The Market Ticker

Let's dispose of the simple first - Merck (MRK) reported better than expected results and, as a DOW component, was largely responsible for the opening pop. Credit where credit is due.

Ok, on to the interesting stuff.

Heh, what's this? Expedia (EXPE) isn't buying back as much stock as they were planning to? And how come? They couldn't get the financing they wanted! Is that good? Indeed, they cut the buyback amount by eighty percent! (The stock was punished to the tune of about 10% on the news)

Now remember kids, there are no wider consequences to the credit contraction caused by risk mispricing. None at all.

How many companies have announced stock buybacks and are doing it through debt issuance? Hmmmm..... what happens when that leg is kicked out from under the stool? Anyone got an educated guess?

How'd you like to have bought Blackstone (BX) on the IPO? Trading at $26. That's a hell of a haircut.....

A funny thing happened over the weekend - the press started actually paying attention to the data on the housing market. We got this one:

"Over the next 18 months, adjustable-rate home loans sold at the peak of the high-risk lending boom in 2005 and 2006 will be reset. Given a recent tightening of lending standards as banks try to rein in their mortgage exposures, this raises the prospect of further serious losses. Christopher Flanagan, strategist at JPMorgan, estimates up to 45 per cent of borrowers facing resets will not meet criteria to refinance into new home loans."

But of course there are those who continue to whistle past the graveyard....

"On Wall Street, where the most lucrative credit markets are barely limping thanks to the worst housing slump in a decade, there isn't a chief executive officer who will tell you there is a crisis.

A few weeks after Merrill Lynch & Co. CEO Stanley O'Neal said he saw 'no clear signs' that rising delinquencies on subprime U.S. mortgages were hurting the rest of the debt markets, borrowing costs for non-investment grade companies rose to the highest in nine months. ServiceMaster Co., US Foodservice and 19 other companies have canceled bond sales because nobody wants to buy them."

So nobody will buy your crap but that's not a problem.

If you say so.

It would seem to me that this is one of those deals where people are afraid to tell it like it is for fear of people figuring out that they've been sold a bag - or three - by those very same executives.

Oh wait - there are a few people who see it that way!

"'There is a chance that wider spreads are making the situation more worrying, especially with all the leverage in the system,' Jim Reid, head of fundamental credit strategy at Deutsche Bank in London, said in a note to clients today. 'We are close to a crucial juncture for credit.'"

You think? A bit of forced selling by hedgies wouldn't do anything bad, would it?

Oh, and then there's oil. A new research note says "perhaps $100 within months." Will that be good for the economy? I suspect not.... what do you think $5/gallon gas will do?

You think buyers in the home market still are doing ok? How "ok" is this?

""I could put anybody in a loan last year," says Stephanie Gagnon, a senior loan officer at First Capital Mortgage in San Diego. But, "In the last six months, all of the big lenders are shutting down all special programs they were working with because they've realized it's bitten them."

Now, she says, "I'm turning away 50 percent of my first-time home buyers. They just can't qualify.""

50% eh? Put a fork in the homebuilding industry kids. Not that you ought to have to be told about this by now.

American Express reported 88 cents, with card-billed business up 15% in the second quarter, issuing 2.3M new cards. The market didn't particularly like the report; the estimates were for 86 cents, so I guess two cents isn't enough. Immediate reaction was to hit the stock but then rebound somewhat, finishing basically flat with today's closing price - at least initially - but is now heading lower, outside of the day's trading range. The revenue line looks lighter than forecast, which may explain the less-than-stellar response. Also, loan-loss provisions were increased by 85%, which is huge. That's not so good either. Considering that Amex tends to market towards the higher end consumer, this is a troubling read on Chucky, and it appears that market participants may be figuring it out. It should be interesting to see if this translates into the S&P futures in the morning.

Texas Instruments came in with 42 cents EPS, with revenue down 7.4%. A MISS on revenues. They are getting positively slaughtered in the afterhours and so are both the Nasdaq and S&P500 futures. SO MUCH FOR THE TECH BELLWEATHER THAT EVERYONE WATCHED LEADING HIGHER ON ANTICIPATION OF A BLOWOUT! The "instant reaction" may be a bit overdone, but the street sure as hell didn't like the report, hammering them for almost 4% immediately.

