Thursday, August 21, 2008

Point 1 finger, 3 point back at yourself!

I read an interesting article today about LEH and CFC. Some of the info I knew, some I hadn't broken down quite as succinctly. In Feb. or 2007 LEH announced that they were buying back 20% of their stock. Over the next few months to a year insiders sold over 60,000,000 of their own shares. Basically, they sold their own shares back to the company. The stock price? Over $80 a share! Now, here we are and the insiders are the only ones who got out and made a boatload. Investors and even employees who kept hearing that the company is fine, got crushed. Country Wide (CFC) had similar actions by their top level management, and similar results. These companies continue to tell the public that everything is fine, that the media and short sellers are overplaying the situation and that in the long run they will work things out. Even today the market rallied on Dick Bove's comments that LEH is a buy here at $13s. And, Bove has been one of the better market callers on the sector, so the financials popped, though not with a lot of heart frankly. LEH is a buy like I have a full head of hair. It's the same thing. If I were to go on TV and tell the audience that I really have a full head of hair, I'm no bald. THAT is the same thing these companies are and have been doing. And, yet NOTHING is done about it. How does LEH buy back 20% of their stock and then less than 18 months later be on the verge of bankruptcy? And, better question - how do they get away with it? Insider trading means trading on knowledge that only an insider knows, thus creating an unfair advantage that you capitalize on. What do you call this? It doesn't take a brain surgeon to figure out that LEH bought back their shares to keep the stock price up long enough for insiders to sell 60,000,000 shares! 20% of LEH that they bought back? 100,000,000 shares. Congress can talk about short sellers and market manipulators all they want, the real problem is internal, its an inside job. Until that is dealt with then the rest is meaningless. LEH isn't a buy, that's hysterical. Maybe it'll bounce again to back over $15, but that whole sector is a mess and its only going to get worse. Someone should be held accountable, but looking outside is a big mistake. Had LEH used that money to shore up their financial situation they probably would be a viable company. 100,000,000 shares at $80 a share is 8 BIL. Give LEH $8 BIL more in liquidity and even I would give them a solid shot to survive. Instead, that money went to executives who had to know what the future held. Why else would their be that many insider sales. Was it a coincidence? Be real. It's a travesty, and unfortunately it will more than likely go unpunished. Keep shorting these things on every rally, I just don't see any shot they will get more than dead cat bounces. As far as the market goes, we look really beat here. Tech is starting to roll over and once that happens all hell is gonna break loose. is that time now? Hmm, probably .not just yet, but that time is coming soon. You know things are bad when even GS can't hold up. I like AAPL short here around $175, and I still like GOOG crash and burn. FNM staged a mild rally on hopes that the FED will come up with a plan to buy stock back. If they do that then they are possibly the dumbest Fed ever. I find it hard to believe they will be that ridiculous, but stranger things have happened, lets hope not. I have another options call tomorrow I'm looking at for Options Trader, time to sign up folks and time for you all to take the BEAR HUNTING class on the 26th and 27th that I and Tiny are hosting. We're going to give several stock and option plays and a spread trade or two to boot! In the meantime, I think we could get a real washout here. I think we bounce before the holiday because the Fed will probably do something post Labor day and shorts will rush to cover before then, so trade with your stops on both ways,. its gonna be a bumpy ride! We're shooting our new infomercial in a few weeks, if you have a good story to tell and would like to be on TV and come to NYC, email me at - waxie@trendfund.com! Thanks! Waxie

5 comments:

johnny said...

Waxie, I've been watching MER,what are people thinking after Thursdays announcement, do they really think the bottom is in on this stock, I would of thought the stock would of gone down big. What are your thoughts? Your insights are really appreciated, keep up the great work!

comcity said...

Hi waxie
I have been a NINJA now for about a month and also am a member of morning briefing. So far I have made some money on your calls both in the room and on my own using your techniques.
I have $35k in in my trading account and was wondering if I should do more options or stock plays with these limited funds.
Since you did quite well starting with the same amount could you tell me what you played when you got started.
I have 2 options plays now being AMED and LEH Puts. Love you guys and keep up the good work.
any advice on the Puts would be helpful since the LEH upgrade.
Thanks for your time.

Erik28 said...

Waxie,

I really would like to be able to get the Bear Hunting Class. However i will be flying out the state to visit family tommorow AM.

I see that archived class are available, (however is that for ninja only members?)

I would not mind paying full price for the class, even archived. Please let me know if this is possible.

I emailed Sally, so if so then no need to double tap. Just wanted to make sure, try my best to get the class.

Thank you

v/r

Erik

Erik28 said...

Waxie,

I really would like to be able to get the Bear Hunting Class. However i will be flying out the state to visit family tommorow AM.

I see that archived class are available, (however is that for ninja only members?)

I would not mind paying full price for the class, even archived. Please let me know if this is possible.

I emailed Sally, so if so then no need to double tap. Just wanted to make sure, try my best to get the class.

Thank you

v/r

Erik

Jeanne Mancuso said...

Waxie,

If it was your family member...I'm very sorry for your loss.

Jeanne