TigerSoft News Service    5/14/2008      www.tigersoft.com   
                    Update - 9/11/2008 - WM is now 2,32  There is a widespread sense the Feds will soon intervene.                       

Is Washington Mutual ( WM ) the next Bear Stearns or Northern Rock?


               Other related articles on our Blog about the significance of steady red distribution and
               insider selling. 


                Update 6/11/08  WM is now $6.  Down  40% more since this article. 
                Here's a good explanation                         
                                                           by William Schmidt, Ph.D. -  Creator of Tiger Software.
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                                  The Dangers of Owning Washington Mutual Stock

Is Washington Mutual the next Bear Stearns? The charts look similar.
              wpe12F.jpg (37909 bytes)

Is Washington Mutual the next Northern Rock?  Again, the charts show similar steep
              downtrends and heavy red Distribution and Insider Selling.

            wpe130.jpg (65610 bytes)

                        TigerSoft emphasizes the predictive power of its Accumulation Index.   Our invention,
             the Tiger Accumulation Index works because it reliably shows very significant insider buying
             and selling.   And in our society, the US SEC barely polices massive insider buying, except to
             give the a[[appearance   that Wall Street is a level playing field..  Our website is full of examples
             of prescient insider buying and selling.  Here is the current chart of Washington Mutual.  It shows
             steady red Distribution.  And, in fact, insiders have been heavy sellers.  The stock looks like it
             will collapse below $5 if it makes a new low.  Then it will probably have to be rescued by the Fed.
             If you have an account with Washington Mutual, you are protected up to $100,000.  But if the bank
             were to suddenly close its doors, like the UK's Northern Rock did last year, it might take weeks to
             get your money.

                       Some might accuse me of peddling fear.  But I am reporting what the Tiger charts show
              and what they, all too often, mean.  "Don't shoot the messenger".  If you have a complaint
              take it up with Kerry Millington, the CEO, who paid himself more than $5 million in 2007,
              while losing his shareholders 80% of their stock's value.  I wrote last year that shareholders
              should be furious at Killington.  And six weeks ago, at the Annual Washington Mutual meeting
              if shareholders the shareholders were furious.by all accounts.
              See http://www.tigersoftware.com/Insider-Trading-News-Reviews/12-30-2007/index.html          

                       And things appear to be getting worse.  In the last two months the DJI-30  has rallied
              10%.   Washington Mutual hardly even turned up when the FED lowered interest rates to 3%
               and bailed our Bear Stearns.  Washington Mutual may be too far gone to revive.    From a
               chartist's point of view, all the red Distribution from the Tiger Accumulation Index is more than
               enough to make one sell the stock short.  Add to that, the OBV-Line is now making new lows
               ahead of price and the stock is under-performing the DJI by more than 30% over just the
               last 50 trading days.
A weak OBV line that makes new lows ahead of prices making new lows
               is relatively rare and reliably bearish.    It means big sellers are dumping.
  The stock is also
               showing regular weakness after the opening.  This is also bearish.   Big holders are trying to
               get out on rallies which never materialize, and, so, they are forced to sell their shares near the
  A close below 8, the January low, would be very bearish. 
            --------  TigerSoft Chart of Washington Mutual with Key Indicators of Internal Strength -----------
wpeF3.jpg (46230 bytes)wpeF6.jpg (8152 bytes)wpeF7.jpg (20959 bytes).
                          The problem with Washington Mutual is that it is loaded up to the gills with bad home
                 loans and derivatives based on these loans.  Their stock was only $2 in 1991.  As the prices
                 of homes rose in the next 15 years, this bank stock rose 2500%.  Its use of leverage with
                 home mortgage loans made that possible.  Now the sword is turned against them.

                                                    HOW CLOSE IS WAMU TO THE BRINK?

                         Here is a write-up I found on the internet at http://walltreetexaminer.com about
                 Washington Mutual.  

                          "In order to get a better idea of the likelihood that ...(this) leading mortgage lender...
                  will “go under”,   I thought it would be a good idea to dig into their last 10-K annual report filing
                  to obtain information on what is their total exposure in higher risk loan categories.    As you read
                  through this post, keep this quote in mind:   The option ARM is “like the neutron bomb,”
                  says George McCarthy, a housing economist at New York’s Ford Foundation. “It’s going
                  to kill all the people but leave the houses standing.”  

                        "Let’s start with Washington Mutual’s portfolio, shall we?
                                                Option ARMs   $63.4 billion
                                                Loans with combined loan-to-value over 80% (and no insurance)   $7.5 billion
                                                Home equity loans and home equity lines of credit   $15.6 billion
                                                Interest-only loans   $11.7 billion
                       Total exposure:   $98.2 billion    You can find all these numbers on page 79 of their last annual
                        report found here.   

