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Non-Tech : Signature Group Holdings -- Ignore unavailable to you. Want to Upgrade?

To: SI Bob who wrote (9)	3/29/2007 5:32:32 AM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 78

Sy Jacobs has a far better view of this segment of the market than I do. This Barrons article is dated March 24th. Buyer beware... ... Are you hanging on to your subprime shorts, or have you moved on? In subprime, the decline has been vicious already, and we are starting to look elsewhere for that kind of juicy downside. NovaStar Financial [NFI] is down from 39 to 6 since we last spoke, and we are still short. We are still short some others, and I think New Century Financial [NEW] is very likely going to zero. Another that has more downside is Fremont General [FMT], which we've been short for two to three years already. Fremont is a little more complicated, but if you read the cease-and-desist order that the regulators issued to them two weeks ago, and which started its stock crashing, it is hard to see how they don't eventually seize the bank. They as much as call Fremont's management incompetent and order them to stop doing business in subprime. Their losses from the loans they've made -- and they made $31 billion last year -- are going to be huge. Another part of their business is condo and construction lending, and the regulators criticized them for lax controls in this area and inadequate reserves, as well. By the time they take proper reserves on those loans and because of the losses they'll experience getting out of subprime, we see them as capital-deficient. Given the criticism of management by the regulators in this cease-and- desist order and the probable desire to make an example of someone, I don't see the regulators being lenient with them, and I don't see how they will avoid getting seized and wiping out equity holders. ... Message 23400755 EK!!! PS - RE: Short interest... I called my brokerage today on a hunch. There are no shares available to borrow for shorting. What can be shorted has been shorted. Period... RE: non-recourse on sale of subprime portfolio... Look at the situation from the perspective of the buyer, not the seller (FMT). FMT has few sensible options other than to sell the entire portfolio and exit the subprime business. In doing so, they shed themselves of associated employee expenses in the residential loan division of their business, which is a plus. But, no one knows the exact terms of the sale, and I for one would wager BIG BUCKS that these terms were/are extremely onerous to FMT. There will be no timely reporting of the past due 10K, and likely any current and future 10Qs as well. Since this sale was announced subsequent to the filing due date of the this past year's now delayed filing, there will likely be no full disclosure of the terms of the sale in that filing when finally submitted. So, investors will have to wait until the filing for the current quarter or even next quarter before the terms will be publicly disclosed. Just silently think about this question. What reason would any "white knight" have to come in and buy out the subprime portfolio, especially considering that extensive losses within the portfolio are almost a sure thing? I don't think that the so-called "discount" is reason enough, considering that everyone else is reporting that they are discounting somewhere between 20 and 35 cents on the dollar, whereas FMT is rumored to have gotten something like 90 to 95 cents on the dollar. And I don't think that the buyer was allowed to "cherry-pick" the portfolio. No, it stands to reason that somewhere along the way, FMT will shoulder the brunt of any portfolio losses through some form of indemnification, either a cash subsidy or a reversal of sale. Remember, most of these loans have underlying property values that theoretically buffers the lender from losses. But these subprime properties are among the expected leaders in property value declines. So, it stands to reason that someone, somewhere is going to eat some huge losses, and I'd be willing to wager the loser won't be the buyer of the portfolio...