Quick Takes: IndyMac Goes Boom, More Pain for Regional Banks, why I Bought a Battered Business Development Company
July 07, 2008
– Comments (9) |
RELATED TICKERS: PRK
, MVC
If you didn't hear the news, Indymac (IMB) is one step closer to death after announcing that it will originate no new loans and that it is considered to be under-capitalized. The stock was down 30% in the after-market. Remember, Bank United (BKUNA) is next on the list of banks to go bye-bye. To quote ChimpInvestor, "no cutting in line."
Indymac was the prime pusher of Alt-A loans that never had a snowball's chance in Miami of being repaid:
The Pusher - Steppenwolf
Why did they do it? Why did they offer horrible loan products to people who could not afford them? Maybe they were just going along with the zeitgeist, but they had free will and must be held accountable.
Free Will - Rush
Pain continued for many regional and local banks today. All of the banks I have criticized in this space in the last month are down big. I continue to hold my shorts in DSL, SSBX, FED, PRK, and GBCI. The first three I continue to plan to hold until FDIC receivership or a take-under. PRK and GBCI I am looking for more modest drops after which I will cover. I expect everything financial to take another big hit tomorrow as the news of Indymac imploding hits the market.
Today I bought some shares of MVC Capital (MVC), a business development corporation. It lends money and invests in the equity of mid-sized private companies. MVC is trading at a 20% discount to its NAV, and at a 13% discount to my SWAG of reality-adjusted NAV. What is wrong with the computed NAV? The valuation committe has not reduced the value of MVC's debt investments, despite a turn towards the worse for the economy. Publicly-traded high-yield bonds have declined substantially over the last half-year (The ETF HYG is down about 6.4% this year). Mike Tokarz and crew have exhibited consistent ability to make solid investments.Those of you who follow me know I bought this less than a year ago but sold after a quick 20% spike.
For those who follow penny stocks, I covered my short position in Aussie Soles (OTC BB: AUSE) today at about a 30% profit. It never got pumped enough to make it onto CAPS.
Disclosure: I'm short DSL, SSBX, FED, PRK, and GBCI. I am long MVC.
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