That’s what David Gaffen implies when on the Market Beat today.
And herein lies the peril of mark-to-market accounting. The company says “difficult market conditions that have resulted in a significant deterioration of prices of mortgage-backed collateral.” Market strategists have pointed out often that the assets in question being held — in Thornburg’s case, adjustable-rate mortgages with high credit ratings — are being priced at levels that reflect the expectation of a higher rate of defaults than most expect.
Thornburg CEO Larry Goldstone signs on with this view in its release, saying “the mortgage financing market’s complete inability to differentiate and appropriately value superior AAA-/AA-rated mortgage securities from all other mortgage assets is as unprecedented as it is frustrating,” said Mr. Goldstone. “Quite simply, the panic that has gripped the mortgage financing market is irrational and has no basis in investment reality.”
We understand why Thornburg’s believes that his company is a victim of a panic but we’re not ready to sign off on that analysis. We doubt Goldstone regarded the markets as irrational when Thornburg was flying high and real-estate values climbing. Irrational markets are like rogue traders: people only notice them when they’re losing money.
Market Remains Irrational Longer than Thornburg Remains Solvent [Wall Street Journal]
Exactly. I do not think Goldstone cared much about market irrationality when he was leveraging up the Jumbo assets to death.
Video illustration of the markets weekly performance:
http://media.fukung.net/images/8044/7055f41207bc77bdee33bb6b99b0
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Oh snap! The above “guest” comment was by me . . . bitches
– Dave Chappelle
Goldstone is rightly criticized for over-leveraging in a liquidity bubble and taking it further than most who made the same mistake. But it doesn’t change the fact that bids for non-agy rmbs started to pull back a month ago and have evaporated in the past. Mark to mkt managers are hating life as the bid sid on quality paper passed distressed levels a week and, probably, 3 bottles of whisky and a handful of horse tranquilizers ago…
here’s a traders tidbit:
no market is irrational
the market is what it is
just like life
Goldstone really believes: “It’s not me, it’s the market, stupid.”
Who cares about the market – his Orangeness is testifying before Congress!
for those of you who know anything about thornburg’s book of business, you too would agree that the market is behaving irrationally. it’s a simple run on the bank. the avg. credit score of tma’s outstanding mortgages is north of 700. these mortgages aren’t your sub prime variety. not to mention, some of the mortgage holders have cash in the bank equal to a multiple of the actual mortgage – why you ask? taxes beyatches. I’m pouring out a 60 oz for poor old larry.