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The sub-prime mortgage disasters continue to be exposed for being high stakes high flying gamblers on folks with poor credit. The mess is further complicated by high priced areas such as California causing a priced-out panic over the past three to four years. This priced-out panic caused a huge rush of unqualified and uneducated would be buyers to run down to their local mortgage shop hoping to qualify and get in before it was too late. I can attest first hand about this panic. I lived in Orange County, California from 2001 to 2005, and believe me when I say the only word to describe it is Hysteria. You had Realtors feeding the frenzy with their talk of a real estate market that had no limits to how high it could go, and more than friendly mortgage brokers ready to hand you an exotic mortgage with exotic terms that on the surface appeared to be a God-Send, but was the devil in sheep’s clothing. These exotic mortgages such as the interest-only and negative amortization loans have been a huge disservice to folks who did not understand they were literally entering into a trap that eventually would engulf them in misery.

Now that the mess of the past five years is coming undone and many companies are being led to the slaughter such as New Century and Accredited Home Lenders this may be the perfect time to scour the sector for companies with strong operating histories and balance sheets that can weather the storms of this cyclical industry.

This brings us Countrywide Financial. The company has been operating since 1959 and has weathered every housing downturn since that time. While history is no exact predictor of the future there appears to be the real possibility Countrywide may be oversold and undervalued in respect to the strength the company possesses and its ability to emerge from this chaotic mess stronger with fewer competitors as the high flyers started over the past five years fade away into financial oblivion.

The company is defiantly exposed to sub-prime losses, however, its exposure should be limited as its entire loan portfolio is not sub-prime and mortgage originations represent just 47% of the 2006 pre-tax earnings. The company has and is currently diversifying its business in order to avoid earnings gyrations caused by the cyclical housing market.

The company’s five operating segments are: Mortgage Banking, 47% of pretax earnings in 2006 (59% of pretax earnings in 2005), Banking, 32% (25%), Capital Markets, 13% (11%), Insurance, 7% (4%) and Global Operations, 1% (1%). In 2007, the company will likely continue to focus on diversification in an attempt to leverage its core Mortgage Banking business and provide earnings that are less cyclical.

The Standard and Poors is expecting EPS growth of 10% over the next five years. This is obviously not spectacular, but if the company is currently undervalued it could present a real opportunity to achieve an above average return. S&P has also determined the fair value of the company is $35.50. Most companies trade well above this fair value calculation.

As of the close of the trading on Friday, March 23, 2007 the company was trading around 8.6 times earnings (TTM). Current year (fiscal 2007) earnings estimates are $4.22 a share, which currently puts the stock at 8.7 times earnings. Earnings estimates for fiscal year 2008 are projected at 4.87, which puts the stock at a 7.56 times 2008 earnings. The following are PE histories Countrywide:

Average 10-Year High PE Ratio 12.1
Average 10-Year Low PE Ratio 7.0

Average 5-year High PE Ratio 9.2
Average 5-year Low PE Ratio 5.8

The company’s major competitors are trading at higher PE Ratios such as Bank of America (BAC) at 11.25 earnings, Washington Mutual (WM) at 11.60 and Wells Fargo (WFC) at 14.06. The industry is trading at 10.41 earnings. These are all for the trailing twelve months. These competitors are more diversified financial institutions and may explain why they are trading at higher PE ratios; however, it appears Countrywide is trading at a discount to its strength and historical PE ratio. If the company were to trade at just 10-times 2008 projected earnings the stock would be priced at $48.70, which would represent a 32% return over the next 12 to 24 months, and that would not include the dividend yield of 1.60% at current share prices.

Now all this talk about the company trading at 10 times 2008 earnings is great, but it means relatively little if the company incurs more than expected loan losses due to its exposure to non-prime mortgage loans. A review of the Company’s most recent 10-k shows that non-prime loan production represented the following as part of total loan production:

2006 8.67% of total loan production or approx. $40.5 million
2005 8.94% of total loan production or approx. $44.6 million
2004 10.85% of total loan production or approx. $39.4 million
2003 4.56% of total loan production or approx. $19.8 million
2002 3.74% of total loan production or approx. $9.4 million

For the past five years total non-prime loans originated equals $153.7 million. The company is also servicing approx. $116.2 million in non-prime mortgage loans, which are currently 19% delinquent with 3.53% of these loans pending foreclosure. As of 12-31-06 the company had common shares outstanding of 585,466,719 with basic earnings per share of $4.42 and diluted of $4.30. So if all of these non-prime loans were to be written off it would only amount to approx. $.46 per share. It is obviously unlikely that all of these non-prime loans would go bad. Sandy Samuels, an executive officer Countrywide, recently said to the Senate Banking Committee said foreclosure rates on their non-prime loans could reach or exceed 10%. He did emphasize that 90% of the company’s non-prime borrowers will not loose their home. So if we were to establish a range of 10% to 20% it means the EPS hit could be $.05 per share to $.10 per share.

