I am trying to understand what is happening with MMA and why it's happening. Here are some thoughts.
Any company or bond fund that is holding mortgage bonds that are not backed by Uncle Sam has absolutely no idea how much these securities are worth. They do not know how much these bonds are worth because nobody wants to buy them. When you can not accurately value the worth of a bond portfolio, stated book value becomes meaningless. No one at M* or AG Edwards knows anymore than you or I know as to how much this company is worth. Period.
In a prior post, someone mentioned that a 10Q or 8K, or whatever, stated that 12% of MMA�s bond portfolio is non-performing and 14% is on the watch list. I have no idea if that�s true or not. But if those figures are accurate, just remember that those figures are before the recent financial turmoil. If par is 100, how much would you pay for MMA�s bond portfolio? As I said, there aren�t many buyers for mortgage bonds so no one really knows how much they are worth. But they aren�t worth anywhere close to 100 cents on the dollar.
So when I see posts about how investors are confusing MMA with a company that makes subprime loans, and how this company is worth $30 a share, and how MMA is a screaming buy and it�s all the fault of short sellers and on and on, I really don't believe it. The best summary I�ve seen that explains what�s happening now is column by Jim Jubak. For those who really want to understand, here�s the link. http://articles.moneycentral.msn.com/Investing/JubaksJournal/HowWallStreetGotIntoThisMess.aspx
Gary Mentesana: "However, by original issue amount, bonds in default fell to 12% of the portfolio at June 30, 2007, down from 16% of the portfolio at June 30, 2006, and the number of bonds on our watch list fell to 14% of the portfolio at June 30, 2007, down from 19% of the portfolio at June 30, 2006."
Yup...Tying to mark to market the bond portfolio is a fools game today. However there is value and even the non performers are backed by income producing assets that only need a workout...which this co has been doing for years. The question is can marking down assets wipe out equity or can they hold on thru recovery. Time will tell