Mr. Mozilo,
I have to admit, I have become quite a fan of you and your company, Countrywide Financial Corporation. You have built yourself quite a company. You have been instrumental in bringing home ownership to many, regardless of race, creed, social status, or financial means. I believe you when you say that your entire life's goal was to bring home ownership to everyone that wants one. I think you have succeeded in your quest, sir.
Countrywide has become the darling of the wall street and I commend you for your deft direction and leadership in this matter. Through your guidance, you have transformed the company which you founded from a humble home loan provider to the conglomerate giant it is today. I know that along the way, you have gained many admirers, like myself, and strong influential connections in the financial institutions and in the government. You are to be commended.
With the burst of the dot com bubble, you have played a key role in propping up the American economy by averting disasterous economic down turn by bringing home ownership to the masses by taking advantage of Mr. Greenspan's proactive interest rate cuts to help stimulate the economy. You have definitely taken advantage of the situation sir and have contributed to the robust housing boom rivaling that of the dot com era just 10 years prior. During that time, many people have become rich by home ownership. You have helped create excess speculation in the housing boom that made instant millionaires and weekend home investors. Many have given up their primary jobs to partake in this new bonanza and you were much happy to oblige and continue to facilitate the greatest housing boom in history. You certainly have done your part to help an average or even below average Americans to reach their goals in the real estate boom.
Mr. Mozilo, I am quite curious lately regarding the future of the housing market. Just one month ago, you said that the subprime companies were making risky loas and that some would not survive. You were right sir, many have folded and some might even go to jail. It is interesting that you yourself said that Countrywide stands to benefit from the fallout of the housing market and mortgage lending industry purge. You have said that Countrywide realized the dangers of subprime and even alluded that you no longer partake in that field anymore, yet your earnings statement today said that subprime loans dropped 29% for prior year, which means that you are still making these risky loans. How do you account also for the fact that your company has a subsidiary called Fullspectrumlending.com? This is a subprime division is it not? If true, then are you not actively seeking these so called "risky" loan groups?
You have also said that you stand to benefit from the fall out of mortgage crisis and housing crisis. You have personally said that Countrywide stands to benefit and become stronger when the smoke clears. Yet, all I have seen so far is a lot of PR campaign by you and your lieutenants. How can you explain in honest truth your excessive selling of your options and that not one of your insiders have bought a single share of your company within the past 2 years? If your company is so sound, and if your company has taken such a dramatic hair cut in terms of share price, shouldn't you stand by your share holders and roll up your sleeves and be buying this stock, since it is so fairly valued? Since that is what your loyal share holders believe, shouldn't you lead by actions not by mouth? You sir have sold more than $25 million last March? You have sold even more just yesterday. How will you explain that other than saying that you need to "bring balance to your life?".
More importantly, if your company is fully hedged in terms of financial risks associated with mortgage defaults via insurance, did the insurance company that provides this coverage know that majority of your loans are fradulent because of your so called stated income loans? Are your prime loan portfolion consist of at least 45% in ALT-A option ARMS? How is your company so much superior to M&T, AHM, or WFM? All of those companies are as well run or better than your company yet they have had the decency to be SQUARE with the share holders and honorably took their lumps. Why are you not?
I am growing tired of the smoke and mirrors of your company. You yourself have said that the only thing that will save your industry is a rate cut in the near term. Sir that is not happening, so, what are you going to say next to prop up your share prices so that you can continue to dump your shares? I especially believe what you are telling the public that you don't think your company is worth $33 and change, otherwise, if it were you'd be buying wouldn't you? And please, what is up with your 8K? Is that the best you can do? I think you'd better look at that 5% increase mumbo jumbo that you have there because somehow the breakdown of the 5% increase in your loan doesn't jive. What? You surprised? Didn't think I could read 8K? Believe me there are plenty of people scrutinizing your every document and your actions right now. I think SEC is closely waching this issue as well.
I think the judgement day is coming. You can at least restore some dignity by telling the truth and coming clean. Your avenues of deception fades with each day and believe it or not, people are not as dumb as you think. They are catching on and you sir, are headed the same path as Kenneth Lay. Please don't disgrace your life's work and for once this year, tell the truth. I know there is some good in you. Tear down your lies.
Sincerely,
your nagging friend.
Thursday, April 12, 2007
On Incredible Complacency of the Markets
So I hear people blaming things on the PPT or Plunge Protection Team when the market continues to go up despite the barrage of ominous economic news. Do I know that it exists? Well sort of. It is defined on Ask.com and just about anywhere in the web. So we know that PPT was created to avert another plunge experienced in 1987. Does it exist today? I don't know and I won't take a position on it or give this entity credibility until there is ample credible evidence.
But on days like today, when the market ignores all the warning signs thrown at them and still manages to shrug off the bad news and continue to go up, I have to at least wonder about PPT. I am only human. PPT is convenient and easily accessible. But what really is driving this insane market move?
I know that the markets are foreward looking. So by the movements of the markets recently, it is factoring in robust economic growth, tame inflation, near term FED cut, no fall out from mortgage and housing meltdown, improving dollar valuation against the Euro and Yen, prudent Chinese global economic policy, low oil prices, and solid national security.