BTW, this is what "yawning wide" on the LCDX (LBO spreads) looks like....


That's a very pretty trend, isn't it?

Here's our buddy the CMBX (Commercial Real Estate)....

That AAA (supposedly "stellar" credit) chart is, well, incredible.

The BB, on the other hand, is downright "Texas Chainsaw Massacre".... if you're unfortunate enough to own any of that crap, or need to buy a swap to protect it!


Oh, we got another Hindenburg today. In Spades. Actually, let's just call it a "Double Hindenburg", because it was - more than double the required new highs and lows! That's two trading days in a row we got 'em, and this one was far stronger than the Friday indicator, despite the fact that the indices were up today.

Countrywide (CFC) reports tomorrow before the bell. I took off my Jan 08 PUTs today in expectation that they will play their "Rabbit Out Of a Hat" game again and may see a pop in the morning. If so I will get the opportunity to buy those PUTs back at a lower price and make the same money a second time. If they instead 'fess up and look to crater I'll be happy to short into the hole premarket. I may give up a bit of potential gains this way but it allows me to protect the real gains already made.

Amazon reports post-market tomorrow as well, which will be watched closely. I'll have a full report on them tomorrow evening.

All told....

The markets amaze me at times. While I agree that all of the "bad things" that "The Bears" believe may occur are unlikely to happen all at once (or perhaps at all), doesn't it only take one of them to create a shitstorm? Credit market contraction (draining the liquidity pool), housing market collapse (more than it has, or just the follow-through from inability to refi all those resetting loans) causing consumer spending to go in the tank, oil at $100 giving us $5/gasoline shoving the consumer in the tank and bringing us insane inflation pressure, the dollar collapses (bringing us that $100 oil again)?

To be a Bull today you have to believe that none of these things will happen. Not just that all of them won't happen - but that none of them will happen.

Because if any of them do, then you're left with an equity market attempting to stand up with only one leg left on the stool.

And, if the earnings reports from the so-called "leaders" are to be believed.... that stool is looking more than a bit wobbly right now.

Short and sweet.

"Its all contained". Remember that?

Really?

No, actually its not. In fact, its far worse than you think.

Lookie what showed up on a nasty little document from the Fed. Oh, its hidden. You might not even notice it unless you looked closely. I missed it the first time I looked.

You probably would too.

That's ok.

I'll tell you where to look. Page 13, line item #34.

Its a 1,214.6B (that'd be 1.2146 Trillion with a "T") exploding debt bomb, and its on the balance sheets of "Large, Domestically-Chartered Banks".

For some sobering perspective on exactly how much this really is, have a look at the total deposits on hand, and the total assets of these institutions. That's all in the same document too.

Now take a long, hard look at that ABX again, and tell me what sort of impairment you think there might of this alleged "asset", which has not been marked to the market.

You might also note that until a couple of weeks ago, this line item didn't exist on that report.

Where'd it come from and why has it suddenly - almost magically - appeared?

Think we might have something like this coming in the credit markets?

Interesting open.

Cat missed, as noted in the my morning flash - and is getting hammered at the open, down nearly 8%. Google is firming a bit but is still down over 6% from yesterday. All three indices are down, but the losses aren't awful - yet.

Wachovia and Citigroup came in with decent numbers. Not really all that surprising in either case; Wachovia has not been involved in much of the stupidity, while Citi is still doing a great trade in all-things-banking (no marks to market on all the trash on the sheet yet, right? Don't worry - it'll come.) But Wachovia is getting the woodshed today, as NIM (net interest margins) are down and guess what - they're still getting impacted by the loan problems! And guys, Wachovia has stayed away from most of the stupid stuff during the boom. If they're getting pinched, how bad is it at places that were more aggressive?

The $64,000 question is "How many people got caught offsides between Google and Cat"?

First blush is that the number is quite large, and that this is a surprise going into expiration that traders did not expect. The first couple of hours will tell us whether this turns into something more serious or not.

Orbitz went public today but is getting hammered, trading below the offering price. This makes two IPOs in two days that have opened weaker than their offer price, and of course we have Blackstone, which is now WELL below its IPO.

