"We're In  Good Hands!"

Part 2

CNBC: If this organization was a person, more likely, his/her chosen vocation would have been prostitution...

Sunday 7-14-02, 1:15pm PST

 Editorial By Ike Iossif/President/C.I.O. Aegean Capital Group, Inc. 

(The following views reflect the beliefs of Mr. Iossif and are not necessarily  the views of Aegean Capital Group, its principals,  directors, employees, and/or other affiliated companies and individuals.) 

I love to read, I have hundreds of books in several bookcases around the house, and in the office. However there are five books that are permanently on my desk-so I can reach them easily when I need them. On the left side of my desk, I have "Technical Analysis Of Stock Trends" by Edwards & Magee, along with "Options As A Strategic Investment" by Larry McMillan. On the right side of my desk, I have the Bible, "Plato: Complete Works" edited by J.M. Cooper & D.S. Hutchinson, and the Constitution of the United States of America.  

Obviously, I consider all the above mentioned books of significant importance.  However, for this editorial I would like to concentrate on the Constitution,  and more specifically its guarantee of freedom of speech and of a free press. The Founding Fathers -in their infinite wisdom- saw a free press as an inalienable component  of the democratic process. They saw the press as a watchdog, as the keeper of the truth.  I think it is a safe assumption that the same principles also apply to the "financial press/media." I can not think of any organization that has betrayed more the vision of the Founding Fathers -with regards to the role of the press- than CNBC!

No other media outlet has so grossly collaborated with Wall Street scoundrels looking to sell their junk, no other media outlet has so enthusiastically promoted lies and biased opinions that have resulted in devastating losses for many naive investors who chose to believe the misinformation served to them by CNBC and its "guests"

I have heard numerous stories from colleagues who at one time or another were contacted by CNBC with regards to being a guest, never to be called again, when it turned out that their views did not conform to the official "party line." I would like to share my own.

Early October of 2001, I was contacted by Martha MacCallum, twice. Apparently she was

 a) aware of an article that I had written back in April of 2001, warning that the escalation of the conflict in the Middle East posed a significant threat to the U.S. financial markets because it would ultimately result in terrorist attacks on U.S. soil, and 

b) she was responding to an email I had sent criticizing CNBC guests over their suggestions to the public to buy stocks for patriotic reasons. (See related articles: Weekly Report for 4-6-01 and  "Patriotism Proves To Be A Poor Investment Guide" by Aaron Task, http://www.thestreet.com/markets/aarontaskfree/10001196.html)

   She told me that she was interested in having me as a guest, and she wanted to know my opinion about the markets going forward. So, I told her briefly what I thought, and I added that I would set up a page within our site with my detailed views, and after she reviews it, then she can select whatever it is that we could cover in the interview. No specific time, or date was set. She was supposed to call me back after she read my detailed thoughts. Below is the page with those thoughts:

----------------------------------------------------------------------------------------------------

