Sunday, December 16, 2007



excerpt from above:

CPI may have remained tame, but massive Credit-induced Current Account Deficits and the depreciating dollar set in motion Credit and asset Bubble dynamics in economies around the globe.
Today, the Fed confronts bursting Credit Bubbles throughout Wall Street finance, with resulting acute asset market vulnerability. Yet the unusual structures that permeate the U.S. Financial Sector at this time foster continuing rampant inflationary Credit creation. First of all, “money-like” financial sector liabilities (i.e. agencies, “repos”, and bank/money fund deposits) are proving thus far sufficient to sustain Bubble economy excesses. Second, the global recycling of ongoing massive Current Account Deficits and speculative outflows ensures over-liquefied markets (and artificially low interest rates!), including key U.S. debt instruments such as Treasuries, agencies and other perceived low-risk securities. Bubble dynamics proliferate in the face of a Wall Street bust.
The extreme divergence in liquidity conditions between bursting Bubbles in Wall Street finance and still rapidly inflating Bubbles in “money-like” Financial Sector Liabilities poses both a major quandary and policy dilemma. Aggressive rate cuts would definitely further stoke the powerful Bubbles inflating in GSE, “repo”, money fund, and bank deposit liabilities. Such ongoing Financial Sector Debt expansion would likely sustain destabilizing liquidity outflows to the world, further fueling myriad global bubbles and worsening an already problematic global inflationary backdrop. A rapidly expanding U.S. Financial Sector (with the accompanying heavy risk intermediation burden associated with transforming highly risky loans into perceived safe liabilities) also significantly increases the risk of an eventual catastrophic breakdown in U.S. and international financial systems. Besides, it is likely that lower rates would have only minimal effect on the investor and speculator revulsion that has taken hold throughout the Wall Street securitization marketplace.
Those arguing for a Greenspan-style rate collapse fail to appreciate the extraordinary circumstances and risks that have accumulated from years of Reckless Credit Bubble Excess. The outcry for an audacious policy response to avert a recession is misguided. Importantly, today’s rampant Financial Sector expansion is unsustainable. There are today acute inflationary risks to go with major financial system stability issues. While the dislocation will be substantial, the sooner the Bubble in Financial Credit is reined in the better. We are today in the midst of dangerous “blow-off” excesses in “money-like” Financial Sector liability issuance. Few seem to appreciate that such a circumstance places the stability of the “bedrock” of the entire U.S. and global financial system at considerable risk. Wall Street is clamoring for a rate collapse and bold inflation in “money” to bailout its faltering securitization markets. At this point, this would equate to throwing massive (relatively) good “money” after bad - ensuring that a dreadful situation festers into a historic calamity. The least bad course for central bank policymaking would be to hold the line on rates, while injecting liquidity as necessary as part of a program to check Credit excess and permit the economy to commence its desperately needed adjustment period.

BDI price paid to ship BULK RAW MATERIALS (end up as finished goods) is correcting and has broken uptrend line.

NOV SHEPHERD INV NEWSLETTER Shows relationship of housing to economy at large.

Finiancials added to record SPX profits on way up, and ALL the trickle down industries and companies associated with mortgages, housing, and construction (commodities) and housing is most important component to our economy, as it unravels, what effect to economy do you think it will have? to SPX profits?

MAJOR US AND FOREIGN BANKS are reporting huge loan writedowns, and there is one of many questions much more of this BAD PAPER, and OFF RECORD BOOKS BAD INVESTMENT remains?

DECEMBER usually a BULLISH month is running into trouble as we head for XMAS, my research show usually by late Jan market reaches at least a short term high and experiences a correction.

Buying enthusiasm has waned, volume on the rallies has fallen as it rises on the declines. Less and less SECTORS contribute to these same rallies and more and more have fallen into bearish looking trends.

I would argue my friends that the OLD BULL MKT has topped, even as theh FED tries to reflate, long interest rates instead are rising, dollar firms (for now) and in my best estimation we have enterred another Bear Market, where preservation of capital is more important than growing it.

I choose to take a very defensive posture, with little equity exposure, and mostly Treasury Money Market Funds (not the typical unguaranteed MM).

Talk to your financial advisor and look over what you are invested in and decide if their council is sound, voice your concerns if any. I don't think sitting around doing nothing will work out.

One could argue over time the market in last 100 years always goes up, but it also shows during long Bear Markets getting the right allocation can be critical over that period.



Friday, December 07, 2007


CME Group Fed Watch – December 7, 2007
In advance of next week's Federal Open Market Committee meeting on December 11, the CME Group will be reporting daily rate change probabilities in the FOMC's federal funds target rate, as indicated by the 30-Day Federal Funds futures contract. The 30-Day Federal Funds futures contract is a key benchmark interest rate barometer that reflects the forward overnight effective rate for excess reserves that are traded among commercial banks in the U.S. federal funds market.

Based upon the December 7 market close, the 30-Day Federal Funds futures contract for the December 2007 expiration is currently pricing in a 100 percent probability that the FOMC will decrease the target rate by at least 25 basis points from 4-1/2 percent to 4-1/4 percent at the FOMC meeting on December 11.

