This may be a big wonkish, but here's the dealio.
Mortgage backed security investors, who buy up the loans packaged as collateralized mortgage obligations (CMO's), had a bit of a come-to-jesus recently with the subprime meltdown. So now they've wizened up to the con, and they're telling the Alt-A (Liar's Loan) companies that they're not gonna buy their junk anymore, or at least not at par value.
Why? Let's me put this in HP terms. Would any of you buy up Casey Serin's Liar's Loan portfolio? Yeah, that's what I thought.
IndyMac is the big kahuna in this space, with nearly 80% of their entire portfolio made up of this junk. Nice business when the getting was good and investors were buying up any debt they could find.
But not anymore. Party over.
It's been fun to watch their CEO (and #1 stock holder) Michael Perry pump his stock to the dubious market, screaming that they're not to be confused with those yucky subprime lenders, and how all is well. You also have the CEO and a few insiders trying to confuse the market and stop the hemorrhaging (of their stock holdings) by buying some nibbles of their own stock. Man, sometimes it's just so obvious.
You have to wonder how long until the SEC investigation, or in this case criminal charges are filed. There's this little thing called Sarbanes Oxley, where intentionally manipulating your stock, or not coming clean about your financials or prospects presents a wee bit of a problem for crooked CEOs and CFOs.
IndyMax reports Q1 this week. Let's see if they come clean on what's happening in their business, or if they choose to head down the Enron / Ken Lay / WorldCom / Bernie Ebbers well-worn path.
Note - I own a few IndyMac puts, betting the stock will (eventually) fall. This one is the mother of insider manipulation and disinformation, not for the wary, but it's a fun ride...