The Market Ticker

Again.....

The only piece of "economic news" was the Dallas Fed index which came in at 4.5, down from 21.6. Considering that Texas is thought of as one of the strongest parts of our economy, well, you figure out what it means. Hint - the word starts with an "R".

The Dollar was hit hard overnight but has recovered its losses back during the day. Perhaps it is stabilizing - for now. But more likely what this happens to be is a corrective move, just like the last one. It may retrace all the way up to or even into the 79s before heading south again - and that time it is very likely to break all-time lows. Will that attract buyers? Or sellers? Hmmmm.... (BTW a move over 78.8 starts to put into play the possibility that this has bottomed in the short term, but doesn't change the intermediate view....)

There was a large burst of buying mid-morning in all the indices, without any apparent news to drive it. "Buy the dips" is alive and well. What does it mean? Perhaps not much, but it bears watching. The homebuilders are all in the ditch (again) today, with Lennar, reporting tomorrow, leading the charge lower (although not by much - Centex is plunging as well.) Unfortunately for the buyers it didn't hold and that was that - down she went from there. Hope you didn't get suckered! I said I expected a red day today on Friday, and we got one. Not hugely so, but does it have to be huge to count? I think not!

SPF announced a very odd convertable offering that looks a hell of a lot like a "Hail Mary" pass, and Moody's downgraded them to "Junk" (better late than never!) I smell a bankruptcy in the offing there. Heh, are bankruptcies in the homebuilding sector good for the stock market? Hmmmm.....

The UAW struck GM, then their "chief" came out and played "whine and bitch, oh poor me" on national TV. I say fuck 'em all. GM ought to declare Chapter 11 and walk off on all of their Pension obligations. That's the way I'd be doing it if I was General Motors. It would be good for the company long-term, albiet fucking over all the shareholders (awwwwww.)

In the "no shit" department we have this:

"Americans may be disappointed that the Federal Reserve's interest rate cut won't translate into lower monthly mortgage payments and a revival of the housing market.

.....

The average 30-year fixed mortgage rose 0.10 of a percentage point to 6.08 percent today, according to North Palm Beach, Florida-based Bankrate.com's survey of banks and lenders in the 50 U.S. states. It peaked this year at 6.42 percent on June 14, Bankrate.com said."

I hate it when I'm right. "Rate cuts will make interest rates go down" eh?

Horseshit - they went up.

So much for that line of crap. Heh Bernanke - you're a total IDIOT. The only rates that went down are the exploding option ARM ones - you know, the reason we have this problem? And you'd like to encourage people to buy more hand grenades eh? Let me guess - you'll do 'em the favor of holding the pin for 'em, just like Greenspan did?

What a total asshole!

Of course tomorrow we get existing home sales and these figures aren't cooked by "contracts signed" shenanigans - they are actual closings. And Lennar is going to report tomorrow...... anyone care to guess how bad their report will be? I bet both suck big hairy ballsacks.

Here's your technical for the day - synopsis is that we're in "neutral territory" with a bearish bias, as the Transports appear to be foretelling a building downward impulse. We'll see!

Well that was fun.

Tough work scalping futures today, but heh, work is rewarded with profits, right?

Ok, let's have a look at how we got where we are, and what's likely ahead for us.

Let's start short (today) and go long (backwards and forwards)

First, in the total bullshit department, we have this:

"In currency markets, the dollar headed for the biggest weekly loss since November 1988 against the Canadian dollar, falling 3 percent. The U.S. currency has lost 1.5 percent this week against the euro and set a record low today on speculation the Fed will cut rates further to spur growth.

'It makes our equities look cheaper to a foreign investor,' said Bartley Barnett, head of listed trading at Morgan Keegan Inc. in Memphis, Tennessee. 'A weak dollar spurs U.S. exports as well.' "

Well, that's true if you want to buy now. But if you bought before, its exactly the same thing as having your investment devalued.

This sort of horseshit is the same crap that was run after the tech bubble started to explode in 2000. Remember people saying you were getting a "great deal" when some stocks were "half off"? Was that a "great deal"?

Well, not if they subsequently went to $5!

Bottom line - the dollar is likely to devalue further.

In the bombshell department we had the Harman LBO deal apparently blow up (makers of Harmon-Kardon audio equipment):

"Harman International Industries, Incorporated (NYSE:HAR) announced that it was informed this afternoon that Kohlberg Kravis Roberts & Co. L.P. (KKR) and GS Capital Partners VI Fund, L.P. (GSCP) no longer intend to complete the previously announced acquisition of Harman by a company formed by investment funds affiliated with or sponsored by KKR and GSCP. KKR and GSCP have informed Harman that they believe that a material adverse change in Harman's business has occurred, that Harman has breached the merger agreement and that they are not obligated to complete the merger. Harman disagrees that a material adverse change has occurred or that it has breached the merger agreement."

Well that's one that goes up in smoke.

And can anyone really argue that there is no economic stress? Oh do come on! When Apple and Hovnavian play "fire sale" with everything from iPhones to houses, you tell me!

"Crazy Eddie, the electronics retailer who advertised insanely low prices, went out of business nearly 20 year ago. But the company's spirit is thriving in blue-chip American corporations. On Sept. 5, Apple sharply cut the price of the 8GB iPhone from $599 to $399. Last weekend, Hovnanian, the big home-builder, held a highly promotional "Deal of the Century" campaign, slashing prices for 72 hours on new condominiums. In some Hovnanian developments, prices were cut by up to 25 percent. Other builders are now following suit. Welcome to fire-sale nation!"

Yeap.

In the "The political class is not ALWAYS wrong" camp we have this:

"Homeowners who lose their house to foreclosure would no longer face a federal tax bill for their unpaid mortgage debt under a bill being drafted in U.S. House of Representatives, a congressional aide said on Friday."

That would the right move, by the way. It would ramp up the foreclosure rate and bring the housing correction to a close more quickly than otherwise. It would also force the shit sandwich to be eaten by those who deserve it - the lenders and CDO holders, without trying to send the tax bill back onto the homeowner who gets forced out of his or her house!

If you think this housing market mess won't get that bad, you're very wrong. Well, at least the market says you're very wrong. Take a look at this; the CME now lists housing futures.... where you can place futures bets on the price of housing in major markets. Have a gander..... they don't see a bottom coming for years.

Now maybe you can tell me how we can have any "home equity withdrawals" to fund consumer spending if this view is correct? Oh, and by the way, these futures are of course priced in nominal dollars - add inflation and things get REALLY bad.

Ok, so what has really happened here up until now?

We need to identify this with some degree of confidence if we are going to figure out what's coming around the bend! Why? Well, I hear the rails singing and past experience tells me that this usually means you better get the hell off the tracks..... but am I right or wrong?

Let's postulate a few things from what we do know, because it has been published.

First, Bernanke pulled the safety pins out of the banking system when he waived the 10% affiliated capital limits. This was done for ONE bank back earlier this year, but just recently, he did it for four large primary banks. WHY? One can assume that their affiliated entities, which are the "trading" or "securities" arms of these organizations, were on the verge of collapse!

Now why would such a thing be about to happen but nobody would know?

That's a good question. And I think we find the answer in the SIVs, or "off balance sheet" conduits, that these organizations set up. These are the same sorts of off-balance-sheet "vehicles" that got Enron in trouble, and they're particular odiferous because they are almost completely hidden from shareholders and the public. Yet if something goes wrong, the liability magically "reappears" on the underlying firm's balance sheet!

So what do we have here?

I think what we've got is a that the commercial paper markets closed for any commercial "paper" that had either mortgages or derivatives in it. By the way, neither is supposed to be in commercial paper, but in the "world of magical leverage" all sorts of crap was stuffed in those things.

