The Market Ticker

In the "Chuckle Of The Day" department:

Aug 13 (Reuters) - Bank of America Corp sued Colonial BancGroup Inc for more than $1 billion in loans and cash, and urged a federal court to order the struggling lender not to sell certain assets, pushing the company into further trouble.

Bank of America, which was the collateral agent for certain loans of Ocala Funding LLC, said Colonial refused to return more than $1 billion of loans and cash which it held as a custodian, agent and bailee. Ocala Funding was a commercial paper vehicle sponsored by Taylor, Bean & Whitaker Mortgage Corp (TBW).

Colonial is almost certainly done; my only shock is that the FDIC hasn't (yet) come in and seized that joint.

But this is truly amusing.  Bank of America gets caught screwing around with the Merrill acquisition, and the SEC tries to do an under-the-counter deal with them, only to get slapped down by an intrepid Judge (who is yet to rule on the finality of the matter.)

BAC, of course, "acquired" Countrywide, one of the worst of the offenders in the liar loan and game-playing department during the housing bubble, and its former CEO ("Tangelo" Mozilo) is under investigation as well.

So now BAC, having gotten apparently hosed in playing intermediary for Colonial and TBW (both of which got nailed with an FBI investigation and ultimately a subpoena) now goes to court and sues, claiming to be due money back that it put forward for companies that are alleged to have been lying, cheating and stealing in the mortgage business.

Hmmmm.... Pot, meet kettle.

Now of course the key word in all of this mess, so far, is alleged.  After all, we're all entitled to our day in court, and until proven, they're allegations, not facts.

But I still find it amusing beyond words that one of the worst apparent offenders (indeed, they had the SEC come after them) in the "I like to play games" department is now suing because, they allege, someone else played games with them!

All I have to say to Ken Lewis and BAC is this: Karma is a bitch!

Tout TV at its finest:

"The Fact is that they're (consumers) shopping" (0:40 in)

No Jim, they're not.  We got the July retail sales numbers today. 

The only thing people are buying more of is booze!

After the blatant false statement about WalMart's actual results - he claimed people "are shopping"; the FACTS are (from their own press release):

Revenue including membership income in the quarter ended July 31 fell 1.4% to $100.9 billion from $102.3 billion.

Cramer then goes on to claim that because moving averages are going up means the market should be bought.

Look folks, this is how the "game" on Scam Street works.  You blatantly bullshit people with something that is just plain not true and then you go off on a tangent into something you claim supports your thesis and there are no honest reporters to call you out, ergo, your false statement stands unchallenged.

This then gets the sheeple to buy buy but and voila - moving averages go up!  Unfortunately they go up right to the edge of the cliff and then all those people who listened to you lose their shirts.

Well Jim here's reality for you and the rest of your cronies on CNBS from the retail sales report this morning:

• Electronics, the "high tech will save us" meme of Cramer and the rest of Tout TV: Down sequentially (8,156 .vs. 8,275), even though this is the start of "back to school" buying of laptops and similar.  It is also down from $9,554 last year, a monstrous decrease.
• Building materials, down as well, despite the so-called "better home starts", again sequentially, July from June.
• Gasoline, down despite the price of gasoline being flat to slightly up.  Uh, isn't this summer vacation driving season?  Ah, people aren't going out are they?
• Clothing is up a bit sequentially ($17,131 .vs. $17,027) but down huge from last year ($18,540)
• General merchandise stores, down sequentially and off about 4% from last year.
• Non-store retailers (e.g. online buying) up a bit, $24,058 .vs. $24,025) but down big from last year ($25,388)
• There was, however, one green shoot.  Bars (in "food and drinking places") were up both sequentially and year/over/year. 

When does this clown get taken off the air?

I understand differences of opinion, but this not opinion - it is blatant and outrageous BS.  WalMart's revenues were down and while earnings did beat expectations, the fact is that their top line decreased, which means they SOLD LESS, not SOLD MORE. 

THE TOP LINE CANNOT BE FUDGED - IT IS WHAT IT IS, AND SINCE WALMART IS STILL OPENING NEW STORES THIS MEANS THEIR RESULTS ON A PER-STORE BASIS WAS EVEN WORSE THAN IT APPEARS!

The Media is hell-bent and determined to get you going with your "animal spirits."

But an animal does not think before he acts, and if you do that as an investor you wind up a bagholder, just like those who are chasing three month old data on hedge fund purchases in the financials - which CNBC touted last night - will be.

LOOK AT THE FACTS FOLKS, NOT THE BS PUT FORWARD BY THE SO-CALLED "MEDIA."

