Post by tatuma on Sept 22, 2006 18:39:03 GMT -6
Oh My! Who can you believe in these confusing times?
Berg warns that Fannie Mae could lose $29 billion, long-term bear argues in investor letter.
Some of what he says makes some cents, but I am just a tab bit cautious of taking him at face value. Berg is a big player in the short selling in the mortage market hedge funds, and who knows how in the hole he might be already. He wouldnt be trying to help his bets come to pass, now would he?
Still, it is already clear that there will be major increases in high risk ARMs in 2007 as the interest rate adjustments hit the fan in the deflating bubble market, so who wins now in this mess, other than the brokers who got their action up front each time a bubble house floated higher and higher. I get a bit lost in all the machinations, but I guess that is the point of some of these hedges linked to derivatives.
High promised returns with no chance of losses, cause it is all carefully hedged, just like the Natural Gas funds. I guess there is still one born every minute!
TacT
Fannie Mae could be hit hard by housing bust: Berg
Mortgage giant could lose $29 bln, long-term bear argues in investor letter
By Alistair Barr, MarketWatch
Last Update: 12:19 PM ET Sep 18, 2006
SAN FRANCISCO (MarketWatch) -- The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market.
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae (FNM) could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
"We are not sure the folks running the show fully embrace the risk of declining house prices," Berg wrote in the letter, a copy of which was obtained by MarketWatch. If the housing market continues to decline "a major portion of Fannie Mae's value could be wiped out." He declined to comment for this story.
Fannie Mae spokesman Alfred King said the company protects itself from housing-market volatility in many ways, including maintaining a geographically diverse book of business and focusing on mortgages that have a high percentage of equity in them.
Berg is considered a leading practitioner of short selling, a trading technique used to bet against stocks. See full story.
'We are not sure the folks running the show [at Fannie Mae] fully embrace the risk of declining house prices.'
— Gilchrist Berg, Water Street Capital
His Polar Fund, which focuses on short positions, returned more than 10% a year from September 1987 through September 2002 -- beating the Standard & Poor's 500 Index. It's not clear how well the fund has done since, although Berg's recent letter noted that the Polar Fund was up 1.38% during the first half of 2006, lagging the S&P 500. See full story.
Berg has been shorting Fannie stock since the summer of 2003, when questions emerged about its accounting. Earlier this year, the company agreed to pay a $400 million fine after its regulator, the Office of Federal Housing Enterprise Oversight, accused executives of manipulating results.
Much More Here
tinyurl.com/jfw4y
Berg warns that Fannie Mae could lose $29 billion, long-term bear argues in investor letter.
Some of what he says makes some cents, but I am just a tab bit cautious of taking him at face value. Berg is a big player in the short selling in the mortage market hedge funds, and who knows how in the hole he might be already. He wouldnt be trying to help his bets come to pass, now would he?
Still, it is already clear that there will be major increases in high risk ARMs in 2007 as the interest rate adjustments hit the fan in the deflating bubble market, so who wins now in this mess, other than the brokers who got their action up front each time a bubble house floated higher and higher. I get a bit lost in all the machinations, but I guess that is the point of some of these hedges linked to derivatives.
High promised returns with no chance of losses, cause it is all carefully hedged, just like the Natural Gas funds. I guess there is still one born every minute!
TacT
Fannie Mae could be hit hard by housing bust: Berg
Mortgage giant could lose $29 bln, long-term bear argues in investor letter
By Alistair Barr, MarketWatch
Last Update: 12:19 PM ET Sep 18, 2006
SAN FRANCISCO (MarketWatch) -- The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market.
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae (FNM) could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
"We are not sure the folks running the show fully embrace the risk of declining house prices," Berg wrote in the letter, a copy of which was obtained by MarketWatch. If the housing market continues to decline "a major portion of Fannie Mae's value could be wiped out." He declined to comment for this story.
Fannie Mae spokesman Alfred King said the company protects itself from housing-market volatility in many ways, including maintaining a geographically diverse book of business and focusing on mortgages that have a high percentage of equity in them.
Berg is considered a leading practitioner of short selling, a trading technique used to bet against stocks. See full story.
'We are not sure the folks running the show [at Fannie Mae] fully embrace the risk of declining house prices.'
— Gilchrist Berg, Water Street Capital
His Polar Fund, which focuses on short positions, returned more than 10% a year from September 1987 through September 2002 -- beating the Standard & Poor's 500 Index. It's not clear how well the fund has done since, although Berg's recent letter noted that the Polar Fund was up 1.38% during the first half of 2006, lagging the S&P 500. See full story.
Berg has been shorting Fannie stock since the summer of 2003, when questions emerged about its accounting. Earlier this year, the company agreed to pay a $400 million fine after its regulator, the Office of Federal Housing Enterprise Oversight, accused executives of manipulating results.
Much More Here
tinyurl.com/jfw4y