Vultures among us: Bank of America gets its price for Countrywide
In the spirit of true vulture capitalism, Bank of America waited for what it thought was the best price on Countrywide Financial then pounced on the embattled mortgage company.
Condo Vultures™ - Opinion Column

Speculating on Countrywide
Vultures among us: Bank of America gets its price for Countrywide

By John T. Fakler
Executive Editor
Condovultures.com

In the spirit of true vulture capitalism, Bank of America waited for what it thought was the best price on Countrywide Financial then pounced on the embattled mortgage company.

Bank of America (NYSE: BOA), the second-largest U.S. bank, said Wednesday it would invest $2 billion, helping to shore up a liquidity shortfall at Countrywide (NYSE:CFC), the largest U.S. mortgage lender. Shares of Countrywide gained as much as 19 percent in after-hours trading following the announcement.

In return, Bank of America gets a 7.25 percent equity stake in Countrywide. The preferred stock, once converted into Countrywide stock, is worth $18 a share, about 17.5 percent below Wednesday’s closing price.

The investment comes less than a week after Countrywide obtained an $11.5 billion credit line to cover short-term debt. The value of the company's shares was halved this year after delinquencies and foreclosures increased. Countrywide needed the credit to make new home loans.

"In the current turmoil, the stock market has been underestimating the value in Countrywide's operations and assets," Bank of America Chief Executive Kenneth Lewis said in a statement. "We hope this investment will be a step toward a return to more normal liquidity in the mortgage markets."

Bank of America was rumored to be fishing for an acquisition for some time. And shares of Countrywide jumped 11.5 percent just yesterday on speculation that Warren Buffett's Berkshire Hathaway could buy a stake. Buffet dismissed the idea, according to news reports.

But not everyone is confident with the move, given recent turmoil in financial sector stocks.

"We still don't know where the bodies are buried," commented Stacey Briere-Gilbert, Susquehanna Financial Group chief options strategist on CNBC's Fast Money program Wednesday night.

Financial stocks, including banks and mortgage companies, have been hammered during the stock market's recent 10 percent correction.

Others see opportunity in a realm where most investors fear to tread.

"I see the vultures flying," said Optionsmonster's Pete Najarian, a regular panelist on the CNBC show.

John T. Fakler is the Executive Editor of CondoVultures.com. John's weekly column appears every Wednesday. He can be reached at JFakler@CondoVultures.com.

Copyright © 2007, Condo Vultures™ LLC


The Real Estate Market: Fear and Loathing on Main Street

Chicken Little got it wrong. The sky isn't falling. And healthy financial adjustments are being made from Wall Street to Main Street.

Condo Vultures™ Opinion Column


By John T. Fakler
Executive Editor
CondoVultures.com

A funny thing happened on the way to writing this column. Ferris Bueller’s economics teacher beat me to deadline.

Even scarier, I agree with Ben Stein’s position in his New York Times piece August 8. Chicken Little got it wrong. The sky isn't falling. And healthy financial adjustments are being made from Wall Street to Main Street.

But let me take Stein’s premise one step further.

While Stein attributes the stock market correction largely to subprime mortgage fears and a panic exacerbated by the media, the real estate market is behaving in a similarly petulant way.

Despite the best discounts in years, no one is buying. Investors are sitting on the fence. Media mavens, looking for strong angles at editorial budget meetings are jumping all over the alleged real estate market crash story when what’s really happening is likely closer to a healthy industry correction.

Consolidation is good for business. It weeds out the marginal, the fraudsters, the corporate wanna-bes. The over-leveraged. The real estate and stock markets will come back - at a deliberate and sustainable pace. And we will all be better for it.

Remember those offers of generous equity lines? Gone.

How about getting a mortgage with a credit score below 600? Not a chance.

Exotic mortgage instruments that don’t verify buyer income? Good riddance.

Greed, for lack of a better word is human nature. So is avoidance. Consequences be damned. And we are all to blame.

A glance at the headlines at Condo Vultures™ LLC sums up the general panic. If there is any positive in the reporting, I haven't seen it.

The media lives in a heaven or hell world. Investors, and the financial institutions that serve them, have the Sword of Damocles dangling over their heads. Not that some consternation isn't deserved. It is.

So now that the self-flagellation is over, let’s suck it up and get back to reality.

When the devalued dollar begins to rise again, it will already be too late for foreign buyers in Tokyo or the United Kingdom looking for a good U.S. acquisition.

I believe the same holds true for real estate. By the time the market begins to turn, valuable equity will be left on the table for those buyers looking for even more discounted prices.

Whether you are playing the stock market or the real estate market, a buyer’s market is all about good pricing, and not about knowing the perfect time to pounce.

John T. Fakler is the Executive Editor of CondoVultures.com. John's weekly column appears every Wednesday. He can be reached at JFakler@CondoVultures.com.

Copyright © 2007, Condo Vultures™ LLC

The Downside of Business Branding
By John Fakler

Reports of consumer product defects and recalls are coming in fast and furious these days. The media onslaught appeared to begin with tainted Chinese products and the surrounding political uproar. Big name manufacturers have been outsourcing for decades, so why all the noise now?
Much of it has to do with the sea change in editorial departments across the nation. "Help Desks" are popping up everywhere in an attempt to thwart dwindling circulation. Politically-driven blogs have become the rage, and scare tactics at Network TV and Cable news networks are always popular during sweeps weeks.

There is one daily newspaper in my own hometown that reports product recalls almost everyday.
It's a great public service, in my opinion. If there is bad beef or chicken at my local grocery, I want to know about it.

But I can't help thinking, how much of the reporting is being blown out of proportion. And how exactly are businesses coping with all the negative publicity?

Too many stick their heads in the sand, hoping the crisis will blow over. The general consensus, according to crisis management sources, including the Institute for Crisis Management is that the best crisis management deals with potential crises swiftly, before revenue streams and stock prices can be impacted.

If word has spread to the media and the general public, a crisis communication plan should be implemented to control corporate disruption and any resulting financial damage. With a simple, effective plan in place, organizations are not only in a better position to minimize damage, they are more often in a better position to handle future crisis situations that could disrupt the business and affect its operating expenses, profits and ongoing operations.

Still, creating a crisis action plan is easier said than done. Fear or flight is a visceral reaction to such situations.

One misconception pointed to by the Institute for Crisis Management is that there is usually no warning before such events occur. The fact is, however that problems more often than not have been simmering for a long time, and management often knows about it before any public dissemination. Natural disasters and employee actions play a minor role compared to management decisions, which are most likely to lead to big, bad business news.

The power of branding is an awesome responsibility--and a powerful tool--when implemented by experienced managers who understand the downside costs that effective brand management brings to the corporate table.

eBrandNation is a service of Media Logistics LLC, a media relations consultancy in South Florida operated by John T. Fakler, an award winning former business journalist and corporate consultant. Media Logistics LLC is a niche player in the PR industry. We help businesses communicate with customers and gain media exposure in both traditional and non-traditional ways, such as developing Web content, guerilla branding and e-marketing. Information regarding specific branding services is available at http://www.ebrandnation.com Our Consumer Recalls page can be found at http://www.ebrandnation.com/page18/page18.html

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