www.charlestonmarketreport.

com

August 2007
"The Ponzi Market and Countrywide"
Our Sponsors
This monthly edition of The Charleston Market Report is sponsored by the following songs:
Queen - "Another One Bites The Dust"
Janes Addiction - "Coming Down The Mountain"
Kenny Rogers - "The Gambler"

My new quote:
"The only thing to fear is risk itself."
Can I trademark that???

Thoughts While Bored

A couple things I was wondering about during my 6 hour drive home from Florida last night. Thank the lord for
Mountain Dew and AC/DC!

1. Why can't the US Gov't find a 6' 4" Arab named Osama Bin Laden with all those satellites in the sky and
troops on the ground?
2. We spend Billions on Homeland Security yet our borders are still WIDE OPEN? Why?
3. Why do some of the national homebuilders nuke their land and wipe out all the trees before they build a
"Vinyl Village?"
4. How does a Homebuilder stock make money when their are no buyers?
5. Eli Broad made a great quote when he said, the markets and institutions "lost their discipline" concerning
pricing, products and credit."
6. Does Angelo Mozilo, the CEO of Countrywide, have his own private tanning bed in his office? More on that
in a minute.
7. How could some of the best and brightest on Wall St. be so stupid??
8. If you are an investor in the stock market it will soon be a great time to buy or dollar cost average into some
quality companies because they will be on sale.
9. Why would a developer want to do a generic condo conversion right now?
10. Leverage is a bitch during a credit crunch.
11. Why do these investment firms use derivatives when they do not even know how to price them?
12. Are you a Republicrat or a Demopublican? Haven't both parties been in power for the past 50+ years. Why
can't they just blame themselves instead of each other for the problems out there? I am officially an Independent
and do not claim either party.
13. If Hillary Clinton gets elected (God Forbid!) then the Bush and Clinton family will have been in the White
House since 1989. That would mean 24 straight years if Hillary wins. Is the United States really a democracy or
an aristocracy?
14. I wonder how many of the national homebuilders will make it through this Housing Recession? Not all of
them IMO.
15. Why are some people in the business world so damn egotistical and greedy?
16. Why can't the world, especially the Middle East, just follow words of Rodney King?
"Why can't we all just get along?"
17. What company makes Ramon Noodles? I bet it is a good stock right now.
18. How come colleges and universities do not teach their students basic financial common sense regardless of
their major?
19. I think Bernanke is doing a good job based on the mess Greenputz left him. Let the market correct itself and
quit listening to cry babies like Jim Cramer.
20. Cash is king right now.

Charleston is still the Shizzle!

Travel and Leisure Lists Charleston in "World's Best" list
By Daily Journal Staff

Charleston again has been honored as one of the "Top Cities in the United States & Canada,' according to
Travel + Leisure magazine's 10th annual World's Best Poll.

Charleston joins New York, San Francisco, Chicago, Santa Fe, Quebec City, Vancouver, Montreal, Victoria and
Seattle on the magazine's list of 2007's 10 best destinations in the United States and Canada.

"Charleston's consistent ranking as a top 10 destination is a tribute to the quality and enduring appeal of the
destination," stated Terri Haack, chairman of the Charleston Area Convention & Visitors Bureau. "We are
honored to have been so highly ranked again this year, and will work to continue being worthy of this
recognition."

Charleston area hotels also ranked highly again in this year's poll of the Top 100 Hotels in the Continental
United States and Canada. Woodlands Resort & Inn ranked No. 2, The Sanctuary at Kiawah Island Golf Resort
rank"ed No. 5, Planters Inn ranked No. 7 and the Wentworth Mansion No. 40. Woodlands, The Sanctuary and
Planters Inn also earned the distinction of being named in the magazine's list of the Top 100 Hotels in the
World."

The Market
The current market panic has to do with unpriceable uncertainty rather than measurable risk. The stock market
hates uncertainty and there is a ton of it out there right now because of creative leveraging and financing that
has occurred over the past couple of years. What blows my mind is how these money maagers can attempt to
manage risk if they can not even price or track the investment vehicle aka derivative?
What is a derivative?
Think of it as a giant international casino:
*In the main hall, they bet on the interest-rate roulette.
*In the side rooms, they bet on foreign-currency blackjack, commodity craps or stock-market poker.
*And in virtually every sector, the bets are financed with generous amounts of borrowed money.

The problem is five banks control 97.1% of the derivatives in the entire US Banking System. The bigger
problem is none of these banks have the credit capital to cover their net credit risk. Not good.

If you want to read a fascinating article by a very bright economist I recommend you take a look at this one:
"Are We at The Peak of a Credit Minsky Cycle?"
This article is right on the money and was written by Nouriel Roubini.

