Sub-prime Meltdown Hits Thailand With Force

[the gent]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

[VegasVic]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide. In any event at $22/sh Countrywide is likely very undervalued. This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

[LaoPo]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide.

In any event at $22/sh Countrywide is likely very undervalued.

This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

It is undervalued but at -now, 22.60- it's up some 30%+ from it's 52 week low of $ 15.00 on August 16th...but still very cheap with a P/E of 6.3

But, also, still a good 50% lower than it's 52wk high of $ 45.--.

The question is WHAT will the FED do?

LaoPo

Edited August 22, 2007 by LaoPo

[VegasVic]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide.

In any event at $22/sh Countrywide is likely very undervalued.

This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

It is undervalued but at -now, 22.60- it's up some 30%+ from it's 52 week low of $ 15.00 on August 16th...but still very cheap with a P/E of 6.3

But, also, still a good 50% lower than it's 52wk high of $ 45.--.

The question is WHAT will the FED do?

LaoPo

Just a stab in the dark, but I would look for the FED to lower the rate at the discount window by another 50 basis points prior to their meeting in September and despite their conservative stance on the FED funds rate I think that at the FOMC meeting in September the FED will lower the FED funds rate by 50 basis points as well.

[highdiver]

Accredited Home, HSBC Close Offices as Subprime Crisis Spreads

By Caroline Salas and Steven Church

Aug. 22 (Bloomberg) -- Accredited Home Lenders Holding Co. stopped making home loans, HSBC Holdings Plc closed a U.S. mortgage office and H&R Block Inc. tapped bank lines as a credit crunch started by subprime mortgages shrank demand for loans and left companies unable to fund themselves in the debt markets.

Accredited, whose planned sale to Lone Star Funds collapsed this month, said in a statement today it will shut more than half of its mortgage operations and fire about 1,600 people. London- based HSBC, Europe's biggest bank by market value, plans to eliminate 600 jobs and close an office in Carmel, Indiana, as it retreats from selling home loans in the U.S.

A global debt rout choked off financing to companies such as H&R Block, the biggest U.S. tax preparer, which today said its Block Financial Corp. unit tapped credit lines because it couldn't sell short-term debt. Solent Capital Partners LLP and Avendis Group, two European mortgage-backed securities funds, had their credit ratings slashed to junk from AAA by Standard & Poor's after investors denied them short-term financing.

``The credit markets have become increasingly constrained and unstable,'' H&R Block Chief Financial Officer William Trubeck said in a statement.

A credit-market swoon was sparked earlier this year when U.S. subprime borrowers, those with bad or limited credit, began defaulting on home loans, sapping investor demand for mortgage- backed securities and short-term corporate debt. The pullback by investors closed the door to the main type of financing on which most mortgage lenders had relied to fund new loans.

Bankruptcies, Closures

First Magnus Financial Corp. yesterday became the 14th lender since December to seek bankruptcy protection. More than 90 have shut down completely or sought a buyer. Two days ago, Capital One Financial Corp. closed its GreenPoint Mortgage unit, eliminating 1,900 jobs.

Accredited said it will close its 60 retail branches and five support centers within two weeks as well as halting U.S. wholesale mortgage applications from brokers. The job cuts will shrink Accredited's workforce to 1,000 from 2,600.

The company said the reductions are necessary to stay in business until it can begin lending again.

``These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets,'' Chief Executive Officer James Konrath said in the statement.

Accredited shares fell 31 cents, or 4.7 percent, to $6.24 at 11:03 a.m. composite trading on the New York Stock Exchange. They fell 76 percent this year before today.

H&R Block Draws

H&R Block, based in Kansas City, Missouri, said Block Financial drew down $200 million on Aug. 16 and then repaid that loan when it borrowed $850 million on Aug. 20, the company said today in a statement.

``We have decided to substitute this more stable source of funds to support our short-term needs,'' Trubeck said.

More than 20 companies have been shut out of the market for asset-backed commercial paper, which is short-term debt maturing in 270 days or less, as investors balked at buying debt backed by mortgages.

H&R Block shares fell 45 cents, or 2.27 percent, to $19.34 in New York Stock Exchange composite trading. in New York, leaving the stock down about 16 percent this year.

London-based Solent's $4.5 billion Mainsail II Ltd. fund and Geneva-based Avendis's $5 billion Golden Key Ltd. unit were forced to sell assets after they couldn't find buyers for their short-term debt, causing ``an erosion of capital,'' S&P said.

Golden Key

Golden Key's commercial paper rating was cut to B, one step below investment grade, from the highest level of A-1+. Ratings on parts of Mainsail II fell by 16 steps to CCC+ from the highest grade, and its commercial paper rating dropped three steps to A- 3, the lowest short-term investment grade ranking. S&P downgraded $3.2 billion of debt issued by the two funds and said their ratings may be cut further.

