Month: November 2007

Article: The Stealth Public Bailout of Reckless “Countrywide”: Privatizing Profits and Socializing Losses


Yet another excellent article. See yesterday’s piece and the day before’s as well.

Nouriel Roubini | Nov 27, 2007

The letter by Senator Schumer questioning the $51.1 billion that Countrywide borrowed from the Federal Home Loan Bank system (specifically the Federal Home Loan Bank of Atlanta) has finally revealed the little dirty secret – that was known only to a few insiders and was noticed on a blog a month ago – that Countrywide, the largest US mortgage lender, has received a massive stealth public bailout that has put at severe risk taxpayers’ money. Here is Countrywide – the premier poster child financial institution of the reckless and predatory lending practices of the last few years – getting in severe financial trouble because of its rotten lending practice in subprime, near-prime and prime mortgages – and whose CEO Mozilo is under SEC investigation for potentially illegal activities – now receiving a massive $51.1 billion of public bailout money with little official supervision of such lending. Mozilo is under investigation for his accelerated sales of Countrywide stock under a 10b5-1 plan. Mozilo has made more than $100 million on stock sales this year, while Countrywide shares collapsed more than 50%.


The Next Dominos: Junk Bond And Counterparty Risk


(click on image above to larger version — pops up in new window)

Another excellent recent piece on the unfolding credit crisis. This article was originally brought to my attention by John Mauldin, whom in turn was brought to my attention a few years ago by a fund-manager friend, Steve Miller.

Note, the image above was selected by me, not the author of this article, Ted Seides, CFA[i]. Footnotes are at the end of the article.


Financial history doesn’t repeat itself, but it often rhymes. Earlier this year, losses from subprime mortgages revealed that the financial markets had taken to excess a good idea in the real economy. A perfect economic environment allowed the alchemists in structured finance to apply massive amounts of leverage on low quality, securitized mortgages.[ii] When the first signs of softening in real estate prices surfaced, we learned that investors had taken on far more risk than anyone realized, and losses could not be contained.

The severity of the subprime debacle may be only a prologue to the main act, a tragedy on the grand stage in the corporate credit markets…


Dumb Money Averaging Down?


Citigroup, Inc. (NYSE: C): 10:53 AM NYC time, November 27th: Just a quick comment on the “Citigroup Receives $7.5 Billion Capital Infusion from Abu Dhabi” story. As you may know, the largest individual Citi shareholder is Saudi Prince Alwaleed bin Talal, son of the founding king of Saudi Arabia. Citi shares are down almost 50% in the past six months. Now more money is flowing in from the Middle East. Is it dumb money averaging down? The trailing dividend yield is over 6%, which is attractive…


Draft Gore to Run for Pres. & Vote for Time Person of Year

Draft Gore
Here’s the Draft Gore website:

Vote for Al Gore - Time Person of the Year
And here’s where you can vote for him on Time’s website:


PS: If you really want to help spread the word and make this “draft Gore” idea go viral just do something like write about it, blog about it, comment about it, sign the petition, etc. If you don’t know HTML you can just grab the code for this bulletin and repost it on your blog or website. Feel free to edit or whatever. Here is a link to the code (2 KB .txt file):


What’s Wrong With the Credit Ratings System?


Everyone should read this article… and send it to their senators and congressmen:

Transcript from Heilbrunn Center for Graham & Dodd Investing

Heilbrunn Center for Graham & Dodd Investing
17th Annual Graham & Dodd Breakfast
David Einhorn’s Prepared Remarks
October 19, 2007

What strikes me the most about the recent credit market crisis is how fast the world is trying to go back to business as usual. In my view, the crisis wasn’t an accident. We didn’t get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas. Securitization is a mediocre idea. Re-securitization of already securitized assets into a CDO is a bad idea. Re-securitization of CDOs into CDO-squared is a really bad idea. So is funding a pool of long-term illiquid assets with very short-term funding in the so called asset backed commercial paper market. And as I will get to in a moment, it is a horrendous idea to delegate most of the responsibility for assessing credit risk to a group of credit rating agencies paid for by the issuers rather than the buyers of bonds.


Article: Home prices to keep sliding with no bottom in sight


Home prices to keep sliding with no bottom in sight
Mon Nov 12, 2007 6:09pm EST

By Julie Haviv

NEW YORK (Reuters) – The U.S. housing market’s skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists.

Robert Shiller, a Yale University economist and co-developer of Standard and Poor’s S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What’s more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year.