Miraculous Monday?

Confessional Season continues and Ryder was in the box this morning, warning that it would do no better than it did last year (that's zero earnings growth guys) - we'll see what the market thinks of it.

""Economic conditions have softened considerably in more industries beyond those related to housing and construction," Ryder said in a news release. The company added it expects softer economic conditions to continue through the fourth quarter, and lowered its full-year forecast to a range of $4.10 to $4.15 a share from $4.30 to $4.35 a share."

Oh, the economy is strong eh? Well the stock didn't think so, down nearly 5% in the premarket.

The fun part of this is that the options market guys are getting worried - in fact, they think there might be an outright crash:

"Skittishness over the U.S. stock market's record-setting rally is reaching a crescendo among options traders who are preparing for a crash."

Oh, we should buy stocks, right?

The Hedgie mess is not over. Dig this:

"Ellington Capital Management, the country's largest mortgage-backed securities hedge fund, sent a letter to investors notifying them that redemption's and withdrawals in two of its funds would be suspended because of a sharp decline in the liquidity of certain mortgage and asset-backed markets."

Hmmmm..... the article goes on to try to claim that there's no 'underlying problem.' Yeah, right.

By the way, if you think the Housing Market is "bottoming" - you're wrong. Hovnavian's "sale of the century" was simply an attempt to front-run what Ara Hovnovian knows is coming - huge asset sales at fire-sale prices. If he's the first one in the door, he gets hurt the least.

When you know that all the car dealers in your town have 500 more cars than they can sell, you know what's coming next - someone's going to start liquidating inventory and when they do if you're behind them you're going to get murdered. The only way to survive is to be first!

Of course if you're one of the bagholders, er, "homeowners", who bought before the "fire sale", you're fucked. Your property value is (properly) "marked to market" when the fire sale happens, and $100,000 or more instantly evaporates from your personal balance sheet.

And you thought it was easy to lose money in the stock market eh? Guess what - losing money in your house is even easier when this sort of shit starts! And no, it is just warming up now!

Every one of the talking heads thinks that the "housing bust" is on full-force. Nonsense. The "bust" part is just beginning. Prices in real estate are very "sticky" but this is about to change, as builders are now facing the fact that they can either cut prices or get their revolvers and other credit facilities called. In short they are being forced to de-leverage in order to survive, and the only way to do that is to take whatever losses they need to take in order to get the contingent and actual liabilities off the books - reduced to cash losses so they are over and done.

Some - perhaps many - will not survive. In the process anyone within 2 miles of these "fire sales" is going to see their home's value slashed by 20% or more. This instantly slams the door on any more HELOC or MEW money and may even cause some HELOCs to be called. If you need to sell your house under such conditions (e.g. your job get relocated) you're just plain old-fashioned screwed.

(Oh, by the way, I bet most of you didn't know that HELOCs can be called. Surprise! If you have one, go look at the documents very carefully. I've yet to see a HELOC that didn't have a call provision if the "security" isn't impaired in the judgement of the bank - what do you call a drop in market value below the outstanding balance of all liens out? Oh oh....)

And don't get me started about "this is all about personal greed on the part of borrowers." Sorry, but no bite here on that one. The Consumer should not be expected to be an expert on what is and is not safe mortgage lending. The people who have been doing it for 100 years and "served" millions of loans up should be. Here's an example of the total horseshit that has been foisted off on people - and in this case, he can't even speak or read English, yet guess what language his loan documents were written in?

"Relying on the broker's word, he signed loan documents written in English, a language he neither speaks nor reads, Aviles said. He was shocked to learn afterward that the monthly payment would not be $3,600, but $4,800 -- a price that forced him to rent out bedrooms, the garage and an enclosed porch while he and his wife slept on the couch. He fed his family with food from friends and corn he grew.

Aviles says he was not aware that the February 2006 loan application he signed dramatically exaggerated his family's income. The application lists him as the owner of a landscaping business with a $7,400 monthly income. His 27-year-old daughter Marlene, who earns $9 an hour in a noodle factory, appears as the owner of a housecleaning company who makes $5,700 a month. The application lists their yearly income as $157,000, when, according to Aviles, it was really closer to $60,000."

