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....

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.