FirstFed Financial Corp. (FED)

ZetaPingPong (77.11) Submitted: 8/22/07 7:49 PM

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Actually contrary to this subprime scare, FirstFed doesn't really deal with much subprime lending.

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DemonDoug (99.68) Submitted: 8/23/07 5:43 PM

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Note to all fool readers: The user who posted this has no CAPS picks, is not a CAPS player, and has no other intention other than trying to mitigate my pitch, which is short and somewhat ham-handed to begin with.

What does this signal to me?

It says to me that there is someone out there who cares enough to specifically reply to one amateur investor's stock pick. The only reason I can think of for someone to do this would be to pump the stock in the face of some very bad news that will be coming very shortly.

As an actual response, the poster is correct, technically FirstFed doesn't (or didn't) deal with subprime loans. They did, however, do 80% of their business with Alt-A option ARM loans. Recently Alt-A loans have had higher defaults than subprime mortgages!

"Its mortgage portfolio is packed with risky loans known as option ARMS.

80% of its loans have little or no documentation to prove the borrower’s income or assets (Liar Loans –Prospectus).

The bulk of FirstFed’s income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank’s income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn’t collected. "

http://financial.seekingalpha.com/article/26306

This post is a signal to me that there is some very, very bad news very shortly coming out against FED, and a prudent investor may want to look into buying some put options as a way to speculate on a negative outcome.

So I thank you whoever you are anonymous poster for tipping your hand to the investing public. :)

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