My Kind of Rally

Down 80, up 200, down 37, that's 417 points, pretty close my friends. Too bad pouring more money into an economy drenched in credit troubles doesn't really solve anything. But that's not what ended this irrational rally. What did is another bond insurer downgrade and S&P revealing oh by the way maybe another $500 billion dollars in poor subprime debt needs to be written off. MBIA released earnings today, errrr... losings of $18/share. $18/share! Hey, that's not good. But I'm sure they're solvent. I'm sure they should be AAA rated.

Finally, a homebuilder was punished yesterday for dismal earnings and a poor outlook. Centex lost almost a billion dollars and cancellations rose to 33%. That's gross. So Bulls enjoy your bottom bounce, because recession is here and there's lots of subprime gloom ahead. Next, Lehman pays the piper!

Alright, as promised, some props to watch for this weekend. As over climbs to 54.5, like it even more. I'm looking for Kevin Boss, the 6'6" TE to catch at least 2 balls. He caught 4 in the first game and will be a solid option when the Pats clamp down on Plax. I like Bradshaw to have a run over 10 yards as well. The Pats don't shut the run down, and Bradshaw is explosive. He should work in for 8-10 carries, and might get one of those 3rd and 17 draws for 12 yards. I like Kevin Faulk all over the place. I like him to get 4 catches or more (8 in the first meeting) and a catch for over 10 as well. The Giants will double Moss all day so he doesn't get behind them on consecutive plays like he did last time. This leaves a lot of dumps to Faulk and some open space.
Finally, I like at least 4 pats to get a rush in this game. Maroney, Faulk and Evans are guaranteed, then we just need a reverse or a Brady 0 yard scramble to lock it up. Also, if you can find the Brady prop where he compares his own stats to the Carolina SB, get in on the 3td action. 3 tds is a push, 1 or 2 is a win. Tough to throw 4 tds in any game, let alone the bowl.

BOD: I was going to write mad props but didn't.....
1. Boss 2 catches over
2. Bradshaw rush 10.5 yards over
3. Faulk receptions 4 over
4. Faulk reception 10 yards over
5. Pats # of rushers 3.5 over
6. Brady tds vs Carolina Brady 3 under

C'mon Already

HMMM, UBS magically announced a $4 billion additional writedown today, along with an FBI probe into 14 sub-prime lenders and homebuilders who not only participated in insider trading, but who may have released "inflated" results to keep stock prices high. Foreclosures are up 79% from 06', but hey, get me a piece of those stocks!

The fed will announce an additional rate cut today. I have no idea whether it will be 25 or 5o points, but let's wake up. Our financials are a disaster. Most of these banks are broke on paper and shouldn't be allowed to make loans. I'm rooting for an implosion, at a minimum as criminal punishment for one of these lenders or builders, at a maximum for personal gain of course. A company like Google growing revenues at 70% and with $18 billion of debt-free cash loses 20% of its value, but a company like Centex posting a billion dollar loss and decreasing sales goes up 50% in a week. Yeah, that's rational.

The SB is starting to drag out. Aside from the under, I'm looking to some crazy props for this game. I will post shortly where I think the value lies. Until then, hold on tight for a possible 400-point fluctuation surrounding the fed today...... By the way, temporarily switched templates so my friggin' title would reappear for the now 9 of you who have read this, will get it back to normal when a blogger tells me how.

IOD: I'm sticking with QID for the moment, Yahoo will get hammered lowering Nasdaq today.
BOD: Watch for props
TOD: Do not go to walk-in clinic with raging appendicitis

Beary Nice Day

I know, horrible title, but one my Dad, master of the horrible self-amusing pun, would appreciate. Rumors are swirling of more financial collapse in Europe and Karen Finerman noted on Fast Money last night that Ambac will be passed over by Wilbur. Big-time data coming out next week including jobs and Bernanke's next push, whether it's 25 or 50 basis points, we'll see. Financials took some lumps yesterday, and tech continued to get pounded even with Microsoft blowing the doors off of earnings. It's like California in the mid 1800s again in the gold market, as gold finished over $920/ounce. That's about $650 higher than just 6 years ago, wowwy.

Two investment ideas I've been following relate to buyout/tender offers. MGM, after a large investment from Dubai, has officially raised their tender offer to $80/share. After a fire at the Monte Carlo yesterday, shares fell back to $70. Another opportunity lies with PENN (Penn National Gaming). They received a private equity buyout offer of $67/share. Recently, PENN traded into the low 40s, but is not at $55. I'm no arbitrageur, but a recent report stated the likelihood of this deal going through as very high. These represent 12.5% and 18% returns from their current levels respectively.

Stimulated

$600! Wow, I'll try not to spend it all in one place like my kids' college or car payments, or my ever expanding ARM (wait, I don't have an ARM!). Bush is really coming to the rescue and the markets are starting to turn.....based on what? Have we seen any evidence that this economy will not slide into a recession. With home values down 25% over 2 years (worse in some areas) and people without ability to pay their loans, where is the spending going to come from? Even if those tax refunds were plowed right back into the economy (god forbid anybody save), it's only 100 billion dollars, a hiccup in total spending.

I continue to be amazed by the shortsightedness of this market and the irrationality of investors. I'll continue to do so when gold reaches $1,000 or even $1,100 and I short it into riches.

Be on the lookout Pats fans. The line has dropped 3 points this week and may fall to 10 or less. Don't forget, the Giants are gross.

Bubble Boy

Unbelievable. I'd like to run a company where I post a 95% decrease in earnings and my stock goes up 20%. I'd like to run a company that is so abysmal that my stock goes up because I'm now a takeover candidate. Does this remind anyone of the tech bounces of 2000, 2001, or 2002? We heard over and over again that companies were a bargain because their prices had been halved. Not unlike these banks, those companies didn't have any money either. As the dollar continues to plummet and our rates go down, who's going to seek yields from our banks? No one. As other countries suffer from their misguided debt purchases, there isn't going to be anyone to bail us out. So go ahead Bernanke, lower rates to boost the market for a week or two. I'm staying short on these horrible companies, and have the rest of the year at least to play it out.

And homebuilders.....Jesus. These companies have no hope, that's NO hope, of selling a house in the next 3 years. But hey, they own some land that they purchased for 4X today's value, so don't forget to include that in evaluating their "book value."

I do think, not unlike our tech bubble, that eventually some good companies will resurface at WalMart prices. Apple was $13, Microsoft was $16. But not today. And not tomorrow. And not until we know the full extent of the writeoffs and the recesses of this economy should you think about going long. With that said, I bought QID (2X inverse Nasdaq) on the gain yesterday and XLY puts as previously mentioned.

Back to our last football game of the season, arrrrrghhhhh. Coach of the week honors has to go to Mike McCarthy for letting the Giants run a scrimmage against their team. That was nice of him to let Plax Burress catch all those 10 yard passes against single coverage. You would've thought after the first 15 or 16 catches that he might have given Al Harris some help, but not my man, Mike. He stayed loyal to the bitter end.

The Giants are gross. But how gross, I don't know. I feel like with 2 weeks to prepare, Belichick will destroy Manning, as he has his brother on many occasions. But the Pats are failing to cover double-digit lines consistently. However, given the opportunity in the last game, the Pats will put up 50 if possible. With that said, I actually like the under in this game. 53.5 is a lot of points, even given the high output in the first meeting. The Pats played really conservatively on defense, and they've shown if teams are going to drop 8 guys, they'll just run Maroney down your grill. The Giants have been running the ball well also, and aren't afraid to chew some clock. Like everyone else's strategy, they will try to minimize Pats' possessions.

I'm getting sad just writing this. We are less than 2 weeks away from that dreary time of year where only basketball and hockey are on. Sportscenter becomes unwatchable. However, we're only 2 months away from March Madness, where my alma mater Pitt will choke against a double-digit seed in the second round after having an 18-hour layover in the airport.

IOD: QID
BOD: SB under 53.5
Task of the Day: Write to an author

THE BIG BIG LIE

Did we say $8 billion? We meant $18 billion. Did we say "limited exposure"? We meant full exposure. Does anybody get it yet? Banker=Liar. Reading the comments of these CEOs from Citi and JPM are hilarious. We continue to feel the impact of our loan portfolio and the weakening consumer markets. But, I thought you were still going to be profitable this quarter? Oh, wait, earnings were down 34% JPM! Who could've seen that coming, I mean, you guys are usually so transparent with your guidance.

This thing has no floor on it. The next 3 weeks will be the best time in my portfolio's history. But how can that be? The "smart money" from the sovereign trusts are pouring in to help. These sheiks must know something that we don't. Yes, they know that when you have $200 billion dollars, giving $5 to Citi doesn't mean a whole lot. As my brother likes to point out, anyone who uses the phrase smart money should be avoided like SARS as a financial advisor. Despite assertions from the bullish genii who everyday tell you there are good times ahead (See Jim Cramer, any day) and that financials are finding a bottom, the numbers say otherwise. I guess these guys are right in a way, I mean, 0 is a bottom.

As I said before, the commercial real estate market is next. SRS was up another 7% yesterday and at double the inverse return of the commercial real estate index, get your money in now.

I look for the retailers to tank next as well and drown throughout the year as things get worse. Let's short RTH, the retail index with holding like Home Depot and Walgreen's. Thinking even longer term, it's not too early to think about shorting gold futures or indexes, although there's still got to be some room to run given the weak dollar. We don't want to wait for the fallback though.