Ratings on similar funds operated by London-based Cairn Capital Ltd. and Sachsen LB Europe, may also be cut, S&P said. The four funds are known as SIV-Lites, a form of structured investment vehicle. SIVs aim to make money by borrowing in the commercial paper markets and investing in longer-dated bonds, usually asset-backed securities.

[highdiver]

as for the FEDs

Bernanke's Strategy of Increasing Liquidity Survives (Update2)

By Craig Torres

Aug. 22 (Bloomberg) -- The Federal Reserve's strategy of increasing liquidity rather than resorting to a cut in the benchmark interest rate survived a third day.

Yields on Treasury bills rose yesterday after the New York Fed lowered the cost of borrowing securities from its own portfolio to ease a shortage in the market. The action followed a reduction in the Fed's rate on direct loans to banks on Aug. 17, the impact of which officials said they need time to assess.

Chairman Ben S. Bernanke wants to avoid an emergency easing of monetary policy, contrasting with predecessor Alan Greenspan, who cut the federal funds rate target three times in 1998 after the collapse of Long Term Capital Management LP. Richmond Fed Bank President Jeffrey Lacker said yesterday that policy must be guided by the outlook for economic growth and prices, not entirely by markets.

``We did use the fed funds rate and that may have been a mistake,'' said former Fed Vice Chairman Alice Rivlin, who voted for the 1998 rate cuts. ``It might have been smarter to try what they are trying.''

Lacker said in a speech to a conference in Charlotte, North Carolina, yesterday that while the credit crunch and gyrations in financial markets have the potential to hurt growth, signs so far indicate business and consumer spending will continue.

In response to a question, Lacker also underscored the Federal Open Market Committee's determination not to insure poor investments with a cut in the federal funds rate. Ten-year U.S. Treasury notes fell in response, pushing the yield up 7 basis points to 4.66 percent at 9:45 a.m. in New York.

`Market Determined'

``The Federal Reserve isn't responsible for the size of credit spreads,'' he said. ``We leave those to be market determined. Our responsibility and what we are capable of influencing on a sustained basis is inflation and growth.''

Some financial markets offer encouraging signs to policy makers. The Standard & Poor's 500 stock index has held the gains posted on Aug. 17, when the benchmark had its biggest one-day jump in four years. Lenders are also starting to write more ``jumbo'' mortgages as the market for loans above $417,000 improves, Treasury Secretary Henry Paulson said yesterday.

``When we look at the markets over the last couple of days, I've been encouraged to see signs that there's more liquidity in the jumbo'' mortgage market, Paulson said in an interview with CNBC. ``We're looking at all the markets, and you know, obviously, the equity markets, the sovereign-debt markets, the high quality credit markets, are all fully operational.''

1998 Criticism

After the rate cuts in 1998, the economy strengthened and stock prices soared, Rivlin noted, leaving the Fed open to criticism that the reductions were a mistake. Rivlin is now director of the economic studies program at the Brookings Institution in Washington.

The Fed's current strategy showed some signs of success yesterday as yields on three-month Treasury bills climbed the most since 2000 and those on commercial paper backed by assets such as mortgages slipped.

The three-month bill yield increased 0.52 percentage point to 3.61 percent late yesterday as demand for the shortest-dated government debt waned. Top-rated asset-backed commercial paper maturing in one day yielded 5.92 percent, down from 5.99 percent, posting the first drop in three trading days.

``The flight to safety may be diminishing a bit,'' said Holly Liss, a bond saleswoman in Chicago at Citigroup Global Markets Inc. ``We're seeing more calming of the market as T-bill rates come back to normal.''

Jury `Still Out'

Lacker said the ``jury is still out'' on whether the Fed has done enough to improve trading in the $1.1 trillion market for asset-backed commercial paper.

``The markets that are under more stress are the high-yield market, non-agency mortgage markets, collateralized debt obligations and collateralized loan obligations markets and extendible asset-backed paper,'' said Paulson, a former Goldman Sachs Group Inc. chief executive officer. ``Those are markets that we're watching closely.''

Investors and economists still bet that Bernanke will have to reduce the benchmark lending rate between banks, now at 5.25 percent, by at least a quarter point on or before the Sept. 18 meeting.

``Financial volatility and the seizing up of credit markets raises the probability'' of a recession, said Steven Einhorn, vice chairman of New York hedge fund Omega Partners Inc. ``The Fed needs to be proactive and not wait.''

Einhorn said slowing inflation and growth of around 2 percent to 2.5 percent give the Fed room to cut interest rates.

