Social epidemics are something to marvel at. You have bellbottoms in the 1970s and multicolored shorts in the 1980s. Sometimes you look back and wonder, “how in the world did I ever think that was a smart thing to do?” Things ebb and flow and hindsight has Lasik precession of showing us past mistakes with uncanny clarity. In this article, we are going to discuss an incident that occurred in the late 1930s that many of you are probably unaware of. The incident, if it weren’t so telling of how people think in moments of panic and hysteria, is rather humorous. Almost as funny as people giving out $720,000 loans to farm workers that make $14,000 a year or a 102 year old man being able to get a 25 year mortgage. During this fragile time, a feeling of insecurity and sense that the world was coming apart at the seams was taking hold of the American psyche. The collapse of the Coolidge prosperity and the subsequent Great Depression left many Americans skeptical about any so-called recoveries. These feeling hit a feverish pitch during the height of the depression during the early 1930s and slowly dissipated as the economy recovered. But as international conflict was taking the main stage and a subsequent recession brought out the demons of the depression, the attack on the American nerves was high. This feeling was not alleviated by the Munich crisis of September 1938 and the aggression sweeping Europe and Asia.

So clearly the country was sensitive at this point. It is not evident whether this singular incident was caused by the tension, innate fears of insecurity, or a combination of both. Here is what happened:

“On the evening of Sunday, October 30, 1938 – a month after the Munich – Orson Welles of the Mercury Theatre gave, over the Columbia Broadcasting System, a scheduled radio dramatization of an old fantasy by H.G. Wells, The War of the Worlds. To make it vivid, he arranged it to simulate a current news broadcast. After an announcer had clearly explained the nature of the program, a voice gave a prosaic weather forecast; then another voice said that the program would be continued from a hotel, with dance music; shortly this music was interrupted by a “flash” to the effect that a professor at “Mount Jennings Observatory,” Chicago, reported seeing explosions at regular intervals on the planted Mars; then the listeners were “returned” in orthodox fashion “to the music of Ramon Raquello…a tune that never loses favor, the popular ‘Star Dust’”; then came an interview with an imaginary Princeton professor, with more information about disturbances on Mars – whereupon a series of further “news bulletins” described the arrival of Martians in huge metal cylinders which landed in New Jersey. The broadcast gathered speed, bulleting following bulletin. More Martians landed – an army of them, which quickly defeated the New Jersey State Militia. Presently the Martina attack was vividly described as being general all over the United States, with the population of New York evacuating the city and Martian heat-rays and flame-throwers and other diabolical devices causing terrific destruction, till all was laid to waste.”

Most people using common sense and the faculties of reason would realize that this was merely a dramatic show (the announcer had already presented this caveat) and figure for themselves that it was for entertainment purposes. Again, I’m reminded of some talking head cable stations that fling semi-truths at their audiences and viewers gobble up the information as factual and translate it to actions in the real world. We have a media, that is funded through advertising, serving as a vehicle to deliver propaganda regarding certain companies and economical issues when in fact, they are not economist or have any qualifications to accurately discuss financial decisions that will impact your life. But they do and speak with authority over it. So what happened after the broadcast in the 1930s while “Martians” were devouring the Northeast of the United States?

“All over the country, people called up newspapers or police in wild panic to find out what to do. (The New York Times alone receieved 875 calls; the Associated Press had to send out an explanatory bulletin to its member papers.”) In many communities terror-striken people rushed out of their houses and milled about in the streets, not quite sure whether they were being attacked by Martians or by Germans, but sure that destruction was on the way and they must flee somewhere. In Newark, New Jersey, several families convinced that a “gas attack” had begun, put wet clothes on their faces and tried to pack all their belongings in a car; the traffic was jammed for blocks around. A woman in Pittsburgh prepared to take poison, crying, ‘I’d rather die this way than that!” A woman in Indianapolis rushed into a church screaming, “New York destroyed; it’s the end of the world. You might as well go home to die. I just heard it on the radio,” and the church service came to a hurried end. When a church service in New Jersey was similarly interrupted, the congregation prayed for deliverance from catastrophe. A man in the Bronx section of New York saw “the smoke from the bombs” drifting over the city. In a town in the State of Washington the electric-light service was interrupted during the broadcast, convincing listeners that the terror was close at hand, and women fainted.”

