Was Today a Bullish Reversal?

It very well may have been. The next couple of days will prove this. In times like this, you must throw out your previous bias and heed what the market is telling you. A lot of shorts got caught and squeezed today, including myself. I however did not sell into this panic. My rule has always been that just when things feel like it has gone to "hell" and that primitive urge to "fight or flight" is when a true trader can test whether or not he truly has conviction. Of course, a seasoned trader will also acknowledge that his primary duty is to protect his hard earned capital and cut losses quickly. Within context of this market, one must also become flexible and become more flexible if he or she is to trade in this dangerous environment.

Today was a broad rally, spurred by the FED comments and their decision to leave the interest rates unchanged. This interest rate policy was widely anticipated. What is perplexing about this rally is that the FED comments were not at all dovish. Because the FED changed the sentence and word structure of their policy statement, the market perceived this as an end to rate hikes. But when you read the statement without trying to find the implicit or explicit meanings the FED is still concerned about the high inflation and that the housing issue is an ongoing issue. There was no where in the statement that would be even suggestive of the fact that the FED is considering cutting rates or that they will even consider that. All we know is that the inflation is acknowledged as being above their comfort level and that they will continue to be vigilant in combating inflation.

Please see this site as this breaks down and compares the FED policy statemetns:
http://calculatedrisk.blogspot.com/2007/03/fed-weaker-economy-more-inflation.html

Additionally, while technically, today can be consider the "follow" through day, I believe it is a bit early in the correction cycle to have much validity. Usually, according to IBD, a follow through that has the highest rate of success the one that occurrs after at least 7 weeks of correction cycle. Additionally, the follow through day is defined as a bullish movement in one of the major indices on strong volume of at least 1.7% on the fourth day to the 7th day, after the first attempted rally. Additionally, all bullish uptrend started with a follow through day but not all follow through day leads to a bullish uptrend. This bullish movement began last Thursday which counted as day 1 and today's follow through was day 5 of that attempted rally. Today's breadth was strong. 9:1 ratio of advancers to decliners put an exclamation point to today's follow through. It has been mentioned that a day like today where the advancers trumped decliners, especially on a follow through day means that the bullish movement is especially strong. That is true whenc onsidering historically when the follow through day had such incredible breadth.

But an article on today's Barron's Online syndicated article Getting Technical "Is It Morning in the Stock Market?", he has presented an interesting view that perhaps this is the volatility inherent within the bear phase market that has left both the bulls and bears running for cover. He point out that on March 7 Getting Technical showed that the chart pattern exhibited at that time resembled the chart pattern from 1994 and 1999 peaks which lead to a trap after breaking above the trading range, which eerily similar to today's situation.

He also points out that on March 14th, when the Dow fell more than 136 points intraday and breaking support underneath the 12,000 level, the bears seemed to have the upper hand only to reverse above the support level causing a bear trap. Thus when looking at the chart shown below, you will see that this pattern shown both today's bullish follow through and the bearish breakdown on March 14th, some concerns. Notice the extreme ranges on the chart breaking through the support and resistance parallel lines?

I am not trying to discredit today's follow through. I just want the readers to acknowledge the fact that not all follow throughs lead to bullish uptrend. We are still in a technically broken market and any bullish complacency that might drift into the market, it may be met with unexpected whip saw that will have the bulls scurrying for the exits. Too many economical issues both macro and micro, exists to be comfortable in this environment. Additionally, this rally seemed to have been fueled by desperate short covering which exaggerated the movement today. But it is also true that no rally ever started with out the "short squeeze".

We will see tomorrow what the fate holds for the market. But for now, the best place to be in is cash. In a bear phase extremes in volatility exists and just when you get comfortable, the old man market casts a nasty dose of whipsaw.

I will be watching with great enthusiasm what might unfold tomorrow when Senator Dodd investigates the subprime mortgage leaders on what might have gone wrong. I still remain very skepticle about Countrywide and their insider selling issues and whether they will be as strong as they say they will be once the dust settles from the subprime fall out. I am leary of the fact that Mr. Mozilo did not personally attend to discuss this important issue and clear his company's name, granted it is not a trial, but there is so much chatter about this company, you would think that if he had nothing to hide, he would jump at the opportunity to clear his company and his name.

On several fronts, Apple seems to have the momentum to the upside and many prior leaders such as Google, BIDU, ISRG have gained a solid footing today. We will see if that continues. BIDU also has broken the $100 mark in convincing fashion today. Barring a bearish reversal, I believe that this company has possibly began the move to the upside. We will see.

As for Countrywide (CFC), I remain short term, intermediate term, and long term bearish. I am awaiting the next shoe to drop for this company. I also read an interesting article today on Dow News Wire that questioned formally Mr. Mozilo's increased firesale activity. This story keeps getting better and better. I remain short in this stock, though I took a big hit today, I am not rattled. It has become a cause for me to keep digging.

You can read Michael Kahn's article on his syndicated column Getting Technical on Barron's Online.

Please stay safe and go to cash in these uncertain times. It is not what it seems.

Update on CFC and BIDU

BIDU apparently has found spport at the 200 EDMA and is now bouncing off that level and challenging the $100 level. If the stock breaks $100 on strong volume, we can confirm that a new uptrend has started for this stock. But if it fails to break $100 and reverses on strong volume, we can expect to see $93 to $85 in short order.

CFC is currently is also edging slightly higher up $.20 to $35.42 on my Level II quotes. This is on very light volume and there appears to be congestion with the ceiling at $36.50 and floor at $34.79. The market is very cautious ahead of the FOMC results today. It is scheduled to be released at 2:30PM EST. I see some shorts covering their positions ahead of the announcement.

FOMC is most likely going to keep the rates steady but their policy statement will move the markets either up or down. In all likelihood, the FOMC must confront the rising issues with subprime, which they may down play as being anything of significance in order to keep the markets from being spooked. But the duty of FED is to keep the inflation under control and to guarantee that the economy will continue to expand at healthy levels. In order to do this, they must acknowledge the suprime crisis and also be honest about their policy and not pander to the market's whims and realize that they do not exist to prop up the markets but to ensure long term expansion of this economy.

Countrywide To Send The Chief Legal Officer for Hearings

In another turn of events that raises an eye brow or two, Countrywide Financial agreed to participate in the SEC investigation. While most companies are sending their CEO or President to testify under oath, Countrywide Financial is sending their Managing Director/Chief Legal Officer, Sandor "Sandy" Samuels, to testify.

What is troubling about Countrywide's decision to send Sandor Samuels is that it continues to raise questions of integrity and fair play by Angelo Mozilo who is the chief archetect of that company and no one else can have more insight of the operations of the company. The question that needs to be raised is this, "why is Mr. Mozilo sending his top lieutenant when he himself can gain credibility by publicly testifying about the fairness of his business model and legality of his recent "fire" sales of his stocks". I can only infer that Mr. Mozilo actually has more to hide than meets the eye.

I believe the next shoe to drop for the mortgage and housing sector is this event. I have faith that senator Dodd will ask tough questions ranging from validity and morality of "Liar" loans, subprime mortgage process, and excessive insider sales of stock. While I do not believe any "material" information will be garnered from this hearing, it will raise some poignant questions within the media who has been playing cheerleader for the mortgage companies as of late. It will make it hard for the companies to manipulate informational stream to the public to prop up shares while the insiders continue to sell shares of their companies.
Furthermore, it may raise awareness that the problems within the mortgage company is not isolated to the subprime sector and that further escalation of this problem into other mainstream mortgage sectors may be possible.

Countrywide may have as well chosen the path of New Century by outright refusing to participate in this testimony. Even though I anticipate that Countrywide will continue to play ignorant, naive, or take the 5th, the public perception of this company will be raised. That this company is not above the intelligence of the good people of America. In pursuit of profits and insider greed, Countrywide has done more to harm the "American Dream" by making unrealistic goals achievable. The only thing that will be garnered from this testimony will be corporate greed and the arrogance of Angelo Mozilo.

Angelo Mozilo why are you hiding?

Do the Right Thing Mr. Bernake

I am an optimist at heart. I am also a bull at heart. But I am also able to change with the times. Today and for the unforseeable future, I am a bear. Tomorrow at 2:15 PM EST, FOMC will release their policy statement. Many pundits conclude that it is a foregone conclusion that the FED will remain steady with their interest rate at 5.25%. What will be listend to closely tomorrow is the "language" of the FOMC. Many economists and equities players want to hear a "dovish" FED statements tomorrow that will hopefully signal the end of the tightening bias of the FED. What will be most closely watched is if there is any indication that the interest rates will be cut in the near future.

The markets rallied for the past two days based on the premise that the FED will hold the interest rates steady and that the language of the policy statement will reflect a change in tone to a dovish stance which would further invigorate the market. Many are clamoring or worse, begging for a rate cut. Some have even gone as far as to predict that an interest rate cut will come as early as May. Because deep down at the core of the majority of the market's wishes is to keep the market rally going. No one wants the party to end. But sadly, like all good things, all things must have a beginning and an end.

The specter of recession looms large. We have seen the first early warning shots that our economy is not all right from the recent subprime melt down. Many would want the FED to step in, play the role of a good guy, and "save" the markets from the recent "turmoil". That would include a dovish statement from the FED, indication that tightening bias is done, and a wink and a nod that the rate cuts are near. That wishful thinking is erroneous.

