July 24, 2007

FLASH: And today, for all the world to see (including the SEC), we see why Countrywide Mortgage's Angelo Mozilo was dumping shares like rotten oranges



I hope some of you were short Countrywide. HP'ers saw this car crash coming a mile away. Next up - IndyMac.

Yes, I'm short IMB and CFC, and it was all so obvious now. Mozilo is laughing all the way to the bank, but we all know you can't take your money to jail... Good luck Orange Man with the gotta-be-coming-soon SEC investigation.

Countrywide quarterly profit tumbles; shares off 7%
Subprime problems spread to top-rated mortgages, lender says

NEW YORK (MarketWatch) -- Countrywide Financial Corp. reported a 33% drop in second-quarter net income on Tuesday and signaled that problems in the subprime mortgage market have spread to the highest-quality home loans.

The warning pushed Countrywide shares down more than 7%, to their lowest level in almost two years. It also weighed on the broader stock market because investors have been waiting to see if credit problems in the subprime-mortgage sector would spill over into higher-rated, or "prime" home loans.

"The company incurred increased credit-related costs in the quarter, primarily related to its investments in prime home-equity loans," CEO Angelo Mozilo said in a press release detailing Countrywide's second-quarter financial results.

Countrywide's second-quarter net income fell 33% to $485 million, or 81 cents a share, down from $722 million, or $1.15 a share, earned a year earlier, on softening home prices.

Further dampening enthusiasm, Mozilo commented: "During the quarter, softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories as a result."

30 comments:

keith said...

http://tinyurl.com/yukork

CFC shareholders should be calling for Mozilo's head right about now

Here's an article on thestreet.com


The bank's poor performance could put pressure on Mozilo, who has sold Countrywide shares no fewer than six times this month under preplanned sale plans, according to Yahoo! Finance.

Countrywide had a $417 million impairment charge related to the company's investments in "credit-sensitive related instruments."

That included $388 million, or 40 cents a share, of impairment on residual securities collateralized by prime home equity loans. The charge is attributable to "accelerated increases in delinquency levels and increases in the estimates of future defaults and loss severities on the underlying loans," the lender said.

Countrywide also had a $293 million provision for added loan losses on its held-for-investment loan portfolio. The company said $181 million of the provision was for prime home equity loans in its banking business.

paylayale said...

Casey's algae-infested house is on the list of countrywide REO houses.

OC Mike said...

The man needs money for carrot juice.

Why do you have to make everything into a conspiracy?

keith said...

Here's Mozilo's share dumping. You will not believe what you are about to see - scroll all the way down

http://biz.yahoo.com/t/18/6026.html

And here's a stunning chart of insider sales

http://www.secform4.com/insider-trading/25191.htm

Where you'll see these guys have dumped nearly $600,000,000, yes, SIX HUNDRED MILLION DOLLARS in shares the past two years.

The system is corrupt. The system got gamed. The little guy got screwed. And fat cats like Mozilo and his cronies got paid.

Mark said...