This was picked up in part by "Sudden Debt"; they got the "what", but not the "why".

The problem with what Bernanke did with pulling the safeties is that he took what was a manageable problem and turned it into something really hideous. He hasn't (and can't) make people want to take debt that is polluted with this crap, and the correct thing for him to do (especially after all the posturing about how neither he nor Bush was going to "bail out" anyone) was to force those "affiliated entities" to eat their SIVs and, for many of them, die.

Why? Because that would have ended it. Now we've put the entire banking system at risk.

We've seen what happened with Northern Rock. It can and is at least somewhat likely to happen here.

Do you guys realize that by pulling the safeties Ben Bernanke has put all four of those BANKS at risk of collapse?

So should you run to the bank Monday and get all your money?

Well, not necessarily. Here's the deal - a "crisis of confidence" somewhere would have to kick this off. Will it happen? I have no idea. But if it does, with all of that commercial paper now essentially being rolled every night (whether it really is or not) via the overnight FFR market, and the safeties having been pulled from four of the largest money center banks by Ben Bernanke, you've got a very dangerous situation.

All it takes is for those folks to ask for their money back and suddenly you get this:



With absolutely no warning.

Economically, we've still got a wreck. There is no way out of that one. We've had $6.5 trillion (estimated) withdrawn from home equity appreciation in the last four years via HELOCs, cash-out refinances and other such schemes. While this is not "the end of MEWs" it certainly is not going to happen any more at the pace it has been - that much we know for certain.

This has contributed about $1.5 trillion a year to consumer spending. Conservatively, half of that has now disappeared.

We have a $13 trillion economy, roughly, in terms of GDP (which is the only measure that really counts.) If we remove $750 billion from that, about 5.8% of it disappears.

We were not growing at more than 6%; the real GDP growth was in the 4% range during the "boom" years and is now claimed to be in the 2-3% range.

Remove 5.8% and we have a negative GDP growth rate.

This is the definition of a recession.

As we sink into this, employment will be affected. This will further contract spending and thus GDP. It is simply unavoidable; this is no longer a matter of what a political party would like, or what Ben Bernanke would like, or what some economist would like.

It is a matter of debt service in consumer households, which has reached its carrying limit, along with the realities of the Housing Marketplace - we have an affordability problem which can only be repaired by home prices contracting back to 2.5-3x annual income - they are currently running nearly double that on a national basis, with the ratios being even worse in certain parts of the nation (California and parts of Florida in particular)

Oh, by the way, for those who argue that "The Fed cutting rates will spur housing and thus prevent a recession", let me point out two inconvenient facts that blow that argument straight to hell:

1. In the last several months real interest rates charged for mortgages have come DOWN. Has it stimulated housing? No, it has not, because the problem is not that interest rates are too high, it is that house prices are too high!
2. Since Ben Bernanke cut interest rates the long end of the bond curve has moved upwards, not downwards. In other words, real interest rates for "long money" - 30 year mortgages - have GONE UP, NOT DOWN. In short, Ben got exactly the opposite response to what everyone says needs to happen.

Of course this reality - that the Fed interest rate decision will actually make things WORSE - doesn't please those who would like the party to continue.

But reality is what it is, and what someone WANTS to have happen doesn't matter.

We also have this little problem of the SIVs and "Conduits" in the first place. Anyone remember ENRON? I do, you do I'm sure, we all should.

How did they "suddenly" implode instead of slowly bleeding off with everyone aware of the problem? SIVs, Conduits, and other "off balance sheet" games.

These need to be made illegal - it is absolutely imperative that investors and the world be able to look at your 10K and 10Q and see EXACTLY what your exposure is to everything you are involved in!

That is the definition of accounting and a public company. No more mark to model, no more mark-to-myth, no more Level 3 "assets" and while you're free to run all the SIVs and Conduits you want, they all have to be on your balance sheet!

