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March 20, 2009

Can We Trust Anyone?
by Daniel Aaronson and Lee Markowitz

Last week, Chinese Premier Wen Jiabao stirred markets when he said that he was worried about China's holdings of Treasuries and wanted assurances that the investments are safe.

President Obama responded by saying investors can have "absolute confidence" in Treasury bills and that "not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the U.S."

Now just one week later, the Federal Reserve has stated its intention to buy US Treasuries with newly printed money. Clearly, President Obama's statement could not be further from the truth. Trusting the Federal Government to preserve the value of US investments will be as dangerous as relying on the people or companies quoted below.

Angelo Mozilo, CEO of Countrywide

In an earnings conference call on July 24, 2007, Mr. Mozilo stated:

Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist. Nonetheless, we remain optimistic about the long-term future growth prospects and profitability of the Company as the industry continues to consolidate.

Notwithstanding current environment factors and their near-term impact on earnings, we believe that the Company is well positioned to capitalize on opportunities during this transitional period in the mortgage business, which we believe will enhance the Company's long-term earnings growth prospects. We expect to leverage the strength of Countrywide's capital liquidity positions, superior business model, and best in class workforce to emerge in a superior competitive position coming out of the current housing down cycle.

Bank of America

A Bank of America press release from August 22, 2007 indicated:

Bank of America will invest $2 billion in the form of a non-voting convertible preferred security yielding 7.25 percent annually. The security can be converted into common stock at $18 per share.

"We believe that in the current turmoil the stock market has been underestimating the value in Countrywide's operations and assets," said Kenneth D. Lewis, Bank of America chairman and chief executive officer. "This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country. We hope this investment will be a step toward a return to more normal liquidity in the mortgage markets. Countrywide has a strong mortgage origination business and it services the mortgages of one in seven American households."

Lehman Brothers

A Lehman Brothers press release from January 29, 2008 indicated:

Lehman Brothers Holdings Inc. (NYSE: LEH) said today that it has increased the Company's annual common stock dividend by 13 percent, from $0.60 per share to $0.68 per share. The dividend for the first quarter of the 2008 fiscal year is $0.17 per share, payable February 22, 2008, to shareholders of record as of February 15, 2008.

Lehman Brothers also announced today the continuation of its common stock repurchase program. The Firm's Board of Directors has authorized the repurchase, subject to market conditions, of up to 100 million shares of Lehman Brothers common stock for the management of the Firm's equity capital, including consideration of dilution due to employee stock awards.

Fannie Mae

A Fannie Mae earnings release from August 8, 2008 indicated:

Capital remains in excess of regulatory requirements. Our core capital as of June 30, 2008 was $47.0 billion, $14.3 billion above our statutory minimum capital requirement and $9.4 billion above our regulator-directed 15 percent surplus requirement. We currently expect that we will remain above our regulatory capital requirement for the remainder of 2008.

Keith Sherin, Vice Chairman and Chief Financial Officer of General Electric

In a press release from 12/2/2008, Mr. Sherin stated:

Even in a difficult economic environment, we expect the Company to earn more than $18 billion in 2008, including potential restructuring and other charges. We are reaffirming our plan to maintain a $1.24 per share dividend in 2009. We have leadership businesses that continue to generate strong margins and cash flow, supporting the dividend.

Daniel Aaronson
Lee Markowitz CFA
Continental Capital Advisors, LLC

Continental Capital Advisors, LLC was formed to offset the destruction of wealth caused by the global devaluation of currencies by central banks. The name Continental Capital symbolizes the 1775 US Currency, "the Continental", which was backed by nothing and quickly became devalued.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any action taken as a result of reading this is solely the responsibility of the reader.