First thing that everyone needs to understand is that the tightening bias of the FED that began June 2004 that brought the current rates up to 5.25% was implemented to ease the housing bubble that was looming large. The effect was to tighten the credit availability to cool the economy. The FOMC policy of easing interest rates to combat the post 2001 dot com era melt down was artificially engineered to prop up the economy and to induce stimulus to the economy. That stimulus then created the next bubble that is housing. One must seriously consider that the rate hike campaign was to take the excess that existed in the housing and credit markets. Now that the pin has began to prick the subprime excess, many are calling for the FED to stop that they have done enough. If Ben Bernake and Co at FOMC are true to the policies set forth by Alan Greenspan, then they must continue to maintain the tightening bias because we are not done with fighting inflation.

FOMC must battle still high inflation risk versus saving the equity and housing market. The US economy is widely believed to be slowing down to 2-3% growth for 2007 and 2008. I think that the economy is cooling as expected by the FOMC and these measured rate hikes are not to blame for the possible recession that may take place. The easy credit and the go-go housing boom is not fully contained. FOMC must consider that the subprime pruge has not yet ended and that ALT-A Option ARMS pose significant risks to the economy. The interest rate policy of FOMC must be focused and true to their intended purpose. That is to fight inflation and to keep US economy growing at a reasonable rate. If FOMC does not heed their original intended plan, and give into the whims of the market or for political aims, this economy will falter into possible stagflation. Stagflation can be characterized by the 1970's where inflation was sky high and US economic growth was nil. That is exactly what the FOMC statement tomorrow has the potential to avoid or create.

What must be done in this economic environment is to reduce the excess liquidity from easy credit and high inflation. To do that, the FED must do the right thing by acknowledging that the inflation remains critical concern of the FOMC and that further policy will be dependent on the core inflation rates. As our recent PPI and CPI indicates, we are not there yet. Job growth and unemployment is still robust enough for the FOMC to stay in a tightening bias. It may be short term pain for the US economy if the FED resumes tightening the interest rates, but the prospect of a recession versus stagflation, should have the FED doing the right thing. That is to continue to let excess out of the subprime and prime mortgage markets. Acknowledge that the mortgage sector is in need of serious reform, purge the subprime and prime slime that infects our economy. Mr. Bernake has the rare opportunity to do the right thing that may not be seen as being too popular but for the welfare of the future of our economy, he must stay vigilant about fighting inflation, now more than ever. Otherwise, sadly, Mr. Bernake may go the way of Mr. Greenspan, who will trade one boom for another, and cause instability and pain in the American economy.

Mr. Bernake, do the right thing. I know you can do it. The right thing is always the hardest. If you stand for what you truly believe as an accomplished academic, please do the right thing.

Other Blogs of Interest Regarding Countrywide Fraud

I typed in a google search for "Angelo Mozilo Fraud" and it returned some interesting blog sites and websites:

1)
http://blogs.denverpost.com/lewis/2007/03/11/mortgage-fraud-meltdown/

It continues to show that Countrywide is at the forefront of causing housing misery by originating large numbers of subprime loans.

2)
http://housingpanic.blogspot.com/search/label/mortgage%20fraud

Various stories and blogs on why we are in this subprime bubble and why it will spread to other sectors. Read this and be very scared. Again Countrywide is behind many of these "liar" loans.

3)
http://radar.planetizen.com/node/33862

Further issues with mortgage fraud elevating subprime loans by the mortgage brokers themselves.

4)
http://www.thefreelibrary.com/COALITION+AIMS+TO+STOP+HOME-APPRAISAL+FRAUD-a0140074739

is countrywide behind appraisal fraud as well. A story about how Countrywide has not spoken out against this rising issue. No comments from Countrywide when the reporter was seeking answers. Hmmm...

Doug Kass's Bracketology

I ran into Doug Kass's article on Bracketology. He points out the real winner in this subprime melt down. He points out how things will play out and who will ultimately be the king of subprime meltdown.

Enjoy!

SEC "Invites" Countrywide and Others for Investigation

"Broader Investigation of Lenders by SEC" was published today and written by Marcy Gordon, a business writer. Senator Dodd is spearheading this investigation. Senator Dodd is the chairman of the Senate Banking Comittee. My take on this investigation is that it will lead to further investigations and further insights into the problems inherent with the mortgage lending industry. One of the main purpose of this investigation is to see the extent to which the top 5 subprime mortgage lenders have engaged in "predatory" lending practices and to see the "factors" that contributed to this problem.

One of the interesting thing about this investigation, scheduled to take place on Thursday March 22, 2007, is that Countrywide Financial (CFC) has been named as one of top five originators of this loan. Others to be investigated include HSBC (HSBA), New Century (NEWC.PK), General Electric Co (GE), Washington Mutual (WM), and First Franklin Fiancial. All along, Countrywide (CFC) has been vehemently adamant about their subprime loan porfolio comprising only 7% of their entire loans originated. Yet, when the SEC is investigating the top 5 originators of this type of mortgage, Countrywide is at the forefront (CFC). Additionally, it is interesting to see such wide spectrum of unexpected players actually emerging as the top originators of subprime mortgage, namely, General Electric Co (GE). This is significant because the subprime issue is not only relegated to the subprime lenders but is inclusive of many companies that are not in theory or by testimony a subprime lender.

Countrywide (CFC) continues to lose credibility with me and quite possibly with the investment community. All along Countrywide (CFC) has affirmed that they are not a major player in subprime lending business. Isn't it ironic how they get invited as the top 5 subprime lenders in the country? Perhaps Countrywide is not being too truthful about this? This is not surprising based on their recent behavior from insider selling to massive PR efforts (think CNBC). I have written about the issues with Countrywide's Debt to Equity ratio as an a means to counter the relatively attractive PE ratios, PEG ratios, and Price to Sales ratio. And yet, when you dig deep into this company, just even a cursory look at the company's fundamentals will tell you that this company will soon head into trouble as long as they keep lying to the public about their situation.

One of the major issues to be considered at the SEC investigation on Thursday will be to see what extent these companies have acted in predatory fashion. Senator Dodd would be most interested in finding out how many poor, immigrants, and minorities comprised the entire loans originated from the beginning of the housing boom. Additionally, they will seek to gain knowledge on what actually precipitated the current subprime fiasco.

My thinking has always been that the companies that are most to blame are the publicly traded mortgage companies because of the pressure to show "growth" in revenues and EPS. Once the field got crowded and more "main stream" players such as Washington Mutual and Countrywide entered the fray, the pressure to originate subprime loans on riskier population took hold. From there, the "liar loans" or no-doc loans carrying low teaser rates were used to pad up earnings and Wall Street's favor. Once the game was apparent that it would end soon, many of these lenders resorted to hiding behing hiking dividends and increasing buy backs. CFC chose to go the way of buybacks and increased dividends. While these were attractive to the untrained eye, these buy backs were supported by additional debt. This should lead to two main question by the SEC. How much of the growth was garnered by creative accounting and how much loans originated broke fair lending practices? Moreover, hopefully, once the dust settles, it will be apparent that there will be two losers in this game. One is the subprime and prime ALT-A mortgage holders and the second is the retail investors who will be left holding the bag based on misinformation.

One needs to only look at today's Morning Star's Five Star Stocks. They named Countrywide (CFC) as such company. They believe that the PE valuation as well as PEG is reasonable and expect this "high quality" stock to survive the subprime melt down and sees this company as attractive for the long term. "Long Term" is an interesting term coined by Wall Street and its allied industry to screw hard working Americans to prop up the stock while the parties in the know can liquidate their shares. I also mentioned in yesterday's blog about the dangers of following PE and PEG ratio as a measure of "value" in companies wihtout considering the DEBT TO EQUITY ratio.

What matters most is that Countrywide has been named as a participant on SEC's investigation. I don't know how much truth will be revealed under oath. Will CFC finally face the music and confess that all is not well in the mortgage industry, and, especially in the interest of all that is good (or that is left that is good in this world) prevent further deterioration of shareholder value at the price of insider greed. I doubt it. I am sure that they will deny that anything is really wrong. I doubt it because while they are screwing the shareholders of wealth, they are getting rich. There is nothing that a well crafted defined benefits plan or children's trusts or Limited Partnerships that can save the souls of these people whose main purpose is greed. But like all things, things will end in tears, with half assed apologies in front of juries that will pass judgement, and the shareholders will be the only ones who will truly get hurt because of CFC's arrogance.

Low Volume Bounce Does Not A Bull Market Make.

Today's action was impressive. But like all rally attempts lately, it was on weak volume. The Nasdaq finished up $21.75 on below average 17,033,400 volume. The S&P 500 gained 1.1% up $15.11 on below average volume of 14,606,600. The volume was weak across other major indices. This is typical of the type of bounces in the market after a down week in a newly established bear phase market. It would be too premature until the market confirms the new uptrend on strong volume and one of the major averages advancing more than 1.5%. So far that has not materialized. These types of bounces have trapped many bulls lately and the best course of action in these environment is in cash, as I have harped on this issue countlessly before. Or, if you are adventuresome, you can go short or trade the volatility on both the long and short side (not recommended), but certainly opportunities exists.

Having said that, I do not see any reason to believe that the markets are healthy or that even a bottom has been reached. Historically speaking the bottom may not even be formed until at least 5 to 6 weeks into the correction. I do not think it will happen that soon. The 400+ point drop few weeks back has severely damaged the technical conditions of our market. Technical analysis is akin to psychology trading and much psychological damage amongst investors have been done. It will take time to heal these wounds. Once time heals the wounds, I may consider going long, but for now, I will stay with the trend.

