Pesos are Starting to Look Good

Alright, a mere 10 minutes later, I can't resist going apepoop on recent market happenings. Let's start with Charlie Gasparino's dead-on assertions that this facade of saving Ambac and MBIA's ratings should be leading to market destruction, not market gains, and, that Buffett's bond-bailout would be to the ruin of those companies, not a savior in white. He correctly states that even if these companies have raised enough capital to preserve ratings (dubious), who would want a AAA backing from them versus Buffett? The rating is meaningless! Also, Buffett's plan led to a rally (of course) because the average investor didn't take 2 seconds to realize that the muni-business would be saved and the CDOs would go kablooey, leading to bankruptcy for these bond insurers. Of course, Gasparino was poo-pood even yesterday by another B-teamer, Becky Quick, who as per her instructions from CNBC, cut him off several times while he made his bear pitch. We're not alone in this:

"If these banks are pretending these companies are triple-A, it's really all a sham," said Edward Grebeck, CEO of Tempus Advisors in Stamford, Conn. "This [rescue] resembles two drunks standing on a corner trying to hold each other up, frankly." The executive notes that capital-constrained firms Citi, Wachovia, UBS and SocGen have all written down billions in soured debt.



Homebuilders bounced almost 10% yesterday on the preposterous notion that home sale figures were so bad, they can't get much worse, thus a bottom may have been found. Let me get this straight. Home sales were down 9% for the quarter, 23% year-over-year, foreclosures are at an all-time high, the bulk of ARMS haven't reset yet, but sooner than later we'll be able to sell new homes again. Hmmm. Inventories are at 10+ months again (ridiculous figure, much higher in areas where people actually live). As proof, January foreclosures in the Bay Area outpaced sales of homes. The condo market in Miami has a 37 month backlog. Foreclosures do not include bank auctions. An inside source at Centex homes in South Florida told me that the builder is not including cans (cancellations) in its sales figures until it has to report its quarterly earnings. Being that cans are far greater than new sales, this figure is kinda important!



Toll Brothers took a huge loss, Fannie Mae only last 3x more than analysts expected. The market bounced yesterday on the "big" news of IBMs buyback. As Jeff Macke pointed out, this is an annual ploy by IBM, who bought back $19 billion last year. The stuck hasn't broken a new high in 10 years, woo-hoo!



Durable goods fell 5.3% last month. On top of a huge PPI move, how can Bernanke lie to Congress today about the minimal risk of inflation?

Royal with Cheese

Taking a brief break from my gastrointestinal churning secondary to the ridiculous market rise on Ambac and horrible economic data, let's talk combine and football as per my loyal readers' (reader's) request.

Guys who have impressed so far include Donald Royal, who ran a 4.39 40, benched 225 24X, and bounced 36". Royal was also listed as one of Kansas State's top CB prospects as his most difficult assignment this past year. In addition, he was explosive at Senior Bowl workouts.....

Vernon Gholston was a beast, running a 4.67 40 and topping all DLs with 37 reps on the bench. Other DLs who impressed were Chris Long, who ran a 4.75 and had a vertical of 34". Just goes to show that NBA verticals are inflated on these 6'9" dudes......

I won't cover McFadden much, needless to say he blew it up with a 4.33 40, solidifying his #1 RB status. But, moving up is Jonathan Stewart, a big back from Oregon who still clocked a 4.48 40, bounced 36.5", and just for fun, did 28 reps at 225.

As usual, there are a couple of freaks at TE, foremost among them Dustin Keller from Purdue. He ran a 4.55 40, jumped 38", and put up 26 reps. Tamme from UK impressed as well.

Guys who wish they hadn't showed up include the Michigan offensive skill players. I can't even find a time for Mike Hart and Mario Manningham ran a 4.59. Ouch. Hart has always been overrated and the combine will not showcase him as an excellent athlete.

Will post more financial and economic thoughts later.....

