Traci Gregory, Financier

Ethics in the world of working "other peoples' money"? ABOUT TIME

In the AIG debacle, where AIG has officially estimated a discount of 20% to 50% for clients who have been offered the opportunity to redeem half the fund; and while they can redeem residual income, due to mature in 2012, now, it appears that will be at 30% lower than face value.

Finally, some Ethics are being exercised in the world of  working "other peoples' money"

While I don't lately think of ethics and Wall Street banks in the same sentence, Barclays Wealth says they will "step up to the plate" to offer their clients support in recovering from AIG.

An unnamed  Barclays spokeswoman confirmed the bank's earlier comment: “We have a dedicated team working with AIG to determine the best way to achieve the return of all funds to our clients. This team is working closely with other private banks. We are focusing our efforts on representing the interests of our clients in these discussions.

You may recall that Sallie Krawcheck (known as one of the most powerful women on Wall Street)  resigned from Citigroup's wealth division in September, "after failing to persuade her former employer that it should compensate clients for investment losses" according to the Wall Street Journal. (Read the article, it wasn't the only reason she left, but it makes her a hero in my book.)

Maybe the Universe will right itself . . . maybe.

Should you take Cramer's advice and quit the Market?

“Whatever money you may need for the next five years,” Jim Cramer told the legions of Cramericans yesterday, “please take it out of the stock market right now.”

From Agora Financial's 5 minute forecast:

"Mr. There’s always a bull market somewhere” officially checked out of the current market, suggesting that a the current drama could cause “as much as a 20% decrease in the stock market.”

You don't have to run screaming from the market and take losses today because Cramer said to.  You can take a loan against your portfolio to hedge against losses; non-recourse loans mean that if your stock tanks, you can walk away.

I don't recommend making any decision on the emotions we're experiencing now.  Check out your options, take a deep breath, then sleep on it. 

If you'd like a quote on a particular stock, I can give it to you  via e mail.  I'll need:

• symbol
• value
• state of your residence
• whether or not you are associated with the company

I'll get a quote for you as fast as I possibly can.  Loans tend to close in ten days or less, unless they exceed the ten million mark.

Common shareholders, non-affiliates and insiders who are holding stock that trades at least $25K a day in volume can access millions in cash simply using their stock as collateral.

Manage the risk of owing stock in this market by taking out a stock loan.  If you have $1 million in stock you can borrow $500,000.00 now and if the stock drops in value during the loan you can walk away from the loan without any negative impact on your credit.

If the stock increases in value you can capture that appreciation. There is NO fall-back position to selling your stock.

Done is done.

Use a stock loan to hedge your position instead of abandoning it.

“Whatever money you may need for the next five years,” Jim Cramer told the legions of Cramericans yesterday, “please take it out of the stock market right now.”

From Agora Financial's 5 minute forecast:

"Mr. There’s always a bull market somewhere” officially checked out of the current market, suggesting that a the current drama could cause “as much as a 20% decrease in the stock market.”

You don't have to run screaming from the market and take losses today because Cramer said to.  You can take a loan against your portfolio to hedge against losses; non-recourse loans mean that if your stock tanks, you can walk away.

I don't recommend making any decision on the emotions we're experiencing now.  Check out your options, take a deep breath, then sleep on it. 

If you'd like a quote on a particular stock, I can give it to you  via e mail.  I'll need:

• symbol
• value
• state of your residence
• whether or not you are associated with the company

I'll get a quote for you as fast as I possibly can.  Loans tend to close in ten days or less, unless they exceed the ten million mark.

Common shareholders, non-affiliates and insiders who are holding stock that trades at least $25K a day in volume can access millions in cash simply using their stock as collateral.

Manage the risk of owing stock in this market by taking out a stock loan.  If you have $1 million in stock you can borrow $500,000.00 now and if the stock drops in value during the loan you can walk away from the loan without any negative impact on your credit.

If the stock increases in value you can capture that appreciation. There is NO fall-back position to selling your stock.

Done is done.

Use a stock loan to hedge your position instead of abandoning it.

Feds move up from originators, go for IndyMac, Countrywide and New Century Mortgage

I've just heard today that those three, IndyMac, C'Wide and New Century have been issued subpoenas as the subject of a federal grand jury investigation. The Justice Department was focusing primarily on smaller operators thought to be defrauding homeowners and mortgage lenders . . . as if there could have been a coordinated effort across the country large enough to create the mess we're in. . . Now they've decided that it was fraud on the part of large sub prime lenders. According to Los Angeles Times, they have asked for e-mails, phone bills, financial records and other information. The Times said this is part of an investigation into whether fraud and other crimes contributed to the mortgage crisis.

