I've learned from FDIC sources that they are now projecting 300 bank failures and are seeking additional re-hire authority (to bring back retirees)for the DRR division. I anticipate the 300 bank failures are spread out over at least a 2-3 year timeframe at this point.
Someone wondered who was actually "buying" Countrywide on a day where bankruptcy rumors swirled.....now we know...everyone who knew that the news would break.
If you think the Average Joe has a chance in this market, think again. It's no different than gambling, and so people get to peak at the dealer's card.
Somewhere there are people hoping that this does go through. The Federal Home Loan Bank system has a lot of exposure to CW -- or at least they did in the third quarter. If CW did go bust, the taxpayer would be on the hook for any shortfall.
BofA is talking their book. After the stock rises and they get out of their position no doubt the talks will prove unfruitful. No one will notice that the money BofA gets out of the sale of CFC sales immediately went to shorting the position.
The bak is worth a lot. The servicing unit is worth something and probably worth even more if there is intervention. There is also an unasked factor. Cost of doing business. Calabasas, California is not Omaha, Nebraska. Both personell and overhead costs could be halved if an excuse for relocation can be justified.
CFC should file BK first and then BAC should make an offer to buy them up, debt and all, for pennies on the dollar. Maybe this is what the plan is.
CFC has recently taken on $50Billion in debt. $10Billion from bank lines and $40Billion from The Federal Home Loan thing in Atlanta. CFC at any price is not worth taking on this level of debt.
As far as CFC's value goes. Short term, everything they do is losing money. Maybe long term their mortgage servicing and banking can be profitable, but this won't occur for around 5 years.
Why after several months at below $5 was ETRADE not acquired? Because the potential losses of its mortgage division offset its profitable brokerage division. Ameritrade and Schwab couldn't figure out a way to make it worthwhile.
Countrywide is like ETRADE without a brokerage division.
LONDON, Jan 10 (Reuters) - Citigroup is placing 16 million shares in Premier Foods (PFD.L: Quote, Profile, Research), Britain's biggest food maker, at 167 pence a share, market sources said on Thursday.
Citi declined to comment.
Premier Food shares were last down 11.3 percent at 167 pence, making them the biggest percentage loser in London's mid-cap index .FTMC, which was down 0.3 percent along with a modest decline in the blue-chip FTSE 100 index .FTSE.
The placing represents roughly 2 percent of the company's outstanding share capital, according to Reuters data
This whole thing stinks to high heaven. Either Kenny is a complete moron, or, there was something more to the $2B deal, or this is a giant pump and dump to rob money from the shorts.
This puts too much risk on BoA's balance sheet...IMO.
If I owned B of A, I'd be real pissed. For all the B of A shareholders, we feel your pain. You management is throwing good money after bad, and you folks are going to pay for it.
The loss on its $18 investment is the least of BAC's worries. If they buy, who knows what they pay since the CFC liabilities are massive and the value of the asset side of the balance sheet is falling faster than a hookers skirt during fleet week. There are some divisions in CFC worth something to BAC but more important is that BAC's purchase could delay/mask problems in the housing market. The last thing banks want is a bunch of CFC houses puked on the market at fire sale prices. Take it in house and hide/delay the mess at a steep cost of carry I would imagine. BAC could come out and say they'll pay $3 a share for all we know. Why overbid if you're BAC given the debt
Why would anyone feel sorry for CFC shorts? The stock is up to almost $8, last time I checked it peaked at $45. I would say giving back three points after making forty is no big deal.
According to Bllomberg, Morgan Stanley bought 11000 condos/houses from Lennar for 40 cents on the dollar (valued two months ago). How many cents on the $ is BAC assuming the houses in CFC's portfolio are worth?
If you think the Average Joe has a chance in this market, think again. It's no different than gambling, and so people get to peak at the dealer's card.
Average Joe
O c'mon - simple prudence dictated that after its price collapsed, one closed some or all of the short. It should be standard behavior for anybody in the game - however average.
But, will BAC pay a 50% premium on the pre-announcement stock price ? Will they heck - I'm going to short again, very shortly - depending on the price action. At 9.50 it would be a great short.
Separately, CNBC reported that the it was a "Washington" source for the story - not Charlotte or Los Angeles - Cramer suggests this is part of the shot gun marriages that being organized at the highest governmental levels.
With FFDIC's input on FDIC's hiring, this all makes sense.
But at 9.50 and above, CFC has to be a good short - if it gets there; I remember the travails during the final death throws of LEND, NEW, FMT( not dead yet, but.. ) - you get lots of volatility on this type of news.
Keep in mind that Wall Street thinks like O-Joe does, so it goes a long way to explaining why killing two companies instead of one is somehow a good thing for the stock market.
Peripheral Visionary said: "Of course, this could all be a hoax designed to make a lot of money in a spectacular short squeeze."
I'm just wondering if this is why Bernanke and the Fed are so calm, maybe this was one of those behind-closed-doors solutions that get worked-out when the banking system is stressed. Bank of America is a money-center bank---maybe they even get some kind of quid-pro-quo for taking on the risk/expense, even if it's just the thanks of a grateful Fed Chair that BAC can cash-in for a big favor down the road?
Supposedly one of the most bearish things that can happen right now is a 400-point up day, since those precede major crashes. Well, we're not up that much, but we're near 400 points for two days (and more than that off the Wednesday intra-day low).
OT - following this stuff on CNBC in the middle of the day makes me feel a bit dirty...
homedad43 | 01.10.08 - 3:07 pm | #
Ya its much better to download 'Cramer On Demand' then watch them late at night after everyone else in the house has gone to bed... along with the 'normal' porn vids...
Sebastian you might have a point. Funny thing is that for weeks / months Banks have needed CASH, more CASH. Now, there is enough cash/credit to go out buy a competitor. How odd. Maybe it is preemptive...the Northern Rock thing scared a few people.
u always see these kind of squeezes when a stock gets beaten down this low. its its only chance. as i said before, we've heard these BAC buyout rumors many times before not to mention Buffett. BAC knows full well the carnage in the home mkt coming the next 2 yrs. they were the ones who came out with that reset chart update on Ivy Zellners original CS graph. they would be crazy to take on all of CFC's risk given their own balance sheet problems.
I'm just wondering if this is why Bernanke and the Fed are so calm, maybe this was one of those behind-closed-doors solutions that get worked-out when the banking system is stressed.
I thought the same thing - wouldn't you be doing stuff like that if you were fed czar? I'd be taking voice lessons in preparation of all the 'kumbaya' I'd be singing...
Even if this one does prove to be a rumor - you gotta know talks are going on somewhere...
100bps screams desperation, and would have to crater the dollar. Maybe Bernutty is thinking of rolling out some of his hair brained schemes for avoiding deflation that he dreamed up staring at his navel in his ivory tower.
I don't know...gotta watch the signs. But that's just the first data I had to peak at today...and it sure smells funny. I mean everybody "knows" the market already has 50bps priced in.
Why didn't Bank of America buy Countrywide before instead of investing $2B? My guess is that they thought it could survive and the investement was sound. So why buy them now? I can only think that Bank of America feels their $2B is in jeopardy and wants to act (somehow) in their best interest. However, I can't see why they would take on the added debt. This "news" doesn't make economic sense if you are Bank of America. It would be easier to call your $2B investment, liquidate and move on. The taking on Countrywide debt thing (which you would do in a purchase) makes me skeptical that there really is a sale in the works.
Supposedly one of the most bearish things that can happen right now is a 400-point up day, since those precede major crashes. Well, we're not up that much, but we're near 400 points for two days (and more than that off the Wednesday intra-day low).
tj & the bear
i agree. we were due for a bounce anyway. why not help it along with a rumor.
tj & the bear said: "Keep in mind that Wall Street thinks like O-Joe does..."
In my experience here, I've seen that there are a few smart bears here with a clear view of what's happening and a lot of ignorant ones who are just ditto-heads that don't really understand a thing.
So would it kill you to stop painting all the bulls with the same "clueless" brush?
In my experience here, I've seen that there are a few smart bears here with a clear view of what's happening and a lot of ignorant ones who are just ditto-heads that don't really understand a thing.
Sebastian -
What is the smart "bull" case right now? I'm bearish right now but have been a bull for many more years/months than I have been a bear. I have been bearish for about 9-10 months and cautious for about 2 years. I'd like to hear a smart bull case right now because I just haven't heard it yet - although I've heard several try.
I look forward to hearing your argument and seeing your data. Hard compelling data seems to be lacking in the bull camp.
Even if this one does prove to be a rumor - you gotta know talks are going on somewhere...
The problem here is one of disclosure of exposure. We know a lot about the state of their servicing portfolio, but nothing about their own asset valuations. IMHO, CFC is bankrupt already, and any buyout talk is pure nonsense. The $2 billion is chump-change to BAC; they just bought themselves a piece of the carcass.
The problem that you have tj, which I'm sure you will fail to acknowledge, is that in the long term the market trends upward at approximately 8 %/year. That is very close to the house advantage in blackjack. Table players can certainly win in the short term, but the longer they stay, the worse their chances are.
In any event, caution is always wise in calling tops and bottoms.
I predict that those who predict will be unable to predict.
I'm with you Max. The only piece BAC might want is the servicing part -- that will be valuable in the long run, even if it soaks up some cash temporarily. I can't imagine why they would take CFC's "assets" onto their balance sheet (even with some serious arm twisting going on).
Sure, the "normal" trend is upwards -- has to be with a growing population and overall economy -- and it's aided by survivorship and inflation. Big deal.
Are you stating that current circumstances are somehow normal?