Economic developments today gave a bounce today across the markets. At least for a day, we put some of the subprime worries in the back burner. But be aware, do not discount the subprime issues. Mega merger news across the globe gave this beaten down market a much needed bounce. I am now slowly keeping an eye on the follow through of this market and see if this market can regain the uptrend. Many of the prior leaders today have regained their 50 EDMA or is close to it. Still many others are stagnating and are churning. More on that as things develop. The last thing that I want to do is to get caught with my shorts down when the market turns, which can be sudden. But again, I do not think we are there yet.

NYSE has recored record margin levels since 2000. Subprime investigation by SEC is widening. ALT-A Loan chatter is growing. China just riased interest rates by 27 basis points. Wall street is bracing for corporate earnings slow down. Automobile industry (domestic) is in shambles. Inflationary pressure appears to be rising. Japanese carry trade is dwindling.
All of these chatter represent the prescient issues associated with our market today. Tomorrow, FOMC meeting will be held to decide on the monetary policy. I do not anticipate any action but it is their wording that will matter tomorrow. The FED must contend with growing chatter of subprime issues sending our economy into a recession versus fighting inflation. I don't think the FED is in a good position because anything that they do will likely harm this economy. Choose your poision.

Countrywide's Debt to Equity Ratio Revisited.

One of my readers voiced some confusion over the way Debt to Equity ratios are calculated. On the surface, it would seem reasonable to conclude that if you divide total debt by total cash, then that should give rise to the Debt to Equity ratio.

In this reader's post, "if cash avialble is $52.4 Bil and debt is $113.6 how is ratio around 7-shouldnt it be 1:2.otherwise you make a very intresting case of cover-up!!!", it would be incorrect to assume that debt to equity ratio is derived from the simplistic assumption. But it is more than that. The correct way to view shareholder equity, the very definition of shareholder's equity is defined to be the following by IFRS (International Accounting Standards Board: "the owner's residual interest in the assets of the enterprise after deducting all its liabilities".

Stated simply, the equity in a company can be affected negatively (decrease) when shares outstaning in the market are repurchased by the business, assets decrease, liabilities increase, losses are realized, and dividends are paid.

In the case of Countrywide, it has taken on more debt to repurchase shares (taking on more liabilities (debt) and buying back stocks with that (liability) a double negative). Additionally, CFC is paying dividend worth 1.7% again eating into equity. Certainly, you would expect the company's assets to decrease and the liabilities to increase over the subprime issues and ALT-A loan issues and the general environment of housing bubble. That is why the Debt to Equity ratio is so high. Cash is just a facade and I expect the burn rate for cash in the near future to be relatively high and CFC may find itself in the dire need to raise capital like New Century, Accredited Home Lenders, and many other private companies in subprime businesses that have gone out of business.

Countrywide is Testing Bottom Channel

If CFC breaks the bottom part of the channel, it will be a very painful descent. Watch the $32.24 level, if that is breached on heavy volume the next support level may not come until $25.00.

BIDU retesting 200 EDMA

As stated before, if BIDU breaks below $93.80, there will be no meaningful support until $90 to $85 level. BIDU has breached the ABC head and shoulder neckline and generally, this is a very bearish sign. Fundamentally, BIDU will continue to deteriorate in the short term and the future outlook is murky as well. Google has been gaining marketshare in China and will continue to do so. Additionally, entering the Japanese market is a big mistake on BIDU's part and raises serious questions of why they are expanding too rapidly when they have not established dominance in the Chinese search market. As stated in prior conference call, BIDU expects the revenue to decline for at least the next two to three quarters due to costs associated with entering the Japanese market and because of lagging advertising revenue. These will lead BIDU to continue to correct its inflated share price down to the more fair valuation of $52 per share in the long term. Additionally, unless the Chinese companies are more transparent regarding their accounting practices, I would not be a long term holder of these stocks even at these levels.

Countrywide's Debt and Financials

On reviewing the Debt/Equity (ttm) ratio of Countrywide, I was astonished to find that it was 7.934, which means that the debt is 7.934 times the company's entire equity or book value. It is said that the company is also doing a share repurchase with $2.6 billion buy back. Yet there has been no evidence of such buy backs on my research yet. Worse yet, the buy backs are not being done with the total cash that the company has but instead through further debt. Does this make sense to anyone? Also, this buy back is being done in "off balance sheet" fashion which means that it is not recognized as a liability in CFC's balance sheet. It is yet another deceitful efforts by CFC to elevate the share prices of the stock. Generally, you want to see a strong company with manageable debt and strong cash balance doing the buy backs because the insiders feel that the current stock price represents a strong value and is undervalued by the markets. But when a company takes on more debt from its astronomical debt levels to play the wallstreet game of "buy backs" to encourage retail investors to buy their stocks, we have to be a little bit skepticle. When you add the alarming rate at which Samboro and Mozilo and other insiders are selling this stock, you have to question whether the insiders have any faith in this company at all.

The total debt for CFC is $113.60 billion dollars. It is not clear if this represents the additional $2.6 billion that the company took on to buy back shares. We will never know because of the off balance nature of recognizing this debt to buy back shares. Something tells me that it isn't reflected.

The total cash that the company has is $52.54 billion dollars. I wonder how much of this cash will be depleted to meet margin requirements as their subprime loans become delinquent? Additionally, as the share prices falter and the insiders continue to sell their stocks, how much of this cash is needed for legal defense and settlements? This also does not take into account of slowing revenues and squeeze on gross margins as tighter lending requirements and decreased demand will have on the company's cash levels and subsequent ability to meet the short term liabilities?

The misleading price to earnings value of 8.13 and price to book value of 1.45 is allowing some to believe that this company is at great valuations right now. But this is due to recent cut in share prices and does not reflect the health of this company. Additionally, the book value per share of this company is currently $24.47 and declining. But given the off balance nature of the way this company recognizes assets and liabilities what truly constitutes the "honest" book value?

None the less, given the recent tribulations of this company, I can expect this company to trade at or below book value in the near future. As soon as the support is broken and further economic news show that in fact housing woes are not relegated to the subprime only I would expect to see this contract further.

The last question is that the company has been paying out dividends at 1.7%. But usually, companies that pay dividends have rising cash levels and slowing growth. I would say that CFC's growth has halted and declining rapidly as are its cash levels. They can only keep up the charade for so long before the inevitable day of reckoning comes.

Yes, the pain will continue. It is just that the company thus far has been good at hiding the truth.

Main Stream Media Bias as Yellow Journalism and reinvention of Muckrakers

I know I wrote about this "bias" and lack of objectivity in the main stream media few weeks back.

As Herb Greenberg would say, "the drumbeat continues..."

Today's headline on marketwatch.com reads: "Stocks seen posting modest rises next week: Edgy investors to watch Fed meeting, housing data and earnings". This media double speak has me troubled because it continues to give readers optimisim. In a sense, when things look bleak, I guess everyone needs some infusion of hope. But when it comes to dealing with personal finance and wealth accumulation, it would be more helpful if the main stream media and all those that comprise the financial market community were brutally honest about the current market situation. Going back to the marketwatch.com's double speak, it would be easy to get that the writers are confident about the markets recovering next week. Read a bit further even within the headlines and you will see that the word "edgy" investors await Fed meeting, housing data and earnings. Edgy people are generally waiting for something bad to possibly happen. Instead, wouldn't it be great if the headlines instead read "Investors wait anxiously for economic data to see if recent weakness in the stock markets will continue". Isn't that title more telling of the truth? That our markets are in fact in a down trend and that economic data is being looked at to see if further weakness will continue?

Having said that, why is it such a problem with the main stream media with objectivity? When you look at the reportings from the war on Iraq to the current market weakness, it is very difficult to get the objective "jist" of what is going on. It further complicates things because "news" only sells on sensationalism. I see our country's journalistic integrity on par with yellow journalism, and for that matter, the world journalism is also like that. The "Muck-Rakers" were coined by Theodore Roosevelt to describe those who sought to expose injustices and criminal activities during the early 1900's. A muckraker is an American English term for one who investigates and exposes issues of corruption that violate widely held values, such as political corruption, corporate crime, child labor, conditions in slums and prisons, unsanitary conditions in food processing plants (such as meat), fraudulent claims by manufacturers of patent medicines, labor racketeering, and similar topics. In British English however the term is applied to sensationalist scandal-mongering journalist, not driven by any social principles.

The term muckraker is most usually associated in America with a group of American investigative reporters, novelists and critics in the Progressive Era from the 1890s to the 1920s. It also applies to post 1960 journalists who follow in the tradition of those from that period. Muckrakers have most often sought, in the past, to serve the public interest by uncovering crime, corruption, waste, fraud and abuse in both the public and private sectors. In the early 1900s, muckrakers shed light on such issues by writing books and articles for popular magazines and newspapers such as Cosmopolitan, The Independent, Collier's Weekly and McClure's. Some of the most famous of the early muckrakers are Ida Tarbell, Lincoln Steffens, and Ray Stannard Baker.

An example of a contemporary muckraker work is Ralph Nader's Unsafe at Any Speed (1965) which led to reforms in automotive manufacturing in the United States. Nader's publication led to a stop in the production of the Chevrolet Corvair, one of the first rear-engine American cars. The discontinuation of the Corvair was controversial because many believed the innovative style could have been altered for safety and could have spurred the American automobile industry. The rise of muckraking in the late 19th and early 20th centuries corresponded with the advent of Progressivism yet, while temporally correlated, the two are not intrinsically linked.