"Horror Show"

Can't take credit for this excellent title that Nat Worden of TheStreet.com has given to the projected earnings and economic data due out this week. Still feeling queasy from the Ambac 200 point reversal on Friday, I felt a bit more fortified this morning as Lowe's earned $300 million less than analysts expected and 1st quarter and full-year estimates were well below expectations. Yet another signs that these jokers refuse to acknowledge our credit crisis and refuse to lower forecasts until after the fact. Also, as it typical of our irrational bull-machine, the report from Charlie Gasparino that led to the rally had 2 parts, the second half of which was ignored. He mentioned that MBIA's reinsurer, Channel RE, got downgraded. I'd love the bitttersweetness if Ambac somehow manages to save its AAA rating only in time for MBIA to get whacked down to AA or even A in its arrogance!

Just to update our current impending disaster state along with that of our fellow European neighbors, read the attached links below. The first article from the Washington Post details that people's home loan lines of credit have been abruptly cut off. People depending on those lines to pay off higher debt, to run their small businesses, to pay tuition, are out of luck and they'll have to pay off sooner than expected. In the article from the Telegraph, we learn that England will have a similar blowup scenario to our overbuilt condo problem in areas like Miami, with 12% occupancy rates, no hall lighting, no promised amenities, etc. They went crazy on flats, and now these building are ghost towns. Finally, D.B. Zwirn & Co. is closing 2 of its hedge funds after investors lost confidence secondary to fraudulent practices from the manager. Different from funds blowing up due to subprime exposure, this isn't any better, but more of the same from these guys who continue to try to make money out of thin air.

I'll post later with my NFL combine report......good to talk some foosball again!

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/22/AR2008022202987_pf.html

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/21/cmbtl21.xml

http://money.cnn.com/2008/02/22/news/companies/zwirn_closes.fortune/index.htm?postversion=2008022214#

Still the Minors

Whether or not Ambac or MBIA remain AAA or AA, they still have huge sub-prime exposure that can't be easily corrected with a simple line of credit. It's a joke that the market rallied on news that's been out there for 6 weeks. Ambac has already been downgraded and MBIA is headed there. These banks don't have the capital to spare on their already thin liquidity and bolstering Ambac to do so is a sham.

Why aren't we paying attention to the other developing crises at hand like student loan defaults, retailers going bankrupt every week (bye bye Sharper Image), and even preferred customers at investment banks being told they can't withdraw their own money from revolving auctions because these banks would lose too much capital? Citibank has already done this to their own hedge fund customers. The influx of sovereign wealth doesn't mean savior capital, it means greedy capital misplaced.

Muni auctions continue to fail at all-time highs. Even the Patriots are paying 13%-20% on their revolving bond, even though I'm pretty sure Bob Kraft and Cheese is a good credit risk. More and more inflation becomes a significant variable, and the simplistic argument that an economic slowdown means an inflationary slowdown is falsely reasoned. Historically, that has not proven to be the case, but Bernanke, leaning on his degrees, insists it is so. Furthermore, he thinks that the fed will simply reverse rates in a rapid fashion once the economy kicks in and stop inflation in its tracks! Too bad 50% of Americans will be in some sort of delinquency at that point with no usable credit and a negatively amortized home. But let's cheer an Ambac rescue, a company that strayed from its business model to risk $700 billion dollars in loans for our local governments and municipalities for their own gain.

Inflated

Where's Goldilocks now, Kudlow? How do you justify a 160 point loss from the daily high on mostly good news as a Goldilocks economy? When oil pushes over $100, you can't. Almost as impossible to listen to that dude as it is Crammer. By the way, anyone who calls Cramer Crammer is hilarious. Have you watched the video on itulip.com yet?

Watching the B team on CNBC in the morning to see the CPI and housing data while I fed my daughter her breaksfast almost made us both puke. It's like they gave 2 kids and a muppet (Kernen) a microphone and said, "go play!" But don't forget to say, "this doesn't mean the market won't go up" at the end of every sentence.

In light of awful CPI numbers that show inflation is rising as wages are stagnant and unemployment is increasing (not good), let's examine how some retailers have been blasted recently. Also, how can these clowns make statements like "the sudden rise in oil?" Uhhh, oil was at $100 on January 3rd. A commodities trader said this is just a speedbump to $120 this morning; I thought they were going to ban him from speaking ever again.