10-14-01, 7:05PM PST  Hi Martha, I hope the following  charts shed some light to what is taking place. 1) The way markets behave, bears certain characteristics that constitute what I call the "signature" of the move. Price action, when seen in a vacuum, provides little information with regards to the true state of the market. However, by examining the "signature" of the move we can draw a much better, and accurate conclusion. I will not bore you with the details of what each one of the following indicators  measures and how it does it. Just take a look at the "signature" of the rally, and the "signature" of previous bear market rallies, you will see where I am getting at. The part in the red rectangle is the "signature" of the rally, as measured by 12 different technical indicators for different time frames. Notice the similarity between the current rally, and the one in April. (I've got another 9, altogether 18 indicators illustrating the same thing) 2) The following charts are telling an even more revealing story. The first one is NASDAQ, second is the NDX 100 A/D line, the third is the A/D line for the entire NASDAQ Composite, and the last one represents the collective momentum of all the 100 stocks in the NDX but the weight of the momentum for each component is equal to its capitalization weight in the NDX.  (If you got confused just focus on the bottom line: it captures the distortions caused by higher capitalization stocks)  Take a good look at the difference between the A/D line for the Composite and the A/D line for the NASDAQ 100. These charts show unmistakably- that the current rally is centered among a handful of stocks in the NDX, and there has not been -at least up to now- broad participation. Second -and more worrisome- is what the Aggregate Momentum chart illustrates: the current advance is dominated by a handful of "momentum" stocks in the NDX that are popular by short-term traders.  Obviously, if the rally continues, there is a good chance we may see some participation -like what we saw back in January, however, the points to keep in mind are the following: 2a. A characteristic of a bull market rally is its broadness, on the other hand, a characteristic of a bear market rally is its narrowness. For all the "hurrah" the rally has garnered, it is based on roughly 60-70 stocks in the NDX! 2b. Notice the "signature" of the aggregate momentum indicator, and its similarity to the rally in April. 2c. Rallies that are narrowly centered on speculative "momentum" sponsored by short-term traders, tend to end abruptly. Since the bear market started we have had 8 such rallies (see below) they have all resulted in lower prices down the road. 14-Apr-2000 to 01-May-2000: Up 19.1% in 11 days  23-May-2000 to 17-Jul-2000: Up 35.0% in 38 days  02-Aug-2000 to 01-Sep-2000: Up 15.7% in 23 days  12-Oct-2000 to 20-Oct-2000: Up 13.2% in 7 days  30-Nov-2000 to 11-Dec-2000: Up 16.0% in 8 days  02-Jan-2001 to 24-Jan-2001: Up 24.7% in 16 days  04-Apr-2001 to 22-May-2001: Up 41.1% in 34 days  18-Jun-2001 to 29-Jun-2001: Up 8.6% in 10 days   3) Last but not least, I must have heard at least 50-60 times last week, that the "market is at pre-attack levels" However, I have not heard, once what it really means. Let's take a look at the two charts below:   In the aftermath of the attack on the WTC, investors demanded and additional risk premium for U.S. equities in order to reflect the new realities currently present in our country, and their ramifications to the long term trends of economic growth. The fact that the markets are back to pre-attack levels, it means -according to the market- that no additional risk premium is necessary, because there is no in additional risk! However, just two days ago, the President and the FBI warned of additional attacks, your colleague Tom Brokaw was the intended target of a criminal act-which is probably unrelated to terrorism, but it shows the "unknown" factors lurking out there. In other words, the bottom line is this: there is plenty of risk around, yet the "market" sees no reason to demand an additional premium to compensate for the additional risk. That's silly! No serious, professional, risk-averse investor subscribes to such lunacy. People touting and celebrating the fact that the market is back to pre-attack levels, is akin to people saying in March of 2000, that "eyeballs" are more important than free cash flow!  Best Regards Ike

----------------------------------------------------------------------------------------------------

As you can see, I clearly voiced the view that the rally off the September lows was nothing more but a bear market rally, and I backed up my conclusion with solid scientific research. However, the official "party line" at the time pushed by the Wall Street  scoundrels who also happen to be CNBC's regular guests, was that "We are in a brand new bull market, and people ought to be buying stocks, if they did not want the train to leave without them!" CNBC"s own Larry Kudlow declared with much fanfare -and idiocy I may add- on Tuesday 10-16-01 at 4:15 PM PST

"...The market has discounted everything there is to be discounted, and then some, BUY IT!"  

Thus, I was NEVER contacted back! My heretic views were not worthy of CNBC. So, I waited until after the market made new lows and I sent Martha the following e-mail:

-----------------------------------------------------------------------------------------------------

Do you think she returned my email? Of course NOT!

Why has CNBC been so biased towards the "bullish- all is well"  thesis? For one reason and one reason only"

CNBC is not interested in being a watchdog, CNBC is not interested in living up to the vision of the press and its role as envisioned by the Founding Fathers. Ladies and Gentlemen, CNBC is interested in selling advertising spots to sponsors, and they cover the market as it suits the interests of those sponsors, not the public's. Let's take a look at CNBC's commercials. The following are the commercials run by CNBC on 5-30-01 and their sponsors. (We randomly selected that date, anyone who watches CNBC will agree that every day is the same!)

Obviously, we all have a choice, none of us is forced to watch the garbage that is being served by this shameful and despicable "news" organization. Never-the-less, that should not prevent anyone from continuing to expose the disservice this organization has done, and shamelessly continues to do for the public.

In order for journalism to protect the interests of the public- as the Founding Fathers envisioned- journalists must  have decency,  integrity, and a sense of duty, obviously you won't find any of these qualities possessed by your "friends" at CNBC, the same "friends"  who made Henry Blodget a star! 

You can read "We Are In Good Hands Part 1" simply by clicking on the link.