T-minus ? until Countrywide goes under.. . .

NEW -> Contingent Buyer Assistance Program
lendingmaestro - Any opinions on which lender(s) have Alt-a exposure and might find it difficult to get funding? Howz about Downey Savings and Loan?
 
This company`s stock is getting beat up again today. Its below $ 20.00 and off again in after hours. All the bad publicity about layoffs and bank runs is not making things better.

And today something about the Examiners at the Office of Thrift Supervision recently set up a full-time presence in a conference room at the Calabasas, Calif., headquarters does not sound positive either.

I give them 30-45 days and Chapter 11 will be the path of least damage. At least for the shareholders.
 
bitserv - I don't have any prediction, but 30-45 days would be lovely. My shortest dated CFC put expires in Jan 08.
 
Awgee, lets say if I buy Option Put at 20 for Jan 08 and CFC files for BK in 3 months, would I stand to make a lot of $$$? My wife started playing with options a few months back so we are pretty clueless (she's been making money though so I'm not complaining).
 
At $5.20 for the January $20 strike is kind of high for me to buy. If you really think that in the next 30 days they will go BK I'd buy the September $10 strike for $.70. It traded as high as $2.10 on Thursday. I'll watch how it trades tomorrow and if it is flat or down I may be buying. I don't like to have that much capital at risk but the capital I do use is at a much higher risk. If that makes sense.
 
Just curious to know what happens if right before bankruptcy filing the market pulls CFC off the blocks and you aren't allowed to trade on it? How do you get your money back if you do?

I know that in the seniority list of it's debt stockholders are just plan effed.
 
CW owns about 2,500 houses in California. I see it right on their website.

If they take a neg am interest only, no doc loan on all of those houses and wait for the property to appreciate and refinance it, things will be just great for them.

I am sure investors can see the value in that type of loan.
 
Options are extremely risky investments and I'd advise anyone interested in them to learn as much as possible. I would not recommend them for a novice investor.
 
Gosh, I don't know where to start.

When folks say options are risky and it is best not to trade in them unless one has a extremely good idea of what they are doing, they may be asserting some arogance. Kind of like saying," I can do this, but it is too dangerous for you." But they are right, no matter their motivation. I am amazed waiting2bylater's wife is making money without having extensive stock experience first. I don't think one needs as much knowledge as one needs to have experience, but zovall's comment is on target.

If you go long the CFC Jan 08 put with expiration of 20 at a cost of $5.20, you don't break even until the stock reaches $14.80 and if doesn't reach that price and you don't sell before expiration, you lose your entire investment in that particular trade. If CFC declares bankruptcy before the the third Friday of January, the stock would probably go to about $0.50 and each put would be worth $19.50 and your net would be $14.30. So, your at risk is $5.20 for a max potential of $14.30 on the chance the company will go bankrupt.

Real life is much more complicated and the most likely scenario is the stock will immediately go to $25.00 within four days of your purchase of the put, thereby reducing the bid price of your put to about $1.60, causing you to sell the put to cut your losses. Within five days of your selling the put, the company will declare bankruptcy, making you really pissed that you sold and missed out. It is important to consider all scenarios and look at yourself to see how you live with them.
 
I have to second zovall's thought. You can lose all your money that you invest in options. They are very high risk and in markets like this extremely volatile. In no way shape or form is anything I say a recommendation and doesn't necessarily reflect the opinion of IHB or the commenters of IHB. If you chose to invest in anything from goldfish to buying puts on CFC you are doing so by your own will. Any commenter and or IHB will not be liable for any investment you make regardless of where you got the idea. There are plenty of message boards out there for investing/trading and the advice is just bad/good as you can get here. Invest at your own level of risk and what you can afford to lose.

Warren Buffett said: "Tips are for waiters".
 
when i was in grad school, my finance professor quoted this stat: "80+% of all individuals (excluding investment firms) that trade options end up losing money". this was in 1991-92, but i can't imagine it's too different nowadays...dunno from where he got the stat though.

i've been trading options on-and-off since 91, and have one of these 3-letter designations that some people covert. my net gain over the years: -5000 (ues it's a loss)! :)
 
Forget Countrywide. They are only pass a through. Wait till Washington Mutual (WM) and Downey Savings (DSL) have to report the pain on their books. That is coming and soon. Lookout Below!!! Reminds me th the heady days of the savings and loan crisis when every day I got to work it was another Lincoln Savings or Mercury Savings of Far West Savings going under. They don't call em cycles for nothin.
 
I think the only ALT-A shops that will be left standing will be Indymac and Countrywide. These two are actually moving out of ALT-A and into more Agency. Indymac is still doing ALT-A loans below the 417k level. I think Indymac will outlast Countrywide becuase of its thrift structure. Both Companies will inevitably have more layoffs. Countrywide will need to cut more than half its staff IMO. It's just too damn big.

I have friends that work for Downey, and they are still doing alright. I think First Federal of California will be annihilated. The kinds of neg am loans they were doing would make your blood turn green. Tons of Countrywide deposits were flooding into my bank last week. We took in an additional 80 million in deposits on Friday alone!

Within the next 30 days most large warehouse lenders will be gone. Accredited, IMPAC, for sure. The regulators and powers that be are using these recent events to squeeze brokers out of existence. They want to see lending come out of depository banks. They don't want there to be entities out there, who's sole operation is originating loans.
 
As far as options are concerned, they are an exceptional way to preserve profits. Go long on a stock, write a call and buy a put option. You essentially are guaranteeing that you make money.

Options are no different than any derivative. They were initially created to protect your investment but then, like anything else, they became a speculative play. Most options expire worthless ( a wonderful aspect if you are writing calls).
 
Last quarter in Downey's own quarterly statemant they admitted that 90% of their loans in the last 2 years within their won portfolio were option arm, full arm and neg-am. They stated they needed to make those loans in order to remain competitive but wsere unsure of what may happen to them. The stock is off almost $25 bucks from its high. I think your friends there may have thier fingers crossed.
 
almon - Did you pass all three tests the first time?

lendingmaestro - Countrywide Bank is a thrift and they are converting the rest of their mortgage lending companies into it. I don't know if that will save them with their bonds downgraded and the commercial paper market shut down.
 
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