BTW, anyone who has any knowledge of history prior to Alan Greenspan's tenure knows the strong bull market of the last 20 years is a historical anomaly. Buffet, Mauldin and others have noted that on numerous occasions.
Washington is leaking because it doesn't want (and cannot handle) very many bank runs. We will see these bank related leaks when there is something (anything) good to report to damp down fear.
has anyone wondered why these particular pieces of news, ie buyouts, are released midday as opposed to all the bad news which is typically released Friday after close?
Let me guess...The Fed needs a review on what created the boom and bust of R/E.
Save some taxpayer money. Use common sense. Use your brain. You guys along with feeble or no regulations created the boom and bust. ( would not it be hilarious if there actually was some sort of regulatory board in place at the time that did nothing ).
Regulations needed? Let me guess...there are probably millions of regulations in this country but who would have thought mortgage regulators would be an appropriate need during a boom? Obviously very few.
I seem to recall that each of the bankruptcies of public subprime lenders last year was preceded by a buyout rumor. Most of those weren't entirely groundless: once the rumored buyer was in fact providing DIP financing, more often they were looking at an asset purchase.
I can't remember a rumored buyout that actually came to fruition as a full buyout of the equity--the actual buys (Fieldstone, Accredited) stayed out of the press until the formal announcement, or at least I recall being dumbfounded by the announcements....
I'm guessing an asset purchase here. If it's an actual buy, I'm reminded of HomeSide Lending....
"has anyone wondered why these particular pieces of news, ie buyouts, are released midday as opposed to all the bad news which is typically released Friday after close?"
Yes, the bad news normally accompanied by SEC filings. Good news is never substantiated and often never actually consummated.
MLM-I don't think a P/E of 15-16 on the S&P 500 is overvalued with interest rates where they are now and dropping. That doesn't guarantee the market will go up by any means. In all honesty, I am cautious and holding quite a bit of cash and defensive stocks. This is a very difficult market to trade either way.
tj-I dispute that there has been a 20 year bull market under Greenspan. 2000-2002 was one of the worst bear markets other than 1929-32. In fact, I don't even know if I'd call 2002-07 a bull market, since the S & P 500 high of 2000 was only exceeded for about 15 min and P/E multiples actually contracted from around 23 in 2002 to 16 today.
i was short LEND (American Home Lender) from 27 down to 6 before i closed it out. i watched it for a couple more months just to see what happened. up and down it gyrated from 4-14 on buyout rumors. eventually was bought but at around $5 IIRC. traders love that sort of stuff.
I'm speaking of the PE adjusted over a full business cycle (10 year average) ala Robert Shiller.
As for comparing PE with bond yields, The so-called “Fed Model” attempts to value shares relative to nominal bond yields. There is no justification for this either in theory or practice. (Report No. 133 “The Myth of Yield Ratios.” 10th May, 1999.)
BofA is neither knight nor a knave. They want CFCs servicing protfolio. The bank is a safe investment. Much of the rest stands a good chance of being indemnified.
strangely enough there is no mention here of 2 facts:
1) the convert that BAC bought from CFC is a resettable. so maybe, after falling all the way from 18 to 5 BAC already OWNS CFC if it chooses to. on the other hand they don't have to take on all CFC's obligations even if they own the company. they've seen their books. they have a right of first refusal. any price for CFC wouldn't be at premium.
2) before going into restriction on the stock in Aug, BAC's analyst penned out a report, where he put a liquidation value on CFC of $5. would they pay more now?!
personally, i think it's possible to work out a solution. big part of CFC's problem lies in their funding costs of 3000bps on 1yr cds (somebody made a REAL KILL on cds here, equity is peanuts) and 5.5% CD. BAC wouldn't have the problem. + when u say it's so stupid to buy them now, how stupid must HSBC and Wachovia feel buying Household and Golden West. do you think these 2 are better than CFC?! they've paid 2.5x book for that kind of crap. banc of america will get CFC at distressed level in any way.
in any case, i don't think it matters much to the total market. it doesn't mean any bottom is here. and murdoch's reporting habits are getting preposterous. next time there will be naked boobs in that sort of an article, i swear!
Check out any long-term stock chart. After the '87 crash the DOW was under 1800, with recent highs going over 14000. You won't see a long-term trendline like that anywhere else in time, and it's all due to Greenspan's magic liquidity machine.
Oh, and Hussman has repeatedly blew truck-sized holes through the nonsense that current valuations are reasonable.
MLM-The reason interest rates are important is that investors can put their money into equities or bonds. Since equities are risky they demand a premium. Thus stocks at a given P/E are more valuable at lower rates. Also, low rates allow companies to borrow cheaply, thus increasing future profits, all things being equal. I don't see anything in the link that really disputes that.
you keep talking about a P/E of 16 but you never support it.
Every day, the Wall Street Journal publishes Birinyi Associates P/E ratios. Today, S&P stands at 17.8. To get to 16 P/E today, the market would have to drop 10%.
But there's already an earnings decline of about 5% projected for next quarter. So, to get to a P/E of 16 next quarter, the market would have to drop by about 15%.
do you think these 2 are better than CFC?! they've paid 2.5x book for that kind of crap. banc of america will get CFC at distressed level in any way.
Dog crap vs. cow crap is still crap. To me, the big question mark is their held mortgage portfolio valuation assumptions. My bet: those assumptions won't stand the light of day, and CFC is worth $0 right now.
Ahead of the curve -
15-16x p/e of the S&P assumes a pretty rosy earnings scenario and no slowdown let alone a recession. I see a recession (actually think it started last month) and at least 2 years of declining earnings. With the carnage in the financials the S&P p/e could be above 25x in no time.
"I don't think a P/E of 15-16 on the S&P 500 is overvalued with interest rates where they are now and dropping."
Earnings are projected to drop 9% this quarter with large expected writedowns in the financials, bad sales for auto makers, and smaller margins for retailers.
Commodities still seem to be sailing, but the 'E' of P/E is declining at the moment.
"They want CFCs servicing protfolio. The bank is a safe investment."
"But would you rather snatch it up after b/k, or pay a premium right now?"
I'd expect an orderly transfer of the servicing portfolio and the bank prior to any formal announcement of insolvency--can you imagine the chaos if things happened the other way 'round on a lender of this size? New Century and American Home were bad enough....
Good point on the bad reporting. I just noticed that it took three people to write up a story based on 'people'. The only bit of new information was in the first two paragraphs, with the rest being the recent history of CFC and BOA's investment in them. Even that section included the gem of "It isn't clear how quickly a deal might be struck, but two people familiar with the matter said it could occur very soon. It also is possible that an agreement could be delayed or fall apart altogether."
aheadofthecurve,
obviously u are talking about ex-badnews type of PEs of 15x. the only reason S&P ever looked so cheap was that financials were trading at 10x. now more and more of them trade at negative PEs, how do you put that into your model??
in 2000 stocks were more expensive, BUT now they are WAY more leveraged, if you account for financials properly. GS, MER, MS all have above $1tn in assets, think about it!!!
now of course the interest rates will fall. but when the recession comes profits will collapse, and your argument goes out of window (just like it did in japan in the 90s and in US in 2000)
imagine the chaos if things happened the other way 'round on a lender of this size?
And maybe that's what we're seeing. Not a buyout per se, but an "orderly transition." There's been speculation in the past here about what a CFC bankruptcy would look like, and that the number of players even able to assume control of the servicing function is very limited.
There's going to be some pissed off creditors if BAC takes the servicing arm just before bk. Talk about a lawyer's dream!
max,
of course it is worth 0 and much below that in liquidation. so are probably mos t of the IBs & GSEs. i think BAC will be cherrypicking the assets here and taking the prime servicing portfolio. actually to be fair, that BAC analyst was right on the money and was deducting like 20% from even their MSR valuation, and discounting prime portfolio quite a bit. i was short CFC for a VERY long time but covered mostly in the teens. personally, i don't think it's the most exciting short out there.
"They want CFCs servicing protfolio. The bank is a safe investment."
Didn't Tanta just point out that these supposed servicing revenue streams are becoming quite toxic themselves? And we can expect just more squeezing of these margins as delinquencies rise? I assume BAC is experiencing similar margin squeeze, and more pressure on cash requirements to play in the RE servicing area. I don't see the attractiveness.
There has to be more to this story, because BAC can't buy CFC lock, stock and two smoking barrels as it would put them over the 10% federal deposit cap. I would guess they're buying themselves a mortgage servicer (to further their ambition to be the biggest bank in America), then cherry picking what other parts of the operation they want to keep and other parts they'll have to unload. BAC is generally not the sharpest knife in the drawer when it comes to investment banking stuff, but this deal may actually be a lot smarter than people here realize.
In Report No. 133 we showed that the observed positive correlation between dividend and earnings yields on shares and the yield on bonds applied only in the US from 1977 to 1997. It has not applied since. Furthermore, there was a marginally stronger negative correlation from 1948 to 1968 and no long-term relationship whatever. The bond yield myth is thus an egregious example of data mining.
The idea of deciding whether to own stocks or bonds based on comparing P/E to bond yields is nonsensical. Not only that, it doesn't work.
Ask yourself, why might bond yields be low? Because the economy is doing well?
For the "no recession crowd...Why is the fed cutting if we will avoid a recession and only have slowing growth in the first half of 08 followed by continued growth in the latter half...about the time the cuts will make a difference?
and one more thing- doesn't BAC have a very strong self-interest in pumping up CFC stock? Thinks it pumping, or just trying to start of bidding war to reduce its loss?
CHICAGO, Jan 8 (Reuters) - The National Association of Purchasing Management-Chicago on Tuesday released annual revisions to its monthly business barometer, revising the December reading to 52.0 from 56.6 reported on Dec. 28.