Further, all derivatives must be traded through an exchange with proper margin supervision. This practice of allowing Hedge Funds to write OTC derivatives with ZERO margin supervision, effectively allowing unlimited leverage backed by nothing but hot air, MUST STOP.

Our government was responsible for allowing things to get to this point, and it is time for them to take responsibility on the other end as well. Don't expect them to do so willingly, but do expect that the more they try to prop it up the less each successive "prop job" will provide in terms of relief, and the worse the situation will be when it all comes apart.

If you care about this nation you need to get politically active right now. Yes, I know, the Bush Administration would love to shove this off onto the next administration, which is likely to be a Democrat one, and let it blow up in their face, just like Clinton did to him. You think he doesn't "get it" at that level? Oh yes he does.

But this sort of "gotcha" politics is the kind of thing that could provoke a depression instead of a recession, especially with an incoming Democrat President nearly certain to raise taxes into a recessionary environment.

What we've seen this week is only the beginning. If this is not stopped we are likely to see the Dollar devalued all the way to FORTY, or even more!

Why?

Because foreign governments are increasingly diversifying away from the OUTRIGHT FRAUD that our government has allowed in our financial marketplace.

We have no means to FORCE them to prop up this garbage or allow this fraud to continue. None whatsoever. They don't have to sit there and take it - they can move towards a more open accounting environment, they can move out of the United States, they can and are taking their ball and going home.

We are in no position to negotiate with nearly $9 trillion in active outstanding debt on our books in a $13 trillion economy.

Simply put - we the people either insist on reform - now - or we risk the following which will total your purchasing power and wealth -

Hyperinflation.

The government continues to raise the debt ceiling whenever they hit the old one and no reforms of substance are enacted. The bond market, however, will continue to price in trouble because foreign governments are no longer willing to prop us up. The only way out of this box will be for The Fed to buy the long end of the curve to force rates back down, which is instantly hyperinflationary. To actually do so would require an immediate devaluation of the dollar by 13-15% and that is to cover China alone! This will precipitate a full on dollar collapse.

Everything you want to buy will double in price.

The price of milk, eggs, and other things you need to buy are already skyrocketing. Exempting food and energy from "inflation numbers" is fraudulent. We are experiencing 10% inflation right now and it will get much worse if we do not act.

Unfortunately your wages will not keep up. The result will be the destruction of the middle class in this country and as real purchasing power is destroyed our GDP will contract precipitously. In purchasing power terms we will see over the next five to ten years half of our nation's purchasing power destroyed as debt service will become the #1 consumer of capital.

There is no way to prevent this result if the current policies undertaken by The Fed and our government are not immediately reversed.

So how do we get out of the box? Can we get out of the box?

Yes.

The prescription for a fix is some tough medicine and will result in short-term pain, but will also come with longer-term gain. This medicine needs to be swallowed - now. Here 'ya go:

• No more mark-to-model or mark-to-myth. All derivatives and underlyings must be traded on a public exchange. If there is no currently quoted bid for a given item then its value must be carried as zero on your balance sheet. Period. Margin supervision must be enforced and those margin limits must be published and consistent.
• No more off-balance-sheet anything. Create all the SIVs and Conduits you want, but you must carry all of them on your balance sheet along with their current assets and liabilities! In short no more "hide the ball."
• The safeties must be put back in on the banks - right now. If this forces one or more "affiliates" out of business, so be it. These safety mechanisms were put in place to prevent a banking system COLLAPSE after the 1930s! Removing them was the single most irresponsible thing I have seen our government do in the last thirty years. CONGRESS, GET OFF YOUR ASS AND DO YOUR DAMN JOB! YOU ARE THE ONLY CONSTITUTIONALLY-ALLOWED ENTITY TO REGULATE THE MONETARY SYSTEM! To find these "Exemptions" that must be reversed immediately, look at this link for "23A exemption" letters. THERE ARE NOW SIX OF THEM OUTSTANDING, WITH THE LATEST ISSUED ON SEPTEMBER 12th, AND NONE HAVE BEEN WITHDRAWN! ALL OF THESE MUST BE WITHDRAWN IMMEDIATELY.
• Congress must act to require the Federal Reserve to not take actions inconsistent with the defense of the nation's currency. If the Federal Reserve refuses, then Congress, in their exercise of the Constitutional Power to regulate the monetary system, must override The Fed! Failure to act will result in extreme inflationary pressures at least as bad as we faced in the 1970s, and perhaps FAR worse. CONGRESS, LISTEN UP - WE KNOW ITS YOUR JOB AND WE REMEMBER THE 1970s AND DO NOT WANT THAT TO HAPPEN AGAIN! The short-term reality is that the Fed Funds cut must be reversed immediately - right now. In fact, Ben Bernanke should have and must in fact RAISE FedFunds, not lower them.

