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Stock of Countrywide Financial, the nation's largest mortgage operation, shot up 55 percent today (Jan.10) to almost $8 a share on the Wall St. Journal's report that Bank of America is negotiating to buy the ailing company. Earlier in the week, Countrywide stock plunged on rumors of a looming bankruptcy. As reported in two earlier posts, the University of San Diego is bring in Countrywide's controversial chief executive later this month for a major real estate conference, and some people are protesting the move.

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patflannery Jan. 10, 2008 @ 3:25 p.m.

How come you did not give us that hot tip Don? I think I will stop my check to Scam Diego. I bet you gave the tipoff to Jerry Sanders. And Fred Sainz. I'm shattered. I will ask him at 6:00 PM. He won't lie to me.


JohnnyVegas Jan. 10, 2008 @ 5:55 p.m.

If BofA buys Coutrywide they have brain damage.

They should run, not walk, away from anything C-wide is offering. Even if it were FREE, it would be suicide to take on their portfolio of sub prime future disasters.

If we were at say, the top of the hump and had passed the rough waters and heading downhill and things were going to improve BofA might consider buying C-wide, that is different.


If I were a BofA shareholder I would DUMP every share I owned.

Oh, lets not forget the class action lawsuits for fraud, and and then the class action shareholder lawsuits that will be filed against the C-wide for the implosion of shareholder value.....

Man, I cannot believe anyone would touch C-wide with a 10 foot pole.


Don Bauder Jan. 10, 2008 @ 5:34 p.m.

Response to post #1: Sorry, Pat, the Wall St. Journal got this one first. And it's not the first time a rumor of a BofA/Countrywide hookup has made the rounds. If they had gotten the tip, would Sanders and Sainz known what to do about it? I should reveal one thing: I have 100 shares of B of A. I was thinking of selling it when I saw the news. It actually dipped originally, then closed up for the day. Don't ask me why. Best, Don Bauder


JohnnyVegas Jan. 10, 2008 @ 5:57 p.m.

Don Bauder / dbauder

I should reveal one thing: I have 100 shares of B of A.

Sell everything NOW, you still have time.


Anonymous Jan. 10, 2008 @ 6:57 p.m.

B of A's proposed acquisition of Countrywide will be of little help to Charles Brandes' Brandes Investment Partners, a $125 Billion hedge fund headquartered in San Diego. Media reports state that Brandes Investment Partners purchased 7.9% of Countrywide on 9/30/07 for $865.1 million. Although we don't know the exact dates the shares were purchased or for how much, media reports indicate that most of the shares were likley purchased for $18 per share or more. If B of A purchases Countrywide for $8 per share, Brandes will have lost at least $500 million on Countrywide in less than four months. This has to be a record.


Anonymous Jan. 10, 2008 @ 7:09 p.m.

The taxpayers are going to be the real losers if Countrywide is sold to B of A. Countrywide is likely shoveling all the rotten loans on Countrywide Savings & Loan, and B of A will likley only buy the mortgage operations but not the S&L. The S&L will likely be seized by the regulators due to insolvency and the taxpayers will have pay off the depositors. The S&L should have been seized by the regulators in 2006 and shut down when it became clear Countrywide could not survive in order to minimize the government's exposure.


JohnnyVegas Jan. 10, 2008 @ 8:26 p.m.

Anonymous / sdblogger

January 10, 2008 at 7:09 p.m. The taxpayers are going to be the real losers if Countrywide is sold to B of A. Countrywide is likely shoveling all the rotten loans on Countrywide Savings & Loan, and B of A will likley only buy the mortgage operations but not the S&L. The S&L will likely be seized by the regulators due to insolvency and the taxpayers will have pay off the depositors.

The government would not allow that-where ever the assets and liabilities end up- at a US BK Trustee or a Federal Bank Regulator, they would not allow all the assets to be siphoned off leaving only the liabilities for taxpayers.

You simply cannot take the good and dump the bad.

The US Trustee would simply undo all the fraudulent transfers of assets if they filed BK.


Don Bauder Jan. 10, 2008 @ 10:06 p.m.

Response to posts # 3 and 4: You are convinced that the subprime mortgage loans -- and other kinds of mortgages -- will be an utter disaster. Others think it will be not as bad. The trouble is, nobody knows how many mortgage resets lurk out there in which the household cannot afford the payments. And nobody knows how many bad loans in CDOs and SIVs are in the portfolios of the individual Wall St. houses. The uncertainty is a killer. If I truly knew, I would act accordingly. Best, Don Bauder


Anonymous Jan. 10, 2008 @ 10:07 p.m.