The revisions also showed November's barometer at 50.8, below the 52.9 originally reported and barely in expansionary territory.
I'd agree with some of you who think this is a shotgun wedding, but I probably would disagree as to whom will have the shotgun poking them in the back. I'm thinking it will be the minister.
While rich people are still doing fine, American Express said the slumping housing market has begun to take its toll on the American consumer. Charges on the company's roughly 84.7 million cards began to tail off in December, American Express said, and more clients failed to repay their debts.
Really. Rich people are still doing fine. Perhaps, because they are rich?
Nail on the head Schnaps.
BAC could well lose a few billion on this, but they can't fully consolidate CFC even if they wanted to, so their loss is limited to whatever capital they put into the deal. The Feds are on the hook for what, 50 billion already, and I would imagine they'll be funding a lot of the mortgage portfolio and servicing leakage that's bound to occur over the next few years. Think of this as a privatized version of the Resolution Trust Corp, but still funded with government cash. BAC shareholders aren't the one's who will get the worst rogering from this - the American taxpayer is front and center here. I doubt that's in the deal prospectus anywhere. For the cynical here (which would be everyone), it is just a continuation of the privatizing of profits and socializing of risks process that keeps America great (note sacrasm).
In the trenches said: "...I'd like to hear a smart bull case right now because I just haven't heard it yet - although I've heard several try...."
My particular "smart" bull case is that in the absence of clear, unequivocal evidence indicating a severe bear market and associated recession on the way, traders and investors are almost always better off either sitting still with their long positions or looking for good reactions to buy into.
There's an incredible bullish bias to the stock market in all time-frames, making it extremely difficult to time the market consistently and profitably. That's the reason why indexing and LTBH are so tough to beat as long-run investing strategies, why 75%+ of active fund managers can't beat the SP500.
For me, the "clear, unequivocal evidence" of an imminent severe bear market and recession would be things like:
1) Wright Model "B" Recession Probability peaking above 50% (perfect record forecasting the past 6 recessions).
2) At least two consecutive quarters of falling TTM as-reported SP500 EPS.
3) CPI-U inflation persistently above 4.25% and rising.
4) Real (after inflation) SP500 EPS yield below 1%.
5) 2-3 months net job losses (non-farm payrolls) within a quarter or two.
And then there's the Fed cycle. We're in the wrong part for a recession.
Notice that things like housing permits, starts, and prices aren't on the list. If housing-related problems are a serious threat to the economy, the effects will have to show up as important weakness one way or another in broad-economy measures.
"BAC shareholders aren't the one's who will get the worst rogering from this - the American taxpayer is front and center here. I doubt that's in the deal prospectus anywhere."
The WSJ issues a prospectus with their rumors nowadays???
It's just amazing to me how quickly folks go from "people familiar with the situation" and "two people familar with the matter" to discussing the supposed details of a done deal. The rumormongerers don't even have to provide any details; the readers fill them in themselves, circulate them and rehash them endlessly on the 'net...until a couple of days have passed and we move on to a new rumor.
Just how long has it been since the last time "people close to the situation" told us that BAC was buying CFC, anyway?
Federal law prohibits a bank holding company from controlling more than 10% of U.S. deposits after acquiring another bank.
But the law includes a caveat: The 10% limit doesn't apply to federally chartered thrifts, meaning a bank-holding company may control more than 10% of deposits in the U.S. following a thrift acquisition. Since a Countrywide subsidiary called Countrywide Bank is a federally insured thrift, that may give Bank of America room to maneuver around the deposit cap.
MLM,
Watch for exceptions to be made in federal law or emergency powers expressed if there is an emergency that feds feel warrant special treatment. I would not place any bets on static banking law going forward for what that is worth.
Sebastian, I've argued these before and not gotten a response, but it keeps being late in the discussion tree.
seb says - "For me, the "clear, unequivocal evidence" of an imminent severe bear market and recession would be things like:
1) Wright Model "B" Recession Probability peaking above 50% (perfect record forecasting the past 6 recessions)."
Kirk says - The creator of the Wright B explicitly stated some assumptions that had to remain valid for his model to work - their non-existence was the reason the model doesn't work for recessions prior to the six you mention, as well as for several in other nations. In simple sum, it's an assumption that the various rates involved aren't being manipulated through various interjections of money -- like the discount window. Since the discount window's been used recently, I find myself not giving this model 100% trust.
Seb says - "2) At least two consecutive quarters of falling TTM as-reported SP500 EPS."
Kirk says - OK. The indicator work for many of the recent recessions. Not, IIRC, for the 1980 recession, and reporting differences make it impossible to validate prior to about 1965, but...
Kirk says - Full stop. CPI-U inflation measurement standards have been significantly revised over the past couple of decades. Using any of the standards of prior to 1991, we meet your test.
Kirk says - This has been a trailing indicator in almost every recession except 2001. And you seriously use it as a LEADING indicator? OK.
Seb says - "5) 2-3 months net job losses (non-farm payrolls) within a quarter or two."
Kirk says - In more than a few recessions the timing of net job losses was a confirming instead of leading indicator of recession. That's twice you've done this.
Seb says - "And then there's the Fed cycle. We're in the wrong part for a recession."
Kirk says - This one's got me stumped. I mean, I don't know what you mean by "Fed cycle". I can't agree or disagree - no basis for comparison.
Sebastian -
Everything you've mentioned is something you'd see well after a recession has started.
If you're in a business, talk to your customers and hear what they are saying - I've seen a massive change in sentiment occur over the past 6 months which has only picked up steam - board rooms and consumers are planning to pull back. Thats what I see on the front lines. You need to focus on leading indicators not lagging.
By the way, I think we've already tripped 1 (although this indicator basically assumes the bond market gets it right), 2 (you'll see this happen in Q4 which is now over) and 3, and my guess is 5 is only a few months away based on the hiring plans I am familar with - this is also very much a lagging indicator. Not sure of the relevance of 4 - you need a 50p/e before we're in a recession? That's absurd and entirely irrelvant - when that happens we're either in the greatest stock market bubble of all time or in the trough of a recession.
Still waiting for the "smart" bull argument - yours wasnt very compelling.
Housing is relevant - so you cant ignore it - so is contraction of credit - those are 2 highly reliable leading indicators - dont ignore what they're telling you. Looks like they've been pretty good at calling where we are now - the debt markets surely think so - and it looks like the equity markets arent too far behind.
There is no such thing as the unequivocal evidence you're looking for until its after the fact. By then its too late.
I appreciate your views but I'll continue to hold my puts on the financials and stay out of domestic equities - that strategy has worked very well over the past 7-8 months.
I think the reccession is probably already here and there is much risk to being long equities.
Time will tell.
"When the Federal Reserve approved Bank of America's acquisition of LaSalle in September, the combined bank grew to hold 9.88% of the country's deposits. Federal law prohibits a bank holding company from controlling more than 10% of U.S. deposits after acquiring another bank.
But the law includes a caveat: The 10% limit doesn't apply to federally chartered thrifts, meaning a bank-holding company may control more than 10% of deposits in the U.S. following a thrift acquisition. Since a Countrywide subsidiary called Countrywide Bank is a federally insured thrift, that may give Bank of America room to maneuver around the deposit cap.
It isn't known if Bank of America is trying to structure the deal in a way that would help shield the bank from some of the biggest financial uncertainties facing Countrywide."
You need to read these articles from the bottom up....If they aren't trying to structure the deal to shield it from the largest problems, then they are nuts.
BoA could be blinded by trying to acquire for strategic reasons. They obviously have the leverage in this deal and I can't imagine that they wouldn't push for every possible concession.
BoA paid $21 billion for LaSalle. Maybe they overpaid, but they went from close to zip in Chicago to the largest bank.
I've learned from FDIC sources that they are now projecting 300 bank failures and are seeking additional re-hire authority (to bring back retirees)for the DRR division. I anticipate the 300 bank failures are spread out over at least a 2-3 year timeframe at this point.
FFDIC | 01.10.08 - 2:34 pm
FFDIC, Conjure Bag wants to know if you dusted off your brief case as he suggested to you some months ago.
With all the bull and bear talk here I think there is a pretty big disconnect with what is probably the most important feature of the equity markets, and that is the extreme bifurcation of both returns and business prospects by sector. Sure if you are a financial company, or a housing company you have gotten or are getting your head handed to you. If you are not, then it may be an entirely different scenario.
I've been sympathetic to the bear view on housing and finance since late 2006. The bell ringing event for me was the bankruptcy of Ownit. They were a fairly large and diversified subprime lender and with little or no fanfare just went bust. It was pretty clear that this was going to be large and that bets should be made accordingly.
However, it is also clear that we are in the middle of the largest global boom in the history of mankind and that is not going to stop because too many spec condos were built in florida, nevada and california. About 1/3 of the worlds population is changing their living standards from subsistence to something better. The biggest early winners are commodity and infrastructure plays for two reasons. First, in the 90's there was almost zero greenfield development in a wide variety of natural resource sectors. Second, the marginal propensity to consume commodities is much higher at lower income levels, or to put it at its simplest, if Buffet makes another billion dollars he does not eat any more meat, use any more gasoline or install plumbing in his house, while the same is not true for someone living in a hut.
To look at the equity markets thru either lens without cognition of the other is a big mistake. In the whatever its worth category, I have always found it easier to make money on the long side of markets, even when I have the right view of the short side. I guess the reason is that when on the short side, there is no natural end to excess, but when on the long side value can be measured absolutely.
If anyone wants to bet a subscription to the new CR housing letter, I'll take the side that the Dow closes higher 30 days from todays close.
