A Bank Without Checking Accounts For Customers

On the Countrywide bank FAQ site. They say that they are no longer accepting new customers for checking accounts. That is pretty spooky, and just in time for halloween. However, during the conference call officers of the company said that loans were now being funded through the countrywide bank as the company no longer has access to outside sources of credit.

Does anybody still use savings accounts anymore? How do the countrywide executives expect people to hold money in a savings account where you earn 3% interest (if you are lucky), inflation is running at 2% (according to the fudged CPI data), and the dollar has fallen 10.4% against other major currencies this year. Dollars kept in savings accounts lost 9.4% of their value this year subtracting for interest.



CFC Faq Site

"Quality Rated Paper With A High Yield!!!"

This is what currently qualifies as A rated paper:

Last Price (35.86)

If you do not know much about bonds. They always start out at 100. This bond has lost 65% of its value. The rating agencies should issue downgrades on these bonds soon, but they can only downgrade them to BBB- (one notch above junk status). That is because many large institutions are not allowed to hold bonds with ratings lower than a BBB-. If the rating was below a BBB- the institutions would be forced to sell all of their holdings of the bonds. That would cause further price declines and even more selling.

The question also has to be raised: Who has the capital to buy them from the large institutions???

Here is the worst preforming sub prime bond. The BBB- rated bond. You should keep a garbage can close by for puking into if you dare to click on the thumbnail for a larger image.

Last Price (18.57)

The Sultan Of Slime Is At It Again

"Freak of Nature"
"Alien Predator in Subprime Slime"

Anyone who can sell 500 million in stock and have people believe that the company is ok must be a freak of nature. No one person is directly responsible for creating more personal tragedy in in the housing market debacle than the Freak of Nature pictured above. At the same time there is probably no one that profited more. (Sent in by reader Steve)

Just take a look at:
RDN
MTG
TGIC

You can thank Mozilo for the gap up in those stocks today. In three months you can also thank him for those companies filing for bankruptcy.

CFC Conference Call:

"Loans are now being funded through banking deposits because CFC can not obtain funding in the capital markets"

They are giving out loans from their bank assets and deposits. These funds are not unlimited and will eventually run into negative territory, when there is a run on their bank. I am sure that bank customers are happy that their money is being handed over to save home-owners who are close to bankruptcy. This is a recipe for disaster. I would take my money out of CFC as soon as I could if I banked there.

If You Had a Bad Trading Day

Just take a look at the chart below and you will feel better. The company is WCG, and they had the pleasure of being raided by the FBI on Wednesday. The stock was subsequently halted and as you see below there was a small gap down at the open on Thursday.

"The nature of the investigation is unknown at this time. A release from the U.S. Department of Justice was generally vague. It said the ongoing investigation does not directly concern, nor should it have an impact on, the delivery of any health care service to any person."

My guess is that they were actively participating in Medicare fraud. I know someone who used to work for the office of the inspector general and he would tell me that it was rampant.

P.S. Take a look at the RSI reading (overbought/oversold indicator) it went from above 70 (overbought) to below 30 (oversold) in ONE day!

What Is In Store For Today?

What will the master of disaster say?????

The price action in MTG, PMI, RDN, and TGIC will be totally based off of what CFC says today before the opening bell. It looks like they are all going to pop, and catch a lot of shorts off guard.



CFC was a loan originator for 2.5% of all mortgages.

If they offer any good news (they are masters at making up BS) expect these stocks to bounce. They are all oversold right now, and most will eventually go bankrupt. Almost nothing, except for New Century Financial (NEW) goes straight down to 0.

What they said:

Countrywide loses $1.2 Billion

"But the Calabasas, Calif.-based company said it will be profitable in the current quarter and in 2008, as it restructures its business to take advantage of the current market."

Honestly, I do not believe that they are going to just waltz right on through with only one quarter of loss. This is the biggest credit bubble in history, and I think that they are going to suffer along with everyone else. After all, most of the mortgage resets have not even hit yet.

Heisenberg and Einstein Take On Inflation

Have you ever tried reading a newspaper when it is pressed up against the tip of your nose? It is pretty much impossible to do without straining your eyes. That is how I view inflation, it is constantly in front of our face, and it is also constantly in motion. Also, prices tend to move so slowly that it is difficult to even see that they are moving at all. Whoever thought that Einstein's theory of relativity could be useful to economics?

It is kind of like seeing an old friend that you have not seen for a few years. Sometimes they will look drastically different, maybe they gained weight, grew a beard, or even had plastic surgery.

Imagine if you were able to transport yourself back 8 years and come back today. Would you perceive prices differently as they are now? Lets find out

Cost of gasoline in 1999: 1.33 per gallon (12 month average sampled 4 times per month)


2007: 2.95 per gallon

That is a 121% increase in the cost of gasoline over an 8 year period

Well, lets be honest. We all know that crude oil prices have skyrocketed because of increasing demand. I'm sure that prices for other things have not gone up. After all, the fed keeps telling us that inflation is under control.

Product	1999 Price	Price Today	% Increase
Electricity per 500 KWH	45.375	61.457	35.44
White Bread	0.899	1.212	34.81
Eggs Grade A	0.92	1.825	98.36
Orange juice	1.822	2.59	42.15

It is comforting to know that according to the federal reserve, people do not need to eat or use energy. Don't you feel better now that you moved that newspaper away from your nose :) ?

Gushing Oil and A Golden Shakeout

I do not like high oil prices any more than the next person, but pretending that everything is ok with the supply and demand of the commodity is just as good as sticking your head in the sand. If U.S. consumers really cared about the price of oil, more pressure would have been put on congress by the public, and congress would pressure the auto makers. The end result would be an American made hybrid vehicle. Pretty soon people will be wondering if taking that extra 30-60 mile trip is really worth it. Without the implication and utilization of fuel saving vehicles within the next 10 years, "going out for a drive" just for the fun of it might be a thing of the past. The car I took on a 1,200 mile trip was a hybrid vehicle. It got 50 miles per gallon, at an average highway speed of 80 MPH (no exaggeration). Why are people so against hybrid vehicles? Is there anything wrong with getting 50 miles to the gallon while going 80 MPH?

Today, oil gained $2.70/bbl and bounced off the $85 support level.

If you think that oil is not going to $100/bbl you are fooling yourself. The current fed policy is to lower interest rates during a commodity bubble. It is the wrong move in every respect. The fed should have held interest rates steady and let the housing and credit bubble work its way out of the system. Instead, they decide to support the housing bubble with cheap money while it is popping.

I fully expect consumers to start feeling that pain again at the pump. Right now the average gasoline price in the U.S. is $2.82. I expect the average price to increase along with the price of crude oil. The spot gasoline price has slowly been moving up and testing out new levels.

The gold market tried to shake out weak longs in the last couple days.


I suspect that $800/oz is closer than people think

I'm currently counting on another fed cut as the 10yr yield dropped to 4.33% today.


Thanks for reading, and best of luck trading this volatile market.