More Carnage In The Lending Business

Shares of American Home Mortgage Investment Corp. (AHM) gapped down today nearly 90%!!! Thats after they already dropped from $30 to $10 last week! Despite the rebound in the market today, most home-lending companies were down. And later in the day, the market was down on AHM's news.

I think this might be an indicator of the growing liquidity crunch. The excess liquidity that was sloshing around seems to have dried up rather suddenly. After Bear Stearns reveavled that its subprime hedge funds were worthless, it seems that everyone's suddenly concerned that the AAA ratings issued might not really be true and the subprime debacle might spread to Alt-A and prime paper too!

John Devaney, CEO of United Capital Markets, a hedge fund that focuses on buying subprime ARM-backed securities, has been forced to sell his $23.5 million 145-foot yacht and his $16 million Aspen vacation home. Things must be really bad when you have to sell your boat and home!

It also seems that leveraged-buyout party is close to an end. The highly anticipated Chrysler/Cerberus has stalled. Even Blackstone is nearly 36% off its highs. And now it seems that Bernanke won't bail out investors by cutting interest rates.

Looks like a real good time to be a buyer of gold coins and gold stocks!

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