The company also has non-prime exposure in its recourse securitizations. At December 31, 2006 this exposure amounted approx. $401.5 million. Credit losses in 2006 related to these securitizations amounted to $94.8 million.

The following positives with the unpaid principles balances were noted: (1) – 70% of the unpaid principle balances at 12-31-06 had FICO scores above 700 and (2) – 44% of the unpaid principle balances had original loan-to-value ratios (LTV) of 80% or less.

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Don’t be foolish and naive like I was. I went years without shopping around my insurance rates, and one day it dawned on me.. All I had to do was take 5 minutes and get some free quotes and boy, did I ever save some major $$ :)

25.Mar.07 Insurance Quotes Read more Comments (0)

Our study has taken us through 8 principles to make clear the grey areas. In essence we have learned to seek for the well-being of others over ourselves. From convenience to self-discipline, from inner struggle to outer peace, from example to evangelism, we learned that true love is found in the action of those who serve others. For the most part, each lesson was primarily geared to the service of other believers. But considering all principles, there is one that remains. This one principle has risen bit by bit in our other lessons and yet demands that at least one be exclusively dedicated to it. It is the Principle of Execration. Execration is a synonym for condemnation. In context, it refers to the condemning of yourself by refusing to love another believer. It is a description of disunity.

It is best understood in the illustration of the body. We are made up of many parts. Yet all parts are uniquely placed together as one. Though they act individually, their purpose is for the body as a whole. When we stump our toe, the rest of the body reacts. The legs strengthen and send circulation to the foot. The hands reach down to comfort. The vocal chords cry out a loud Ouch! Each part serves a unique purpose, yet they all work for the same goal – soothing the ache. No part is so unique that it can operate independently of the others. Your legs cannot decide to go rest in bed while the arms remain in the kitchen cleaning dishes. Rather, they all work collectively as one body.

When one body part does not operate in a way that helps the rest of the body, it causes division. In human work processes, it causes one to condemn another. The Bible calls the church the Body of Christ. It is an illustration of the Christian community. Like the human body, believers work collectively for the same end. And in like manner, we must seek unity at all times.

Opening Thoughts
Have you ever been in a situation when no matter what decision you made, it offended someone?

What principals from our lessons come to mind when you consider these situations? If your decisions would offend either a believer or an unbeliever at the same time, to whom would you show your love by not offending?

Scriptural Text
John 13:34-35

A new command I give you: Love one another. As I have loved you, so you must love one another. By this all men will know that you are my disciples, if you love one another.

Background Setting
Usually you hear this verse as parallel to the Golden Rule (as defined in Leviticus 19:18 and Matthew 7:12, etc.) which states that one should love others as he loves himself. It means that just as much as we look out for our own well-being, we should more so look out for the well-being of other people.

But in this particular passage, Christ is saying something more. He is sitting at the table with his true disciples – the twelve minus Judas Iscariot. It is the night before his arrest and crucifixion. It is his last night with his closest. On this night, he announces his departure. He begins in verse 33 saying, My children, I will be with you only a little longer. You will look for me, and just as I told the Jews, so I tell you now: Where I am going, you cannot come.After His announcement, he immediately proceeds with this great command, Love one another. As I have loved you (v34). In essence, Christ foretells that the He is leaving the disciples on their own. And the first thing that comes to His mind is not that they remember everything He said, nor be bold in their proclamation of the gospel. Rather, it was a simple call to love. It must have been important.

We have discussed love throughout our lessons to be the laying down of our own liberties, pleasures, and lives for the sake of others. It meant to be selfless and not selfish. He called us to seek the well-being of others before seeking our own. Grasping this concept was clutching the E’s of Christian Liberty.

But the Greek words tell us more about just what Christ was commanding. We find it evident in verse 35, By this all men will know that you are my disciples. It has a ring of our last lesson in it (Principle of Evangelism). But it is much more specific. The Greek word for another literally means mutual others. It does not refer to all people other than yourself, but people like you. It is those others who are the same. Jesus is using this word to mean other believers. He is telling His disciples to first love other believers and that by this, all men will know that you are my disciples.

Provoking Questions
How does loving other believers illustrate that we are disciples of Christ?

Deuteronomy 6:5 commanded love for God and Leviticus 19:18 commanded loving one’s neighbor, so this was not a new commandment. So what does Christ mean in verse 34, when He said, A new command I give you? Why is this important?

List some examples of Christ exemplifying this love with the disciples.

Comparison Text
1 Corinthians 10: 25-33

Eat anything sold in the meat market without raising questions of conscience, for, The earth is the Lord’s, and everything in it.If some unbeliever invites you to a meal and you want to go, eat whatever is put before you without raising questions of conscience. But if anyone says to you, This has been offered in sacrifice, then do not eat it, both for the sake of the man who told you and for conscience’ sake – the other man’s conscience, I mean, not yours. For why should my freedom be judged by another’s conscience? If I take part in the meal with thankfulness, why am I denounced because of something I thank God for?