Macy's: sales down 7.1%, 2,500 layoffs
Walmart: met sales but gave poor outlook for rest of 08'
Target: sales down
Best Buy: poor holiday sales, lowered guidance for rest of the year
Liz Arden: abysmal sales, poor outlook
Nordstrom's: sales down 6.6%

Would like to say thanks to an anonymous TheStreet.com reporter for responding to my email with honesty and personality. You don't often expect a personal response from a legitimate reporter. Thanks for the kind words and respecting the small investor......

Back in Business

Markets back in business today and I'm in full rant mode after I gained 2 new readers over the long weekend. Clearly word is spreading and before long, we'll be pushing a bloggership of 20!

Where to begin? Oh yeah, more writedowns. Credit Suisse magically failed to account for a billion dollars in losses last quarter and is writing down $3 billion total. Barclays is writing down over $3 billion, but somehow, this is good news. And sneaky snakes, American banks, thought they'd just borrow an additional $50 billion dollars last month under new fed rules to sure up liquidity. This however, was not received as good news because we know that they will not be able to freely lend this money for a better rate of return. So why the necessity? Because I can only assume more money is going to be written down and lost forever over the next year as banks continually try to hide their poor credit exposure. Can we punish these guys already?

Great article by Bill Fleckenstein of MSN Money (posted below, don't let the mullet fool you, this is a smart dude) about how we're just in the first leg of a recession, and that's denial. I'm not in denial. I know the credit mess is going to wreak havoc on every nook of consumership in this country. But the market is. Next comes "realization." When Bernanke and his bull-machine fess up, we can get the ball rolling. And finally comes "the give up." We throw in the towel, not every 100pt. Dow day is considered a rally but simply a dead-cat bounce, and we gain full acceptance that our economy is in the pooper.

Housing numbers come out today, should be a bleak story, but anything better than Armageddon will probably be "good news" for the market. Again, denial....

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/ItsTooEarlyToBeBullish.aspx

You've Been Cut Off

Kudos to the management company of my development for putting the hammer down on delinquent owners who don't pay their HOA fees but continue to collect rent. Starting today, the automatic gate clicker won't work for delinquent houses, and basic cable to those homes have been shut off. Is that unfair to the renters? Who cares? It's unfair to me and my wife who send in our fees on-time every month. As a matter of fact, the next step is to evict renters from those homes in arrears. Why should you collect income if you can't pay your HOA? Ba bye!

This is symptomatic of the oversold housing market, full of delinquent investors and overleveraged greedors. When steps like this are taken, more homes will go into foreclosure keeping the spiral trending down. How Bernanke could think this thing is going to turn around this year is insane.

The New York manufacturing survey posted its worst numbers ever. Paying more for gas and milk it turns out, doesn't represent a thriving economy. Please read the attached link to get a sense of how bad the banks have been covering up their losses. Credit default swaps are tough to explain, but the article addresses it well. Let's just setup a simple scenario. What's going to happen when a mortgage-backed CDO defaults for say $20 billion dollars? The banks that wrote CDSs against it will have to come up with the bonds from those mortgages to cover the losses. Problem is, the CDS on those bonds may total 10, 20, 50X the actual bonds' worth. So who gets paid and who doesn't? Furthermore, those CDSs are hardly regulated, who knows who even owns them to pay you if they go kablooey?

One of England's largest banks, Northern Rock, just got "nationalized." This is a nice way of saying it went bankrupt and the gov't is keeping it from going under. When asked what the shareholders in the bank will get, the Brits basically said, "oh, uh, we'll figure something out." I hope the same happens to Citi and BAC, then we can figure something out......

http://www.cnbc.com/id/23210754/site/14081545/page/4/

Waist Deep

It's been awhile, so let me comment on some sports-related issues. I'm still in my post-football funk, but will prep for March Madness shortly, and will start revealing picks soon.



First, is it any wonder that arguably the best pitcher and position player of recent memory (although I don't think Bonds is better than Rodriguez, roids or not) are not only juice monkeys, but HGH freaks? Clemens literally imploded this week, making a total jackass of himself and doing as much damage to his rep as anyone ever has. He might actually go to jail.



