NovaStar Goes Nova---Big Boom
Elaine Meinel Supkis
Time to look into more bankrupting banks. For example, NovaStar. It is going nova, of course. Boom! Cramer the Crybaby is estatic that Bernanke Santa Claus is giving him and his goofy drinking buddies more free money. He thinks we will see new stock market records. I am very angry that I will now have to pay for all this in a debased currency and no return on savings. But hark, the status quo is not saved at all. For obvious reasons: you can't save a drunken empire falling off a fiscal cliff.
NovaStar Financial said on Friday that it has stopped offering mortgages through its main wholesale business, less than two weeks after the company re-started the unit.The company also announced 500 layoffs, or 37% of its workforce, including the departure of the head of its wholesale business. Wholesale centers in California and Ohio will also be shut down, NovaStar (NFI:7.97, +0.64, +8.7%) said.
The real estate market is dead because it is being forced back into the older method of selling houses. 20% down, full documentation, the bank itself goes to check out the property and even snoops around the neighborhood or you know the bank president personally. It was hard to get mortgages when I got my first mortgage. It was nearly impossible in the late 1970's and I had to get it from a guy from Haiti who carried a gun and had a very dark reputation. But we did business and I got my brownstone and paid him in full in less than 6 years which made both of us happy. But no bank would lend me a penny back then.
This brownstone had a closet that hadn't been cleaned since WWII. In it, I found papers going back to 1890. I looked up brownstones for sale or rent and laughed at the numbers. When my own building was turned into a rooming house in 1931, a room went for $3 a week. You can bet, families lived there. One family per room. People wonder where people live when real estate tanks.
The answer is simple. Rooming houses have a very long history. Nearly all if not all, start as single family homes. During the 1991 bust, I was living in a tent and we had roomers stay with us because they had no home...students who graduated from college and couldn't get a job yet, for example. It was actually very amusing. But because people can go from a McMansion for a family of three to a McRooming House with 6 families totaling 20 people in an eyeblink, housing is very 'flexible'. Right now, we see them going off the cliff for two reasons: instead of taking in roomers during a downturn, many of the people who already have fled their homes and without any warning, have dumped them, are probably illegal aliens. My first brownstone came via one, for example.
When he sold it was no questions asked.
These people are now on the run because the US is chasing out illegals because the economy is contracting rapidly. So we are talking about 11 million people and if only 10% of them got those no-document loans, this is 1.1 million houses in Stockton, California or Tucson or Houston suddenly empty. This huge segment of the housing market is now off the market and back to the paperless, underground economy. If not out of the country. And want to know something? The 'no-document' loans KNEW who was asking for the money! They did this for exactly this reason! They NEEDED illegal aliens to buy houses and bid up the prices and pay 'ask no questions and get no answers' loans! They KNEW these people would NEVER sue, NEVER complain about interest rate hikes, NEVER file reports! This was like pushing crack on every street corner of every city in America.
In order to process the Rescission Offer, the Company, as Plan administrator, must temporarily suspend (the “Blackout”) all transactions related to the NovaStar Fund for Plan participants that accept the Rescission Offer. The Blackout will begin at 5:00 p.m., Central time, on February 21, 2006 and is expected to end during the calendar week of February 26, 2006 (the “Blackout Period”) on the date that the proceeds for the Rescission Offer are credited to the 401(k) Plan accounts of such participants. You will be informed if the timing of the Blackout Period changes.
As the ability to make new investments in the NovaStar Fund was terminated on June 17, 2005, the Blackout only prevents Plan participants who accept the Rescission Offer from selling or otherwise transferring units in the NovaStar Fund during the Blackout Period. Participants will still be able to direct their existing account balances and new contributions and rollover amounts into or out of other investment options offered under the Plan.
If the Blackout affects the ability of 50% or more of the participants in individual account plans maintained by the Company to acquire or hold equity securities of the Company, the Company is required to notify its directors and executive officers that certain of their transactions in Company equity securities are prohibited during the Blackout Period. Because the Company does not know whether 50% or more of the participants in individual account plans maintained by the Company will be affected by the Blackout, the Company is providing this notice to you.
Do note that the main function of NovaStar, like Countrywide and all these other reckless banks, was to make as much money as possible and to PLAY THE MARKETS meaning the stock market! Back in 2002 when NovaStar and Countrywide were selling for $70 a share or such, interest rates were finally beginning to rise from the horrid 1% levels. I was ripped off royally during that time frame. My bank account didn't grow whatsoever for SEVERAL LONG YEARS. To my fury and irritation. But the bankrolls of these idiots giving away MY money to anyone who rang their doorbell, they made money hand over fist and fed it straight into their own bank accounts. Getting filthy rich while my money shrank.