Thus efforts of many including Herb Greenberg and many anonymous bloggers whose sole purpose is to expose the corruption, disingenuity, and other unsrupulous practices of the US finanial markets tries to bridge that gap between "yellow" truth and "muckraker" truth. The point in my rantings about the lack of objectivity and truth in the main stream media can be seen with the above example of Ralph Nader's expose on Chevrolet Corvair and eventual rise of safety in American automobile industry. It was widely believed in the 1960' before the muckraker Nader exposed the truth that in fact the American automobile industry was acting in the best interest of the public safety and not in the interest of corporate profit. I am sure that the main stream media was clueless and misled the general public.

In the same way, our financial industry, while it has come a long way in terms of fairness, is still wrought with corruption, deceit, and greed. One needs to only consider just the past 10 years with the Enron, Tyco, Lucent, Cendant, and many other publicly traded companies that misled the investors in the interest of corporate greed. In most of these cases, judgements and indictments did not come after the main share holders were "screwed" out of their money and sometimes their life savings. Yet, the main stream financial media including CNBC, Bloomberg, marketwatch.com, and others continue to fail the general populous that it professes to serve by buying into the propaganda of the corporate deceit and in fact then becomes the very instrument of corporate greed.

The current issue with the subprime mortgage crisis is just gaining wide spread exposure from the main stream media. But I am appalled at the junk and deceit that is being propagated through these channels. Just 6 months ago, this issue was hardly even a small print story in many of the major main stream media. It was an after thought. It misled investors to become complacent and not factor in the ramifications of this crisis. Even now, as evidence clearly points to ominous fall out and future consequences, the main stream media still sides in majority of cases with propaganda campaign by the major investment banks, mutual fund companies, the mortgage companies, and government officials (Fed Chief and Treasury Secretary- who by the way was the head of Goldman Sachs prior to this job). So it now graces head lines of every major main stream media outlet. Yet objectivity is far less evident as it was 6 months ago.

Subprime mortgage fall out has far more integration to the economy than the main stream media and establishment will lead us to believe. Take the next target in question, which is the prime mortgage loans and companies that do business in this sector. Many of the prime mortgages were originated with ALT-A loans which hides behind the word "prime" but beneath that muck, more ominous picture exists. ALT-A option ARMS were given to good credit applicants to be able to "extend" their means and buy the house or properties that they otherwise couldn't afford. I see major fall out from this segment of the mortgage as rising inflation will force the FED to raise interest rates not lower them in the future. Sadly, I believe that the damage has been done and we are waiting for the next shoe to drop and the sad agonizing reality to be felt when it is too late for anyone to do anything about the situation. The prime mortgage being insulated from the subprime mortgage fallout is a facade. It has not yet reached the level of sensationalism for the mainstream media to take notice and "spin" it. In America, he who controls the money, controls the information. The domino effect is clear, and I won't go into much depth here as it is beyond the scope of this blog, but clearly it will affect negatively economic growth, consumer spending, and inflation.

Take for example, the favorable treatment of Countrywide (I know it is getting old) by the media and financial establishments. Many pundits see this outfit surviving the subprime fallout and in some cases thriving in this business. There are 9 analysts covering this company and only one analyst has a negative rating. How can this be? One needs to only consider that analysts are generally wrong during market extremes. Many analysts will have a favorable rating on stocks at market tops and negative ratings on stocks at the market bottoms. I consider this current market to be the inflection point of market top. Historically that is true and one needs to only consider 2000 to 2001 market melt down and the ratings on such names as Broadwing, Ciena, JDSU, Nortel, Global Crossing, and many other high fliers. On the painful death march down in equity prices, the mainstream media and its experts urged retail investors to buy due to favorable valuations while the corporate insiders sold. I believe that is what is going on at Countrywide Financial (CFC). They have launched a major campaign to obtain damage control via CNBC interviews, news paper articles, to mold retail investor's confidence. They also have the financial institutions on their side as they continue to assert that CFC is a buy at these low levels, and that 6 to 12 months out, these stock prices for CFC will "seem" like bargains. I beg to differ on that as the retail investors will again get screwed. Ominous evidence is there. There has been increased insider selling even as the company's prospects are declining. A clear affirmation of their "insider knowledge" while channeling a contrary message to retail investors. When the dust settles we will know only then, if any criminal activities were present. I think so.

So as I part on this pontification today. Please be careful. Please consider only objective facts. Leave out emotions and do not heed the market pundits. For those who closely follow Jim Cramer on CNBC or on thestreet.com, please know this. Cramer has gotten his readers out at the market bottoms and urged his readers to buy on the way down from the 2001 market debacle. If you don't believe me, just Google or read the three months archive of Cramer's recommendations. Thank you.

More on Countrywide GREED

A recent article on Reuters: http://investing.reuters.co.uk/news/articleinvesting.aspx?type=bankingFinancial&storyID=2007-03-16T170127Z_01_N16254655_RTRIDST_0_SP_PAGE_012-N16254655-OISBN.XML

There is a specific quote from Mozillo when asked about his
$140 million worth stock sales over 14 months, he said he was "running out of time" and needed "balance" in his life. I really feel sorry for you. I wonder what "balance" can be bought in life for $140 million? Probably greed.

More importantly, there has been some speculation regarding possible merger with Bank of America (BAC) and that notion was dispeled by the Chief Excecutive Kenneth Lewis in January 07 saying, "the bank 'unequivocally' plans to expand mortgage business organically.

Also, Robert Lacoursiere of Banc of America is the only analyst with a SELL rating on the stock. He specifically states that ""Countrywide has chosen to pursue increased leverage and origination market share gains to hold up earnings," Lacoursiere wrote on Monday. "It is more susceptible to cyclicality and the associated credit risk in a declining competitive market."

While many analysts are pumping hard for Countrywide, unanimously they have lowered expectations for the company. Since Monday, analysts have lowered their average first-quarter profit forecast to 88 cents per share from 98 cents. Countrywide trades around 8.5 times 2007 earnings, below Washington Mutual's 10.5 times and Wells Fargo's 12.5 times. Don't you love that? Let's upgrade the company while downgrading earnings expectations. These deceptive actions by the analysts will lead a lot of investors down the road of Enron.

I am sorry that this site has been dominated by Countrywide (CFC) lately but this company's actions will shed some light into which direction our economy will be headed as I firmly believe that a mortgage industry shakeup and melt down will prelude the US recession and possibly stagflation.

I am short CFC.

Week in Review: Dip Buyers Weakening

This is week #2 at attempted bullish reversal. The bulls appear to be running out of strength and conviction. The longer this bear phase lasts, the more tired the dip buyers will become. Having said that this week saw the Dow ending lower 1.4%, Nasdaq lower 0.6%, and the S&P 500 lost 1.1%. Not the type of action you want to see if you are bullish or believe that this is the bottom of the down trend.

Today, the markets started promising but then began to deteriorate through the mid day and tried to regain some of the losses but ended up down 0.3% for Nasdaq, 0.4% for Dow, 0.4% for S&P 500. Strong start and weak finish is the hall mark of bear market action. Also, even though today was quadruple witching, the high volume associated with this three times a year event is significant based on the context of price action. Thus the rally attempt that started on Wednesday and showed much promise on Thursday, lost all momentum on Friday. Next week promises to be continuation of volatility with the FED meeting that is scheduled to take place on March 21 Wednesday at 2:15 PM EST. On Tuesday March 20, 8:30 AM EST, the housing starts and building permits will be released and should further fan the flames of current issues with subprime mortgage fall out. On Friday March 22 Friday, existing home sales will be reported at 10:00 AM EST with market expectation of 6.35 million from prior 6.46 million.

Traders have become jittery to say the least, especially those who are chasing bottoms. Mondays have not been very kind and a lot of traders are looking for another shoe to drop to precipitate a sell off in the markets. This is the extent of the market deterioration of psychology and it will continue to decline. Historically speaking, down trends whether significant or a blip does not recover in a matter of weeks. So we should have a bit of down side pressure to go.

I watch in amazement in the rapid recovery of Accredited Home Lenders (LEND) the lows of $3.77 on 3/13/2007 an finishing at $10.90 on 3/16/2007. What could possibly be the good news? Certainly, the company has found someone to buy their existing subprime debt at pennies on the dollar to infuse badly needed liquidity into the company to meet margin calls. So what does that prove? Accredited Home Lenders (LEND) is a subprime lender. After meeting their margin calls, can they continue to generate business when they can't originate loans? What purpose does this serve? So they get to survive for another week. Then what? They still have to meet securities filing dead lines and still need waivers of covenants that place restrictions on the company's ability to lend. That seems like a bit too much bullets to dodge. There have been possible buy out rumors circulating around Accredited Home Lenders (LEND) from such respected organizations such as Goldman Sachs (GS). If I had to guess, this may have been a dirty hedge fund scheme to drive up prices while they hedged on a quick options trade that brought up the price from the dead to $10.90. That may explain such a huge put volume on this stock currently as traders now bet that it will sink again.

As for Fremont General Corp (FMT), it was able to obtain a $1 billion credit line to sustain this company on life support. Then what for this company? The same quagmire as Accredited. I do understand that the investment banking community and the economy needs these subprime lenders to stay afloat long enough for them to figure out what the fall outs will be from this debacle. Additionally, many bullish upgrades recently on Accredited Home Lenders (LEND) by FBR, Merril Lynch, and others may be a ploy for the greater equity markets to figure out what to do. What pray tell can be so bullish about these sub prime lenders who are on its last leg? What value can be derived from a business that cannot conduct business even if their credit obligations are met? Who in their right mind would want a loan, if that was possible, from these highly publicized sub prime lenders? All the while, I am getting tired to listening to the spin placed by CNBC and the main stream media.

