After I sold my Canon shares and put money down for a house, I had some cash left over. Today, I used that cash to buy First Marblehead at $1.42 a share. That is less then 10% of what I paid for shares way back in February. In the meantime, the credit markets have fallen apart, TERI has filed bankruptcy and First Marblehead has slashed the accounting value of its trusts.
Even so, I think the company is an even better buy than it was nine months ago. The liquidation value has fallen to about $4 a share, so the market has priced in a considerable chance of complete failure. Further, the residuals are priced as if they are extremely risky—they must be discounted at 25% yield in order to get a $1.42 price. I've been greedy all the way down, so I'm not the best person to ask. On the other hand, there just don't seem to be any more shoes to drop.
One thing I know, this market makes me feel really dumb.
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