Countrywide – an appropriate name

fake_george_hamilton.png Angelo Mozilo (aka fake George Hamilton) who runs Countrywide couldn’t have picked a better name for his company which he founded in 1967 with David Loeb. Why? because the impending collapse of the subprime market (which will happen) is being felt country wide. And, in reality it’s being felt around the world, Bank of China on Friday announced it has a USD 10 billion exposure to subprimes.

I was expecting the LA Times to run with the Countrywide story and have some insight since the company is located in its backyard, but no luck. Instead the best piece so far on the inner workings of Countrywide comes from the NY Times. It shows Countrywide was one massive boiler room operation focused on a part of the credit markets that were considered boring.

What is really laughable is an article from USA Today talking about the best stocks from the past 25 years. Oh yes, Countrywide makes the list at number 12 and the best part is the description of the company:
“This leading mortgage lender provided the fuel for the home-buying boom, which in turn was a boon for it’s bottom line. Its focus on first-time buyers with pristine credit has limited collateral damage from exposure to subprime lending.”

That statement makes about as much sense as saying “focusing on first time mothers who are virgins.”

USA Today PDF article (pdf, 1 page, 56kb)

Reliance's Missed Call

bigadda_logo.jpgLately, I’ve been noticing that Anil Ambanis’ Reliance-ADAG has been building up a portfolio that other entertainment groups around the world could only dream of. If content is king, then distribution is god. Reliance-ADAG has both pieces that are critical to dominate the market. However, I feel they have not been able to do so effectively, almost to the point that each group is not taking the call of other groups within Reliance-ADAG.

Imagine if Universal Studios not only owned the production studio, but the movie theaters, the TV distribution platform, the radio platform, the cell phone platform, cyber cafes, etc… Well Reliance-ADAG has all the above and more, here is a brief list:
– – social networking site
– Adlab Films – production studio
– Adlab Cinemas – movie theater distribution platform
– – gaming portal
– – mail for the gaming portal?
– Big 92.7fm – radio platform
– Reliance Communications – mobile phones, broadband, Reliance World Cafes (formerly Web World)
– Reliance BlueMagic – upcoming launch of their Satellite TV service the latest arrival into the social networking scene was launched this week in India amid a massive marketing campaign all over Bombay. This follows on the heels of an equally large marketing push recently from But you would never know that both properties are owned by the same company, each seems so separate and disconnected from the other. The great thing about Google is you have one username/password for all their various services and everything flows from one to another with a consistent user interface (some call it boring). However, when Google adds a new service people are willing to try it, since it’s just a click away and don’t have to go through the process of filling out another userid and all that non-sense. I know portals are dead, but if anyone should have a portal it is Reliance, they have the platform and content to really drive traffic and create a central destination for all their properties.

Subprimal fear

mr_housing_bubble.pngIt’s late 2003, and I’m sitting in my rented apartment in Redondo Beach, California thinking I need to buy a house. Why? Because everyone is telling me it’s the best thing to do and throwing money at rent is stupid. So I get a real estate agent to show me around Hermosa and Manhattan Beach and quickly realized I was priced out of the market. But, the agent kept on telling me “Manish, I’m getting waiters and waitresses into houses, I can definitely get you a house.” Also, I had friends that were working for companies like Countrywide and Ameriquest and they were telling me how quickly they were expanding. Back then I couldn’t put my finger on what was happening, but now it’s fairly apparent – subprime loans.

It seems so obvious that they were just throwing money at people to buy homes. I know a couple people that took these type of loans and technically speaking they are screwed. They get to watch their monthly mortgage go up, their home value go down, their blood pressure go up and their disposable income go down. If you like roller coaster rides, this is the one to be on.

So what smart investment decision did I make with my money? I did the worst thing possible I bought a constantly depreciating asset – a car. In hindsight it was the best damn return on fun I’ve ever made.

To learn more about the subprime market and the events that unfolded in March and April 2007, download this pdf (46 pages, 356kb). It was published in May by the EIM Group, which is a fund of hedge funds and supposedly had some exposure to these instruments.