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I just got back from an appearance on CNBC about Countrywide Financial and wanted to give you a quick update on what’s happening.
Bank of America has just announced it’s going to buy Countrywide for about $4 billion in stock, and B of A thinks it’s a bargain.
I disagree. Bank of America is diving into the world’s biggest mortgage cesspool — tens of billions in loans that are quickly turning sour.
So unless the plan is to stiff taxpayers with Countrywide’s sinking mortgages and other bad assets, this deal could cost Bank of America a heck of a lot more than $4 billion.
The big picture: The value of $13 trillion in U.S. mortgages is sinking at an alarming pace, faster than anyone believed possible. This means that asset values, book values, and earnings estimates based on mortgages are being widely — and wildly — overstated.
That’s why Merrill Lynch has suddenly discovered a flood of mortgage losses on its books, and that’s why it has just announced write-downs of $15 billion, nearly double its earlier estimates.
That’s why Fed Chairman Bernanke has just warned the world about many of the economic troubles we’ve been warning you about for months.
And that’s why it’s time to follow our recommendations faithfully for both protection and profit. Stand by for more instructions.
Good luck and God bless!
Martin
P.S. If you want to watch my CNBC video, click on the photo at the beginning of this article.
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