CFC Countrywide On Conference Call (29.80 -4.22) -Update-

Delinquencies and defaults rising across all investment tools... says lower home prices may effect credit... notes S&P Case-Schiller is strong tracking tool for health... expect 2006 vintage to be one of the worst performing vintages off all time... loans are more seasoned than in recent quarters... seeing more pre-pay options being added to portfolios... co continues to study further tightening of loan standards for both subprime and prime...Says until the market can understand future rating from S&P they will have difficulty investing in credit areas... says a large question remains that even if CDOs recover would their be buyers again... believes markets will force the weaker mortgage companies to either work with bigger players or look elsewhere for business.... expect to see reduced gain on sales margins until the current market adjusts... Asked what we need to look for improvement: says that inventory in house supply has to be versatile; says no one saw the deterioration of real estate values coming; says right now buyers can wait til housing prices go down and that needs to change... says for a Fed Governor to say that the lending group had this coming is unbelievable... expects to see some companies go out of business and condolidation... Asked about prime portfolio: co says so far what they have seen in deliquencies is due to people losing job, losing health, lost marriage, moreso than any resets; says that definition of prime may not be as high as some think; says FICOs are still favorable in prime but there will still be tails at both ends; says some charge offs were accelerated into this quarter... co seeing home price depreciation at levels not seen since the Great Depression... Says that a small % of lost homes are due to payment shock; says 60% is due to some sort of loss of income; 25% attributable to death or divorce; says a significant amount is explained by investors unable to get out of the property... says not saying that house prices will decline in 2009; says not sure when housing declines will cease (Note: In last quarter co stated that they expected a turnaround in mid-2008, appears that they are stepping back from this statement)... On call, co notes that subprime isn't the story this qtr, rather it is home equity borrowers who pulled money out of their homes.. Says this quarter is not as much a subprime story as it is a HELOX portfolio... says most stable part of the business they have is retail... expects to hear mergers and people going out of business in the near future; asked if CFC was planning on laying off people: co says they have their sales force who create value and then you have those that process business which is driven by volumes flowing through operations; say s if that decreases they would need to lay off people so this is an area where they would make the appropriate steps to cut costs... Says areas were pricing acceleration, for example California or Phoenix and Las Vegas, where people have stretched themselves to get into the home they see high deliquencies; says in San Diego see high deliquencies because you see an oversupply in speculations; says in Florida see a higher rate due to emplyment... says sees the Midwest as an underperformer and does not show any risk of home price decretion going forward but still has poor overall performance issues... Fed rate Decisions: says if unemployment picks up the business could be helped by a fed motivation of an easing of interest rates; believes any rate cut could offset increased credit issues; says if unemployment increases Fed would have to cut and 'that is the underlying cure for all of us'.Margin trends are under pressure... seeing a material shift in mix on the government side; FHA business continues to grow; says FHA is growing in popularity with the declining offerings in Alt-A and subprime markets...

Anonymous said...

It's not just CFC.


Subprime Woes Go Global...

Good day... Without any data in the U.S. and a slow data day in Europe, the currency markets continued to track along their recent trend lines, which are US$ negative. The mood of the markets continues to be one of trepidation as traders wait to see just what the subprime mortgage mess will bring next. Traders continue to come to the realization that the U.S. housing slowdown and subprime mortgage mess will not go away quickly.

Data due out today and tomorrow will do little to calm their fears. The ABC Consumer Confidence number and Richmond Fed Manufacturing Index are the only two reports which will print today, and neither is expected to show much strength. Tomorrow we get a snapshot of the housing market with the release of MBA Mortgage Apps. & Existing Home Sales in the morning, followed by the release of the Fed's Beige Book in the afternoon. Existing Home Sales will be the driver of the markets and are expected to show a month-on-month drop of 2.1% in June.

With the markets nervous about this week's housing reports, the dollar weakened against all of the 109 most active currencies. Even the Japanese yen got in on the fun as it strengthened to a two-month high vs. the greenback. The dollar's slide accelerated after the dollar reached levels that triggered automatic sell orders.

News released yesterday shows the subprime rout is going global, as Reuters reported that Basis Capital Fund Management Ltd., an Australian hedge fund, is hiring Blackstone Group LP to advise the fund on limiting its losses. It seems Basis Capital Fund bought into the CDO markets, and these investments are falling fast. I also read that Japan's nine biggest banking groups have more than 1 trillion yen of combined holdings in products backed by U.S. subprime mortgages.

This is an interesting twist to the mortgage mess, as foreign investors are starting to feel the pain. These foreign investors have been pouring money into the U.S. markets, supporting our deficits and keeping our dollar strong. We have been talking about how these foreign investors will start moving away from their U.S. investments on interest rate differentials, and this latest report of subprime losses will only serve to accelerate these sales.

In the category of 'what is he smoking,' U.S. Treasury Secretary Henry Paulson was on CNBC yesterday and said that problems in the subprime mortgage loan sector could be contained and would not hurt the overall economy. I think Mr. Paulson should try and tell that to investors in his former firm's hedge funds! Confirming our assertion that the Treasury Secretary must have been on something, he followed up his subprime comments with a statement that a strong dollar was in the best interest of the U.S. Tell that to the manufacturers who are trying to compete with Asia!

