The Market Ticker

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!)

Here's what's coming in the financial markets folks....



Rhetorical question - Did Bernanke or Paulson - or their friends - plant that little rumor in an attempt to play "booster rocket" to the markets yesterday? Maybe that's why the SEC never seems to give a fuck? Hmmmm...

Morning comes, and right on queue, at 5:45, the futures take off. And this time, the Yen/Dollar cross lags the futures acceleration. Ah, the difference between cause and effect!

News? No. Salivation. Pavlov's Dog thinks he's going to be fed at 7:00 CT, 8:00 ET, when the "surprise discount rate cut", as allegedly "leaked" yesterday, occurs.

Oh, and this morning? Bob Pisses-in-mouth-ani on CNBullShit actually says the rumor was ridiculous. Well, he's right. The real question is why didn't Mr. Pissssssssani make that statement YESTERDAY while the "bulls were stampeding" in an attempt to actually report the truth and perhaps deflate the stupidity?

The answer is obvious of course - CNBullShit isn't "reporting" or "news" - its entertainment TV, and the more hype, cock and bull they can PROMOTE, even when it comes down to cheering FELONIOUS BEHAVIOR, the better they think things are!

I want to know when they're going to cheer some RAPES, some MURDERS and some little old ladies getting robbed blind, because the latter is exactly what's going on here.

Now to be fair earnings came in reasonable this morning. But I wouldn't call them "good" - just not a wipe-out. And that should be worth, well, nothing; the S&P is still on track to produce a negative earnings "growth" print for the first time since the recession in the Tech Bust.

And some - like MBI's - were terrible:

"The net loss was $36.6 million, or 29 cents a share, compared with net income of $217.9 million, or $1.59, in the year-earlier quarter. Operating earnings were $1.52 versus $1.55; adjusted operating profit was $1.43 a share against $1.37. A survey of analysts by Thomson Financial estimated the quarter's earnings at $1.59 a share."

Oh boy.

Cummins Engine (CMI) missed big - $1.84 .vs. estimates of $1.93, and was instantly pummelled. They've been massively overvalued, just like a lot of the other "everything is wonderful so long as it goes to China" stocks. Psst - higher input costs (raw materials) + slow US sales = falling profits. Duh.

Dow Chemical (DOW) posted lower than expected profit, citing high input costs. They're also raising prices. That wouldn't lead to a topline (and bottom line) change in inflation, would it? Naw.......

The latest trucking company to report crap earnings was Old Dominion; that makes four-for-four. Pretty much a sector bust, and oh by the way, the railroads are a bust too - yeah, I know, BNSF reported good earnings, but look at the car tonnage carried and its down - 5% or so. Those are recessionary numbers, not "a bit soft".

Where's all this coming from? Simple - THE DOLLAR. Duh. It continues to fall like a stone, being particularly weak this morning. How's this chart look?




Thar she blows! I'd make comments about a ski run but it appears to me that base jumping is more appropriate....

This morning we got the first analyst ratchet-down of fourth quarter estimates - only for the financial sector (so far), but heh, this is the "moving of the ball" that I predicted would start to happen.

Watch for "The Bulls" to get really, really nervous and start edging ever-closer to the door as they start to have that sink into their consciousness.

The whole reason we're still trading within spitting distance of the highs is that the 4Q profit growth estimates have remained over 10% - even though they were over 10% for 3Q and now we know that reality is going to be flat at best and most likely negative!

As 4Q estimates ratchet down the P/E/G ratio of the S&P heads north, and since it is already at "maximum reasonable levels" any material deterioration results in the "SELL" button becoming not only illuminated but flashing with increasing urgency!

Now let's talk about Paulson's scheme known as "M-LEC" - a scheme that in my view ought to be resulting in indictments rather than accolades:

"'Continuing to mask transparency by means of rearranging risk without actually offloading or recognizing the true value of that risk is not going to help anyone,' said Joseph Mason, an associate professor of business at Drexel University in Philadelphia and a former financial economist at the Office of the Comptroller of the Currency."

Do you think that gent has some credibility? OCC eh? I'd say so. Never mind that Buffett thinks this whole thing is total bullshit (he spoke of trying to turn toads into princes - that'd be "fraud" by the common, no-nonsense use of language, right?) in that same referenced article.

