GM Death Spiral or Another $0 Price Target

This time its on GM, already down over 90% in a year. Whats with these jerk off analysts, have they no shame? To set the record straight and note the incompetency of Deutsche Bank (read douchebag bank) (DB) analysts, I'd point out that they had a buy on GM as recently as February and were recomending hold until today. I find it comical that they tell their clients to hold GM all the way up until today when they recomend selling and the stock drops another 30% under their clients. I'm sure that DB's customers that held until now were happy to see their bank finally recomending sell to save the last 5% of their investment. Way to go douchebag bank! Note this is a follow up to a post I did on IMB.

Saturday Rock Blogging: Another Bank Bites The Dust

IndyMac makes the 265th mortgage lender to implode since the start of this crisis, and the largest since 1984. If you want to keep a wraps on this stuff, there is a wealth of good info at /bankimplode.com/.

Regulators Shut Down IndyMac (IMB)

Late today the office of thrift supervision shut down IndyMac, it was the second largest financial institution in US History to close down. I guess Paul J. Miller Jr. will now have to stop following IMB since it no longer exists.

"IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. ...

The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.

IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said.

IndyMac had $32.01 billion in assets as of March 31.

The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.

In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.

Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.

In the letter to shareholders, IndyMac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indymac safe and sound through this crisis period."

The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time.

But the run on its deposits ultimately short-circuited the strategy, prompting regulators action Friday. " -Source

Hmmmm, I wonder if that dickhead "analyst" Paul J. Miller Jr. had anything to do with the run on the bank this week. If I had money with a bank who's stock just had a price target of ZERO set on it, I think I would definitely try and get all of my money out asap. Is it just a coincidence that the bank collapse happened to coincide with the $0 price target? Who knows, that article seems to blame a letter by the honorable senator from New York. Whatever the case, all the talk of the banks certain demise seems to have become a rapidly self fulfilling prophecy.

In conclusion of the IMB matter, way to go Paul J. Miller Jr.!!! Your brilliant price target was met in less than one week! In honor of you really nailing this thing down I give you the slow clap. I couldn't find a picture of you so I will just imagine that you look identical to George Clooney, what a pimp.

"Analyst Sets $0 Target (IMB)" or Why Technical Analysis Is The Only Way

Is there anyone else that thinks this is a wee bit, oh I don't know, totally fucked up? How does an analyst get off setting a target price for a stock at $0, not .1, not .001, a big fat ZERO. He's making a mockery of his own profession, who would do that? This analyst isn't some joe shmoe internet blogger that thinks hes an analyst either, here's the deal:

"Friedman, Billings, Ramsey & Co. Paul J. Miller Jr. cut his price target on the Pasadena, Calif., company to $0 from $1. He rates the company "Underperform." -source

Why not just say, ok this company is in trouble and we have a policy of (fill in the blank) so we no longer cover it. He could save a little face and say he only follows companies with share values above $2 or re-iterate his "underperform" as he discontinues the attention. Isn't it below his company and his dignity to not talk about a company which he says does not have "any value left for common shareholders!" And then theres the issue of how this move will impact the company in such a weak state, the stock did drop 38% today.

I think I have this jerkoff figured out. Is this guy short the stock? No, that would be blatantly illegal. Are his buddies short the stock?, well probably, but that should also be illegal so I'm sure they are smart about it (of course this is pure speculation). I think this guy is trying to give the impression that he is on top of it, like he figured it out. What do you think?, here was his last downgrade on November 7th, 2007:

That doesn't seem so bad until you look at the chart. IMB had already fallen 78% from its peak in a little over a year prior. This guy was clearly way off by expecting the stock to "market perform" which is another way of saying "hold" the stock. He essentially said hold the stock for the first 78% of the decline (from $45) and here he is at the bottom, after the stock is below $1, saying oh, uhhh, I guess its gonna go to zero now. Is he retarded?


So whats my point, this seems like a rant so far. Well firstly, the analysts get it wrong sometimes, really wrong. Maybe this guy's analysis of the fundamentals was on the money, but that doesn't really matter to the investor. All that matters is the return, so the share price and possibly a dividend. My grande lesson in this story is the power of technical analysis. Regardless of what the crunching the numbers might tell you about the value of a company, the only thing you should care about is the return from this investment. Looking at that chart it was pretty easy to tell, a very long time ago, that the company was no longer a good investment. In fact, you could even tell that it would likely go under.

It just so happens that the first time I posted about IMB was about a year ago, and I was bearish based on the chart on the long term time frame. I said that IMB had "more downside potential than the other mortgage stocks and the chart is begging to be shorted," four months before Paul J. Miller Jr. downgraded the stock from his neutral. Here was the chart I posted:


Both the 50 and 200 dma's were declining and the stock bounced off the 200 dma like a racquetball off my head. The thing was going down and going down fast so why would you listen to what the fundamental analysis or some wall street goofball (analyst) might be saying? Technical (chart) analysis is the only way to consistently make big money in the equity markets. Sure, there were some smart people who figured it out well before this dope, after all the stock had already fallen a great deal when he said it would underperform. Some of the "analysts" (now I'm being more vague in my use of the word) got it right and some very public ones got it wrong. All of the chart readers got it right because its been clear that IMB has been in a death spiral for a long time. To wrap it up, trust the charts not the analysts.

Disclosure: I have no position in IMB now but I made a pile of money shorting it in 2007.

Solar Squeeze (FSLR, JASO, LDK, SPWR, TSL)

The solar stocks have been on a rampage lately on increasing volume and many of them have massive short positions. The poster child of this rally is First Solar, ticker FSLR (see above), which recently had a big gap up and run on $1.3B in new solar panel orders. FSLR has formed what looks like a short stroke (no pun) on the daily time frame. This is a pattern you see after a big move where a stock consolidates mostly sideways for a week or so before blasting higher again. According to IBD, this pattern provides an "itty bitty opportunity to buy shares."

Since going public last fall the short interest in this stock has steadily risen. Theres no doubt that this will be a great short at some point, but lets wait for signs of a top first and until then the premature shorts will propel this stock higher as they take losses. I am very bullish on this stock above $119.85 (the all time high) which is conveniently just below $120 so this may provide a pause for the inclined to buy $120 calls before they go in the money. This level would then be a nice price to set a stop or for a longer term hold or a trailing 8% stop might be effective given the 8% range in the short stroke.

I'll leave it up to the readers to check out the charts of the other solar stocks like JASO, TSL, LDK and SPWR, but they all look very similar. They are exploding higher as the short interest grows. One stock that for the most part has not joined along that is in this sector is WFR. I have been bearish on WFR for a couple of months now but the chart is starting look good again after a few months of consolidation and base building. If WFR can manage to close above $67.50 things could get interesting. Based on a rough measured rule $85 seem like a good target once WFR starts making new all time highs.


On a few other notes, ICE broke out and looks like an awesome buy at pretty much any price as it marches towards my $210 target. In fact Investors Business Daily recommended ICE as a buy in the weekend edition of the paper. SWKS has earnings after the close on Wednesday and I will probably take some profits (but not all) ahead of that announcement even though I am still very bullish on the stock. AHM might be finding some support at $14 but who knows, that stock is a train wreck. I am also interested in IMB as another mortgage company short (like AHM and PHM). IMB seems to have more downside potential than the other mortgage stocks and the chart is begging to be shorted. Finally, Brian over at Alpha Trends had some interesting short squeeze ideas over the weekend. Check them out.

And don't forget that July options expire on Friday, so deal with your July's if you haven't yet!

Disclosure: I own ICE calls, SWKS calls, AHM puts and IMB puts.