So much for "people will buy any crap you stick out there on the street eh?

Cat is a big deal and a problem for The Bulls. The thesis has been that global would save the day. What they seem to have forgotten is that the consumer is still 70% of the US GDP and the consumer has this little problem due to the housing sector, which is 30% of GDP all-told.

As Cat told us today, the US Housing Market thrashed their earnings. Oops.

And the bond market is starting to trip people. We've now got people talking about the credit crunch. Gee, you think? Uh huh. And what leads the equity markets? Back to the thesis guys - the credit markets must be healthy for equities to do well, and if the credit markets implode they smother equity prices at the same time - every time. Treasuries are finding a bid as people give up on the idea of "high yield", discovering that the guys who sold it to them forgot the second half of that phrase - "high RISK."

The concept of "contagion" is now spreading, and its no longer a "subprime" story. Now the chatter is on LBO money drying up, syndications running into trouble, CLOs being downgraded globally, not just in the US, and more.

The Gig may be up folks!

The dollar is getting roached today, pinging off 80.17 on fears of that very same credit market implosion. Most of the weakness is coming from the Yen, which is strengthening.

If 80 breaks the Yen will strengthen precipitously, the carry trade will unwind with a vicious snapback and add even more damage to the implosion in the credit markets. This is the stuff crashes are made of.

Now let me say that I am not prognosticating a crash. You know, "The Big One"? Circuit breaker trips and all? Yeah, that one.

I see the potential for one, but by definition crashes cannot be called in advance, because the actual triggering event can't be known. As these are "five sigma" events they always occur due to some exogenous trigger that is not forseen (otherwise the market would would have "priced it in" before it happens, and therefore, by definition it wouldn't happen! You'd get a slide instead of an explosion.)

But - the ingredients are on the kitchen counter. This doesn't mean they're going to get baked into a cake, but it does mean that caution is advised!

Let's recap:

• Softening consumer spending. Check.
• Rapidly rising consumer debt with no new sources of equity to tap. Check.
• Record margin debt (like throwing nitroglycerine into a fire.) Check.
• Markets running not on fundamental economic numbers, but rather on liquidity flushes and LBO premiums, currently trading 30% over a "rational" PEG value based on earnings expectations.
• An imploding sector in the economy, responsible for a large (30%) component of GDP, that people recognize as bad but are discounting as a "material impact" on the economy as a whole (housing). Check.
• Credit spreads widening at the same time that people are financing everything with debt, including "buybacks" which are announced but yet not completed. Ditto with all the LBOs. This can and usually does result in "hung deals". Check.
• Many of those deals are being written with no financing contingency and thus if they "hang" someone - usually a big money center bank - gets to eat them. Check.
• Oh, and the Dollar is being roached (again) today. This is especially dangerous because a break below 80 may cause tremendous repatriation of foreign money from the US ("dollar flight") and force the Fed to try to arrest it with a surprise rate hike. Maybe.

Oh, we got another Hindenburg today. I think we're up to five or six at this point; I've kinda lost count here, but its definitely getting "more real" by the day. That you have components of an index trying like hell to pull things up on a day that's a near-panic-sale situation is not any healthier than the opposite during a buying mania, but we've had both with this series of indicators. All is not well.

By the way, why didn't the Nasdaq collapse? People talk about Apple. Nope. It was ISRG, Intersurgical, which reported a blowout quarter but saw their stock price go up 30% on the earnings to nearly $200 a share. Even more interesting, while they got several upgrades on the announcement the current trading price is above the revised price targets!

Can you say "The Speculators Are Excited"?

Then there's Apple, of course. Piper-Jaffrey raised their price target to north of $200/share on.... of course, the IPhone. Guys, pull the other one. You folks are smoking some serious crack to be using 2009 estimates (which you're conjuring out of thin air - the company hasn't provided any guidance out that far!) to try to come up with a 12 month price target. Unless my calendar works differently than yours, its 2007 right now, not 2008!

Of course in the end, its the earnings stupid! And Brunswick, which I shorted the other day expecting the boating industry to get pounded as the economy softens, lowered their outlook, pretty much as I thought they would.

