This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Chrysler Investor Admits 'Idiot' Deal

NEW YORK ( TheStreet) - Chrysler and GMAC investor Stephen Feinberg has more than a little regret in regards to the nearly $15 billion his firm - Cerberus Capital -- spent on the auto makers prior to the onset of the financial crisis.

"One thing about investment management is you'll never cease to be amazed at your own ability to be an idiot," Feinberg said at the Dow Jones's Private Equity Analyst Conference in the Waldorf Astoria Hotel Tuesday.

With his head-slapping auto's experience over -- which wasn't all lossmaking after a $6.3 billion sale of Chrysler Financial to Toronto Dominion Bank (TD - Get Report)

in 2011 -- Feinberg laid out Cerberus Capital's more credit market focused investment strategy.

Feinberg said that Cerberus will probably stay away from the giant deals it was known for in the past. While Cerberus was able to initiate operational change in past investments, he said "one of the mistakes we made in the '08 period was we bought too many cyclical businesses."

Investments like Chrysler and GMAC both were highly centered around cycles in the extention and contraction of consumer credit and spending, Feinberg explained. Within a span of just months, both companies needed multibillion dollar injections of capital from the U.S. Treasury.

After doing giant leveraged buyouts in 2006 and 2007, Cerberus is becoming more focused on investing in debt tied to housing such as residential mortgage backed securities and European bank loans. It's a market where Feinberg believes Cerberus can use both its technology and loans expertise to find high returning investments. "The credit market today is an exciting opportunity," said Feinberg.

In particular, housing related debt looks attractive to Cerberus because of how hard it is for prospective homeowners with good FICO scores to get a loan. Feinberg said that factors such as credit tightness and interest rate volatility for mortgage loans are causing "tremendous inefficiencies in the system" and are the reason the average new home loan is backed by an estimated 29% down payment and just 71% loan-to-value. He added, "this kind of an environment is tough on your existing positions, but there is also tremendous opportunity" for new ones.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
BLK $338.75 -0.32%
TD $40.47 -0.34%
AAPL $122.66 -0.27%
FB $95.00 -2.10%
GOOG $633.00 0.17%

Markets

Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.63 +0.06 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs