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KAI RYSSDAL: Wall Street bit into Countrywide today, hook, line and sinker. This country's biggest mortgage lender said this morning it lost more than a billion dollars in the quarter just ended.
But founder and CEO Angelo Mozillo said the black ink's going to start flowing again this quarter -- and that he thinks Countrywide's better off than any other mortgage company out there. By the convoluted logic of the stock market, that turned into a 32-percent spike in Countrywide stock today.
We asked Marketplace's Steve Tripoli to see whether the people bidding up those shares have been drinking more than their share of the Kool-Aid.
Steve Tripoli: Countrywide executives say a $1.2-billion third-quarter loss is the big hit that will set the company right.
Tom LaMalfa of Wholesale Access Research and Consulting sells mortgage-industry research to Countrywide -- count him among the skeptics about that claim.
Tom LaMalfa: I think such an assessment really isn't supported by the facts about the mortgage mess, and about how Countrywide specifically can extricate itself from its fate.
Countrywide boss Angelo Mozilo would disagree. He said in a statement today that the company is building up cash and tightening underwriting guidelines. Mozilo says those fixes, plus thousands of job cuts, are setting things right.
Not so fast, says Tom LaMalfa:
LaMalfa: I think that they have hidden in their portfolio all kinds of problems that have not yet surfaced.
...problems with asset valuation, the quality of loans and what it will cost to resolve those two.
Not everyone's a skeptic. Just about every Countrywide analyst on the planet was tied up in an hours-long conference call with Countrywide this afternoon. But here are some of their comments from earlier today, as read by Marketplace staff members:
Analyst #1 Quote: We're still working through the model, and we have a lot of questions. However, on the surface, this is positive.
Analyst #2 Quote: Countrywide moved decisively to re-orient its business model -- so that should help it, once the mortgage market begins to recover.
Analyst #3 Quote: Countrywide's problems won't work themselves out in a period of months. But the industry will be around three or four years from now, and Countrywide will be more valuable.
The stock's already more valuable -- it was bid up all afternoon by investors who want to believe the company's fourth-quarter optimism.
But should they believe? That's hard to say. Countrywide's recent pronouncements about how it's weathering the subprime storm it helped create have been pretty consistently of the rose-colored variety.
I'm Steve Tripoli for Marketplace.