*Source: Since Yesterday: The 1930s in America published in 1939

Even if 1 person out of 20 took what was said at face value, it created enough reverberations throughout the country to serve as an example of mass hysteria. What has occurred in the housing bubble is a low-grade mass hysteria. When media outlets are packaged as financial experts, it can easily be assumed that a certain percentage of people will swallow the blue pill and never ask questions of what the pill will do once it is digested. Many people sunk into loans they had no idea about. In March of 2007 a survey conducted by GFK Roper found that 34 percent of homeowners with a mortgage had no idea what kind of mortgage it was. When adjustable mortgages were only a small niche market, they now compose 1 out of every 4 mortgages. What do you expect when a large percent of the population doesn’t even know what kind of mortgage they have? We might as well argue that the Martians are destroying the credit markets and run a poll and we will find double-digit percents of people thinking it is true.

War of the Housing Worlds

This case study is an example of not asking the right questions. If anything this housing market has as much to do with human nature and mass psychology as it does with actual economics and market fundamentals. There is now an economic war in the housing industry. What can be done to ameliorate a decade long binge on credit and living beyond our means? Any good debt counselor will tell you that the first thing you need to do is cut up all your credit cards. Well we are at the point in the housing road where we have to decide if products such as sub-prime loans need to be “cut up” and never allowed in the market ever again. Those in the housing complex would argue that sub-prime has a niche and most folks will use them for financially prudent ends. Well as the case in mass hysteria shows, not everyone is going to use certain information in a logical way. In fact, a large percentage will not especially when you have lenders pushing people into riskier loans that have higher kickbacks. This is another way to fix the industry; legislation is now trying to stop brokers from steering people into certain loans. This is a good start. If anything, before this mess is over we will return to localized lending in a few years and doing things as they were once done. Local lenders having a piece of the action and understanding the market dynamics of their respective areas and having a piece of their own financial skin in the game. How is a foreign lender going to know what is happening in Santa Ana California, Fort Meyers Florida, or Portland Oregon?

Orson Welles

Orson Welles as many of you know is an Academy-Award winning actor and as such, is a very convincing person. In fact, what transpired with this incident at CBS should go on his resume “ability to convince a large percentage of people that Martians with ray guns are invading the United States.” Another major issue that occurred is we have media outlets not disclosing their financial backers. We will never have complete transparency but when you have certain acclaimed news stations passing on wrong economic advise as dogma, it is inevitable that you will create a culture that believes what you are saying in a cult like fashion. Television is a form of education for the large part of society. The Census Bureau estimates that only 25 percent of the American population carries a bachelor’s degree. Is it a requisite to have a college degree to be successful? Absolutely not. Look at pro-sports and you’ll see that this isn’t the case. However, the statistics paint a different picture. There is a study showing that 80 percent of millionaires in the United States do hold a college degree. But the importance of having an eclectic educational background is that you have the ability to question authority and think for yourself. I have friends that have English and Science backgrounds asking me even years ago, “it doesn’t make sense what is happening in housing but why are financial professionals saying this is a new housing era?” There gut instinct was right and many stayed out and fortunately for them they didn’t jump into a banana republic loan for $600,000 so they can have a 1,000 square foot home. These were not financial experts.

Mass Media

I’m not big on government regulating our entire lives. However, looking at the rampant greed and corruption that occurred in the housing market I’m convinced that we need to axe certain products. What we will be hearing about in the next year, I am convinced, is talk about Fannie Mae and Freddie Mac. These government sponsored entities have the implicit blessing of a government bailout if all things go south. This has never been tested but we may get our trial by fire soon. Just so you are aware, there is still another $350 to $400 billion of loan resets hitting in 2008. In fact, March of 2008 is going to be the peak month but again all we hear from mainstream media outlets is “it may get worse” or “this is the bottom.” How useful is that information? If the public had an idea of the money, corruption, and greed that has occurred in the vast part of the housing industry over the past few years they’d be fuming and they would get out their ray guns. With all the cases now pending and the housing market heading to its inevitable climax, we will finally open the books of what really occurred in this housing sector and I can assure you, some of the things we will find will look like they came from Mars.

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Filed under: Products and services, Competitive strategy, Google (GOOG), Technology

Just as gasoline prices promise to rise to record levels, Google Inc. (NASDAQ: GOOG) has found a new outlet for its Google Maps — the gas pump. I think this is a splendid idea, particularly for drivers who need gas and directions, although there seems to me to be some danger that Google could tarnish its Do No Evil brand by associating itself so closely with the oil industry.

