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Redwood Trust, Inc. Message Board

  • craigla11956 craigla11956 Jan 9, 2008 11:16 AM Flag

    Where is mightimercx?

    Where is my friend mightimercx? THE most insightful guy on this board ....

    He told us you could buy this for < $30 (correct). He schooled another poster on the tax laws governing REITs.

    I would like his response to where you find the consolidating financials (to highlight what RWT looks like without Acacia & Sequoia). Would be most helpful.

    His earlier point about write-downs causing a negative net worth at 12/31 is correct. Yet the point about the write-downs being of securities "sold to others" is far from true (I strongly suspect). I believe the write-downs will be in the CES and CMBS portfolios (assets of RWT, funded by equity).

    I wonder if he's at his desk in Mill Valley???

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    • Here I am craig, sorry to have disappeared for a while. RWT does not publish to my knowledge a tax-RWT only balance sheet or income statement. They do publish balance sheet info on pages 89 and 90. Total assets owned by RWT were $746 million, of which $310 was cash! RWT debt on page 90 was $189 million, which is a combo of short term debt ($39 million) and $150 million of subordinated notes. However, after adding other liabilities (such as accruals etc..) I can't get the balance sheet to "balance." (Marty, if you are reading this, please help us in the next RR.) There is no RWT-only income statement. This is disappointing given the amount of info that RWT provides. I don't think they are hiding it as much as they either don't think its necessary or they don't appreciate what we are trying to focus on.

      For the record, I sold my position, and look to reestablish in the mid-$20s. The 4Q will likely look very bad on a GAAP basis since fire sale prices on securities similar to what they own will lower the mark on their own securities. I think it�s likely there will be additional substantial write-downs, but remember, these write downs are largely on securities they DO NOT own (which is amazing - thanks GAAP), and the write downs are more "market" driven than "economic" driven, that is just because no one wants to own these securities, it does not mean the economics or cash flow from those securities has changed dramatically. If I understand RWT, they are arbitraging the "market" and "economic" values of the securities, and they are cash (not margin) buyers with the ability to hold to maturity. You can think of this company somewhat as a publicly traded hedge fund.

      If RWT decides to mark its liabilities to market, there could be a huge gain on the debt they DO NOT own on the securities they DO NOT own, which were written down. (No, I am not on drugs, but the FASB rule makers might be.)
      Bottom line, lots of pending noise in numbers and the stock will get crushed, and I will be a buyer again.

      By the way, I am not in Mill Valley, I am about 300 miles south in California�s wonderful Gold Coast, with a fantastic view of the blue Pacific Ocean.

      • 2 Replies to mightimercx
      • mercx,

        I've been in and out twice on rwt for 16 points. bot because they seem to be a valid player in identifying value in this confused area, sold because it moved so fast. I think I'd like to get back in, but unsure as there are so many other opportunities right now. What do you think about the management retires...just moving on, or do you think they don't see business being attractive going forward?

      • multimercx,
        I haven't done it, but if you can put together RWT-only balance sheets from each quarter's RR, you can infer an income statement bottom line from the changes in those balance sheets. You'll need to adjust for dividends and stock sales, but that info is available, as you know.

        If RWT chooses to mark its liabilities to market, do you still think the stock will drop? Either way, I like your thinking and I'll probably follow your lead.

    • Craig, Mighti, and Others... I think that much of the dialogue on this board is very good, but it would be very helpful if someone can help find the unconsolidated RWT (excluding Acacia and Sequoia) balance sheet, income statement, and statment of cash flow. We need to analyze both the quality of the RWT assets and the sources of RWT income and cash flow.

      • 1 Reply to skykomish45
      • I would LOVE to see this! I think you need to go to Edgar. There is probably a supplemental filing that gives you this.

        You should also go to their website and look at the Redwood Report (I believe you go to the investor relations page). It's 100+ pages, yet filled with financial info.

        Bottom line: I think you have a parent company (ex Sequoia and Acacia) with CES and some mortgage-backed securities, funded almost entirely with equity. I predict further mark-downs in their commercial MBS.

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