Getting back to football, I have high confidence in the Pack this weekend. Favre is giddy even without his Vicodin that they get another home game instead of travelling to Dallas where he is 0-9 lifetime. The Pack play tight man-to-man coverage, and even though Charles Woodson is the most overrated player since Emmitt Smith, they'll challenge little Manning on every play. Plus, it's going to be 4 degrees. Play the Pack before the line moves to 7 1/2.

The Pats are giving 14 again, and even though they'll lead these big-mouthed, never done anything buffoons to slaughter, they haven't been as concerned lately with covering the number as just controlling the game. They are just 2-5 ATS lately, all big spreads of course. I would leave this game alone, except maybe going over 47.5 if the weather looks passable.

IOD: RTH and XLY puts
BOD: Packers -7
TOD: Research BFS

Manning?

For years now I have had a simple formula for making money during football season. Bet the Colts during the regular season, and against them during the playoffs. Why? Because Peyton Manning stinks when it counts. Some of you, myself included, were fooled by last year's title run against crummy Chiefs and Bears teams that only proved the exception to the rule. This is the third time that the Colts have had a first round bye, and the third time that they have choked as huge favorites in their first game. Every year we hear about how this Indy team is different; the run defense is beefed up, Manning is sharper than ever, he has more weapons.....but when he's had to take the ball and drive his team to a win when it's counted....the outcome has almost always been a loss. What' a more familiar sight during the playoffs, a Colts win or Manning throwing a terrible interception in scoring territory then immediately looking over to his bench, making some arm gesticulations implying his receiver ran the wrong route, then throwing his arms up in pouty defeat?



I'm tired of this dude. Ten years, that's a long time to keep making the same mistakes and failing to get it done. The anomaly last year was Brady not getting it done, even with far inferior talent. If he had any of the 3 wrs he has this year, they would've beaten the Colts and rolled the Bears. Guess we don't have to worry about the "only team that could possibly beat the Pats."

Despite a crazy college season, I would like to establish 4 rules for betting football forever more:
1: NFL week 1. We haven't seen anybody play yet. We thought the Pats would be good, but weren't sure how good. How's about 7 pts against the Jets? That's Secretariat in retrospect. Oddsmakers don't go crazy week 1 because of the uncertainty, and this provides a lot of easy pickins.
2: NFL week 17. Some teams are out, and some teams are definitely in. Others need a win and they all mix together into a bunch of uncertainly low spreads again, providing easy opportunities such as the Titans/Colts.
3: Bowl Underdogs: 7 pt. dogs in the pre-New Year's Bowls were 36-17 the last 2 years before this one. Navy, UCLA, S. Miss., E. Carolina, C. Mich. and FSU all covered (2 out 5 big dogs covered post Jan. 1).
4: Always bet against Peyton Manning in a game that counts! Going back to his UT days, that's 13 years of consistent earnings. At least next year we won't have to be bombarded by his dumb commercials.


I shouldn't complain. Things were looking grim after Ryan Grant pulled his best Thurman Thomas impersonation and coughed up 2 of the first 4 plays for the Pack. But the Seahawks really do stink, and Favre made good on my previous assertion that he was a cold weather quarterback by rolling up 42 points. 1-1 this weekend.



Watch for huge spreads next weekend as both home teams will be playing lower seeds than expected. I'll post the lines later this week. I'm getting a 1-4 prop on the Pats winning though, and as I'm one of the few Americans left who can actually afford a 2nd mortgage, I might take one out.



Now for the real fun. Banks, beginning with Citi, will announce their "earnings" over the next 3 weeks. In an effort to be proactive, they released on Sunday a potential $24 billion writedown and the possibility of 20,000 layoffs. Hey, thanks for letting us know whole 2 days ahead of time! I'm sure their accountants began looking over the books Friday night and by Sunday said, "hey wait a minute, these loans don't look so good, we better write some of this down!" Both the NY gov't and the SEC are looking into Wall St., with many potential lawsuits ahead. Cleveland and Baltimore are suing at least 21 separate banks over false lending practices. Again, I advise looking at your mutual fund holdings very hard and getting out of those that have large financial exposure.

Capital(less) One

Wow, for six days now I've been warning of the insidious spread from subprime debacle to credit card delinquency. When you don't have money to pay your mortgage, do you think people are going to pay their other bills? Capital One was down about 8% in pre-market trading on yet another warning of huge impending delinquencies and a 20% earnings slash for 07'. Delinquency rates are approaching 7%, but who knows what the actual figures are; these guys tend to lie. Be thinking about the next fallout. Will it be the largest investment banks such as Goldman and Lehman, will it be retail as consumers literally go broke, or will it be emerging markets as the U.S. economy puts the kibosh on foreign goods?



