Fragmented Friday

So Countryslide (CFC) reports a loss more than double consensus, and the premarket instantly bids up the stock by $3 - and for a $13 stock, that's a nearly twenty five percent move.

Huh? Oh, they said they'd be profitable in the next quarter. Uh huh. Sure they will be. We were told that last quarter was the trough too weren't we? Was it?

How 'ya gonna be profitable with these "improvements" in delinquency rates?

"The overall delinquency rate climbed to 7.12% from 4.55% a year earlier. For conventional mortgages, the rate rose to 4.41% from 2.57%, while the rate on prime home-equity loans increased to 5.76% from 2.52%. The subprime delinquency rate grew to 29.1% from 18.3%."

Nearly a double! No, not in profitability - in delinquency rates! Conventionals approaching five percent, "prime" HELOCs more than doubled and subprime nearly doubled as well?!

Heh short-bus riders, are you going to continue to believe this bullshit?

I want to know what you - and Mozillo - have in that bong. It sure as hell ain't tobacco!

WAKE UP FOLKS, YOU ARE BEING LIED TO!

Oh, and Microsoft (MSFT), which did report great numbers, hid a turd in there - zero EPS growth in the estimates for next quarter. Uh, zero is a good number for profit growth? I thought we were told that it was going to be 10%+ next quarter?

The truth is that it will be much less, and perhaps nil - again - on the SPX as a whole. Again guys, wake the fuck up - you're being lied to!

How do you get 10%+ profit growth on the broad market when companies are, by and large, ratcheting down profit estimates in their earnings announcements for the coming quarter? When we have shipping firms reporting lower freight volumes, and not just historically - prospectively as well? When we have oil spiking over a NINE handle, with oil being the feedstock for everything made of plastic or other synthetic material - now tell me what you have in your home or business that doesn't have some form of plastic in it!

Short answer - you don't.

Now go look at that PEG ratio again. Take out the train wreck financials and tell me what the PEG ratio is on the broader S&P500? Oh, you mean its somewhere north of stupid?

Still want to hit the "buy" button?

Be my guest.

By the way, the wire on that button goes to a nice brick of C-4 that is wedged firmly up your ass!



Oh Ben! BEN! You know, Mr. I-bail-out-the-Pigmen? You fucking asshole! Again! I know, I know, the dollar is Paulson's responsibility so you say.

You lying sack of shit! You both work for the same people!

BERNANKE and PAULSON are the ones responsible for the precipitous decline in the dollar! By cutting rates to bail out their buddies, promoting even more mendacity in the banks through refusing to require and enforce both marks to the market for ALL assets and demanding that ALL "off balance sheet" financing vehicles be consolidated back onto balance sheets - moves that The Fed and Treasury do have the authority to enforce among banks - Bernanke and Paulson are the root cause of this mess.

Both know this is bullshit and they also know this is why Enron's explosion was such a "surprise" instead of being exposed as a failing business years before they finally went down the chute.

But in the end they simply don't care about your fuel prices going through the roof, your food basket being up 20% over the last two years and doubling since 2003, and oil over $90. Nor do they care if half the big Investment Banks on the Street are technically insolvent right now.

Indeed, they are both, it would appear, dedicated to insuring that you, as a consumer and investor, have absolutely no way to know whether this is the case or not!

And while we're at it we have $92 oil, headed to $120 if they keep dropping interest rates and destroying the currecny. You have people clamiing this is a "normal adjustment." Yeah, right. The Fed's LEGAL MANDATE is sustainable employment consistent with modest inflation, and yet actual inflation is running fucking close to double-digits annually!

Today we have another example of this - CountrySlide has all these "assets" which they've "moved" to their bank. How were they valued? Option ARMs in California? Option ARMs are nearly HALF of their portfolio of "assets"!

What are those worth? Anything?

Apparently they are worth whatever the company says they are worth.

I want this ability for the stack of expired PUTs I have around here. Hell, according to my "model" they're worth $10 each! The market disagrees, but the market is wrong. I should be able to claim them at $10!

You fuckheads over at Treasury and The Fed! This is discrimination! I demand the same rights you give YOUR FRIENDS!

And we wonder why foreigners are tired of this shit and are fleeing our assets, thereby devaluing our currency?

REALLY? You wonder why this is happening?

ARE YOU SMOKING CRACK?

We now know that the ratings applied to these various "securitized" mortgages were intentionally mispriced, as they made no provision for people inventing income that never existed, had no provision for declines in home prices (that is, the probability of such an event was considered "zero") and what's even better, the latest to come out is that they assumed 60% recovery in the event of a foreclosure and claimed that was "conservative" - when the field data we're getting now says that the real recovery rate is between 0-30% - 60 is a cock-addled dream!