And let's expand on the fraud game discussion yesterday.

Let me be clear - the Fraud in the system today that I was discussing isn't illegal. Oh, its fraudulent all right, but its not felonious, although from my point of view it damn well should be!

Why don't we see INDICTMENTS?

Because those very same Pigmen that benefit from this game influence the folks at the helm of FASB and BASEL who write the accounting standards - and those "standards" specifically allow you to keep liabilities in these SIVs and not report them with any sort of transparency or consolidate all of this on your balance sheet!

These are the same regulators that allow you to have "dark pools" where pricing doesn't have to be reported, OTC traded swaps and derivatives with ZERO margin surveillance and enforcement (since there's no exchange or public reporting) and no public "bid", "ask" or "mark" - therefore, no public market against which to value whatever the hell you're doing today. In short, you can just make it all up - and the regulators and lawmakers, at least to this point, say its all ok!

Then we have the regulators at The Fed, OTS and OCC who are supposed to enforce Tier Capital requirements - and it sure looks like THEY don't count "off balance sheet" contingent liabilities either! Never mind that Regulation "W" appears to be able to be waived these days simply by asking!

Further, despite the fact that we had ENRON happen, and there were warnings from the outfall of that incident that BANKS and OTHER CORPORATIONS needed to be held to account for these OFF BALANCE SHEET GAMES, no meaningful regulation or enforcement occurred under Greenspan's Fed of the banking system for this VERY SAME CHARADE and Bernanke has done NOTHING about it either!

And finally, we have a law called "Sarbanes-Oxley" that says a CEO is supposed to sign a statement that his firm's financials are honest and complete and then we have FASB and BASEL II that give corporations ways to avoid producing financials that are honest and complete and regulators that seem to think this is all ok.

Does anyone else but me have a problem with this duplicitous sort of bullshit?

I happen to believe that fraud in all cases - that is, producing a "financial statement" that does not in fact truthfully and completely present ABSOLUTELY ALL OF THE ASSETS AND LIABILITIES TO WHICH YOU ARE EXPOSED should expose YOU to a nice stay in a cell with Bubba.

Yes, I realize that "the regulators" currently disagree.

WHEN, not if, the epitath is written on this mess this very situation will end up being a huge part of why things got so out of hand.

'Nuff said.

Durable Goods came in at down 1.7%, much worse than the expected +1.5%.

Jobless Claims came in at 331,000; not materially different than last time around or expectations. Not much hiring - or firing - going on. No surprise there either - business are always behind the curve on the firing end as we go into recession.

New Homes Sales for September? You have to ask? They came in at dogshit, 770,000 and previous month was revised down to 735,000. Of course the headline is "up 4.8%", but the reality is that it wasn't - the unrevised number was 795,000 - the "improvement" was entirely due to the revision and in addition there have been insane "giveaways" - below cost - by builders in the last month! Of course the new home "sales" are actually contracts signed, not closings, and you saw what happened to the previous month's data once "contracts" was adjusted to "closings"!

If patterns hold new home sales were down about 3%, not up. Of course next month this month's data will be revised down too. Only in the government (or the NAR) can you commit out-and-out fraud-by-numbers and not go to prison.

The builders all popped a bit on that as did the indices - I bet that won't hold. Give the short-bus riders a bit to figure out that the entire "gain" was due to revisions to the previous month and then see if the bloom remains on the rose.

The Dow Jones Business Barometer can in at -0.2% with a previous of -0.3%. Hmmmm..... so business expectations are still below trend?

Now here's something to think about guys...... the only reason we're the "place to invest" on the world stage is our alleged transparent markets - that is, we supposedly have trustworthy markets, transparency and accurate pricing.

Is that true any more?

I argue it is not.

We have cooked inflation numbers, cooked new home sales (which are really down, not up, but are reported up), rumors not only of specific stocks (e.g. Lehman) but now proven false orchestrated manipulation of the entire US equity market on the claim of imminent fed action, and a Treasury Secretary who is engaged in trying to find ways to hide even more liabilities off bank's balance sheets.

And we expect foreign investors to come here because we're "the most trustworthy financial markets in the world" eh?