`All' Tools

Senate Banking Committee Chairman Christopher Dodd said Bernanke agreed to use ``all of the tools at his disposal'' to restore stability in markets roiled by the subprime mortgage crisis. He added that he didn't ask Bernanke to cut the federal funds rate and that the Fed chief didn't pledge to do so.

Dodd, a Connecticut Democrat who is seeking his party's presidential nomination, said banks should take advantage of lower borrowing costs at the discount window. He spoke after meeting with Bernanke and U.S. Treasury Secretary Henry Paulson.

Yesterday, the New York Fed reduced the so-called minimum fee rate that bond dealers pay to borrow its Treasuries to 0.5 percent from 1 percent.

``We are doing it to provide additional liquidity to the Treasury financing market,'' said Andrew Williams, a spokesman for the New York Fed. He said the rate was the lowest in the history of the program, which has existed in its current form since 1999.

Discount Rate

The central bank on Aug. 17 cut the so-called discount rate half a percentage point to 5.75 percent to direct more cash to companies starved for short-term financing while avoiding an emergency reduction in its broader lending-rate target.

Banks can borrow at the discount rate with a wide variety of collateral, including everything from mortgages -- the market that sparked the credit crunch after defaults rose to the highest in five years -- to municipal bonds.

Lacker told risk managers yesterday that the Fed's district banks would even accept boat loans as collateral. It's up to the banks to establish a value for the assets as they make the loan, he said.

[LaoPo]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide.

In any event at $22/sh Countrywide is likely very undervalued.

This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

It is undervalued but at -now, 22.60- it's up some 30%+ from it's 52 week low of $ 15.00 on August 16th...but still very cheap with a P/E of 6.3

But, also, still a good 50% lower than it's 52wk high of $ 45.--.

The question is WHAT will the FED do?

LaoPo

Just a stab in the dark, but I would look for the FED to lower the rate at the discount window by another 50 basis points prior to their meeting in September and despite their conservative stance on the FED funds rate I think that at the FOMC meeting in September the FED will lower the FED funds rate by 50 basis points as well.

Exactly my thoughts also and wrote so before, but the question remains:

what will happen to inflation if the FED keeps lowering the rates...on the LONG term !?

LaoPo

[Carmine6]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide. In any event at $22/sh Countrywide is likely very undervalued. This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

News just coming out 10 minutes ago. Both stocks are up afterhours on the News. Countrywide up almost 20%. B of A about 1%.

http://online.wsj.com/article/SB1187817949...p_us_whats_news

Bank of America to Invest $2 Billion in Countrywide

By Valerie Bauerlein

Bank of America Corp. is making a $2 billion equity investment in Countrywide Financial Corp., the embattled mortgage giant, according to people familiar with the situation.

Bank of America will purchase $2 billion worth of preferred Countrywide stock yielding 7.25%, and that can be ...

[LaoPo]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide. In any event at $22/sh Countrywide is likely very undervalued. This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

News just coming out 10 minutes ago. Both stocks are up afterhours on the News. Countrywide up almost 20%. B of A about 1%.

http://online.wsj.com/article/SB1187817949...p_us_whats_news

Bank of America to Invest $2 Billion in Countrywide

By Valerie Bauerlein

Bank of America Corp. is making a $2 billion equity investment in Countrywide Financial Corp., the embattled mortgage giant, according to people familiar with the situation.

Bank of America will purchase $2 billion worth of preferred Countrywide stock yielding 7.25%, and that can be ...

Here is a detailed report:

http://www.forbes.com/feeds/ap/2007/08/22/ap4045841.html

Relatively good news and maybe it eases the mortgage market....

LaoPo

[VegasVic]

Vis a vis Countrywide, I thought I read somewhere that Warren Buffet is looking to pick it up cheap.

Nothing quite like playing the long game it seems.

Bank of America has expressed interest buying out Countrywide and Warren Buffet has only expressed interst in parts of Countrywide. In any event at $22/sh Countrywide is likely very undervalued. This has been said many times before, but the time to buy is when there is blood in the streets. The bottom is dropping out of natural gas and oil will follow shortly, the bottom is also dropping out of the silver market and gold will follow, overall in a slowing growth environment the world over most commodities will be making a substantial retracement, given the incredible runup in commodities over the last few years this should come as no surprise.

News just coming out 10 minutes ago. Both stocks are up afterhours on the News. Countrywide up almost 20%. B of A about 1%.

http://online.wsj.com/article/SB1187817949...p_us_whats_news

Bank of America to Invest $2 Billion in Countrywide

By Valerie Bauerlein

Bank of America Corp. is making a $2 billion equity investment in Countrywide Financial Corp., the embattled mortgage giant, according to people familiar with the situation.

Bank of America will purchase $2 billion worth of preferred Countrywide stock yielding 7.25%, and that can be ...

