Tuesday, January 8, 2008

Remember What the Media is Telling You and Remind Them Later

Nice 60 degree day here in Massachusetts. Lots of excitement as well for the nearby New Hampshire Primaries. While I find it hard to get all that excited about any of the candidates, you have to like it when record numbers of people are heading out to vote.

Countrywide Financial - What's it Going to Be?
In last nights post I commented that the action in CFC stock on Monday was a clear sign that something was wrong (more than the usual!) with the company. Today the stock was pummeled to the tune of a 28% loss! Various reasons were thrown out there including some kind of paperwork involving a foreclosure being mishandled. I seriously doubt that note moved the stock in such a way.

So what's left? As stated here, Angelo Mozilo and his promise of a profitable quarter for the next earnings report, as well as a profitable 2008 as a whole, was a hopeless lie. He knew it then, and now as the numbers are prepared for the end of the month report it must be clear that CFC is going to miss earnings expectations by a large amount. The bold and aggressive forecast was so serious a misstep that surely the CEO is being ushered out the door this month. Is CFC going to go bankrupt? I am not skilled enough to look over financial disclosures, nor would I place too much faith in any numbers coming out of CFC anyway. That said, the company will be a great test of the "Too Large to Fail" concept. I imagine it is very possible that CFC will not last the month in it's current form. I will keep looking out for when/if CFC plans to report earnings at months end. Below is the chart for today's action in CFC. The spike up around 1pm is when CFC stated BK was not being considered. Looking at the fall into the close says the street may not believe them.

I know that CFC is offering very high rates for their Cash Deposit (CD's). At this point, if you can move any funds that are in CFC's hands it may be time to do so. The hassle and paperwork involved if CFC does go down will surely be a stress you do not need.

Remember What the Media is Telling You and Remind Them Later
2007, especially the August through September fireworks was a year of denial. Bulls abounded in the face of horrific news on the housing front. Now would be a good time to compile a list of calls made by the "experts" and keep them in mind as we progress through 2008. I will supply a small list, and I encourage you to make notes yourself. After all is said and done, market players that were so clearly wrong should not be offered a chance back into the game through TV or print.

Calls made during 2007 to watch:
  • Mortgage losses contained to subprime arena only
  • Financial stocks basically are being given away at low levels
  • Housing bottom for both prices and sales by mid 2008 with rebound into 2009
  • CFC, FNM, FRE are too big to fail
  • FED will cut rates and re-ignite the economy (ie don't fight the FED)
  • Bank losses limited in size and now fully priced in
  • Recession impossible
  • Unemployment is low, and plenty of jobs being created

The point here is that even as lately as 2 months ago the financial press was singing a very different tune than they are now. No credibility can be given to sources that have been so clearly wrong about basically everything. I understand that if you are reading this blog and others like it, you are not surprised. But as one of your New Years Resolutions you should make an effort to introduce at least on person you know to the writings of alternate media. Direct one person towards Mish, Calculated Risk, Nouriel Roubini, or even this site.

Expansion of Rate Freeze Plan to All Mortgages

As if on cue, Hank Paulson was out this morning saying that the silly Rate Freeze plan dubbed "Hope Now" will be extended to prime loans that are resetting as well as their subprime brothers. This fact kills the subprime only debate once and for all. It is becoming clear that as Paulson and others start to dig into the mortgage mess, they are scared out of their minds at what they see. The acceleration of events to start 2008 is even catching this writer by surprise. What will things look like by Valentines Day? Buckle up folks!

I have a new poll up, so please vote.

Have a good night.


Anonymous said...

Add Peter Schiff to your alternate media.
Check the archives for past missives, and the video's of his TV appearances. He hosts a weekly web broadcast, also available in the archives.
His book "Crash Proof" is worth a read.

watchtower said...

It`s like when my daughter and I are watching "America`s Funniest Home Videos", and some kid is swinging a T-Ball bat around their dad`s crotch...this will end badly.

I`ve tried to get people interested in what is currently unfolding, but they look at me like I`m from a different planet when I suggest that something bad could be coming our way.
Kind of reminds me of KD trying to get people to sign his petition(which I did), so few, out of so many(who knows, maybe they believed, but didn`t want to take the time).
I`ll keep trying though, and if I ever make any headway, I`ll send them here, plus a few other places