Countrywide Financial Hasn't Failed - To Disappoint

This year, Countrywide (CFC) has offered some outstanding opportunities for bearish investors. Despite the gathering storm of the subprime crisis (and even after that storm had hit!), Countrywide's management could be relied upon to provide cheerfully optimistic assessments and some investors were more than eager to either grasp at these straws or try their luck at bottom-fishing. Neither of those two approaches proved overly lucrative, as the stock has fallen steadily from a high of over $45 in January and currently trades at $9.80.

As the subprime fiasco deepened, management was reliably consistent in being too optimistic in its assessments. Earlier in the year, Mr. Mozilo downplayed the potential impact of the subprime crisis on the company. In August, the infusion of capital from Bank of America was supposed to solve Countrywide's problems. However, in late October, the extent of those problems became more apparent when Countrywide announced that it was forced to write down $1.2 billion in the third quarter. Nonetheless, it promised a quick return to profitability. To use a now hackneyed phrase, the market reacted with irrational exuberance and Countrywide stock jumped 32% on 26 October.

For those bearish on Countrywide, this burst of unfounded optimism, along with several other such outbursts during the course of the year, has provided ample opportunity for profit. (I began to purchase puts when Countrywide stock stood at over $28; thus far, they have appreciated 30-250%.)

With the stock down to $9.80, some might see an opportunity to finally pick up shares on the cheap. Concurring with the promise of a return to profitability, the consensus EPS estimate for this quarter is $0.19; the estimate for next year is $1.73. Beyond that, projected EPS growth for the next five years is a respectable 11.42%. Shares trade at a trailing twelve month price to book of 0.39 and a price to sales of 0.24.

However, investors should not be too hasty -- Countrywide still has great potential to provide further disappointments. Consensus earnings estimates obscure the wide range of actual predictions, with estimates for the fourth quarter ranging from a loss of $.050 to a gain of $0.59 and estimates for next year ranging from a loss of $1.00 to a gain of $2.94. In this case, I tend to go with the lower numbers -- even if Countrywide does not lose money, I think it will disappoint in the amount that it makes, as profit estimates continue to be revised downwards. Indications are that this trend may continue; for November, Countrywide's loan production, though up 5% from October, was down 40% from the same month last year. At the same time, delinquency rates have increased to 6.43% of loans serviced. Even the "Hope Now" arrangement, if successful in preventing some foreclosures, will also lower previous expectations of future income.

Similarly, the book value of Countrywide's stock is based upon assets of dubious quality. On 30 September, Countrywide reported assets of $209.2 billion. Mortgage loans held for sale totaled $30.9 billion. Of these, $5.7 billion were subprime and, not surprisingly, may be somewhat difficult to unload, not to mention accurately value. Countrywide held an additional $13.1 billion in trading securities, with a further $1.8 billion pledged as collateral. Of these, $9.4 billion were mortgage pass-through securities and $2.7 billion were CMOs. All were rated AAA as of 30 September, but, in the current environment, these are always under threat of downgrade. Loans held for investment totaled $83.6 billion, with an allowance for losses of $1.2 billion. (Of these, $1.1 billion are nonprime.) Countrywide transferred $14 billion worth of loans from the held for sale category to the investment category, as it realized that it will have to hold onto them, recognizing a loss of $0.7 billion in the process. Investments in other instruments came to $27.1 billion, to include $19.7 billion in mortgage-backed securities. Mortgage servicing rights were calculated at $20.1 billion.

Though industry experts are better suited to calculate more specifically the possible extent of future writedowns, from the data above one can see that several billion in value could easily disappear if some of these assets were revalued or the mortgage crisis deepens. Countrywide's shareholders' equity amounts to $15.3 billion; a writedown of $10 billion -- huge, but not inconceivable, looking at the numbers above -- would bring the book value down to less than $9.25 a share.

It almost seems like we are overdue for another cheerful announcement, doesn't it?

