Stock Ideas 
Stock Ideas Investors Daily Edge Thornburg Mortage Mess (NYSE: TMA) in the Red
Stock Ideas Investors Daily Edge Thornburg Mortage Mess (NYSE: TMA) in the Red 
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By Rick Pendergraft This week’s economic calendar is busy, but it may seem like a letdown compared to last week. There aren’t as many big reports as last week, but there are still three to keep an eye on. |
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| Thornburg Mortage Mess (NYSE: TMA) in the Red |
| Saturday, 20 October 2007 | ||||||||
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The dividend was omitted for the third quarter, and the fourth quarter will be reviewed as the market conditions for mortgages evolve and develop in the next several weeks. Thornburg outlined that while it’s gone through the full reckoning of its portfolio and has now made the major adjustments to its book of assets and liabilities as well as how the company is running, too many of the major mainstream market leaders have yet to come clean in the same fashion. Instead, as many have noticed, the three biggies of the US financial markets--BANK OF AMERICA (NYSE: BAC), CITIGROUP (NYSE: C) and JP MORGAN (NYSE: JPM)--have started to talk up a new private pool of so-called bailout funds for mortgages that will begin to work with Structured Investment Units (SIU) inside what are also being referred to as Master Liquity Enhancement Conduits (M-LEC).Whatever the marketing department of these banks are calling these funds and pools of mortgages, all it really comes down to is this: The biggie banks don’t want to go through the same reckoning that Thornburg has already gone through. And to keep them and others from being forced to do so, they’re trying to get the rest of the majors to pony up capital to create a fund to put bids on bonds and pooled mortgages that will be either held by the fund for a bit or repackaged and dumped back on the market. The bottom line is that they want bids to come back to the market for crummy loans. And if they don’t, another credit crunch will ensue. This means that the massive drops in profits for the third quarter, as reported by many of the biggie banks and brokerages, won’t just be repeated in the fourth quarter but will worsen.
This pool just prolongs the process of coming clean. This is what Thornburg doesn’t like and sees as a threat to even the highest tier of the mortgage market. As such, it wants to hold on to cash a bit longer as the market goes through what it sees as a further workout. The result is that Thornburg will either be better off than the majority of its peers, or it will be able to put bids at fire-sale prices on a bunch of good-quality mortgage pools, as the biggies will be forced to raise capital. This is why we continue to have this company in the Nibblers. While the dividend omission for this quarter is indeed bad on the surface, Thornburg’s forthcoming strategy seems to be right on the money for the current and pending market conditions.Source : Pay Me Weekly This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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