I find this stuff small time compared to the creation of the programs that required a heartbeat and a signature to get a loan, but I'm just a loan officer . . . They didn't need fraud to lose money on those programs! There were such minimal requirements for loans an enterprising 12 year old could have made them work.

You already know about Countrywide and Angelo Mozilo, with the "friends of Angelo" mortgage program . . . interesting that the only "friends of Angelo" that we know about are politicians . . . who probably can't repay the favor for him now . . . too much daylight shining on their relationships . . . and you probably know by now that Countrywide is being sued in Illinois, Florida and California. I'm sure Cuomo will jump in there soon. After his win with Fannie Mae, he couldprobably take on any lender and win.

Countrywide and all its memories will fade though, except maybe for Angelo and anyone else who actually attends a trial. BOA bought it, and they'll swallow it whole. . . they're already changing the names of the divisions to "Anything But Countrywide".

I was surprised to hear that a court-appointed examiner has determined that New Century was involved in inappropriate accounting practices that inflated its profit and gave top executives the ability to acquire millions of dollars in undeserved or inflated bonuses. I guess I was surprised that I had not heard it sooner . . . I'm certainly not surprised at the charges.

They were not a lender that I sold loans to . . . they were quick to change program details, interest rates, etc, at the closing table and they only had to embarrass me once for me to take them completely off my list of possibilities. They filed Chapter 11 in April of 07 . . . and I felt almost the same way when I heard that news as I did when I heard Greenpoint had "bitten the dust." (What goes around comes around doesn't it? Couldn't have happened to anyone who deserved it more.)

The FBI is up to 21 cases against corporate and other large companies relative to subprime market defaults. They've inferred they want brokers, lenders, and now securities firms, hedge fund operators and credit rating agencies. The Securities and Exchange Commission (SEC) is reportedly working closely with the fibbies to find and charge anyone who may have contributed to the credit crises . . .but because of deregulation they're struggling with making criminal cases about the subprime debacle.

I've recently thought of two youtube videos I think I'd like to make . . . Bear Stearns indictees, set to the tune of Dirty Laundry, by Don Henley

You may listen to it in the next post

News from all over, again . . . indymac, bear stearns, fannie, freddie, and the beat goes on and on and on

New Yorker editor David Remnick said the provocative cartoon was intended to satirize those [Obama's religion and other] rumors and those who traffic in them. In fact, the New Yorker is a publication that would be inclined to support Obama. New York Gov. David Peterson, the state's first black governor, condemned the cover as "one of the most malignant, vicious" magazine covers he's ever seen. The National Association for the Advancement of Colored People called it "tasteless, Islam-a-phobic, mean-spirited and racially offensive." The Obama campaign early on called the cartoon "tasteless" and "offensive" and even Republican presidential candidate John McCain referred to the cover as "inappropriate." Judge for yourself - I don't care for it at all.
Lehman Brothers' CEO Dick Fuld is seriously mulling a way to take itself private and out of the public eye
	Back in the news, Indicted former Bear Stearns hedge-fund manager Ralph Cioffi has hocked houses in New Jersey and Naples, Fla. to secure a $4 million bond, but saved the Southampton digs for the family. According to Assistant U.S. Attorney Patrick Sinclair the government is considering further criminal charges against two former Bear Stearns executives indicted last month related to the collapse of two hedge funds they oversaw.  In a court hearing in U.S. District Court in Brooklyn, Sinclair said "the government is indeed contemplating additional charges." Reuters for full story And, check this out!! According to the New York Post, Cioffi would like to start an independent hedge fund and may have some investors lined up . . . wonder if they'll still be there in 20 years . . . .
Fannie Mae and Freddie Mac . . . End of Illusions.  The Econonmist has a series of articles detailing the problems at Fannie Mae and Freddie Mac.  Now that we've jumped to trillions of dollars at their behest, surely the American Public will sit up and pay attention to what the federal reserve is doing to us by printing more and more money. Highly detailed, easy to understand . . . you should read every word. Hank Paulson, America’s treasury secretary, unveiled the emergency plan to save Fannie Mae and Freddie Mac, two mortgage giants that owe or guarantee $5.2 trillion.  He wants you to know how imortant it is so you won't mind paying for it . . . this isn't capitalization or free markets as we know them, this is nationalization and it will only create problems for the people who pay the bills.  That would be me and you . . .
The FBI had launched an investigation of IndyMac Bank for possible mortgage fraud shortly before the thrift was closed by regulators and placed into receivership, according to news reports. Fraud and they failed . . . they couldn't do anything right then could they?
Even though mortgage fraud for housing "doesn't seem quite as violent" as mortgage fraud for profit, it has its own consequences, according to a representative of the Florida Office of Financial Regulation's Bureau of Financial Investigations. Fraud for Housing is when a borrower commits fraud to get housing, as opposed to fraud for monetary gain. And that, my dears is life in my lane . . . I'm seriously thinking of Montana . . . horse, bedroll, rifle.  Sounds like the place to be to me!