In their annual report to shareholders, NovaStar executives said performance of its 2006 loans had dropped to “unacceptable levels,” blaming the downturn in the housing market and the company’s own underwriting guidelines and tolerance for inflated appraisals. The company reported profits declined from $132.5 million in 2005 to $66.3 million in 2006.NovaStar has been subject to increased repurchase demands as a result of borrower fraud and early payment defaults, the company said. The lender said it was tightening underwriting guidelines, stepping up its review of appraisals, and working to identify loans with unacceptable levels of risk.
A tad too late. And when they did tighten standards, they lost 'business' so they didn't do this sincerely. None of them did this sincerely. Indeed, the outrageous Alt-A and no-princapal/less than the interest due loans grew and grew. All the way until February, 2007 when the world financial markets went into a total but brief tailspin when the Bank of Japan suddenly raised their woeful interest rates from a laughable .25% to .5%. Since then, Japan and China have been in a very nasty tit for tat fight over the relative value of their currencies that has suddenly turned very nasty just this last 2 weeks after the IMF told China that Japan could make the yen as weak as they wished because of Japan's fake depression!
Bang. Now, nearly all commentators are pretending this mess has nothing to do with China stopping the flow of money into their FOREX reserves. China has even offered to buy a controlling interest of Bear Stearns. They can do this! We will see if the Ruling Elites will allow this. The sudden rate cut was to save Bear Stearns from the Dragon who still has money flowing into its clutches and still will buy. They can wait until Bear Stearns is worthless and buy. I guess. Time is on their side, after all.
From Mr. Reit:
NovaStar originated and purchased 62,747 nonconforming loans in 2006 totaling $11.2 billion, up from $9.3 billion in 2005. The average loan-to-value ratio was 82 percent, the average FICO score was 633, and 62 percent included prepayment penalties.
Lots of red ink, I see. Loan to value under 100%=bankruptcy over time. Bankruptcy of the bank.
Reit again:
Friday’s announcement of job cuts came the same week the company announced bonuses for top executives.CEO Scott F. Hartman and President and Chief Operating Officer W. Lance Anderson were each compensated $1.6 million in 2006, including $474,534 in bonuses and stock options and awards valued at $442,605. David A. Pazgan, chief executive officer of subsidiary NovaStar Mortgage, was paid $1.05 million, including a $300,000 bonus and stock options and awards valued at $348,171.
As the famous bankrobber, Willy Sutton said, robbers go where the money is. And he was a fool not to know that the best way to rob a bank is to be the banker. And this is why Argentina and Brazil were useful. Today, these guys run off to the Cayman Islands which were struck by a massive hurricane and severely damaged yesterday.
Click here to see income statement for the last two quarters as registered to the NYSE via Reuters:
Total Revenue: $131,037,000Total Operating Expense: $200,399,000
Operating Income: MINUS $69,362,000
Red ink=>every year=>bankruptcy. One follows the other. Now the rich idiots bankrupting NovaStar could return their bonuses and their stock options to save the bank but they won't. They want to make money, note protect deposits or investors. The moral collapse within our empire is remarkable. In the previous three bank collapses in my life, the quality of the people protecting our investments and savings have declined. Today, they all seem to be the bastard children of Willie Sutton and Billy the Kid.
By Craig Cunningham May 4, 2004NovaStar Financial (NYSE: NFI) certainly has been making the headlines lately, and it is hard to find much good news. Quite a turnaround, given that 45 days or so ago the company's stock was trading up to $70, on news of a record 2003 and record January and February originations. So how did it all turn so quickly, and how did perception get so skewed?
I, too, was curious. The party was still raging at that point. How could anyone screw the pooch when the dogs were doing a dogpile?
Motley Fool:
Not more than two days later, the hoard of killer lawyers descended upon NovaStar led by none other than the notorious law firm Milberg-Weiss. Milberg enjoys the distinction of being labeled modern day "squeegee boys" by one Florida judge. Even more notable is an investigation about their representation of a plaintiff in a San Francisco court. It seems that the lead plaintiff suing a company for stock fraud was actually a hedge fund heavily short the stock and ready to profit from a fall.
The usual game we see today with all the failing mortgage companies: the top brass were more interested in lining their pockets and if they were careless, they could trigger a sell-off or a panic. Countrywide, for example, was very careful until this last 8 months and then threw caution to the wind and began to sell like crazy, hoping someone, anyone would buy. I hope they are sued.
