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Slamming Forbes; Defending the Wii; 'Very Aggressive' Ratings

THE "PSWii360," DOWNEY, AND IS IT REALLY TIME TO BUY FANNIE AND FREDDIE??

Nintendo Wii
AP
Nintendo Wii

Kotaku.com's Mike Fahey weighed in on the gripping saga of my son's videogame console choices, adding a hilarious video reaction to my statement that my teenager "wouldn't be caught dead" owning Nintendo's Wii.

Brendan K. comes to the Wii's defense:

"My son is 12 and 1/2. My wife and I jumped through considerable hoops last birthday to get him a Wii. I liked the "get up off your rump" aspect of it...Yesterday we got out Blazing Angles, a WWII fighter combat game. It's not talked about as the "best" game in the game magazines, (they tend to rate it as a little lame) and as you said the Wii is not the "coolest" platform as it doesn't have Grand Theft Auto ( which is one of the reasons we picked the Wii to be honest.). Nonetheless my son really enjoys Blazing Angles, and unlike SuperMario carts, I do too.

"So for three hours on Sunday I got blown out of the sky by my son...Mostly I perfected the art of becoming a big ball of flame and/or a smoking hole in the ground...BUT…I had fun with my son...So you (or your son) might just be underestimating the Wii a bit. Our Wii has benefits that in my view, far outweigh its' low "teen coolness" factor, and since I'm the one that actually BUYS AND PAYS FOR the platform and the games, that should count for something come marketing time."

Game developer Ray W. writes:

"...While it is true that Sony has picked up the pace, most hardcore gamers know that both consoles are worth owning. Having to 'choose' is like being forced to have dinner at only one restaurant for years at a time...

"Speaking of your son getting a used copy of MGS4, I have to bring up potentially a sore subject - the widespread purchasing of used games through Gamestop. When you buy a game used, the game's 'official' sales numbers are unchanged. Gamestop sees great profits from it, but they're the only ones. That business practice guarantees that publishers and developers get lower sales, thus increasing the likelihood that good games (and the good developers that make them) will see lower profits.

"Publishers virtually never look at a game's good review scores as 'the' barometer as to whether to reward a developer with another project, it is almost always based on the sales numbers. If the pattern develops that, over and over again, 2 people are buying the same copy of the game, that turns a potential million-selling profitable game into a barely-break-even 500k. Not a lot of incentive for the publisher to reward the developer with a sequel.

"What's worse, the used game is only about $5 cheaper than the new version. So, you save a measly $5, but imagine your surprise when you love the game and want a sequel, but the publisher sees low sales numbers, so a budding franchise dies on the vine. Do yourself a favor, forego a latte for a day and buy new - reward developers for their hard work so they can get another project."

Jerry A., who started this whole update business with an earlier email, added:

"Perhaps...we, too, will venture into the 360 world, as we already have a Wii and a PS3. Some folks would call all three consoles a 'PSWii60.'

On my blog about Downey Financial, I mentioned Audit Integrity. The firm's CEO, Jack Zwingli, wrote me:

"...we provide risk ratings and reports to investors and others concerned with risks related to corporate integrity...You quoted a restatement (of Q1 earnings) probability of 'only' 3.1 percent. That is actually a high probability when taken in context with other financial institutions. It put them in the worst 20% at the time of that rating...

"I'll also note that in our latest ratings, which came out about a week ago, Downey receives our lowest rating of Very Aggressive, putting them in the bottom 10% of all firms (bottom 4%, actually.) So we certainly view Downey as a very risky company for investors.

"We also have Wamu at Very Aggressive for the current quarter and 9 of the last 10 quarters. Other notable companies receiving our lowest ratings the past few quarters are Bear Stearns, Citi, Merrill and Lehman. Our models have been down on the financial sector for over a year now. While no ratings, quantitative or analyst-based, are going to uncover all the risky companies, ours have proven to have good success, especially in down markets."

From Greg W.:

"I especially liked the zinger on Keefe Bruyette. They have been bulls on just about every disaster financial stock. I especially like how they recently reaffirmed FED (FirstFed Financial Corp.) as a 'buy' with a price target of $40. It is at $14 now, and its portfolio is basically the same as DSL's: a whole lotta California 'option arm' mortgages."

From Sharlene:

"I was a Mortgage Broker for many years...I never did a loan that wasn't A paper and no lender ever lost a dime on my loans. But when the guidelines had no boundaries and unscrupulous loan agents were qualifying Gardeners and the night Cleaning Crew for homes on which they couldn't afford the taxes let alone the payments, I knew it was time to exit.

"It didn't take a rocket scientist to see the bubble was going to burst. I live on the Westside of L. A. and knowing the area as well as I do your coverage has been very accurate and very fair if not kind to the financial institutions. You also cover some of the wackiest stories that are always good for a laugh and that is always welcome."

And from Dan W., a link to an article in Forbes where Lisa Hess admits she was all wrong when she put a "Buy" on Fannie and Freddie: "Wow, what a horrible call."

Hess writes:

"In one of my more spectacularly awful recommendations, I suggested in my Mar. 10 column that readers buy stock in Fannie Mae...at what seemed then to be the ridiculously low price of $35. My reasoning was that the housing market's woes were well advertised and the stock was trading at a value that reflected a tremendous amount of pessimism."

She also recommended buying Freddie Mac in April when it was at $29. So what should investors do now? Um, buy.

"The good news, if there is any, is that Fannie and Freddie are now trading like very long term housing-market call options...For the taxable investor, I'd suggest taking losses. If you bought Fannie, sell it and hold Freddie instead for 31 days; then get back into Fannie. The 31 days will keep you from having a 'wash sale' problem with the IRS, and holding the sister stock will reduce your risk of getting whipsawed--seeing mortgage stocks rebound just when you're on the sidelines. If you bought Freddie, sell it and buy Fannie.

"For tax-deferred accounts, I'd take a big breath and double down, buying more at the current low prices. Risks include the housing market getting even worse and equity holders getting hammered by a Treasury intervention. Not a trivial possibility."

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