Hmmmm.... why am I having a problem believing foreigners will see it that way?

If I'm an investor why don't I just go ahead and invest in some banana republic's stock market? At least there I can start the rumors and trade ahead of them too without going to prison (just try to "get me" when I'm not in the country!) while here in the US, only the "chosen few" - which doesn't include intrepid foreign investors - get that privilege.

Oh, McHugh claims we got another Hindenburg yesterday. I'm not willing to go there - on a purely pedantic basis we were a few short on the New Highs, and besides, additional hits don't improve the quality of the signal. However, what can be said is that "its not over" until the signals stop..... so perhaps it is reasonable to "count" it.

Or you could just count the one today! Yeah, we got another one.

Here's your technical!

Yes, wilderness.

Barren, at least in the context of economic data today, unlike yesterday (which printed three recession-level indicators!)

Today we only got one. But boy, was it a doozie!

Existing home sales for September came in down 8% in September, down 19.1% from September of 2006. Inventories up 0.4%, to 5.04 million units. Prices fell 4.2% year-over-year. And this is from the "cheerleaders in chief", the National Association of Realtors - those who were complicit in the game right up front!

The gig is up kids!

What's even worse is that they're still building into the oversupply of inventory! INSANITY!

What was the market reaction to this? It priced in more rate cuts! As if that's the solution to whatever ails the market. Here's a hint kids - you can't clear this sort of inventory overhang by making money cheaper when the prices are still being at DOUBLE the affordable maximum!

Overnight we saw an interesting dichotomy; Asia opened up bright green but ended with a far more mixed picture with most indices closing down modestly in what was a fairly surprising (to some) reversal of fortune. It didn't surprise me; the press is calling it "risk aversion" but let's be straight with people here - this isn't about "risk aversion" at all and never was.

It has been about intentional mispricing of risk so you can make money by fucking the poor dupes you sell your shit sandwiches to. After all, is a shit sandwich worth anything at all? Even though you start with perfectly good bread, which does have a value, once you apply the shit the bread becomes just as worthless as what's inside.

There are a few other people who have picked up on this, talking about how "CDOs" and "CLOs" and such are only "of value" to issue if you can misprice them. Well, duh. It also flies over the average person's head, which is why I like the shit sandwich analogy instead. After all, that's one that's graphic, easy to understand, and impossible to play "spin" with.

This much is for certain - you have no doubt about the "value" of such a thing once you've taken a bite!

Merrill reported an $8 billion loss on writedowns. Yes, they said $7.9 billion. That's a lot like your local gas station - "$2.99/9", claiming loudly "under $3!" Horseshit. As an aside, do you realize that in the days of mechanical gas pumps the "9/10" was actually built in to the mechanism? Yep. Intentional mispricing by design. Kinda like what's going on now, eh?

Indeed, its the oldest game in the book; make a bad number look smaller so people will buy, and make a good number look bigger so people will be enticed to sell. So when its what you're "given" for your used car, its $13,000. When its the price of the car you want to buy, its $12,999. Uh huh. And before our government's intentional misstatements on inflation, the other buck would have actually gotten you a cup of coffee - but now the Latte at the Green Mermaid not only tastes like a shit sandwich but costs $4 on top of it!

Now let's talk about cops and robbers (again). Where are the cops? Just a couple of weeks ago Merrill said this loss was going to be 30% - or more - less! And let's cut the bullshit kids - the quarter had already closed. So the idea that this was some sort of "surprise" in the last two weeks is utter horseshit. I ain't buying that, but heh, even in this day of SarBox which allegedly forces CEOs to either shut the fuck up or tell the truth, it appears that nothing has - in fact - changed.

And yet today the deception continues in "structured finance" land. Yes, we've seen downgrades - but has anyone truly "marked to market"? No. Why? Because if they had, the fact of the matter is that there is no such thing as a "AAA" mortgage written to a consumer. Huh, you might say? How can that be?

Simple - AAA credit has a risk profile similar to that of the United States Federal Government. Yet not even Bill Gates has credit that good. Excellent, yes. As good as the "Full Faith and Credit" of the world's largest economy? Bollocks.

So what's going on here?

What's always been going on. What was going on during the 1990s. What's still going on now. Today.