So, I think about this. Am I a fool for being too negative on the market and the health of the economy? Am I wrong for not buying that the current economic climate is the worst it will get and that improvement is just around the corner? Perhaps. But I don't buy it.
Why?
Because of the complacency in the markets and the financial pundits who continue to hold out hope that it won't get worse and that this time it is different. People dig up words like PPT to explain the unexplainable. No one said the markets would be rational. But historically, complacency in the market place has been rewarded with pain. In 1929, a close parallel to today's market could be made. Despite ongoing concerns regarding excess liquidity, growing negative economic indicators, and rising speculation in the stock markets, the markets continued to climb until, well we know how that ended. Am I saying that it would be that bad? No, but, actions in the market place currently is a harbinger that just around the corner might be a disaster waiting to happen.
Right now we have the ticking time bomb called mortgage lending crisis that is within minutes of exploding. Despite recent on going concerns about inflation, devaluation of the dollar, rising mortgage delinquencies and foreclosures, and weakening US economy, we are seeing the market that stubbornly marches on ignoring all signs of danger. How long will this continue? I do not know, but I know that the danger is out there and waiting. I have said recently that I expect some form of a blow up in Countrywide sometime this week, and I must admit, I am running out of time. But at least I have my money right where my mouth is. I will continue to remain bearish until the bearish factors resolve themselves. But the currnet indication shows that we are just beginning the bear phase and not at the end. Perhaps I am wrong, but it sure would be one hell of a way for me to go broke when the economy is slowly crumbling around us.
But on days like today, when the market ignores all the warning signs thrown at them and still manages to shrug off the bad news and continue to go up, I have to at least wonder about PPT. I am only human. PPT is convenient and easily accessible. But what really is driving this insane market move?
I know that the markets are foreward looking. So by the movements of the markets recently, it is factoring in robust economic growth, tame inflation, near term FED cut, no fall out from mortgage and housing meltdown, improving dollar valuation against the Euro and Yen, prudent Chinese global economic policy, low oil prices, and solid national security.
So, I think about this. Am I a fool for being too negative on the market and the health of the economy? Am I wrong for not buying that the current economic climate is the worst it will get and that improvement is just around the corner? Perhaps. But I don't buy it.
Why?
Because of the complacency in the markets and the financial pundits who continue to hold out hope that it won't get worse and that this time it is different. People dig up words like PPT to explain the unexplainable. No one said the markets would be rational. But historically, complacency in the market place has been rewarded with pain. In 1929, a close parallel to today's market could be made. Despite ongoing concerns regarding excess liquidity, growing negative economic indicators, and rising speculation in the stock markets, the markets continued to climb until, well we know how that ended. Am I saying that it would be that bad? No, but, actions in the market place currently is a harbinger that just around the corner might be a disaster waiting to happen.
Right now we have the ticking time bomb called mortgage lending crisis that is within minutes of exploding. Despite recent on going concerns about inflation, devaluation of the dollar, rising mortgage delinquencies and foreclosures, and weakening US economy, we are seeing the market that stubbornly marches on ignoring all signs of danger. How long will this continue? I do not know, but I know that the danger is out there and waiting. I have said recently that I expect some form of a blow up in Countrywide sometime this week, and I must admit, I am running out of time. But at least I have my money right where my mouth is. I will continue to remain bearish until the bearish factors resolve themselves. But the currnet indication shows that we are just beginning the bear phase and not at the end. Perhaps I am wrong, but it sure would be one hell of a way for me to go broke when the economy is slowly crumbling around us.
My Thoughts on CFC's Operating Results for March 07
So Countrywide is up to its game again. This time their lies won't work. They report that their loan funding percentage was up 5% over last year. This was due to increasing volume of refinances and fixed rate loans. They claim that their subprime loans declined by 29 percent to $2.4 billion.
They also claim that on consolidated basis, it funded $3.5 billion in pay-option loans during the month as compard to $8.8 billion in March 2006. They tried to stress that their pay option loans have a fixed rate for 5 years which totaled $1.3 billion. What about the remainder of the $2 billion? I thought they thought ALT-A was not exposed to subprime risk, if so, why are they going out of their way to seem as if their ALT-A loans were declining AND that the rates are fixed for 5 years on 33% of their pay option ARMS? What about the 67% that are not?
Read between the lines of mortgage loan servicing portfolio growth to $1.4 trillion. More loans for them to be exposed to in their ever increasing foreclosures and loan defaults. What about a comment here on that? On the surface that might sound good but no one seems to be buying that. That their foreclosure rate is increasing 100% is not a good thing.
The smoke and mirrors continues. In a fashion eerily similar to AHM before releasing their earnings warning, CFC is trying to do damage control at this point and true to form, they are not exactly forthcoming. Meanwhile, Mozilo continues his selling true to form.
They also claim that on consolidated basis, it funded $3.5 billion in pay-option loans during the month as compard to $8.8 billion in March 2006. They tried to stress that their pay option loans have a fixed rate for 5 years which totaled $1.3 billion. What about the remainder of the $2 billion? I thought they thought ALT-A was not exposed to subprime risk, if so, why are they going out of their way to seem as if their ALT-A loans were declining AND that the rates are fixed for 5 years on 33% of their pay option ARMS? What about the 67% that are not?
