Chillin' out till it needs to be funded
Contrarian Indicator: CEOs?
March 18, 2008
In the current recessionary environment, if a CEO comes out to say that all is well, is that an indicator to short the stock?
On the 31st of January, after a worse than expected quarterly loss, MBIA CEO Gary Dunton came out to say that “We believe that these steps, along with reduced capital requirements resulting from slower business growth, will result in our capital position surpassing rating agency Triple-A requirements … and will allow us to continue serving the needs of our clients and investors”
February 28th, John Stomber, CEO of Carlyle Capital, reported that during the fourth quarter the company’s portfolio stabilized and generated returns consistent with our near term targets, continuing to run the business to preserve the value of our shareholders’ equity and to position the Company to meet our long run objectives of earning an attractive risk adjusted return and paying a consistent dividend in the future.
On March 12th Bear Stearn’s CEO Alan Schwartz came out to say that Bear Stearns would have a profitable 1st Quarter and that the company had a $17 billion cushion against losses.
By March 12th, Carlyle Capital is bankrupt. March 17th, Bear Stearns has been sold to JPMorgan for $240 million. MBIA while still grasping to its AAA foresees further write downs and withdraws from Fitch ratings.
Carlyle Capital Corporation
Such a situation not only brings up a whole lot of questions surrounding the legality of issuing such statements but the very credibility of company guidance. Is this fraud? Or for conspiracy theorists, is the misinformation deliberate, to allow insiders to get out of positions beforehand?
Either way, in current conditions, it might just be a good idea to start shorting a stock whenever a CEO comes out with “good news”.
1 Comment | Stock Market Contemplations | Tagged: Bear Stearns, Carlyle Capital, Contrarian Indicator, Ethics, MBIA | Permalink
Posted by jqwerty
the author is a bachelors student in Canada, haing been part of an equity research team in alt energy and blogs regularly at financialmusings.wordpress.com