Intentional deception for profit.

The common word for this is FRAUD. Yet it is, in fact, what this entire decade has been built upon, and most of the tech boom before it.

In the 1990s it was all about intentionally overstating growth forecasts ("The internet is doubling in size every 3 months"), allegedly supporting multiples that were stratospheric and business plans that, when all the bullshit was distilled out, could be written in one sentence: "We're an internet company - give us $500 million for our stock in an IPO."

In the 00s it has been all about intentionally mispricing complex financial instruments - the more complex the better, as it makes it essentially impossible for "the sheep" to figure out that you're going to fuck them (and charge them for the privilege!) 100+ page documents describing the "subordinated classes", alleged "credit support", claimed "models" which assumed that houses would never go down in price but instead would rise at 2, 3, or even 5 times the rate of wage growth.

This is, in fact, nothing more than a complicated Ponzi scheme! Those schemes have been highly illegal since Charles Ponzi assfucked a bunch of "investors" 75 years ago!

Huh? How's that you say? Certainly not ALL of the mortgage and housing mess is fraud, is it?

Yes it is.

Here's why.

While it is certainly possible for some people to make a lot of money in real estate, on balance housing must be a net cost - not a net profit center - for the American Homeowner.

Why?

Because prices cannot rise faster than the rate of wage growth over longer periods of time. It is simply impossible for that to be a sustainable situation; as prices rise in order to keep up with the last year's "growth rate" the required increase in price goes exponential due to the "curse" of compound price growth.

And, since every house has expenses, such as replacement of roofs and appliances, lawn care, taxes, electricity, water, sewer charges, trash hauling and the like on balance housing must be a net cost - not a net profit - on American's balance sheets.

It simply is not possible for what we've been told over the last seven years to be true! Mathematically it cannot happen.

The financial "alchemists", including the "smartest people in the room" such as Hank Paulson and Ben Bernanke, are fully aware of this. They KNOW that this entire house of cards is fraudulent. So does Greenspan. So does every last one of the "investment bankers" on Wall Street, all the ratings agencies, and all of the regulators involved in actively looking the other way.

Yet all of the above continue to insist that this was just "accidental mispricing of risk."

That claim is a total, unadulterated load of bullshit.

Now, let's get back to the facts, and the simple question - where are the cops?

See, this is really just garden-variety fraud. An asset cannot grow in price at a rate which exceeds the earnings power acceleration of its purchasers for very long. Oscillations around the mean can and do happen - the very concept of "buy low and sell high" comes from this, and it works.

But over time the price of a house is limited by the financial ability to pay for it. Therefore, over time, houses cannot grow in price at a rate which exceeds the growth in wages.

This is so blatantly obvious - and immutable - that each and every one of those "merchants" who have sold "investors" on the basis of a contrary claim should, under the law, be under indictment for fraud!

How do you get away with putting together a model that is based on house prices rising at more than the rate of wage growth - indefinitely? And then you use that model to rate debt securities! How do you get away with telling people that you have "AAA" credit quality in these securities (whether you bought that rating from someone or not) when in fact you know that you loaned money to people who likely lied about their income and thus have a totally-unknown debt-to-income profile? Then, we allow people to come up with a computer model and trade these things over the counter with no recording of prices paid or surveillance, instead of forcing them to be traded on an open, public exchange with a public bid, ask and mark!

Yet as we've seen time after time, you get the best "justice" you can buy in this country.

Nowhere have we seen the cops actually show up to break up this merry band of fraudsters and send them off to the hoosegow where they can experience some of the assrape they've served up to their "investors" and the American Public.

Chinese banks, German Banks, Pension funds and other investors are all shaking their heads at the enormity of our regulatory failures and complicity!

Indeed, we now have Hank Paulson, a US Government Official, participating in trying to paper over the deception with even more deception by setting up a "super-SIV" in a bald attempt to stop the market from pricing these alleged "assets" at their true market value - that is, for many of them, ZERO! And even better, "an unidentified Fed Official" last night said that The Fed "was not opposed" to this plan!

Imagine that - our central bank isn't opposed to intentional hiding of liabilities off company balance sheets and intentional mispricing of securities? In short, did I really read that The Fed isn't opposed to FRAUD?!

