Today appears to be "pokey day" for Madoff.

My first view (and that of a lot of other people) seems to be best summed up as "it's about damn time."

I'm far more concerned about the continuing (it better be) investigation into all the co-conspirators.  Where is it, and what's going on in that regard?  This most certainly does not end with Madoff.

My "What's Dead" Ticker made the rounds to a lot of places, including some conspiracy boards where I don't usually get much attention.  The resulting traffic spike was, to put it mildly, "interesting" and forced a lot of work on an accelerated schedule to get The Ticker onto more-capable infrastructure.  It has also drawn lots of questions about whether it was one of those infamous "early and thus wrong" calls, just plain wrong, or to put it more succinctly "where's the kaboom?"

For those of you who watch the markets let me recommend that you pay attention to credit before equities.  I do.  The stock market is the tail and the credit market is the dog - always - and if you remember that you'll be ok.

In this regard the dog was definitely barking and it still is, although it has calmed down a little bit.  Friday was especially bad, right up until we reversed, and then of course the moonshot Tuesday took some pressure off.  But only a bit. 

The most important aspect of Tuesday (and yesterday) is that spreads came in just a tiny bit.  Let's not overemphasize that - it really was a 'tiny bit' in most corners of the credit market, although some spreads improved more than others.  In particular the commercial real estate spreads (CMBX) didn't improve nearly enough for me to take my hand off the "oh oh" button.

The rally that we got Tuesday and the weak follow-through yesterday was a consequence of a serious "coiled spring" problem - the very same coiled spring that could have produced a crash.  Friday's late move higher took the "crash now!" indicators and extinguished them but the underlying stress remains.  We remain in an extremely fragile market, with Congress now talking about mark-to-market, the uptick rule and other similar machinations driving much more of the short-term direction than anything else - the old "greed and fear" dichotomy back in train.

That ticker was intended as a warning as to how bad things could get; reading for context is important.  Of course government could do the right thing, and perhaps they're taking the cotton out of their ears, even if just a little bit.  Mary Shapiro made some very interesting noises yesterday in her testimony before Congress, and actually answered questions - something that our regulators haven't done in the last 20 or so years.  It was a welcome change, and if we can hear more of that, perhaps the markets - especially the credit markets - will ease off the edge of the cliff a bit, gaining just a bit of confidence that some of The Bezzle will be removed.  We shall see.

The brouhaha surrounding that Ticker has poked me once again on a Ticker that I've had on the back burner for quite some time, and now will commit to finish and get out before the end of the weekend.  It deals specifically with fractional reserve banking.

There are, you see, a whole host of people who think that fractional reserve banking is inherently fraudulent.  That is, a bank loaning out money, taking that money back in through the deposit of the merchant, then loaning some part of that back out inherently constitutes fraud.  Those who believe this are wrong on a whole host of levels, and if you understand how to read a balance sheet (and how a bank inherently works) you understand this immediately, but it persists. 

Fractional reserve banking comes with both costs and benefits.  It has become very popular over time because the benefits are quite real.  It is the tampering with the costs that tends to get us into serious trouble; nobody likes the bitter to go with the sweet, but it is inevitable with any system.

In any event I keep finding other things to write about, but I will commit to getting this one finished (it's full of pro-forma balance sheet tables and thus is a bit tricky to edit) and out over the weekend.  Look for it - this is something you should have learned in High School but obviously, unless you were born 100+ years ago and actually had to pass a test in 8th grade on discounting notes and other banking-related functions, you didn't.

Citibank executives seem to have been doing a bit of trading ahead of Pandit's claimed "leaked" memo.  There's nothing wrong with buying the stock of the company you work for.  There is something very wrong (and illegal) with buying it if you're in possession of material inside information (like, for example, the profit numbers for the first two months of this quarter) while the rest of the marketplace is unaware of them, if your purchase was made due to the fact that this information would be "material" to the marketplace.

The price action of the last few days makes quite clear that the information was 'material.'  My obvious question is whether or not these executives had possession of it before their "buy" orders were placed.

I, by the way, bought a few lottery tickets with the name "C" on the front of them in the last few days before that announcement too, but I did it as pure (and inexpensive) speculation.  For these executives to claim the same they'd have to get me to believe "the dog ate my homework."

Yesterday's screed by Jamie Dimon of JPM infuriated me.  There were some nuggets of truth in there - but mixed in was just enough outrageous nonsense for my blood pressure to spike a few points.

One of the correct points was this:

“If we act like a dysfunctional family and we don’t finish these things and we’re forever debating them, I think this will go on for several years,” Dimon, 52, said at a conference hosted by the U.S. Chamber of Commerce in Washington. “It’s completely up to us at this point.”

True.  Refusing to acknowledge that both Republicans and Democrats have embraced a corporate Bezzle that has swept through the system, rewarding fraud and theft instead of punishing same, and allowing the argument over same to degenerate into the usual partisan finger pointing will not only get us nowhere, it will cause the economy to continue to sink into the abyss and our capital markets to implode.  If you want the "What's Dead" Ticker to come true you want the partisan finger-pointing to continue.

But then we got gems like this:

Dimon said the U.S. needs to “fix” securitization because no one was responsible for underwriting standards. Regulation in the mortgage market would help with disclosures and standardization, he said.

“My biggest mistake, probably of my whole career, was not closing down our mortgage broker business sooner,” Dimon said, citing a loss rate two to three times higher on loans not originated by the bank.

Gee, fraud is good so long as it boosts profits right?  There's no admission in there that those "profits" weren't real but rather were the fruits of a poison tree, nor any intent to return any of that money "earned" by himself or the other employees of his bank eh? 

How come Jamie?  It's all good so long as we can get the taxpayer to cover it and we wink and nod at the root cause, promising "not to sin again", right?

Where is the admission that this was all about The Bezzle - about intentionally mis-priced sales of products up and down the line, starting with consumers who lied to mortgage brokers who lied to ratings agencies who lied to bankers who lied to securities buyers?  Where is the admission that all of this lying up and down the line is the root cause of the asset bubble and the now-inevitable losses, along with the fact that when you lie and people lose money we have a name for it in our society?

Consumer sales and unemployment came out this morning and consumer sales were unexpectedly stronger ex-autos, being actually positive.  That is a surprise, and resulted in the market's malaise this morning reverse immediately to nearly flat on the futures.

I wouldn't call these numbers "good", but "not a disaster" would be accurate, and everyone, it would appear, was expecting a total wipe out (including me.)  The unemployment (first time claims and continuing) figures were in fact a disaster; how spending can increase into continuing unemployment is an interesting exercise.  A look inside that spending number shows that a fair bit of the "improvement" was rising gross sales of gasoline - all comprised of rising prices.  Strip that out and gallons purchased actually dropped a bit.

That of course is bad news, not good news, and shows exactly how carefully those folks trading "momentum" bother to read, eh?