2 Former Bear Stearns Executives Arrested

Staggering Arrogance??

Update to Bear Stearns indictments

July 6 2008 Update to Bear Stearns indictments

Dan Slater writes in the Wall Street Journal LAW BLOG: Bear Fund Managers Get Good Draw, Sizing Up Judge Block

So, Justice Carries a Swift Sword?  We'll See - Curiously, a poster named "Anonymous", says "the sub-prime mess  . . . has plenty of people who deserve fines and jail time . . . BUT these guys are not the scapegoats we need."

Well, gee, they thought up the hedge funds, created them, bought the mortgage backed securities, and then (!) CIOFFI was charged with insider trading for moving TWO MILLION DOLLARS OF HIS MONEY out of the fund . . . leaving institutional investors in the fund with no warning . . . when they knew the fund was in danger.

They may not be the scapegoats we NEED, but it certainly appears they need to be in front of a judge for the way they ran the funds!

Quick Notes from all over . . . indictments at Bear Stearns . . . a new kind of black widow (!) and loans for foreign nationals again (hooray!)

The U.S. Attorney's Office for the Eastern District of New York handed down indictments for Ralph Cioffi and Matthew Tannin formerly with Bear Stearns.  You may or may not recognize them as the brains (if you will forgive me) behind the Bear Stearns High Grade Structured Credit Strategies Fund (begun  in 2003) and the Bear Stearns High Grade Structured Credit Strategies Enhanced Fund (begun  in 2006), both of which failed miserably earlier this year.

From the US Attorney's Office (Eastern District of New York) Press Release   "... The indictment alleges that by March 2007, the defendants believed that the Funds were in grave condition and at risk of collapse.

However, rather than alerting the Funds’ investors and creditors to the bleak prospects of the Funds and facilitating an orderly wind-down, the defendants made misrepresentations to stave off withdrawal of investor funds and increased margin calls from creditors in the ultimately futile hope that the Funds’ prospects would improve and that the defendants’ incomes and reputations would remain intact. " (italics all mine)

"... The subsequent collapse of the Funds during the summer of 2007 resulted in losses to investors totaling more than $1 billion."

CIOFFI was also charged with insider trading, as I understand it, for moving TWO MILLION DOLLARS OF HIS OWN MONEY out of the fund and into another.

Probably one that didn't fail, doncha guess?

Attorneys for the men maintain their innocence . . . Well, would they get paid otherwise?

Read the Press Release in its entirety here

I understand the FBI is investigating 19 other companies who were originating and securitizing sub-prime loans for accounting fraud, insider trading, and the failure to disclose true valuations.

Lovely

~~~~~~~~~

July 6 2008 Update to Bear Stearns indictments

Dan Slater writes in the Wall Street Journal LAW BLOG: Bear Fund Managers Get Good Draw, Sizing Up Judge Block

So, Justice Carries a Swift Sword?  We'll See - Curiously, a poster named "Anonymous", says the sub-prime mess  . . . has plenty of people who deserve fines and jail time . . . BUT these guys are not the scapegoats we need."

Well, gee, they thought up the hedge funds, created them, bought the mortgage backed securities, and then (!) CIOFFI was charged with insider trading for moving TWO MILLION DOLLARS OF HIS MONEY out of the fund . . . leaving institutional investors in the fund with no warning . . . when they knew the fund was in danger.

They may not be the scapegoats we NEED, but it certainly appears they need to be in front of a judge for the way they ran that fund!

~~~~~~~~~

Billed as social networking with a bite  (pun intended I suppose) the Black Widow Network is designed to send real estate investment deals direct to your in-box . . .