Dollar losses vs. the euro were limited as offsetting economic reports released this morning made it difficult for traders to establish a direction in early trading. The conflicting data started on the consumer side as French consumer spending surprised to the upside rising 1.6% from the .7% which was expected. This was the best reading since August 2006 and was buoyed by a sharp reduction in French unemployment. On the other hand, Italian Retail Sales showed a far more tepid rise of just .1% vs. .3% projected.

Other data this morning showed growth in Europe's manufacturing and service industries slowed more than economists expected in July. The Royal Bank of Scotland Group Plc's combined index fell to 57.3 from 57.8 in June as reported by Reuters. While this index did fall, any reading above 50 indicates expansion. This negative data was offset by German import prices, which increased more than economists expected in June. German prices rose 1.3% in the year, the biggest gain since December of 2006. These price gains will continue to put upward pressure on the euro.

The pound sterling rose to the highest in 26 years against the dollar on further speculation the BOE will raise interest rates at least once more this year. Much of this recent movement in the pound is due to momentum as data released today should have been somewhat negative for sterling. British factory orders unexpectedly fell in July, but currency traders largely ignored this data and continued to make bets the pound will rise. The BOE will meet next on August 2nd but will probably wait until September to make their next move up.

Two other currencies which have been benefiting from interest rate differentials are the New Zealand and Australian dollars. The New Zealand dollar moved over .81 cents for the first time last night before moving back down in early European trading. The Australian dollar also continued to gain and hit a new 18-year high. Both currencies continue to benefit from some of the highest interest rates in the industrialized world. The New Zealand central bank is expected to boost its key rate a quarter of a point this week. New Zealand's dollar will extend its rally to 83 cents, said John Key, the leader of the nation's opposition party and former European head of global foreign exchange at Merrill Lynch.

The Aussie dollar gained yesterday after a govt. report showed producer prices rose by more than economists expected in the second quarter. A report tomorrow is expected to show Australian inflation accelerated last month. Australia's consumer price index probably gained 1 percent in the second quarter, compared with .1 percent in the first three months of the year. These higher inflation numbers will continue to push the Reserve Bank of Australia into raising its overnight cash rate at their next meeting on August 8.

In preparation for my presentation later this week at the San Francisco Money Show, I ran a spreadsheet calculating the currency returns for all of our different Index CDs. I was happy to see that all of these indexes had returned over 9% annualized on a year-to-date basis. The Commodity Index was the top performer, with a currency-only return of 9.63% during the first seven months. Our new WorldEnergy Index was second with a currency return of 9.29% and the Prudent Central Bank was number three at 8.54% so far in 2007. Even more impressive are the total returns (including interest) for these Index CDs. The Commodity Index was still the top at 14.38%, followed by the WorldEnergy at 13.61% and then the Prudent Central Bank at 12.09%. GREAT STUFF!!

Currencies today: A$ .8847, kiwi .8082, C$ .9565, euro 1.3812, sterling 2.0602, Swiss .8298, ISK 59.15, rand 6.8237, krone 5.7313, SEK 6.6390, forint 178.15, zloty 2.7226, koruna 20.4079, yen 120.80, sing 1.5059, HKD 7.8217, INR 40.2325, China 7.5685, pesos 10.7742, dollar index 80.22, silver $13.335, and gold... $682.97

That's it for today... We are back at full staff this morning, so it should be a better day on the desk. The big boss Frank Trotter emailed me from Vancouver last night where he is one of the key speakers at the Agora Wealth Symposium. He is expecting some great crowds out there. I still have to finish the presentation for San Francisco, so got to get to work! Hope everyone has a great Tuesday.

Filling in for Chuck Butler:

Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837
www.everbank.com

Trevor Cordes said...

Mark, good transcription. Lots of really juicy details in there.

Keith, insane insider graphs! Thanks for the link, useful site. Any idea why the charts for homebuilders don't show any post-May activity? Homebuilders stopped selling or is there a lag time?

MSN has more juicy tidbits re: CFC: paraphrase: no recovery till 2009; USG says 2nd year of multiyear downturn; not since great depression, even prime affected, etc.

Ha, clowns say no one saw this coming. Try prudentbear, HP, Jim Willie, Financialsense, daily reckoning, etc, who tipped me off to this great opportunity in 2005.

Glad I didn't yet sell my homebuilder puts... they're going gangbusters today. OMG, if there's a bad existing home sales number tomorrow things will be REALLY UGLY. Where's the relief rally that should be coming? We're stretching outside the bollingers and way below 50DMA here. No relief for quite a while now. Not that I'm complaining...

Anonymous said...

Mozillo just finished a 3 hour conference call. I hope the SEC and FBI were listening.

K.W. - Southern Ca. said...

There should be no surprise as to the negative "spill-over" effect into higher-rated mortgage loans.

All the media "talking-heads" telling people the problem is contained is simply a means to dampen concern.

Well, the s%^&! is getting ready
to really hit the fan.

Anonymous said...

Bill Gross, the bond king, just said the erosion in the corporate bond market over the past few weeks is equivalent to the Fed raising interest rates 150 basis points. Gross says this will jeopardize many of the announced stock deals as they will struggle to get funded as buyers demand higher returns. Gross says the stock market will have to take notice, hinting at a market selloff soon! Go to CNBC's website for video of the interview.

Anonymous said...

Angelo made hundreds of millions.

HPers rented 1 bed slum apartments.

Yep, you sure showed him.

Losers.

K.W. - Southern Ca. said...

Keith -

This is common practice by CEO's when they see their ship is sinking.

It's just now the share-dumping, bonuses and other exec. payouts are done in such grand style.

There is no honor or loyalty amoung thieves.


keith said...
Here's Mozilo's share dumping. You will not believe what you are about to see - scroll all the way down

http://biz.yahoo.com/t/18/6026.html

And here's a stunning chart of insider sales

http://www.secform4.com/insider-trading/25191.htm

Where you'll see these guys have dumped nearly $600,000,000, yes, SIX HUNDRED MILLION DOLLARS in shares the past two years.

The system is corrupt. The system got gamed. The little guy got screwed. And fat cats like Mozilo and his cronies got paid.

Anonymous said...

but but but...


What about the crud of taking market share?????

Anonymous said...

It's mind-boggling to me that the quality of loan underwriting could decline so quickly. Look at this in regards to Countrywide:

"Payments were late on 23.71% of subprime mortgage loans, up from 15.33% at the end of the same period in 2006."

What they are saying is that in nearly one out of every four loans made to subprime borrowers by Countrwide, the lender incorrectly assessed that the borrower would be able to repay the loan according the terms set forth in the promissory note. One of out of four. That's some credit portfolio risk management that Countrywide has employed, eh? Imagine if banks who loaned money for auto purchases were that careless and inaccurate in their underwriting - 23.7% of all vehicles purchased and financed by subprime borrowers would on the verge of being repossessed.

Anonymous said...

Subprime: "Now contained on three continents!"

Anonymous said...

Anonymous said...
Angelo made hundreds of millions.

HPers rented 1 bed slum apartments.

Yep, you sure showed him.

Losers.

July 24, 2007 7:12 PM
--------
Don't worry he'll be in a rent free studio apt w/ bars shortly.

Anonymous said...

Angelo made hundreds of millions.

HPers rented 1 bed slum apartments.

Yep, you sure showed him.

Losers.
*************************************
Anon:
HAHAHAHHAHA. Thats funny! I am still lol ;-)
Thanks for the laugh but I am not with you on this one...

Anonymous said...

Angelo made hundreds of millions.

HPers rented 1 bed slum apartments.

Yep, you sure showed him.

Losers.
*************************************
Anon:
HAHAHAHHAHA. Thats funny! I am still lol ;-)
Thanks for the laugh but I am not with you on this one...

sam said...

