We have all heard the rhetoric of politicians, analysts and the hindsight journalists who try to tell us how the automotives, Wall Street and our government created the current debacle.

 Where is their ACTIONABLE market intelligence from years ago where they sounded the alarms, saving investors from losing their shirts on these stocks? They get a great deal of face time and make money on their books - BUT - where were they THEN???

For those who ask the question – WHY - WHY should I value YOUR opinion? Here’s some of my ACTIONABLE market intel (with completely independent, 3rd party, time-stamped links). I openly challenge any analyst, journalist or politician to provide authenticated links to match the following in quality and timeliness. I issue this challenge not to boast. I believe that if people are going to spend their valuable time reading and researching – they have a right to evaluate the track records of those whom they read.

With that said - here's mine:

Scott Ryan (MrArbitrage) on General Motors (GM) (August 7, 2001 through March 4, 2003)

DATE: 3/4/2003 MrArbitrage: TITLE: “Right Again”

“…As the economic reality continues, I think we should start hearing news of high defaults from GMAC Finance. If we don't hear anything, than I will start to wonder about possible “creativity” in the accounting department. If that's the case, could we have another corporate confidence rocking scandal in America? We'll see.

I don't have evidence to that effect; it's all based on my seemingly patented common sense business analysis. So don't think I'm breaking news here. I have no inside information…”

DATE: January 8, 2003 TITLE: “The Worst is Yet to Come”

The problem with GM is not only the Pension accounting issue about which we have been hearing.

Other problems include the fact that they are giving the things away in order to move inventory. Just last week on the way to my office I heard a radio commercial by a local dealer proclaiming that Detroit is in trouble and need you to bail them out... "too much inventory..." We all know the dubious tactics of auto-dealers but this is one I haven't heard in years and this dealer was actually saying the manufacturers are in trouble. There could be an element of truth to that based upon the expansion of ZERO percent financing.

The way that cars have been selling the past few years, it simply can't go on forever. We're not talking pancakes here. People only need so many cars. Anyone who believes the optimistic pabulum of the manufacturers is very naive. Are they as good and OPTIMISTIC at projecting future auto sales as they are at projecting future returns on their pension plans?

The last major concern I have is that they are making too many sub-par loans to people who are much more likely to default, especially in this economy as people get their pink slips. It's much harder to make a car payment on a car with an unemployment check. They make these loans to "undesirables" in my opinion, in order to delay the inevitable. The pressure is strong to keep moving cars, especially with the heat on them regarding possible pension shortfalls.

I think this will be the next big controversy. I can see the useless blowhards at CNBC a year from now doing another special on this one. Remember, you heard it here first….”


DATE:: 8/7/2001 TITLE: “What’s with the Echo Star BS?”

GM is so strapped in debt that it wouldn't even put a dent in it. (GM’s sale of Echo Star) It's SCARY how much debt they have. Looking at the balance sheet, one would think they were a damned utility, not a car maker. – MrArbitrage 8/7/2001

GM Closing Price on 8/7/2001: $63.29


DATE: 8/22/2001 TITLE: “Drink the Kool-Aid”

“It is amazing to me how short sighted analysts and many investors are. What about 2002? Does anyone think that the price ought to bare some correlation to more than 1 quarter worth of "projected" sales? These are cars people, CARS. Should the stock price reflect DECLINING market share and declining profit margins?

How much blind faith are you going to invest into the notion that some CFO can read into the minds of the average consumer and into the future in order to accurately predict what is going to happen to the auto market next year and the year after that? If they have that kind of talent, they certainly are wasting it working for auto companies when they could easily rule the WORLD by amassing great fortunes trading their own stock portfolios. Perhaps if they have such infallible abilities to predict the future, THEY should be Wall Street analysts.” – MrArbitrage 8/22/01


Scott Ryan (MrArbitrage) on AOL – While AOL was the little darling of Wall Street and surpassed AT&T as the Most Widely Held Stock in AMERICA.