Kirk Spencer, now that I've generously shared, please extend me the same courtesy and tell me the objective, independently-verifiable methods you're using for measuring the health of the economy.
I've said "no recession now or at any time in 2007 and no recession in 2008" based on my methods and I still stand by my statement.
I propose a challenge, your method and forecast against mine. Okay? Nothing like actually putting yourself out there to really clarify things, am I right?
You have to place your bets before the horses come out of the gate.
All I can tell you is that I've got all the data I mentioned right here in front of me on charts, with the appropriate recession ribbons overlaid, and I'm satisfied with my judgment about what they're telling me.
Dow closes less than 12,853.09 Fri. Feb 8.
If anyone wants to bet a subscription to the new CR housing letter, I'll take the side that the Dow closes higher 30 days from todays close.
david_in_ct, So you're betting on emerging markets? How do you value those in their opaque financial markets? My experience with 3rd world companies is they get looted at the first hint of a downturn and vanish without leaving a trace. And to boot during a boom they get bid up to the moon - precisely where they are now. The demand side of their business is drying up. Won't be long, and I am betting that way. At least that's my game plan. The hedge & MM funds need to get the first whiff of trouble and it's all over in a flash, like OwnIt.
barely,
i agree with you on the opacity of emerging market co's. i wish i had better insight there. i take a more conservative route and bet on the first world producers. my two, largest exposures at the moment are US based natural gas (XTO, HGT) I think that the oil/natgas btu arb is going to resolve over the next while. Even at the current henry hub strip these are both good plays. The CEO of XTO (Simpson) is about the best in the business. Both stocks have been running of late.
I am picking thru copper companies deciding where to place bets. With US housing collapsing it is remarkable that copper prices have maintained and speaks directly to 2nd and 3rd world demand. There is a pretty large short interest in FCX which might have been a clever idea had we had the same housing set up 20 years ago and US demand was much more important, but its not. Also there has been a recent technological change which is going to allow for copper cast rotors in electric motors. This is going to add a chuck to demand though i have not run any numbers yet to get a feel for what it might be. One of the big themes i am willing to bet big on going forward is that electricity is going to become a much larger part of the energy mix as the climate stuff takes hold. This too will not be bad for copper and those that mine it.
The way I figure it, most of these properties are going to be worth , what, 40 cents on the dollar? If BAC buys CFC at 30 cents on the dollar, then they're getting a deal.
At this stage, only chumps would buy emerging markets or commodity stocks.
THe time to buy either was in last 98 and again in 2001-2002.
And for those that are banking on a global disconnect, where emerging markets can grow amid a U.S recession, please pass some of that kool aid my way. It must be some good stuff.
But in all reality, the U.S is a much larger portion of global GDP than Asia was to Global GDP in 1998, yet Asia unravelling was able to reek havoc on our market. Now, you guys are telling that the world's largest economic superpower hits the skids and the emerging markets or commodities are a good buy.
The U.S economic slowdown will spread to the rest of the world as little as subprime spread to the U.S housing market (please note the sarcasm).
Please guys, let me know where I can get the kool-aid.
Sold to you!
Bank of America would have to be retarded, sorry mentally challenged, to buy Countrywide. JMHO
I've learned from FDIC sources that they are now projecting 300 bank failures and are seeking additional re-hire authority (to bring back retirees)for the DRR division. I anticipate the 300 bank failures are spread out over at least a 2-3 year timeframe at this point.
They had better do better than the $18 a share.
Some folks are just slow learners.
Bargain or burden?
Go to the Fed Window and pledge CFC shares for cash! Yippie.
Someone wondered who was actually "buying" Countrywide on a day where bankruptcy rumors swirled.....now we know...everyone who knew that the news would break.
If you think the Average Joe has a chance in this market, think again. It's no different than gambling, and so people get to peak at the dealer's card.
Another Seal of the Apocalypse.
two people familiar with the matter said it could occur very soon. It also is possible that an agreement could be delayed or fall apart altogether.
Is it also possible that Buffet is going to buyout CFC???
WTF? Why?
I can see starting such rumors, but I don't see why it would be true, as it is of no benefit to BofA.
Somewhere there are people hoping that this does go through. The Federal Home Loan Bank system has a lot of exposure to CW -- or at least they did in the third quarter. If CW did go bust, the taxpayer would be on the hook for any shortfall.
holy SH!T
Great. I've been waiting to short BAC.
Buffet is going to buy out 299 more failing banks after that..
I am just wondering now....who will buy BAC?
If they consolidate operations to Charlotte then Ventura County, California is screwed.
Maybe BAC, Wells Fargo, Countrywide, WaMu, Citigroup and Chase can all buy each other and then we can set the whole pile on fire...and makes smores.
Gee, nobody saw this coming
Avg Joe,
You're just learning that 99.9% of avg Joes who tryo to play the market get beat?
hey,Paris Hilton could buy it! she could do a better job running it than the Tan Man and people already boast about being $crewed by her.
BofA is talking their book. After the stock rises and they get out of their position no doubt the talks will prove unfruitful. No one will notice that the money BofA gets out of the sale of CFC sales immediately went to shorting the position.
The bak is worth a lot. The servicing unit is worth something and probably worth even more if there is intervention. There is also an unasked factor. Cost of doing business. Calabasas, California is not Omaha, Nebraska. Both personell and overhead costs could be halved if an excuse for relocation can be justified.
Yeah, but who is going to rescue BAC? Never mind, I already know the answer.
Admit it, you're all just afraid you won't have the Tan Man to kick around anymore.
How much is a used tanning bed worth?
Sorry got that wrong: BofA buys CFC. Pledges 1.4T to the Feds (CFCs mort. book) takes the cash and buys 49% of C.
There problems solved. C will be liquid, BofA has zero sum on the Balance Sheet. And, CFC customers continue on.
I don't want to lay down anywhere that guy has been. What if some got on me?
Just bot 4500 CFC just under $5
i deserve to lose it all
I'm An Idiot | 01.09.08 - 3:32 pm | #
in still an idiot, but sometimes inside info is Wonderful
ooh.. CFC puts on sale..
Doesn't seem to be doing a lot of good for BAC share price atm...
Oh you Idiot - I wouldn't even joke about something like that. You could be sued!
CFC up 65%...shorts got burned.
KenL is not going to sue a nephew
Countrywide may (or may not) be bought out.
And the deal may (or may not) go under.
Why is this a blog entry?
CFC should file BK first and then BAC should make an offer to buy them up, debt and all, for pennies on the dollar. Maybe this is what the plan is.
CFC has recently taken on $50Billion in debt. $10Billion from bank lines and $40Billion from The Federal Home Loan thing in Atlanta. CFC at any price is not worth taking on this level of debt.
As far as CFC's value goes. Short term, everything they do is losing money. Maybe long term their mortgage servicing and banking can be profitable, but this won't occur for around 5 years.
Why is this a blog entry?
Because it involves the Tan Man. And the Tan Man is one of the Mortgage Pig's ancestors. Pig, would you care to comment?
Please just mail the keys to the US economy to china or Dubia.
BAC-let's kick WaMu's a$$ while they're down
.
The bottom is close IMO. Bearish sentiment and insider buys are starting to peak.
O-Joe
Why after several months at below $5 was ETRADE not acquired? Because the potential losses of its mortgage division offset its profitable brokerage division. Ameritrade and Schwab couldn't figure out a way to make it worthwhile.
Countrywide is like ETRADE without a brokerage division.
BAC -Lower Standards
Countrywide going down the tubes....
try Osamanomics Islamwide
YouTube - Osamanomics: Warning Infidels on Real Estate Crash
It all depends on how much they paid for CFC, iceman. The servicing division and a $2 billion head start will go a long way to a low price.
I hope Bank of America goes through with it, because if not, it will be the taxpayers (all of us) who bail out CFC.
Of course, this could all be a hoax designed to make a lot of money in a spectacular short squeeze.
how many times have we seen this in the past? i'm betting its a rumor.
O-Joe -
Let me know when you see no bottom in sight and no end to this recession - then I'll know we've hit bottom....
O-Joe, are the planets coming into alignment?
Yesterday, one of the commenters bought 4500 shares. Great job!
O/T but interesting:
LONDON, Jan 10 (Reuters) - Citigroup is placing 16 million shares in Premier Foods (PFD.L: Quote, Profile, Research), Britain's biggest food maker, at 167 pence a share, market sources said on Thursday.
Citi declined to comment.
Premier Food shares were last down 11.3 percent at 167 pence, making them the biggest percentage loser in London's mid-cap index .FTMC, which was down 0.3 percent along with a modest decline in the blue-chip FTSE 100 index .FTSE.
The placing represents roughly 2 percent of the company's outstanding share capital, according to Reuters data
I'm with the Dawg on this one. Only a fool would buy them out now. Wait for b/k, then swoop in on the cheap.
This is a book play, pure and simple.
Yum! Put two pieces of bread around it and call it a sandwich!
This whole thing stinks to high heaven. Either Kenny is a complete moron, or, there was something more to the $2B deal, or this is a giant pump and dump to rob money from the shorts.
This puts too much risk on BoA's balance sheet...IMO.
Cheers,
If I owned B of A, I'd be real pissed. For all the B of A shareholders, we feel your pain. You management is throwing good money after bad, and you folks are going to pay for it.
The loss on its $18 investment is the least of BAC's worries. If they buy, who knows what they pay since the CFC liabilities are massive and the value of the asset side of the balance sheet is falling faster than a hookers skirt during fleet week. There are some divisions in CFC worth something to BAC but more important is that BAC's purchase could delay/mask problems in the housing market. The last thing banks want is a bunch of CFC houses puked on the market at fire sale prices. Take it in house and hide/delay the mess at a steep cost of carry I would imagine. BAC could come out and say they'll pay $3 a share for all we know. Why overbid if you're BAC given the debt
wait til you here the px talk
cough....hack....