Read between the lines of mortgage loan servicing portfolio growth to $1.4 trillion. More loans for them to be exposed to in their ever increasing foreclosures and loan defaults. What about a comment here on that? On the surface that might sound good but no one seems to be buying that. That their foreclosure rate is increasing 100% is not a good thing.
The smoke and mirrors continues. In a fashion eerily similar to AHM before releasing their earnings warning, CFC is trying to do damage control at this point and true to form, they are not exactly forthcoming. Meanwhile, Mozilo continues his selling true to form.
Wednesday, April 11, 2007
My Reply to CNBC's Question "Should the Government Bail Out Subprime Borrowers?"
Home ownership is not a right. It is part of the American dream to own a house. In order to own a house, one must put in diligent efforts at work, savings, and discipline. The benefits of home ownership is achieved by proper planning and sacrifice. That is what home ownership means to me.
Sadly, the recent meteoric rise in home values was fueled by easy financing, low interest rates, and greed. The environment was ripe for "unfit" individuals to obtain home ownership. For example, contrary to what Angelo Mozilo (CEO of Countrywide) says, not everyone is fit or should be home owners. This is being proven right every day in light of the worsening subprime crisis that seems to be now infiltrating into "prime" loans as well.
Excess easy money available and probable mortgage lender corruption has led to this debacle. It would be a travesty to consider bailing out those subprime borrowers, who should have known better, for whatever reason that their quest for home ownership may be, because it would derail the very system that was set forth within our Darwinian economic system. I do not think spending billions of dollars to bail out these individuals because they are labeled as victims would be doing justice or service to those who worked hard to save and finally had enough life style discipline to become home owners.
Bailing out subprime borrowers would continue to send the wrong message to a society that is already lacking in the value of hard work, discipline, moral fortitude. Especially, it would be heinous to think that my tax dollars will go towards bailing out someone who was using subprime loans to speculate in the housing market in hopes of striking it rich.
Call me heartless or whatever. But I think the responsibility of bailing out the subprime borrowers should rest solely on the shoulders of multibillion dollar mortgage lending industries and wall street firms, who obviously can afford lucrative multi million dollar bonuses and pay packages. Why not use that excess that so few can enjoy to bail out the subprime borrowers? Because in the end, wasn't wall street greed that fueled such frenzied subprime industry in the first place?
But overall, people should not be bailed out. The lending institutions and wall street firms that facilitated this crisis should be on the hook for the losses and foreclosures. It will be painful but nothing worth doing comes without some effort.
Sadly, the recent meteoric rise in home values was fueled by easy financing, low interest rates, and greed. The environment was ripe for "unfit" individuals to obtain home ownership. For example, contrary to what Angelo Mozilo (CEO of Countrywide) says, not everyone is fit or should be home owners. This is being proven right every day in light of the worsening subprime crisis that seems to be now infiltrating into "prime" loans as well.
Excess easy money available and probable mortgage lender corruption has led to this debacle. It would be a travesty to consider bailing out those subprime borrowers, who should have known better, for whatever reason that their quest for home ownership may be, because it would derail the very system that was set forth within our Darwinian economic system. I do not think spending billions of dollars to bail out these individuals because they are labeled as victims would be doing justice or service to those who worked hard to save and finally had enough life style discipline to become home owners.
Bailing out subprime borrowers would continue to send the wrong message to a society that is already lacking in the value of hard work, discipline, moral fortitude. Especially, it would be heinous to think that my tax dollars will go towards bailing out someone who was using subprime loans to speculate in the housing market in hopes of striking it rich.
Call me heartless or whatever. But I think the responsibility of bailing out the subprime borrowers should rest solely on the shoulders of multibillion dollar mortgage lending industries and wall street firms, who obviously can afford lucrative multi million dollar bonuses and pay packages. Why not use that excess that so few can enjoy to bail out the subprime borrowers? Because in the end, wasn't wall street greed that fueled such frenzied subprime industry in the first place?
But overall, people should not be bailed out. The lending institutions and wall street firms that facilitated this crisis should be on the hook for the losses and foreclosures. It will be painful but nothing worth doing comes without some effort.
MGIC (MTG) Posts 43.4% Fall in Profits!
MGIC (MTG) is a mortgage insurer who reported 43.4 percent first quarter profit short fall as losses and expenses cut into its business. I would like to direct your attention to an article released by Reuters earlier today titled "US Credit-Mortgage Insurers' Subprime Risks Seen Overdone". I am including some excerpts but anyone can view the article at:
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070411:MTFH23776_2007-04-11_20-07-57_N11578333&type=comktNews&rpc=44
"Just earlier, BarclaysCredit spreads of U.S. mortgage insurers have been battered by worries about risky subprime mortgages, but are likely to improve in the near term as the companies turn in robust first-quarter results."
"There's no doubt to our minds that there's potentially value in the mortgage insurers, and certainly near-term value," Credit Suisse analyst Leslie Mapondera said on Wednesday."