The results of this medicine, if it is taken, are predictable. We will have a recession - probably a fairly severe one. Housing prices will contract back to 2.5-3x annual incomes on average, with values at the higher end of the range in more desirable (e.g. coastal) areas and slightly less in "heartland" areas. Demand destruction will drive down commodity prices over time, which will result in purchasing power remaining reasonable for the Middle Class.

Those who bought homes during the middle of the boom are in big trouble.

But they cannot be saved no matter what is done. We can either contain the damage to them or we can make it 100 times worse and spread it to everyone!

The Bill cited above by the Senate and House will help; those who bought or refinanced during the "boom" will be foreclosed upon but the good news is that in a year or two they will be able to buy back their house for half the price they paid before, which is good for them (and the rest of the economy), not bad. With a lower house price they will also have a lower house PAYMENT, which means that those people will have more discretionary income to spend.

Ask any of these people which they'd prefer - a short-term "clean" credit report followed by a bankruptcy, foreclosure and destitution, or a foreclosure now, a trashed credit report for seven years but the ability to maintain their standing of living over time and, in a year or two once they start rebuilding their credit, they can buy back their house at half price at a permanently-affordable payment!

THAT IS THE CHOICE WE FACE AS AMERICANS.

If we act politically and stop this madness, we get the latter.

If we don't act politically we will get the former, and the damage which will be inflicted on us as Americans will be hundreds of times worse.

You've got four points above to raise holy hell over.

Look up your Representative and Senators at http://www.house.gov/ and http://www.senate.gov/. Fax them a copy of this Ticker.

Then fax another copy to President Bush - his fax number is 202-456-2461.

And before you say "The Fed is independant", no its not. Greenspan has said in his book that there were many times that he was under political pressure to take rate actions. There is no reason to believe that Bernanke wasn't basically "told" to cut rates.

Therefore, if we want to fix this, we damn well better get politically active RIGHT NOW or the window to actually affect the outcome will have passed.

Here's your technical update for the markets over the weekend....

We're fucked folks.

Bernanke made a critical mistake dropping FedFunds and now the market is going to make him pay in ways he cannot even imagine.

The Dollar. It went off the cliff again last night, as I expected it would. This is not over by a long shot. DX to 40? Maybe. I would not be surprised to see it hit 70 within six months, which would be catastrophic - a deterioration at four times the rate of the previous two years. It could fall much faster, if Bernanke does more stupid things.

HUI gave confirmation of a breakout in metals last night. This morning, I bought Gold and Silver. Why? Because that along with the continued slide in the dollar means that you simply must hedge in some fashion. I will convert some of this to physical over time, but that can be done any time at parity, so it is what it is.

Commercial paper is still screwed. Told 'ya that Ben wouldn't actually fix that with dropping FedFunds. He can't fix that, because the problem is that the CP market has become infested with CDOs and other derivatives. If yours doesn't have that crap in it you don't have a problem. If it is, you do. End of discussion. FedFunds could be zero and it wouldn't change this.