BASELTOOEY!!!
...much better now.
"Of course, this could all be a hoax designed to make a lot of money in a spectacular short squeeze.
--Peripheral Visionary"
I think you're right on the money! Those 2 people will probably benefit most from spreading this rumor.
idoc- yesterday's bankrupcy thing was likely the rumor that should be looked at
.
Yesterday, one of the commenters bought 4500 shares. Great job!
Over at the HBB, Hoz and Txchick made a bundle, too. Great call by Hoz today morning.
O-joe
Just saw Cramer on CNBC and he states that when this kind of thing happens, the bottom is in sight...
0-joe = Cramer?
OT - following this stuff on CNBC in the middle of the day makes me feel a bit dirty...
Why would anyone feel sorry for CFC shorts? The stock is up to almost $8, last time I checked it peaked at $45. I would say giving back three points after making forty is no big deal.
I hope BAC buys CFC. I will short BAC.
According to Bllomberg, Morgan Stanley bought 11000 condos/houses from Lennar for 40 cents on the dollar (valued two months ago). How many cents on the $ is BAC assuming the houses in CFC's portfolio are worth?
Geez, I bank at BofA -- if they go through with this I'll have to move for sure.
I still don't get it. It's like the idea of Buffet buying one of the monolines after setting up his own -- it just doesn't make any sense.
The bottom would be in sight if BofA paid a good price for CFC
If Mozillo just cashed out then its a different matter entirely. Moz wants to retire and wants his money.. im betting he caved.
This is bearish for the U.S stock market. Why would BAC want to drain its own cash flow to service CFC servicing agreements?
BAC tries to pick a bottom? Yeah right, the real estate market sucked with the economy growing, let's see how well it does with a recession.
The stock market won't hold the almost 200 point gain today.
Talk about adding insult to injury:
MoodyÂ’s says spending threatens US rating
Tom Stone, the problems are bad enough without throwing herpes in the mix.
OK,
Dow up 1.11%
Gold at $890+
Silver at $16.09
Dollar below 50 day MA, and just sank through 76.
50bps, methinks that these numbers say it's gonna be bigger...or at least something big is up.
Cheers,
Wall Street just loves the idea of bailouts. Increasing moral hazard gets traders all juiced up.
you'd really be amazed at the amount of odd lot order flow out there... it's insane
Why buy CFC when you can merely convert for $18 per share and not take on any debt. BofA shareholders should be screaming bloody murder at this point.
Didn't we just have CR's post on how servicers (as in CFC) are having to front cash to MBS owners when the loan payments aren't showing up?
There's no way that BofA is going to buy this money sink.
If you think the Average Joe has a chance in this market, think again. It's no different than gambling, and so people get to peak at the dealer's card.
Average Joe
O c'mon - simple prudence dictated that after its price collapsed, one closed some or all of the short. It should be standard behavior for anybody in the game - however average.
But, will BAC pay a 50% premium on the pre-announcement stock price ? Will they heck - I'm going to short again, very shortly - depending on the price action. At 9.50 it would be a great short.
Separately, CNBC reported that the it was a "Washington" source for the story - not Charlotte or Los Angeles - Cramer suggests this is part of the shot gun marriages that being organized at the highest governmental levels.
With FFDIC's input on FDIC's hiring, this all makes sense.
But at 9.50 and above, CFC has to be a good short - if it gets there; I remember the travails during the final death throws of LEND, NEW, FMT( not dead yet, but.. ) - you get lots of volatility on this type of news.
Enjoy.
-K
FHLB debt issuance up 500B 2007 v 2006. Over 50B to CFC.
Issuance Statistics
last week: Fed to Buffet: "PLEASE get into bond insurance so someone will be left standing after this mess plays out."
this week (maybe): Fed to BofA: "PLEASE buy CFC to avert a banking crisis (for now)."
Can't wait to read "Age of Turbulance, Volume II" by Ben Bernanke in 25 years.
Misean - Would he dare do a full 1 point cut?
Keep in mind that Wall Street thinks like O-Joe does, so it goes a long way to explaining why killing two companies instead of one is somehow a good thing for the stock market.
Peripheral Visionary said: "Of course, this could all be a hoax designed to make a lot of money in a spectacular short squeeze."
I'm just wondering if this is why Bernanke and the Fed are so calm, maybe this was one of those behind-closed-doors solutions that get worked-out when the banking system is stressed. Bank of America is a money-center bank---maybe they even get some kind of quid-pro-quo for taking on the risk/expense, even if it's just the thanks of a grateful Fed Chair that BAC can cash-in for a big favor down the road?
Sebastia
Hey Tanta and CR:
Did you know your blog shows up on the newsfeed for bloomberg?
Supposedly one of the most bearish things that can happen right now is a 400-point up day, since those precede major crashes. Well, we're not up that much, but we're near 400 points for two days (and more than that off the Wednesday intra-day low).
OT - following this stuff on CNBC in the middle of the day makes me feel a bit dirty...
homedad43 | 01.10.08 - 3:07 pm | #
Ya its much better to download 'Cramer On Demand' then watch them late at night after everyone else in the house has gone to bed... along with the 'normal' porn vids...
Sebastian you might have a point. Funny thing is that for weeks / months Banks have needed CASH, more CASH. Now, there is enough cash/credit to go out buy a competitor. How odd. Maybe it is preemptive...the Northern Rock thing scared a few people.
I'm just an engineer, but this makes no sense to me at all other than as a ruse to boost stock prices.
u always see these kind of squeezes when a stock gets beaten down this low. its its only chance. as i said before, we've heard these BAC buyout rumors many times before not to mention Buffett. BAC knows full well the carnage in the home mkt coming the next 2 yrs. they were the ones who came out with that reset chart update on Ivy Zellners original CS graph. they would be crazy to take on all of CFC's risk given their own balance sheet problems.
I'm just wondering if this is why Bernanke and the Fed are so calm, maybe this was one of those behind-closed-doors solutions that get worked-out when the banking system is stressed.
I thought the same thing - wouldn't you be doing stuff like that if you were fed czar? I'd be taking voice lessons in preparation of all the 'kumbaya' I'd be singing...
Even if this one does prove to be a rumor - you gotta know talks are going on somewhere...
Unbelievable. Crime in high places pays. The Tan Man was just given a DO NOT GO TO JAIL card and can keep his illgotten gains
Barley,
100bps screams desperation, and would have to crater the dollar. Maybe Bernutty is thinking of rolling out some of his hair brained schemes for avoiding deflation that he dreamed up staring at his navel in his ivory tower.
I don't know...gotta watch the signs. But that's just the first data I had to peak at today...and it sure smells funny. I mean everybody "knows" the market already has 50bps priced in.
Cheers,
Why didn't Bank of America buy Countrywide before instead of investing $2B? My guess is that they thought it could survive and the investement was sound. So why buy them now? I can only think that Bank of America feels their $2B is in jeopardy and wants to act (somehow) in their best interest. However, I can't see why they would take on the added debt. This "news" doesn't make economic sense if you are Bank of America. It would be easier to call your $2B investment, liquidate and move on. The taking on Countrywide debt thing (which you would do in a purchase) makes me skeptical that there really is a sale in the works.
Supposedly one of the most bearish things that can happen right now is a 400-point up day, since those precede major crashes. Well, we're not up that much, but we're near 400 points for two days (and more than that off the Wednesday intra-day low).
tj & the bear
i agree. we were due for a bounce anyway. why not help it along with a rumor.
Some great lines in this cnbc video on Countrywide
Cat is out the bag now
Video - CNBC.com
tj & the bear said: "Keep in mind that Wall Street thinks like O-Joe does..."
In my experience here, I've seen that there are a few smart bears here with a clear view of what's happening and a lot of ignorant ones who are just ditto-heads that don't really understand a thing.
So would it kill you to stop painting all the bulls with the same "clueless" brush?
Sebastia
Sam Sam - Unless I am wrong the current market cap is approx. 4.6B. So, they double down and walk away with a prize to slice and dice.
"Death throws"? Quel fopah.
Seb,
Where in my post did I say "clueless"?
I just stated that those in the business tend to be optimistic (as in "Optimistic Joe") and trade accordingly.
dryfly said: "Even if this one does prove to be a rumor - you gotta know talks are going on somewhere..."
Laws, sausages, and saving the banking system, you know?
S.
If you thought investing $2B in a dying company was stupid when BAC did so last summer, well, now you have your topper.
In my experience here, I've seen that there are a few smart bears here with a clear view of what's happening and a lot of ignorant ones who are just ditto-heads that don't really understand a thing.
Smart = knows the game is rigged
Clueless = market forces rule
Pretty much sums up your position?
reminds me of when Worldcom was going under back in July 2002....
This rally really isn't that spectacular, it's taken us back to Tuesday. Gold's a freaking tear though.
Cheers,
Sebastian -
What is the smart "bull" case right now? I'm bearish right now but have been a bull for many more years/months than I have been a bear. I have been bearish for about 9-10 months and cautious for about 2 years. I'd like to hear a smart bull case right now because I just haven't heard it yet - although I've heard several try.
I look forward to hearing your argument and seeing your data. Hard compelling data seems to be lacking in the bull camp.
hey all u bulls. u better sell now, the rally is peaking out and u are overextended. all the data is bad, bad, bad.
Rob Dawg said: "Smart = knows the game is rigged
Clueless = market forces rule
Pretty much sums up your position?"
No.