"The largest U.S. mortgage insurer, Mortgage Guaranty Insurance Corp. (MTG.N: Quote, Profile , Research), which reports its results on Thursday, is likely to perform better than expected in the near term, making it a good time to sell credit protection on the insurer's bonds, Barclays Capital said in a note on Tuesday."
So, this once again shows the spin placed by the crooked wall street analysts who up to the earnings release day, got the retail investors into this stock, which pinned false hopes of turn around, and minimizing the impact of subprime, did a near criminal service to the investment community. It affirms that the main stream financial community and the media does not have the grips on how severe the subprime and housing related issue is to the economy. I think everyone needs to wake up and smell the coffee and trust no one. It is as bad as you think it is and perhaps worse.
Do not trust wall street analysts. Subprime issues are real and its effects will now begin to snow ball into other previously safe havens in mortgage lending and housing related stocks.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070411:MTFH23776_2007-04-11_20-07-57_N11578333&type=comktNews&rpc=44
"Just earlier, BarclaysCredit spreads of U.S. mortgage insurers have been battered by worries about risky subprime mortgages, but are likely to improve in the near term as the companies turn in robust first-quarter results."
"There's no doubt to our minds that there's potentially value in the mortgage insurers, and certainly near-term value," Credit Suisse analyst Leslie Mapondera said on Wednesday."
"The largest U.S. mortgage insurer, Mortgage Guaranty Insurance Corp. (MTG.N: Quote, Profile , Research), which reports its results on Thursday, is likely to perform better than expected in the near term, making it a good time to sell credit protection on the insurer's bonds, Barclays Capital said in a note on Tuesday."
So, this once again shows the spin placed by the crooked wall street analysts who up to the earnings release day, got the retail investors into this stock, which pinned false hopes of turn around, and minimizing the impact of subprime, did a near criminal service to the investment community. It affirms that the main stream financial community and the media does not have the grips on how severe the subprime and housing related issue is to the economy. I think everyone needs to wake up and smell the coffee and trust no one. It is as bad as you think it is and perhaps worse.
Do not trust wall street analysts. Subprime issues are real and its effects will now begin to snow ball into other previously safe havens in mortgage lending and housing related stocks.
The Sounds of Inevitability
All I can do is roll my eyes and throw my arms up in the air in disgust. Not because the market tanked today but because it took so long for the markets to finally gain some rationality. What has changed today that the past few months haven't been telling us traders? Nothing.
Now that euphoric stupor is behind us, let us objectively analyze where we are headed. It doesn't take a rocket scientist to figure out that major economic signs all point to inflation and slowing growth. Yet what I have a problem trying to figure out is how in the world did we get this complacent? What was so good about the economy and the markets for that matter? The past few weeks have been an exercise in futility in terms of trying to find any rational reason for the rally in the markets.
So the FED minutes were released today and the market literally wigged out on the news. This was NEW news? Last time I checked, the FOMC meeting clearly stated that inflation was still the primary issue. Today's FED minutes not only killed the "goldilocks" stupor but it also brought a lot of wishful thinkers in the market down to reality. The fact is there isn't going to be a rate cut. Sorry Jimmy, no rate cut for you in May, so can you please do all of us a favor and stop calling for a rate cut or predicting bottoms? Sorry Angelo, no rate cut for you to continue to hide behind and lie to the public that somehow Countrywide is immune to all of these economic slow down and inflationary issues. I have news for all of those goldilocks well wishers: The FED will raise interest rates before they cut them. They will not risk forming an economic environment of negative growth and rising inflation.
Here are the exact quote from FOMC meeting minutes: "....Further policy firming might prove necessary to foster lower inflation...but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming.''
What that says is that the FED doesn't know what to do anymore. They are genuinely worried that the economy is slowing more than they are comfortable AND that inflation is beyond their "comfort" zone. All of these means that they are afraid of STAGFLATION. You don't think this could happen? Well, it is happening right now. Inflation is not under control and is getting worse. US is losing manufacturing and monetary leadership in the world. Our government and its citizens are addicted to debt and we are at the lowest savings rate per person in this country of all time. Did anyone check the price of oil and today's announcement that gasoline price is rising with no end in sight? How about the 9% price increase in milk and other dairy products that might not seem like much but upon closer inspection it dawns on you that everything is costing much much more these days. Never let anyone else tell you that economy is fine. Not the FED, not the Media, not anyone. They do not hold your best interest at hand. Remember, the reason why everyone is so bullish on the stock market right now is that those exact people are engaged in making money off of robust equity market.
Then there's the trade wars that have started between US and China, in what should become an escalating tension between these two superpowers. Yes, I said it, China is a superpower and we need to accept that. The sooner the better. And the sooner Paulson recongnizes this fact, the better for our economy. Dollar sank to its lowest level recently on this tension. Lest anyone should forget, China is one of the biggest buyers of our government debt. I am not even going to comment further.
Then there's the acceptance of the woeful housing market and the impact of subprime, which now appears is nothing compared to the issues surrounding ALT-A and the fallouts of failed subprime lenders and class action law suits by the holders of these worthless bonds. This will cast a dark shadow on this segment of the economy for years to come. For those engaged in the mortgage or housing industry that hasn't admitted to the problems and its impact on their respective companies are delusional and liars. Countrywide anyone?