These are new investing times. Historical data won't do you much good here. Having your money out of the market on several key days over the last 5 years could've saved 25-50% of your portfolio's value. Value managers got killed last year with traditional measures leading them to ride banks all the way into the ground...and they're still buying. Don't be fooled by BAC's possible bailout of Countrywide. Tell me, where are the profits going to come from in these crumbling industries? It's always a good time to short these losers on up days, take your pick....Capital One is actually up at the moment based on absolutely nothing. Not many companies stay buoyed by news of a 20% earnings loss.

Attack!

Let me begin with a quick note. Since I don't know how to archive my insightful picks and tasks of the day in the sidebar, I will begin leaving them at the bottom of the posts for that day so we can later look back and see what a genius I am, without me saying, "remember in 07' when I recod Countrywide's destruction?" This way, my winners and losers will be documented.....

Have you not heeded my advice yet? Countrywide's impending demise, along with poor commentary regarding the future of mortgage bond insurers, led to huge selling yesterday. Furthermore, there was rumor that even local gov't bonds might default in the Vegas market, which put pressure on the big boys such as Bear Stearns and Goldman. Still waiting for that bounce in financials and homebuilding? Good luck. I'd take a hard look at your funds, anything holding the major financials and construction support stocks like HD should be pared down quickly, before you find them at pre 2003 levels.

SRS blew up almost 9% yesterday. Double the inverse return, that's like buying a put without having to pay for it. Up almost 25% since I first recod. How's about Capital One? Down almost 8% yesterday, your Jan 09 55s or 50s already earned you a 10-12% gain had you bought on the 4th or 7th. XLF, it's never too late. The top 2 holdings are still Bank of America and Citigroup, and will continue to get killed. Check out the new must read link, Doug Kass's 20 surprises for 08', seems to agree with a lot of what I've said....

As far as football, went 2-1 this weekend, with Seattle and the Pitt/Jack over covering easily. Unfortunately, my pick of the week failed us as TB jumped out 7-0 and forced the Giants to go 3-and-out on their first 3 possessions, only to then revert back to a 1930s style offense and allow 24 unanswered points. Fear not, mismatches abound this weekend. Jacksonville doesn't scare me, but 13 points do. I prefer the Pack at home-8 and the Colts at home -9. Did anyone watch that Tenn/SD game? Anyone who still thinks "defense and a good running game wins championships" is an idiot. If you can't put up points, Dallas, GB, NE and Indy will KILL YOU.
I look for Rivers to stink it up once the Chargers fall behind and play like the non-Drew Brees that he is. I'm only hoping my Brownies don't make the same mistake by letting Anderson go and keeping Quinn.

To recap:
Investment of the Day previous picks: XLF, SRS, COF, PXJ
Bet of the Day previous picks: UF (L), Pats (L), TB (L), SD (W), GB (L), Tenn (W), SD (W)
Task of the Day: Do more, watch less, Rent Chan Wook Park's Revenge Trilogy, Read I am Legend, Read James B. Stewart

Today's Ideas:
IOD: Still love COF Jan 09' 55s and 50s, so leaving it up
BOD: GB -8, Indy -9
TOD: Check out Covers.Com

Down Time

Happy New Year, all. A quick review of my recent recos leaves us with an all or nothing feeling. Florida pooped their pants in the bowl game, making Chad Henne look like Tom Brady for 4 quarters, while TBow was exposed as an inaccurate groundball thrower when pressured and put into definite passing situations. Note to Urban Meyer, when your QB is getting dumped on every play, perhaps reel in the spread a little bit and use that crazy RB guy to throw a block. Awful coaching that we've seen repeatedly in these games, like the onside kick "Big Game" Bob tried against WVU after they scored on their first 2 possessions of the 2nd half. Awful like Frank Beamer not going for it on 4th and 1 at the 6 against Kansas, then getting the fg blocked and losing by 3. My Pats and Chargers picks split as the Giants put up a much better fight than expected.

Fortunately for us, my stock picks have been much better, and hopefully where the real money has gone. Simply buying PXJ (the oil services ETF) 10 days ago would've produced a better than 10% return already. My last reco, SRS, was up 7% yesterday as I believe commercial construction will continue to flail behind unsellable retail space and poor demand.

I saw on CNBC yesterday that a poll of analysts listed Financials as their most bullish sector for 2008. That only reaffirms my belief that the financials will continue to get pounded, particularly over the next 6 months. XLF, a LEAP put I recod 2 weeks ago, is down from $32 to $28 in that time, a 12.5% decline. Volatility should remain very high this year, and we need to look at stocks that will continue to suffer. Homebuilders, financials, construction services such as Home Depot, and slim margin businesses like retail and restaurants will fail unless management is precise. I don't see that in too many of the business I research. Continue to be short in the near and far except oil.