I used to make fun of Countrywide being treated by the media as a proxy for the health of the housing/mortgage/credit markets.
Here are a few brief samples:
Off By A Countrywide Margin October 26, 2007
Is Angelo Your Leader? November 30, 2007
I guess we all know what ended up happening to that stock and how stupid all those market moves were based upon optimism for Countrywide and the mortgage /credit crisis. So now that CFC is gone as a standalone piece of crap stock and cannot be used to hype the market, I had serious flashback hell with GM yesterday and its effect on the Dow.
The headlines like this one from CNBC indicated that GM’s better than expected sales were the reason for stock market optimism and the rebound from “oversold” (I hate that term) levels. Spinning the GM’s 9% sales decline as a good thing because it beat wrong extreme estimates reminded me of how Countrywide used to get a bounce from their pathetic (but better than really really pathetic) expectations and belief that the worst was over.
Maybe you remember in September when the contract negotiations with GM and the UAW were used as hyping tool to try and spur the market higher with the concept that what is good for GM is good for the American stock market. If not, read this post called Promises Promises Promises. And then reflect how wrong those expectations were and what happened to GM’s stock price which was $37.64 when I wrote that piece and $10.60 now.
If yesterday’s rally was based upon optimism from GM and that somehow we should believe that the company and the American consumer is doing well, then we are really messed up. GM and automotive manufacturing is in big trouble. And one day after the GM short covering rally, we get to hear from Merrill Lynch saying what we already knew but disregarded yesterday - GM Bankruptcy “Not Impossible”. What a shocker! I seem to remember people suggesting that Countrywide would fail and then the deniers came out and said that it was just fearmongering and those mean short sellers. I suspect that lovers of GM will feel the same way. And the comparisons to Countrywide will only be more complete if we get a ridiculous rally every time someone agrees to provide “Additional” capital to GM (see above link).
The next step along this goofy analogy would be calls for a government GM bailout because it is too big to fail. And then, when the CDS positions on GM are too scary for a test of that disaster, we might have to see a government sponsored merger with some other troubled company (Say Ford). NAHHH! Something like that could never happen!
I used to laugh and ask “Is Angelo Your Leader?” now it looks like I can say “Is GM Your Leader?” NO SINGULAR STOCK IS A PROXY FOR ANYTHING ELSE regardless of the direction. Please do not believe the worst is over just because the media hypes a story like GM yesterday .