This is a guy who makes $9/hour but bought a $600,000 house, and signed documents he couldn't read. Stupid? Yes. Was his mortgage lender aware that he couldn't read English? Yes. Did he know he made $9/hour? $500 says he did. Did he perpetrate a fraud upon him? That's up to a judge, but you sure as hell wouldn't want to ask me if you're the bank!

In my view we need to start seeing some brokers and bankers in jail.

I'm sure there will be plenty claiming this was an "isolated incident." My ass. There's nothing isolated about it - this sort of thing was absolutely common during the housing boom, along with appraisal fraud.

In fact there is on record a 2001 petition to CONGRESS about blatant appraisal shopping and what amounts to extortion - "pay for value" or "extort the value" games - from the START of this "housing boom." Was anything done? FUCK NO!

This is the sort of shit that makes my blood boil. We have millions of Americans who are going to lose their homes and both a housing and equity market "rally" that has, once again, built in the back of fraud, just like the last time during the "Tech Boom", and the cops are INTENTIONALLY IGNORING THE PROBLEM.

"The consumer might be slowing down" says CNBullShit. Might be? Consumer spending is going to slow for the next two to three years. This cannot be prevented or mitigated. Not possible. This is reality when the average American's biggest asset - his house - depreciates. And depreciate it is and will - housing will not bottom for at least two to three years.

Oh, and if that's not enough, Shitigroup (C) wants to sell KKR some of its debt that it used to fund its own acquisitions. Say what? You want to lend someone money to buy something that they borrowed to do in the first place - from you? I think a gentleman with the last name of "Ponzi" figured this out some time ago.

Why does this shit go on?

Because CONGRESS, Banking Regulators, the SEC, and State Attorney Generals have, just like THE LAST TIME, ignored their Constitutionally-mandated responsibility to regulate these industries.

Goddamn it this shit must stop!

Is it limited to the housing and banking markets? Oh hell no. Its all over - once again - including in the "Tech Space."

The pump monkeys were out this morning playing with RIMM premarket, as an example. Never mind that the company has taken channel-stuffing to a new level of art - if I'm reading it right they shipped twice as many handsets last quarter, recording the revenue on them, as were activated! And since all handsets must be "registered" in order for them to work with the Blackberry "enhanced" services, they know exactly how many were actually put in use.

This sort of "channel stuffing" is nothing new for RIMM - its been going on since the first quarter at a torrid pace, but last quarter set a new record by far. By the way, without it they would have missed their numbers by at least fifteen cents - and perhaps more. Notice how not one so-called "analyst" asked about this on the conference call? They didn't last quarter either, or the quarter before that. Gee, that's nice of those "analysts."

How long can it continue? Until the cell store owners start refusing to accept the shipments for product they will eventually end up effectively "eating." That day will come, but exactly when is difficult to determine. This much is certain though - if you're buying this stock here, you're going to get a rude surprise. It is simply a matter of when - not if - it comes apart into lots of pretty (and very small) pieces. For instructive examples of what can (and will) happen, go back and look at all the "MoMo" stocks of 1999 and early 2000. The parallels are frightening, and the techniques used to "hit the numbers" haven't changed a bit.

Today was expected to be quiet, with no economic data. In fact, other than ICSC and Redbook, there's really nothing in terms of economic data until Friday.

Google is "on fire" today, pinging the $600 level. Give me a break. This is yet another one-trick pony, despite their protesting otherwise, with big cost-control problems and one of their primary advertising channels - Real Estate and mortgage lenders - in the toilet. Their earnings report ought to be interesting......

The amusing part of this latest blowoff move is that it has come on lighter and lighter volume. While this is not necessarily proof that exhaustion has arrived, it is a fairly reliable indicator. Today we're seeing even more indications of potential trouble, including the Transports rolling over along with the Russell and S&P - leaving the NDX as the only sector green right now (10:00 ET), and that only by a thread. Hmmmm.....