Belichick, it was revealed, has been taping defensive signals since the first second he put on a Pats hoody. Goodell revealed this to Arlen this week, in another of our country's most pressing issues. I mean, who cares about stuff like war and economic collapse when the Eagles might have been cheated out of a SB! What's going to happen to this dude? Nothing. He's already been punished and the NFL just wants it swept out into space with the bus-sized spy probe that may land in your front yard if we can't shoot it down with nuclear missiles in the next 2 weeks.



Good job IU. You replaced a guy who beat and choked his players with a guy who's going to bring your program the death penalty. Has the AD been shot yet?



Getting back to economic issues, let's start withe the Dinallo interview. Seemed like a bright guy, it was just so hard to tell with Joe Kernan interrupting him every 3 seconds to say, "But that's not going to hurt the market, right?" Jesus, every time CNBC ventures to bring on an educated, informed guest who wants to talk economic reality, they're almost kicked off the set for their anti-market sentiment. Dinallo spoke about how FGIC, another bond insurer, had filed to be split into its good and bad businesses, aka, munis and subprime cdos. When pressed about if this was a good option, Dinallo said it was better than bankruptcy, but would not make it a great company all of a sudden. Ambac and MBIA face the same decision in the very near future.



In a little-reported aftermarket note, S&P downgraded debt on 4 builders, including Centex, from junk to bad junk, or from ok to junk status as with Centex. They see very poor prospects of this debt getting paid with limited cashflow and don't think these companies should be allowed to borrow money. Shocking.



And last, just a quick note on analysts. S&P profit forecasts for the 1st quarter are now less than 0. In December they were 11%. In October they were 18%. So these guys were wrong by 20% and if we just look at these numbers, even less than zero seems overly optimistic. How do these guys have a job when they're so very wrong so very often?



IOD: XHB and Centex jan 09' puts
BOD: NFL will do nothing to Belichick
TOD: Watch Itulip.com's Cramer video contest. HIIIIlarious.

Dear Ben

Thank you, Master of the Obvious, for announcing that our economy is in the pooper and propelling stocks into a downward spiral as they should be. Unlike market gurus like Cramer who insist that the fed should only make forward looking statements that are optimistic, even if untrue, I was glad to see a bit of honesty in his testimony. But only bit. For some reason, he keeps insisting that growth will pick up in the 2nd half of the year. When is the 2nd half of this year taking place, in 2020? Bernanke said yesterday that housing and credit problems will continue to weigh on the market for perhaps longer than we expected. Well, which is it? Just earlier in the week he said that housing should pick up by the end of the year. That makes sense. Just yesterday, 45 states said that home sales were down and foreclosures were up. 4 states didn't report and the 1 state that had improving sales was S. Dakota. Wow, what a boon for the GDP that will be !



Cramer also recod yesterday that the gov't bail out all of the CDOs and float the mortgages of the millions of delinquent/foreclosure loans. That's great advice. Hey, I bought shares in a company that didn't actually go up. U.S. gov't, can you just refund me the difference in share price? Why should I have to take a loss? These idiots have only one concern, stock prices. They don't want market turmoil because then the 500 stocks they make you pay to get access to might go down and make their record, like Cramers, stink.



In a bold move today, Citibank is not allowing hedge fund owners to withdraw their own money. Can you imagine if you tried to pull money out of your mutual fund, and Vanguard or Fidelity said, "Nope, I don't think so. You have to ride this sinking ship to the bottom!" Nice work fellas, this on the heels of your other hedge fund which has produced a sweet 52% loss in its first 3 months.

Just in case you thought the bond insurers were in good shape, a reporter revealed on CNBC yesterday that he was begged by Dinallo 2 weeks ago to not report that the bond insurers may be forced to sell/be taken over in their muni business and just go kablooey on their subprime CDOs. All this talk of a bailout was smoke and mirrors, with Dinallo knowing all along that that wasn't a viable option. FGIC got downgraded yesterday and in turn, can't offer municipal protection. So for 2 weeks market optimism has been provoked by a lie. Big surprise. Dinallo has an interview in about 10 minutes, will report on that later......

