (171)12/14/1998 9:30:00 AM
From: jmt  Read Replies (1) of 216
 
Daw:

From reading the PR the company is holding $2.2B, secured by $2.1B in short term borrowings after the transaction. That $2.2 must have all of the general risks of any mortgage pool. Although sold, clearly their is recourse in the event of non-compliant lending practices.

Concerning the cash value, please understand I mean net cash, after all liabilities. If those liabilities are contingent of otherwise difficult to quantify, clearly the cash will trade at a discount. But in the interests of efficient markets, I respectfully request any example of a company which has traded more than a day after disclosing its net cash value per share exceeded its share price. The only possibility would be if management was speculative with their use of cash and investors knew they would never realize that cash value in their pocket.

I recognize the market has excesses in both directions at times. But what is being suggested here is you as an investor have outsmarted the smart money. I could be wrong, and as always I am in the camp with the small investor wishing you the best, but I believe analyzing this transaction is more complex than meets the eye.

And as always, it could be the smart money is more willing to miss the beginning of a run than get caught holding at the end. As usual, it is an individual risk/reward decision.

Best of luck.

jmt
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