No wonder it was an "unidentified Fed Official."

Oh, and by the way, obviously this sort of Fraud isn't illegal, or people would go to jail, right? Why isn't it? Well because those very same pigmen influence folks like FASB that write the accounting standards and they specifically allow you to keep liabilities in these SIVs and not report them transparently!

So we have a law called "Sarbanes-Oxley" that says a CEO is supposed to sign a statement that his financials are honest and complete and then we have FASB that gives you ways to avoid producing financials that are honest and complete!

NOW do you see why I say we get the best cops "money can buy"? We just pay them to sit in the fucking donut shop instead of busting the bad guys!

This is beyond ridiculous and yet these are precisely the sort of actions that trapped rats take when the ship starts to go down.

Unfortunately for "the pigmen" they are ultimately doomed to fail, because in the end analysis when the payments can't be made the cashflow stops and those "credit default events" grow precipitously.

You can only sustain the deception until people stop paying - just like Ponzi and his "postal coupon" scheme when the money simply can't meet the cashflow requirements you're no longer able to lie to people and the whole scheme comes apart in your face.

The absolute stupidity on display in the equity markets in holding up these companies is testament to the fact that we don't teach math any more in our schools; even a fifth grader can, with a paper and pencil, figure out what happens when you assume 10% growth rates in prices on an annual basis yet wages only advance at 5%!

What's even more stupid is how individuals continue to "spend spend spend" well beyond their means. Oh we hear how "the consumer's balance sheet is strong" yet that's a lie too. It is predicated upon a house "value" that is fully double what reality is. Take that back out and account for true debt load - debt that exceeds in many cases by half the value of the underlying assets - and suddenly you find that the consumer is functionally bankrupt!

The truth is showing up in things like credit card chargeoff reserves. American Express, Capital One Financial and more are all reporting dramatically growing delinquency rates. And of course the delinquency rate on mortgages is growing at a ridiculous rate as well.

"The worst is behind us"? Oh bullshit. "The worst" has not even yet begun to be talked about! We face an absolute tsunami that is now just starting to curl over as it approaches the shore, while all the locals are scurrying out on the exposed seabed collecting fish and chatting about how smart they are while raking in their "hoard", totally blind to what is about to happen to them.

We learned absolutely nothing from Enron.

Enron exploded due to these very same sorts of financial games.

Ponzi finance at its best.

This morning the dip buyers came out right at the open and started bidding up stocks.

Bidding them hard? No. Heh, a few people got smart - margin contraction scared a few people and Spamazon got sold off hard, being driven to an 8 handle almost immediately.

But in general the "mark to market" has not yet occurred.

So here's my question to "The Market" - when are you going to display more than a shoe-sized IQ? Will it be before - or after - your portfolio gets shredded?

You don't remember 2000?

Really? You sure?

I sure as hell do and I know what happened to friends of mine who were "true believers", forgetting their fifth grade math skills before they pushed the "buy" button in a speculative frenzy to bid up stocks to 80, 90, 100, 1000 P/E multiples.

Will you ever hear CNBullShit talk about this? Oh fuck no. Never mind that every one of those people behind a desk know the truth. Never mind that Hank Paulson sounds like someone has a cattle prod up his ass every time I see him on TV. He knows he's lying but he also knows that if he tells the truth about these "compounded rates of return" and that they are not only unsustainable but in addition that the promise of these returns were an act of intentional deception that the financial markets would implode 30 seconds later!

I know, I know, the solution to every problem is a share buyback, never mind that this is just another example of levering up at unsustainable rates as inevitably debt is used to pay for it, and when losses come you get buttfucked twice - once by the loss taken over a smaller number of shares (making the "EPS" loss much larger) and by the demand on your capital in the form of interest payments.

You want to know what will force "Mark To Market" on all those CDOs? Here's a hint - whisper "Acceleration Event" to a CDO manager and see how white his face turns.

What's an "Acceleration Event"? It is a deterioration in the underlying credit quality that causes all of the subordinate tranche coupon payments (the "regular" interest payments) to be cut off. This is usually an incurable event; once it happens only the "super senior" tranches - which typically are NOT traded - get interest payments. Everything else, including the so-called "AAA" tranches DO NOT.