The main way I analyze real estate and financial markets is through technical analysis (TA). I use Point &
Figure TA, which I learned when I worked for Wachovia Securities Private Client Group not inside the bank. I
used P&F TA during the days of very volatile stock markets such as the Internet Bubble and Post 9/11. I can tell
you with confidence that it works and is a superb risk management tool. It took years to learn and it works for
me because I am a very picture oriented guy. Why should I try to look through piles of fundamental data and
put to great an emphasis on it when it is easily manipulated by the government, a company's management or a
public accounting firm. It happens all the time. Remember Enron?

Just to give you an example of what I am talking about check this out. I have a blog which is fun for me because
I get to tease guys like Jim "Booooyah" Cramer and Greenputz but also time stamp articles on issues I see in the
stock market or real estate.

The NYSE Bullish Percent, which is the main risk management TA tool we use for the market, threw up a
warning flag about a month ago before the stock market began to retreat. It is not a black box but rather gives us
an overall signal on the current market conditions. This just shows how solid TA is for covering your assets.
On July 17, 2007 I put the following in the blog about the stock market risk increasing and the need to
put "defense on the field."

The great aspect of technical analysis is there is not any "Analyst" wearing a suit with a hidden agenda or
conflict of interest from the firm where they work. TA is pure because it is derived from pricing action which is
the best way to measure supply/demand, risk, psychology and volatility of the market which we are witnessing
right now. So when the market gets volatile or "the tide starts going out" you put the defense on the field by
possibly using risk management techniques such as hedging, options strategies and/or stop losses. This is an
example of how to minimize the losses and remember, "Defense Wins Championships" but this does not mean
you panic and liquidate your portfolio.

So lets take a look at some examples of the Anatomy of a Collapse courtesy of our "Ponzi" Like Financial
Market.

The question all lenders are asking right now.

Q: Got Cash?
A: NO

Apprarently, companies such as WCI Communities (Builder) and Accredited Home Lenders (Lender) are
running on empty. At least they can say they are still in business unlike approximately 112 lenders since late
2006.

A quick P&F lesson.

X= Demand...Stock price goes up
O= Supply...Stock price goes down
It takes at least three boxes to move from one column to another because this takes the noise out of the charts.
So lets pick on Countrywide Financial Corp now because they have my home loan and they have issues.
On March 9, 2007 I posted their P&F chart when it was trading around $36 and some change.

Below is the most recent chart. The stock broke the trend line at $34 in March 2007.

What I noticed was their chart broke a trend line in March 2007 and remember "The trend is supposed to be
your friend." It closed today (8/15/07) at $21.29.
The "elephant in the room" appears to be "Mr. Tan Man," Angelo Mozilo. Apparently, there are fears of
bankrupcy based on a recent downgrade by Merrill. Click here for article.

Is he Orange?

"Mr. Tan Man" has sold $118 mil in options since last December. Hmmmmmm? You think he might know a
little somethin somethin??? During the same time all this insider selling was going on Countrywide has been
buying back its own stock to prevent downside pressre. In March supply finally took over and really put a hit on
CFC. To see a list of Mr. Tan Man's stock sales click here.

On 7/24/2007 Mr. Tan Man said:

"As I try to walk through what happened there and could a lot of this have been foreseen ... nobody saw
this coming"He would not have been selling his stock like it was going out of style the past year if he had not
seen it coming! I call BS!

The only way to combat Smoke and Mirrors on Wall Street is risk management.

So remember the lyrics Kenny Rogers sang in his song "The Gambler"
"You gotta know when to hold em
Know when to fold em
Know when to walk away
Know when to run"

***I do not hold any positions in the stocks mentioned above.

Stay cool during this hot summer. Until next month.

~Ciao~
 Disclaimer
The research done to gather the data in The Charleston Market Report involves examining thousands of
listings. With this much data inaccuracies will occur. Care is taken in gathering and processing the data and
information within this report is deemed reliable. IT IS NOT GUARANTEED. The real estate market is
cyclical and will have its ups and downs. Past performance cannot determine future performance. The purpose
of the Charleston Market Report is to educate you on current and consistent market conditions by reporting
leading market indicators with the support of traditional real estate data.

This information is offered with the understanding that the author is not engaged in rendering legal, tax or other
professional services. If legal, tax or other expert assistance is required, the services of a competent
professional are recommended. This is a personal newsletter reflecting the opinions of its author. It is not a
production of my employer. Statements on this site do not represent the views or policies of anyone other than
myself.

Investing in real estate is not a get-rich-quick scheme nor is there any guarantee you will make a profit. Every
effort has been made to make this report as complete and accurate as possible. However, there may be
mistakes. Therefore, this report should be used only as a general guide and not as the ultimate source for
making money in real estate.