In August 2007 the Federal Reserve pumped $12 billion into B of A to shore it up. Shortly thereafter, B of A invested $2 billion in Countrywide in exchange for stock. I have a hunch that the Federal Reserve Board is behind B of A's acquistion of Countrywide through "under the table" payments or covert/hidden investments in B of A. I also believe that the Federal Reserve has a secret agreement to reimburse B of A for any post-acquistion operating losses it incurs after it purchases Countrywide. This is just conjecture and suspicion on my part.


Don Bauder Jan. 10, 2008 @ 10:09 p.m.

Response to post # 5: I recently did a column on Brandes's investments, and I noted the media reports saying he had bought the big block of Countrywide. However, in searching Countrywide documents, I couldn't find validation of that, so I left it out. If Brandes indeed bought it at that price -- and that's the price I remember that was reported in the NY Times -- then, yes, it looks like he will take a loss. He is not doing so well on his Gannett and McClatchy positions, either. Best, Don Bauder


Don Bauder Jan. 10, 2008 @ 10:12 p.m.

Response to post #6: Your scenario is often what happens in these disasters: the bad loans are shoveled off on the government. I do not know if that is what is going on here, however. If this happens, it is just the beginning of what the government may have to absorb. How about Fannie and Fredddie? And banks that will go under? The list of possibilities goes on and on. Best, Don Bauder


Don Bauder Jan. 10, 2008 @ 10:15 p.m.

Response to post # 7: Government regulators have taken the bad assets before. Remember U.S. National Bank? Crocker Bank (which no longer exists) bought the good loans and the government took the bad ones. Best, Don Bauder


JohnnyVegas Jan. 11, 2008 @ 8:53 a.m.

Too late Don;

B of A just made a 4.1 Billion dollar mistake this morning!!!!!!

As for how far the sub prime mess will go, all I can tell is what my developer friends told me- that in 2005 and 2006 only 5-15% of their home buyers would qualify for a traditional 20% down fix rate loan on the homes they sold, or 85-95% were using sub prime/exotic loans to finance the homes. That tells me the problem is not big, but HUGE.

In any event, I would not gamble any amount of money with that kind of potential liability, and certainly not 4.1 billion for a company teetering on BK.


Anonymous Jan. 11, 2008 @ 11:12 a.m.

A price jump of 55% Wow!

(Some black swan speculators made some serious money on this one.)

So everything is fine. Crisis over.

You can just see the impotent financial regulators chortling, "Everyone go home. Nothing to see here. It's all back to normal." Meanwhile, there are some BofA executives in the back of the room, staring at their shoes with lips pursed. Maybe their ties are a bit too tight. Oh well, it's not really THEIR money either.

Aren't we all thankful that savvy (insider) Wall Street investors made out, once again? What a relief!

Too bad about Grandma, though. Guess she'll be sleeping in her car. But she'll be fine! Her photo album has pictures of the house she lost to the mortgage scams.

(yet another sdblogger)


Don Bauder Jan. 11, 2008 @ 12:28 p.m.

Response to post #13: You may be right on B of A. You are definitely right that San Diegans jumped for exotic, adjustable rate, other dubious mortgages. I don't know that it's 85-95 percent. Certainly more than 2/3rds when the market was at its peak. Best, Don Bauder


Don Bauder Jan. 11, 2008 @ 12:31 p.m.

Response to post #14: Remember, Countrywide stock was in the mid-$40s a year ago. So there are a lot of big losers. Certainly, bottom fishers who came in at the nadir in last few days made a killing. But how many were there? Best, Don Bauder


valueinvestingisdead July 15, 2008 @ 9:27 p.m.

Reply to #10

Don, You can go to www.gurufocus.com to see all of the disasters these value managers have bought. It is ugly and I believe value investing the way it has been done in the past is DEAD. The market is controlled by a bunch of hedge funds who could care less about fundamentals. Also, the emergence of the inverse ETFs causes them to short stocks without regard to fundamentals. Thus, value investing is not going to work anymore, especially when you buy debt laden companies during a credit crunch.

If I were these gurus, I would take my money and run. Get out now before you lose it all.


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