Though Countrywide has the potential to disappoint yet again and the stock may still go lower, the risk-reward ratio is now much higher than it was at the end of the summer. Though I remain bearish on the company, I do not think Countrywide will slip into bankruptcy (of course, I could be wrong!) and thus the bottom may not be far off. Consequently, I am holding my current puts, but do not see adding to them -- there are more rewarding bearish investments available. At the same time, based on what I have seen of Countrywide's performance and tendency to overpromise, I think it is much too early to take a bullish position on this stock.

Disclosure: Author is long Countrywide puts

Comments

[H2O:]

WEll if you want to bet on Countrywide - Try this one - they will have a lot of liens against there properties - they forclosed on. Many due to them being junk house's - with no up keep....

Foreclosure Activity Up 30 Percent in Third Quarter
RealtyTrac Staff
Foreclosure Actions Filed Against More Than 446,000 Properties
Activity Up Nearly 100 Percent From Q3 2006

A total of 635,159 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 446,726 properties nationwide during the third quarter of 2007, a 30 percent increase from the previous quarter and an increase of nearly 100 percent from the third quarter of 2006, according to the RealtyTrac U.S. Foreclosure Market Report. The report also shows a foreclosure rate of one foreclosure filing for every 196 U.S. households for the quarter.
www.realtytrac.com/new...

2007 Dec 17 09:20 AM

[H2O:]

~ America once Again Is Called Upon To Rise's Up - To Fight In-Justice ~

America is once again in a CIVIL WAR - once again looking to free the slave's - From cheap-slave-labor - driven trade DEALS ...

McCain is right - So the first thing is a strong shut the border
bill - in it resending the free trade deal with mexico - So the
mexican poor can start re-building there life - Also in it heavey
penalties for the coyoties and drug runner's and sex runners - and
the fines so high big-biz will not dare explote these humans - across
the border.......

These human beings are endowed by their creator with certain inalienable rights - and no American big-biz should ever be allowed to explote cheap-slave-labor - Never Again In America ......

The Good of America -VS- The Evil of America !!!


"" In Durham, McCain told the skeptical employee at Goss International
that under his bill, illegal immigrants seeking to become citizens
would have had to pay fines and get in line behind those here legally.
But he also offered a broader perspective.""

"They are God's children. They are human beings. Many of them come
just because they need a job. And I think many of them, as you know,
are badly exploited and mistreated by these coyotes and others," he
said. "So I think we ought to be sure we look at the humanitarian
side of this issue to try to make sure that all human beings are
endowed by their creator with certain inalienable rights, whether
they are citizens of this country or not."

news.yahoo.com/s/ap/20...;_ylt=AtMP64k_lJyFFA7m...

2007 Dec 17 10:10 AM

[Zakia:]

Don't deposit at Countrywide banks and financial centers. Learn more about the national mortgage crisis and Countrywide's role in it. Visit dontdepositatcountrywi...

2007 Dec 17 12:26 PM

[jack kreg:]

Mozillo, said last year, "market downturn would be hardest in decades", also, never saw a downturn in real-estate that did not lead to recession". I guess that the author only listens when it fits his ideology.

2007 Dec 17 01:58 PM

[H2O:]

There you go forgetting Native American's again - HELOOOOOOOOOOOOOOOOOOO... - were right in front of you - PLZ don't tell me - your going with that propoganda - genocides of the American Native's was and is a good thing ?????

Why is it when it come's to Native American right's - there is no where in sight - the ADL - and or the ACLU ......

What about Native Right's - are they taken on how school's in America still depict a Native American and call themself's the savage's ????

Or how billion's been stolen from Native American's ?????

How how countrywide use's racist term's towards Native Americans????

Nope but they sure can run out and say respect the racist mexican's .......

ADL Urges Candidates to Keep Debate on Immigration Policy 'Respectful'
news.yahoo.com/s/usnw/...;_ylt=AoEj86h4nc8lMSEG...

Although we constantly complain about the increasing racism, discrimination and poverty that Hispanics face in the USA, Indigenous Mexicans suffer the same problems in Mexico.