"The Lakewood, Ill., company now sees 2007 earnings from continuing operations of $1.25 to $1.35 a share, down from its prior view of $1.65 to $2. Analysts, on average, had forecast earnings of $1.70 a share, according to Thomson Financial."

Well, yeah. As a boater my entire life I can tell you this - high gas prices and lack of free cash flow in households, translates into crap boat sales. And while Brunswick makes bowling equipment, they also own a lot of the boating market, including Mercury Marine (outboard, stern drives, etc) and several boat brands. All I gotta do to see this is take a gander at all the unsold boats on dealer lots around here and how many fewer of them I see racing around during the weekends. Not tough to figure out. (By the way, while they're saying "earnings", I think there's a decent chance that by the end of the year they'll change that word to "losses".... which means they're still too expensive.)

The LCDX yawned wide once again today. Given that the Cerberus deal for Chrysler needs to poop that debt out to the market, this is not a good thing. Now here's the question - is there enough trouble there to "hang" that deal? Unknown - but if so, you're going to see the credit market do one of these:

And believe me - it won't stop in the credit markets if that happens. Just one deal that hangs and equities will hang too, and it'll come first and worst in the places that have been over-speculated. That'd be Apple, Google, Amazon, RIMM. All those places where "The speculators are excited."

Let's add another tidbit. Kudlow loves to pound the table on his "Dow Theory" with the Transports making new highs. But what he's not telling you is that there has never been a sustainable rally, nor a healthy Bull Market, without LEADERSHIP from the financials, and that leadership has been TOTALLY ABSENT SINCE THE START OF THE YEAR.

In fact, the XLF (Financial ETF) double topped in February and then again in May, and since then has broken down, utterly DESTROYING support at the 200 Day Moving Average three days ago with follow-through in both of the last two trading sessions! While the Dow, S&P and Nasdaq have been moving up, the financials have rolled over with a breakdown confirmed on 6/6 in the last of several key technical indicators.

We got another spike play in the Futures into the close on the Nasdaq which (again) was taken right off after the close. That was a clear attempt to prevent the QQQ 50 PUTs from going into the money; they threatened to right at the close. It was Nasdaq-only today - no corresponding spike in the S&P.

The ABX continued its plunge. The new 07 series now has data on it and all are at or right near the lows, with the BBBs trading at 45 (!) Even AAA credit is in the ditch. The graphs are not all that useful as they only have one day's worth of data on them for the 07s, but this will change in the coming days.

The CMBX is incredible today. Check these out:

You gotta love that "AAA" credit eh? But the BB is beyond stupid:

725 basis points?! WOW!

The LCDX today closed at 271.4 - horrifyingly bad from yesterday, almost 30 more bips.

The markets themselves were down 150 on the Dow, down 19 on the S&P and down 32 on the Nasdaq, all between 1.1 and 1.2%.

It would appear that we may be at a tipping point going into next week, and if so, things are going to get very, very interesting. If spreads continue to widen and credit quality continues to be at issue, the LBO game is over - and so is the run in equities.

Have a great weekend!

Caterpillar MISS!!!!

So much for "Globalization Wins"!

"CAT said its net income fell to $823 million, or $1.24 a share from $1.05 billion, or $1.52 a share in the same period last year."

Bang. You're dead. Expectations were $1.49.

That's called "A Big Miss"and is whaling on the futures, along with Google's Mess.

CAT is indicated down about $5.25 or ~7%ish.

Given that this is OpEx, things are going to get verrrrry interesting today. Unlike most OpExes, its at least somewhat likely that there will be some extreme violence to the downside, as a number of option writers will have been caught "offsides" .vs. expectations - which, of course, were that the market was going to roar higher as it has during the last six months on OpEx Fridays.

Let's lead with Motorola (MOT) - missed big, losing its mojo in the phone business, reported a loss. The Bat is getting its comeuppance. I've never liked that company so I've had plenty to smile about watching them sink into the abyss. These guys led the "piss in a cup" parade many, many years ago, back before I ran my own shop, prompting me to tell an interviewer that he could collect his sample by opening wide. He wasn't impressed (and no, I did not get the job!)