The Yen is strengthening and soon will skyrocket, because it will not be long now before the Bond Market forces reality down the throats of equities - inflation is coming in a big way, and that means that profits are going to be squeezed. When "E" disappears P/E goes to the moon and equity prices contract. This is inevitable and those fools who put carry trades back on in the wake of the Fed dropping interest rates are going to get murdered. Don't be on the wrong side of this one. Oh, and no, Globalization does not fix it - we import $800b more than we export, and guess what - when we go to shit they will follow. Parity on the Yen? Quite possible. What does that do to all those carry traders?

Speaking of the Bond Market, real interest rates on the long end have gone up a lot. Covered in the technical tonight. Its still happening today after yesterday's moonshot. This will continue so long as the inflation monster continues to step on buildings. There is no longer a "PUT" from foreign buyers in the bond market to stop it, as has been the case for the last ten years - they've all said "fuck that!" to having 10% of their money disappear annually in the form of dollar debasement. Oh wait - that's 12% now isn't it? So I guess stopping the pain would be a good thing if you're a foreign government yes?

Goldman beat estimates based on "smart" trading. Smart? Or tipped off by Hank Paulson? Naw, nobody would ever trade on inside information illegally would they? Why that would be UnAmerican!

Bear Stearns, on the other hand, had problems. Gee, who'd a thunk? Uh huh.

Buy equities here? Only if you're stupid. Could the markets take a run at the all-time highs? Sure. Will it hold? What do you think? We've got a recession coming and we will not avoid it. Those who think we will need to take the needle out of their arm and detox; the next shot you take is likely to be full of Drano. Care to roll those dice?

My view on positioning here? Simple - buying metals here as a trade is a no-lose if you're bearish on the market. If Ben puts rates back to defend the dollar you'll get hit on the metals but will slaughter the market on the bearish positions. If we get a "crack up boom" you take a moderate hit on the bearish bets but metals skyrocket. If the equity markets ditch (as I expect they will) and the dollar continues its debasement (which is the scenario I expect) you win twice.

So the way I see the worst case is you're hedged and in the best case you win twice. That looks pretty good to me.... but what do I know?

Oh, Leading Economic Indicators came in -0.6. That ain't so good.

Here's the technicals. They are what they are - tomorrow is likely to be quite exciting as I suspect from the options activity I see that a LOT of people expected that we'd be the "Roaring Bull" all week. Oops.

That could get ugly...... be careful in the morning!

Wailing shorts?

No.

Wailing for our nation.

Bernanke proved one thing yesterday. The Credit Junkie can wail and whine as he withdraws and Sir Fed will stick a needle in and inject more Heroin.

Unfortunately, Sir Fed will do it until The Junkie overdoses and dies. And like all junkies, as tolerance rises to the drug of choice you need more and more to keep the high going, and as the body load rises you get closer and closer to "coffin corner" - where you either withdraw or die, as the rest of your body systems simply cannot tolerate any more drugs.

Most unfortunately The Dollar will be sacrificed. Folks, we are likely headed to 40 on the Dollar. Not immediately, but with a high degree of certainty. I expect we will see 70 within 12 months, which is a 12.5% debasement of your real purchasing power.

Oh, and if you think you're going to see lower real interest rates on your mortgage? The Bond Market says you're not. The curve steepened and is rising on the long end, and that is where your mortgage rates are set.

So, as I predicted, not only will your Latte at Starbucks go up in price, but so will your Mortgage payment. We could have gotten reamed once but thanks to Ben Bernanke, we will now get assraped twice, and the Vasoline is all sold out.

It gets worse - The Saudis just told us to fuck off!

"Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East."

Congratulations Ben - you really fucked up and now not only is the inflation monster coming out of the closet but the dollar flight monster is growling too!

Oh - and "I told you so you FUCKING IDIOT!"

Of course Ben tries to throw people who have a brain a bone. Check this one out:

"Bernake in the letter opposed any increase in the portfolio limit. 'Both the size and composition of the portfolios should be tied to reforms that both reduce the systemic risks posed by the portfolios and also clarify the public purpose,' Bernanke said"

Yeah, ok. I believe you. Not.