Motley Fool:
One problem is that NovaStar is greatly misunderstood by many investors. Mortgage REITs (real estate investment trusts) are a special type of REIT that don't actually own property, but invest in mortgages in a variety of ways. NovaStar originates mortgages in the non-conforming market with a focus on debt consolidation loans. NovaStar splits up the loans into their respective principal and interest portions, packages the principal portion as bonds, and sells them to institutional investors. The interest pieces are held in a portfolio of securities that represent the spread between the rates on the securities they sell and the loans they originate. This mortgage investment portfolio is responsible for 88% of the dividend and is a key metric for growth.As a mortgage originator, some may be quick to point to the "risks" of rising rates. Originations will drop, the dividend will fall, and the short sellers will laugh all the way to the bank -- that's the theory, anyway. As always, reality is a bit different than traditional wisdom. First, subprime borrowers are typically less sensitive to interest rate adjustments than prime borrowers, so the overnight demise of subprime originations is likely overstated.
Secondly, as interest rates rise, more borrowers will be bumped into the subprime category since the cost of borrowing will be greater, thus increasing the population of subprime borrowers.
This poor mottled Fool. He thinks if you hold the mortgage you don't hold the propery. I hate to clue him in, but the entire point of a 'mortgage' is to hold a property! Gads! Where do these people come from?
My ruling class family has owned property...and peasants....not to mention slaves...for the last 1,000 years. When we used to sell land to peasants who got the cash...if we were in arrears because of careless spending on wars and goofing around at tournaments, we would NOT sell for cash on the cow. We took 'mortgages' which is a French medieval term. If the payer dies, we got back the property! Haha! See? The Great Plague was a mess.
Anyway, no sane person ever gives tons of money to someone unless they have some sort of security in case they go bankrupt. In the case of properties, it is THAT THING one takes back! If a bank loans money for a car and you don't pay, they confiscate it! At night. I know people who make money running aound at night, towing cars and getting in fights. These guys are biker and pretty nasty. Most people not paying up retreat when a pair of bruisers with tatoos show up in a big rig.
Same with houses. If the people who aren't paying up refuse to leave, we come back with the police. Once, on behalf of a mortgage holder trying to evict, we had to get the fire department to climb in through the third story windows to grab a woman trying to light the house on fire on the second floor! People, even rich people (I have witnessed this) will vandalize the inside of houses about to be seized by the bank.
So this is more proof all the mortgage companies of the last 5 years were lying about who they were and what they were doing. Pretending they weren't going to be encumbered by distressed properties was a pure lie. If someone loans money with no property as a vested value to be held in security, they would have to pay more than double the rate most mortgages go for! Ask any bank for a personal loan of $600,000 and watch the security guards muscle you right out the door.
Also, back when this poor analysis was written, this chap (fool) believed the lies about subprimes being safer because they are 'less sensitive' to interest rate hikes. Obviously, this was the reverse of reality. As rates rose, everyone fled to interest-only loans because they were CHEAPER. This means, they were very rate-sensitive. They all imagined the Fed would drop rates.
Well, the Fed did drop rates and will keep dropping them until America goes bankrupt. In about, hmmm, another 10 years if oil drops in price. 5, if oil rises in price. Ouch.
Here is 10 years of NovaStar. Note how, after that old criminal mastermind, Greenspan, ravaged my bank account by dropping interest rates to 1%, the stock for this organization shot up and up and up. It doubled in less than a year until early January, 2004. This is right when the interest rates began a very prolonged climb due to obvious inflation destroying our currency's value and a total collapse in savings due to no returns. In less than a week, the stock collapsed.
Here is a close up of Friday's rise in stock value along with all stocks as they rejoiced the Bernanke helicopter money drops. Absolutely everyone thinks the bad times are over and the fun and games of 2003 are back. Happy days.
As NovaStar fades in the night sky leaving only a pretty ring, let's go look at the whole REIT business as that poor multi-colored fool talked about so naively.
Staring in 2005, the performance of the REITs fell and fell and fell as Bernanke was forced to raise interest rates. Of course, during this time, the dollar became nearly worthless in Europe and many other lands. The US trade deficit rose to nearly a trillion dollars a year and savings in the US went negative to the tune of minus a quarter trillion! Since the end of February when the banking crisis began in Asia, it has utterly fallen off the chart made by the optimist running this site. He will have to redesign his graph to show the extend of this accelerating collapse. The infusions of loot from the US and European FOREX reserves has done nothing to stop this collapse. Dropping rates to 4% won't stop it. Rates wil have to fall to Japanese levels to stop this from collapsing.