In a nation devoted to celebrating its Indian heritage, the terrible irony is that Indians are despised. "Don't behave like an Indian," are common sentences heard among the white mestizo (person of mixed race or blood, specifically a person of mixed European and Indian) and the criollo (direct Spanish descendants) families. The Indians are despised for their physical appearance, their poverty, and their language. Racism enters every criollo and mestizo family, defining the value and the place of the children according to their color. The darkest one may become the outsider, while the fair-skinned one is a prize.
www.hispanicvista.com/...

www.globalexchange.org...

www.nytimes.com/2005/0...;en=50841bbd82cc3976&a...

www.mexicomatters.net/...

2007 Dec 17 07:13 PM

[H2O:]

~~~ MEXICO - DECLAIR'S WAR ON THE UNITED STATE'S ~~~

ROCK'S BRICKS BOTTLES - BACK-UP - BY A HEAVEY ARMED DRUG GANGS
- SANCTIONED BY MEXICO !!!!

THEY ARE TIRED OF FREE SLAVE LABOR - AND STEALING OF THERE COUNTRY WITH FREE TRADE ....

NOW WE HAVE BECOME ANOTHER ISREAL - WITH MASSIVE IMMIGRATION - SAYING
THEY OWN AMERICA !!!!

Border Patrol fires tear gas into Mexico

SAN DIEGO - Border Patrol agents are firing tear gas and powerful
pepper-spray weapons across the border into Mexico to repel what
the agency says are an increasing number of attacks by assailants
hurling rocks, bottles and bricks.

2007 Dec 18 01:29 AM

[Sticks:]

Whenever thinking about Countrywide(CFC)...ple... note that in Spring 2007 (yes just this year) it became a Federal Saving Bank (FSB) with FDIC Insurance for the depositors. Shareholder equity is subject to protecting depositors and not just the broader CFC assets. Therefore, who really owns CFC...shareholders or the Fed's? BK is not the only way the CFC shareholders could lose ALL their equity! Too BIG to fail...but not to BIG to be taken over!

2007 Dec 18 12:34 PM

[Arohan:]

Fears are overdone. Mozillo maybe too optimistic in some eyes but he is also an excellent operator. We will soon know if CFC's view of future profitability pans out in reality, but one thing is for sure, CFC is too big to fail.

I agree with the author that the stock is very close to the bottom, if not already there. Therefore, and knowing with great probability that CFC will not fail, this is a good time to go long. Actually, this may be the best time in decades to go long on many financial names

arohanvalue.blogspot.c...

2007 Dec 18 03:25 PM

[H2O:]

CUM-ON Bush SR - whats a little toe-tapping with a Clinton - to keep your world dom's going ......

Whats wrong - you really thought being put in a casket and saying your reborn - not'ts working - now you can see there really is a GOD - not your PLAY GOD - you control everything ????

WHAT YOU GOING TO DO WHEN GOS SHOW'S HIS FACE ????

FALL BY THE WASTE SIDE LIKE THE GOLDEN CALF BUILDER ????

GOD DON'T NNEED A SPACE-SHIP - TO REACH YOUR ASS !!!

Caught on tape: Death star galaxy
By SETH BORENSTEIN, AP Science Writer
2 hours, 40 minutes ago

WASHINGTON - The latest act of senseless violence caught on tape is cosmic in scope: A black hole in a "death star galaxy" blasting a neighboring galaxy with a deadly jet of radiation and energy.




news.yahoo.com/s/ap/20...;_ylt=ArBBXepdmhQV.muv...

..........

2007 Dec 18 09:08 PM

[H2O:]

Mozillo is a lying cheating racist condoming fool .......

THOSE MEXICAN'S THOUGHT THEY OWNED THERE HOUSE"s TOO - SAID TO A NATIVE AMERICAN .........

INFLATE THE HOUSE PRICE FAKING WHAT THE HOUSING MARKET IS REALLY WORTH - THROUGH RACIST ADD ON FEE'S - ORIGANAL WHATS OWED 24,600 - MAKE IT 35,000 - with illegal fee's - then push the housing market up .......

now you add on that kind of housing mark-up and add that to a 500.00 dollar house - then hell yes you can push off on the tax-payer inflated price's.........

and I have proof - of all that .....

