ILongyou

Countrywide: Potential Short Squeeze in the Offing

** So lets see the new arguments:

-- If shorts see other shorts getting squeezed, ... it’s very possible.

** So now you are reverting to the old "shorts spooking one another" for your long CFC bet profits? Yes, a lot of things are very possible, if longs see other longs getting margin-called, .... :)

-- Add in the recent rumors of a Wachovia acquisition by JPM

** aah... the rumors...


-- With BAC, no analyst I am aware of is forecasting the company goes out of business

** Don't always need the "going out of business" to make profits on shorts

-- As such, your potential gains are capped at some point and your potential liability is extremely high as the stock has the ability to appreciate a great deal form its current levels.

** Well, yes, ... shorts KNOW that the profits are capped and the losses are unbounded... not any new information... but thanks.

-- It does not help that at current prices, shorts are facing a ~ 6% squeeze immediately upon the transfer of the position.

** That is certainly a VERY valid point.. and I agree that if shorts DID want to move from CFC to BAC, its more prudent to cover CFC now and sell BAC... but as the lack of the big arbs taking positions here indicates, significant risk lies in this deal not going through... or at least not as exactly promised!

** I am glad you mentioned the Wachovia rumor.... here is a short snippet from a VERY recent history...

"We feel like we are merging with a crown jewel,” Thompson said during an interview Monday. “This is a transformative deal for us.”

ring any bells???

www.msnbc.msn.com/id/1.../

Here is more...

"We believe this combination of our two companies, both known for exceptional customer service and pristine credit quality, will generate superior long-term growth in earnings per share," said Ken Thompson, Wachovia chairman and chief executive officer, who noted that Golden West’s World Savings Bank is the nation’s only standalone savings and loan with a "AA" debt rating.

So how did THAT turn out?