Markham Lee_

On Short-Sellers and Dishonest Executives

If the naked shorts are indeed using rumors and other illegal means to take down a company, then the root crime is market manipulation. Market manipulation in the form of lying executives, suspect accounting, etc, is no different from spreading lies to "take down a stock" (if indeed short-sellers are doing this). So people against the naked shorts should be against ALL market manipulators, instead of ignoring the ones that can cause stocks to go up.

Make sense?

The other issue is that lying executives know their companies are in trouble when they say things like: "We'll be profitable next quarter, don't need more capital, no more write downs, etc", while legal shorts are shorting companies that investors are dumping due to the companies being in trouble.

So who is the real menace?

-M

On Short-Sellers and Dishonest Executives

Tan and Jason,

First I'd like to thank you for reading my article.

Second, I'd like to point out that in no part of my article did I say anything positive about naked short-selling, or claim that I was in favor of it. In fact I clearly said that anyone in favor of fair markets should be against ALL ILLEGAL and/or UNETHICAL behavior, whether that includes naked shorts, false rumors or executives who blatantly lie about the state of their companies.

The article is more about people who rail against all short-sellers, while ignoring bigger threats from lying executives then it is about naked short-sellers. It was also about the fact that there is nothing inherently wrong with legal short-selling.

When having these discussions it's important to differentiate between naked short-selling and legal short-selling, as they're not one and the same.


-M

Banks' Earnings Guidance Best Taken With a Bucket of Salt

I'm not excusing the bank's behavior, after all this particular article places the blame squarely on their shoulders. However, the cheap money provided by the fed was the catalyst for the situation AND the Fed is supposed to regulate banks and they failed in that regard as well.

Financial Sector Value Trap: The Worst is Far From Over

1) The main problem isn't the credit crunch it's the fact that their customers aren't paying back their loans, a trend that is worsening, not improving. CFCs losses from lending will be greater in Q4.

2) The Commercial Paper markets are just as bad now as they were in Q3, and CFC isn't anymore credit worthy.

3) Mozillo has been calling Mortgage Bottoms for months now, he's been wrong for months, why believe him now? In fact, trusting CFC's guidance and judgment is a fatuous endeavor at this juncture.

4) CFC has massive lending needs and with loan losses accelerating, lending costs increasing and loan originations declining (i.e. they're generating less revenue) difficulties in selling loans, etc, the environment is worsening, not getting better.

5) Simply Put, there is very little empirical evidence to support CFC's claim of a return to normalcy, especially within the context of their bad decision making. This is the same company that was on a hiring binge in July and a layoff binge in August.

-M

Countrywide: The Lender Who Helped People Save Their Homes

I have to disagree Todd.

The NY Times investigated Countrywide's previous loan modification programs (this one isn't really different) and it had very limited results and for the most part, only served to irritate their customers.

The other side is that by the time many people "need" a loan modification it's already too late and they can't be helped anyway.

I would hold off on celebrating this move until it actually shows some results, as CFC has a rather dismal track record in this area.


-M

Q3 Earnings Season: Taking the Long View

That sounds interesting, as it would definitely give readers the ability to view changes to those numbers over time. Instead of the usual, only knowing the current and forgetting the past.

-M

Banking Stock Rally: Jumping the Gun?

I'll go on record as to say that I'm long USB, so I wouldn't disagree with that decision.

Citibank has solid international exposure, better than the other retail banks so whilst I'm "worried" about the short to medium term, the long-term should be fine.

I think BAC will face stagnation as they can't really grow more via acquisition as they're running into the 10% of all US deposits rule. Furthermore, banking profit growth is going to slow down as the prior years inflated profits.

If were to rank:I'd say USB is a buy, C is a push and BAC is a hold.

But that's just my 0.02

Disclosure: I'm long USB

Is the Normalization of Housing Prices a Realistic Expectation?

Your sarcasm is appreciated :)

Is the Normalization of Housing Prices a Realistic Expectation?

Understood, my point is that without the things I mentioned artificially inflating housing prices, things will have to return to a point where the fundamentals drive the price I.e. things like income.

Bank of America: Countrywide’s White Knight

To be sure, CFC isn't LEND or NFI - is it expensive short-term financing to avoid trouble? Sure. But the light at the other end of the tunnel is a lender capable of funding its loan volume via its retail banking operation and then selling the loans to the mortgage GSEs.

The investment is a costly way to help ensure that happens, but once it does CFC should be able to survive IMO, it won't be a pretty trip, but I don't see the company collapsing.

$2B is a fraction of their loan volume, so it's not quite accurate to say it's the equivalent of borrowing at 21% and lending at 6.8...when you fold the investment into their overall loan volume, the effective cost (assuming it helps ensure continuous operations) is actually quite a bit smaller.

Either way, time will tell


-M