now add in how they did it - have there own bought part of them landsafe - that priced the house's = for them -with over charging fee's ........

so they can cover=up - having there own apprasier - the housing price - never see's it's price is based on there over-charging of fee's added onto the price ........

so for the IDIOT's there price is based on fee driven price's of house's ...

and if IDIOt countrywide CEO is not a racist drive up fee based housing price's - fool - why does it not make-right - what was-made wrong ????

SOOOOOOOOOO nope countrywide CEO - is killing Countrywide/landsafe - by what they are .......

...........

2007 Dec 18 09:26 PM

[H2O:]

So the only question become's - WHY is not this Mozillo CEO of countrywide/landsafe - in JAIL serving 50 years' and all of the board and every body in corpo office ????

and the lawyer's that made it possible ????

and the dip's in the FED office that allowed them to drive-up housing price's - with illegal racist fee's ????

............

2007 Dec 18 09:34 PM

[H2O:]

So why not do the easy thing ??? round up people like Mozillo - throw them in jaIL AND THE SPECULATORS AND ALL THE TOP - AND MAKE A SIMPLE SETTLEMENT WITH THE RACIST THING - AND WHAMOOOOOOOOOOO
- YOU HAVE PUT BACK INTO THE MARKET THE HOUSING SECTOR !!!!
sows your in charge AND WILL NOT ALLOW THESE THINGS ..........

...........

2007 Dec 18 10:08 PM

[H2O:]

FEDS want to show there in charge - Time to start a full
blown investigation into those company's and Finacials -
That pushed sub-prime based loans - and pushed those sale's
onto the open Market - Knowing full well they were fee-based
pricing hike's and targeted minorities with those inflated price's...

Time to Stop the ENRON of Housing

Now Only a IDIOT would think - A 68% increase - with
a 10% drop from the prev Month is GOOD NEWS ...

Or that IDIOT maybe counting of the TAXPAYER - paying
and buying those high fee based inflated housing price's ????


US foreclosure filings up 68 pct in Nov.

In all, 201,950 foreclosure filings were reported last month,
compared with 120,334 in November 2006, Irvine-based RealtyTrac
Inc. said Wednesday.

Last month's filings fell 10 percent from October's 224,451.

2007 Dec 19 08:28 AM

[H2O:]

Now just play what-if - there still wanting too Do a
fleecing of the American People !!!


The Feds FHA and HUD will need to look over every - Mortgage
there being sold - from the appraisals - Why they based there
price and how they priced the housing Market the way they did.

When these company's have been crying around for - Higher FHA
buying power - and have been crying around - It cost 50,000 for
each mortgage Forclosure and you already have a florclosure rate of
over 200,000 a month - These mortgage company's are already
looking to dump - Billions on the American taxpayer ...

Now you add in those fee's and the over pricing in the first
place - Your looking at not only a bail out - But a fleecing of
the American Taxpayer ....

So until the FEDS FHA and HUD has in place a system to evaluate each
and every mortgage there looking to back - NOT ONE MORTGAGE SHOULD BE
BACKED BY AMERICAN TAXPAYER'S ...

HELL WHY NOT JUST PROVIDE THEM WITH TRUCKS - FULL OF FORT-KNOX GOLD ???

2007 Dec 19 09:23 AM

[H2O:]

Now if a person is living in a forclosed for sale by owner
house and trying to get the mortgage in there name - and the mortgage company is charging fees on the orginal mortgage made by the for-sale by owner ...

Okay simple example - the pay-off on the orginal mortgage - was 24,600 - now after a year - it's up to 35,000 - thats a monthly rate of charges of 833 dollars - on the original mortgage - They put on a Native American - and or other Minoritie's - That got caught up in those sub-prime for-sale by owner's ....

So all they have to do is sit on there butt's and collect - 833 a month - in fee's - before they work things out ...