CPI came in down 0.1%, core 0.2% up. No surprises there given the PPI number yesterday. Core y/o/y 2.1%. The problem isn't in this month's numbers, although you got a big outlier from energy price decreases (which, given what oil has done in the last bit here, is likely to be a real problem in coming months) but rather in what is to come.

Permits down 5.9% for August on housing, more than forecast. No light at the end of this tunnel, and there won't be either. Why? See the "I told you so" above - real interest rates are going up, not down.

"Construction of single-family homes plunged 7.1 percent to a 988,000 rate, the fewest since March 1993, today's report showed. Work on multifamily homes, such as townhouses and apartment buildings, jumped 13 percent to an annual rate of 343,000."

Yep.

Think this rate cut is a good thing? Toll Brothers doesn't think so:

""I would have done a quarter instead of a half because it signals we're in deep doodoo," Robert Toll said, speaking at the Credit Suisse Homebuilder Conference."

No shit?

Here's our technicals for today.. lots of meat on this bone...

Ok, let's start with the PPI - Core up 2.2%, headline down 1.4%, annual 2.2% up.

Huh? Headline down? All of it came in food and energy. Well let's see, that'd be August, what has food and energy done in September?

Psst - look at the 12 months of data in Finished Goods column. Notice the TREND? In particular, look at the entirety of 2007 from February until now! Likewise, the intermediate goods numbers for this year, Ex-January, has all been trending the WRONG WAY.

THERE IS NO GOOD NEWS HERE FOR INFLATION.

Oh you know..... Of course the market cheered this number, popping the futures up about four points.

Oh, and speaking of popping, Lehman reported results this morning that were nowhere near what had been feared, and were indicated up $1.20 premarket.

"Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, said profit fell less than expected as fees from equities trading and investment banking offset some losses from subprime home loans."

Sounds like awful results? Hmmmm.... maybe not. Unless, of course, you bother to read them, in which case you'll find plenty of book-cooking, including a change in their assumed income tax rate. How do you get a change in income tax rate? You make less money, or you blatantly cheat in the current quarter to hit the numbers, praying that your business recovers so you don't have to recognize the loss (which would otherwise double back on you) next quarter.

Best Buy came in ahead of expectations and got a $2 (or 5%) premarket pop. I'd love to know how they pulled that one off. Certainly it isn't on the back of the local store here - I've been in it a number of times in the last couple of months and it has been an absolute ghost town. In fact, I've never seen it that slow! But obviously, Chucky is burning the numbers off his plastic somewhere in their stores.....

So exactly what, may I ask, justifies a cut in the Fed Funds Rate in these numbers? You have investment banks claiming all is ok, you have a major retailer claiming not that all is ok but that sales gains are accelerating,

Producer Prices reflect August while we've had very high wheat, soybeans and oil prices in September, the trend is clearly going the wrong way and you want to slash interest rates?

Oh, and let's not forget Bucky. HE is not ignoring this. As soon as those PPI numbers printed he took a nice swan dive! Somewhat abortive, but there was an instant reaction - and not the kind The Fed is going to like.

Hmmmm.... me thinks that our 2-year-old "market model" is back in play today and might be throwing a tantrum in a few hours.... we shall see....

This much is certain - we're going to open higher, and probably go snaking after the 1490 level again up to the 2:15 PM ET announcement from the Fed.

In Europe we had the government step up and guarantee all bank deposits at Northern Rock, which has been suffering from a punishing bank run. Now we'll see if they allow the common shareholder's equity to be destroyed and the executives fired (and they should) or if we have a new definition of "moral hazard" from our buddies across the pond.

Foreclosures were up 35% from July and up 115% from last year (!) Nevada, California and Florida were the leaders (gee, big surprise - NOT!)

