Courageous Call on CIM

November 17, 2011

Yesterday Merrill Ross at Wunderlich put out a sell opinion, even though she was potentially angering the largest player in her stock sector.  You simply don’t see that among equity analysts.

Hold, maybe.

But an outright sell?  Never.

Long time MoM readers know that I had doubts about the non-Agency business model Chimera was pursuing.  Specifically, by selling off the front end cash flows of the MBS bonds they bought in the marketplace, they were setting themselves up to earn a (non-cash) profit only to the extent that the back end cash flows were worth more each quarter, at least until the front end bonds were paid off.

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Clear Air Turbulence

November 11, 2011

Anyone who flies a lot, especially the transatlantic fall/winter route, knows how disturbing mid-flight bouncing around can be.  Invariably the pilot comes on and says we just hit some “clear air turbulence.”  Occasionally we even get a warning passed on by another plane ahead of us, but more often it’s a surprise.  Consider this the pilot coming on and suggesting you buckle up because a plane flying ahead of us is reporting they encountered clear air turbulence.

A note came from Wunderlich Securities’ mREIT analyst Merrill Ross today. She discontinued her price target for Chimera (CIM) and pointed out the difficulties that this non-Agency mREIT is probably having with its portfolio valuation.  In particular, they have delayed their quarterly SEC filing, and the best guess is that a permanent impairment charge may be coming on a chunk of their portfolio.  That would trigger both a loss in book value and hit to current earnings as the impairment is recognized.

My readers can’t say they weren’t warned, here, here, and again here.

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Back from the 19th Century

November 11, 2011

Anyone who thinks the pre-technology days of the 19th century were some wonderful simpler time hasn’t tried living that way.  Even though our freak pre-Halloween snow storm (official snow total at the airport more than seven times the old record for the month of October) didn’t lead to days and nights of sub-zero cold that burst house pipes, it did send about half the people in our state (and more than 90% of the people in my area) into a daily grind of dealing with warmth, food, water and hygiene before we could even begin to address other needs like communication, jobs, etc.

That beautiful Japanese maple I posted a few weeks back lost one of its major limbs, and that casualty is still hanging up above the ground, hooked on one of the other major limbs that didn’t fall.  Especially hard hit were the oaks, since they are just about the last to lose their foliage.  But even evergreens, which are supposed to be designed for snow, lost tons of limbs.

This stuff that came out of the sky was sticky, wet, and heavy.

Anyway, I’m glad to be back, and happy to report that losing a few trees and limbs isn’t the end of the world.  But I did have some serious internet withdrawal symptoms.