Then there was Alan Greenspan, who has the knack from appearing out of the retirement and proves that he still can affect the US and global equity markets. That he is, while old as dirt, intelligent, able, and significant. His artful speak about him not seeing the subprime meltdown extending into other financial segments of the economy if and only if the housing markets can appreciate 10% this year. In essence when you read between the lines (somethings never change), Mr. Greenspan effectively concluded that this market is basically headed for the recession. How can housing markets appreciate by 10% this year? Based on what demand? Am I the only one reading his statement this way?

Then there is Counrywide Financial (CFC) who is busy doing major PR efforts to curtail the company's image being linked to subprime lenders who are in trouble. The CEO Angelo Mozillo has appeared on CNBC to strongly defend his company's ability to weather any mortgage related storm, and yet, did a double speak and said that only the FED can save this industry with a interest rate cut. Real strong endorsement if you ask me. All the while, when you dig deeper, the company states that their subprime exposure is only 7% of their entire outstanding loan portfolio yet a recent marketwatch.com article shows that they are in fact #3 in subprime lending based on volume. Additionally, their over exposure to ALT-A Option ARMS are at a staggering 45 to 50%. ALT-A Option ARMS are even more toxic as they drove borrowers with good credits into homes that would soon become unaffordable once interest rates rise. Perhaps this is why Mozillo publically called for the FEDS to cut interest rates now. All the while, the CEO who is the champion of his mighty company has been dumping his stock like it is going out of fashion. Herb Greenberg from marketwatch.com has been on him for over a year for his activities and it raises an eye brow or two when the CEO says one thing about his company but his actions are contrary. Is Enron like ending possible for the American market darling Countrywide? This soap opera gets better and better.

In sum, the drama in the mortgage sector bears (no pun intended) close scrutiny. Despite constant noise that this is a contained event and not likely to affect the entire financial markets, the domino effect is definitely possible. Loss of liquidity and wealth from the housing fall out will directly correlate into further reduction in US economic growth while triggering rising inflationary pressures. I am short but it is okay to stay out of this fray in cash, which I wished I had the courage to do. But please be careful out there and trust no one but yourself.

Countrywide as a Prime Lender is a Facade!

Just look at the rankings for subprime lending for Countrywide:

Top subprime mortgage lenders
Rank Lender Location Q4 2006 originations, in billions
1 HSBC Finance (HSBC) Prospect Heights, IL $12.3
2 New Century Financial Irvine, CA $12.2
3 Countrywide Financial Calabasas, CA $10.1
4 WMC Mortgage (GE) Burbank, CA $9.0
5 First Franklin (Merrill Lynch) San Jose, CA $7.8
6 Wells Fargo Home Mortgage San Francisco, CA $7.4
7 Option One (H&R Block) Irvine, CA $6.1
8 Fremont Investment & Loan* Santa Monica, CA $6.0
9 Washington Mutual* Seattle, WA $5.7
10 CitiFinancial (Citigroup)* Baltimore, MD $5.0

It is ranked #3! Just behind New Century Financial. Yet the company keeps stating that they will not be harmed by the subprime market meltdown. All the while the company also has significant exposure to the ALT-A Option ARM package which is more toxic than the subprime loans. Additionally, the insiders, especially the CEO is selling his shares of the stock like something is not right at his own company. He certainly does not practice what he preaches.

CPI is Highly Anticipated for Friday's Market

The markets shrugged off the high PPI numbers and focused on comments by Bear Stearns and Morgan Stanley regarding sub prime market place not spilling over into other aspects of the economy. The market also ignored comments by Alan Greenspan who spoke about the dangers of sub prime mortgage industry meltdown. He did not see sub prime melt down affecting the economy but hinted that recession may be a possiblity. I don't know why it is that he keeps popping up out of the dead to infuse a bit of panic in the market. Geez! If you're retired, stay that way! That is the mantra of this market who is good at being manipulated by the big institutional players. The market should continue to ignore the ominous signs and warnings at their own peril.

Now the markets are spinning the issue with CPI being the major catalyst for the market. I don't know but I highly doubt that even CPI will be able to sway this market one way or the other. But certainly, the market does not seem to care about inflation at this point in favor of the recessionary fears. What the markets should really be fearing is the prospect of stagflation. I don't really care what the CPI shows whether it is too high, too low, or just right. The real thing that will move this market is the big "R" or recesion. We are fixated on it. We know it will be coming but we just don't want to believe that it could happen. We as a whole populace do not want the good times to end. Thus we keep ignoring ominous signs in the market place and continue to believe in things like, if only the feds would cut interest rates, everything will be fine. We are delusional.

The propanganda main stream media continues to pump optimism and sadly many investors are being sucked into the false sense of security in this market. I have people again calling for bottoms in this correction only after two weeks of pain. That tells me we are not yet done going down. This market is fundamentally different from many other market corrections. There are many issues with our economic factors that tells me that it is not healthy. Here are my main reasons why I am so down on the market:

1. Housing Bubble has not yet burst.
2. Liquidity crisis of prime and sub prime mortgage fall out.
3. Highly leveraged state of American consumers.
4. Corporate Corruption- see Countrywide CEO Angelo Mozillo's indiscriminate liqudiation of his stocks while assuring investors that all is fine at his company.
5. Unrestrained inflation.
6. Unstable global oil markets.
7. Weakening economy
8. Manipulative spinster main stream media who are spinning their own agenda.

On a separate note, Countrywide CEO Angelo Mozillo is liqudiating his shares in CFC like it is out of fashion. To avoid Ken Lay type of accusation if and when CFC falters, he is disclosing his activity in plain day light. And yet, the analysts, the main stream media, continue to support CFC even as the insiders are liquidating their holdings. How many times do we as investors have to be burned by such blatant and offensive actions of greed by these corporate level insiders before we realize the objective truth that something is quite not right at CFC despite the spin placed by FBR, Morgan Stanley, Bear Stearns, and other influential media pundits? Do we forget that Enron, Worldcom, Lucent, and many others before CFC had high brokerage ratings and was highly recommended while the insiders sold while the retail investors bought? Are we doomed to repeat this mistake again?

CFC has high exposure to option ARMS (ALT-A) mortgage. Even if the CEO states that they are only exposed to 7% of their entire portfolio of loans to subprime section, the fall out will touch even the prime segments of that company. Additionally, the market needs to have CFC, which is the poster child of this sector, to be placed in the best light as possible to continue to prop up the markets. The shoe will continue to drop and how many times do we have to see the "dead cat bounces" before investors wise up and go to cash? I will do my part to continue to short the market in the mean time.

PPI Comes in HOT!

PPI today was 1.2% and Core PPI was 0.4%. Inflation is high and you could pretty much forget the FED cutting interest rates any time soon. This news should create some downward force on the markets today. Dow is down -24 as I speak and Nasdaq is down -.5. Oil is edging up,

This should continue to put pressure on the mortgage markets. As I see the premarket trades, Accredited Home Lenders (LEND) is trading up. This is probably due to take over rumors by Goldman Sachs. I do not think that is possible and LEND now should be considered a prime short right now. The best way is to take advantage with PUT options rather than borrowing common shares.

Countrywide Financial should be shorted on any strength such as today. The underbelly of CFC is being exposed and the WSJ and Marketwatch.com is hot on its trails. Excellent posts at Yahoo message boards at least for the time being is a refreshing change from the usual BS that goes on at that site. Keep up the good work guys!

Google and BIDU appears to be good short candidates today. I believe BIDU will retest the 200 EDMA if the market conditions continue to detriorate based on the PPI numbers. The death spiral of the equity markets will continue today.

Good luck trading.

Great Post on Herb Greenberg's Blog at Marketwatch.com

This is a good post from Dennis Nguyen who brings up parallels of Enron's off balance sheet transactions at CFC. Notably, they are buying their shares back with debt (bonds), which equates to nothing other than propaganda. More and more skeletons are coming out of the closet. In the mean time, Mozillo and his cohorts continue to sell.

Please check it out:
http://blogs.marketwatch.com/greenberg/2007/03/playing_survivo.html

Something just doesn't add up.

Insights into Countrywide Financial

I was wading through google searches today to see what I can dig up in terms of what the mortgage brokers are talking about in regards to CFC and I was a bit astounded to find out that CFC is predatory and mortgage brokers hate working with CFC. Additionally, a lot of the brokers seem to feel that pay option arms (ALT-A) are a scam. Rest assured, this will blow up. That is why Mozillo is selling!

"I got to attend a meeting with Angelo Mozillo (mister countrywide) today, that was entertaining.Yes the mortgage industry sucks and all of us in it are on shaky ground...good time to move into another sector at least until the market turns itself around.It still amazes me that busineses can be so succesful while making such horribly bad decisions...really says something about our society. Also payoption ARM loans are a blatant scam imho. The real estate equivelant to star craft map hax."

That was posted by Catatonic on February 2006 on http://www.notacult.com/forums/showthread.php?t=6899

There are many posts like this occurring all over the internet chat sites, blogs, and mortgage broker forums. The shoe will drop, question is when?

Do Not Buy This Bounce!

Tomorrow 3/16/2007, the markets should try to extend their gains today, emboldened by the dramatic turn around on higher volume today. This would count as day one of the attempted rally after the sell off on Tuesday. Many will probably proclaim that the bottom of this market has been achieved. Notably, if you have access to thestreet.com, please do not heed Cramer's advice. He has called too many bottoms recently and all of them have gotten his readers into trouble.

