Wednesday, February 27, 2008

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?

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