Fact is no one will be spared. For those who have become complacent, today was the first warning sign. Go to cash or go short.
Now that euphoric stupor is behind us, let us objectively analyze where we are headed. It doesn't take a rocket scientist to figure out that major economic signs all point to inflation and slowing growth. Yet what I have a problem trying to figure out is how in the world did we get this complacent? What was so good about the economy and the markets for that matter? The past few weeks have been an exercise in futility in terms of trying to find any rational reason for the rally in the markets.
So the FED minutes were released today and the market literally wigged out on the news. This was NEW news? Last time I checked, the FOMC meeting clearly stated that inflation was still the primary issue. Today's FED minutes not only killed the "goldilocks" stupor but it also brought a lot of wishful thinkers in the market down to reality. The fact is there isn't going to be a rate cut. Sorry Jimmy, no rate cut for you in May, so can you please do all of us a favor and stop calling for a rate cut or predicting bottoms? Sorry Angelo, no rate cut for you to continue to hide behind and lie to the public that somehow Countrywide is immune to all of these economic slow down and inflationary issues. I have news for all of those goldilocks well wishers: The FED will raise interest rates before they cut them. They will not risk forming an economic environment of negative growth and rising inflation.
Here are the exact quote from FOMC meeting minutes: "....Further policy firming might prove necessary to foster lower inflation...but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming.''
What that says is that the FED doesn't know what to do anymore. They are genuinely worried that the economy is slowing more than they are comfortable AND that inflation is beyond their "comfort" zone. All of these means that they are afraid of STAGFLATION. You don't think this could happen? Well, it is happening right now. Inflation is not under control and is getting worse. US is losing manufacturing and monetary leadership in the world. Our government and its citizens are addicted to debt and we are at the lowest savings rate per person in this country of all time. Did anyone check the price of oil and today's announcement that gasoline price is rising with no end in sight? How about the 9% price increase in milk and other dairy products that might not seem like much but upon closer inspection it dawns on you that everything is costing much much more these days. Never let anyone else tell you that economy is fine. Not the FED, not the Media, not anyone. They do not hold your best interest at hand. Remember, the reason why everyone is so bullish on the stock market right now is that those exact people are engaged in making money off of robust equity market.
Then there's the trade wars that have started between US and China, in what should become an escalating tension between these two superpowers. Yes, I said it, China is a superpower and we need to accept that. The sooner the better. And the sooner Paulson recongnizes this fact, the better for our economy. Dollar sank to its lowest level recently on this tension. Lest anyone should forget, China is one of the biggest buyers of our government debt. I am not even going to comment further.
Then there's the acceptance of the woeful housing market and the impact of subprime, which now appears is nothing compared to the issues surrounding ALT-A and the fallouts of failed subprime lenders and class action law suits by the holders of these worthless bonds. This will cast a dark shadow on this segment of the economy for years to come. For those engaged in the mortgage or housing industry that hasn't admitted to the problems and its impact on their respective companies are delusional and liars. Countrywide anyone?
Fact is no one will be spared. For those who have become complacent, today was the first warning sign. Go to cash or go short.
Tuesday, April 10, 2007
Law Suits Over Subprime Lender's Bonds
An Interesting article on Bloomberg.com titled "Subprime Losers Blame Bear, Credit Suisse, JPM, Morgan Stanley" which continue to show that the fall out from subprime is not just isolated to bankrupt subprime lenders or the major banks that supported them. It is also not a isolated issue to the CDO's and whether or not Moody's will down grade these debt packages that are snapped up by Institutions, pension funds, insurance companies, and other banks. But the most sobering aspect is that everyday hardworking individuals who sought better return than what the treasury notes were yielding with the promise of a solid mortgage company who issued them.
It turns out that there was much more deception than meets the eye. The subprime mortgage lender's bonds were brought to investable packages by the big mortgage banks mentioned in the article. The lure of a solid backing by the reputable investmnt bank and the high flying subprime mortgage lender's pledge of stability lured many average investors in to these "safe" and "lucrative" investment vehicles.
Buck Meyer, mentioned in the article, invested $300,000 and lost every penny of it when the American Business Financial Services Inc's notes were defaulted. There are more sad stories such as these, which were misled by the major investment banks such as Bear Stearns and Morgan Stanley, all of whom are also implicated as major debt holders to the New Century's Chapter 11 bankruptcy filings, show that they have not acted in the best interest in disclosing the risks associated with these bonds.
It is aptly called a Ponzi scheme, a word which has been utilized in many other articles and complaints regarding the subprime mortgage lending practices, bond issuances, as well as the industry practices.
There are currently 26,534 claims filled for $750 million from the bankers and former officers and directors of defunct subprime mortgage companies in the Philadelphia Court of Commons. This class action law suits will continue and will begin to affect the upper echelon Wall Street investment banks and others such as Countrywide Financial as investors who lost all of their life savings will look for compensation for the "ponzi" scheme and deception.
