There is a great scene toward the end of the movie Animal House. The Deltas have decided to wreak havoc on the Faber College Homecoming parade. The grandstand has been destroyed, floats are running amok, people are fleeing for their very lives and there is chaos in the streets. One of the ROTC members who has been charged with maintaining public safety (played, I believe, by Kevin Bacon in his on-screen debut) stands still amidst the whirlwind of activity that envelops him and screams at the top of his lungs: “Remain Calm! All is Well!!” The absolute lunacy of his reality is made hilarious by his sheer conviction. I am amazed every time I see it. I feel that way lately as I watch Wall Street react to Countrywide, almost imperceptibly screaming “Remain Calm! All is Well!!”
I was more than a little confused by Wall Street’s reaction to Countrywide’s pronouncements last October regarding a profitable 4th quarter. I wrote about it then and I guess I am writing again with a childish “told you so.” Countrywide is underestimating their financial obligations in my humble opinion and it seems rather obvious to even the casual observer. But as I have pointed out, main stream media is missing the real problem as well. In a world of doom and gloom I am loathe to admit it, but these players are not doom and gloomy enough. That is all well and good because their misjudgments serve them and it is easy for us to follow the ball when we follow the money. More difficult to follow, however, is Wall Street’s desire to play along.
Today Countrywide announced that they were in fact unprofitable in the fourth quarter (which must have come as a bit of a shock to those that bid their stock up last quarter) . This was in direct contradiction to their public estimates. It now seems even more reasonable to conclude that Countrywide’s set asides are woefully inadequate, yet their stock today was… up. “Remain Calm! All is Well!!”
Filed under: LENDERS, POLITICAL & ECONOMIC FOLLY , Countrywide, Wall Street
Kevin Bacon played the convincing young cadet.
I often feel like Otter when covering CFC.
Hi, that was Brian Brady, Rush chairman, he was damn glad to meet you.
[...] Sean Purcell doesn’t either. He and I share similar backgrounds (stockbroker) so I guess I’m in pretty good company. Check out his humorous analogy on A Life That Pops. [...]
Brian linked to this article and deservedly so. There seems to be a sort of madness surrounding the markets, not just Countrywide, but CW is a great example. Your correlation to Animal House is spot on.
Brian – America’s Mortgage Broker is not just good company, it is Star company
Robert – I agree completely. Countrywide is (was?) the largest and therefore easiest example but there are others out there with the same problems. It is going to be a bumpy six months.
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