So whether you eat or drink or whatever you do, do it all for the glory of God. Do not cause anyone to stumble, whether Jews, Greeks or the church of God– even as I try to please everybody in every way. For I am not seeking my own good but the good of many, so that they may be saved.


Background Settin
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Our last principle returns us to where we began. We have back tracked to find the Purpose, Pattern, and the Principles to clear our grey areas. This portion of Scripture is a short illustration of our last Principle to study. Paul paints the picture to set up the most difficult gray area of them all. What do you do when any choice you make will offend?

It reads that there are two believers who are invited to dinner at an unbeliever’s home. The unbelieving host is serving meat. Paul’s first command is that we do not cause problems over food being clean or unclean. It would be more edifying and helpful if we were to just be grateful and eat. This was not much to weigh.

But then Paul throws a wrench in the mix. The unbeliever is an immature believer who would be violating his own conscience if he were to eat the plate set before him. His conscience cries out, We cannot eat this! It has been offered in pagan sacrifice. As we just learned, it would be better to not eat the dinner for his sake. So we have a problem. If we do not eat the food, our host might get upset. If you are a loving Christian with a passion for the sinner, that would seem like a lost attempt at Evangelism. On the other hand, if you eat the meat in order to become all things to all men, you can surely crush the faith of this believer. It is a catch twenty-two. You will have to settle with potentially offending one person.

Paul echoes Christ’s command that we should love our brethren before all others. His instruction points out that the nonbeliever might envy your undying unity and charity for each other. It could easily push the host to be more anxious to know your God. In fact, that is exactly what Jesus said it would do. By this all men will know that you are my disciples. Moreover, one cannot truly give thanks to God for food by which another believer stumbles.

Understanding the Meaning
What does this mean? Why is brotherly love our strongest witness?

The idea is not that we are commanded to offend unbelievers, but that we are to love our fellow believers most. What are some examples of this in Scripture? What about in your life?

How does this tie into the entire Bible Study series? What can we learn from this?

Summary
Scripture teaches us that our love for other believers is the strongest witness we have. In our life we should be seeking to glorify God in all things. We look to the prophets and apostles before us as well as our Most High example, Jesus. By our careful study of their principles, we can surely make clear the grey areas. For one day we will be held accountable for our decisions. So making the righteous ones should be our ever present passion. The grey areas can be clear.

Don’t be foolish and naive like I was. I went years without shopping around my insurance rates, and one day it dawned on me.. All I had to do was take 5 minutes and get some free quotes and boy, did I ever save some major $$ :)

23.Mar.07 Reviews Read more Comments (0)

If you don’t undertand the title to this first blog, its from the song Half Acre by Hem. Its the song on the Liberty Mutual Commercial. The song is excellent sketching mucic, and sleeping music. Unfortunately I just started really sketching yestrday, after i lost half of my mind. Ah, do let me explain. Because of this stupid time change and my lack of common sense i still go to bed late and get up early, which equals lack of sleep. Also, the day before yestrday after school…i just stopped eating. Not by choice, i just felt really full for two days. Now that equaled lack of food. Lack of food + Lack of love = one huge headache. Thats why I missed school yestrday. 

Now, my sob story doesn’t end here. This morning I was finally hungry! YES!! So for some showchoir fundraiser I bought chocolate from my best friend Drew. The only problem with Drew is that we’re to alike. We’re very argumentave in the morning. Drew said “Allie, give me a dollar, I cant take four quarters.” I said “Drew, I don’t carry my money around at school. I’ll give you your dollar on Monday.” & that set us both off because he woudlent take the change. Oh well, i still got my chocolate. Probably when i screamed “DREW, I HAVENT EATEN FOR TWO DAYS! I’LL GET YOU YOUR DOLLAR! GIVE ME CHOCOLATE!” Thats the part where i threw money and him and snatched my candy! Muahahhaha. Yeah, and you know what? Eric Newfeld just had to chime in “Wow. that was a really bitchy thing to do.” Well, Eric, no one likes you anyways.  He has crossed over into the “Allie no longer likes you at all” side of me. Stupid drama. If Chelsea wouldent have told me I would still think Eric was pretty cool. What satisfaction did she get telling me that I got called a bitch? WELL my best friends are just absolutely wonderful.

Okay, im done. I’m glad i got that out. That really didnt effect me as much as it seems like it did. So now I’m in Kentucky. Which is good, I love it here. Tomorrow I’m going to a charity fashion show in Lousiville that my Aunt set up. I’ll add lots and lots of pictures, I promise! Horray for that!

On a really random note,  LOLLAPALOOZA TICKETS GO ON SALE APRIL FRIST! FOR ABOUT 130 DOLLARS! YES YES YES! 
Okay, im done now. Ta ta!

oh and just to put it out there, if any online predators try and stalk me and track me down, i’ll kick your ass. That is a fact. :D

Don’t be foolish and naive like I was. I went years without shopping around my insurance rates, and one day it dawned on me.. All I had to do was take 5 minutes and get some free quotes and boy, did I ever save some major $$ :)

16.Mar.07 Insurance Quotes Read more Comments (0)




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