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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Dale Baker who wrote (15514)	11/16/1998 11:42:00 AM
From: RockyBalboa	Read Replies (1) \| Respond to of 18691

Dale, note that AMMB's losses, similar to much others fincos, are past losses due to the widening of credit spreads. So believes the management and they tend to guide nice profits "next year", for AMMB the estimate is $1.60 making it dirt cheap at prices between 6 and 9. Earlier Mr. Pink noted, most of the firms won't survive a forced Mark to Market. As the market for their loan portfolio is still weak - very recently as the fire sales of assets happened in late october, after the early october dust settled. AMMB lost money on each sale of loans and they had to sell in order to get in urgently needed money. Another such quarter and their equity is halved again. Sure can they earn lots of money if there is no additional widening in credit spreads, and for the treasury repo side, no more rallies in treasuries. But this implies to happen: no recession in 1999 onwards and no significant worsening in observed credit quality. The worst case for AMMB is two more bad quarters where their thin interest margin and services income is impaired by losses due to loan sales and the book value is off then. Then they are toast. All in all it is a risky play. As for AMMB, also other co's sold huge amounts of loans at low prices in an act of desperation. So we should question: Who buys, who is strong enough in terms of core capital to buy up that? The big banks? Because new buyers perhaps made bargains in snapping up those loans... IMCC (<$2) for example did an equity backed credit line - a soft convertible in order to get fresh money, a feature not unknown to short sellers. You see it in their chart, the final blow from 4 to 1 later in October, when a planned sale of co. or certain asset failed to work out. AMMB and others are a sort of Credit Linked Option now. If the spreads are too high and fresh money is too tight for such co.s the option may expire worthless. And the knockout barrier is lowered again, for AMMB. Just IMHO C.