Hershey says sales were flat. Oh, and profits non-existent. What, isn't Chucky eating Chocolate anymore?

PIMCO is starting to see the bleedover into the economy.

"A slowdown in the U.S. housing market and losses in mortgage-linked bonds will lead the Federal Reserve to cut interest rates, said Paul McCulley, a bond fund manager at Pacific Investment Management Co."

Psst - there's a word for what's coming, and it starts with an "R". Betcha you can guess the rest. That's the only reason the Fed would cut rates, and they can only do it once it goes global so as not to destroy the dollar in the process.

Weekly Jobless claims came in at 301,000, previous month revised to 309,000. Interest rates moved up a bit to 5.05%, up 0.86%, still in the range. The futures didn't move much on the report.

Honeywell (HON) reported this morning, beating by 3 cents. The premarket gave them a small boost immediately on the report; we'll see if it holds.

Juniper, which got nothing right away off their earnings report, seems to have woken up this morning and is running hard. The Speculators Are Excited. Again.

The WSJ is starting to bang the drum a bit louder on the credit markets.

"If you're not a bond trader, should you care? After all, the nation's stock market is giddy. The economy, despite the housing bust, is growing. Unemployment is low. Inflation, though higher, remains moderate.

All true. But if something mars the picture, history suggests it will involve credit markets."

No kidding. Its just that every market crash through history starts there.

China's economy expanded at the fastest rate in 12 years.

"Gross domestic product expanded 11.9 percent from a year earlier, the statistics bureau said in Beijing today, exceeding all estimates of 23 economists surveyed by Bloomberg. Inflation climbed to 4.4 percent in June, the fastest since September 2004, breaching the central bank's 3 percent target for a fourth month."

The problem for them is that we're exporting our inflation there, and they are certain to eventually stick a big "Return to Sender" stamp on what we're sending them. Maybe sooner than we think. Maybe by unlocking the Yuan and allowing it to float. That'd be fun for us. NOT!

Oh, here's an interesting statistic - and one that ought to rattle you a bit.

In 2000, market leverage (bonds and stocks) was about $300 billion. It of course declined in the crash but since recovered in equities to about $350 billion.

But bond market leverage has risen to north of $1.4 trillion.

Now is all this leverage destined to implode? Not necessarily. But what history teaches us about leverage is that people take it on while hedging, thinking they have correlation figured out sufficiently well to protect them against something going wrong.

History says that's a bad bet; the desired correlation only works in "healthy" markets. When markets decouple from fundamentals and start to run on "The speculators are excited", as they're doing now, one of the first sacrifices is accurate correlation between the underlying and financial instruments used to hedge. This has proven correct over and over again, yet the market speculators never learn the lesson, inevitably becoming drunk on the power and money they are swimming in as they continue to "drink their own Kool Aid."

Harley-Davidson (HOG) had good results but is talking about increasing delinquencies on their motorcycle loans. Gee, you think? And Harleys ain't cheap. So if they've got a problem with delinquencies, what does that say about the the health of The Consumer?

The morning opened up strongly, with an instant pop on the DOW over 14,000. Did I sell my Q 50 PUTs? Nope. I don't think this thing is going to hold. I've got a stop on my DXD trade which will fire a bit over the 14k level; I don't think its going to go off, but I could be wrong. We will see as the day develops.

Leading indicators came in down 0.3%, which is not good. This makes the cumulative run rate negative 0.7%, which suggests a recession in the offing. The market took an immediate crap on that, although it was somewhat muted. We shall see what happens as the day progresses - are people finally starting to pay attention to the data once again? Hope springs eternal!

Bernanke is getting roasted today on The Hill, with him being nailed on inflation, homeowner MEWs, stagnant median income and more. He's having a lot of trouble deflecting the incoming fire this time around; the Senate Banking Committee seems to have a bit more brainpower than the House did yesterday.

Bernanke seems to be having this problem with the idea of debt and appreciation. He said that "well if my house went up by $1,000 and I took out a $500 loan, my debt went up by $500 but I'm still ahead" in response to one of the questions asked of him today.