After 1 year they will collect 833 a month in fee's - around 10,000 a year - after 2 years thats a price of the original loan of 24,600 - To 45,000 - just sitting on there butt's not working it out ...

Then they can use - those fee's as a cost of the house's - THUS driving up the housing MARKET .....

There is no break down in the cost of a house - you will never know - if it's the real price - or a house driven up by fee's ....

So it's in there best - rich-greedy interest - to sit around - and let the fee's run-amonk ......

Then it become's easy to say to a Native American - The mexican's thought they owned there house's too - Because after all the housing market driven price on fee's - just cut you out .......

and that does not even cover the thousands invested in the house -by the Native and or other Minorities

.........

2007 Dec 19 03:24 PM

[H2O:]

Max Fraad Wolff:
Mortgage Market Metastasis

~ For I Have Numbered You All ~

When you take a regulated market - and trash it for - a free market - Greed becomes the motive of the day ...

Traders become the regulators and you see enron style laughing - all the way to the bank ...

Moral ethics no longer rules the day - Greed becomes the rally cry - laughing at the people suffering ....

But hey something must DIE - for something else to be born - The New World Order must be the cry of the day !!!!

I will sacrifice my brother and sister - for there love for me - NO love greater for me - then there very life's sacrificed on the alter of GREED ....

Come one - come all - I control all - Your number is - who I say is great of with-in you all ...

I set you to buy a house on the hill - I told you God was for you - Now that dream is gone - I shot your credit number down to nothing - Now I control all ...

Beg Beg you all - Nothing was ever for you - I have controlled all - For I have Numbered you all ....

..........

2007 Dec 20 01:11 PM

[H2O:]

This is Why we were lied into IRAQ so easy - The NEWS
no-longer tell's the truth - and the story of a IDIOT man
relying on his faith - almost killed his KID'S .

THE FOOL GOT HIMSELF AND KIDS LOST - IN SEARCH OF KILLING
A TREE - FOR HIS WILD'S OF BEING A IDIOT ....

BUT NOOOOOOOOOOO - The Media would have us think of this IDIOT
as some-kind of hero.

ASK THE REAL QUESTION'S - OF WHY - HE WAS SUCH A IDIOT - TO TAKE
HIS KIDS OUT DURING A BLIZZARD ?????

JUST LIKE IRAQ - THEY PAINTED A ROSEY PICTURE - OF THE LIES GALORE !!!



Man lost in snow stayed strong for kids

By JULIET WILLIAMS, Associated Press Writer
Thu Dec 20, 2:12 PM ET
PARADISE, Calif. -

A man who was lost in the mountains along with his three children
for three days during a snowstorm said he was terrified they wouldn't
make it out alive, but he remained strong for his children and relied
on his faith.

news.yahoo.com/s/ap/20...;_ylt=ArfU.tAU_f4W2tN3...

2007 Dec 20 06:10 PM

[H2O:]

DAN ABRAMS Is running a LIE about Edwards - There saying He would not have the power to cut congress health care - well lets take a look how they give themselfs all these perk's ...

PREZ Executive Order - If The PREZ sign's the Executive Order - to give all the perks and raise's - then a PREZ just has to resend that order - does he not - so DAN ABRAMS and all - are just some more - out-soursing Billy's-Willy - Lover's ....

"""Bush Signs Executive Order on Pay Raises

Thursday, December 21, 2006

WASHINGTON — President Bush signed an executive order Thursday to raise the pay of federal workers, members of Congress and Vice President Dick Cheney in the new year.

Congress passed the pay raises earlier this year, but Bush was required to sign an executive order to enforce them.

The president's annual salary of $400,000 is not affected by the legislation.

The size of the pay raises was based on a formula in federal law that takes into account cost-of-living changes.

Civil servants, on average, will get a 2.2 percent pay increase in January. So will uniformed members of the military.