And to do this, they have to kill inflation. And to do this, they have to make the yen and yuan super-duper cheap and we have to continue to outsource and deindustrialize and wages of the lower 50% of the population must be reduced further and guess what?
We can't go too much further down this path to hell! We are already being licked by the flames of bankruptcy.
Most investors are stupid. At least that's what the Securities Investor Protection Corp. says; most even don't possess basic investment skills. "Few investors possess [the] needed blend of basic knowledge and smart behavior," SIPC found in survey released last week. SIPC is the agency that insures against losses in brokerage accounts up to $500,000
And who makes them 'stupid'? The web of lies, the veils of opacity, the tricks of the trade plus a host of magicians madly waving their wands, it is a wonder anyone can figure anything out. Not to boast too much, but being part of the ruling class, a very black sheep part, I know what goes on behind the scenes. Of course, there is no way in HELL anyone at the top wants ANYONE to know what the hell is going on! The internet is wonderful for it allows me to surf the world, seeking information.
Better still are the emails readers send. As well as comments. Tons and tons of information is now at my fingertips! Thank you, everyone! You are all very valuable and quite necessary! I used to work on 43rd Street in Manhattan and I would go to the International Newstand on 42nd and 8th Avenus to read foreign papers like Die Zeit, for example. Or the London Times while sipping tea. Now, I can read them online.
And knowing the truth means reading lots of seemingly useless stuff! And history. I really wish the media would have a show which explains simple investment stuff and which has someone who has a grip on history and is very suspicious of goofy 'get rich quick' schemes..ah! Someday.
Securities Mosaic. December 15, 2005
_________________________________________________________________________EXCERPT: How do you regulate an industry when a quarter of the firms remain outside your reach? That may be a question nagging the Securities and Exchange Commission as the first, unofficial deadline of the agency's new project to oversee the hedge fund industry is reached on Thursday. Hedge funds have traditionally been lightly regulated investment pools for rich investors and institutions. But the industry has grown rapidly in recent years and there are now an estimated 8,000 funds overseeing more than $1 trillion. That encouraged the SEC to introduce new rules this year that require hedge fund advisers to register with the agency as investment advisers. Managers have to sign up by Feb. 1, but because the SEC needs time to process documents, hedge funds need to file by Dec. 15 to make sure they're registered. (Those that miss Thursday's deadline need not despair: the agency suggested earlier this month that it would try to process registrations that arrive as late as Jan. 9.) The SEC hopes the project will give it a better insight into the hedge fund world, help it detect and prevent fraud in the industry and monitor the increased availability of these funds to less-sophisticated investors. But those goals - already the subject of much debate -- may be compromised by the fact that many hedge funds aren't signing up. Hedge fund lawyers interviewed by MarketWatch said that at least 25% of their clients aren't registering.
I got a wonderful email from a reader sharing a newsletter PDF. The guy in this PDF newsletter talked about hedge funds saving us. And lots of other jolly things that ain't going to happen. These funds were make occult and opaque because....they are actually protential criminal organizations! I had an ancestor who was a pirate after the Queen Regent killed his entire family and confiscated his lands. He didn't report to anyone (though he did take under the table payments from the King of England). People who are doing stuff that is not quite legal are always eager to keep them secret. Bury that chest and kill the work crew. Make sure the map is legible. Stumble, stumble, crawl, crawl (as in "Yellowbeard", a movie I adore).
Read this amazing PDF file from the Stanford Law School!
Lawsuits are way down the last several years because of good enforcement of the laws...due 100% to one man: Eliot Spitzer who no longer runs the joint regulating Wall Street because he is now our govenor! His crew is still hard at work and protected by him and several powerful Democrats in high offices. But this article written a mere three months ago talks about the serene, happy stock market.
Kiss that baby bye-bye.
An analyst at Banc of America Securities upgraded shares of troubled mortgage lender Countrywide Financial Corp. to neutral from sell Friday, saying that tapping its $11.5 billion credit facility should provide Countrywide the time needed to address liquidity and capital concerns.'[W]e think the possibility of a liquidity induced distressed sale [is] unlikely.'
