One wonders how many more times you go can go back to the well and make a fortune with these subprime stocks? I'm always cautious about going back one time too many.
Here we have a stock down 7% today, but still trading above $14, yet volume on the March 10 puts in the first 3 hours of trading is over 1000 on open interest at 22-thousand. While that's not overwhelming reason to jump into those puts head first, it is sure indicative of the bearish sentiment surrounding this stock and many others either directly involved in subprime, or guilty by association. The further slide in NEW shares comes as investors and speculators have totally ignored Friday's upgrade of the stock by UBS from SELL to NEUTRAL and a $17 price target. UBS had stated that NEW's liquidity risk was OK and the weak credit outlook is already reflected in NEW's shares. Really?
So we'll see what happens March 1st... just a few days from now. That's when NEW is expected to report the revisions earnings.
Obviously with ABX bbb- falling through the floor boards, even if NEW pulls a big rabbit from the hat, prospects over the medium and long term look bleak for the company.
And this whole issue of them having to correct errors relating to how it incorrectly applied Statement of Financial Accounting Standards No. 140 - Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities - stinks to high heaven. After scandals like Enron, how is that New Century and its accountants could fail to include the expected discount upon disposition of loans when estimating its allowance for loan repurchase losses?!? Get my drift?