I noticed the after hours action in B of A and Countrywide and came here to post it, but as usual this board is up on the latest events as they occur-kudos to you Carmine! I was fortunate enough to pick up some Countrywide on the cheap last week and now I am very happy camper (I really didn't think that B of A would act this soon but am glad). I think that over the coming weeks there will be more of this type of thing happening, the major money center banks and major corporations in the U.S. are flush with cash and they can see some of the uncommon values that are out there especially in the mortgage sector. Those that don't buyout other companies or part of them will likely increase the ammount of their share repurchase programs should they sense that the market has undervalued their company. One final note, a little birdy from Goldman Sachs told me that the FED was really putting the full court press on banks to use the discount window ( in the past this was seen as the last resort of financing) and thus taking the stigma away from doing so. The way the little birdy read this is that there may not be a FED funds cut in September, take it for what its worth! Inflation is fairly binine in the states right now and if there were to be a slight blip up in unemployment from all of this, then inflation would be reduced further and deflation could potetentially become a problem, so if the birdy is wrong and the FED does wind up cutting the FED fund rates by 50 basis points in September then it will have little impact on inflation ( of course the dollar could weaken a bit ).

[joeuk1]

Maybe time for all the doom and gloom merchants to go stick there heads back in the sand it must be a misreble life being a bear .

JB

[VegasVic]

Maybe time for all the doom and gloom merchants to go stick there heads back in the sand it must be a misreble life being a bear .

JB

Agreed JB! Those merchants of armageddon should go stick their heads in the same hole in the sand that they just burried all their gold in

[LaoPo]

Ouch!

Countrywide CEO sees recession ahead

NEW YORK (Reuters) - Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday the U.S. housing downturn is likely to lead the country into recession, but that the largest U.S. mortgage lender will survive.

excerpt:

"In an interview with CNBC television, Mozilo said markets are in "one of the greatest panics I've ever seen in 55 years in financial services."

Complete article here:

http://today.reuters.com/news/articlenews....&src=nl_dai

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

[VegasVic]

Ouch!

Countrywide CEO sees recession ahead

NEW YORK (Reuters) - Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday the U.S. housing downturn is likely to lead the country into recession, but that the largest U.S. mortgage lender will survive.

excerpt:

"In an interview with CNBC television, Mozilo said markets are in "one of the greatest panics I've ever seen in 55 years in financial services."

Complete article here:

http://today.reuters.com/news/articlenews....&src=nl_dai

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

I caught the CNBC interview and quite frankly if I were at the helm of the largest lender in the U.S. and my company was at the center of the crisis I would also try and throw off some of the attention by saying that the financial markets are in one of the greatest panics that I have ever seen and the country could be sliding into recession! I also think that this was a very public shot across the bow of Mr. Bernankes boat, the USS FED funds. I think that this will work in B of A's favor in the long run if their intent was to eventually takeover Countrywide, because they will be able to buy it for a better price if things get worse, and if things get better then they just made a great investment!

[LaoPo]

Ouch!

Countrywide CEO sees recession ahead

NEW YORK (Reuters) - Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday the U.S. housing downturn is likely to lead the country into recession, but that the largest U.S. mortgage lender will survive.

excerpt:

"In an interview with CNBC television, Mozilo said markets are in "one of the greatest panics I've ever seen in 55 years in financial services."

Complete article here:

http://today.reuters.com/news/articlenews....&src=nl_dai

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

I caught the CNBC interview and quite frankly if I were at the helm of the largest lender in the U.S. and my company was at the center of the crisis I would also try and throw off some of the attention by saying that the financial markets are in one of the greatest panics that I have ever seen and the country could be sliding into recession! I also think that this was a very public shot across the bow of Mr. Bernankes boat, the USS FED funds. I think that this will work in B of A's favor in the long run if their intent was to eventually takeover Countrywide, because they will be able to buy it for a better price if things get worse, and if things get better then they just made a great investment!

Yes, you're probably right here.

It's 'easy' for this 68 year-old giant (he is, isn't he?) to say:

"The Bank of America investment also raised speculation that the Charlotte, North Carolina-based company might eventually buy Countrywide, which Mozilo helped launch in 1969.

Mozilo said that's not happening. "We've gone it alone for 40 years and can go it alone for another 40 years," he said."

Anyway, I have a lot of respect for this man since he built Countrywide with a loan from BoA of $ 75.000 back in 1969....

However...

It seems like Mr. Mozilo knew a lot more than we did and do, looking at his sales of Countrywide-shares since early January 2007....

We'll see, but I'm sure he doesn't have to go and beg for a mortgage since he was #10 on the Forbes' list in 2006 with $ 68,95 Million in compensation.

http://www.forbes.com/lists/2006/12/7G33.html

edit:

Just to give the man a face:

Angelo Mozilo; CEO of Countrywide.

