Wachovia’s (WB) banking and finance analyst upgraded Countrywide Financial (CFC) following the $2-billion loan by “Fed discount window” pen pal, Bank America (BAC). The Wachovia analyst said, "We believe that Countrywide Financial still faces many near term challenges. But the influx of cash & capital reduces the potential for a catastrophic liquidity event, in our view." Deducing, of course, that prior to the Bank America loan, the Wachovia analyst indeed feared for a “potentially catastrophic liquidity event,” but never published such concerns prior to news of Wednesday's Bank America loan to Countrywide. I’m not picking on the Wachovia analyst per se, as said analyst has actually made some prescient calls on the stock, downgrading shares to an “underperform” in March. Nevertheless, Angelo Mozilo, Countrywide’s founder and CEO went on CNBC USA to berate the Merrill Lynch (MER) analyst, Kenneth Bruse for what Mozilo described as yelling “fire” in a crowded movie house, and called his downgrade to a "sell" and his accompanying verbiage that suggested a possible bankruptcy for the nation’s largest mortgage underwriter as “irresponsible” and “deplorable.” Of course, Mozilo’s liquidation of 736,000 shares between June 19th and August 13th (3-days before collapsing as low as $15/share) wasn’t his own way of yelling “fire?” I read excerpts from Mr. Bruse’s report on Coutrywide Financial and nowhere did he say emphatically that Countrywide will fail. He said in his own words that such an event was now possible. Ya know, if an analyst actually believes that a company could possibly fail, they should say so. He or she owes it to his bank's clients. In fact, in order to maintain integrity within the analyst community, it’s incumbent upon them to say as much—if they really believe it. Why is the inverse any different, which is far more common, to delude investors into believing that growth rates of particular companies are sustainable infinitum? I actually believe this brutal honesty, if it were actually capable of blossoming unencumbered by conflicts of interest within the “sell-side” analyst community on Wall Street, would even the playing field and even help to prevent bad ideas and bad operators from being funded through the rich retail and institutional Wall Street distribution systems. It would also prevent many smaller less informed retail investors from being lulled into what is often a web of lies usually costing Wall Street untold fortunes (in the long run) in lost "goodwill." The logic of this is no different than equating patriotism with dissent. It’s necessary and absolutely vital within a democratic society just as skepticism and doubt is and should be a vital ingredient, almost an innate characteristic, for any good financial analyst. So for Mozilo to berate Ken Bruse for simply expressing an educated opinion is disgraceful in itself. Okay, I’ll get off my soapbox…..By the way, Countrywide’s stock faded nearly all of its initial 4-dollar gain yesterday seen initially after hours on Wednesday when news of the Bank of America loan hit the wires and proceeded to drop another $1+ today. Baring the rush to prop-up this ailing mortgage company, I believe it to be fairly likely that the Merrill Lynch analyst would indeed be spot-on with his call. But given that we have become much more like China than China has us, the central planners on Wall Street and in Washington will exert as much muscle behind this effort as humanly possible stopping just short of being labeled a total bailout for Countrywide Financial. It’s a shame that those that profess to be the biggest proponents of free markets are often the ones that seem to despise it the most.….Another fairly important semiconductor company issued poor results; Marvell Technology (MRVL), a customer to Apple’s (AAPL) iPhone with its Wi-Fi lost baseband chip, lost money last quarter and showed sizable increases in Account’s Receivables and Inventories year-over-year. This is on top of Analog Devices' (ADI) punk guidance earlier in the week. And again, the operating environment from here forward only gets more difficult for this industry due to events witnessed over the past several weeks. ... Japan's central bank kept interest rates on hold at the end of its two-day policy board meeting Thursday, keeping borrowing rates for yen essentially free. And the Federal Reserve, in its behind the scenes bailout of the U.S. financial system, posted a notice on its web-site that said it would now accept “investment grade asset-backed commercial paper” as collateral at its discount window. In a world where we’ve seen paper rated AAA/Aaa by both Moody’s and Standard & Poor’s, trade like junk, this move by the Fed gets us closer to what I believe will be full throttle for the Fed’s printing presses. Got gold? By the way, gold bullion was up over $9/ounce today. It moved nearly $6/ounce within minutes of this being posted on the Fed’s web-site today.
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