Time to take the gloves off here: You are a fucking liar Ben and you know it. A HELOC or mortgage taken over 30 years requires total payments of three times the principal over the term of the loan and as a consequence of this you lose when you do that unless you take less than ONE THIRD of your appreciation! The music ALWAYS stops and when it does SOMEONE is left holding the bag!

One of the forum members stuck a great avatar up - I just have to reproduce it.....




Gotta love Photoshop.....

Oh by the way, if you think that the first half of 2007 marked "better" underwriting on home loans, you're wrong. It didn't.

"Subprime mortgage securities created in the first half of 2007 are about as likely to default as those made last year, according to a new series of benchmark credit derivatives."

You mean that lenders didn't respond to defaults by actually cutting the crap and returning to responsible lending? Well well well.... so we still have people trying to stick the buyers of that debt. Got it.

At some point this crap has to come to an end. Obviously, the market will eventually take care of it, but now we get to the real problem, don't we? Will the government step in and try to bail out the people who made these bets and wrote these CDOs? If they do, I'm going to be royally pissed because that amounts to the TAXPAYERS paying off when people commit FRAUD! I don't care if people want to make unsafe loans, so long as when they blow up they EAT THEM.

Philly Fed Index came in at 9.2 .vs. expected 10, all internal indicators are down, new orders and employment, prices paid level and prices received down. Not a good report although I wouldn't call it disastrous.

More bonds being slashed in the mortgage space.... gee, 'ya think?

"Eight classes of mortgage bonds, including some issued by a Goldman Sachs Group Inc. (GS) trust, were cut to "BBB" from "AAA" as S&P applied its new assumptions, it said. In all, S&P cut ratings on 418 classes, or portions, of second-lien bonds."

THAT IS HUGE! From AAA to BBB in one step?! Holy shit! That is simply NEVER supposed to happen in the bond markets.

The repercussions of this WILL filter through. It may take a while, but it is inevitable. These deals will not be able to be sold at anything approaching the current price in the months to come, which means that real interest rates on these lines are going to do a moonshot, further depressing the housing market as affordability is further destroyed.

This has already started with some lenders putting 100-200 basis points (that's 1-2%) on their offered rates already. Its not enough - the total spread increase will likely wind up somewhere around three to four hundred basis points.

Oh, in the "Its just two Bear Stearns Hedge Funds" column, we have this:

"Basis Capital Funds Management Limited (ACN 092 478 441) as the responsible entity of the Basis Yield Fund advises that the Basis Yield Alpha Fund Master in which the Fund indirectly invests most of its assets has liabilities to its financiers secured over most of its assets. The financiers have reduced their valuations of those assets as a consequence of the disruption in US credit markets following concerns in relation to sub-prime residential mortgages and have made margin calls. The Master Fund is in default in meeting some margin calls which has resulted in a number of its financiers declaring events of default."

They go on to say that the losses, at what they think they can sell the assets for right now, would be around 50%. Oops. Good thing they're in Australia eh? Oh wait a second - I thought this problem was localized and wasn't going to spread? Hmmmm..... Given that this was a $1b fund (roughly) and considered Australia's "fund of the year" last year (no kidding!), this is interesting. You know, $500m here and $500m there and pretty soon we're talking real money!
Oh, BHP said "nuts" to the idea of chasing after Alcoa this afternoon. Oops. Alcoa dropped 5.5% almost immediately and with it some of the steam came out of the Dow and S&P. The LBO acquisition boom is drying up as people are starting to take a far more critical look at WHAT they're buying given the precipitously rising cost of debt issuance! More and more, they're going to find that the numbers just don't work.

Those who bought those AA calls and didn't sell them into the run? 9 million shares worth of calls took losses between 60 and 80% within seconds. Yes, it really was that bad, and this is what happens to you when "The Worm Turns." Expect there to be more and more of this in the coming months, making playing the long side more and more dangerous as this ugly thing called RISK comes back into the market.

FOMC minutes are out with worries expressed both on inflation and growth. This is not good; that's spelled STAGFLATION. "Housing contraction to continue for several more quarters, along with concern about a credit crunch."

Oops. The market doesn't like it either; as soon as those hit the wires and people started to read the markets came down a fair bit.

