Countrywide Deals Another Blow to the Glass Jaw Market

Countrywide Financial (CFC) made its bid for "disaster of the year", again. (It's easier for a recording artist to have a number one hit in successive decades than it is for a stock to be the top disaster in consecutive sessions.) There were the typical denials from the company to the speculation that it is on the cusp of filing for bankruptcy protection; obviously nobody believed management. The bigger part of the story is the fact that stocks in general are extremely vulnerable, not unlike a professional boxer that's taken too many on the chin (read: Roy Jones Jr.). No matter how valiant the effort, that porcelain jaw is a huge liability. Interestingly, Countrywide Financial, lead by a flamboyant CEO, and Roy Jones Jr., a flamboyant boxer, have a lot in common.

At this point, Roy Jones looks great ahead of his fight in less than two weeks; however, the same can't be said about Countrywide which is vulnerable to rumors and speculation. Sure, there are legitimate reasons for saying the company could go bankrupt, but I wonder about the timing of the story and how quickly the flames were fanned in the media. Certainly there was nothing different about CFC on Tuesday than on Monday. To a certain extent I think we saw the power of the shorts that have the soapbox right now and can tilt the fortunes of individual stocks as well as the entire market. Without a doubt Countrywide makes for an easy target and could indeed be in trouble, but the way it was smashed Tuesday spoke volumes about the state of mind of investors and those that control the levers.

This week's mortgage application index jumped 32.2% following a large drop during the holiday season while interest rates were at their lowest level in more than two years. The average rate of a 30-year fixed rate mortgage fell to 5.73% from 6.05% the previous week. The index is back near the highest levels of the past year, driven more by increased refinancing than new purchases. Observers of the industry noted many consumers filled out multiple applications to different banks due to difficulty securing loans under tight credit standards. The past few weeks' data may also be misleading due to difficulties seasonally adjusting for shortened business weeks.

CFC was down as much as 19% Wednesday, reaching a new 52-week low.

Disclosure: none

Comments

[william L. ...:]

I just finsihed reading an article that made me VOMIT. it said if Countrywide were to go under that would cause a severe impact on the consumer....ARE YOU NUTS...I am sure that statement was ment to be a JOKE....Mozilo, Countrywide and their agents and or brokers tactics and lack of ethics are already the cause of severe impact to the consumer....Again as I said in another reply....LET THEM GO UNDER...NOW...don't keep feeding the evil one ..help the honest people they swindled ...My business started to fail early in 2006...I have a title search company...and in 2006 Mozilo was already taking advantage of his free stock option plan that did not cost him a penny and converting it into 100's of millions of dollars.. and some of his fellow friends did the same...Save the guilty one...is everyone crazy???? LET THEM GO UNDER ...CLEAR THE DECKS ...and lets move forward....I am sick of hearing the word sub prime....its going to be the so called pay option arm , which is considered a prime mortgage , that is going to do the worst damage..which I am sure is the favorite of Countrywide, their agents and or brookers...PEOPLE !!!! Wake Up Already!!!!

2008 Jan 10 08:06 AM