Comments on: Reading between the Lines: Countrywide Announces $1+ billion Dollar Loss, Stock Soars

By: Adams

Adams — Tue, 11 Dec 2007 02:41:53 +0000

You cannot cut staff in December to make a profit in the 4Q - too late. If the large RIF has not happened yet, then 4Q profits will not be impacted by lay-offs. I think Brian has an interesting perspective. Perhaps CW is telling us they will not be writing down too many $$$ of their protfolio in the 4Q, while the rest of Calif drops like a rock. . Stockholders with law degrees should enjoy seeing that.

By: Doug

Doug — Wed, 31 Oct 2007 16:35:57 +0000

If you’re like me, you used this temporary uptick as an opportunity to further short Countrywide stock.

By: Brian

Brian — Wed, 31 Oct 2007 12:26:13 +0000

Countrywide announced that it expects to be profitable in the fourth quarter and for the year. Since their profitability or loss depends on the amount of write-downs in their mortgage portfolio, it is completely up to management whether they make money or not (at least in the short term). If I have $100 billion in mortgages on my balance sheet, and I choose to write down $2 billion of them as bad debt, who is checking up on me? The auditors?

This especially applies if Countrywide has securities based on mortgages, rather than mortgages of themselves on their balance sheet. There is no way to price most of the mortgage backed securities, CDO’s and others, other than making up a value out of thin air. Since there’s no market for them, how do you value them? It’s a game all of the banks and Wall Street investment banks are playing right now. Until aggressive auditors get in there and dig through the crap on their balance sheet, we won’t know. And most auditors are not aggressive, as they’re being paid by management.

Going forward, Countrywide is out of the “affordable” loan business. No more subprime, no more option arms, no more loans that they made so much money on. Now they’ve gotten religion. Now they are only going to sell agency loans, or ones that can be sold to Fannie Mae or Freddie Mac. In other words, in other words, 30 year, 20% down, fixed rate loans. Ones that they will make very little money on, as they are commodities. And, to fund these loans, they are not going to be borrowing in the short term asset-backed paper market. Instead, they are going to fund these loans through Countrywide Bank deposits. Which is paying above market rates to attract deposits. So you have a case where they are going to be making low-margin loans, at a cost of funds above market. What a recipe for profits!

So Angelo and David can say anything they want — who can check up on them? Meanwhile, Angelo props up the stock price with bogus announcements, and behind the scenes he’s selling, selling, selling. I suggest anyone holding Countrywide stock do the same.

By: The Property Pundit

The Property Pundit — Wed, 31 Oct 2007 06:43:46 +0000

Rick- good article. I do think that many people and journalists overstate how much the Fed’s can affect things. Yes, there is an immediate response to their decisions, but the main reason rates have been so low is the demand on the secondary markets in commercial paper. Pressure from overseas has been good for our rates. It will be interesting to see what happens when, or if, China starts diversifying its assets out of the dollar.

By: rick

rick — Tue, 30 Oct 2007 23:17:42 +0000

Dr Bubble,

Today there is an interesting article about how the Fed lowering interest rate will actually be hurting the ARM borrowers:

http://realestate.yahoo.com/Real_estate_news/story?s=rytimes/item-28ae4f7a62040fe7aeaa7c9a6ca8aa85.html

It kind of make sense.