"The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier as subprime borrowers with adjustable-rate mortgages saw their monthly payments rise, RealtyTrac Inc. said.

Lenders sent notices of default to a record 108,716 homeowners in August, up from 42,144 a year earlier, RealtyTrac said today. California had 41,714 new foreclosures, the most in the U.S., and Florida was second with 26,203, the real estate data company said."

This is good news too right?

Let's not forget the ICSC Chain Store Sales Index (although the media sure has; they haven't reported it on CNBS at all today), which was down 1.1%. Is that good news too? No? Well then I guess we'll just not report it, right?

Oh, and what you did NOT HEAR on CNBS? A TWENTY print on the NAHB Builder Index. Worst ever (ok, matched one month in '91.) Oops. (Update: They did mention it - a half-hour late.)

Ok, so the FOMC caves. 50 Bips.

BERNANKE: YOU STUPID BASTARD!

Guess what Bucky did - went straight in the shitter - straight off the cliff.

EXACTLY AS I SAID IT WOULD.

This is really, really bad, and the 10 year bond yield DID NOT COME DOWN. In fact, the long end of the curve WENT UP!

So now we have a 10 that is sitting, the currency is going in the toilet, and it will not be long AT ALL before the capital flight danger becomes "real".

SHORT THAT SHIT BOYS! WE ARE FUCKED!

I immediately took my profits from my hedges on the initial pop. I didn't get it all, but that's ok. I got some, and that's enough - that was the point.

It will be days, or at most a week or two, before the market figures this out and when it does things are going to get very, very dicey. Oil spiked higher as the dollar was debased, as one would expect. Gold ran but not enough to be a breakout (we need $730) and Silver didn't get its break on either, although it did move north on the announcement. HUI still has not broken out, which is a key confirming indicator on Gold - beware buying into this now until that confirms, as there is a potentially VERY SEVERE correction coming in the equity markets when the state of the dollar sinks in, AND IT WILL.

To those who said that "The dollar won't get hit by a big interest rate cut."

HORSESHIT.

Its damn near PARITY against the Loonie and 1.40 on the Euro! The fucking dollar lost 1/2% instantly on the announcement!

So enjoy your rally today guys, but were I you, I'd be goddamn careful and take your profits while you have them. It might even continue through Friday, although I'm not sure I'd take that bet.

This much I'm quite sure of - it won't last, and neither will our economy given that Bernanke just imported a huge fucking slab of inflation that is about to hit us on the head.

REAL INTEREST RATES ARE GOING TO GO HIGHER, NOT LOWER. MARK MY WORDS ON THIS.

This will NOT help homeowners, and in fact will HURT them!

Oh by the way, I'm done with the lying Republicans. While I'll get buttfucked voting for a Democrat, at least they're honest enough to tell me that they're going to fuck me up the ass straight up.

With Bush, I get to hear him tell me that they won't bail out speculators (meaning the investment banks) - but then he does.

He appointed Bernanke, he and the rest of the Republicans get to eat the consequences.

You folks who are reading this - you better get off your asses right now and get politically active on THIS SPECIFIC ISSUE or you can kiss the middle-class goodbye!

We're fucked boys and girls. Enjoy it and make all the money you can in the market.

Your dollars won't be worth dick.

YOU HAVE LOST NINE PERCENT OF YOUR PURCHASING POWER IN ONE FUCKING YEAR!

THANK YOU BEN, THANK YOU GEORGE BUSH, THANK YOU TO THE REPUBLICAN PARTY!

GET ACTIVE NOW AND GET DOUCHEBAG BERNANKE REMOVED FROM OFFICE OR YOU WILL LOSE TWICE THAT IN THE NEXT TWELVE MONTHS. EIGHTY-NINE AND CHANGE TO SEVENTY-NINE POINT TWO! IN TWELVE FUCKING MONTHS!

MARK MY WORDS - ACT NOW OR IT WON'T MATTER!

RANT (technical below)



Technical on where we go from here