Countrywide Again

This is your final warning!

Many market experts and analysts have been warning us about this. To see the storm, you no longer need the flat-screen window to the world that you get each day from CNBC , Bloomberg or CNN. You don't even require the newspaper. Why?

Because I have reasons to believe that you can FEEL it right under your feet. That's where you'll see the U.S. housing market — the source of most of America's wealth — starting to crumble before your very eyes. That's where you'll see large chunks of the U.S. mortgage market — the lifeblood of millions of Americans — being swept away by a flood of home foreclosures and mortgage company collapses.

Some of the recent casualties of the subprime fiasco includes big names like American Home Mortgage of Long Island, bankrupt 6th August; Home Banc of Atlanta, bankrupt 10 th August; and Aegis Mortgage of Houston, bankrupt 13th August.

Now, according to Merrill Lynch, there's another candidate for failure which is many times larger — Countrywide Financial! The company has exhausted its $11.5 billion in credit lines. That was fast! It has just received another $2 billion capital infusion from Bank of America. And it's still not enough.

Indeed, one top Bank of America executive privately believes that up to ninety percent of the country's Alt-A mortgages, a staple of Countrywide Financial's business, will eventually default. If so, it will easily crush all the cash and credit of many Countrywides. Why do I believe Countrywide is doomed to failure?

Because Countrywide CEO Angelo Mozilo himself sees the industry and the economy going down for the count. Just last week on CNBC, he admitted that the mortgage crisis striking America today is "one of the greatest panics I've ever seen in 55 years in financial services." He acknowledged that the troubles in the industry are going to continue. He even predicted that the housing downturn is so bad it's likely to drag the economy into a recession.

If someone of his experience and exposure (55 years) believes it is going to be rough, you better believe it. Afterall, you have got nothing to lose and everything to gain if the market heads south and you are out in cash instead of equities. Right?

So, stay safe, sane and most importantly, solvent!