There are two components to valuing their assets 1) Their individual credit performance 2) The bbb- cmbs spread from an index. They have of course financed their credit portfolio with recourse loans, so they are being forced to post collateral as bbb cmbs spreads widen. This is of course the crux of these credit problems, each player owns loans that have a unique value, but they are being indexed to a basket of loans. JRT has marked their assets to their credit performance, they have however disclosed the CMBS bbb- spread in their SEC filings.
And bbb- cmbs paper (jr tranche) has already imploded, why do you think JRT is at 5?
No one at JRT did anything illegal, unethical, or which would cause them to go to jail. Everything has been fully disclosed in SEC filings.
I am currently not long JRT, but have been studying them to consider taking a nice long position. I have not done so yet, other opportunities seem to offer less returns but satisfactory without the risk of getting crushed by an unmet margin call.
I went long TMA (Thornburg Mortgage) I learned my lesson somewhat, and remain leary about getting involved in any credit player who could be subjected to mark to market losses. Anyone looking for an incredible entry price on a speculative security sure has it right now with JRT. They have recently added people in Eastern Europe to expand internationally and landed a deal with Calpers. They also succeeded in selling off portions of their loan portfolio at book value. That was a BIG deal that largely went unnoticed.
Anyway -- we are either on the verge of a big breakdown here or at a bottom. Many people showed up at this forum to buy at 10-12 as vultures. I would be inclined to take a speculative long position at this price point. But like I said -- I have been bitten once already during the credit crunch and other opportunities are also attractive with more clarity on the balance sheet.