                        Tangible equity:   $14.4 billion  (Source:  Yahoo Finance)

                        "Therefore, it would only take a write-down of 15 percent on their higher risk loans for
                         Washington Mutual to be completely wiped out.  (14.4B / 98.2B).

                         "Also, keep in mind that 1/2 of their total loan portfolio is in California (ground central for
                          the US real estate meltdown—the highest risk region of the country)."

                                                  Washington Mutual Has Made A lot of Enemies

                                      I was surprised at how many internet sites reflect customers' bad experiences dealing
                         Washington Mutual.  Do a search yourself on Google.  Someone is even collecting the
                         complains, legal and otherwise at http://www.wamufraud.com/   This is no way to run a business.
                         But then tho CEO of the company and his cronies probably realize that they could never
                         get another job anywhere else after what they have done to shareholders at WAMU.

                                                  The Housing Market Is Apt To Get Worse

                                     Elsewhere I have shown that housing prices have only corrected a small
                         percentage of what they gained from 1995 to 2006.  A 37% to 50% correction might
                         be considered as normal even if the longer term trend is up.  Home prices have only
                         fallen back 20% so far from their highs.  
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             (Source: http://www.nytimes.com/imagepages/2007/09/23/weekinreview/20070923_BAJAJ_GRAPHIC.html )

                                                  There are many signs that the decline will continue.

                                   1) Home loan defaults and delinquent mortgage payments are spreading
                         from "sub-prime mortgages  to "prime mortgages. 

                                   2)   Recently released figures have revealed that the number of foreclosures in
                        California, United States has more than quadrupled.

                                   3) The average real income for most home owners is declining.  Rising oil
                          and food prices has simply made the downtrend since 1971 become more obvious.

                                    4) As home prices go down, more and more homeowners have negative
                       More revealing was the close correlation between declining home prices and high delinquency
                       rates. On the home price decline map, states like California and Florida were drenched
                       in red, indicating the worst losses. On the map revealing the highest foreclosure rates,
                       the same states were also covered in red. equity just as their adjustable mortgage interest
                       rates have jumped upwards.  Rather than pay the ballooned rates, more and more are just
                       walking away from their loans.   

                                   5) The Fed has lowered interest rates.  But banks are not passing the lower
                          rates along to their customers.  As inflation advances further and further, the FED
                          may have to start protecting the US Dollar.  If it reverses course, interest rates
                          could skyrocket.  In 1980, they reached 20%.  Imagine how such high rates would
                          impact the Housing Market.

                                                    2008 Jump in Foreclosures and Drop in Home Prices

                                      "Foreclosure filings of all kinds - delinquency notices, auctions sale notices
                            bank repossessions - were up 112% during the first three months of 2008 compared
                            with the same period a year ago. Community advocates and policy makers are worried
                            that the problem will worsen as the interest rates on as many as 1.8 million mortgages reset
                            this year....(R)evealing was the close correlation between declining home prices and high
                            delinquency rates. On the home price decline map, states like California and Florida were
                            drenched in red, indicating the worst losses. On the map revealing the highest foreclosure rates,
                            the same states were also covered in red."                                 
                      ( http://money.cnn.com/2008/05/05/real_estate/Bernanke_home_prices_and_foreclosures/index.htm )




                   See how steady TigerSoft red distribution has shown significant insider selling in
                  the weakest finance stocks... still traded..    Each of these is down 92% to 96%
                   in the last 200 trading days!   Tiger Users will want to sell shorts like these on the
                   numbered automatic Sell Signals shown.


                 Ambac Financial Group, Inc. (ABK)
Ambac Financial Group, Inc., through its subsidiaries, provides financial guarantee

products and other financial services to clients in the public and private sectors worldwide.
           (Update - 6/11/08 - now 1.92.  down from over 3 when this was first written)

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              Moneygram International Inc. (MGI)
MoneyGram International, Inc., through its subsidiaries, provides payment services. It operates through two segments, Global Funds Transfer and Payment Systems. The Global Funds Transfer segment provides money transfer services, money orders, and walk-in and electronic bill payment services to consumers, such as unbanked, underbanked, and convenience users.
          (Update - 6/11/08 - now 1.41.  down  sharply from when this was first written)

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                 First Marblehead Corp. (FMD)
The First Marblehead Corporation, together with its subsidiaries, provides outsourcing services for private education lending in the United States. It provides an integrated suite of design, implementation, and securitization services for student loan programs to national and regional financial institutions and educational institutions, as well as businesses, education loan marketers, and other enterprises.
           (Update - 6/11/08 - now 3.64.  down  sharply from when this was first written)
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