Wall Street News: Goes Through The Spin Cycle

by | Jan 24, 2009 | Asset Management

When I was in college, I loved listening to a local college radio station (WFUV, Fordham) that had a sports-talk show on Sunday nights.  The show featured something new: phone calls from listeners!  This was more than 25 years ago, before WFAN in New York, ESPN Radio and all the other sports outlets we have today.

Incidentally, one of the announcers was an annoying student at Fordham, Michael Kay.  Kay continues his annoyance today as the obviously homer-voice of the New York Yanke$$.

One day, I got into a conversation with my father about something mentioned on the show.  He asked “where did you hear that?”  I told him about the radio show.

He replied, “So, they are experts?”

That one line really stuck with me…especially as a communications student.  Shortly after, I changed majors to business and focused on economics, later getting my MBA in Finance.  But our conversation continued.

“Tom, the job of the media is to sell.  They sell advertising.  Not a bad profession.  You can make a lot of money.  But the media has no obligation to look out for YOUR best interests…or even tell you the truth.  They want to sell ads.  So what do you think they are going to say?  And they can (and often do) twist a story to get a different perspective.  Be skeptical.”

With that piece as background, let’s look at the top headlines Saturday morning over at CBS Marketwatch:

Freddie Mac to ask for an additional $30 billion

Gosh, that sounds awful, doesn’t it?
But wait…Freddie already was granted a $100 billion line, but only used $13.8 billion.  They are tapping a line that is already established.  Non-story.

Capital One results suggest gloomy 2009

The unreported part: Capital One also said they don’t see a bottomless pit of losses.  Guess CBS Marketwatch missed that.  Or maybe that’s just not a sexy headline today.  The spin continues: “In the last three months of this year alone, Cap One lost a staggering $1.42 billion.”  Sounds bad, right?

But wait: that number includes $1 billion it set aside to deal with expected losses.  They are making provisions for losses that may — or may NOT — happen this year.  I’m not recommending buying this stock whatsoever, but that sounds like pro-active management to me.

Californa-based 1st Centennial Bank Fails

And your point is…?  Look, when banks fail (that is, when banks fail after 1933), they are taken over by the FDIC or sold in a pre-arranged marriage (through the FDIC) to another bank.  In the last real-estate driven recession (18 years ago), 800 banks failed.  Banks are going to fail in recessions.  But accounts don’t get wiped out anymore because of this.  They pull down the signs on Friday and re-open on Monday.

AFLAC assures investors it does NOT need additional capital, but S&P downgrades anyway.

What is S&P saying?  Are they saying management is lying?  Or does S&P just knows AFLAC’s business better than AFLAC?  After all, S&P re-affirmed positive ratings on banks and brokers throughout 2007 and much of 2008 — all the way down the drain!

And from a few days ago:

Microsoft cutting 5000 jobs.

Microsoft announced they were cutting 5000 jobs — over the next 18 months.  And while 5000 “jobs” were being cut, the actual number of employees being let go — again — over 18 months, is expected to be 2000.  Many people will be re-trained and re-assigned.

Look, sites like CBS Marketwatch, Yahoo Finance, magazines like Business Week and channels like CNBC are designed to do two things: generate enough shock value to attract attention and then find a way to keep you glued to them.

This is a waste of your time, and straps you into the emotional roller coaster.  Why do you want to do that?

Remember this:  Everything said and written in the media on Wall Street is written or said to make you do the wrong thing.

I had a longtime client (and friend) call me yesterday.  She told me one of the “experts on TV” said the market could drop another 20% from here.  And she was scared, worried, and nervous.

Wouldn’t you be?

I reminded her — that’s just one guy’s opinion.  If you met a guy named “Mr. CBS Marketwatch” in the line at the grocery store, you wouldn’t believe half of the nonsense he was spitting out.  You’d just nod politely, and pray that he bags his prunes and oatmeal and gets out of your way.

Look, there’s a reason I use these point and figure charts.  For the first fifteen years of my career, I was burned relying on “expert opinions.”   What do you say to a client after you relied on the “experts” and lost money for them?  There’s a lot of brokers wondering exactly that lately.  They instruct brokers to tell clients “you have look at the long term picture.”

That’s nonsense.  And it’s the path to losing money.

I use these charts because there is no “opinion” built into the chart.  They only show price changes.  And from price changes, you can see trends.  And — unlike other types of charts — point and figure charts are not subject to interpretation.  It is what it is.  Charts either trend up, trend down, or stay in place.  No opinion.  Just facts.

And, a funny thing I’ve noticed, time and time again: Point and figure charts often start to move down (meaning, prices are falling) WAY before bad news arrives.  And these charts often start moving up (reflecting rising prices) well before the good news is announced.

Keep that in mind as you read this again: Everything said and written in the media on Wall Street is written or said to make you do the wrong thing.

Don’t ever forget that.

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