How close are we to that starting? Pretty close! Exactly how close? I don't know, but I'm hearing whispers about it here and there, which means its bad - real bad. If one of those happens to a CDO then ALL of the tranches become effectively "D" rated (for "Default") immediately, because there are no more coupon payments! So much for "AAA".

When does this whole house of cards come crashing down? I can't give you a date. But what I can tell you is that as certainly as the sun will rise in the east tomorrow that day will come. I call it the "Cold Sweat" moment - when you wake up at 4:00 AM and suddenly realize that the math simply doesn't work - and can't.

Beware.

Oh, in the "Peak Bullshit" department here we go again with totally ILLEGAL market manipulation. Today it was a rumor that hit the Blackberries RIGHT ON SCHEDULE AT 2:15 claiming there was a "discount rate cut" coming.

The result? TWENTY FIVE HANDLES on the Spoos in less than 30 minutes, with the first 15 being STRAIGHT UP.

One way or another - whether this is "rumor" or a "leak" - people need to start going to fucking JAIL for this shit!

And let's be straight here guys - there is no distress in LIBOR, no distress in interbank lending and no reason for an emergency action, especially with a scheduled meeting ONE WEEK AWAY!

This is a big part of why The Petition exists, AND WHY YOU MUST SIGN IT.

This sort of thing simply MUST STOP.

And Maria Cuntface Bartaromo? SHE'S FUCKING CHEERING THE RUMORMONGERING! No mention ANYWHERE by ANY of these media fuckheads that this shit is a FELONY!

Gee, Enron was a felony though too wasn't it? This is fucking rediculous.

Here's your rant, er, technical.

For tomorrow.....



ICSC Chain Store Sales Index For Oct 20: -1.5%. Previous: +1.0%.
Redbook Retail Sales Index For Oct 20: -0.2%. Previous: +1.0%.
Oct Richmond Fed Manufacturing Index: -5. Previous: 14.

(Negative 5?! NEGATIVE five? When was the last time we saw a negative print from one of the Fed Indices?)

Number of mentions of these recession-indicating prints on CNBullShit, which is spending its time following Buffett's Jet around the world to China and cheering Apple? Do you really need to ask?

Let's be straight here - THOSE indicators are the story of the day, if you're an honest reporter. Not whether Apple "blew out LAST quarter." After all, the stock market is supposed to be a forward looking animal, right?

The story continues to be the same no matter where you listen on earnings - US weak, International strong. UPS managed only an anemic 1% volume growth in the US.

"The US economy is in the ditch but we're doing good in China, and we see no indication that the US is getting any better - quite to the contrary."

I could go down the list of nearly 100 companies that I've read the same summary from over the last week.... but there's really no need.

Now the concurrent indicators are confirming the projections of CEOs when it comes to the United States economic outlook.

Brinker (EAT) is a US-centric firm and their story was the same as everyone else's - labor costs are up, input commodity costs are skyrocketing, same-store sales are down. That's the US story, and the one that equity markets - in the end - will respond to.

AXP looks to have gotten a bid this morning - surprising with the huge growth in charge off reserves. But heh, so long as people are charging (even if we can't collect?) its time to buy the stock, right?

Whirlpool is the same story. Crap US sales, strong international.

But - in terms of equities today all that matters is that Apple beat last night and put forward what (IMHO) is a totally-unsustainable forecast, so its "buy buy buy" time this morning.

Have fun with that kids.

This looks to me to be time to step aside, pay attention to the blast radius - and insure that you're outside it.

Why?

I still am seeing nothing indicating that "the analysts" are downshifting their 4Q forecasts, even as individual firms are. If UPS' 1% US volume growth holds, that's 4% - not the 10-12% that is necessary to maintain P/E/G ratios.

Yet what is CNBullShit's coverage like this morning? Just heard - "who is going to be the first with a $1,000 price target on GOOG?"

I seem to remember something like this "let's see how high we can raise the price target" game a few years. I think it was in 1999. Hmmmm..... are we reprising the old song from the "tech bubble"? Maybe.

Does anyone remember what happened next?

