Big bankruptcies often happen close to bottoms. This is not new or unusual.
I doubt that NEW going under (if it happens) qualifies as marking a bottom because it was never a big company and the move down from the peak is so small.
A failure, if it happens, so close to the top seems very strange to me.
Wikinvest Wire
16 comments:
New Century (NEW) wasn't big overall and neither was Fremont (FMT) but they were, respectively, the #3 and #5 subprime lenders nationally so this may mark a bottom of sorts in that sector. I've been fooling with these two for weeks strictly as a trading matter but it looks like we're pretty close to done now, one way or the other, at least in the case of NEW.
In my experience credit driven markets w/ significant real estate involvement are historically slow to unwind -- no quick crashes/fixes -- but may not seriously infect other markets primarily because they are typically regional in character; OTOH if the malaise spreads into other sectors/markets (regions combine, equity extraction prevented, construction related unemployment) then a larger scale breakdown can occur that is also rather slow and tortuous.
Don't think we're there but things continue to feel chancy to me; of course that's been true since last May so what do I know.
PS: read an interesting hypothesis (unfortunately can't remember where) that an unwinding of the Yen carry could cause the US yield curve to normalize (demand for long bonds would decline). I would think that would also depend on oil prices since I believe petro-dollars tend to relocate into the middle of the curve but, still, interesting.
the carry trade is curious. i have heard the carry trade market is close to $1 trillion, is our total debt $3-4 trillion?
Of the $3-4 Trillion how much is in China and not going anywhere? China has over a Trillion is reserves but some of it is short term paper.
Of the $1 trillion in the carry how much is in NZ, Iceland, Oz, Turkey and Hungary?
I will be surprised if it works out as theorized in the link u saw.
My 1.5 cents.
Yeah, your 1.5 cents is probably worth at least as much as my buck two-eighty ;-)
You wouldn't believe what the rumor mill is doing WRT NEW et al: The revised script now includes several crashing hedge funds (who bet too heavy on subordinate MBS tranches and/or invested directly), a couple big investment banks who controlled and/or supported to boost profits, and of course the SEC probes w/ FBI agents skulking in the shadows ready to pounce. My oh my, hasn't been this much excitement in the sector since Lincoln Savings started going down the tubes during the S&L debacle.
I am busy buying NEW here at these prices. The rumor was stated by someone who was short so they could easily cover. I am surprised by how so many people could think NEW is going bankrupt.
DFl
Going long NEW? You're on the other side of my trade then but I suspect our time-frames are quite different; i.e., based on the latest SEC filing (http://tinyurl.com/297kvj) NEW can clearly gain necessary financing even though they will be suspending all loan orginations for now but this is a swing trade for me and I don't expect to be in it much longer.
Regardless, good luck with the long. That's a pretty bold play at this stage of the subprime drama but FWIW Tom Brown over at bankstocks agrees with your assessment (http://tinyurl.com/34dmom) and he's nobody's fool.
NEW may win my award for Wild Stock of the Year. It's high last year was $51.97 on 5/1/06. It now at $3.70 in after hours trading. It has a P/E of .58, with a dividend yield of (gasp) 147.28%.
Maybe I'll wait until the stock is down around two bucks and get a 200+% yield. I always like to triple my money when I can. (Now if I only knew about that pesky bankruptcy thing).
(LOL) Wild is right Anon 3:57 but even if they avoid bankruptcy I suspect it may take awhile to recover. If it were just fear among retail investors I'd say the chance of a strong pop in NEW's stock price could well be in the cards but as I read the quantitative, fundamental and technical tea leaves (noting that NEW's lenders appear to have suspended additional credit) I think things will go otherwise.
We shall see, as always.
anon said
"NEW may win my award for Wild Stock of the Year. It's high last year was $51.97 on 5/1/06. It now at $3.70 in after hours trading. It has a P/E of .58, with a dividend yield of (gasp) 147.28%."
what are you talking about. It has 0% dividend yield currently and no p/e going forward. It is projected to lose money. You obviously have no clue how to look at fundamentals other than reading the dated yahoo finance pages.
anon#2
This from Fidelity "real time quote" on NEW:
Volume 51,175,177
Net Change -1.29
52 Week High 51.97 on 05/01/2006
Net Change % -25.00% 52 Week Low 3.94 on 03/05/2007
Bid 3.70 Ex. Dividend Date 12/27/2006
Bid Size 8 Dividend Pay Date 01/31/2007
Ask 3.79 Dividend Rate 1.9000
Ask Size 20 P/E Ratio 0.5800
Bid Exchange Third Market Yield 147.29%
Ask Exchange Third Market Split Factor 0.00
Last Trade Exchange NYSE EPS 6.71
Open 5.59 Currency USD
Day High 5.6000 Primary Exchange NYSE
Day Low 3.3700 As of 03/08/2007 4:01:55pm
Prev Close Price 5.16
Prev Close Date 03/07/2007
I might also like to add that you have no sense for sarcasm.
Thank you anon1 for clearing it up. I did not sense sarcasm in your post.
anon#2
No problem Anon #2. I figured that RW's "LOL" would have done the trick. But I should have added a :> myself though.
i would not say sarcasm i would say drier than I don't know what. I thought my humor attempts were, i am very thirsty
Regarding dividend yield....for an org that is in danger the danger that NEW is in, I think I can say one of the following scenarious has a high probability of happening. Either the company will fail before any future dividends OR the dividends will fail prior to the company going under.
Falling stock prices generally mean poor underlying fundamentals. Poor fundamentals generally leads to cash squeeze, and dividends go the way of cash.
I'm not sure by what measure Roger says NEW isn't big. They were among the top 5 subprime lenders, and are responsible for $22B of securitised debt. Back when they were trading in the $40's had a market cap upwards of $2 billion.
When NEW goes under, it will be a decent sized bankruptcy. IMHO this latest loan is not enough, since NEW has to basicly stop all operations until they can free up the capital tied up in EPD's on book.
Even will all this going on, NEW is still originating crap loans, as shown in the last press release, with 1.9% of february's loan production defaulting on the first payment.
Societe Generale's chief us economist said that all of residential construction is 5% of GDP on Bloomburg this AM. What % of residential is subprime? What percent of subprime construction is in trouble? He felt that the correction in employment of construction jobs started a year ago and continues today probably through 07. He also said that NEW and FMT are part of a normal banking cycle and a healthy correction of unhealthy lending practices. He said that there could/would be a 'small' trickle through effect to the general economy. My beef right now is that both the senate and the house are holding hearings about these business cycle banking events (subprime credit practices). Now if they don't decide to 'fix' the banking system again, we will probably see a nice upbuild in construction in all areas. But I don't trust them not to meddle in the economy. they are in everything else:-< Tom in Indy
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