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Novation Companies, Inc. Message Board

  • JustinK101 JustinK101 Dec 22, 2004 10:28 PM Flag

    Nice Special But If We See A Huge Loss

    I am long, and happy about the divy and special, but honestly if we see a huge decline tomorrow, I could care less about the divvy. I am young and look at my gains, I, as most of us have, are now back on top in the green after this month and I don�t want to get caught again losing 40 or 50% in a matter of days. The short's feel this is their last hope because of the huge runs up in the last two weeks, and now this negative news is their only and perhaps last chance at driving down the price.

    It�s a little worrisome to hear the cause of lowering their estimates is due to interest rates, when in-fact many times management had stated that interest rates have little effect on their portfolio, I.E. earnings. Can anyone shed some light on this?

    I would prefer to sell wait to see if the decline happens, if it does then buy back at the bottom, but what is everyone saying/doing?

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    • You have been here long enough, if you really do not get it, you deserve to sell your shares. The only other explanation is that you are a short in sheep's clothing.

    • A long time ago I posted my 2003 experience swing trading this stock. Made a lot of money, only to discover at the end of the year that I would have made as much or more just by holding and accumulating throughout the year. And I wouldn't have had to pay taxes on all those short term cap gains.

      This year I've done a lot less trading and I'm happy with the results.

    • Young man (that's how you describe yourself),

      I'm a devout Long but don't let anyone intimidate you. Do what you feel comfortable doing.

      Your possible strategy of selling in anticipation of a dip and buying when when you think the bottom is reached is perfectly rational.

      Nevertheless, I have been investing with some success for over 40 years and here's why I would not undertake your strategy if I was in your shoes:

      1. If you are ahead, you will pay an "Exit Visa Fee" in the form of ST or LT Capital Gains Taxes.

      2. If you really like this stock and buy it back at some point, the ST Capital Gains clock will restart and you will have to wait another year for it to go LT Capital Gains.

      3. If recent history is any guide (i.e. IMH had an actual GAAP loss), there may be a morning dip and then the stock will rise as the pros replace the weak hands. Psychologically, I've always found it hard to buy back a stock that I sold when it moves up. Hopefully, you have better intellectual discipline than I do.

      In any event, do what you think best. Even if you mess it up this time, you will have increased your experience for the next time.

    • Justin,

      The company is making money. That is why they announced a 2.65 dividend.

      Last year before the split they paid out .33, 2.25, 2.50, 2.50 and 2.50.

      If the stock handn't split, our comps this year would be 2.70,2.70, 2.80, 2.80..and a special of 2.50.

      That is an increase of 34%... This is not GAAP. This is the real deal.. The company has to pay out 100% of it's earnings.. and they have grown by 34% this last year..or more if they have chosen to roll more forward which it looks like they have.

      The announcement seemed to be a sucker trap for Ding-a-lings to short some more. Good. Let them drive that price down so that we all can get a few more shares at silly discount prices and the shorts can pay us those dividends while they figure out what they hell they've done to themselves.

      Just look at those numbers.

    • If we see a huge loss- although it appears unlikely , but who the hell knows--in my case it just means I will own more shares with the drip and the eventual rebound will just mean more assets. Not a bad worse case scenario for me.

      If Mr. Ponzi really believes this is a Ponzi scheme he should call Spitzer up.

    • Yes, there has been a lot of light shined on it,
      but there's a lot of garbage you have to wade
      through as well.

      Wait a couple of weeks, and maybe we can have a
      rational discussion.

      Bottom line -- this is what happens when rates
      rise. The company continues to make actual
      earnings from the credit, not interest rate,


    • "interest rates have little effect on their portfolio, I.E. earnings. Can anyone shed some light on this?"

      Interest rates have little effect on TAXABLE earnings, which pay the dividend.

      Interest rates affect GAAP income, as the hedge gains flow to "other comprehensive income", and are not included in GAAP income.