Asian markets are rebounding in sympathy to our markets. That should start a chain reaction in our markets tomorrow. As I have always said, "sell the strength and buy the weakness" in this market. Volatility and trend is your friend. Nothing other than shorting to the downside for the long term (more than 3 months) will work. But staying in cash and protecting your capital is probably the best idea right now. There are some exciting shorting opportunities available especially if the market bounces again tomorrow. But please keep your eyes on the price volume action. The market rebound today was impressive but it is nothing to write home about in terms of reversing the down trend. Right now, we will continue to have fall outs from subprime mortgage markets but we should also keep our eyes and ears peeled for issues associated with prime mortgage markets as well, especially with the (ALT-A Mortgages). Good short candidates are: CME, AAPL, GOOG, BIDU, CME, GS, LEH, MS, RATE.

PPI numbers will be released at 8:30AM EST. Market expects PPI to be 0.5% and core PPI to be 0.2%. Producers Price Index (PPI) is not that important but the markets will focus on it because everyone is trying to hold on to some bastian of hope. Longs and shorts alike will spin it anyother way. Unfortunately any effects from PPI report will be short lived and may cause short term volatility but nothing more. This is because PPI is a lagging indicator and is affected by many biases and adjustments. If PPI comes in higher than forecast, it will stir inflation worries again but the markets may actually applaud this in the short term due to easing of "recession" worries tied with current housing market debacle. If PPI comes in lower than forecast, it will stir recession worries and the markets may sell off on this news even though interest rate cut hopes will rise. That would be my guess, but it is only that.

I am looking to add to BIDU or CFC puts based on which stock is rising. Good luck everyone. Investigate everything and trust no one.

Interesting graphic Representation of Mazillo CFC Chairman's Selling Rate

I just found this excellent graphics to show the intensity of Mazillo's selling activity lately.

Notice that from 12/29/06 and on, the lines are more intense representing intensity of selling. Something is not all right at CFC as I mentioned before. You might also take a look at the following blog site by the La Jolla Guy:

Wall Street Journal Finally Comes Around to Insider Selling at Countrywide

Finally! This is from Scott Patterson from Wall Street Journal Online today.

Some Countrywide Insiders, CEO Sell Stock as Shares Fall
Since hitting its highest closing level in early February, shares of Countrywide Financial, the largest U.S. mortgage lender, have dropped 24%.
The Calabasas, Calif., company isn't overly exposed to troubled subprime mortgages, which make up 7% of its loan originations. It has played aggressively in other exotic mortgages, like option adjustable-rate mortgages, which give borrowers a variety of payment choices and interest rates that reset. At year-end 2006, Countrywide had about $33 billion in option ARMs on its books, about 42% of its overall loan portfolio, according to Standard & Poor's.
Corporate insiders seem to have gotten jittery about something.
Total insider sales at Countrywide for the first quarter are $90.1 million so far, the highest amount of quarterly selling during the past five years, according to Thomson Financial.
Since Feb. 5, as the stock has fallen, Chief Executive Angelo Mozilo has sold 882,000 shares of the company for a total of $34.8 million. Mr. Mozilo owned 11.5 million shares and exercisable stock options of Countrywide in all as of April 5, 2006, according to regulatory filings.
While it's normal to see large insider sales when a stock is on the rise, sales during declines are more unusual and potentially worrisome. A company spokeswoman declined to comment.
--Scott Patterson
Send comments to justin.lahart@wsj.com and scott.patterson@wsj.com

FBR Upgrades Countrywide Financial to Outperform

I was taken aback today by Friedman Billing's upgrade of Countrywide Financial today. I believe this upgrade was agenda driven and has no real substance behind it. Any decent analyst will take into consideration significant macro economic implications behind the mortgage industry. Analysts should consider their fiduciary duty to not only their own company but also for the welfare of the shareholders of the stocks that they recommend. In this instance, I find this to be a gross negligence on the part of Paul Miller who is the analyst who upgraded Countrywide financial today.

The part that I don't understand is that Paul Miller downgraded Countrywide Financial (CFC) on January 30, 2007 from Outperform to Market Perform. Today on March 14, 2007, just over 2 months later, he flip flopped his opinion to Outperfrom from Market Perform. The main reason behind this upgrade is that Paul Miller assumes that Countrywide Financial (CFC) will survive the subprime meltdown and will emerge as the leader in subprime lending business as a result of other "competitors" going out of business. He contends that Countrywide Financial is strong enough to weather this "storm" and emerge stronger as a result of the purge both in the subprime and prime mortgage lending business. Bottom line is that the business at CFC will grow as a result of these recent activities. I will read the research report when it is available as it is not yet published on the FBR site (Friedman Billings Ramsey).

The erroneous contention that subprime business is a viable model has been ignored by the main stream financial media and the industry. The reason for this may not be too far fetched to consider that the financial community has conflict of interest in terms of share holder welfare and obligations to the companies that they follow. This can take the form of owning shares in the company in the hedge funds or mutual funds that they control, having an investment banking relationship with the company, or having non equity stake in the company. I believe that it is this conflict of interest that misleads the vast majority of shareholders in the "retail" segment of the equity market. At this point it is mere speculation and futile attempts at mental exercise to consider all the reasons for the upgrade other than what is purported to be true by FBR.

One consideration many analysts and pundits fail to realize about the subprime meltdown is that it is not insulated. I have harped on this issue over the past few days on my prior blogs. Even a small exposure to the subprime market can have compounding negative ramifications on the company such as Countrywide Financial. In order to originate the subprime loan, the company takes tremendous risks associated with possible loan default. In exchange, the lending company is rewarded with higher application fees, restrictive clauses in the loan agreement against the borrower (such as early termination fees- which can be as high as 20% of the outstanding principal), and higher interest rates. It is the high rate of return on investment that the subprime market focused on. When it was sexy, not less than 8 months ago, many main stream banks such as HSBC sought out these risky loans to increase their bottom line. Once the subprime slime has been exposed and the "hysteria" has spread in the stock market, these loans are no longer the highly sought after investment vehicles that it once was. A leper has better chances currently. This is creating a severe liquidity crisis, because many of these subprime loans are bought by other investors, banks, and hedge funds for their returns. Right now, it is considered to be about attractive as cow dung. Angelo Mozillo publicly stated that mortgage industry will face severe liqudity crisis for this very same reason. Spillover effect of the subprime meltdown is complicated but if it can be simplified, I would state that the demand for the mortgage loans would be directly proportional to the willing and able loan applicants. The purging of the subprime market does not mean subprime applicant cannot qualify for a loan. It means that the industry must have quantifiable accountability for the loans. Additionally, as the industry cracks down on its lending practices, even prime applicants will have problems obtaining the mortgage that they need because the ristrictions and guidlines will become stricter. Additionally, the same prime applicants who financed their houses are over extended in terms of what they can afford and many have resorted to 5/1 ARMS or its derivatives or have bought houses with interest only loans. It is also purported that many subprime loans were made to illegal aliens and foreign nationals. If these contingents, probably small in sheer percentage amount, are removed from the applicant pool, that will also add to the liqudity crisis.

The other issue is PMI (Private Mortgage Insurance) companies. These companies have been all but forgotten in the current subprime meltdown fiasco. They will also begin to suffer as loan defaults will eat into their bottom line and many companies will either go out of business or stop offering such insurances. This will reduce further abilities of population in the US to obtain loans for real estate due to down payment requirements. I believe that the days of 0 down home loans will go by the way of the do do bird.

One thing that struck me as interesting is the current article listing top originators of subprime loans. #1) HSBC #2) New Century (now defunct) #3) Countrywide Financial (CFC)! Yet the company continues to contend that their subprime loan exposure is small. This is another questionable aspect of CFC that needs to be scrutinized because I feel like Angelo Mozillo is not telling the whole truth. Just look at his recent spike in selling activities, as I listed on my prior blog. If the company is doing so well and does not have significant exposure to the subprime market and therefore should not suffer the same fate as Fremont General, New Century, and Accredited Home Lenders, why has the CEO and Chairman of the company's selling activity increased more than three fold over the past year, and especially during the market melt down? Sadly, if CFC ever comes under scrutiny like New Century, more dirt can be dug out at that time. I just don't trust Mozillo right now.

Speaking of trust, did anyone catch the artful double speak that he pulled off on CNBC with Maria Bartaromo? On one hand he reassured the viewers that his company was strong and that his subprime exposure was minimal (see marketwatch.com's article on this). He then turns around and says that the mortgage industry will face severe liquidity crisis and was practically beggin for the FED to cut interest rates. He contends that is the only thing that will save the mortgage industry. Oh really? And why might that be? Perhaps because even the prime lending industry is not clean and many of the loans were originated that were adjustable? Or perhaps the borrowers might have been credit worthy but bit off more than they can chew on their homes? Or is it because every prime lending institutions also have more subprime exposure than they care to admit?

And now FBR comes out with a lame upgrade that means nothing. I just don't buy it. Subprime business is not one that will be beneficial for any companies that are interested in taking over its operation via take overs, buying loans, or driving the competition out of business. The only conclusion that I can derive out of all this is that the insiders and institutions are counting on the "dumb" retail to prop up the share prices while they unload with huge profits. Because at the end of the day the only thing that matters is how much money is in the personal bank. No one really cares about retail anyways. It has always been that way on the Wall Street and the sooner we realize that the better off you are as an investor or a trader.

Lastly, shame on you Paul Miller at FBR for such weak upgrade.

BIDU Tested the 200 EDMA today.