Gee, you think someone's been paying attention to The Ticker?

Check out the footnotes to Regions Financial Corp.’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.

So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well capitalized.”

Hmmm.... where have I seen that before?

Oh yeah, right here:

English: We still have banks that are engaged in what amounts to accounting fraud when looked at through any sort of objective lens, but its all "ok" because we have "accounting rules" that say you can claim something is worth more than it really is.

Sheesh.  Such a revelation.  NOT!

I've been pounding the table on this for over two years.

I appreciate that Bloomberg is finally picking up on it, but am dismayed that this shows up under "Opinion" and not hard news, which is, of course, the correct category.

(On second thought, maybe not - 10Ks and 10Qs are now "opinions" and not "facts", right?)

Psst: Congress might want to pay attention to Elizabeth Warren, chair of the COP.  I know they don't care about people like me, but Ms. Warren's saying the same thing I am: the banks are all lying.

The Morning dawned with the futures playing rocket ride once again, this time on "index speculation" in Japan followed by the European GDP reports from France and Germany.

The claim is that "they exited their recession", repeated over and over and over on Tout TV.

A 30-second look inside the GDP reports show that the reason for the positive prints was a mathematical reality, not growth: Imports collapsed.  Yet the article referenced in the above link did not mention this at all.  Why not?

Further, what do collapsing imports tell us?  They speak to both crashing inventory levels and a lack of ability (or desire) to purchase imported goods. 

The Euro and Pound have moved higher which has whalloped the dollar, now at 78.32.  Below 77.5 the abyss continues to beckon, with a last handhold between 72 and 71. 

Should 71 break there is no floor.

On reflection it appears that FX traders have deduced that whatever Bernanke said yesterday (he wasn't going to extend the size of QE, and was going to slow purchases) that he was either lying or it didn't matter - effectively The Fed has the "print" button mashed to the floor and they are in turn punishing the United States in the FX market compared to other nations.  Of course the ECB has interest rates above ours, which doesn't help.

WalMart (WMT) came in with revenues that were roughly in line (although down) and earnings that beat expectations by a couple of pennies.  The problem is in same-store sales and outlook - they're looking for flat to up 2% for the next quarter sequentially, which isn't good.  Back-to-school is usually a strong quarter for them; that they're not forecasting the usual 3%ish blip in this quarter should be concerning.  This morning its not - the stock is called up over a buck pre-market.

Last night after the bell Mr. Paulson's hedge fund disclosed that in the second quarter it bought a metric buttload of Bank America (BAC); the stock instantly skyrocketed in the aftermarket.  This sort of "follow me" game is one of the most dangerous (and disingenuous) ones that investors can play, and Fraud Street along with Tout TV encourage it.  The facts are that these purchases were made with a cost basis some 50% below today's trading price - which means that this fund has a fifty percent gain in three months.  That's 200% annualized, and you can bet that at the first sign of weakness (or the first sign of a bunch of suckers) you could be the ones that wind up buying all of his shares from him.  What a nice way to drop a steaming load in your bag; if you're going to trade this pump your only advantage is that with a much smaller stake you can bail fast, where it will take Mr. Paulson a while to unwind his bet.  Turn your back on this one and you're playing "what could possibly go wrong."

Beware....

Sigh.....

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $342.3 billion, a decrease of 0.1 percent (±0.5%)* from the previous month and 8.3 percent (±0.7%) below July 2008. Total sales for the May through July 2009 period were down 9.0 percent (±0.5%) from the same period a year ago. The May to June 2009 percent change was revised from +0.6 percent (±0.5%) to +0.8 percent (±0.2%).

Let's look inside the numbers because they are far worse than anyone had expected, and in fact resulted in roughly 8 handles coming off the futures instantly on release.

The internals in the report should give everyone pause.  A few highlights:

• Electronics, the "high tech will save us" meme of Cramer and the rest of Tout TV: Down sequentially (8,156 .vs. 8,275), even though this is the start of "back to school" buying of laptops and similar.  It is also down from $9,554 last year, a monstrous decrease.
• Building materials, down as well, despite the so-called "better home starts", again sequentially, July from June.
• Gasoline, down despite the price of gasoline being flat to slightly up.  Uh, isn't this summer vacation driving season?  Ah, people aren't going out are they?
• Clothing is up a bit sequentially ($17,131 .vs. $17,027) but down huge from last year ($18,540)
• General merchandise stores, down sequentially and off about 4% from last year.
• Non-store retailers (e.g. online buying) up a bit, $24,058 .vs. $24,025) but down big from last year ($25,388)
• There was, however, one green shoot.  Bars (in "food and drinking places") were up both sequentially and year/over/year. 