Other websites designed to take advantage of REOs and the possibility of making money off them are

• BiggerPockets.Com
• PropertyShark.Com
• Krunching.Com

If you're looking for deals - try them out -

~~~~~~~~~

I've finally located three lenders that will work with Foreign Nationals.  So I'm taking those applications again --

Requirements include:

• Assets Held in Foreign Accounts must be in English and I need copies of statements for two months.
• Seller concessions are held to a maximum of 3% and are ONLY acceptable on second homes.
• Single Family Dwellings, PUDS, Warrantable Low and High Rise Condos are the properties . . . that means NO CONDOTELS
• FULL DOCUMENTATION ON INCOME AND ASSETS
• 30 year fixed, no prepayment penalty
• 75% maximum LTV

That's all I've got for today . . .  pax et bonum

...

Jim Cramer talks about DB (my mini-cooper) || Now I’m Hedge Lender® Approved Agent

In Jim Cramer's Mad Money lightening round on Friday June 27 he said, "In the end, people aren't spending… they are on the Interstate and you just don't feel rich anymore when you're on the Interstate, unless you're driving a Mini Cooper."

Meet DB, my mini-cooper . . .

I don't feel rich on the Interstate, but I'm not bleeding money for gas anymore. I went from $95 a week for the truck I was driving to about $40 every other week. The savings almost equals the car payment AND it is a kick to drive!

I've just learned that I'm now an authorized agent for Hedge Lender. They have programs for Stock Loans and an amazing customer service approach. Highlights are

• Employee Stock Options Solution Using HedgeLoan®
• Margin Loan Rescue Solution Using HedgeLoan®
• Expanding Business Financing Solution Using HedgeLoan®
• Real Estate Purchasing Solution Using HedgeLoan®
• Diversify Investments Solution Using HedgeLoan®

HedgeLoan Stock Loans for Business Expansion Capital...

John Shareholder owns a farm with a 10% interest note that collateralized by all of his equipment and most of his other farm assets. He needs expansion capital and owns 100,000 shares of the stock XYZ worth $10 a share, but he expects good news this year that will boost the stock's price and doesn't want to liquidate.

Solution: With a HedgeLoan® @ 6.99% interest fixed, he can refinance the farm, get the capital to grow the business and remove the liens from all other assets. If his favorite stock goes up, he can participate in the upside, and if it goes down, he can exercise his right to default on the loan (with no reporting to credit bureaus) and the collateral stocks acting as full satisfaction of the HedgeLoan obligation.

PIPE Replacement Solution

A publicly trading company needs to raise $1,000,000 in capital but can't do asset-based lending and can't afford to wait for a PIPE to be completed.

Solution: Use a HedgeLoan® stock-secured loan to do an off-balance sheet financing with shareholders friendly to the issuer and gain flexibility and greater shareholder loyalty in the process.

Think of the benefits:

• it can help enhance the value of the collateral pledged for the HedgeLoan®;
• be structured so that borrower also receives warrants which could have considerable added value (terms negotiated with the issuer).
• no debt service - since the borrower's note will run concurrent with the stock loan, the debt service will be covered by interest paid to borrower on note (payment terms and dates can be structured to fall just prior to due date on HedgeLoan®.)

Quick funding – 2 weeks or less possible vs. many months with PIPE or secondary offerings. Many registration and legal costs associated with PIPE or secondary offerings are not required with a HedgeLoan® solution. Shares go (via warrants) to presumably friendly hands (current large shareholders) rather than to unknown parties.

Stay in and Out of the Market at the Same Time - with HedgeLoan® Stock Loans

I'll try to go over each of them in the next day or two – in the meantime, you can call me 770.333.4404 or send an email traci@tracigregory.com if you have questions.

You may read my full Disclaimer including definition of "approved agent" .

Daniel Gross talks about Hedge Funds and the Black Swan

Came across  an interesting reference to The Black Swan (see my earlier entry) on MSN/Newsweek  (Posted August 15)

Daniel Gross writes on "Speaking Hedgie
Translating the strange dialect of hedge-fund managers who are trying to explain big losses."

Hedge-Fund Phrase: Unprecedented, unique circumstances
Translation: Stuff happens. But we had no clue.

Anyone who read the best seller The Black Swan  [I did, and highly recommend it] knows that random geopolitical, financial, and economic events can cause the prices of assets to move in ways that defy history and sophisticated computer models. But it comes as a shock to the brightest minds on Wall Street, especially those who run quantitative-based funds.

"Wednesday is the type of day people will remember in quant-land for a very long time," Matthew Rothman, head of quantitative equity strategies for Lehman Brothers told the Wall Street Journal last week.

"Events that models only predicted would happen once in 10,000 years happened every day for three days."

Strangely, these same models failed to predict the once-in-10,000-year events that roiled the markets in 1997, 1998, 2001, and 2002.

Daniel Gross writes for Newsweek and Slate, and has a book on economic bubbles, one of my new favorite subjects: