- First they used Bernanke who (almost) explicitly said that rate cuts are coming. The market made a small rally around 12:15pm, which was completely reversed by 2pm
- Ok, then they released the rumor that Countrywide got acquired. The market made a nice short squeeze from 2pm to 3pm, but after 3:30pm the rally started to fade
- Oil sold-off, i.e. less of inflation worry and good rotation from oil to stocks
- Bonds also sold off, i.e. money rotated into stocks
And after all this bull-fest the S&P is up only 0.8%? That’s all they can pull out of this?
Many shorts were shaken out from their positions and many smart money got a chance to unload. It seems to me that a big crash is coming within the next 3-4 weeks and that crash will get through the March lows like a knife through the butter. It’s a bear market and it has its rules that better have to be respected
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January 10, 2008 at 7:27 pm
Don, one of your comments was moderated by the wordpress. I manually approved it.
I apologize but the I need the spam filter, sometimes it filters good posters 😦
January 10, 2008 at 9:38 pm
No Problem and thank you for your kind words…I am still long fertlizer and gold stocks but am also long a few inverse ETFs now. However when I see or hear about shorts getting shaken out by a 3-4 point move against them (ie yesterday and today), given what is going to happen in the next few months I think…are they stupid?
January 10, 2008 at 9:44 pm
excellent point. 6 weeks ago this would be triggered a monster rally.
Herb Greenberg says the Fed is behind the CFC buyout.
January 10, 2008 at 10:00 pm
Well I think a pure business decision is behind the BAC CFC rumors. One…CFC has a very large and profitable loan servicing biz…and they have a nice bank. The fact that BAC put in a billion or so a few months ago got them first dibs on the assets of CFC..which are still worth a few bucks. BAC is getting them very cheaply. What would you think that if instead of CFC’s name on your Mortgage statement you see Bank of America. Your concerns just dropped a whole bunch. BOA is doing again what they did when they bought all those Texas banks when Oil and Real Estate crashed last time. It would cost them a whole lot of money and time to build the business they are getting for dimes on the dollar and they sure as hell are not in it for a trade.
January 10, 2008 at 10:13 pm
CFC business model is dead. How the beast is divided up in the end doesn’t really matter. The service end which everybody seems to think is such a great deal could be, it also might turn into a labor hole requiring significant capaital and manpower to break even.
The RE market may be in for a very long period of decline and slow growth. Business models today are built around velocity and mortgage banking has all the earmarks of going back to a labor driven slow growth low margin business.
January 10, 2008 at 10:41 pm
Don, do you know any fertilizers ETF? I’d like to have…
January 10, 2008 at 11:45 pm
One…CFC has a very large and profitable loan servicing biz…
I wonder: How profitable is, or will be, CFC’s mortgage servicing business?
January 10, 2008 at 11:50 pm
6 weeks ago this would be triggered a monster rally.
And yesterday? It was only good for a pitiful $0.07 on the QQQQ.
January 11, 2008 at 12:13 am
Ouch.
Lennar’s New Homes Fetch 60% Less as U.S. Market Slump Deepens
Lennar Corp.’s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar…That’s how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier.
January 11, 2008 at 1:49 am
I like Russ’ comment on the whole sordid affair. simply put, “This stuff just can’t get much stranger. Now BAC can pay the severance for 40K CFC employees, and they can both go down the toilet.” LOL!!!
Nice work idiots.
January 11, 2008 at 11:43 am
Heah, that deal is a big puzzle for me. There will be a plenty of free banks to grab very soon – why pay anything at all now, even for Countrywide? Knife catching game…
January 11, 2008 at 7:31 pm
FWIW: BAC aquired CFC because the Fed gaurenteed them against any loan losses. That said, BAC probably has exposure from lawsuits (I doubt the Fed is going to provide BAC indemity for CFC lawsuits). They may have exposure to employment contracts (ie laying off the CFC employees) and costs associated with foreclosed properties CFC has (ie Maintaince, property taxes, etc).
Over the next year I expect BAC to regret its decision to purchase CFC, not matter what gaurentees the Fed is providing them.
January 11, 2008 at 11:37 pm
T,
Not aware of any Fertilizer ETFs unfortunately. My system generated a buy on the Fert stocks in 12/06 and am still holding… not sure how much longer but we will see. Let me mention a comment I made at CR about CFC. In 2004, a more normal real estate year, CFC made 2 billion after tax on 11 bill of revenue. Pretty good margins on a boring business. So BAC is paying 2 bill cash and small stock dulution to get a normallized Aft tax profit of say…1 Billion per year? I think they got a large profit machine on the cheap. Is there risk..sure… Just like there was when as NCNB they bought Republic Bank of Texas when oil dropped to 10 bucks a barrel and the oil and real estate biz was dying in the Lonestar State. They made billions on that deal.