Eugene David<br>...The One-Minute Pundit

Posted 2:32 PM by Gene

While the subprime market whirled toward disaster, The Street was up to its old tricks:

On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks. [Actually, two "analysts."]

What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21. [FIRST TWO GRAFS]

Why not be upbeat? The Street can go right smack into the business for itself! Including Bear Stearns!

“The regulators are trying to figure out how to work around it, but the Hill is going to be in for one big surprise,” said Josh Rosner, a managing director at Graham-Fisher & Company, an independent investment research firm in New York, and an expert on mortgage securities. “This is far more dramatic than what led to Sarbanes-Oxley,” he added, referring to the legislation that followed the WorldCom and Enron scandals, “both in conflicts and in terms of absolute economic impact.”

That would be an achievement. Or would it?

Meanwhile, back on March 1:

If New Century is forced to sell itself or liquidate, the stock could still be worth $10 to $11, according to Coren and Nannizzi.

That's a bargain.