Nice suit

LaoPo

Edited August 24, 2007 by LaoPo

[Carmine6]

LaoPo, I was just looking at SEC filings to see how much net worth he lost the last couple months and on a glance looks like sometime about mid year he was awarded a lot of stock options. Trying to double check if I'm reading the Form 4 SEC filings correctly.

Anyway, B of A got a nice deal there. 7.25% interest and already exerciseable conversion. Countrywide has a lot of loan servicing revenue so even if they never wrote another loan, there's something of value there.

Edit: His July 12 Form 4 (STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES) filing says 497,297 shares of stock and 78,580 options. His July 13 Form 4 shows 497,297 shares of stock and 1,049,588 options. Stock closed $36.26 on July 13.

I think I'm reading the form right.

Edited August 24, 2007 by Carmine6

[LaoPo]

Mr. Angelo Mozilo's words certainly have an enormous impact:

Japanese Stocks Fall on Renewed Concern Over U.S. Economy

Aug. 24 (Bloomberg) -- Japanese stocks declined after the Chief Executive [Angelo Mozilo] of Countrywide Financial Corp., the largest U.S. mortgage lender, said the nation's housing slump may lead to an economic contraction, causing stocks there to fall for the first time in six days.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

Edited August 24, 2007 by LaoPo

[j_cheung]

Hmm, although things in the mortgage & credit/equity markets don't look rather appetizing, a few (e.g. John Crudele of NY Post) ask the question that seems not to have occurred to anyone else on Wall Street: With delinquencies and chargeoffs surging in the subprime mortgage market, why hasn’t credit quality of credit card issues deteriorated as well?

After all, one would think that a distressed borrower would default on just about all his other debts before getting behind on his mortgage. It’s one thing to get a black mark on your credit report by being late defaulting on your credit card, after all, but it’s another thing entirely to default on your mortgage and lose your house. Why are the U.S. consumers like that?

http://www.nypost.com/seven/08212007/busin...se_of_cards.htm

[highdiver]

World wealth isn't growing, world DEBTS are growing and the place they are growing the fastest is the US which is the sole terminus of world trade at this point. The biggest growth industry today is selling debt instruments. The entire existence of hedge funds, for example, is to funnel profits from uneven trade with the US back into the US via dumping debts onto the backs of any corporations that can run up more debts!

Currently, the US gobbles up two-thirds of the world's credit each year with no conceivable way of paying it back. That won't last much longer.

The bottom line is that US is buried beneath a $9 trillion mountain of debt and there's no way to dig out. If there's a break in the liquidity-flows to US stock market — stocks will crash, unemployment will soar, and the US be pulled into a deflationary downspin draging the whole world after.

The name of the game now amongst the “don't worry, be happy” crowd is to keep the stock market flying-high for as long as possible while the transfer of wealth continues unabated. That means the hucksters on Wall Street will have to devise even better scams for expanding debt — increasing margin limits, escalating derivatives trading, loosening accounting standards, inflating the booming hedge fund industry, and — the new darling of Wall Street — increasing the mega-mergers, the biggest swindle of all.

These over-leveraged mergers create boatloads of new credit, but add nothing to GDP. They reflect the basic disconnect between the stock market and the real economy.

Markets are self-correcting. Eventually the overleveraged debt-instruments, which pushed the Dow to historic highs, will be expelled from the system, but not without considerable pain for everyone involved. At the end of the day we will all pay a dear price for the American way of life...

[Carmine6]

Hmm, although things in the mortgage & credit/equity markets don't look rather appetizing, a few (e.g. John Crudele of NY Post) ask the question that seems not to have occurred to anyone else on Wall Street: With delinquencies and chargeoffs surging in the subprime mortgage market, why hasn’t credit quality of credit card issues deteriorated as well?

After all, one would think that a distressed borrower would default on just about all his other debts before getting behind on his mortgage. It’s one thing to get a black mark on your credit report by being late defaulting on your credit card, after all, but it’s another thing entirely to default on your mortgage and lose your house. Why are the U.S. consumers like that?

http://www.nypost.com/seven/08212007/busin...se_of_cards.htm

If they expect to keep the house that is generally the case. However, unlike typical default situations, it's not that people are losing their jobs and defaulting, it's that they were given loans they couldn't afford. In the former situation you think you'll be able to keep the house as soon as you get another job. In the latter you know you it's just a matter of time until you're kicked out.