Alt-A

Ever heard of Alt-A loans? Better get familiar, because they're next. Alt-A loans, like as in alternative to A, like as in alternative to good credit or full documentation of income, is a loan written with substandard credit or ability to pay. Not as risky as a total ARM, these loans were typically written for sub-680 credit holders and people with suspect ability to pay. Banks such as Countrywide wrote a ton of these loans and have been hesitant until now to even acknowledge the tremendous backlog on their books because guess what, they're going to take huge losses on the defaults of these as well. UBS came out today and said they had a $26 billion exposure to these things. Do you think they're the only ones?

Jim Jubak of MSN Money also foreshadowed of another set of loans waiting to collapse. As the government slashes rates to "stimulate the economy" with more credit for millions of already credit delinquent Americans, rates on student loans and some auto loans go down. That makes the bonds they're repackaged into less valuable. With rates set to go down further, those bonds will continue to lose appeal, so they may get sold sooner than later at less than they were purchased for, again causing writedowns for the holder.

I'm rooting for MBIA to get scorched on Capital Hill today. They wil testify that short-sellers, Bill Ackman in particular, have "unfairly driven their price down." Well, let's see. You guys left your primary business to back high-risk loans and you got blown up. Now, with your stock price in the pooper and your ratings about to get cut, you want government intervention. Why should anyone help you out? If your loans fail, it will force massive writedowns and reinsurance, but evryone who played the game knew that. Ackman warned about it in a 2002 report, but nobody wanted to listen.

Check back tomorrow for Bernanke's babble.....

Pound to Get Pounded

I wanted to revisit my visit with Fortune Brands about a month ago. As I said then, be on the lookout for their Jan. 25 forecast. A prime example of another good company being hit hard by sub-prime. They are selling booze better than ever, golf clubs are still moving, but their exposure to homebuilding (Moen) has stopped the company's growth and forced them to lower forecasts. They earned $201.5 million, or $1.28 a share, down almost 22% from $257.6 million, or $1.65 a share, a year earlier. They went on to say that, "the home products unit could only "outperform [a] challenging market."

Hey, at least there's some honesty there. There are other companies with no product exposure to housing who will still lose money as a result of sub-prime. The reason? Greed, of course. Looking to boost investment returns, some companies bought into sub-prime securities to increase interest gains. How's that working out? Let's see.....

Mary Thompson of CNBC reports "these firms bought auction-rate securities — bonds created from pools of long-term debt. They don't pay a fixed rate, rather a lower, rolling rate that's reset through a Dutch auction every 28 to 35 days." Companies who lost their bets include Bristol-Myers and US Air, with writedowns up to $275 million dollars. Nice job putting your cash to work.

Next stop, Europe, where higher interest rates will prevent the huge inflation we'll see next year and beyond as Bernanke allows us to relive the Japanese implosion of the 90s, but at the cost of market hatred. By popular demand, I'll post my congressman's email and phone below so anyone living in my hood can berate a sub-prime bailout plan.

Alcee Hastings: Tel: (561) 684-0565, email at website http://www.alceehastings.house.gov/index.php?option=com_content&task=view&id=104&Itemid=

Follow Me to the Liars

Ok, very bad week for stocks, very good week for my picks. Just to prove I follow my own advice, let me reprint an email I received from the investor relations department of MBIA a few days ago:

Me: I'm confused. Didn't your company just spend 4 hours on the conference call last week insisting you had enough cash? Now you need to raise an additional $750 million dollars (I understand, only $250 million of that is new money)? Is it possible you guys were not being honest last week? Please explain.

Response: The prospectus for the offering is available on MBIA's website, under "SEC Filings". While it provides the company with cash, as mentioned on last Thursday's call, we don't have a liquidity concern, but rather need additional capital to satisfy severe stress testing rigors associated with Triple-A ratings requirements.

Me: Horses**t!

No, you don't have a liquidity concern except that your company may be on the hook for a trillion dollars in faulty securities. Talk about a non-answer answer. Oh, by the way, not only was MBIA lying last week, this dude was lying to me as he wrote! Later that day MBIA made it another billion dollars they needed to raise in an offering, not $750 million. As I've said, these guys lie and are going to continue to lie, just like Mozillo of Countrywide, until they are bankrupt. We need big time corporate punishment/penalties, not corporate bailouts.

