The Psychic Friends Network closed down for a reason. The ability to see into the future has been debunked several times, and unless Michael Nierenberg had Nostradamus on his investment banking teams during the mortgage crisis, he nor anyone could have ever seen what was coming. The tumble weeds were blowing by in late 2006 and the skies were turning black, but no one really knew what was coming. Even if traders of CMOs suspected that there were problems, few actually knew that there were a plethora of lenders, out in the bucolic suburbs, writing mortgages on those with very risky credit profiles.
Michael Nierenberg lived through this entire debacle, and it is perhaps during these dark days that a new strategy, of active management of mortgage backed securities, was adopted by this seasoned professional. As CEO of New Residential Investments (NRI), after having a storied career working for nearly all of the big investment banks in New York City, he believes that active asset management is the only way forward. NRI operates as a REIT and will outright buy distressed properties rather than invest in them.
The great Oracle of Omaha, Warren Buffet, has observed that it is better to be a buyer of a business rather than renting its stocks. Post-mortgage crisis, the same applies for the real estate market. In addition, I am sure Michael Nierenberg feels better owning the entire property, knowing what is going on with it and using it to strengthen the NRIs position. Investing blindly is what led to the mortgage crisis, so avoiding that kind of blind investment, where one does not know much about the property they are buying into, is best avoided by simply owning the property. NRI, under Michael Nierenberg’s guidance, will likely be solid as a result of his overall experience spanning a very tumultuous three decades in the financial industry.