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Stock Ideas Investors Daily Edge Profiteering From Subprime
Stock Ideas Investors Daily Edge Profiteering From Subprime 
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As the price of gold stagnated during August, any reasonable speculator had to wonder why the crisis hedge sat still while investors were filled with credit-collapse fever. |
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| Profiteering From Subprime |
| Sunday, 26 August 2007 | ||||||||
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Did you catch Senator and Presidential wannabe Chris Dodd’s press conference? The Democrat from Connecticut, Chairman of the Senate Banking Committee, got Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke together in his office for a great photo-op and a discussion of the subprime credit crunch last week. Does make you wonder where the guy was during the whole easy-term credit thing that brought us to our current predicament. Why didn’t we get some comments years ago to the effect that perhaps we might need to tighten down on reserve rates for mortgage securities and loans on bank and financial books and move further to tighten margin rates on investments in these securities?Or how about a press conference a few years back when Collateralized Debt Obligations (CDOs) were getting really wound up? The all came with nice, official stamps of approval from the so-called approved rating agencies--Moody’s and Standard and Poor’s and their easy terms for Aaa/AAA ratings. Granted, Dodd’s not alone; the rest of the Senate, the House and the administration didn’t know or want to know what was going on under Wall Street’s hood--and that of the whole US banking system--over the past several years. Just about everyone was gung-ho over cheap money: homebuilders as well as buyers, from Section 8 homes to multimillion dollar mansions. And as I’ve been writing since well before the credit meltdown, the Fed, along with the Senate Banking Committee, were moving to further ease capital requirements on mortgage debt as part of the global banking agreement commonly as Basel II.
But now Dodd and just about every other politico with access to a microphone is either criticizing the markets or trying to appear as the savior for investors, homeowners and the whole darn economy. That’s fine; that’s what these guys specialize in. Ignore the real issues because it would slow down the markets and cause some issues with current or potential donors. And when trouble really flares, get a press conference going and tell the voting public you’re on the case. The same thing happens on the company front. Several companies, including THORNBURG MORTGAGE, are sweating out the details of getting through the credit market crunch. More and more are appearing in the financial media with the message that they never had any subprime exposure, and that this lack of exposure gives them the edge for better growth in coming months and years. That does sound good now, doesn’t it? But the same could have been said of Thornburg as well as countless other financials and even run of the mill businesses around the nation and beyond our borders before the recent market mess. That won’t stop the message from getting out and convincing plenty of investors to pile into potentially dead assets, or worse--companies that have other issues. By Neil J. George, Jr. Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by email at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Source : KCI
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