Short version is that they stuck more weight on both sides of the scale. Of course this means that when one of those weights come off, we get a rocket effect on the other side, and both are bad!

Google got SHELLACKED in the aftermarket on earnings. While the numbers don't look that bad it wasn't what the street expected and they got pulverized immediately, down almost $20 instantly, and it has continued, down as much as $30! Light a bit and WHAM. Now you know why that option premium was as high was it was. This hit the Nasdaq Futures instantly as well.

Sandisk came out with 12c EPS with 15% revenue increase; the market seemed to like that one, driving the price up about $3 on the announcement. We'll see if that holds; by the numbers this is a miss .vs. expectations, but they're getting a big pop initially, fading back as people digest it.

Capital One came in at $1.62; interestingly, they affirmed guidance of $7-$7.40. That looks just a bit aggressive to me. Chargeoffs increased significantly as well, as did delinquencies. Card revenue increased significantly but total loan amounts didn't go up much (higher interest rates charged plus fees/delinquency charges?) Their stock got a small pop out of that which almost immediately faded; call it flat.

Microsoft reported 39 cents ex-charge for the Xbox, inline. The market didn't like it much, revoking a good part of Mister Softee's gains during the day, which were quite substantial, only to think "ok, that's inline, we'll leave 'em alone." No material move; as I post this its fading back again.

Net-Net the Nasdaq futures are right back where they were before the market opened! This could be a verrrrrry interesting open tomorrow, as it now appears that people got just a wee bit excited beyond reality. Oops.

Option expiration is tomorrow and it looks to be setting up to be a really raucous one at that!

The ABX site over at Markit is a mess - it looks like they screwed up internally (this wouldn't be the first time.) But looking at the numerical tables there is absolutely nothing to like here, with the deterioration continuing. The AAA tranches are bad news, with the BBBs recovering just a bit.

The CMBX spreads are still working and they're flat on the day. Here 'ya go!



I just can't get over the spread on that "AAA" credit. Wow.

The LCDX yawned from 238 to 244 today, going in the "definitely wrong direction" for buyout money. This is next guys.

Someone linked this on the forum too.... it was just too cool...... I think it dates back to '99....




Time for me to go out on a limb here. Yes, I know I said February was the top, and obviously - I was early. Looks like that makes me early twice eh? (The last time - in '99 - I wasn't blogging, but it is what it is.)

I've seen notices (as I've noted in the ticker) that 2/28s and 3/27s (plus 3/37s) either are dead or will be nationally within the next few months. In addition, stated income loans are apparently being banned in Minnesota and this is almost certain to spread nationally as well.

Therefore, I believe it is totally reasonable for me to postulate the following:

30% of the housing market from here will disappear within the next month or two. Mortgage applications will continue to look ok for another month, maybe two, but will then crater as it becomes obvious that nobody in that space will be able to qualify.

Contracts signed may hold up for another month, but will then crater. Closings will crater as well, starting no later than August and continuing onward.

The housing decline will go from something that looks "orderly" right now to an outright rout, becoming more panic-based as the 3rd and 4th quarter continues. There is no chance that this remains orderly. 30% of the GDP is linked to housing in some fashion; as a consequence we will have a recession beginning likely in the 3rd quarter, but certainly before Christmas. It is unavoidable at this point in time.

When this becomes obvious to the equity markets, certainly before the end of the year and very likely susssed out in advance - possibly as soon as within the next couple of weeks - we will see The Bear wake from his slumber.

If I'm wrong your Christmas present will be to watch me eat part of my WSJ on camera and post the video on the blog!

There 'ya have it, as I see it.

BTW, let me plug the forum again here at http://tickerforum.org/. If you're not there you might want to think about trying. Its got RSS enabled as well which is nice if you just want to watch what's going on during the day - pick your reader, all work well, and the RSS system is actually intelligent unlike those for Yahoo and other sites (which have a habit of changing the IDs, causing you to get things you've already seen for a second time!) There are a couple of areas (including people's trade logs where several folks are posting in real time) which requires registration, but most of the forums can be looked at without being logged in.

Until tomorrow, have a great evening!