AOL: Tuesday, December 5, 2000

Closing Price: $44.08

DATE: 12/5/2000 TITLE: “TWX Execs should be fired on spot”

This deal was a bamboozlement of TWX shareholders from the beginning. It is the equiv. of agreeing to sell the company for Russian Rubles. These execs must be insane. On one hand, you have a media conglomerate packed with real, tangible assets that are in many cases American institutions. On the other hand, you have a company that nobody ever heard of until about 1994, a company that really has no diversification, a company that is in a business with no barrier to entry. Sure, AOL has millions of people who use their service, but where's the profit? TWX can go buy a CD ROM with millions of people on it for $99.00. It would be a much better deal for them than to give away their company for an inflated currency which has been propped up by the fantasies of ignorant "investors" who have never experienced a market crash.

AOL is a glorified magazine. It has a nice number of readers but it doesn't warrant a premium of 80x earnings. Even more ridiculous is the fact that AOL was @ about 400-500x earnings when the suckers at TWX agreed to be taken by this.

You can't blame Steve Case & Co. for trying. It's a great deal for them. It's a way for them to actually lock in some great value to their stock. If they can get a sucker to accept their "bubble currency" at face value, why not? If at all, TWX should have purchased AOL @ a fraction of the then current market price. It still would have been a great deal for AOL. It is hollow money.

If they were prudent, this would have been a "Take Under" from the beginning.


DATE: 12/7/2000 TITLE: “The AOL Fantasy Land will soon meet reality”

AOL investors have been seduced by the internet glamour. AOL is a $27 stock to be. I have persistently maintained that AOL should be treated more like a digital magazine. They are not the next Microsoft. Microsoft could defend its Patents through litigation keeping competition out. AOL is leading mostly because of STYLE and being one of the pioneers. This doesn't translate to the type of profits that justify its valuation.

The justifications that I consistently hear from AOL proponents are naive. Yes, I believe that AOL is a good company. I also believe that AOL will be around for years to come. That doesn't have anything to do with valuations. "AOL has IM ownership". So what? How much does AOL charge per IM usage? $0.00

"25 million AOL subscribers can't be wrong". Again, so what? Readers Digest (RDA) has about 100 million people who pay for its magazine + THEY also make money from advertising. Reader's Digest has what is considered to be one of the world’s most extensive and best consumer databases.

Reader's Digest is Global and has 49 editions, published in 19 different languages.

Reader's Digest is a diversified publisher of books, music, videos and TV movies.

RDA is an institution that has stood the test of time.

And finally, Reader's Digest is trading for about 20x earnings.

I contend that it would be less absurd for RDA to buy TWX than for AOL to do so.

Again, Levin should be ousted for falling prey to this speculative bubble, and if anything, TWX should make a hostile bid for AOL. Popularity and a high subscriber rate are not comparable to the intrinsic value contained within TWX.

History will prove that this speculative period was one in which even the elite threw in the proverbial towel and abandoned common sense, as was the case in 17th century Holland with the "tulip bulb craze", as was the case with the vending machine craze in the 1960's when vending machine oriented stock typically ran from $500 to $200.00 within a year. "Those who don't learn from history are condemned to repeat it".

The aforementioned post was written at the pinnacle of Levin's popularity. TWO YEARS LATER Fortune Magazine "breaks the story".

The headlines on CBSMarketwatch read: AOL's Fortune: Levin was forced out NEW YORK (CBS.MW) - Though Chief Executive Gerald Levin has repeatedly denied that he is leaving the top post at AOL Time Warner for anything other than voluntary reasons, the company's own Fortune magazine now says otherwise.

Magazine quotes board member Fay Vincent
By David B. Wilkerson,
Last Update: 7:57 PM ET Jan. 24, 2002


DATE: 4/30/2001 TITLE: “Insider Selling”

Because the visions of grandeur can propel the stock to such unbelievable new heights in the short term regardless of the direction of shareholder equity and it's rate of increase or decrease, I can't predict the top in the stock; however, I believe that the high p/e and p/b ratios are not a sacred part of Americas culture and will not be held up by mere tradition, I will venture to predict, contrary to popular religion, that AOL/TW will probably be trading at a more "media like" earnings and asset multiple. I also think AOL will find itself over extended, indebted and in the red within a couple of quarters as growth slows, profit margins get squeezed and debt increases … I don't revise my projection because a herd is willing to follow each other in bidding up a stock to lofty heights. That doesn't last in the long term. The only SUPPORT this stock has is psychological. True support, based on assets and earnings will be found in the $20.00 level. I think this stock price will collapse like a Ponzi-scheme. I can take a little ridicule now. The beauty of this is that this is archived. I will be vindicated."

AOL stock price on 4/30/01: Closing Price: $50.5 (Market Cap approx $61 BILLION)


DATE: 4/30/2001 TITLE: “The Floodgates have Opened”

I was very bullish on AOL, beginning in about 1996. I like the company. My opinion is based on valuation and the slow down in new subscribers and computer buyers. The explosion has to slow down eventually and I believe that time has come. I also believe that AOL is operating like those boiler room, bucket shops that constantly pump the willing public full of "irrational exuberance" via press releases, meanwhile they are getting their favored clients (in this case themselves)out of the stock... I think that the behavior of the execs only supports my theory.

TWO YEARS LATER the media catches on:


April 14, 2003

Suit charges AOL execs with fraud According to the suit, the merger triggered early vesting of $1.7 billion in stock for five top executives, including former CEO Gerald Levin. In the five months following the merger's close, the suit alleges, the executives sold off $550 million in stock, while at the same time spending $1.3 billion to repurchase 30.2 million shares on the open market.

The repurchase "[used] corporate money to prop up the stock's value so they could benefit personally and shield themselves from a stock collapse," the suit said.

- By David B. Wilkerson, CBSmarketwatch{D50A32D6-237...

MrArbitrage on INTEL (INTC) Valuation

DATE: 2/12/2002 TITLE: “Intel Valuation”

Being short is certainly frustrating... As with AOL, it took about 7 months for it to reach my price range of the low $20's... It is frustrating when you know that something is going to happen, but can't exactly pinpoint the when. The duration of credulity is difficult to quantify. I think no man knows the hour or the day, but the season is most certainly upon us... Many will find it hard to believe, but I will once again be bullish - when prices justify being so... Those who are living by the sword are going to die by that sword because they are not going to be content to take their short term profits and run. If they do run, that will perhaps cause the correction.

If they don't run, it will implode upon them. It's a paradox.

INTC Stock price on 2/20.02: Closing Price: $31.44


DATE: 1/28/2002 TITLE: “Price War”

"Intel is a cyclical". That's the common justification I get after I point out Intel's extraordinary earnings multiple. Well, it looks like Intel is following the business model of the auto "cyclicals". It doesn't look very auspicious for Intel and AMD to find themselves in an aggressive pricing war. Although, it looks quite auspicious for consumers.

That shouldn't be a surprise. The consumer always wins out in the technological evolution. Competition heats up, Tech gets cheaper and quality actually gets better.

When a cyclical gets a favorable cycle, they need to get the profits while they can because the well will dry up again. That's why you call it a cyclical. When you find your company in a war with another chip maker, you can slash prices and retain market share for little profit or you can keep profit margins and lose market share. That's fine, but you are in a "catch 22" situation.

Intel will continue to be a great company. The question is how do you justify a multiple of almost 200 times EPS when your profits are going backwards by double digits while your cycle is supposedly turning favorable?

This is the same deal that is going down with the automotives. Hell yes they are selling cars like hotcakes, but at what cost?

INTC Stock Price on 1/28/02 Closing Price: $33.92


DATE: 1/16/2002 TITLE: “To the Pollyanalysts”

Letter to the Analysts:

It's a tragedy that people still listen to you charlatans. Do earnings mean anything to you?

Does market cap mean anything to you?