Smart = knows the game is rigged and market forces rule, but can tell which is the driving force at the time
Clueless = does what everyone else is doing without understanding why
S.
Even if this one does prove to be a rumor - you gotta know talks are going on somewhere...
The problem here is one of disclosure of exposure. We know a lot about the state of their servicing portfolio, but nothing about their own asset valuations. IMHO, CFC is bankrupt already, and any buyout talk is pure nonsense. The $2 billion is chump-change to BAC; they just bought themselves a piece of the carcass.
The problem that you have tj, which I'm sure you will fail to acknowledge, is that in the long term the market trends upward at approximately 8 %/year. That is very close to the house advantage in blackjack. Table players can certainly win in the short term, but the longer they stay, the worse their chances are.
In any event, caution is always wise in calling tops and bottoms.
I predict that those who predict will be unable to predict.
I'm with you Max. The only piece BAC might want is the servicing part -- that will be valuable in the long run, even if it soaks up some cash temporarily. I can't imagine why they would take CFC's "assets" onto their balance sheet (even with some serious arm twisting going on).
Marriage to be held on Consititution Ave. in Washington DC, reception to follow in a foreclosed house nearby, humble pie and crow to be served.
A lot of the 2007 faces of greed and perhaps criminal activity are vanishing from the headlines.
Say bye-bye to the face of CFC. Good riddance.
Another dose of Prozac for the our bi-polar market.
Aotc -
The problem you have is that both long-term average P/E's and Q are mean reverting. And both of them say this market is overvalued by 30%+.
In other words, the house may not be who you think it is.
Totally agree on the chances of any near-term prediction being correct however.
aotc,
Sure, the "normal" trend is upwards -- has to be with a growing population and overall economy -- and it's aided by survivorship and inflation. Big deal.
Are you stating that current circumstances are somehow normal?
BTW, anyone who has any knowledge of history prior to Alan Greenspan's tenure knows the strong bull market of the last 20 years is a historical anomaly. Buffet, Mauldin and others have noted that on numerous occasions.
Ahead, the saying in horse racing goes "All horse players die broke."
CNBC, Bloomberg, Fidelity, etc...that's kind of like owning the horse track.
Washington is leaking because it doesn't want (and cannot handle) very many bank runs. We will see these bank related leaks when there is something (anything) good to report to damp down fear.
has anyone wondered why these particular pieces of news, ie buyouts, are released midday as opposed to all the bad news which is typically released Friday after close?
Let me guess...The Fed needs a review on what created the boom and bust of R/E.
Save some taxpayer money. Use common sense. Use your brain. You guys along with feeble or no regulations created the boom and bust. ( would not it be hilarious if there actually was some sort of regulatory board in place at the time that did nothing ).
Regulations needed? Let me guess...there are probably millions of regulations in this country but who would have thought mortgage regulators would be an appropriate need during a boom? Obviously very few.
the stock mkt is expending its last few bullets.
I seem to recall that each of the bankruptcies of public subprime lenders last year was preceded by a buyout rumor. Most of those weren't entirely groundless: once the rumored buyer was in fact providing DIP financing, more often they were looking at an asset purchase.
I can't remember a rumored buyout that actually came to fruition as a full buyout of the equity--the actual buys (Fieldstone, Accredited) stayed out of the press until the formal announcement, or at least I recall being dumbfounded by the announcements....
I'm guessing an asset purchase here. If it's an actual buy, I'm reminded of HomeSide Lending....
FFDIC,
When that time comes, you may want to start your own "Bank Run" Blog. I'm sure you'll have lots of material to post.
"has anyone wondered why these particular pieces of news, ie buyouts, are released midday as opposed to all the bad news which is typically released Friday after close?"
Yes, the bad news normally accompanied by SEC filings. Good news is never substantiated and often never actually consummated.
MLM-I don't think a P/E of 15-16 on the S&P 500 is overvalued with interest rates where they are now and dropping. That doesn't guarantee the market will go up by any means. In all honesty, I am cautious and holding quite a bit of cash and defensive stocks. This is a very difficult market to trade either way.
tj-I dispute that there has been a 20 year bull market under Greenspan. 2000-2002 was one of the worst bear markets other than 1929-32. In fact, I don't even know if I'd call 2002-07 a bull market, since the S & P 500 high of 2000 was only exceeded for about 15 min and P/E multiples actually contracted from around 23 in 2002 to 16 today.
i was short LEND (American Home Lender) from 27 down to 6 before i closed it out. i watched it for a couple more months just to see what happened. up and down it gyrated from 4-14 on buyout rumors. eventually was bought but at around $5 IIRC. traders love that sort of stuff.
Takes BAC out of the market support role as they shoot their wad. We'll run out of brain-dead white knights before long.
aotc -
I'm speaking of the PE adjusted over a full business cycle (10 year average) ala Robert Shiller.
As for comparing PE with bond yields,
The so-called “Fed Model” attempts to value shares relative to nominal bond yields. There is no justification for this either in theory or practice. (Report No. 133 “The Myth of Yield Ratios.” 10th May, 1999.)
More at Smithers & Co. - q & FAQs
"...according to people familiar with the situation."
"...two people familiar with the matter said..."
We've heard these lines before. I'm willing to say outright (at the risk of eating crow) that these are rumors and nothing more.
BofA is neither knight nor a knave. They want CFCs servicing protfolio. The bank is a safe investment. Much of the rest stands a good chance of being indemnified.
They want CFCs servicing protfolio. The bank is a safe investment.
But would you rather snatch it up after b/k, or pay a premium right now? That $2 billion was just to give them a place in line.
strangely enough there is no mention here of 2 facts:
1) the convert that BAC bought from CFC is a resettable. so maybe, after falling all the way from 18 to 5 BAC already OWNS CFC if it chooses to. on the other hand they don't have to take on all CFC's obligations even if they own the company. they've seen their books. they have a right of first refusal. any price for CFC wouldn't be at premium.
2) before going into restriction on the stock in Aug, BAC's analyst penned out a report, where he put a liquidation value on CFC of $5. would they pay more now?!
personally, i think it's possible to work out a solution. big part of CFC's problem lies in their funding costs of 3000bps on 1yr cds (somebody made a REAL KILL on cds here, equity is peanuts) and 5.5% CD. BAC wouldn't have the problem. + when u say it's so stupid to buy them now, how stupid must HSBC and Wachovia feel buying Household and Golden West. do you think these 2 are better than CFC?! they've paid 2.5x book for that kind of crap. banc of america will get CFC at distressed level in any way.
in any case, i don't think it matters much to the total market. it doesn't mean any bottom is here. and murdoch's reporting habits are getting preposterous. next time there will be naked boobs in that sort of an article, i swear!
aotc,
Check out any long-term stock chart. After the '87 crash the DOW was under 1800, with recent highs going over 14000. You won't see a long-term trendline like that anywhere else in time, and it's all due to Greenspan's magic liquidity machine.
Oh, and Hussman has repeatedly blew truck-sized holes through the nonsense that current valuations are reasonable.
MLM-The reason interest rates are important is that investors can put their money into equities or bonds. Since equities are risky they demand a premium. Thus stocks at a given P/E are more valuable at lower rates. Also, low rates allow companies to borrow cheaply, thus increasing future profits, all things being equal. I don't see anything in the link that really disputes that.
aheadofthecurve,
you keep talking about a P/E of 16 but you never support it.
Every day, the Wall Street Journal publishes Birinyi Associates P/E ratios. Today, S&P stands at 17.8. To get to 16 P/E today, the market would have to drop 10%.
But there's already an earnings decline of about 5% projected for next quarter. So, to get to a P/E of 16 next quarter, the market would have to drop by about 15%.
do you think these 2 are better than CFC?! they've paid 2.5x book for that kind of crap. banc of america will get CFC at distressed level in any way.
Dog crap vs. cow crap is still crap. To me, the big question mark is their held mortgage portfolio valuation assumptions. My bet: those assumptions won't stand the light of day, and CFC is worth $0 right now.
Ahead of the curve -
15-16x p/e of the S&P assumes a pretty rosy earnings scenario and no slowdown let alone a recession. I see a recession (actually think it started last month) and at least 2 years of declining earnings. With the carnage in the financials the S&P p/e could be above 25x in no time.
"I don't think a P/E of 15-16 on the S&P 500 is overvalued with interest rates where they are now and dropping."
Earnings are projected to drop 9% this quarter with large expected writedowns in the financials, bad sales for auto makers, and smaller margins for retailers.
Commodities still seem to be sailing, but the 'E' of P/E is declining at the moment.
"They want CFCs servicing protfolio. The bank is a safe investment."
"But would you rather snatch it up after b/k, or pay a premium right now?"
I'd expect an orderly transfer of the servicing portfolio and the bank prior to any formal announcement of insolvency--can you imagine the chaos if things happened the other way 'round on a lender of this size? New Century and American Home were bad enough....
Good point on the bad reporting. I just noticed that it took three people to write up a story based on 'people'. The only bit of new information was in the first two paragraphs, with the rest being the recent history of CFC and BOA's investment in them. Even that section included the gem of "It isn't clear how quickly a deal might be struck, but two people familiar with the matter said it could occur very soon. It also is possible that an agreement could be delayed or fall apart altogether."
aheadofthecurve,
obviously u are talking about ex-badnews type of PEs of 15x. the only reason S&P ever looked so cheap was that financials were trading at 10x. now more and more of them trade at negative PEs, how do you put that into your model??
in 2000 stocks were more expensive, BUT now they are WAY more leveraged, if you account for financials properly. GS, MER, MS all have above $1tn in assets, think about it!!!
now of course the interest rates will fall. but when the recession comes profits will collapse, and your argument goes out of window (just like it did in japan in the 90s and in US in 2000)
Just bot 4500 CFC just under $5
i deserve to lose it all
I'm An Idiot | 01.09.08 - 3:32 pm | #
in still an idiot, but sometimes inside info is Wonderful
I'm An Idiot | 01.10.08 - 2:46 pm |
Idiot-
No, I am. I was thinking the same thing yesterday at $4.82 and thought I'd wait for it to fall a little more.