The Associated Press reports that 3,500 gas pumps, made by Gilbarco Veeder-Root, will include an internet connection and will display Google’s mapping service in color on a small screen. Motorists will be able to scroll through several categories to find local landmarks, hotels, restaurants and hospitals selected by the gas station’s owner. After the driver selects a destination, the pump will print out directions. Eventually, Gilbarco Veeder-Root hopes to enable motorists to type in a specific address and get directions.

Google will not put advertisements on the maps but the participating retailers will be able to make extra money from other merchants that offer coupons on the service. Google seems to think that giving away its maps at the gas pump will increase the number of people who use the service in places where it does advertise. I just wonder whether people will feel good about Google as they watch the price of filling up their tanks climb towards $100.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

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Filed under: Earnings reports, Forecasts, Google (GOOG), Microsoft (MSFT), Cisco Systems (CSCO), Stocks to Buy, Technology

Cisco Systems (NASDAQ: CSCO) will report its October 31st, fiscal first quarter results after the close today. Analysts are expecting revenues to come in at $9.5 billion and earnings per share at $0.36. The “whisper” circuit has Cisco posting slightly better numbers than expected.

More importantly, Cisco will discuss the state of technology around the world. Cisco has stated in the past two quarters that emerging markets, including China and India, are experiencing growth rates of around 45%. Cisco has put more feet on the street in those markets plus the addition of more senior management. The other key question will be how strong is the United States and its prospects going forward.

The shares have been strong these past 6-7 months with the stock running from the mid $20s to the mid $30s. Cisco is currently the third biggest technology company in the world in terms of market capitalization, only behind Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT).

John Chambers, CEO of Cisco, will conduct the earnings conference call. Titled the “cheerleader in-charge,” Chambers has been very enthusiastic the past 2-3 quarters as Cisco’s heavy-lifting in the last four years is paying off with increased and sustainable growth.

Cisco will probably confirm what many other technology companies have stated this earnings season that technology is right in the middle of the sweet spot in this difficult market environment.

Georges Yared is the CIO of Yared Investment Research and the author of “Baby Boomer Investing…Where do we go from here?”

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Filed under: Newspapers, Magazines, Google (GOOG), Microsoft (MSFT), Merrill Lynch (MER)

MAJOR PAPERS:

• The Nasdaq Stock Market (NASDAQ: NDAQ) will acquire the Philadelphia Stock Exchange for $652M, reported the Wall Street Journal (subscription required).

OTHER PAPERS:

• Microsoft (NASDAQ: MSFT) announced yesterday that it fired Chief Information Officer Stuart L. Scott on Friday for violating company policies, although the company did not specify an exact reason for the dismissal, reported the Associated Press.
• Laurence Fink, the chairman and CEO of BlackRock (NYSE: BLK), has met with the executive search firm responsible for filling the CEO vacancy at Merrill Lynch (NYSE: MER). Fink is believed to be the leading candidate to become Merrill’s CEO, according to the New York Times.

WEBSITES:

• GigaOM reported that Google (NASDAQ: GOOG) is kicking off its game-focused advertising initiative later this month, according to inside sources.

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Filed under: Before the bell, Earnings reports, Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Amazon.com (AMZN), Ford Motor (F), Toyota Motor Corp. (TM), Citigroup Inc. (C), Research in Motion (RIMM), Delta Air Lines (DAL)

Before the bell: Futures sharply lower as oil rallies, dollar declines, GM takes a charge

Almost any stock I’ve looked at so far has been down over 1% from Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), Reearch in Motion (NASDAQ: RIMM) — down about 1.2% as of 7:30 — to Citigroup Inc. (NYSE: C) — down over 1.7% — to Ford Motor Co. (NYSE: F) — down over 1.8%. This gives another indication to the direction the market will be taking at the open. I expect stocks to be hammered.

Unlike GM’s earnings, Toyota Motor Corp. (NYSE: TM) reported that its quarterly profit rose 11% on solid overseas sales and it raised its earnings forecast for the full year.

Microsoft Corp. (NASDAQ: MSFT) said it fired its chief information officer for violating company policies. No more details were provided. Meanwhile, today, the company said it signed an agreement with China’s No. 2 personal computer maker to pre-install Microsoft’s Windows operating system in PCs to combat widespread Chinese product piracy.

