Countrywide and Bank of America Get Married

So it is Bank of American coming to the rescue of Countrywide. It isn’t Berkshire Hathaway, that’s for certain. Bank of America’s move shows that some of the liquidity concerns have lessoned over the last few days. Maybe things are getting back to normal. By giving Countrywide $2 billion and in essence stating they are going to back the company BAC pretty much guarantees that CFC is not going bankrupt. I still am not convinced that Countrywide’s stock should be shooting up like it is, because the company will still have to change it’s way of doing business to proceed in the future as I have discussed before.

I am pleased I added Bank of America to my portfolio last week. I think as a move for BAC, this is a homerun. BAC’s $2 billion bought non-voting preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, 17.5 percent below the shares' Wednesday closing price. Sounds like a pretty good deal to me, as long as Countrywide’s stock justifies this price (see preceding paragraph).

Ford Not Having Fun

So not only does Ford have to make a deal with their union by September 14th, they are also concerned about the sales of Jaguar and Land Rover brands. CEO Alan Mulally said that current U.S. economic conditions were a “headwind” to their turnaround plan.

I still believe strongly that Ford is going to get it turned around.

Q2 earnings showed a profit (which was thought to be something that would happen in 2009). The union and the company will ultimately come to an agreement. I understand the union being upset with Mulally’s pay package of $39 million and the average worker is being asked to take a pay cut. But the average benefit for a union worker is $25 more per hour than a Toyota worker. Something has to give for them company to stay competitive.

Jaguar and Land Rover will be sold. Projections now are for the end of the year into early next year (Ford had been saying by September 30). Ford stated that they are also looking at selling Volvo. I am all for that. The company needs to focus on the core business.

July sales were down 17% year over year. You are still seeing some hang over from reducing sales to rental fleets. The good news was the crossovers the company offers sales were up 40% in July. This will continue to improve and new models should start coming into the fold in the next couple of years.

Ford is a stock to add now because the future is going to be brighter than the past.