Today's "strength" was all concentrated in one place - the NDX. Google at $600 (and incidentally with a Market Capitalization now higher than WalMart?!), Apple up 2% and more than $3 today, RIMM up over 3% and $3.50, Spamazon up 2% and $2? Hmmmmm... Internet stocks trading at P/Es of 40-100+ eh? Yeah, ok. We know how this ends, right? You won't hear this on CNBullShit of course, since they're all looking at "the market must rise" as their mantra, but when you get right down to it there is not a thing that makes a P/E of 100 sustainable or appropriate no matter what the company's name is. Amazon has been here before and it collapsed from $113 to LESS THAN $10. How soon people forget.... it was only a short seven years ago that the precise same pattern played out in the same stock!

Oh, and before you go all gaga over stocks like CROX, be aware that this last week has included some pretty amazing inside selling of shares by their officers and directors..... hmmmm..... directors, VPs, CEOs..... yeah, I know, its all "prearranged", right? Does anyone remember one Angelo Mazolla (sic) and his slippery stock sales? How'd buying CFC's stock while he was selling turn out for you?

The dollar appears to have stabilized and the 10 is flat - but fixed income is closed today, so you can't draw much in the way of conclusions from today's action. Tomorrow we shall see if the breakout higher in the 10s and 30s rate is sustainable, or if it was a blip. If they continue to move higher......

The Options Market gets it. Look at the Implied Volatility on Puts and Calls out to December 2009 on the SPX. You will find that PUTs have a higher volatility (and thus price) than CALLs. The further out you go, the higher the disparity. This level of disparity and ramping IV with increasing time was last seen in March of 2000. Does anyone remember what happened next?

Do you really think that the Options Market Makers - the guys who are obligated to "pay up" when they're wrong - are the dumbest people in the room? To buy this rally that is precisely what you must believe - or you must believe you are good - and fast - enough to get out before the turn.

Good luck with the latter!

Oh, just by-the-by, you know how earnings estimates for the S&P 500 came down to 4% from 7% a week ago? Well guess what - now its down to 0.7%, which is basically zero.

What's the P/E/G on the S&P again? Oh, its now moving even higher, like into the 20s? Gee, that's only TEN TIMES overvalued! Naw, the market can go way higher right? PEG ratios can be 100, 200, like Amazon's P/E?

Yet today you have the CNBullShitters on the floor with Radigan trying to "explain away" the fact that Transports are not confirming the move to new highs in the markets. They're also trying to spin the idea that "earnings will beat expectations" as a reason for the market to move higher while not mentioning the actual PEG ratio which is stratospheric and, absent divine intervention, pure irrationality, or some "new paradigm" not seen before in ONE HUNDRED YEARS in the market, suggests that a HUGE correction is in the offing.

Do you hear these people accepting what the numbers say? No. If you listen carefully their words get real measured and their speech quite nervous. Do they believe in some "new paradigm" (like people did back in 2000)? Hell, I don't know.

But if you think they don't understand the question - you're wrong.

In the video this evening I am also going to go through the SPX specifically back to the last "Bull and Bust" years, and show you some interesting differences in chart action. This doesn't mean that we can't continue to run from here - we can - but it should provide a bit of a sobering addendum to the "buy buy buy" pump monkey nonsense.

The signals keep piling up higher and higher. When do people figure it out? Tough to know, although this morning around 11 ET it sure looked like - at least in SPX and the Russell - someone might have gotten a whiff of dead fish.

PS: Yum is going higher in the aftermarket, but read this from their earnings release:

"In the U.S., meanwhile, revenue fell 6 percent. The division has been plagued by a series of public relations disasters, including an E. coli outbreak last year that sickened 70 people, and a rat infestation in a New York City KFC/Taco Bell restaurant that was filmed by a TV news camera in February."

Always something to blame it on, isn't there - even when the "incidents" are a year old! Oh, and no earnings conference call until tomorrow.... I wonder how many people will bother reading beyond the first line of the release..... careful there....

Here's your technical!