Since the last folks in with subprime 100% loans had negative equity as soon as their house values declined, they don't have a lot of incentive to pay. All the money they're paying for property taxes, mortgage insurance, principal, homeowners insurance, and interest only helps the bank. When they're kicked out they'll get none of it back. Instead, they'll just live in the house 3 months rent free during foreclosure, then turn in the keys. Meanwhile they'll save up the money so they can go back to renting. Their already low credit score gets dinged? Well its not any different if you pay a lot of money before the foreclosure or pay nothing before the foreclosure. Supposedly some 2006 loans never had any payments made.

If they keep paying credit card and other companies, they'll be able to get credit much sooner. Not a home loan but they were really renters to begin with. They'll get the consumer credit that they really use. Not at cheap rates, but they'll get it. I worked at a finance company back in the early 90's when the last housing problems happened in California. It was surprisingly easy to overlook a repossession if everything else had been paid as agreed. But a foreclosure and other things behind we never touched.

[LaoPo]

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

Reuters Before the Bell news mail.

August 24, 2007

"Countrywide, what have you done? Just hours after getting a big cash infusion from Bank of America, the mortgage lender's CEO [Angelo Mozilo] put the fear of God into Wall Street by saying the downturn in the housing market could drag us into a recession."

LaoPo

[LaoPo]

His [Angelo Mozilo] July 13 Form 4 shows 497,297 shares of stock and 1,049,588 options.

That's very nice for Mr. Mozilo...

According to this graph he sold a mere 100.000 shares since early January, bringing him more than 200 Million US$'s, apart from his $ 69 Million compensation in 2006.

He has some shares left for his retirement...

Apart from that nobody can deny he's a real LUCKY GUY !:

Angelo Mozilo wins Lamborghini with a $ 1,000 ticket...

http://images.google.nl/imgres?imgurl=http...ficial%26sa%3DN

LaoPo

[VegasVic]

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

Reuters Before the Bell news mail.

August 24, 2007

"Countrywide, what have you done? Just hours after getting a big cash infusion from Bank of America, the mortgage lender's CEO [Angelo Mozilo] put the fear of God into Wall Street by saying the downturn in the housing market could drag us into a recession."

LaoPo

As I told you yesterday this is a win-win situation for B of A, if Countrywide goes up then they made an outstanding investment and if it goes down then they buy it out at a steal of a price! Apparently Reuters new service is not widely disseminated in the U.S. because as I sit here posting this the U.S. markets have been trading for over two hours now and all the averages are in the green. I have been familiar with Angelo Mozilo for many years, and while his achievements have been very impressive he has always been very outspoken to the point of being considered a bit of a flake by many, in any event he has certainly been a very successful maverick! By the way the U.S. new home sales figures came out today and new home sales were up nearly 4% ( it looks like Mr. Mozilos' recession may be a bit premature). Personally I am still holding on to the shares of Countrywide that I bought last week in the 16's, if it does drop below 19 then I will exit and lock in my profit.

[LaoPo]

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

Reuters Before the Bell news mail.

August 24, 2007

"Countrywide, what have you done? Just hours after getting a big cash infusion from Bank of America, the mortgage lender's CEO [Angelo Mozilo] put the fear of God into Wall Street by saying the downturn in the housing market could drag us into a recession."

LaoPo

As I told you yesterday this is a win-win situation for B of A, if Countrywide goes up then they made an outstanding investment and if it goes down then they buy it out at a steal of a price! Apparently Reuters new service is not widely disseminated in the U.S. because as I sit here posting this the U.S. markets have been trading for over two hours now and all the averages are in the green. I have been familiar with Angelo Mozilo for many years, and while his achievements have been very impressive he has always been very outspoken to the point of being considered a bit of a flake by many, in any event he has certainly been a very successful maverick! By the way the U.S. new home sales figures came out today and new home sales were up nearly 4% ( it looks like Mr. Mozilos' recession may be a bit premature). Personally I am still holding on to the shares of Countrywide that I bought last week in the 16's, if it does drop below 19 then I will exit and lock in my profit.

I know VegasVic, I read my stuff

Good luck with your CW stocks, they're around $ 21 now, but I'm sure you keep an eye on them; if I were you I would stick to them, even below 19...and buy some more....but, that's me.

LaoPo

[VegasVic]

Hmm, although things in the mortgage & credit/equity markets don't look rather appetizing, a few (e.g. John Crudele of NY Post) ask the question that seems not to have occurred to anyone else on Wall Street: With delinquencies and chargeoffs surging in the subprime mortgage market, why hasn’t credit quality of credit card issues deteriorated as well?

