Saturday, February 9, 2008

Follow Me to the Liars

Ok, very bad week for stocks, very good week for my picks. Just to prove I follow my own advice, let me reprint an email I received from the investor relations department of MBIA a few days ago:

Me: I'm confused. Didn't your company just spend 4 hours on the conference call last week insisting you had enough cash? Now you need to raise an additional $750 million dollars (I understand, only $250 million of that is new money)? Is it possible you guys were not being honest last week? Please explain.

Response: The prospectus for the offering is available on MBIA's website, under "SEC Filings". While it provides the company with cash, as mentioned on last Thursday's call, we don't have a liquidity concern, but rather need additional capital to satisfy severe stress testing rigors associated with Triple-A ratings requirements.

Me: Horses**t!

No, you don't have a liquidity concern except that your company may be on the hook for a trillion dollars in faulty securities. Talk about a non-answer answer. Oh, by the way, not only was MBIA lying last week, this dude was lying to me as he wrote! Later that day MBIA made it another billion dollars they needed to raise in an offering, not $750 million. As I've said, these guys lie and are going to continue to lie, just like Mozillo of Countrywide, until they are bankrupt. We need big time corporate punishment/penalties, not corporate bailouts.

However, I continue to be stunned by the market's response to horrific news. MDC, a homebuilder, casually mentioned they lost $6.14/share last quarter. They were rewarded with a 5% gain. MBIA initially got slammed for announcing the need for further cash, but ended Friday up 3%. Ricoculous.

Distressed debt vultures are salivating over the potential for huge losses/bankruptcies this year. Bruce Richards, CEO of distressed specialist Marathon Asset Management, which manages $10 billion, says 162 companies will either default or restructure in the next 12 months.
He hates homebuilders, forecasting home price decline for the next 3 years.

This just in. Bank of America has just for fun (actually, not just for fun, to avoid bankruptcy) decided to double the interest rates on random consumers. I say random b/c some of these customers have good credit, pay their cards on-time, and have even paid down debt over the last year. Welcome to delinquent payment increases BAC, and welcome to phase 2 of the credit cruuuunchh! Read article at right....


Anonymous said...

What a great post!!! I think everyone should read this at least twice. Additionally, I think you should add a link to our congressman's email so we can write to him from your site.

AX said...

Not a bad idea. But I urge anyone in any district to write their congressman as well....