This law suit makes sense in light of the fact that the major investment banks who purchased the debt from the subprime and prime lenders created liquidity by issuing bonds. Thus, the subprime fall out is not just relegated to the lenders who are in trouble. It affects the whole establishment who are working in the shadows peddling these menacing bonds to unsuspecting and misinformed investors.
The unraveling is gaining steam.
It turns out that there was much more deception than meets the eye. The subprime mortgage lender's bonds were brought to investable packages by the big mortgage banks mentioned in the article. The lure of a solid backing by the reputable investmnt bank and the high flying subprime mortgage lender's pledge of stability lured many average investors in to these "safe" and "lucrative" investment vehicles.
Buck Meyer, mentioned in the article, invested $300,000 and lost every penny of it when the American Business Financial Services Inc's notes were defaulted. There are more sad stories such as these, which were misled by the major investment banks such as Bear Stearns and Morgan Stanley, all of whom are also implicated as major debt holders to the New Century's Chapter 11 bankruptcy filings, show that they have not acted in the best interest in disclosing the risks associated with these bonds.
It is aptly called a Ponzi scheme, a word which has been utilized in many other articles and complaints regarding the subprime mortgage lending practices, bond issuances, as well as the industry practices.
There are currently 26,534 claims filled for $750 million from the bankers and former officers and directors of defunct subprime mortgage companies in the Philadelphia Court of Commons. This class action law suits will continue and will begin to affect the upper echelon Wall Street investment banks and others such as Countrywide Financial as investors who lost all of their life savings will look for compensation for the "ponzi" scheme and deception.
This law suit makes sense in light of the fact that the major investment banks who purchased the debt from the subprime and prime lenders created liquidity by issuing bonds. Thus, the subprime fall out is not just relegated to the lenders who are in trouble. It affects the whole establishment who are working in the shadows peddling these menacing bonds to unsuspecting and misinformed investors.
The unraveling is gaining steam.
IT IS GETTING CLOSER FOR COUNTRYWIDE
So now that we have the undivided attention of the main stream media, it begs the question, is the end near? What do I mean by this?
What I mean by that is, is the housing market near bottoming? There certainly is more noise surrounding the doom and gloom of the housing market and mortgage lending inustry. Perhaps we are near the end of the bear cycle for the housing market. But I do not think that it really is the end until the God Father of all things housing and mortgage finally pays the Piper.
No one gets out of this game unscathed. For too long, Countrywide was able to hide behind their perceived good name and a darn good public relation campaign. Their, mantra of "But, we are different from all others" might have worked for a while. But even that tune gets old as insurmountable evidence points towards the age old adage that "if it quaks like a duck, it is a duck".
Today was that pivotal day where everyone even remotely interested in this historical debacle taking form would agree that far more factual evidence came out lending credence that in fact, subprime issue is not just an isolated short lived case. Let's review what has come to light thus far in the world of housing and mortgage lending:
1. IMF acknowledges that subprime issue is not an isolated issue and appears to be spreading.
2. FED is seen publicly discouraging the public from being invested in Financial sector.
3. "Prime" lenders are being hit just as hard if not harder than subprime lenders, giving credence that ALT-A loans are indeed a force that needs to be reckoned with and the contagion is spreading from subprime lenders.
4. Home builders are continuing to come "clean" and asserting that this downfall will not be short lived and that much glut of supply exists confounding those who consistently are calling for a bottom.
5. Mortgage fraud is being defined and uncovered.
6. Unscrupulous broker practices are shown to be rampant and not in the best interest of the borrowers to use them.
What impact will this have on our economy?
1. Inflation continues to be the major concern and does not seem to abate.
2. Questions about stagflation is being tossed around at bloomberg TV.
3. Trade war with China has just started with severe consequences if this should escalate.
4. The tightening credit market IS a reality and everyone just needs to accept it.
5. The FED is more apt to raise rates in the future than cut it.
6. Despite Alcoa's earnings, media spin is once again causing undue optimism. Since when was Alcoa relevant?
7. Foreclosures and home loan defaults will trickle into consumer credit such as auto loans, consumer credit cards, and other financing activities.
I have a feeling that all of these cumulative weight of evience towards mortgage lending collapse will be more evident after the FED minutes tomorrow. Complacency has returned to the markets with false sense of hope based on no significant basis other than media hype has kept this market afloat. But this will have a severe short term consequences.
So we come to Countrywide, where they have been awfully quiet the past few days. Despite rising evidence to the contrary, Countrywide continues to remain a teflon to bad news. But the foundation is crumbling and once it crumbles, I anticipate that it will come down faster than New Century. This is a company that is rather opaque and has a lot of explaining to do. The similarities to Enron is unreal. Thus I can anticipate some form of warning from this company this week. If I am wrong, then I am wrong. But the alternative blood bath that this company faces if they announce a terrible earnings is too hard to fathom. Mozilo knows this. I think that it is this week where the truth will come out. If not, I am out of a lot of money, but undeterred, I will continue to short this stock. But the writing's on the wall for Countrywide.
1. abrupt departures of key insiders within relatively short period of time.