So if the economy sucks you won't buy much, but you will go out and get drunk.  Sounds rational to me.

Investment strategy? 

Go long booze and bars, short everything else - including Tout TV.

Folks, I caught the shift onto credit cards for consumers in April of 2007 and warned about it.  Nobody wanted to listen in 2007 or 2008 and they're sure as hell ignoring it now.  The "green shoot" guys have been gushing all over themselves claiming that "the economy has bottomed" but they simply cannot answer the question that I have continually asked: where is the money going to come from?

Let's go back through the progression that I laid out and identified from the mathematics and earnings reports more than two years ago:

1. Consumer has been pulling out hundreds of billions of dollars a year to maintain their standard of living, running up credit cards and then refinancing their house to pay it off.  Rinse and repeat.
2. Housing ATM slams closed in 2007 when the floor falls out of Subprime and the liar loans start to explode.
3. The credit card build is detected in the spring of 2007; I identified it at that time and started yelling about it right here in these pages.
4. The media ignores this, and claims "there will be no recession" across the board.  This claim is not just made by Tout TV - Bernanke and the other "so-called" economists also ignore the data staring them in the face.
5. In 2008 the market collapses.  But consumer borrowing does not; in fact, consumer credit continues to increase all the way through the meltdown last fall!  This is madness but it is what Tout TV and the rest of the media have wrought - instead of cautioning in 2007, they incessantly try to pump consumption to keep "hope alive", despite the math all the way into the maw of the abyss.
6. In January 2009 consumer credit peaks.  The consumer finally hits the wall right after Christmas 2008, and is forced to start paying down and defaulting his debt.

But as of today we have only erased some 3% of consumer debt obligations. 

THREE PERCENT! 

This is simply nowhere near enough credit available for the consumer to be able to restart the borrow-and-spend cycle.  The housing ATM is still closed and will remain so for the foreseeable future.  Consumers now must earn what they spend, not borrow it.

This is not about how much money banks can lend, it is whether there is any borrowing capacity and desire among consumers.  The attempts by the media and government to stoke "animal spirits" among shoppers are doomed to fail because there are no jobs, there is no borrowing capacity, and there is no ability to pull forward demand - consumers officially hit the wall in JANUARY but nobody in the media will talk about it.

The argument that the S&P 500 or any other stock market is "reasonably priced" based on the 2003-2007 metrics of "reasonable", and that earnings will "greatly accelerate" (along with top line revenues) is ridiculous.  Everyone wants to claim "the market is cheap."  Nonsense.

We had an auto industry that was turning out 20 million units annually, it is now doing around 11 million, and this is with "Cash for Clunkers." That's approaching a fifty percent reduction.  So what you say?  All those people that used to make cars now are unemployed!  What are they going to spend - their good looks?

We have imports down some 30% and China is reporting exports down 25%.

The "employment report" was better only because half a million people gave up and exited the workforce last month alone.  That's "improvement" only in the world of government numbers, and that sort of "improvement" will continue in the coming months as well over 1 million people will exhaust their extended unemployment benefits over the next four months.

There is no spending power left in the consumer; he has hit the wall with his plastic and now is reduced to spending what he makes, which is a LOT LESS than he spent in 2007 and before.

Dick Bove has even come out and said "sell banks!" - he has finally come to my conclusion: Yes, the positive yield curve is nice, but credit costs are real and credit quality is still deteriorating.  Those losses are REAL.

The so-called "economists" are either all taking mescaline or are in someone's pocket and making calls that are knowingly false.  This data has been visible to all now for more than two years, yet it has been willfully and intentionally ignored.  Yet irrespective of what the media wants to think you cannot get people to spend who have no money, and the result looks like this at the local shopping mall:

The consumer is out of money!

Now add to this the increase in crude oil - which inevitably translates into gasoline.  Oil has doubled since the bottom on the calls for "green shoots" and similar nonsense, along with dollar depreciation.

That's a very pretty cup and handle; on a measured-move basis it projects to a price of around $110/bbl for oil.  Would you like your $4 gasoline back?  I hope so, because you just might get it. later this fall and into the winter, just in time for JP Morgan and others to sell their stockpiled heating oil (they've been leasing tankers full of the stuff - with government bailout money!) to Grandma and profit (again) from your misery.

Wake up folks.  The mathematical facts are what they are.  Dig inside the data releases from our government and other sources.

Do not just read headlines off CNBC and the "analysts" who are falling over themselves to "upgrade" stocks that depend on consumer spending when there is no spending power, or you will be misled and make a hideous mistake.

The economic storm is NOT over.