Fair Isaac May Get Treated Unfairly When The Newest Credit Bubble Bursts

Reggie Middleton's picture

In continuing my rant on the state of the US consumer, I present to you this email I received from a reader...

Short FICO. This company engineered a stock-back program in Nov 2011. The Stock buy-back was equivalent to 20% of its market cap at the time. The three executives left the company and cash in their stock options. The company had 3 CEOs in 4 years. The Company latest quarter was slightly down, without the massive buy-back the share count would have meant that the stock had lower earnings per share YoY. What is staggering is while the company did this massive stock buy-back, some execs (including the 3 execs departing) sold at price sometimes below the price the company was buying back its stock at. If the company was doing such a good deal by buying the stock "cheap" at around 40 USD, why would the execs sell their "cheap" stock at 39 USD?

Now recently the company announced its quarterly earnings, poor data, the stock plunges by 10.5%, next thing you know SECput the Rule 201 alternative uptick rule. The next day the stock is up 10.5%, but of course nothing is done to prevent the stock to move up more than 10% a day. The same happened on the same day with Vulcan Materials which released its earnings, really crappy (a lot more than FICO), Vulcan Materials is a Einhorn short, and yet again you have the rule 201 implemented the next day....

Those who have been following me recently know that I have been laying the foundation for a most cogent argument against the US consumer, hence the consumer discretionary and durables sector - as articulated in BS At The BLS Leads To Profitable Short … and Is The New US Consumer Consumption Bubbl…

FICO is a credit data processor and provider. They make money when a lot of people apply for loans, and make less money when less people apply for loans. With that being said...

Credit card usage is dropping...

Mortgage applications are dropping... The two largest uses of consumer credit is falling to the wayside (save the student loans mentioned in the links above). More on FICO...

 

FICO Note Page 1.1FICO Note Page 1.1

FICO Note Page 2FICO Note Page 2

We have formed an internal opinion on FICO that all paying subscribers are invited to download here: File Icon FICO Note.

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