Ignore the Investment Advice You Hear on TV

Ignore everything you hear on television. Especially CNBC (owned by GE). While they’re busy pumping the markets, this is what’s happening in the real world (from Bloomberg):

Borrowers such as Dayton, whose 2004 compensation was almost 10 times the median U.S. household income, are becoming trapped by the same issue facing the poorest subprime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.

The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, California, show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, RealtyTrac said.

By the way, notice that Goldman Sachs (GS) put Bank of America (BAC) on its “conviction buy” (strong buy) list Monday (the cause of the rally), and today we find that Bank of America is selling $13 billion worth of stock on the public at the inflated price (because of Goldman’s cheerleading). Pretty crazy, huh? The banks are trying to keep each other alive! But the massive dilution (20% from BAC's recent offering) will eventually destroy most of the shareholders. What’s next in the dilution game for BAC shareholders? Conversion of private preferred shares to common shares; another 20% dilution at least.

And don’t even tell me the banks will be earning their way out; S&P 500 profits have shrunk by 90%. Yes, 90%. No way they’ll earn their way out of this.

If you’re a BAC shareholder, I’d highly suggest re-thinking (read: sell) your position at the gift price of $11 (compliments of Goldman Sachs). I’d also suggest being in cash for a while until earnings start to come back, but that certainly won’t happen unless people stop losing their jobs.

Good luck out there everyone.

Disclosure: Freund Investing Managing Member Ryan Freund holds no position in any of the companies mentioned in this article. Freund Investing has a solid Disclosure Policy.

Comments

[rick12345:]

Agree with your rationale; It's what i've been trying to tell bullish investors for the last month or so, but they just won't listen. I hear the same rhetoric over and over again - I have made "x" returns since March; no one can predict how the market will run ; bull will keep running ; you're just jealous because you missed the rally etc... Not one of their arguments is ever supported by factual data, just a deep desire to debunk the bears' "warnings".
Perhaps the thing I utterly detest most is their continued effort to read negative data positively; the old "not as bad as (analysts) expected". This is only because analysts have set the bar so low that any forecast couldn't possibly miss. You forget that financial advisor's need to support their wall street buddies as well as being legally responsible for their comments.

May 20 05:04 AM

[bc1400:]

Yes.

Step One: Stop listening to CNBC. I've switched to watching Bloomberg. I can no longer stand listening to "cub reporters" mouthing slogans and tossing around false dichotomy. They bring on Investment Gurus and then rebut the views with 8th grade political opinions.

It's actually pathetic because they seem to believe that this is what people want to see/hear re: market news.

They used to be much better.

May 20 06:28 AM

[VennData:]

CNBC was much better when George W. Bush was president... their positiveness, their energy. Now that we've got a Socialist in the White House socializing everything they need to realize how bad things are going to get.

While Bush actually socialized the TSA, Fannie Mae, Freddie Mac, AIG... increased nationalized health care to over 50% of Health care spending with his the prescription drug benefit for Medicare (with no ability to negotiate prices)

en.wikipedia.org/wiki/...

...then allowed the Treasury to buy up positions in banks (not too mention Fed buying hundreds of billions of private mortgages) like JPMorgan, Citi, BanK of America, Goldman Sachs, Morgan Stanley, and tossed billions up on billions of loans at the automakers, people need to understand that he wasn't a Socialist... and Obama who hasn't socialized anything really is.

You can't look at the data... listen to your feelings. That will help you. Trust your heart-felt disgust at the liberals and their left-wing liberalism ...and their Socialist masters in France and the Trilateral Commission.

Oh and don't ever even think of buying when there's "blood on the street" because once the economy's recovered, you'll have plenty of time to buy stocks... and scream about how much you hate those left wingers who have ruined America.. or are about to anyway... I'm sure... I'm absolutely sure of it... I feel it.

LOL

May 20 07:21 AM

[BlueOkie:]

CNBC is just the place to go if you want screaming over the other guy. Go to Fox Business or Bloomberg for much better reporting. Any views or recommendations by anyone coming on TV should be taken with a grain of salt. If they had the inside track, they'd sell it, trade it and surely wouldn't tell everyone for free.

May 20 07:47 AM

[conceptwizard:]

They are all in the same soup, controlled by the Governmemt. Do your own reporting.

The facts:

In the first three weeks of April this year, insiders for NYSE listed companies sold 8.32 times more stock, by dollar value, than they purchased. What does that tell you? We won't insult your intelligence by answering. If ever there was an indicator to identify a sucker's rally, this would be it. This is the ongoing Big Sting Two as strength is created by the PPT for insiders to sell into as our economy collapses under a dollar-busting juggernaut of fiat paper, aka Federal Reserve notes, being monetized at light speed as our President and Congress go on a spending spree that makes the spending habits of a Saudi sheik's entourage look like those of a group of Welsh penny-pinchers. So much for "beloved" Emperor Obama's promise to put an end to legislative pork and fiscal profligacy.

May 20 08:44 AM

[DONE_SONZ:]

You have to put in your own work in the marketplace.Suggestions and opinions are just that.Be careful of them when it comes to money.Have an understanding of the market and know the present and past news and try and predict the future news.Carve your own path.

May 20 08:44 AM

[notsosmart:]

do your own thing. or look for the next made-off.once youve been scammed out of your money you dont have to worry about your so called investments.if you dont take care of your own you deserve what you get.you may pay a high price for laziness.everybody has their own interest & its not you.whom do you trust?

May 20 10:24 AM

[ain't no fo...:]

VennData, great comments!

Now just click your heels three times and chant "I Believe... I believe... I believe..." and think back longingly to the days of Karl Rove, and John Snow, and of course dubya and dickya... wasn't ignorance bliss?

But now Ve must get rid of those proletarians who are destroying Amerika!

May 20 11:11 AM

[speeddaimon:]

Me thinks you may have either not read the entire comment or entirely missed the satirical tone of it.


On May 20 11:11 AM wpdragon wrote:

> VennData, great comments!
>
> Now just click your heels three times and chant "I Believe... I believe...
> I believe..." and think back longingly to the days of Karl Rove,
> and John Snow, and of course dubya and dickya... wasn't ignorance
> bliss?
>
> But now Ve must get rid of those proletarians who are destroying
> Amerika!

May 20 01:37 PM

[Tony Daltorio:]

Investors need to learn to think for the themselves!

CNBC is simply America's version of the old Soviet news agencies - PRAVDA and TASS.

May 20 05:04 PM

[ain't no fo...:]

uh, I GOT the satirical tone, and agreed with it entirely, he did make a GREAT comment, which is why I too was being satirical - as in imitation is the best compliment.

methinks you do not understand satire.


On May 20 01:37 PM speeddaimon wrote:

> Me thinks you may have either not read the entire comment or entirely
> missed the satirical tone of it.

May 20 11:10 PM

[InvestBaboo:]

Yes, put CNBC on ignore as well as articles such as this one. Do what the charts tell you. Doing this has enabled me to catch this rally from the very inception and even the most recent rally in Gold. What is tragic is when the markets don't follow through the rationalization that individuals like author work up in their minds they become bitter and self-defeating and publish even more asinine analysis such as this. They would rather go down with the ship than admit that perhaps they may be wrong and maybe they should just ride the trend and rationalize the trend and get off when the trend hits the bend at the end.

May 31 07:50 PM