Countrywide

Bill Miller bets on Freddie Mac

Jim Kim — Wed, 13 Aug 2008 08:14:08 -0400

It's fair to say that the financial crisis has been unkind to a lot of value-oriented fund managers. The mindset--by on valuation dips--has proved to be a loser's strategy. Anyone buying on the likes of Bear Stearns, Merrill Lynch and Lehman Brothers on the way down took some big hits. Miller was long on a whole lot of financial stocks, including Citigroup and Countrywide. At one point the Legg Mason Value Trust fund was down a whopping 40 percent. So what's the answer? How can he start a new 15-year streak? In true value fashion, Miller is loading up on Freddie Mac. Fortune reports his fund owns 80 million shares (12 percent of the total). That's up from 15 million shares at the end of last year. Some might call this desperation. We'll see.

For more:
- here's the Fortune article

What's Jamie Dimon waiting for?

Jim Kim — Wed, 30 Jul 2008 13:39:37 -0400

Most people assume the cagey Jamie Dimon is angling to make another purchase, specifically one to build the retail-bank side of the firm. The rumors are heavy regarding several companies, notably SunTrust with its strong Southern footprint and troubled Washington Mutual. Both are, ahem, attractively priced right now. Wachovia may also be a candidate for some kind of a deal. JPMorgan Chase is one of the few large banks well positioned to make deals right now. Citigroup has numerous issues to deal with, including capital troubles, and Bank of America has it hands full with the tricky Countrywide integration, so Dimon can afford to be choosy. Or can he? CNNmoney.com notes that a possible accounting change forcing banks to add off-balance sheet assets to their balance sheets could make it much harder to do a deal. So we may see a deal soon--or not at all.

For more:
- here's the CNNmoney.com article

Credit crisis crunches Bill Miller

Jim Kim — Wed, 23 Jul 2008 13:35:48 -0400

In the annals of investing, Bill Miller remains a big name. Recall that he beat the S&P 500 for 15 years in a row until last year. In 2007, his Legg Mason Value Trust fund fell nearly 7 percent against a 5 percent gain for the S&P 500. Many thought that was an aberration. But the credit crisis is dashing hopes of a return to historical form, Fortune reports. The Legg Mason Value Trust lost 20 percent in the first quarter; Miller was long on a whole lot of financial stocks, including Citigroup and Countrywide. He told shareholders the worst was over, but clearly he was wrong. As of now, the fund is down a staggering 40 percent. He's hardly alone. Fortune notes several big-name funds--such as Fidelity's Growth and Income fund the Oakmark Select fund--that have gotten tripped up on financial stocks.

For more:
- here's the article

Bank of America: Another upside surprise

Jim Kim — Mon, 21 Jul 2008 08:18:50 -0400

Bank of America joined Wells Fargo, Citigroup and a handful of other bank that reported better than expected earnings for the second quarter. It posted a gain of 72 cents per share against expectations of about 50 cents per share. Of key interest, the bank announced the Countrywide deal will start adding to the bottom line this year and that cost savings will be higher than anticipated. Credit quality, however, continued to weaken. The bank took $3.62 billion in charges, and boosted its reserves against bad credits of $2.21 billion. Most of this was real estate related. Interestingly, investment banking income was the second highest ever. Remember when CEO Ken Lewis quipped he had all the fun he could handle in investment banking and all but vowed to exit the business? Good thing he didn't.

For more:
- here's the press release

More on Ken Lewis's big bet

Jim Kim — Wed, 16 Jul 2008 12:27:28 -0400

Ken Lewis, CEO of Bank of America, really bet his career on Countrywide. We've made that point repeatedly. For all the savvy deals he's pulled off--MBNA and FleetBoston--this is the one that will matter most. Many have suggested that the deal will blow up for him--and painfully so. But maybe not. Portfolio notes that he has been quite savvy about the mortgage market, and has built a conservative mortgage business at Bank of America that wisely stayed out of the subprime mess, despite the obvious appeal before the crisis. You can imagine the internal debate. He's a sophisticated thinker when it comes to mortgages and how they can drive the complete customer relationship. Obviously, he's betting he can take Countrywide and integrate the best of it while discarding the worst. The jury is out. But he may surprise his critics yet.