What's particularly mendacious and dishonest about this is that the entire "value" behind these "complex instruments" in the securitization "industry" was created by these intentional mispricings! Indeed, without doing that there was no value at all in such a model, as the costs of doing so simply dilute out the apparent "benefit"!

Isn't that nice?

So these "marks" are in fact known to be no good. CountrySlide converts to a thrift to get a "more friendly" regulator (OTS rather than OCC) and then exploits it; they take a "huge loss" but is there any transparency in their marking of their alleged "assets"? No! Is there any material chance that their Option ARMs, especially in California, are worth anywhere near "par" if they were to be sold today? What do you think? How the fuck does anyone know how those things are valued? We don't!

And both Treasury and The Fed - which both have the authority to stop this shit, not to mention the FDIC - do nothing.

This isn't a new problem; there were warnings sounded about this shit back in 2003! Yet the regulators intentionally ignored those warnings, instead allowing those under their alleged "supervision" to do whatever the hell they want.

If you "supervised" your 13 year old daughter as well as these assholes have she'd have AIDS, keep a crack pipe in her bedroom, you'd be supply the crack and she'd be fucking three different boyfriends every night!

If that's not enough, CFC advertises one of the highest yields on Certificates of Deposit in the nation. How? Moral hazard - they don't bear any risk if they go bust doing this - you do, through the FDIC insurance fund!

But where the Feds will not go due to campaign contributions (just go look up who's giving all the money to people like Chris Dodd, Hitlery Clinton .et.al.) the states occasionally will. S&P was subpoenaed this morning by the Connecticut AG's office. The subject? Credit ratings.

"Connecticut's subpoena escalates investigations of S&P, which faces a probe by the U.S. Securities and Exchange Commission and the state of Ohio. S&P, Moody's Investors Service and Fitch Ratings, the three largest ratings companies, also faced criticism from lawmakers and investors, who say they gave excessively high rankings to subprime mortgage securities that later lost more than half their value."

Heh, perhaps someone will get that date with Bubba yet! A later "flash update" says this is not limited to S&P - the other two "big boys" (Fitch and Moody's) got subpoenas too.

Hope springs eternal - my response is "that's a good start - how about 49 more?"

Heh, today's the day to buy, if you believe that all this is sustainable. At the open we broke the channels on all three major indices.

Me?

Naw. I took a clean double (plus a bit) in my Microsoft straddle this morning, setting trailing stops on the CALL side which were pinged quickly and unloading the PUTs for what little value was left in them. My only regret on that trade is that I was a pussy and only risked a couple of grand.

October Consumer sentiment came in at 80.9, down from 82 and below estimates. Naw, you think?

Moody's today downgraded SENIOR portions of several ABX tranches.

This is a really, really big deal guys. These super-senior portions are not part of the "visible" ABX tranches - they are supposedly fully insulated.

Many of these have come off super-A ratings and a few even got the dreaded "C" rating, which is below investment grade.

THE SHITSTORM IN THE CDO MARKETS I HAVE BEEN TALKING ABOUT APPEARS TO BE STARTING. THE IMPACT OF THIS IS NOT YET APPRECIATED, WITH THE EXCEPTION OF A FEW PEOPLE WHO ARE SELLING THE FUCK OUT OF THE MORTGAGE INSURERS ONCE AGAIN THIS MORNING.

This afternoon, a lot of that was given back. That's ok - after BenDover gets done trying to pump the pigs again next Wednesday and the pump fades every one of these fuckers is a SCREAMING short.

The risk of capital calls on these guys is VERY REAL and some of them may end up insolvent.

What's potentially FAR WORSE is that "Acceleration Events" may literally be days away and are almost certain in early 2008, which will crash Pension Funds along with everyone else who holds anything lower than these "senior" tranches, as that cuts off coupon payments. If that begins to occur you will see insane levels of selling of everything as everyone who gets hit will be FORCED to liquidate anything that still has value in order to meet capital needs.

THIS IS THE REAL DEAL KIDS if it happens - this is, as far as I can tell, the FIRST TIME that big ratings downgrades have been taken on the senior tranches, and its VERY un-funny.

It is also, with the exception of one tiny little mention on CNBullShit, being completely ignored.

That's not a falling knife - it is, in fact, this:



You DO NOT want to think about what this means. Consider that the probability is extremely high that "Acceleration Events" are just around the corner with senior tranches cut below investment grade, or perhaps they have already occurred in fact but are just not being recognized - for right now - in a "hope and prayer" belief that they might 'cure' (which, as I've noted before, is basically impossible.)

Do not be the guy with the umbrella!

Oh, the amount of press this got on CNBullShit and Bloomberg? Thirty seconds worth on CNBullShit early this morning, ZERO on Bloomberg, not one bit of followup or discussion of the implications! Yet this is FAR, FAR more serious news than whether CountrySlide claims they've "hit bottom".

Goldilocks my ass.

Here's the technical!

(Note - transfers are having problems to the video server - please be patient!)