This guy seems to know what he's talking about.


So I'm Mozillo. I'm about to go broke. I can't sell CP, I can't go to the discount window, I just tapped my $11b credit line and there is no more.

So here comes my "Savior", BAC. They "give" me $2 billion in money in exchange for convertable preferred. I agree to pay them 7.25% and they get rights on roughly 111 million shares of stock ($18 by the 2 billion)

Sounds like a good deal, right?

Wrong.

Here's why.

The day after I do this, BAC shorts 111 million shares of my stock! This nets them $2.8 billion dollars RIGHT NOW. They get interest on the $2.8 billion on top of it. So now if I'm BAC I just made $800 million bucks.

If the stock runs I have an $18 cover. But if I can short the stock to ZERO, I pocket the entire $2.8 billion PLUS I have preference picking over the bones PLUS I got my coupon until they die.

You this won't happen? The @#$% it won't! I've seen it DOZENS of times. Hell, this is old @#$% guys.

So is CFC stupid? Or are they REALLY in that tight of a box?

By the way, Cramer wrote about this years ago here
http://www.thestreet.com/comment/rewrite...

You got a gift here if you're long and underwater. GET OUT AND DO IT NOW.

If you're short, why would you cover? BAC is going to short this pig to zero. That's how they win. They've got a delta-neutral zero-risk trade on this one guys.

Don't be idiots; this sort of issue is NEVER good news.

NEVER.

AHM did one of these and guess what - they got shorted relentlessly and died. CFC did one months ago privately, and guess what - they never saw that price again, and THAT ONE had a PREMIUM over the offer price.

This is at a DISCOUNT.

I'm short. Hurt? Hell no; I have plenty of free cash margin on my account. I'm not stupid enough to get close enough to the line to get hurt by this, and I'm NOT COVERING.

Don't play the long side on this. The pros show up in the morning and they've seen this play before, and know how it ends.

Be the smart money or get killed.

Your choice, but there will be no further warnings from me, and lots of laughing when CFC's stock implodes.

He is talking about how Bank Of America invested 2 billion dollars in Countrywide a couple days ago.

He believes that it's a plot to make a quick buck off a dying company.

Shorting a stock is profiting as a stock goes down in price.

Matthew

This guy seems to know what he's talking about.

He has a strange way of talking about it.

HERE

You'll see that not everyone thought that he knew what he was talking about. Fact is, CFC is still at about the same $20 it's been for some time. The range included 15, at one point.

I have to wonder if this Fri, the 14th, that the bears are becoming increasingly disappointed with the latest 'false correction'. The industrials, so-called, that they hoped would fall, are now down about 600 from the start of this, and look to even recapture much of that, next week. Whence the bears, now?

As for home prices, yes, Florida real estate has taken a 10% hit in many cases. But elsewhere, especially where housing stock is tight (no room to build), median prices are up 5-10%, in this period.

I think there will be a bear market. But it's not yet. There will likely be a recession. Not yet. When it comes, how easily will the US pull out, or even certain other countries, and other markets?

I still think it makes sense that while the vast Commie sovereignty funds were created to destroy the free west, some of that money, and some of those generals and colonels, will want money for themselves, and healthy companies, and no change to the 'system'. And where better to buy, than US equities markets? At least, that will be the question facing this group. I think it will be a battle with the rest, to destroy, or to profit. When that time comes, we'll see how they use that 'rope' they've been given, to strangle the capitalists, or strangle their 'revolution'. You juxtapose the vast Commie funds with those held by oil-moneyed Arabs/UAE types, and still the prospects for those who desire materialism rather than their 'revolution' would seem best in the materialistic US equities markets, even more than US real estate, which too, as seen above, is something everyone wants even when the real estate itself becomes suspect in certain 'usual' parts of the country. Home prices are actually up in many of the more settled and wealthier markets.