Today's tape was pretty amusing; the divergences in the Nasdaq 100, however, are downright alarming. On a day with a 2% move upward the down volume is actually higher than up, and the A/D line is only 53:46! That's not funny at all, indicates tremendous distribution and that only a handful of issues are driving this. Over time history says this never resolves higher, although in the short term it sure feels good if you're long.

Just beware disappearing floors - they have a nasty habit of occurring when you least expect it when markets start trading like this.

Psst - might happen tomorrow. Don't look at Broadcom, Amazon, LVLT or Juniper tonight.

Psst2: Watch out if you're listening to Cramer and his call on "buy buy buy" CSCO. Great company? Yes. Beyond high risk here? Absolutely.

Here's your technical :)

Amusing overnight action...

Asian markets got whacked Sunday night...... although they did recover considerably from their intraday lows.

Europe followed with a downdraft.

The only economic news was the Fed National Activity Index, down 0.45 from last month's down 0.65. The key here is that its negative - again.

The dollar suddenly got a huge bid early this morning. I've been hearing rumors over the weekend of a potential problem over in Europe with a "big bank", but nobody's putting a name on it or explaining exactly what is going on. But the sudden "dollar grab" is consistent with someone needing dollars - right now - and paying whatever they need to get them.

The problem for equities remains twofold, with the credit issues being a part of it, but the bigger deal, in absolute terms, is that 4Q estimates are not yet being adjusted by the analysts, although they sure as hell are by the companies that are reporting earnings!

It is simply a matter of time before that happens, and when it does it is not going to be pretty.

As things stand right now we're still prancing along in the equity markets on the wish and a prayer that while 3Q was a wipeout, 4Q will be "just fine" and "on plan."

Uh huh. CAT's CEO says that's bullshit and other firms are reporting eating big inflationary input price pressures. The evidence is strong that the economy is slowing - with margins getting squeezed - and that this is going to continue well into 2008. The complaints about high input prices continued today - how do you spell "inflation"? Oh, and book-to-bill in the semiconductor space is well below 1.0 as well (so much for the "tech will save us" mantra.)

This WILL bleed through to analyst 4Q estimates.

Don't be caught on the wrong side when it does.

The particularly pernicious problem is in fact food and energy inflation. Nobody wants to talk about it but refusing to have the discussion doesn't make it go away. Quite to the contrary; its very real and no matter what people will try to tell you its not leaving either. We're facing structural changes in inflation pressures that, at this point, cannot be stopped. The Fed has been going the wrong way and continues to, along with our other political policies - particularly those related to Ethanol and drilling for our own natural resources - and the result shows up in your food and energy bill. While people like myself can manage, if you think I don't notice you're nuts. Just last night I went and bought a grocery cart of "stuff" that a few months ago would have cost me $50 or so. Before the $10 "instant discount" coupon that Winn-Dixie had printed in my last trip to try to keep me out of the WalMart Supercenter, the bill came to $73.56! Aieee! What was in there? Food. Eggs (doubled in the last six months), cheese (ditto), milk (ouch!) - basic staples. A 12 pack of soda that a few months ago was $3.00 was $4.50 (!) How come? Corn syrup - the primary ingredient - has gone up radically in price and it is being passed straight through to the consumer.

You can tell people that there is no inflation but you can't argue with the cash register tape at the grocery store. That tells the truth - and the truth is ugly. This has and will translate into discretionary purchases; we've been seeing since the spring the attempt to keep spending on "crap" via credit cards, but that wall is being hit now for many, and it will increasingly be so for all.

Consumer spending will collapse due to inflationary pressures and The Fed is harming, not helping, this situation with its inappropriate rate cutting scheme!

Chucky is getting ass-raped every day and his ability to absorb it is exhausted. Just wait until crack spreads start to widen out again and gasoline goes to $3.50/gallon - at today's oil prices, it is very likely to do so sometime this winter. This reality is "already here" when it comes to heating oil. Gasoline is not far behind.

The ABX index is hitting all-time lows and there's a huge problem in these CDOs which is not being discussed with any sort of clarity - yet. Many of these instruments are getting dangerously close to a "credit event", which shuts down coupon payments to the "subordinate" tranches - including the so-called "AAA" ones. Once this happens it is typically permanent - this is not just "a missed payment or two", its a "there will be no more coupon payments!"