As Bugs said, "What a maroon!"
imagine the chaos if things happened the other way 'round on a lender of this size?
And maybe that's what we're seeing. Not a buyout per se, but an "orderly transition." There's been speculation in the past here about what a CFC bankruptcy would look like, and that the number of players even able to assume control of the servicing function is very limited.
There's going to be some pissed off creditors if BAC takes the servicing arm just before bk. Talk about a lawyer's dream!
max,
of course it is worth 0 and much below that in liquidation. so are probably mos t of the IBs & GSEs. i think BAC will be cherrypicking the assets here and taking the prime servicing portfolio. actually to be fair, that BAC analyst was right on the money and was deducting like 20% from even their MSR valuation, and discounting prime portfolio quite a bit. i was short CFC for a VERY long time but covered mostly in the teens. personally, i don't think it's the most exciting short out there.
"They want CFCs servicing protfolio. The bank is a safe investment."
Didn't Tanta just point out that these supposed servicing revenue streams are becoming quite toxic themselves? And we can expect just more squeezing of these margins as delinquencies rise? I assume BAC is experiencing similar margin squeeze, and more pressure on cash requirements to play in the RE servicing area. I don't see the attractiveness.
There has to be more to this story, because BAC can't buy CFC lock, stock and two smoking barrels as it would put them over the 10% federal deposit cap. I would guess they're buying themselves a mortgage servicer (to further their ambition to be the biggest bank in America), then cherry picking what other parts of the operation they want to keep and other parts they'll have to unload. BAC is generally not the sharpest knife in the drawer when it comes to investment banking stuff, but this deal may actually be a lot smarter than people here realize.
BAC has no shortage of issues of its own with a crapload of HELOCs and CC debt. This could be the coup de gras.
aotc -
From the Smithers FAQ:
In Report No. 133 we showed that the observed positive correlation between dividend and earnings yields on shares and the yield on bonds applied only in the US from 1977 to 1997. It has not applied since. Furthermore, there was a marginally stronger negative correlation from 1948 to 1968 and no long-term relationship whatever. The bond yield myth is thus an egregious example of data mining.
The idea of deciding whether to own stocks or bonds based on comparing P/E to bond yields is nonsensical. Not only that, it doesn't work.
Ask yourself, why might bond yields be low? Because the economy is doing well?
As tj & the bear points out, Hussman has also written about this: Hussman Funds - Long Term Evidence on the Fed Model and Forward Operating P/E Ratios
If you own stocks based on bond yields, good luck with that, as they say.
Remember that when Enron was in its death sprial it was nearly aquired by Dynergy (or Duke, or someone like that).
For the "no recession crowd...Why is the fed cutting if we will avoid a recession and only have slowing growth in the first half of 08 followed by continued growth in the latter half...about the time the cuts will make a difference?
Pay attention to what they do, not what they say.
and one more thing- doesn't BAC have a very strong self-interest in pumping up CFC stock? Thinks it pumping, or just trying to start of bidding war to reduce its loss?
OT but a strong revision for a healty economy:
CHICAGO, Jan 8 (Reuters) - The National Association of Purchasing Management-Chicago on Tuesday released annual revisions to its monthly business barometer, revising the December reading to 52.0 from 56.6 reported on Dec. 28.
The revisions also showed November's barometer at 50.8, below the 52.9 originally reported and barely in expansionary territory.
healthy ;..
"I predict that those who predict will be unable to predict" if your prediction is true it will be incorrect.
Didn't Tanta just point out that these supposed servicing revenue streams are becoming quite toxic themselves?
Yup, which would come straight off the valuation, one would think...
AMEX visits the confessional...
will-I predicted you would say that...
Turbo - big dittos.
I'd agree with some of you who think this is a shotgun wedding, but I probably would disagree as to whom will have the shotgun poking them in the back. I'm thinking it will be the minister.
for FFDIC,
reading thru the QBP, I notice that Table IV-B shows 476 institutions in Risk categories II, III and IV (none named tho).
I presume those are the ones getting extra attention ?
Mike,
Link?
Sorry, here it is: NAPM rev. Dec. PMI to 52.0 from 56.6
NAPM-Chicago revises Dec PMI to 52.0 from 56.6
| Reuters
COME ON PEOPLE
THIS IS A PUMP, DUMP AND SHORT PLAY TO TRY TO MAKE UP SOME OF THAT 2 BIL B of A INCINERATED AT $20 BUCKS
IT TOOK ONE PHONE CALL TO WSJ DO THIS
I GUARANTEE IT DOESN'T MAKE
OT This has to be my favorite bit of writing for the day - from an article on Amex's problems
While rich people are still doing fine, American Express said the slumping housing market has begun to take its toll on the American consumer. Charges on the company's roughly 84.7 million cards began to tail off in December, American Express said, and more clients failed to repay their debts.
Really. Rich people are still doing fine. Perhaps, because they are rich?
I have to believe that Kenny Boy matriculated from this great institution....
Millionaire University
Very funny:
So the rich people still have money?
So when the rich go broke then the trouble really begins?
Anyone got an article on the linkage between federal funds rate target and mortgage rates? The lack of correlation confuses me.
Nail on the head Schnaps.
BAC could well lose a few billion on this, but they can't fully consolidate CFC even if they wanted to, so their loss is limited to whatever capital they put into the deal. The Feds are on the hook for what, 50 billion already, and I would imagine they'll be funding a lot of the mortgage portfolio and servicing leakage that's bound to occur over the next few years. Think of this as a privatized version of the Resolution Trust Corp, but still funded with government cash. BAC shareholders aren't the one's who will get the worst rogering from this - the American taxpayer is front and center here. I doubt that's in the deal prospectus anywhere. For the cynical here (which would be everyone), it is just a continuation of the privatizing of profits and socializing of risks process that keeps America great (note sacrasm).
Real estate bubble bursts.
Feds "encourage" good banks to acquire bad banks.
How'd that work out for Japan?
In the trenches said: "...I'd like to hear a smart bull case right now because I just haven't heard it yet - although I've heard several try...."
My particular "smart" bull case is that in the absence of clear, unequivocal evidence indicating a severe bear market and associated recession on the way, traders and investors are almost always better off either sitting still with their long positions or looking for good reactions to buy into.
There's an incredible bullish bias to the stock market in all time-frames, making it extremely difficult to time the market consistently and profitably. That's the reason why indexing and LTBH are so tough to beat as long-run investing strategies, why 75%+ of active fund managers can't beat the SP500.
For me, the "clear, unequivocal evidence" of an imminent severe bear market and recession would be things like:
1) Wright Model "B" Recession Probability peaking above 50% (perfect record forecasting the past 6 recessions).
2) At least two consecutive quarters of falling TTM as-reported SP500 EPS.
3) CPI-U inflation persistently above 4.25% and rising.
4) Real (after inflation) SP500 EPS yield below 1%.
5) 2-3 months net job losses (non-farm payrolls) within a quarter or two.
And then there's the Fed cycle. We're in the wrong part for a recession.
Notice that things like housing permits, starts, and prices aren't on the list.
If housing-related problems are a serious threat to the economy, the effects will have to show up as important weakness one way or another in broad-economy measures.
Sebastian
Thanks Mike
Re the 10% rule, isn't there some exception if the acquired entity is a federally chartered thrift? Isn't Countrywide Bank a federally insured thrift?
Aheadofthecurve,
With a historic credit bubble we also got bubbling corporate earnings.
With a popping credit bubble, we'll get collapsing corporate earnings. It's only just begun.
Also, as we saw during the recent tech bubble, lots of earnings numbers are manipulated during a bubble and only come to light later.
Be careful calling today's PE ratios tame.
"BAC shareholders aren't the one's who will get the worst rogering from this - the American taxpayer is front and center here. I doubt that's in the deal prospectus anywhere."
The WSJ issues a prospectus with their rumors nowadays???
It's just amazing to me how quickly folks go from "people familiar with the situation" and "two people familar with the matter" to discussing the supposed details of a done deal. The rumormongerers don't even have to provide any details; the readers fill them in themselves, circulate them and rehash them endlessly on the 'net...until a couple of days have passed and we move on to a new rumor.
Just how long has it been since the last time "people close to the situation" told us that BAC was buying CFC, anyway?
Lyndal - WSJ story in the link now includes:
Federal law prohibits a bank holding company from controlling more than 10% of U.S. deposits after acquiring another bank.
But the law includes a caveat: The 10% limit doesn't apply to federally chartered thrifts, meaning a bank-holding company may control more than 10% of deposits in the U.S. following a thrift acquisition. Since a Countrywide subsidiary called Countrywide Bank is a federally insured thrift, that may give Bank of America room to maneuver around the deposit cap.
MLM,
Watch for exceptions to be made in federal law or emergency powers expressed if there is an emergency that feds feel warrant special treatment. I would not place any bets on static banking law going forward for what that is worth.
Sebastian, I've argued these before and not gotten a response, but it keeps being late in the discussion tree.
seb says - "For me, the "clear, unequivocal evidence" of an imminent severe bear market and recession would be things like:
1) Wright Model "B" Recession Probability peaking above 50% (perfect record forecasting the past 6 recessions)."
