Friday, June 15, 2007

Countrywide CEO Does The SELL SELL SELL

Countrywide Financial Chairman and CEO Angelo Mozilo (NYSE:CFC) has been selling shares like a shipwreck survivor bailing water out of the emergency life boat. Since May 1 he has disposed of approximately 2 million shares. He has been actively selling well before that.

The stock sale was conducted under a prearranged 10b5-1 trading plan which allows a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material nonpublic information.

Angelo Mozilo is a co-founder and aged 68. So with his perspective and long in the tooth experience now that he is in the twilight of his career he has decided to liquidate as quickly as possible and put his money somewhere much safer I assume.

You can listen to all the guidance you want when the CEO runs for the hills investors need to worry.

Thursday, June 14, 2007

Freddie Mac Mumbo Jumbo

Freddie Mac (NYSE:FRE) trumpeted its return to timely financial reporting with some mumbo jumbo that makes you wonder what lessons if any have been absorbed. Freddie Mac has been governance conflicted so investors should expect and regulators should demand some changes. Here is the quote from the press release that deals with some of the changes under the critical heading of Internal Controls.

"The company has made significant progress in addressing its internal control issues. For example, it has addressed the material weakness related to the adequacy of its staffing by adequately filling the company's critical vacancies in areas related to controls and financial reporting"

Basically that's like telling your wife that when the toilet was backed up you would hire a plumber. Freddie Mac needs to create credibility by explaining how they are really approaching the problem. We have hired a few guys to fix it sounds like they did not really believe they had a problem and are just responding to the bad PR.

In the meantime they are still reporting losses but have announced a share buy back program to return value to shareholders. They claim their capital is strong enough to meet regulatory requirements. Just getting by does not create long term confidence.

Richard F. Syron, chairman and chief executive officer was particularly proud that Freddie Mac took a leadership role in the sub prime mortgage market, announcing new underwriting standards and products and committing to purchase up to $20 billion in mortgages to support sub prime borrowers." The new underwriting standards is a big sleeper comment. Given the problems from sub prime what does that really mean. When Freddie Mac was conceptualized did they want to be in the sub prime markets.

Freddie welcome back but you need to speak more clearly.

Wednesday, June 13, 2007

Apple Needs A Cigarette

Apple (NasdaqGS:AAPL) has had so much hype the only thing left is the cigarette. The iPhone you know will take over the world. It will make competitors shake in their boots. It will make otherwise sensible people run out and spend all their money. It will change the way we live (Lots of things think they can do that). It will do unimagined things that only Apple designers....

OK its probably going to be a neat product. Apple will not embarrass itself. But think about it. The whole uber alles thing is very overdone. Apple just snuck out an email announcement that says you need to sign on at iTunes for your iPhone to work. This message is coming out in the veritable last minute before product availability. I feel a little bit manipulated into a cross selling marketing platform.

The iPhone is a big bet on touch screen technology. Most other touch screen technologies have problematic experiences. Apple is really rolling the dice here. They need for these problems to disappear right now. If the problems disappear for Apple than it also goes away for the competition.

Has the iStockoption issue been fully resolved? When the hype wears off there are still real world issues. Jonathan Hoopes of Thinkequity is also concerned about the valuation in relation to the hype. When everyone or almost everyone believes big time, who is left to buy?

Tuesday, June 12, 2007

Cerberus Bi-Polar Approach on BCE

BCE Inc (NYSE:BCE) has multiple groups circling trying to figure out a way to acquire the telco which for so long has disappointed investors and customers. Cerberus in meetings with the the Canadian Minister of Finance Jim Flaherty along with overall lobbying efforts has promised to retain the current but very embattled CEO Michael Sabia.

Cerberus which is supposed to find BCE attractive because they feel they can fix and improve is now telling the market they will keep the old CEO. Michael Sabia rightly or wrongly has taken much of the criticism for not really fixing BCE. The criticism was starting to stick because Michael Sabia has been in the drivers seat long enough to make a difference.

So if you like the old team why not just buy the stock and hold it in your portfolio.

The entire process is becoming more political than financial. So one wonders what manner of offspring will come from all of this. Jim Flaherty currently Finance Minister took a lot of political heat for reversing his stand on income trusts and upsetting the entire investment community. BCE was a major factor at the time. It would be understandable if the minister hates his phone.

In the meantime while BCE is distracted with strategic who will own us crap, Rogers (NYSE:RG) the main competitor to BCE is sailing along doing profitable deals and laughing all the way to the bank. At least for now they are laughing.

Monday, June 11, 2007

Deere In China

Deere (NYSE:DE) announced a major acquisition of Ningbo Benye Tractor & Automobile Manufacture Co China’s leading manufacturer of low horse power tractors. We are to believe that because the Chinese farmer particularly the rice farmer is interested in becoming more efficient this is a really good idea. What does Deere add to the equation? The Chinese rice farmer will become more efficient with or without Deere.

You can say it provides access to the Chinese market but Deere already has that. The financial details were not disclosed. The press release was silent on who was the seller. Benye was started in 1955 when Mao was in charge so I expect the state is still the shareholder. The press release indicates they have asked for the appropriate government review of the transaction. It’s all quite fuzzy but I expect Deere will be the owner in the end.

If Deere wanted to build in China it probably could have. This way they acquire the legacy issues. The entire release is silent about any potential business plan. Yes the Chinese Rice Farmer is trying to modernize. But can the Chinese Rice Farmer afford the new equipment or will it have to be financed in some fashion. Farm financing is a very political issue in any country. Who will run and capitalize the program?

Deere has its problems and probably sees China as the driver to many solutions. Deere needs to put some cards on the table so that the investor can follow the program. Wide sweeping comments such as “we are expanding in China” do not cut it.