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June 09, 2008

... And in Today's News, the World Discovers the Obvious!
by Reggie Middleton

It is amazing that this stuff is headline material. Fact is indeed stranger than fiction.

Ratings Agencies Sold AAA status to the highest bidder

The U.S. Securities and Exchange Commission may recommend this week that Moody's Investors Service, Standard & Poor's and Fitch Ratings be prohibited from advising investment banks on how to earn top rankings for asset- backed securities, according to people familiar with the matter.

SEC staff may also propose at a June 11 meeting in Washington that the companies disclose all the data that goes into a rating so competitors can grade bonds even if they weren't compensated by the underwriter, said the people, who declined to be identified because the rules aren't final. Moody's, S&P and Fitch help design securities backed by a stream of payments, making it impossible for them to be impartial raters, a May 2007 study by academics Joseph Mason and Joshua Rosner concluded.

It is much too early to invest in land. I will get an update to the Lennar report out this week. This refers to the JVs that I busted Lennar under reporting, and eventually selling off to CALPERS, who obviously does not read my blog. Some should offer those guys a gift subscription, it would have saved them a BILLION dollars!

A partnership that involves the nation's largest pension fund and owns 15,000 acres of land outside of Los Angeles has filed for bankruptcy-court protection, representing one of the biggest land deals to sour amid the housing bust.

The Chapter 11 filing by LandSource Communities Development LLC late Sunday is a potentially costly and embarrassing blow for the venture's main investor, the California Public Employees' Retirement System, known as Calpers.

The bankruptcy filing in federal court in Delaware means Calpers could lose much of its $970 million investment in the venture, which it made through an investment vehicle in February 2007, only months before land values plunged. At the time, the venture's assets were appraised at about $2.6 billion. Earlier this year, the value had shrunk to $1.8 billion....

The 2007 deal allowed home builder Lennar Corp. and Cerberus Capital Management's LNR Property Inc. to reduce their ownership in much of the land to 16% each from a 50-50 split. Lennar and LNR also each received $660 million from the deal.

The Calpers investment vehicle, MW Housing Partners, took a 68% stake. MW Housing involves MacFarlane and Weyerhaeuser Realty Investors, a unit of timber titan Weyerhaeuser Co. The equity holders say they aren't responsible for paying back the nearly $1.2 billion of syndicated debt that was bought by more than 100 banks and institutional investors.

"Lennar and the other owners are not responsible for, nor a guarantor of, any of LandSource's debt," the Miami-based home builder said in a statement...

Lehman Brothers is awash in liquidity and does not need capital again, as it raises $5 billion , the 4th trip to the capital markets and the Fed for money, amounting to over $11 billion total over a 4 month period. Well, if this is what they need when there is no liquidity issue, just imagine how much money they would suck up if they ACTUALLY HAD A PROBLEM.

I would also like to note that they are reportedly about to announce $2 billion in losses. I made it very clear that they took a significant economic loss last quarter, and this quarter would be much harder to hide the losses (even though it didn't appear that they did a very good job last quarter either, but the Street seems to have fell for it).

Lehman Brothers Holdings Inc. is close to raising more than $5 billion of fresh capital from an array of investors including the New Jersey Division of Investment, according to a person familiar with the matter.

The move comes as the firm is set to report a second-quarter loss of more than $2 billion, this person said. Until recently, most analysts who follow Lehman have been predicting a loss of about $300 million.

On Sunday afternoon, the firm was still pulling together final details of the capital raising, which could be announced Monday or Tuesday. Additional capital raisings are sure to follow for other banks.

Reggie Middleton
http://boombustblog.com/

Reggie Middleton is the personification of the freethinking maverick--the penultimate nonconformist as it applies to macro strategies, investment, and analysis. He uses his background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation, and financial analysis to pursue, analyze, and capitalize on global macroeconomic opportunities.

Finding most available research lacking, both in quality and quantity, Mr. Middleton assembled his own talented research staff. As forensic research is a lynchpin for his own investing, "to actually put food on the table," he stands behind it as doing what it is supposed to do - illustrate, elucidate and educate.

He does not sell advice or research. He is an entrepreneur who exists outside of mainstream corporate America and Wall Street. This allows him the freedom to do things that many cannot--perform without conflicts of interest and corporate politics. He prides himself on developing some of the highest quality, actionable research available - regardless of price. He welcomes any and all to peruse his blog of freely available analysis, opinion and participatory social media; use his custom tools, download files, interact with the community and make critical comparisons from a results orientated perspective. Reggie believes ideas and implementations are improved and fine-tuned when bounced off of the collective intellect of the many, in lieu of that of the few - in essence, a form of collaborative open source financial analysis.

Visit his blog Boom Bust Blog.

Copyright © 2007-2008 Reggie Middleton

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