Kirk says - The creator of the Wright B explicitly stated some assumptions that had to remain valid for his model to work - their non-existence was the reason the model doesn't work for recessions prior to the six you mention, as well as for several in other nations. In simple sum, it's an assumption that the various rates involved aren't being manipulated through various interjections of money -- like the discount window. Since the discount window's been used recently, I find myself not giving this model 100% trust.
Seb says - "2) At least two consecutive quarters of falling TTM as-reported SP500 EPS."
Kirk says - OK. The indicator work for many of the recent recessions. Not, IIRC, for the 1980 recession, and reporting differences make it impossible to validate prior to about 1965, but...
Seb says - "3) CPI-U inflation persistently above 4.25% and rising."
Kirk says - Full stop. CPI-U inflation measurement standards have been significantly revised over the past couple of decades. Using any of the standards of prior to 1991, we meet your test.
Seb says - "4) Real (after inflation) SP500 EPS yield below 1%."
Kirk says - This has been a trailing indicator in almost every recession except 2001. And you seriously use it as a LEADING indicator? OK.
Seb says - "5) 2-3 months net job losses (non-farm payrolls) within a quarter or two."
Kirk says - In more than a few recessions the timing of net job losses was a confirming instead of leading indicator of recession. That's twice you've done this.
Seb says - "And then there's the Fed cycle. We're in the wrong part for a recession."
Kirk says - This one's got me stumped. I mean, I don't know what you mean by "Fed cycle". I can't agree or disagree - no basis for comparison.
Sebastian -
Everything you've mentioned is something you'd see well after a recession has started.
If you're in a business, talk to your customers and hear what they are saying - I've seen a massive change in sentiment occur over the past 6 months which has only picked up steam - board rooms and consumers are planning to pull back. Thats what I see on the front lines. You need to focus on leading indicators not lagging.
By the way, I think we've already tripped 1 (although this indicator basically assumes the bond market gets it right), 2 (you'll see this happen in Q4 which is now over) and 3, and my guess is 5 is only a few months away based on the hiring plans I am familar with - this is also very much a lagging indicator. Not sure of the relevance of 4 - you need a 50p/e before we're in a recession? That's absurd and entirely irrelvant - when that happens we're either in the greatest stock market bubble of all time or in the trough of a recession.
Still waiting for the "smart" bull argument - yours wasnt very compelling.
Housing is relevant - so you cant ignore it - so is contraction of credit - those are 2 highly reliable leading indicators - dont ignore what they're telling you. Looks like they've been pretty good at calling where we are now - the debt markets surely think so - and it looks like the equity markets arent too far behind.
There is no such thing as the unequivocal evidence you're looking for until its after the fact. By then its too late.
I appreciate your views but I'll continue to hold my puts on the financials and stay out of domestic equities - that strategy has worked very well over the past 7-8 months.
I think the reccession is probably already here and there is much risk to being long equities.
Time will tell.
From the WSJ...
"When the Federal Reserve approved Bank of America's acquisition of LaSalle in September, the combined bank grew to hold 9.88% of the country's deposits. Federal law prohibits a bank holding company from controlling more than 10% of U.S. deposits after acquiring another bank.
But the law includes a caveat: The 10% limit doesn't apply to federally chartered thrifts, meaning a bank-holding company may control more than 10% of deposits in the U.S. following a thrift acquisition. Since a Countrywide subsidiary called Countrywide Bank is a federally insured thrift, that may give Bank of America room to maneuver around the deposit cap.
It isn't known if Bank of America is trying to structure the deal in a way that would help shield the bank from some of the biggest financial uncertainties facing Countrywide."
You need to read these articles from the bottom up....If they aren't trying to structure the deal to shield it from the largest problems, then they are nuts.
BoA could be blinded by trying to acquire for strategic reasons. They obviously have the leverage in this deal and I can't imagine that they wouldn't push for every possible concession.
BoA paid $21 billion for LaSalle. Maybe they overpaid, but they went from close to zip in Chicago to the largest bank.
I've learned from FDIC sources that they are now projecting 300 bank failures and are seeking additional re-hire authority (to bring back retirees)for the DRR division. I anticipate the 300 bank failures are spread out over at least a 2-3 year timeframe at this point.
FFDIC | 01.10.08 - 2:34 pm
FFDIC, Conjure Bag wants to know if you dusted off your brief case as he suggested to you some months ago.
Sebastian, The stock market, and your portfolio should be telling you we are in a recession. Think about how your NEW trade worked out.
Long term NASDAQ holders in 2000 are still 50% under water - nominal. How long should they wait to break even inflation adjusted (running at 6%+)?
O-Joe, do you hear what Average Joe is SAYIN'?
Feel it and weep!
With all the bull and bear talk here I think there is a pretty big disconnect with what is probably the most important feature of the equity markets, and that is the extreme bifurcation of both returns and business prospects by sector. Sure if you are a financial company, or a housing company you have gotten or are getting your head handed to you. If you are not, then it may be an entirely different scenario.
I've been sympathetic to the bear view on housing and finance since late 2006. The bell ringing event for me was the bankruptcy of Ownit. They were a fairly large and diversified subprime lender and with little or no fanfare just went bust. It was pretty clear that this was going to be large and that bets should be made accordingly.
However, it is also clear that we are in the middle of the largest global boom in the history of mankind and that is not going to stop because too many spec condos were built in florida, nevada and california. About 1/3 of the worlds population is changing their living standards from subsistence to something better. The biggest early winners are commodity and infrastructure plays for two reasons. First, in the 90's there was almost zero greenfield development in a wide variety of natural resource sectors. Second, the marginal propensity to consume commodities is much higher at lower income levels, or to put it at its simplest, if Buffet makes another billion dollars he does not eat any more meat, use any more gasoline or install plumbing in his house, while the same is not true for someone living in a hut.
To look at the equity markets thru either lens without cognition of the other is a big mistake. In the whatever its worth category, I have always found it easier to make money on the long side of markets, even when I have the right view of the short side. I guess the reason is that when on the short side, there is no natural end to excess, but when on the long side value can be measured absolutely.
If anyone wants to bet a subscription to the new CR housing letter, I'll take the side that the Dow closes higher 30 days from todays close.
Kirk Spencer, now that I've generously shared, please extend me the same courtesy and tell me the objective, independently-verifiable methods you're using for measuring the health of the economy.
I've said "no recession now or at any time in 2007 and no recession in 2008" based on my methods and I still stand by my statement.
I propose a challenge, your method and forecast against mine. Okay? Nothing like actually putting yourself out there to really clarify things, am I right?
Sebastia
In the trenches said: "...Time will tell."
You have to place your bets before the horses come out of the gate.
All I can tell you is that I've got all the data I mentioned right here in front of me on charts, with the appropriate recession ribbons overlaid, and I'm satisfied with my judgment about what they're telling me.
Sebastia
david_in_ct,
You're on; I don't doubt you're right in general, but I think your timing is off. Besides, the stakes are too good to pass up, win or lose.
Dow
Dow closes less than 12,853.09 Fri. Feb 8.
If anyone wants to bet a subscription to the new CR housing letter, I'll take the side that the Dow closes higher 30 days from todays close.
david_in_ct
and I trust Sebastian to hold the stake
and I trust Sebastian to hold the stake
ratefink | 01.10.08 - 7:07 pm
Be careful. He may buy Men's Warehouse stock with it. There's a global boom in Chinese made men's suits and they have a catchy commercial.
david_in_ct, So you're betting on emerging markets? How do you value those in their opaque financial markets? My experience with 3rd world companies is they get looted at the first hint of a downturn and vanish without leaving a trace. And to boot during a boom they get bid up to the moon - precisely where they are now. The demand side of their business is drying up. Won't be long, and I am betting that way. At least that's my game plan. The hedge & MM funds need to get the first whiff of trouble and it's all over in a flash, like OwnIt.
ratefink,
done.
barely,
i agree with you on the opacity of emerging market co's. i wish i had better insight there. i take a more conservative route and bet on the first world producers. my two, largest exposures at the moment are US based natural gas (XTO, HGT) I think that the oil/natgas btu arb is going to resolve over the next while. Even at the current henry hub strip these are both good plays. The CEO of XTO (Simpson) is about the best in the business. Both stocks have been running of late.
I am picking thru copper companies deciding where to place bets. With US housing collapsing it is remarkable that copper prices have maintained and speaks directly to 2nd and 3rd world demand. There is a pretty large short interest in FCX which might have been a clever idea had we had the same housing set up 20 years ago and US demand was much more important, but its not. Also there has been a recent technological change which is going to allow for copper cast rotors in electric motors. This is going to add a chuck to demand though i have not run any numbers yet to get a feel for what it might be. One of the big themes i am willing to bet big on going forward is that electricity is going to become a much larger part of the energy mix as the climate stuff takes hold. This too will not be bad for copper and those that mine it.
The way I figure it, most of these properties are going to be worth , what, 40 cents on the dollar? If BAC buys CFC at 30 cents on the dollar, then they're getting a deal.
david_in_ct Can you pass the kool aid to me?
At this stage, only chumps would buy emerging markets or commodity stocks.
THe time to buy either was in last 98 and again in 2001-2002.
And for those that are banking on a global disconnect, where emerging markets can grow amid a U.S recession, please pass some of that kool aid my way. It must be some good stuff.
But in all reality, the U.S is a much larger portion of global GDP than Asia was to Global GDP in 1998, yet Asia unravelling was able to reek havoc on our market. Now, you guys are telling that the world's largest economic superpower hits the skids and the emerging markets or commodities are a good buy.
The U.S economic slowdown will spread to the rest of the world as little as subprime spread to the U.S housing market (please note the sarcasm).
Please guys, let me know where I can get the kool-aid.