Best quote in conference call:

"Nobody saw this coming"

Nice one oh orange oracle, selling $600mm in shares

Out at the peak said...

Finally. I was shorting at $35 and it went all the way up to $42. I stayed the course and it paid off. I am going to cover some positions to materialize gains.

It will probably rally again (and again) before blowing out at ~$25. Sell high, cover low.

Anonymous said...

So this dude should go to jail because he made money? You communist filth need to be rounded and gassed.

Anonymous said...

Lucky Insiders at Countrywide
Posted by MarketBeat Staff
The Wall Street Journal’s Scott Patterson has this report on some fortuitous recent insider trades at Countrywide Financial:


Today’s dismal results from Countrywide Financial show why investors should keep a keen eye on insider sales by top executives.

In March, we pointed out that insider sales at Countrywide were skyrocketing, hitting the highest quarterly level in the past five years, according to data provided by Thomson Financial. Were the top guns at the mortgage lender getting jittery about the high load of adjustable rate mortgages the company had on its books, at 42% of its overall loan portfolio at the time?

Of course, insider sales don’t always mean bad times are on the horizon. Executives cash in options and sell shares all the time for a multitude of reasons. What was worrisome for Countrywide was that insider sales had surged when its share price was in a freefall due to investor jitters about the impact of rising mortgage loan defaults on the lender. Normally, insider sales jump when shares increase and executives cash in their options.

It may not come as much of a surprise after today’s huge selloff that Countrywide insiders have been selling fairly aggressively of late. The Associated Press reports today that, according to SEC filings, CEO Angelo Mozilo on Monday exercised options for 70,000 shares of common stock under a prearranged trading plan. He sold all 70,000 for $34.22 apiece, according to the report (the stock ended trading today at $30.50, down 10.45%). Since the beginning of the current quarter this month, insider sales have totaled $16.2 million, nearly half the $37.4 million average for the quarter, according to Thomson.

Lucky thing they sold those shares before Tuesday’s 10% tumble, isn’t it?

Countrywide did not immediately return calls seeking comment.
http://blogs.wsj.com/marketbeat/2007/07/24/lucky-insiders-at-countrywide/?mod=yahoo_hs

area 51 said...

Someone please pull up quotes from Orangelo a few months back when he was saying, "Subprime will not hurt us, we are stronger than those other guys, etc etc"........
All the while, he was SELLIN' LIKE A FIEND.

But I firmly believe the SEC will ignore his blatant lies until people lose their pensions and sh*t......

Chicken said...

Bet he wishes that he had not "juiced" the markets now that he's feeling the "squeeze". Afraid he will "rot" in jail, but he will get off on an "a peel" and that will be just "grate". Orange you glad you did'nt buy his crap?

christiangustafson said...

What a beautiful day! Truly glorious!

Danny said...

I'm SRS baby. Up almost 5% today. Just riding the wave. This is only the beginning.

Great job Keith.

Danny

My blog:
http://housingtsunami.com/blog/

Shakster said...

Those tweakers at CFC sound like our troll...."WE NEVER SAW IT COMING".Parallell that with the denials of our troll,and ....nahhhhh.Troll is broke with a donated 486 to surf with.Orange Julius is of course very rich.
We saw it coming,and alot of others did too,nvertheless,Mozilo is swimming the shattered dreams of more than a million American families.He may have wheelbarrows of dough,but it isn't his.Know what I mean?

W.C. Varones said...

Nice comments, especially the recap from Mark.

Linked you here.

djsandbox said...

You hope the SEC was listening? You wacky big government Ron Paul supporters you - you're so crazy.

Anonymous said...

http://www.secform4.com/insider-trading/25191.htm

Any shareholder that sees insider activity like this needs to just needs to dump the shares and then short the company's stock. Its the only way they can protect their investment and profit from it, do not expect the CEO & corp. officers to protect shareholders, tey will just hid behind the corporate friendly Delawhere corporate laws and the Florida homestead laws and laugh in the luxury of their mansion with their ill gotten millions offshore in the Caymans just a few miles away!!