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 ****storm? 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.