Delta Air Lines (NYSE: DAL) has reached a 10-year, $1 billion plus deal with Chromalloy Gas Turbine Corporation. The agreement will help the airline expand the types of engines it can maintain itself.
A group of Republicans in the U.S. House of Representatives called Tuesday for a hearing to extend a public inquiry on Google Inc.’s (NASDAQ: GOOG) planned merger with DoubleClick.

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Filed under: Google (GOOG), Apple Inc (AAPL), Research in Motion (RIMM), Stocks to Buy, Cramer on BloggingStocks, Technology

TheStreet.com’s Jim Cramer says these stocks will ramp higher into year-end.

Apple (NASDAQ: AAPL) (Cramer’s Take), Research In Motion (NASDAQ: RIMM) (Cramer’s Take) and Google (NASDAQ: GOOG) (Cramer’s Take) are soon to be over the hump. As we get closer to year-end, we are going to see these stocks ramp as they become the most obvious ways to show that you know what you are doing.

Every few years we get into a situation where the year is in its final months and there are some names that everyone knows, including the trustees of mutual funds and investors in hedge funds.

At this point you can only imagine the questioning:

• “How come you didn’t buy Google?”
• What were you thinking when you passed on RIMM? I love my Blackberry.”
• “Did you think the iPhone wouldn’t be big?”

Plus, you also get into this jolly analyst period where the analysts know they can please their clients by simply raising their price targets to augment their customers’ performance.

It’s called a virtuous circle, and Apple, Google and RIMM are at the heart of it.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer had no positions in stocks mentioned.

RELATED LINKS

• Cisco Fans Getting Stoked
• This Shipping Stock Will Take Off

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Filed under: Internet, Google (GOOG), Yahoo! (YHOO), Initial public offerings

OK, so is China really communist? Not from what I can see.

Just look at the IPO market. Yes, it’s been sizzling.

And, of course, the latest mega deal is the public offering of Alibaba.com, which operates a sprawling group of fast-growing Internet properties.

According to a report from Bloomberg.com, the IPO surged from HK$13.50 to HK$39.50. In fact, Alibaba.com sports a market cap of a cool $25.7 billion. That is a thrill for Yahoo! (NASDAQ: YHOO), which has a 39% stake in the company.

Actually, Alibaba.com even has earnings. Although, at the current valuation, they are more than 150 times the market cap. That makes Google (NASDAQ: GOOG) look pretty cheap.

While China certainly has strong growth prospects, there are still risks. Can the country continue its torrid growth rate? What about political instability?

If you look at the history of US markets, strong IPO markets are usually a sign of excess and a top. So, investors should show caution.

And if you want to check out the IPO action here in the US — which is not as frothy — you can visit DealProfiles.com.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

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Filed under: Google (GOOG), Yahoo! (YHOO), Cisco Systems (CSCO), China, Initial public offerings

Alibaba more than doubled on its first day of trading in Hong Kong today. After the trading day ended, Alibaba took its place as Asia’s second largest Internet company behind Yahoo! Japan. All in, Alibaba is now valued at over $23 billion.

With shareholders including Cisco Systems (NASDAQ: CSCO) and Yahoo Inc. (NASDAQ: YHOO), Alibaba joins other high-flying Asian IPOs in 2007. I wrote briefly yesterday about the PetroChina (NYSE: PTR) IPO, which after it saw its value triple, is now the world’s first trillion dollar company.

Part of what makes the Alibaba IPO so interesting is the firm’s growth prospects. China’s largest Web trading site for companies predicts profit will almost triple this year on increased spending in the world’s fastest growing major economy.

Hot? Yes. According to Bloomberg data, Alibaba’s IPO was the biggest by a Web company after Google Inc.’s (NASDAQ: GOOG) $1.9 billion float in August 2004.

Says Bloomberg, “Clients can advertise or buy products using Alibaba’s Web site for free. The company charges suppliers from China and Hong Kong an annual fee to become so-called premium members, which enable them to gain preferential access to buyers.”

China was home to 162 million internet users at the end of June, second only to the U.S., according to the government-backed China Network Information Center.