Baidu (BIDU) tested the 200 EDMA at $93.87 today and bounced off of that strong support level and ended the day at $97.37. A retest of that level will be coming shortly and will determine if the stock will find support or break down. As I have said many times, I do not think that the 200 EDMA will hold in this market condition. I have a sneaking suspicion that the new ceiling will be the $100 level and anything above $98 would be a good short entry point.

If you are contemplating shorting the market, the safer way to do it would be with put options rather than borrowing the common as it is customary. There are two definitive advantages and one major disadvantage of using options for these purposes. The advantage is that you limit your down side even if the stock runs away from you when you are wrong. The second is the tremendous leverage that you gain as opposed to borrowing the common stock. The major disadvantage is time decay issue or theta. Remember options are considered depreciating asset and can be very risky, so consider all facts before doing this. I have always harped on the prudence of going to cash during market correction. As always, capital preservation is always a winning strategy.

Back to Baidu (BIDU). I see that Google has gained some traction lately in the Chinese search market. It would be a bad policy to bet against Google, even if BIDU is the native company for internet search. Their abysmal advertising base should shrink even further as evidenced by their recent conference call (which in itself was abysmal). Their foray into the Japanese market is ill timed and deep down reveals the company's lack of conviction in the Chinese market place despite BIDU's position that China is a rapidly growing market. Those two moves does not make sense for three reasons. Culturally, Chinese and Japanese (add Koreans for that matter) cultures have major apathy for one another. It would be difficult to really appreciate the superiority factor that the Japanese have over their Asian counter parts (sad to say) but also the animosity for the war atrocities during world war II and prior issues still exists. The Japanese search engine of choice currently is Yahoo and Google is dilligently establishing presence at that market right now. BIDU is basically a bad copy of Google and offers no competitive advantage over either Yahoo or Google.

I would like to put to rest some rumors surrounding Baidu (BIDU) might be bought out by Google. I do not think that is true. If that were true, Google would not have divested its ownership shares in BIDU. Additionally, there is no competitive advantage that Google can gain by this merger because eventually, Google will do it better than BIDU. I think the most likely scenario is that the competing search engines will merge in China to better compete against Google and Yahoo.

Good luck.

Angelo Mozillo CEO of Countrywide Financial Selling!

Since 3/1/2007 to 3/12/2007 (possibly more since that time), he has dumped regularly up to $17,870,240.00 into the open market under the pretenses of programmed selling. He was on CNBC yesterday with Maria Bartaromo saying that Countrywide Financial is strong and would benefit from the fall out from subprime mortgage but then added that the mortgage industry faces severe liqudity crisis and stated that a Fed cut is the only thing that can save this industry. A double speak if you ask me. What is more troubling is that the selling activity has intensified around February 07 to currently. I think that SEC investigation should be in order to make sure that Mozillo is not abusing his powers as CEO and misleading share holders into buying and holding while he dumps his share for his own gain. This scenario is similar to Accredited (LEND) and NEW Century (NEW) which eventually led to the down fal.

I would not believe the wall street right now when they expect Countrywide Financial (CFC) to survive. I think once the shine of the company wears off and in midst of further turmoil from sub prime and prime mortgage (Alt-A) fall out, you will see that Countrywide Financial (CFC) has hidden agenda and further activities that would lead to SEC investigations. More on this as it comes up.

I am short CFC.

Do Not Trust the Main Stream Media

I find the main stream media ludicrous. Unfortunately many sites including marketwatch.com is proclaiming that the markets are in a rebound mode. Excuse me? What rebound? It is these types of proclamations that gets the average traders in trouble because many trust the main stream media to be objective and honest. Everyone loves to have the economy expanding, consumers spending, the stock markets rising. The realistic view would be to accept that this market is broken and to encourage the market participants to protect their capital or lead them into the appropriate directional trade. Instead, many articles are flowered with "hopeful" rants about how the market is near the bottom, how everyone should buy defensive sectors, or how everyone should buy the "dips" as they are on sale.

I sound like a broken record but at critical market junctures, the media, the pundits, and just about every investors are wrong. Just remember, though it may be painful, and if you were into stocks during the 2001 meltdown, what the experts were encouraging the investors to do. They encouraged investors to buy the dips as the stocks were on sale, invest for the long term, and that the bottom was near. Not until Nasdaq was down over 80% from its highs and S&P 500 was cut in half did the market experts proclaim that the market would not recover, just near the eventual bottom of the market, they finally gave the all clear signal for the investors to "sell", of course, they should have been buying.

If you keep your wits about you and stay contrarian and go against crowd psychology of the markets, you should do well. I do not advocate just playing the contrarian but to instill discipline and research in your decision making process in the markets. What is the markets currently telling you? It is clear- we are in a down trend and no one knows how long this will last and no one knows how severe it will be.

One last note on Jim Cramer's Mad Money show. I think that show is the most dangerous show on the media. If you check back to Cramer's picks harkening back to early January, you would be wiped out by now. He proclaimed that the three stocks for 2007 were 1) New York Stock Exchange (NYX) down 30%, 2) Apple Inc (AAPL), 3) Cisco (CSCO). Additionally, his other picks including Mastercard (MA) which he personally said he would eat "crow" if the stock went down after its recent earnings report and encouraged the masses to buy, was a disaster and a lot of people lost money. Since the Chinese market crash few weeks ago, he has called the stock market bottom on 12 different occasions and he is encouraging people to buy the dips right now. So please becareful. He is dangerous and sometimes, I question his "expertise".

So today, the market is staging an expected small bounce from yesterday's painful sell off. I do not think it will last. If you are short, this would represent a good point to add to your short positions. The pain in the mortgage markets will continue to spread. Most obvious aspect is that it will dampen consumer spending as well as further adding fuel to the housing market's woes by increasing supply. A good short candidate right now is Countrywide Financial (CFC) and Washinton Mutual (WM) both of which have significant exposure to subprime and Alt-A loans (loans for credit worthy individuals that could not get main stream financing). Both of these loans represent people who bought houses on shaky financial foundations and are most likely to default. Additionally, when you see the insider selling intensifying at CFC recently, and ironically coincing with current subprime lender meltdown, especially by their CEO Angelo Mozilo, you have to raise your eyebrow. Especially since he came on CNBC yesterday with Maria Bartaromo and said CFC would be in better shape as subprime competition would be reduced or eliminated. Excuse me? Subprime is still palatable for CFC? Also, he added that the mortgage markets will face liquidity crisis. So he gave a double speak to probably prop up the stock while he and his upper management cronies dump. We will see whether CFC will weather this storm. I just think something smells fishy here.

Good luck today.

The CAT IS DEAD!

It put up an admirable fight but the cat was finally vanquished today. The complacency that I have been alluding to regarding the still bullish market players has lead to this death. The writing was on the walls well before this sell off and those who went to cash or went short during this short unimpressive rally is doing well. Unfortunately, I fear that many people lost a lot of money today.

There was no denying it. It was an utterly ugly action today. Many market gurus were calling for a bottom last week and encouraged people to buy the "dips". As I said all along, this is not a market to be buying. The trend is your friend.

The ramifications of the sub prime market meltdown is not an insulated event, as I have said before. This market has quite a ways to go down before we find the bottom. I don't think this is a garden variety correction. The economic impact is significant. I have laid out my thoughts on why subprime market meltdown will trigger a domino effect on the economy and will definitely pull us into a recession. But more concerning is the possiblity that a "stagflation" may be imminent. The premise of stagflation is rising inflation and stagnant economic growth. We may be headed into that abysmal realm soon. I hope not but it is a distinct possibility.

I would be picking at a good entry points for shorting the market right now. As I have always said, Google and Baidu were perfect short candidates. I am working on Apple and Countrywide Financial (CFC) right now. This market has ways to go down so keep the shorts on or stay in cash. If you do decide to go long, make sure that the temporary downside is met with the "dead cat bounce".

Accredited Home Lenders (LEND) Seeks Strategic Options

More fall out from escalating sub prime woes. Accredited Home Lenders (LEND) is now seeking strategic options including refinancing to increase liquidity to mee its debt obligations. The domino effect is in full force. I would also be keeping a keen eye out for Countrywide Financial (CFC) as their sub prime market exposure is also significant. Additionally, there has been signficant insider selling activity at CFC which raises questions about the stability at that organization. CFC further stated that their operating results will be affected by the fall out from the sub prime crisis.

I am just waiting for the next shoe to drop. Perhaps Goldman Sachs (GS) early morning earnings report will shed some light onto the severity of the sub prime crisis.

My Views of Subprime Mortgage Crisis

The sub prime mortgage crisis is important and has far reaching consequences that will affect every single stock market participants in the near and long term. Despite what the main stream media says, this crisis is not an isolated and insulated event. This crisis will have a domino effect on the financial market, the equity market, the global financial market, and consumer spending.