After all, one would think that a distressed borrower would default on just about all his other debts before getting behind on his mortgage. It’s one thing to get a black mark on your credit report by being late defaulting on your credit card, after all, but it’s another thing entirely to default on your mortgage and lose your house. Why are the U.S. consumers like that?

http://www.nypost.com/seven/08212007/busin...se_of_cards.htm

If they expect to keep the house that is generally the case. However, unlike typical default situations, it's not that people are losing their jobs and defaulting, it's that they were given loans they couldn't afford. In the former situation you think you'll be able to keep the house as soon as you get another job. In the latter you know you it's just a matter of time until you're kicked out.

Since the last folks in with subprime 100% loans had negative equity as soon as their house values declined, they don't have a lot of incentive to pay. All the money they're paying for property taxes, mortgage insurance, principal, homeowners insurance, and interest only helps the bank. When they're kicked out they'll get none of it back. Instead, they'll just live in the house 3 months rent free during foreclosure, then turn in the keys. Meanwhile they'll save up the money so they can go back to renting. Their already low credit score gets dinged? Well its not any different if you pay a lot of money before the foreclosure or pay nothing before the foreclosure. Supposedly some 2006 loans never had any payments made.

If they keep paying credit card and other companies, they'll be able to get credit much sooner. Not a home loan but they were really renters to begin with. They'll get the consumer credit that they really use. Not at cheap rates, but they'll get it. I worked at a finance company back in the early 90's when the last housing problems happened in California. It was surprisingly easy to overlook a repossession if everything else had been paid as agreed. But a foreclosure and other things behind we never touched.

I posted similiar thoughts on another thread last week, basically most of these loans going bad are falling into two catagories. The first catagory is the largest one and that is the non home owners (renters) prior to 2004 who were made to believe that they could not only now get a loan and own a home but that they could get more home than they could ever have dreamed of (of course as we now see there are not any free lunches). These folks basically were thrown into some very creative financing instuments with no money down, and now that they see there ARM's adjusting they simply stop making payments and live in the house for free for 3-6 months and then go back the their former apartments no worse for the wear except for the hit on their credit rating that you pointed out (most of these folks didn't have very good credit in the first place so it doesn't bother them much). These people still have their jobs and their payments in their new apartments are less than their home payments were so in fact they have more disposable income to put into the economy now then when they were making the house payments. The second group is the flippers(many of whom are from overseas) who got caught late in the cycle, and all I can say here is that these folks along with some of the hedge funds will be getting exactly what they deserve One last note, you will notice that you don't see Wells Fargo in the same position that Countrywide is in and that is because they didn't underwrite these ridiculous loans like Countrywide did, I do find Mr. Mozilos' comments rather odd since he and his company was one of the primary movers that led to this crisis

[VegasVic]

Don't think the Board of Bank Of America is happy with his interview (as they just made it public they've the intention to invest $ 2 Billion in Countrywide).

LaoPo

Reuters Before the Bell news mail.

August 24, 2007

"Countrywide, what have you done? Just hours after getting a big cash infusion from Bank of America, the mortgage lender's CEO [Angelo Mozilo] put the fear of God into Wall Street by saying the downturn in the housing market could drag us into a recession."

LaoPo

As I told you yesterday this is a win-win situation for B of A, if Countrywide goes up then they made an outstanding investment and if it goes down then they buy it out at a steal of a price! Apparently Reuters new service is not widely disseminated in the U.S. because as I sit here posting this the U.S. markets have been trading for over two hours now and all the averages are in the green. I have been familiar with Angelo Mozilo for many years, and while his achievements have been very impressive he has always been very outspoken to the point of being considered a bit of a flake by many, in any event he has certainly been a very successful maverick! By the way the U.S. new home sales figures came out today and new home sales were up nearly 4% ( it looks like Mr. Mozilos' recession may be a bit premature). Personally I am still holding on to the shares of Countrywide that I bought last week in the 16's, if it does drop below 19 then I will exit and lock in my profit.

I know VegasVic, I read my stuff

Good luck with your CW stocks, they're around $ 21 now, but I'm sure you keep an eye on them; if I were you I would stick to them, even below 19...and buy some more....but, that's me.

LaoPo

Thanks LaoPo! The SP seems to have solidified around $21/sh, so my feeling is that if it drops down through $19/sh there is a reason for it and it will likely be going lower (where I can reload). Its never a bad idea to lock in a profit!

[Carmine6]

His [Angelo Mozilo] July 13 Form 4 shows 497,297 shares of stock and 1,049,588 options.

That's very nice for Mr. Mozilo...

According to this graph he sold a mere 100.000 shares since early January, bringing him more than 200 Million US$'s, apart from his $ 69 Million compensation in 2006.

He has some shares left for his retirement...

Apart from that nobody can deny he's a real LUCKY GUY !:

Angelo Mozilo wins Lamborghini with a $ 1,000 ticket...

http://images.google.nl/imgres?imgurl=http...ficial%26sa%3DN

LaoPo

Forgot to add that his latest filing (8/13/07) says he has 1,149,777 options even though he's been exercising some. So he's gotten about 100,000 options this last month. CNBC had a teaser saying something like "Why is Mozilo selling his shares now? Come back and see what he says." But then some breaking news came in and I don't think they ever covered this.