However, I continue to be stunned by the market's response to horrific news. MDC, a homebuilder, casually mentioned they lost $6.14/share last quarter. They were rewarded with a 5% gain. MBIA initially got slammed for announcing the need for further cash, but ended Friday up 3%. Ricoculous.

Distressed debt vultures are salivating over the potential for huge losses/bankruptcies this year. Bruce Richards, CEO of distressed specialist Marathon Asset Management, which manages $10 billion, says 162 companies will either default or restructure in the next 12 months.
He hates homebuilders, forecasting home price decline for the next 3 years.

This just in. Bank of America has just for fun (actually, not just for fun, to avoid bankruptcy) decided to double the interest rates on random consumers. I say random b/c some of these customers have good credit, pay their cards on-time, and have even paid down debt over the last year. Welcome to delinquent payment increases BAC, and welcome to phase 2 of the credit cruuuunchh! Read article at right....

Not a Pot to Piss In

Ironically, my wife and I were shopping at Macy's yesterday looking to spend some hard earned gift certificates at the mall in Palm Beach Gardens, Florida. This is a pretty high end mall with Saks and Nordstrom's as 2 anchors. A few observations. The mall in general could only be described as a ghost town. If it weren't for women with strollers and retirees, there wouldn't have been anybody there. Also, my wife commented to me that there were way too many people working there considering the # of shoppers. Macy's didn't disappoint, a mere 3 hours later they layed off 2,500 on a 7.1% decrease in sales. Two salesmen were talking and they asked how sales were going. To that point around noon the had made a combined $9 sale of a t-shirt. They weren't too thrilled as I chuckled.

Even retailers who had a good 4th quarter will get smoked this year. Wal-Mart came out with crappy sales last month and this brought out Cramer. Anytime you see Jim Cramer on CNBC in the morning, you know it's only to "refute" all of the bad news. The fed cut rates, things aren't so bad, some retailers had great 4th quarters, blah blah blah. People are broke. Nobody can get a loan with the new lending standards which were the old standards that should've been maintained.

An analyst from Bank of America actually upgraded the housing sector 2 days ago, upgraded it. He insists that cheaper mortgages and availablity of homes will lead to a resurgence in sales. Hmmm, let's see what Bob Toll and Mr. Eller, CEO of Centex have to say about the bright future of homebuilers. Diana Olick reported from Capital Hill, where Eller and other CEOs were pushing tax relief and sub-prime support, that Eller admitted to her, "this will ultimately be the deepest and longest housing correction since World War II." The CEO of Lennar added, "There really isn’t any visibility as to where the bottom is.” Bob Toll upon giving horrific earnings yesterday said he, "doesn't see much light at the end of the tunnel in the housing malaise." Far from being insulated by the higher end buyer, Toll sold far fewer homes, had huge cancellations, and has been very slow to correct prices.

Again I ask. If homebuilders have negative earnings and no foreseeable earnings this year and maybe next, how do their stocks have any value? Oh, land you say. That's right. Tons of land that they overpaid for in Florida, California, Arizona, and Texas that they are now trying to sell for less than they paid. Also, if they don't own any land, where are they going to build homes? If homebuilders don't build homes, what exactly is it that they're doing to make money. See?

One more thing, I thought MBIA said last week on their 4-hour conference call that they had plenty of cash. So why do they need an additional $750 million all of a sudden? I'm going to write them and find out.

IOD: XLY again, retailers go kablooey.
TOD: If you actually put money down on your house, write your congressman about not bailing out sub-prime losers.

Dead Wrong

We all were. I believe my brother summed it up best when all he could say was "Shocking" over and over again. All of you who bet the second mortage on the Pats moneyline for a 21% return are still feeling ill, and not just from your hangover. Hey, but some of us were right! Let's review my initial and final props, along with my 2 week ago call of the under.