For more:
- here's the Portfolio article

Is Bank of America's Ken Lewis the next to get sacked?

Jim Kim — Wed, 25 Jun 2008 13:17:22 -0400

In the recent furor over Lehman Brothers, many have suggested that CEO Dick Fuld's job is on the line. You really could say the same for other banks out there--big and small--as well. A commentary on Seeking Alpha weighs in with some thoughts on Bank of America CEO Ken Lewis. It's fair to say the jury is deliberating. On one hand, he has shrewdly built the company on acquisitions; Fleet Boston and MBNA come to mind. But will the Countrywide deal be his undoing? We've said before that he has bet his career on this deal. It has to work out for him. Seeking Alpha suggests that if the deal goes through, his career will be in jeopardy because the bank will undoubtedly struggle. The positive spin is that it's an opportunity to prove his worth all over again as a CEO.

For more:
- here's the item

Illinois to sue Countrywide; tip of iceberg?

Jim Kim — Wed, 25 Jun 2008 07:31:02 -0400

We've noted before that prosecution and regulatory action always follow scandals. So the news that the state of Illinois will sue Countrywide and its CEO, Angelo Mozilo, come as no surprise. You can bet that other states are mulling similar action. The charges will be familiar: misleading marketing, perverse incentives to sell inappropriate mortgages, lack of disclosure, inflated income...those sorts of things.

So what effect this will have on Bank of America, which has committed to a purchase of the troubled mortgage company? This may be the tip of a very large mountain of regulatory action from a host of players, including the SEC and FBI. Bank of America--CEO Ken Lewis in particular--has a lot riding on this. Countrywide needs to clean up fast.

For more:
- here's a New York Times article

Countrywide to be Ken Lewis's undoing?

Jim Kim — Sun, 08 Jun 2008 10:35:21 -0400

The sacking of former Wachovia CEO Ken Thompson shows how one deal really can blow a guy's career. True, Wachovia had run into considerable problems, but the bank's ill-timed Golden West deal was the final straw for the board. Will the Countrywide deal wreak the same sort of havoc (except on a grander scale) at Bank of America? Ken Lewis, CEO of Bank of America, remains convinced the bet will pay off. But there are many reasons to doubt him. The mortgage business remains uncertain, to say the least. The New York Times takes a long look at Countrywide's loan servicing business. Once the company's crown jewel, it has also run into some thorny problems that will be hard to fix. The jury's still out. We've said all along that Lewis has bet his career on the deal.

For more:
- here's the New York Times article

New era for Bill Miller opening up?

Mon, 12 May 2008 06:59:58 -0400

We tend to think of Bill Miller as the guy who manages the $12 billion Legg Mason Value Trust, famous for having beat the S&P 500 for 15 years straight--a streak that ended recently. But as the New York Times points out, he's also chairman of Legg Mason Capital International, which is taking its lumps right now. It had large stakes of Yahoo and Countrywide. But these are the times when talent really shines. Some may think he's lost his touch. Or maybe he was due for a drought. But he's also thinking of shifting strategies in a way that would focus the fund on more stocks, or just a few dozen. He has his team scouring for opportunities, and you get the feeling that if Legg Mason Capital continues to lag, it won't be because of a lack of trying.

For more:
- here's the New York Times article

Should Bank of America walk away from Countrywide?

Tue, 06 May 2008 06:59:54 -0400

MarketWatch notes that Countrywide is a bad position. Basically, its debts exceed its assets. Negative equity, of course, doesn't exactly speak well for the mortgage giant's future. Of immediate concern is the deal that Bank of America has struck. As Countrywide's loan problems mount and its stock tumbles, many analysts say the deal will have to be renegotiated. Friedman Billings Ramsey analyst Paul Miller holds that Bank of America should walk away. At a minimum, it may have to make some huge changes, like lower the price and perhaps require Countrywide bondholders to swallow more of the expected losses from loan write downs. This is getting tricky for Ken Lewis, who seemed to have bet the farm on the deal. It may be better for him to take his lumps now by giving up.

For more:
- here's the MarketWatch article