WHEN that happens the only people who get paid from there on for their coupon are the "senior" tranches - which are NOT in the ABX indices. Typically, those "super-senior" tranches are held by the issuer (nice eh?)

The entire rest of the chain - including the so-called "AAA" credit pieces - get NOTHING.

This of course is catastrophic for all of these CDOs - and their holders. After all, the point of buying them was not just "return of capital" but also the coupon - promised at something beyond Treasuries. Now the spectre of them being "dead money" at best and "lost money" at worst is starting to rear its ugly head.

This is being presaged by the downgrade tsunami which is now hitting all of these instruments. Moody's, S&P and Fitch, late to the party and stuffed full of conflict of interest, sure as hell didn't bother warning anyone before they bought did they? This is a scandal bigger than Watergate by far, yet I'll bet there won't be any meaningful regulatory response until millions of Americans see their pensions go "poof". The time to fix this was three or four years ago!

NOW, when its too late for you to do anything about it if you're one of the "suckers" who bought this trash, you're fixing to find out that the supposed coupon payments aren't going to be made and you were sold toilet paper.

"AAA" toilet paper, but toilet paper nonetheless - its all good for only one thing - wiping your ass!

Where is this crap? Pension funds. Overseas banks. Asian investors. All of whom are sitting on zeros and not all of them are smart enough to know it yet. They will figure it out when the coupon money stops coming in and they rush for the door.

I've been warning of this for months and yet nobody wants to listen. Believe me - they will - and as this unwinds it is going to murder the funds who will be forced to sell whatever they have that's still "good" to cover the losses - especially if the buyers were dumb enough to lever up, and many of them were. Hedgies are in for a big (and ugly) surprise; this is also a big part of where the "SIeVe stress" is coming from.

Oh, and was today a "strong rebound"? Ha! Go tell that to Gold. This was Quant-unwind, oversold bounce and margin driven; why do you think Gold and Silver got murdered at the open and kept being sold off all day long? Gee, I wonder - NOT! I warned that this was likely to happen, which is why I got out of my metals positions last week. Its not over either.

Of course Hank Paulson wants us all to think that "super-SIeVing" all this crap will make it "ok". Uh huh. Amazing how when you take a picture of this clown his "true colors" come shining through in the finished print....

(credit for this one to "Foxymoron" on the forum..... and by the way, you owe me a keyboard!)

AXP came out with 90 cents in earnings; the street expected 85 cents. The real question is charge volumes, which appears at first blush to be up significantly, but their provisions for losses are also up 24%. That's not small! In addition they took a big tax benefit during the quarter...... hmmmm...... Revenue wasn't anywhere near forecasts (6.94 .vs. 7.29B) and loss reserves up - that doesn't look good from a consumer perspective. The market is churning on their price aftermarket; I'd call this mixed at best; the revenue number is a pretty big miss. This points to a weaker consumer sector - exactly what we've been seeing in other readings. It will be interesting to see how the market treats this in the morning.

Apple claimed $1.01 in EPS, 2.16M Macs shipped - but the "whisper" was over 2.2. They also claim they expect 42% higher EPS next quarter? That'd be amazing if they hit it - I'm not buying on that. 1.2 million iPhones, heh, not bad there. But 42% growth in EPS? I'm not sure if I believe that given a slowing consumer (you didn't read the AXP release did you?)

Texas Instruments (TXN) appears to have beat by 4 cents with the beat coming from an asset sale - revenues inline. Forecasts are light compared to what the street wanted to see. The market didn't like their numbers at all and is punishing them after-hours.

So let's see if we got this right - Apple claims they can sell anything to anyone and they're pretty much all consumer sales. Texas Instruments says their chip demand isn't what it should be, and American Express says that consumer charge volume is down and charge-offs are up.

Hmmm...... who's right? I guess we'll find out eh? But you certainly have balls to be issuing a 42% EPS growth number into what is clearly a slowing consumer, when virtually all of your sales are to that very same consumer!

Oh, market internals? Nice strong advaice - and 28 new highs - 178 new lows. Tech led you say? 29 new highs on the 'Daq, 193 new lows.

Go long here? Are you nuts?

Here's your technical!