The Market Ticker

Anyone care to take a bet on Lehman surviving the weekend in its current form? Here, let me help you out....

 For the uninitiated, that volume over there on the right is, uh, massive.  And the last 30 minutes in particular of Wednesday were just plain butt-ugly.

Now I have no way to know what's really going on with Lehman, but I can read the tea leaves, and it ain't good.

There were also an awful lot of PUTs bought down to the $15 strike for July.  So far, the "KaPUTts" (the $5s and below) haven't been bought with any sort of volume, but that could come tomorrow....

Forbes picked up on it too, saying:

"The losses accelerated into the close on what TradeTheNews.com called "vague chatter" that the capital raising plan had run into trouble. (See: "Lehman's Bear Necessity")

The report said speculation suggests funds could renege on the deal before Thursday's closing."

No kidding?  You mean that people won't pay $28/share for stock when they can buy it on the open market for $24?  What an unbelievable SHOCK!

This morning it appears that both the CFO and COO are gone - reported on CNBC live.  No link as of yet to an official press release.  The stock cratered further on the news.  Gasparino is also saying - repeatedly - that the company cannot survive as an independant firm! 

That's going to leave a mark (on the stock price.)

Speaking of which, how about WaMu?  How's this chart look?

What impresses me about this is also the volume.  Essentially the entire non-institutional float has turned over for three days running now.  That's impressive - and unusual.  How long can that keep up?

Well, it got bad enough this afternoon that the firm came out with a press release stating that "they have had no adverse actions taken by regulators."  I have no reason to doubt that.

But over on Business Journal, there was a curious part of the firm's statement:

""This is about as challenging as it gets for any of us in home lending," said Killinger. "We have to make a conscious, deliberate choice to fight to the last." "

Uh, did he really say that? 

Folks - exactly what does their Tier Capital Ratio look like right now?  And more to the point, how do they intend to survive (and they're not alone - look at any of the lenders with a heavy concentration in California or Florida) with the property price declines and foreclosure rates?  No bank can realistically take 20, 30, 40% whacks on mortgages and survive.  That's just unreasonable.

Yet this is what happens when you start doing "option ARMs" and then property prices stagnate or decline.  I noted this back in April of 2007 at which time I said:

"WaMu had better hope that the housing market markedly improves out there in Californicated. I doubt it will though. And as more and more people get squeezed and have to pay those minimum payments, that "back cap" will grow - up until all those loans hit hard recast.

Then the shit hits the fan as the payments will double and, if market values have in fact declined, the "owners" won't be able to refinance."

Ding!

Oh, by the way, where's Dick Bove?  I think there may be a serving of crow ready for him shortly, as I suspect that a number of these institutions won't survive the summer.  WaMu may be one of the ones that does, but there are plenty of others where they're at and worse.  Generational buy eh?  Uh huh.

Thornburg Mortgage lost a stunning amount of money, more than $20/share.  How in the hell do you stay in business doing that?  Their stock price, by the way, is under $1.00.  20 times your market cap eh?  That's cute!

Corn rose to a record (again) today as flooding continues in the Midwest.  Never mind the impact of being stupid by burning corn in our gas tanks.  This what happens when you, the people allow CONgress to run amok handing out what amount to subsidies to big corporate farmers so they can in turn pick your pocket.  No small part of the problem is our tariffs on imported Ethanol from Brazil, which can produce for a lot less since their base is sugar cane instead of corn.  The weather isn't helping, of course, but the underlying stupidity here is ours, not God's.

The Fed's Beige Book showed generally weak economic conditions.  Gee, I could have told you that too; has anyone on Wall Street been out somewhere like, for instance, to a restaurant?  Oh I forgot - New York has a bunch of tourists and $300,000/year investment bankers in it, and that's all of America.  Well blow me down.

You have to wonder what people have been thinking out there in Equity Investment land.  If you listen to Kudlow you keep hearing "no recession" time and time again.

Naw, $4 gasoline and $5 diesel doesn't matter.  Nor does a tsunami of foreclosures, tightening consumer credit across the board (it was way too loose in the first place) or rising unemployment.  All of this is an "anomaly" and doesn't - or at least shouldn't - count.

What are these people smoking?  More to the point, what is the equity market in general smoking, given that none of this is a surprise and yet it appears that nobody wants to deal with reality!

May retail sales up 1% ex-autos up 1.2%, import prices up 17.8% year/over/year, up 2.3% month/over/month.  Ouch.  Jobless claims up to 384,000.

Interest rates moved up hard on the data release, as did the dollar and equity futures.  Huh?  Someone's wrong there, and I bet its the equity markets. The TNX hit 4.167% instantly, up more than 2.25%.  That import price statistic ought to freak anyone out - import prices nearly eighteen percent higher on an annualized basis?

So now Berspankme and Plosser have an interesting conundrum - do they put forward an inter-meeting swamp draining enterprise?  I wouldn't take that bet, but this points out the fact that The Fed is totally full of crap in terms of their claim that "they are very concerned about inflation." 

Nonsense.

Oh, and price inflation must and does always do one of two things over time - it either translates into wages or it must cause demand destruction in consumption as consumer buying power is destroyed.

What's the overwhelming recession play?  Booze.  Just ask InBev:

"Anheuser-Busch climbed as much as 9.7 percent in late New York trading after saying in a statement today that its board will evaluate the $65-a-share proposal ``in due course.'' InBev said in a separate statement on its Web site that it intends to pay for the purchase with cash. "

When you're broke, you will still - somehow - find a way to get drunk. 

Given how Berspankme and the rest of The Fed and CONgress have utterly mishandled this credit mess, not to mention the outright lies and mathematical impossibilities put forward by both as "policy", and in our stupor as Americans we have sat back and permitted this nonsense, perhaps today would be a good day to start drinking......

Heavily.