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Newcastle Investment Corp. Message Board

  • objective11 objective11 Oct 7, 2011 8:46 AM Flag

    Europe Effects On CMBS

    Hope this posts per I am a subscriber to Barrons online. Talks about Euro debt crisis effect on US commercial debt market. And yes, widening credit spreads are mentioned.

    Also mentions CXS as a stock that has been negatively effected. I was not familiar with CXS and will research, but company seems similiar to NCT.In fact, paying similiar divy yield...

    Dont want to beat a dead horse, but anyone that still thinks the Euro debt crisis and widening spreads are a good thing for nct is in denial or misunderstanding the situation .

    Until the Euro situation stabilzes, which it has some this week, and spreads begin to tighten, imo do not expect nct pps to rise much barring news of CDO buyback or something comparable.

    SortNewest  |  Oldest  |  Most Replied Expand all replies

      good article, agree that need "shock and awe" out of Europe to get the "risk trade" back on.nct is definitely a credit risk trade.

      mention some recent positive(can you beleive it)developments in credit markets. hope better than the Iraq shock and awe. that did not work out very well.

    • jabar--to my knowledge,norway and sweden are not wallowing in debt, their citizens pay their taxes and they do not retire with generous benefits at 40-45.

      Also, in general, northern European countries are much more productive than the southern countries. no two hour lunch breaks and 30 hour work weeks...

    • $4,05 close.
      Nice stock this is...not!.

      But more REIT's are under pressure.

      I am concerned about Newcastle actually.

      It looks like the professional investors are anticipating on the Q3-earnings in the short time.

      Why shows Google NCT market cap still based on the old nummer of outstanding shares and not the new from SPO.

    • Two points -

      I have owned NCT for more than 10 years in all kinds of credit markets. It is clear that the business model has been successful in all but the extreme conditions that existed in 2008-9. Even then it was able to recapitalize. Looking at any stock's price on a day to day basis and trying to figure out a reason for its activity is folly. We live in a situation where the vast majority of investment decisions are made by machines, Momentum is more important not fundamentals in that environment. NCT's low price is an anomoly that has nothing to do with fundamentals. It has to do with short term investors jumping in and out trying to capture dimes and quarters. It is only in the long run that fundamentals have meening.

      As to Europe, Greece and Italy etc. (and the U.S. as well), their huge deficits are a result of the recession more than anything else. Their economies are contracting and the result is more and more of a budget imbalance. Austerity is more of a problem than a solution for these countries. The more austerity the more people out of work... and the more tax revenues contract. Its a vicious cycle. Its like in this country. Government cuts in spending resulted in the loss of 35000 jobs last month. Tax revenue dropped with each of the lost jobs. To say that Greece and Italy's problems are "Socialist spending" is a gross over-simplification. Socialist spending isn't hurting Norway and Sweden.

    • Stratfor, the intelligence service, thinks that it will take about 2 trillion euros to save the European situation!

    • The European problem continues to pose very significant risks for all USA stocks. When fear suddenly grips the market, investors don't seem to discriminate too much between those that are well placed, and those that are not.

      Recapitalization of the banks by sovereigns is the ultimate shell game. Germany wants to see the individual countries recap their own banks. So, for instance, if Spain wanted to recap its banks, where would it get the money? It would have to borrow it, increasing its sovereign debt, reducing its credit worthiness, reducing the value of Spain's bonds held by Spanish banks, increasing the recap requirement, etc.

      Europe has always been behind the curve in dealing with this problem, and there's no indication that that will change. Delays in taking action worsen the problem, creating new demands, increasing reluctance to move forward, leading to more delays, making matters even worse.

      We're much closer to the beginning of this problem than the end.

    • objective, I think it is fair to point out that Crexus is not a CDO manager, unlike Newcastle. Crexus bought a portfolio of performing mortgage loans from Barclays, which comprises the bulk of its investment portfolio. It did a large share offering to raise cash to buy the loans from Barclays, and has little leverage. I personally think Crexus is an attractive investment at the current stock price. But IMO, CXS bears little similarity to NCT, aside from the obvious fact that they are both mREITs.

    • Of course speculating on how the European debt crisis will effect CMBS assumes that the European debt crisis will not end up being controlled. I would wager that the chance of that occurring is less than 10%.

      It is probably more likely that a rabid weasel will get into the board room and bite everyone with a brain and the janitor will be promoted to CEO.

      You can always conjure up a worry. Investments are never risk free.

    • CXS 2Q NII = 12M NCT- 30M

      Quick comparrison, nct seems to be generating much higher NII and cash flow.

      CXS has higher BV and less shares outstanding(76M) and paying out 30c quarter in divies which appears to be a very high percent of taxable income and exceeds quarterly cash flow by about 10m!.

      Just a super quick analysis, may be missing something major,but sure makes nct look good.

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