One needs to see how we got into this mess in the first place. To facilitate a speedy recovery from the recession that began in year 2001, and to encourage liquidity in the financial world via consumer spending, Fed chairman Alan Greenspan embarked on fiscally liberal policy of interest rate reduction. The cheap money began to have immediate impact in the economy which facilitated corporate expansion and spending as well as consumer spending. It is the easy credit that encouraged people from all credit back grounds to drive the gas guzzling new SUV's to buying homes that couldn't be possible without the low introductory interest rates. From the rapid expansion of the hosuing market, need for more creative financing schemes were born in the form of sub prime mortgage fianciang packages. This proved to be a lucrative business as everyone began to jump into the "real estate bonanza" that soon followed. The housing market was humming that culminated in virtually everyone trying their hand at real estate investment. The sub prime mortgage industry was there to serve the needs of the investors, sub prime applicants, and other generally "prime" real estate customers to afford houses that were thought out of reach. The cycle was contagious and quick. Hybrid loans of all types flourished that teased applicants of these loans with up to 50 year terms and low teaser rates that adjusted with fed fund rates. Interest only loans were also popular and it was not uncommon to see someone making under $100,000 buying a home worth $1 million. The lenders both prime and sub prime was vigorously competing for customers that in the past wouldn't have even qualified. Risk assessment took a back seat to corporate greed and human greed. Virtually everyone that wanted a loan got one. Flipping homes with no intention of living in that property was popular and was for a time very lucrative. At its height, it was not uncommon for real estate investors to buy up spec homes in anticipation of price appreciation before the house was even built. This encouraged housing builders to over build and buy up land at ridiculously inflated prices. This had the effect of raising housing prices at unprescedented levels and the bubble was born. This came to a climatic end in the spring of 2006 and we are now mired in the mess that is known as post real estate bubble.

The problem that was created from the housing (real estate) bubble was inflation. Paper millionaires were being born every day. Due to the equity appreciation of homes, consumer went on a spending spree that rivaled any of those seen in this new era. Feeling rich, consumers spent lavishly on their home improvements, vacations, gas guzzling SUVs, and real estate investments. In 2004, the Fed began to raise interest rates from the historically low 0% to the current 5.25% in consecutive fashion which ended last fall 2006. The sad truth of the matter is that the Fed was preemptively popping the real estate bubble that threatened the well being of the US economy. The net negative that formed from this tightening activity by the Fed was the short term yield inversion in relation to the long term yield. This usually precedes a recession. When this yield curve inversion was brought to light in late summer, no one really cared and from July 2006 to February 27, 2007, we had a bullish rally in the stock market without any pull backs. In fact, there was no meaningful correction in the market place since 2004.

The ramification from the subprime market is many fold. The one thing the main stream media won't tell you is that sub prime mortgage applicants are not the only ones that participated in the interest only or hybrid loan packages. Even top candidates for mortgages were buying homes that were out of reach financially by employing these creative loan packages. In addition, many main stream banks such as HSBC, Bank of America, Washinton Mutual, and many others also competed against the likes of New Century among others for these willing mortgage applicants. Thus it would be erroneous to think that the sub prime fallout is only relegated to the sub prime mortgage companies. Secondly, wage growth did not keep pace with inflation. While job creation was also lagging. This has the effect of reduced consumer spending when the housing casino eventually ends, and we are close to that. The pundits will tell you that corporate spending will take over consumer spending to keep the economy afloat and that probably the economy will moderate growth to 2 to 3%. I do not think that to be true at all. The liqudity crisis is being averted at the moment by foreign investors in the US equities. Once that dries up, and as US goes into a recession that every knew was coming but chose to ignore, the fall out will be that there will be eflux of investment out of US and possibly into other emerging market or main stream markets. This will elicit increased inflation and slow job growth or stagflation, yet no one seems to even consider this as a possibility in the main stream media.

What will happen then? I think a good tell will be Goldman Sachs, Lehman Brothers, Bear Stearns, Morgan Stanley, all of whom has had significant exposure to the sub prime market in terms of lending, derivatives, and direct support of companies such as New Century. Do I think that a cautionary tone will be heard when Goldman Sachs (GS) reports tomorrow at 8 A.M.? I am eagerly waiting for the next shoe to drop. As goes the investment banking firms, so goes the rest of the economy. Therefore, while the main stream media is thinking that the rally will continue, the action thus far in the stock market has been to the contrary. Volume is lacking and the recent correction must be heeded. That it is a warning shot that there are dark times ahead for the US economy. It is time that we paid the piper. Those who aren't short or in cash may be in for a world of hurt. For the time being, let the delusional market players and main stream media continue to play the game of the Ostrich. I choose to stay hedged, short, and mostly in cash.

APPLE and SEC

Apple rose today on weak volume to $89.87, up $1.90 and traded higher in the after hours to end at $90.02. The trouble with the market players right now is that they are still too complacent. Judging by the low volume activity in Nasdaq showed another up day on very weak institutional buying activity. In fact, weak volume means that some very "brave" bottom fishers are getting antsy and are nibbling at these seeming bargains for the fear of getting left behind. At least that is probably what the psychology is behind the market activity during a correction or bear market. I myself being a momentum trader, I know when to stay out and when to go full force into participation mode. I do not think this is one of those moments where anyone should be going into the market with their guns blazing. There are times to increase your wealth and there are times to protect your wealth. Protection and precaution is worth its weight in gold in terms of prevention of needless financial heart aches and broken dreams. I must also remind the market players that it is indeed options expiration week and a lot of volatility will be in force (not that it isn't volatile now). I believe today's action is due to hedging and protective call option selling activity which has the indirect effect of raising the common stock prices. We may see some deflationary action in terms of price in the coming week.

If you are trading Apple, you need a strong thesis or conviction in why you are in this particular stock. This stock on the surface has had tremendous appreciation over the past 4 to 5 years and has been one of the best performing stocks. It is also loved by the market place and the analysts are continually bullish on the prospects of this stock. The company is hitting on all cylinders and is slated to relase the iTV, iPhone, and the new Leopard operating system, which is creating quite a buzz. I myself am very impressed with the Apple products and own a Macbook Pro and several video iPods. However, most of the growth prosects of this company for the short term has been priced in and in the current environment where the trend has changed directions to the downside, many of those factors will not be the determinant factor in price appreciation. The one thing that makes me want to sell short this stock, and I am short right now, is that too many people expect this stock to continually out perform regardless of market conditions. I must remind you, that at crucial points in market turning points, most analysts and pundits are wrong and that the stocks with excellent fundamentals will succumb to the selling pressure eventually. So how do I know if I am not too early to the party? The simple answer to that is- I don't know. I just go by my research and my gut instincts based on my research, which has served me well in the past.

The real kicker in the equation that people seem to forget about Apple is that the options back dating scandal is alive and well and is apparently taking a turn for the worst. It is just that Steve Jobs (who I think is the most influential CEOs of all time, surpassing Jack Welch of GE) has done a masterful job of covering up this important dark cloud that lurks over this company. In addition, Pixar is also under investigation for options back dating by the SEC and again, Steve Jobs is in the center of this contention. In the latest 10K filing, Apple goes as far to admit that the SEC investigation into its options back dating may affect the company adversely and further restatements may be necessary. Please check this excellent link out http://www.macrumors.com/2007/02/05/apple-believes-sec-investigation-poses-risk/.

I don't know when, but I just don't think SEC is done with Apple and Steve Jobs just yet and any adverse or pretense of adverse events will tank this stock. http://www.macrumors.com/2007/02/16/sec-to-file-charges-against-ex-apple-execs-soon/

I think that Apple may even challenge the $93 mark this week but that is the point that I will be adding to my put positions. I just think that the combination of the subprime market woes and the SEC investigation issues is just too much downside risk for this market climate.

Please do your own due dilligence and as always, take care of your capital.

Optimism Abounds for Rebound

In anticipating the week ahead, I am struck by how optimistic the business sites are. I think this type of "spin" put forth by the main stream media is a good contrarian indicator. For example, marketwatch.com has already prognosticated that further strength in the market and recovery will continue based on strong data reports and earnings reports from Goldman Sachs (GS) and Texas Instruments (TXN). Those are all asumptions and tying in the earnings report from TI and GS has nothing to do with the state of the equity markets and the economy. It also does not alleviate the fact that we are in a technically broken market where the inflection point has been reached to the down side. The trend has clearly been established to the down side and the meager attempts at recovery last week is being heralded as an evidence by many main stream media that the bottom has been reached and that recovery in the stock market is in full force. I beg to differ. An interesting blog from 1stmillionat33.com, has a nice piece on the fact that most journalists and perma-bulls are ignoring the troubling past market evidence of further deterioration in the market place.

While I am sticking my neck out on the line, I do not think the health of the economy and for that matter, the global equity markets are not healthy with many emerging markets including China overheating into bubble territory. I do not know what the catalyst will be to pop that bubble but I imagine we are closer to that event that we are far away from it. The fall out from the sub-prime mortgage industry is far reaching and those who are spinning it as a localized problem without contagion are dead wrong. While I am a bull in many instances, I have also lived through the horrific dot com melt down and not one analyst, economist, or market gurus were right in calling the down market. The exact feduciary duty that they held for the millions of investors that relied on them for guidance. Now is no different.

My game plan is continue to short the market on any evidence of temporary market strength. I do not know how long this "dead cat bounce" will continue. My mantra of "sell the strength and buy the weakness" still holds. For most, this is a high risk market environment. If you have gains, I advise on taking them and go to cash and see where this see saw battle ends. I am not claiming to be right because I have been wrong more times than I can explain. I can only offer my opinion, and that is all it is. But every once in a while, the market screams so loudly that what it seems is not what it is, that I have to speak out. We are due for a major pain which will surpass all that we have experience last couple of weeks. We are not yet done folks. This is how many down turns in economy and disasters in the market place starts. The "experts" will continually say that the economy is fine and that they would advocate buying the weakness as "the stocks are on SALE". Belive it if you must. But I choose to ignore these pundits and formulate my own opinion and heed the loud cry of warning. I guess I have now become a bear. That is too bad because I like being a bull. But these are not those times.

Please throw caution to the wind and not believe all that is said in the media. They are as confused as you and I are, perhaps more due to their predisposition to spin things. Good luck this week and as always be careful!