The Dangers of Owning Washington Mutual
Is Washington Mutual the next Bear Stearns? The
charts look similar.
Is Washington Mutual the next Northern Rock?
Again, the charts show similar steep
and heavy red Distribution and Insider Selling.
TigerSoft emphasizes the predictive power of its Accumulation Index.
Accumulation Index works because it reliably shows very significant insider buying
And in our society, the US SEC barely polices massive insider buying, except to
a[[appearance that Wall Street is a level playing field.. Our website is full
insider buying and selling. Here is the current chart of Washington Mutual. It
Distribution. And, in fact, insiders have been heavy sellers. The stock looks
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
they, all too often, mean. "Don't shoot the messenger". If you have
take it up
with Kerry Millington, the CEO, who paid himself more than $5 million in 2007,
losing his shareholders 80% of their stock's value. I wrote last year that
furious at Killington. And six weeks ago, at the Annual Washington Mutual meeting
shareholders the shareholders were furious.by all accounts.
And things appear to be getting worse. In the last two
months the DJI-30 has rallied
Washington Mutual hardly even turned up when the FED lowered interest rates to 3%
bailed our Bear Stearns. Washington Mutual may be too far gone to revive.
chartist's point of view, all the red Distribution from the Tiger Accumulation Index is
enough to make one sell the stock short. Add to that, the OBV-Line is now making new
of price and the stock is under-performing the DJI by more than 30% over just the
50 trading days. A weak OBV line that makes
new lows ahead of prices making new lows
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
out on rallies which never materialize, and, so, they are forced to sell their shares near
close. A close below 8, the January
low, would be very bearish.
-------- TigerSoft Chart of Washington Mutual with Key Indicators of Internal Strength -----------
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
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
"In order to get a better idea of the likelihood that ...(this) leading mortgage
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
says George McCarthy, a housing economist at New Yorks Ford Foundation.
to kill all the people but leave the houses standing.
"Lets start with Washington Mutuals 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
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
the US real estate meltdownthe 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
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.
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.
released figures have revealed that the number of foreclosures in
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
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
rates have jumped upwards. Rather than pay the ballooned rates, more and more are
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
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
the same states were also covered in red."
THE FIVE BIGGEST FINANCIAL STOCK DECLINERS
OF 2007-2008 EACH SHOWED HEAVY
how steady TigerSoft red distribution has shown significant insider selling in
the weakest finance stocks... still traded.. Each of these is down 92%
in the last 200 trading days! Tiger Users will want to sell shorts like these
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
(Update - 6/11/08 - now 1.92. down from over 3 when this was first
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
(Update - 6/11/08 - now 1.41. down sharply from when this was
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
- 6/11/08 - now 3.64. down sharply from when this was first written)