Such a rag sheet CNBC is becoming. All last night while the Asian and European markets were open, they were hyping you heard it on our air, Mozilo says a recession is coming. Zero context in the coverage. Today they're backpeddaling like crazy. There must have been some criticism because today they were defending themselves talking about media being held accountable for "just" reporting news. They had lots of guys on today who do not expect a recession. Bob Pisani has an article on their website saying "Talk about a recession from a very small group of people need to be balanced against the fact that no major strategist is predicting a recession."

Well, most of the banks were up today while Countrywide is down. I think people are correctly reading that Mozilo was not so optimistic about his situation. I think he's now stuck with a lower growth, but solid company. Even when he starts moving paper again, he'll no longer be as price competitive as he was. The banks are going to take back market share. Great purchase by B of A, not so great an outlook for a flashy guy like Mozilo.

Interesting chart from WSJ:

http://online.wsj.com/article/SB1187911908...p_us_whats_news

[LaoPo]

Forgot to add that his latest filing (8/13/07) says he has 1,149,777 options even though he's been exercising some. So he's gotten about 100,000 options this last month. CNBC had a teaser saying something like "Why is Mozilo selling his shares now? Come back and see what he says." But then some breaking news came in and I don't think they ever covered this.

Such a rag sheet CNBC is becoming. All last night while the Asian and European markets were open, they were hyping you heard it on our air, Mozilo says a recession is coming. Zero context in the coverage. Today they're backpeddaling like crazy. There must have been some criticism because today they were defending themselves talking about media being held accountable for "just" reporting news. They had lots of guys on today who do not expect a recession. Bob Pisani has an article on their website saying "Talk about a recession from a very small group of people need to be balanced against the fact that no major strategist is predicting a recession."

Well, most of the banks were up today while Countrywide is down. I think people are correctly reading that Mozilo was not so optimistic about his situation. I think he's now stuck with a lower growth, but solid company. Even when he starts moving paper again, he'll no longer be as price competitive as he was. The banks are going to take back market share. Great purchase by B of A, not so great an outlook for a flashy guy like Mozilo.

Interesting chart from WSJ:

http://online.wsj.com/article/SB1187911908...p_us_whats_news

Yes, I saw that chart yesterday.

Some further news, just 'fresh':

Fitch Cuts Countrywide, GMAC Servicer Ratings

Fri Aug 24, 2007 11:01 PM BST138

NEW YORK (Reuters) - Fitch Ratings on Friday downgraded mortgage servicer ratings for Countrywide Financial Corp and GMAC Mortgage LLC, citing pressure on liquidity in an "increasingly challenged" U.S. residential mortgage market.

http://investing.reuters.co.uk/news/articl...71905-OISBN.XML

and:

[uK] Rates on the rise for subprime mortgage borrowers

Fri Aug 24, 2007 2:38 PM BST139

LONDON (Reuters) - UK subprime mortgage borrowers are facing a sharp rise in rates as credit market turbulence adds to pressure on funding costs, lenders and brokers said on Friday, reviving fears of increased arrears and repossessions.

http://investing.reuters.co.uk/news/articl...N-MORTGAGES.xml

So, the sub-prime 'virus' landed in the UK too...

LaoPo

[LaoPo]

Sorry, can't help the news continues:

Heads roll as subprime crisis takes toll

Fri Aug 24, 2007 3:44PM BST

ZURICH (Reuters) - Market turmoil set off by the U.S. subprime meltdown has taken a toll of bankers across Europe and analysts say many more could lose their jobs before the crisis runs its course.

One of the latest casualties is the head of the once-booming European collateralised debt obligation (CDO) division at Barclays Capital, Edward Cahill, who left the bank this week, sources familiar with the matter said on Friday.

Rest:

http://uk.reuters.com/article/businessNews...479222020070824

LaoPo

[VegasVic]

Sorry, can't help the news continues:

Heads roll as subprime crisis takes toll

Fri Aug 24, 2007 3:44PM BST

ZURICH (Reuters) - Market turmoil set off by the U.S. subprime meltdown has taken a toll of bankers across Europe and analysts say many more could lose their jobs before the crisis runs its course.

One of the latest casualties is the head of the once-booming European collateralised debt obligation (CDO) division at Barclays Capital, Edward Cahill, who left the bank this week, sources familiar with the matter said on Friday.

Rest:

http://uk.reuters.com/article/businessNews...479222020070824

LaoPo

Oouch!!! Looks like another hedge fund bites the dust