When a company like Intel has its earnings drop 80% and it is still priced not for perfection as some like to say, but rather for stupidity, what do you do? You stick to your guns in order to save face and declare it a strong buy! It is typical of human nature to mitigate as you do in order to save face; however, it is disgraceful when your saving face is at the expense of millions of people. With INTC currently near its 52 week high and a market cap of about $240 BILLION DOLLARS, Intel will need to reach a market cap of about $1 trillion dollars in order to live up to the premium by which it now trades.

If Intel's near term future was so rosy, they would be increasing capital spending - not decreasing it. They should also be pumping up R&D spending because they are going to need to open new industries if they are going to reach the new highs from here which you predict. The actions of Intel don't seem to match the zeal priced into the stock, after all, as I have been challenged over the past several months for propounding the notion that the nature and history of technology is attrition in profits and margins despite the improvement of technology, the contention was that Intel would spend money fervently in order to create new markets. That was the justification I was given for such an extraordinary premium for diminutive earnings.

It will be absolutely necessary for Intel to re-invent itself to warrant this price because during their glory years, most people didn't yet own computers so naturally sales would be quite strong. It was the same way with automobiles, radios, televisions, VCR's etc.

The Calculator business was once a highly profitable growth industry. Now that so many people already own computers, there needs to be a pretty damn compelling quantum leap in technology for most people to keep that extraordinary growth rate of the 1990's going.

There is no such incentive at this time. Unfortunately, Intel is priced at the 50% EPS growth rate at this time while growth rates have actually been receding by the double digits! The price doesn't make sense.

I'm not saying that Intel is a bad company. There is nothing wrong with Intel. There is something wrong with Intel's price. I might add that it is through no fault of their own, unless Arthur Andersen is doing their accounting. The current egregious error in Intel's price in my opinion is directly attributable to the charlatanism of the Wall Street analysts coupled with the excessive credulity of the investors and fund managers. I believe we have a castle in the air my friends. Remember $240 BILLION Dollars is allot of money, even in this day and age. In order to be willing to pay $240 bills for this company, one has to believe that Intel is heading to at least a half of a trillion dollars in market cap while jobs continue to be obliterated...

As I predicted in December, the new wave of cuts are coming after the major new cuts in automotive firings. We are in recession. Unemployment is going to the double digits and there is no compelling technology out there to start a massive wave of upgrades in tech spending.

So, all of you pseudo-analysts out there, sit back and have another hit of the old “peace pipe”.

INTC stock price on 1/16/02: Closing Price: $33.71


MrArbitrage on Character and Future Suffering to be manifested through our Economy

DATE: 8/9/2001 TITLE: “The Decade of….”

“ If the 1980’s were the "decade of greed" I can't imagine what that would make the 1990's. Don't get me wrong; I am as capitalist as they come but when I reflect back on the 1990's, in all candor I come to the conclusion that that was the decade where we sold our souls as a nation.

Looking back, I see how we got so caught up in our greed, to such a prodigious extent, that ANYTHING, no matter how immoral it was, we were willing to defend the INDEFENSIBLE, all in the name of "THE ECONOMY-STUPID". The small few who were outraged, were treated as if they were the ones who had character flaws. They were treated with disdain for implying that Character counted or had ANY place in our government. All that mattered was our back pockets.

Personally, I believe in divine providence. Many people, even those who don't believe in God, believe that there is some kind of "cosmic justice" or karma or whatever. I see the ramifications of our decisions coming back to us. I believe that this country will reap what we have sown and it will be manifested in our ECONOMY.

Is that a bad thing? Sometimes we NEED a wake up call to get back in line, to put things into perspective. Sometimes we have to fall hard - in order to recover. Sometimes SUFFERING builds great character. Look how far we have fallen as a nation. Try to compare the character of the baby boom generation forward to those who suffered the great depression. There is NO worthy comparison.

Whatever it takes to get the attention of this once great nation, whatever it takes to restore our souls, I think is a good thing.” - 8/9/2001