Initial Props:
1. Boss 2 catches over loss by 1 b/c he dropped an easy 3-yarder on the first drive
2. Bradshaw rush 10.5 yards over win
3. Faulk receptions 4 over win
4. Faulk reception 10 yards over win
5. Pats # of rushers 3.5 over loss, couldn't Brady have scrambled once?
6. Brady tds vs Carolina Brady 3 under easy win

Later Props:
1. Maroney 1 catch over win (+155)

Pats/Giants under 54.5 win

6-2, not too bad! I wish I had been that good during the regular season. What a bizarre ending. You just never see the Pats choke like that. They actually got tight. Samuels dropped a pick. Merriweather dropped a pick. They let Manning out of a sack, and when they did, they let him complete his 4th airball of the game that magically landed in his receiver's hands. When have you have ever seen Rodney Harrison not make that play? Not only did he not intercept it, he was unable to knock it away from a much smaller player.

Three more downgrades of credit card lenders yesterday, including the infamous Capital One which had been on fire the last 2 weeks. I'm posting an article in my must reads by Jim Jubak of MSN.com's Money touting that the commercial loan/CDO mess may dwarf our current sub-prime mess by reaching into the $90 trillion range, yeah, that's right, like much more than our GDP. God knows how many more losses these banks are holding off on, but if there's even a fraction of the liability he implies, my previous reco of SRS (inverse real estate ETF) will be an excellent 2-3 year play.

Sallie Mae got downgraded to B---, that's triple minus, 1 step above junk status. Another lender begging to go into bankruptcy, let's see who follows. Don't be fooled by the last 2 weeks, and don't have any faith in our lenders. They make Belichick look like an honest dude.

Game Time

Personally, I hate both of these teams. I think I've already made my feelings on the Mannings pretty clear. When Belichick was in Cleveland going 5-11 every year before he started cheating, he was no "genius." Wouldn't it be great if that video dude said, "yeah, we taped the Rams walk through." The Rams would be awarded the Super Bowl and it might get Kurt Warner into the HOF. Not gonna happen, but would stick it in and break it off our man Bill. Ok, so you can't second guess me tomorrow, here are my prop winners:

1. Kevin Boss 1 1/2 catches over
2. Maroney catches 1 over
3. NE total rushers 3.5 over
4. Brady SB 38 TDs (3) vs SB 42 TDs-SB 38 TDs pickem'

Deductive Reasoning

Writeoffs have been announced. Thereferore, all the bad news has been spelled out. Nice reasoning Sherlock. In a 4 hour conference call yesterday, leaders of MBIA refuted claims that their company with less than a billion dollars can remain solvent when on the hook for over a trillion dollars in bad bonds. HMMM, that makes sense. Pulte announced dismal earnings and a poor outlook. This admission, viewed through all the common sense of the OJ jury, was rewarded with a 20% one day gain.

Yet another downgrade for a bond insurer and MBIA has been put on ratings warning by S&P. Even under the most optimistic circumstances, even if a homebuilder could eek out a small profit (not going to happen, see must read about Pulte), how does that justify $20,$30,$50 stock prices? Home builders traditionally trade around a P/E of 10-13. In the early 2000s, P/Es hit 3 or 4 and that was a good time to buy. Now, P/Es for these stocks are figments of our imagination, but if earnings were to be projected, P/Es would be 40-50! Are these growth stocks given the current housing and lending environment? I didn't think so. Again, a stock like Google who made $4 billion dollars last quarter and has over $14 billion in cash loses 25% and a broke, hopeless company like Pulte gains that much in a single day. Hello Japan circa 1991.

One factor that is being overlooked in how poor these numbers are is the disproportionate downturn in major population/production areas. Everybody knows housing in Cleveland and Detroit has been dead and on the decline for 10 years, but Phoenix? San Francisco? LA? Austin? Miami? These are kind of big neighborhoods with lots of people going broke. When these people can't spend, companies will not do well. So let's keep pouring money in people, that way everyone can officially be debt poor. ARGHHHH! By the way, Microsoft just bailed Yahoo out for a 63% gain, Yahoo owners. Lucky bastards.

Nice call on the jobs report analysts. Instead of 80,000 new jobs, we lost 17,000 workers last month. But that's not a recession....