— Robert Lacoursiere, Banc of America SecuritiesIn a research note, however, analyst Robert Lacoursiere cut his price target on the stock to $21 from $31. Shares of Countrywide (CFC:21.43, +2.48, +13.1%) , the largest U.S. mortgage lender, closed Thursday off 11% at $18.95 after it said it borrowed $11.5 billion from a group of 40 banks due to problems finding money in credit markets. To reduce its reliance on credit markets further, the company said that it would try to originate nearly all mortgages through its banking operation.
4 and 20 bankers, baked in a pie. And when the pie was eaten, the all began to scream, 'What a dainty dish to feed to vultures!' Countrywide's officers won't be able to reap half a billion a year in stock options doing classic mortgages. Nor will anyone make much money this way. And if Bernanke sets rates below the rate of inflation...THESE MORTGAGES WILL MAKE NO PROFITS AT ALL!!!!!!!
This is the nature of the crisis: the solution---super cheap interest rates that steal money from savers of dollars---won't make these clowns and grifters richer! They can ONLY make money loaning it way above the rate of inflation! And if these goof balls and criminal minds think the Chinese will continue to hold debased dollars losing value...ARE WE NUTS????
NOOOOOOOOO.... and it is obvious. ONLY if we let China continue to destroy our industrial base, buy up all our financial entities like Goldman Sachs, etc, will they hold dollars. Ditto, the Arab kings and sheiks who also are buying up these financial houses and our industries.
Maybe I will be forced to be a pirate. I am already limping due to my hurt knee. I could chop it off and go one legged. Get a parrot again. And another monkey. Got to have a monkey.
WASHINGTON, Aug. 17 (Xinhua) -- The Securities and Exchange Commission on Friday filed fraud charges against a former Brocade Communications Systems Inc. executive.The U.S. federal regulators alleged Michael J. Byrd, a former chief financial officer and chief operating officer, that he disregarded indications that other senior corporate executives were improperly backdating stock option grants at the company.
Byrd, of Saratoga, Calif., is the fourth former Brocade executive to be charged. Last year, the SEC charged former Chief Executive Gregory Reyes; former Chief Financial Officer Antonio Canova, and former human-resources executive Stephanie Jensen for backdating, according to a report carried by The Wall Street Journal.
He won't hang himself or get shot dead right after a trial. Note that China's capitalist system is working. We should prepare for this in the future. They will be running things by then.
Jim Cramer, the CNBC television host who led the howls for the Federal Reserve to cut interest rates, got his wish today.``They obviously heard us, they acted,'' he said on the air. ``This is the beginning of the run to 14,500.''
This infantile, stupid, short sighted fool. Of course, these idiots will use the half trillion to run the stock market back up! Why not just do whatever so long as it makes the markets rock? Why charge interest rates at all in the first place? Why worry about inflation? Good honking grief.
European stocks fell for a fifth week, the longest losing streak since July 2004, on concern a rout in global credit markets will hurt earnings and erode economic growth.Siemens AG, Europe's largest engineering company, and Arcelor Mittal, the world's biggest steelmaker, paced declines by companies more sensitive to economic swings. Ciba Specialty Chemicals AG dropped the most in almost six years after the world's largest maker of colors for plastics said selling prices fell and raw-materials prices rose.
As the world's economy shuts down, stocks will soar, right? Europe has been totally naive. Too arrogant to understand the game being played by China, Russia and Japan. Too proud to beg. To trusting of the US to not believe we will throw them under the wheels of the speeding Asian train if this allows us to stuff our faces and wallets at their expense!
The entire load of this mess has been moved into the euro! And all European business has been run up in value and they can't sell anywhere on earth anymore the dollar has just been made much weaker and my next article is all about the yen, yuan and dollar's dance of death.
Culture of Life News Main Page
So you figure that China is taking something like the current dollar trade surplus and buying yen?
I do have a decade of on-the-ground East Asia time. Anyone who can't see that China wants the Japanese hide nailed to the wall for a trophy, and I mean REALLY, is not playing with a full deck.
Also never forget that the Japanese hate us and fear us. They are mad as hell at having to make believe they loved us all these years.
Posted by: Callihan | August 19, 2007 at 01:23 AM
In many Japanese anime that refer to modern politics, the bad guy is American.
Posted by: Elaine Meinel Supkis | August 19, 2007 at 08:57 AM
Their "elites" surely hate us. Their "middle class (HA!!!) just thinks we are stupid. All Russians KNOW we are stupid! We are not considered much smarter than Germans, frankly.
Posted by: blues | August 20, 2007 at 02:56 PM
Russia fears Germany. And is happy it is tied down by the rest of Europe in the EU.
Posted by: Elaine Meinel Supkis | August 20, 2007 at 07:32 PM