DISCLOSURE: I personally own shares of GOOG.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

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Filed under: Google (GOOG), Yahoo! (YHOO), Time Warner (TWX), Citigroup Inc. (C), Money and Finance Today, Sun Microsystems (JAVA)

Interest Rates Defy Feds Recent Cuts
Interest-rate cuts by the Federal Reserve are normally bad news for savers and good news for borrowers. But that scenario hasn’t been playing out fully since the central bank began cutting rates in September.
Interest Rates Defy Fed’s Recent Cuts - WSJ.com

2 More Years for A Better Retirement
Just 24 more months of work can really improve your financial position. By waiting an additional seven years, you can double your nest egg’s size simply by earning the market’s historical 10% average annual return.
2 More Years for a Better Retirement - Fool.com

Consumer Reports’ Guide to Best Gifts for Holidays
Whether you’re shopping for people who like to cook, take photographs, listen to music, work out, or eat, we have the gift list for you. These products, culled from the thousands that Consumer Reports tested during the last year or so, all received high scores, and many were CR Best Buys.
ConsumerReports.org - Best gifts for the holidays

8 Over 80
Forget shuffleboard and croquet. With Americans living longer, more of them are embarking on entrepreneurial second careers — well into their 80s. So what are the real secrets to longevity, in business and in life? Meet America’s coolest octogenarian (and then some!) entrepreneurs.
Who Are the 8 over 80? - Inc

Most Affordable College Football Towns
Muncie, Indiana, ranks as the most affordable big football town for housing in the United States, according to an annual survey released Tuesday by Coldwell Banker. The home of Ball State University tops the list followed by Texas Christian’s hometown Fort Worth and Tulsa University hometown Tulsa, Oklahoma. The most expensive college football town is Stanford’s hometown of Palo Alto.
Most affordable college football towns - Nov. 6, 2007

Are Fast Food Fries Trans-Fat Free?
Consumer Reports sampling says Wendy’s still missed its mark. So did Burger King. McDonald’s fries claim a high 8 g for most locations and 0 g for New York City, and they met those claims. The best way to cut trans fat from fast-food fries? Try to stick with fries from Arby’s or KFC, which were virtually free of trans fats (and choose a small serving).
ConsumerReports.org - Trans-fat free fast food fries

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Filed under: Before the bell, Earnings reports, Analyst reports, Analyst upgrades and downgrades, Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Motorola (MOT), XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Citigroup Inc. (C), Sprint Nextel Corp (S), US Airways Group (LCC), QUALCOMM Inc (QCOM), UAL Corp (UAUA), Delta Air Lines (DAL), Housing

Before the bell: Techs to the rescue — stocks poised for a rebound

Citigroup (NYSE: C) was downgraded at Bank of America to Neutral from Buy. Also, CIBC analyst Meredith Whitney — whose downgrade of Citi last week triggered a sharp drop in the stock and the retirement of CEO Charles Prince — told the Daily Telegraph newspaper the only way forward is to carve the bank up and sell it off, because it lacks the capital to manage it.

Google Inc. (NASDAQ: GOOG) yesterday unveiled its mobile-phone strategy. It wants to break into the wireless market with a plan to create open standards for mobile phones. The search giant is teaming with several companies like Sprint Nextel (NYSE: S), Qualcomm (NASDAQ: QCOM) and Motorola (NYSE: MOT) to develop a strategy that could make devices cheaper and give consumers more control over their phones’ capabilities. Speculation that Google could announce a competing phone to Apple Inc. (NASDAQ: AAPL) iPhone didn’t materialize, although the company didn’t say if a there is such a plan for a Gphone. GOOG shares were 1.5% higher in premarket trading.

Two home builders announced news. Hovnanian (NYSE: HOV) delivered 3,969 homes during its fourth quarter, a decrease of 19% from the same quarter a year ago as its problems continue. Beazer Homes (NYSE: BZH) said after the close yesterday that it’s planning to take a $230 million fourth-quarter non-cash pre-tax charge and cut 650 positions, or 25% of its workforce. BZH shares are up nearly 3% in premarket trading.

Microsoft Corp. (NASDAQ: MSFT) announced it will build a $500 million data center in Ireland that will support customers throughout Europe, Africa and the Middle East.

Airlines announced October traffic Monday: Delta Air Lines (NYSE: DAL) system traffic increased 6.2% from October 2006 with a capacity increase of 2.9%. UAL Corp. (NASDAQ: UAUA) October traffic fell 0.6%. U.S. Airways Group (NYSE: LCC) October traffic was down 1.5% from October 2006.

According to the Wall Street Journal, the U.S. Federal Communications Commission sent questionnaires to XM Satellite Radio Holdings Inc (NASDAQ: XMSR) and Sirius Satellite Radio Inc (NASDAQ: SIRI), which give an indication into areas where it could ask for concessions as part of any satellite-radio merger approval.

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