Subprimes up on Countrywide Rumor
The Financial Times is reporting a potential alliance or acquisition involving Bank of America (BAC) and mega-subprime Countrywide Financial (CFC). Countrywide is currently up about 10%, and other subprimes - including New Century (NEW) and Accredited Home (LEND) - are up about 2%.
Unnecessary Disclosure: I have no positions in the securities mentioned above
Unnecessary Disclosure: I have no positions in the securities mentioned above
Labels: housing bubble, mortgage, trading
2 Comments:
Still have conviction in the subprimes?... If so now you have opportunity to get a better entry point on other subprimes courtesy of NEW's restatement blunder...
Agreed. And after today's continued selloff, the entry points are even tastier (LEND's P/E now at 4.14). However - and to be honest - I'm not sure I have the cajones to pull the trigger on this one. I view this as a high-risk play, and all my high-risk capital is wrapped up in that d@#*! oil ETF right now (Today was a great day for the bulls, but we need some closes above 60).
Will the quality players (CFC, LEND) recover? Yes. Will they go lower before they go higher? Maybe. Will recovery happen anytime soon? No.
On a tangent: "high-risk" capital. Funny. This is what Behavioralists call Mental Accounting: w-percent for blue chips, x-percent for bonds, y-percent for speculative plays, z-percent for lottery tickets and Vegas. I believe this kind of allocation flies in the face of modern portfolio theory, so all appologies to Markowitz, Sharpe, et al.
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