A Survive or Die Investment for Jumbo Mortgage Co.

Sep 3rd, 2008 – Comment

Hi Lou, May I please have your opinion of Thornburg, TMA? Thank you, Steve Hi Steve, Thornburg Mortgage, Inc., TMA NYSE, is one of those will they survive or die investments, which offer high risk but also high rewards if all the cards fall just right. TMA specializes in jumbo mortgages, those over $417,000, which […]


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Chart tells horrible story of wealth destruction

Chart tells horrible story of wealth destruction

Hi Lou,

May I please have your opinion of Thornburg, TMA?

Thank you,

Steve

Hi Steve,

Thornburg Mortgage, Inc., TMA NYSE, is one of those will they survive or die investments, which offer high risk but also high rewards if all the cards fall just right.

TMA specializes in jumbo mortgages, those over $417,000, which because of the credit crisis is a market that is currently weakly served. If TMA survives they have a very wide field to play on with few competitors. This usually means more than economic profits are available to the survivor.

But survival is the question hanging over TMA. They have diluted their stock appreciably to get this far and on September 2, 2008 extended their offer to preferred shareholders to convert their shares for $5 in cash and 3 common shares of the company to September 09, 2008. Not a great offer but any port in a storm.

TMA has moved higher over the last 3 weeks from $0.25 to $0.50 on speculation of a resolution of workout that will save the company. If you want to gamble on the outcome you should consider this approach.

I always advise that with a speculative winner take all situation, like this one, you have to ask yourself how much capital you are willing to put at risk. If you are willing to lose all or most of that sum if you are the wrong side of the trade then fire away.

The chart tells a horrible story of wealth destruction as the U.S. mortgage market blew up. The RSI is showing a stock that has been oversold for most of the last year and an ugly downtrend. Go forward with caution!

Happy Capitalism!

Categories: Financial Services
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