2. Questionable accounting principles.
3. More evidence pointing to CFC as one of the largest ALT-A originators and subprime exposure.
4. Incessant insider selling activity.
5. Damage control is priority for this company, instead of running a forthright company.
6. Lies Lies and More Lies.
So, I feel that this week is especially crucial for CFC shorts. I see ever increasing put volume that appears highly unusual. Hmm. Like say, AHM? When will they do the right thing?
What I mean by that is, is the housing market near bottoming? There certainly is more noise surrounding the doom and gloom of the housing market and mortgage lending inustry. Perhaps we are near the end of the bear cycle for the housing market. But I do not think that it really is the end until the God Father of all things housing and mortgage finally pays the Piper.
No one gets out of this game unscathed. For too long, Countrywide was able to hide behind their perceived good name and a darn good public relation campaign. Their, mantra of "But, we are different from all others" might have worked for a while. But even that tune gets old as insurmountable evidence points towards the age old adage that "if it quaks like a duck, it is a duck".
Today was that pivotal day where everyone even remotely interested in this historical debacle taking form would agree that far more factual evidence came out lending credence that in fact, subprime issue is not just an isolated short lived case. Let's review what has come to light thus far in the world of housing and mortgage lending:
1. IMF acknowledges that subprime issue is not an isolated issue and appears to be spreading.
2. FED is seen publicly discouraging the public from being invested in Financial sector.
3. "Prime" lenders are being hit just as hard if not harder than subprime lenders, giving credence that ALT-A loans are indeed a force that needs to be reckoned with and the contagion is spreading from subprime lenders.
4. Home builders are continuing to come "clean" and asserting that this downfall will not be short lived and that much glut of supply exists confounding those who consistently are calling for a bottom.
5. Mortgage fraud is being defined and uncovered.
6. Unscrupulous broker practices are shown to be rampant and not in the best interest of the borrowers to use them.
What impact will this have on our economy?
1. Inflation continues to be the major concern and does not seem to abate.
2. Questions about stagflation is being tossed around at bloomberg TV.
3. Trade war with China has just started with severe consequences if this should escalate.
4. The tightening credit market IS a reality and everyone just needs to accept it.
5. The FED is more apt to raise rates in the future than cut it.
6. Despite Alcoa's earnings, media spin is once again causing undue optimism. Since when was Alcoa relevant?
7. Foreclosures and home loan defaults will trickle into consumer credit such as auto loans, consumer credit cards, and other financing activities.
I have a feeling that all of these cumulative weight of evience towards mortgage lending collapse will be more evident after the FED minutes tomorrow. Complacency has returned to the markets with false sense of hope based on no significant basis other than media hype has kept this market afloat. But this will have a severe short term consequences.
So we come to Countrywide, where they have been awfully quiet the past few days. Despite rising evidence to the contrary, Countrywide continues to remain a teflon to bad news. But the foundation is crumbling and once it crumbles, I anticipate that it will come down faster than New Century. This is a company that is rather opaque and has a lot of explaining to do. The similarities to Enron is unreal. Thus I can anticipate some form of warning from this company this week. If I am wrong, then I am wrong. But the alternative blood bath that this company faces if they announce a terrible earnings is too hard to fathom. Mozilo knows this. I think that it is this week where the truth will come out. If not, I am out of a lot of money, but undeterred, I will continue to short this stock. But the writing's on the wall for Countrywide.
1. abrupt departures of key insiders within relatively short period of time.
2. Questionable accounting principles.
3. More evidence pointing to CFC as one of the largest ALT-A originators and subprime exposure.
4. Incessant insider selling activity.
5. Damage control is priority for this company, instead of running a forthright company.
6. Lies Lies and More Lies.
So, I feel that this week is especially crucial for CFC shorts. I see ever increasing put volume that appears highly unusual. Hmm. Like say, AHM? When will they do the right thing?
Commentary on Mortgage Lenders
The news media is now chock full of the "sexy" housing market crisis stories. All of a sudden the main stream media is spewing "doom and gloom" scenarios. Especially interesting is that CNBC has now jumped on the bandwagon of subprime and now ALT-A Option ARM concerns.
I just don't know why it's a surprise to anyone. The writing was on the wall months before this realization by the main stream media. Now, the story is too sexy for anyone to pass up and might I remind you that print media and broadcast media are all in it for the ratings to generate ad revenue. Disgusting!
There are whole slew of news out today regarding the Mortgage Fraud (as if that was even a surprise), Weakening (??) prime markets due to ALT-A exposure, and surprise, Countrywide is mentioned as one of the largest originators of ALT-A loans. But the most poignant read of the day belongs to Dr. Irwin Keller's article on Marketwatch.com. He questions why everyone is so SURPRISED at the weankening housing market and rising default on mortgages.
The whole system is beyond screwed up and like all bubbles, it must be paid in suffering and blood. Many people will have their lives ruined and turned upside down. The economy must pay for their "lax" ways and this time "IT IS NOT DIFFERENT". People never really change. That is why you can trade the stock markets because it is an analysis of the market behavior which is a reflection of human behavior. It is about greed, fear, and deception. Most people are by nature gullible, weak, and prone to panics. This game has been played for centuries as long as the US Equity market was born in the frontier days of early Wall Street, when Wall Street was aptly named because of wooden palisades to partition out the hostile Indians. Corruption is part of the game and you always have to "read between the lines" in this game.
