Zeev's Turnips Patch-No Politics (ZEEV)

[Bruce A Thompson]

Market value has nothing to do with the real value

NFI's multibillion dollar portfolio was performing according to model. Their conservative underwriting meant that the portfolio was making nice profits and had an intrinsic value at or greater than the mortgage balances. That did not matter one bit. When the MBS and the CDS said the MtM value was only 22 cents on the dollar, that was the value they had to show on their books. That triggered hundreds of millions, nay, hundreds of billions of dollars in paper losses.

Those losses had to be shown as "Real" losses even though there was nothing wrong with the portfolio. That meant hundreds of millions of dollars was sucked out of the company in collateral calls and that, combined with the death spiral going on in the share price, killed the company and the entire industry.