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Anthracite Capital, Inc. Message Board

  • dpsimswm dpsimswm Aug 14, 2009 8:10 AM Flag

    Two Ways to Look at This

    Goldman is shorting REITS and buying AAA CMBS. There are two ways to look at this.

    1. AHR is screwed as traders are shorting it heavily, pushing down the price. Evidenced by the downward trend since earnings.

    2. GS is creating a short bubble that could burst just like any other bubble. The catalyst would be positive news for the sector or company.

    Takeaways -
    Keep an eye on the Call Option volume. If that starts to pick up, somebody is looking to hedge their position.

    Don't expect upward trends any time soon, but when it does come its going to be like a rocket.
    (I'm holding 14,200 shares)

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    • Far be it, that I would disparage what GS is doing. But I have a problem with it in the case of AHR. They are holding a ton of AAA rated CMBS with even more in the CDOs. If the shorting of a .70 stock to hedge a billion dollar CMBS bet makes sense then do it, however if AAA CMBS recovers so does AHR.

    • Call Options? At 2.50?

      Okay - we'll keep an eye out (almost LOL)

      People, AHR is not in the AAA CMBS game - only about 400M, best I can tell (15% max)

      The 2 ways to look at this:
      1) Do you think mezzanine financing that AHR has provided will continue to payout at 'reasonable' levels? And, can AHR somehow reduce their cost-of-capital / extend the terms (via forbearance - like the swaps that went to 75 BP for higher balance loans).

      I continue to do DD - these are some oldies but goodies. In one of the Reitwrecks articles, the owner of the site is corrected by '42'. Mr. 42 explains how AHR buys-into discounted CMBS and fully expects them *not* to pay... only to pay for some time. The math guys determine what % they should pay, and works out the defaults should be - voila, you have an investment. As long as these pay at, or above the expectation, you're in business.

      The headline in WSJ today was that Europe *escaped* recession. AHR has a lot of exposure in Europe (700M or so). I find this very heartening for prospects.

      I also include the Q3 2008 conference call transcript. I found this interesting in that it was a) a lot longer, b) paying a dividend while be very cautious, c) looking into the future and preparing for the downturn.

      As many have mentioned (the same info as MFFAIS) NASDAQ shows that Credit Suisse and Barclays are still major owners and increased their positions at 6/30 - now, that was a time where they could have been bailing, but they were buying... interesting.

      2) Do you think the defaults will over-run the company and they will become insolvent?

      • 3 Replies to chrisanja
      • What would be the scenario that would cause 2) insolvency? The delinquency rate has reached 4% and they still made a profit after paying expenses. The unsecured notes will probably continue to convert debt for equity, especially if delinquencies rate increases. This would improve the interest expense side. My guess is that with effort AHR could withstand an 8% delinquency rate. And in fact the reserve for bad loans would indicate they are preparing for something like that. All this being said, there is always a chance of insolvency, but should it happen in this case I see our economy in a total shambles.

        Secondly the CDOs created by AHR contain 60% AAA CMBS. That's why they have the securities. They used to have >.6 billion but with the lost value and possibly some selling they have .495 Billion today. My guess would be that AHR has 25% of their assets minimum in AAA CMBS, but that isn't really the point. If AAA CMBS raise substacially, so do all other CMBS.

      • Another 2 ways to look at this - technically.

        1) The rise to .96, then 1.07 have seen fall-backs. The overall market has been rising (in case the pain of watching everything else go up has escaped you!). Nothing goes straight up, there ARE pullbacks. Pullbacks with AHR are profound, as are rises. The trend is up (check out - trendspotter says so; as does American Bulls, which still has a 'hold' (normal selling pressure).

        2) The MMs know something. They've got a big short position for a reason, and have been able to lure unsuspecting idjits (like me) into thinking this is a viable entity.


      • Another 2 ways to look at this.

        1) Were the Q2 results the last and final 'horrible' earnings? If CMBS does a U-turn in Q3, this may be the case.

        2) Were these a statement of more-to-come. How much more.


        They have 3 areas of investments:
        1) CDOS -
        The old CDOs are paying - and working well. Over collateralization actually increased in Q2

        The Euro may be stabilizing? (92.8 to 92.4) ratio.

        HY1,2,3 are doing okay, too.

        2) External investments -
        These may turn around with CRE/CMBS market!?

        3) Mortgage loans -
        This is that problem child. How much more do they / will they write down. Roughly 700M already written down to 640M (I calc as 7%); does this go to 500M, 400M? (another 140 or 240 to go?)

        FWIW, I think the CDOs will be okay, the investments may rebound (12M and 6M losses in Q1 and Q2, forget which was which)... the jury is out on the mortgage loans!

    • GS no doubt makes up most of the 11% short interest. They are probably looking to reverse their position by handing the bag to some retail investors.

    • I think everyone should read the comments to this blog entry too.