As for lending industry related to housing, I hope that this "bubble" that they helped create will create new reforms in lending, prosecutions of those that perpetuated these Ponzi schemes, and the Wall Street Firms that continually misled the investors. I sincerely hope that the likes of Countrywide and IndyMacs of this world will get their due. These two have been very cagey about spinning their story to the wall street. Yet, as the truth that are coming out cannot be refuted anymore. They cannot be spun any other way. Sadly, I believe it is too late for many of those who invested on "dumb" advice from the Wall Street. No matter, I do not see how the large lenders that tried to "hide" behind that they were "prime" lenders can now adequately justify their position, when they pumped up their share prices by essentially "lying" to the public.
AHM is going down for the count. I believe NDE and CFC is not too far behind. I will have a sneaking suspicion that the only thing that these lenders can do now isn't about saving share holder value. It is about coming clean and doing the "honorable" thing. The spin is over. As Bill O'Reiley would say, this is now a "No Spin Zone".
No one can deny that majority of "prime" loans by these lending institutions, save for the big banks, relied heavily on Option-ARMS to pad their bottom line. When the CDO's and the debt that they carry is no longer worth more than what they paid for, it cannot be spun in any other way. The lenders have a choice of holding onto the depreciating asset and risk future catastrophic losses or liquidate for short term loss. Neither option is appealing and will be good for some form of pain in the near and long term future. Sadly, the only people that will lose in this game are the share holders who have entrusted the insiders on good stewardship. If you question that look at Angelo Mozilo's incessant selling. Perhaps the recent options granting probe will reveal something of value- why else would the company try to "squealch" the law suit before it became public? If they had nothing to hide why would they try so hard to put an end to it?
I see, contrary to popular belief, that some major news regarding NDE and CFC will be out sometime this week, as a form of damage control. I think these companies have gotten away for a while on Market ignorance. But no longer.
I just don't know why it's a surprise to anyone. The writing was on the wall months before this realization by the main stream media. Now, the story is too sexy for anyone to pass up and might I remind you that print media and broadcast media are all in it for the ratings to generate ad revenue. Disgusting!
There are whole slew of news out today regarding the Mortgage Fraud (as if that was even a surprise), Weakening (??) prime markets due to ALT-A exposure, and surprise, Countrywide is mentioned as one of the largest originators of ALT-A loans. But the most poignant read of the day belongs to Dr. Irwin Keller's article on Marketwatch.com. He questions why everyone is so SURPRISED at the weankening housing market and rising default on mortgages.
The whole system is beyond screwed up and like all bubbles, it must be paid in suffering and blood. Many people will have their lives ruined and turned upside down. The economy must pay for their "lax" ways and this time "IT IS NOT DIFFERENT". People never really change. That is why you can trade the stock markets because it is an analysis of the market behavior which is a reflection of human behavior. It is about greed, fear, and deception. Most people are by nature gullible, weak, and prone to panics. This game has been played for centuries as long as the US Equity market was born in the frontier days of early Wall Street, when Wall Street was aptly named because of wooden palisades to partition out the hostile Indians. Corruption is part of the game and you always have to "read between the lines" in this game.
As for lending industry related to housing, I hope that this "bubble" that they helped create will create new reforms in lending, prosecutions of those that perpetuated these Ponzi schemes, and the Wall Street Firms that continually misled the investors. I sincerely hope that the likes of Countrywide and IndyMacs of this world will get their due. These two have been very cagey about spinning their story to the wall street. Yet, as the truth that are coming out cannot be refuted anymore. They cannot be spun any other way. Sadly, I believe it is too late for many of those who invested on "dumb" advice from the Wall Street. No matter, I do not see how the large lenders that tried to "hide" behind that they were "prime" lenders can now adequately justify their position, when they pumped up their share prices by essentially "lying" to the public.
AHM is going down for the count. I believe NDE and CFC is not too far behind. I will have a sneaking suspicion that the only thing that these lenders can do now isn't about saving share holder value. It is about coming clean and doing the "honorable" thing. The spin is over. As Bill O'Reiley would say, this is now a "No Spin Zone".
No one can deny that majority of "prime" loans by these lending institutions, save for the big banks, relied heavily on Option-ARMS to pad their bottom line. When the CDO's and the debt that they carry is no longer worth more than what they paid for, it cannot be spun in any other way. The lenders have a choice of holding onto the depreciating asset and risk future catastrophic losses or liquidate for short term loss. Neither option is appealing and will be good for some form of pain in the near and long term future. Sadly, the only people that will lose in this game are the share holders who have entrusted the insiders on good stewardship. If you question that look at Angelo Mozilo's incessant selling. Perhaps the recent options granting probe will reveal something of value- why else would the company try to "squealch" the law suit before it became public? If they had nothing to hide why would they try so hard to put an end to it?
I see, contrary to popular belief, that some major news regarding NDE and CFC will be out sometime this week, as a form of damage control. I think these companies have gotten away for a while on Market ignorance. But no longer.
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