Members of Congress, the vice president and most senior federal officials will get a 1.7 percent pay increase, as will federal administrative law judges."""

2007 Dec 20 09:14 PM

[H2O:]

Hey how come we don't Have a pilgrimage in The United States???

WE could make a pilgrimage to Washington - and have all the Devils
- I mean politicians - Stand out side there office's - and we could
throw tar-balls at them !!!

WE could end the pilgrimage - Throwing tar-balls on K-Street
Devils - Ohh mean Lobbyist !!!

Just might put a little Honesty into them - knowing there will be
a pilgrimage - every year - To seek out and tar-ball the the Devils
- sorry I mean the rich-greedy devils !!!

Or We could just Unite and Have A voting - Tar-balling of the - Washington
Insiders - Those for There New World Order - sacrificing Americans along
there way .....

Time to make that pilgrimage down to the Voting Booth and give Washington
- One Hell of a tar-balling !!!

~ Vote America - For America ~

2007 Dec 21 10:25 AM

[H2O:]

Since Jesus died for the injustice to the POOR - and He Himself
was based on the POOR - How can anyone say there for the POOR - If
all they have is taken from the POOR ????

WOULD JESUS STAND - FOR THE MARK OF THE BEAST - YOUR FICA SCORE -
AND FOR A NON-REGULATED MARKET ????

WOULD JESUS STAND FOR THE LONG ROBE IDIOTS - RUNNING THE MARKET PLACE ???

YOU DUMB DIP-S*THS - HE WARNED YOU WHAT'S EVIL !!! WALLSTREET OF TODAY -
IS WHERE THE DEVIL LIVE'S ...

Devil: The Temptation of Jesus - The Devil owns all these things - For
if he Did not - How could he have offered them to Jesus ???

So who does the long """ROBE MARKET PLACE""" belong to ??? Jesus or The Devil ???


Mark.12.38 And in his teaching he said, Beware of the scribes,
who like to walk around in long robes and like greetings in
the """""""""""""marketpla...


Pope celebrates Midnight Mass

Dressed in white and gold-colored robes, Benedict blessed
the crowd of pilgrims, Romans and tourists as he walked in
a procession up the main aisle to the central altar, which
was decorated with red poinsettia flowers.


John Paul’s concerns with economic justice are deep and important.
He seeks to put the Church on the side of the have-nots of the world
economy, and he says that the rich North will be judged by the poor
South for its imperialistic monopoly of economic and political supremacy
[gained] at the expense of others. ...The appropriation of liberation
theology themes by John Paul is apparent in his many encyclicals on
economic issues. The biggest difference between the liberation theologians
and the pope is not on capitalism, dependency, or exploitation they
agree more often than not, at least up to Centesimus Annus but on John
Paul’s insistence that... apal social teaching is the standard...to which
liberation theology must conform.

2007 Dec 24 07:44 PM

[H2O:]

~ Mom Sacrificing - So Santa Can Live ~

WEll so there saying there Santa Push For sale's
are around the same as last year except for women
clothing !!!

See these are those Big things that get's lost - In
today world of greed...

Lets explain it this way - Let me ask you a question?

The avarage American family - Is facing falling housing
price - Gas price's high - cost of food way up - clothing
up - and made cheaper - replacement cost's ...

Now for the question? Who in the family is the first - To start
Sacrificing for the Family ???

Could it be posible??? - The Mom starts sacraficing first????

Mom Sacrificing - To keep her family feed???

Mom Sacrificing - To make it to work with the high gas price's???

Mom Sacrificing - To cloth her family - and the high cost of cheap
made clothing ???

Could it be that Mom Sacrificing - Is the Canary in the economy - The
warning of what is to come???

So World there never was a SANTA - IT's always been your MOM - Your Parents
doing with-out - Sacrificing - For a World of Greed !!!

........

2007 Dec 26 01:33 PM