In addition, the 30-Day Federal Funds futures contract is pricing in a 41 percent probability of a further 25-basis point decreasein the target rate to 4 percent (versus a 59 percent probability of just a 25-basis point rate decrease).

Monday, November 26, 2007



Are we in for a 30% haircut? I think so, IMHO decline will resume after "holiday" bounce.


Monday, November 19, 2007


Time to begin researching candidates, aside from ROn Paul I personally feel Romney is worth considering, none of the Dem's are.



Mortgage meltdown seen spreading to credit cards
Analysts point to new round of charge-offs expected by major U.S. issuers
By Murray Coleman, MarketWatch
Last Update: 5:03 PM ET Nov 19, 2007
SAN FRANCISCO (MarketWatch) -- As shares of Citigroup Inc. tumbled on Monday, analysts pointed to signs that the mortgage meltdown could be spreading to the banking giant and other major credit card players.
"We're starting to see signs within the industry that credit quality is dropping," said Justin McHenry, research director at market tracker "That's causing major credit card companies to at least consider taking out larger reserves to protect themselves against more people defaulting in the future."
In downgrading Citigroup (C
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C) , Goldman Sachs analyst William Tanona raised issues related to an ongoing search for a new chief executive and expectations of more write-downs related to mortgage lending. See related story.
But he also forecast an erosion in Citigroup's credit card business. Tanona says he foresees "deteriorating consumer credit trends and higher corresponding provisions and charge-offs" for the company in the future.
Such views come on the heels of at least two key credit issuers revising expectations for coming quarters.
'We're starting to see signs...that credit quality is dropping. That's causing major credit card companies to at least consider taking out larger reserves to protect themselves against more people defaulting in the future.'
— Justin McHenry,
On Nov. 6, Capital One Financial Corp. (COF
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COF) said that it expects charge-off rates to reach around 5.25% in the fourth quarter. That would imply that as much as $1.2 billion of its U.S. credit card portfolio could require some sort of provisions to stem short-term credit-related setbacks.
"Charge-offs are the amount that consumers have charged on their credit cards but haven't paid off," said Julie Rakes, a Capital One spokeswoman.
Typically, lenders will take charges on credit cards that are past 180 days or so overdue. Those charges go against reserves set aside for uncollected balances, among other possible uses.
Rising delinquencies, usually considered 30 days or more overdue, spur credit card issuers to usually at least consider raising reserves.
And that's definitely starting to happen, say McHenry and other analysts say.
But they warn that determining the extent credit card issuers will be hit by macroeconomic trends and falling mortgages remains difficult to state at this point.
"If we see more credit card companies raise reserve levels," said McHenry, "then that will be a fairly definitive sign about eroding credit conditions in this industry. But it's a very fluid situation right now."
More charge-offs seen
Peter Schnall, Capital One's chief risk officer, says that he now expects 2008 charge-offs of around $4.9 billion.
"We based that view on the delinquency trends we saw at the time and limited speculation about the future course of the economy," he said at Capital One's annual investor conference in early November.
In a presentation on Nov. 14 at a banking conference, Capital One's Chief Executive Rich Fairbank reiterated previous guidance.
"Delinquencies have been relatively flat, although over the last four months they have increased," he said.
Much of that rise can be traced to a changing mix in the firm's credit portfolio, Fairbank added. "But there is some component of the delinquency increase that appears to have its roots in the economy," he said.
CIBC World Markets says it now projects credit losses at Capital One to reach $5.2 billion next year, which would be in line with upper ranges given by management this month.
Meredith Whitney, a CIBC analyst, also has raised her estimates on the firm's credit losses in 2009 to $5.4 billion.
"The increase is driven by prolonged, higher credit card delinquencies and further deterioration in the housing market," she wrote on Nov. 7.
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DFS) also says it now expects charge-offs in 2008 to range between 4.25% to 4.75%. That could result essentially in write-offs to the firm of around $2 billion next year, estimates Mike Taiano, an analyst at Sandler O'Neill & Partners.
Still, such charge-offs wouldn't come close to levels seen in 2001-02. In that period, several large credit card companies reported close to 7% rates. And some engaged in more risky credit markets soared into double-digits as a percentage of outstanding payments.
"If you look at those numbers, charge-off rates are still pretty low from a historical view," said Taiano. "But the signs we're seeing of more charge-offs could be creating an earnings headwind for the industry."
Credit card receivables aren't growing a lot for the industry as a whole, he added. "Coupled with the fact that their losses are expected to go up in coming quarters, credit card companies could be facing a significant impact going forward on their earnings," Taiano said.
Capital One and Discover emphasized that any rise in delinquencies come after historically low levels in recent years.
"Credit card issuers are arguing their charge-offs are simply precautions and represent still manageable levels," said analyst McHenry. "But it's worth noting that they're taking out larger reserves in anticipation that more people could default on their credit card payments."
Murray Coleman is a reporter for MarketWatch in San Francisco








Saturday, November 10, 2007


*click to enlarge Transports warned in late 1999 that something was wrong, they are doing it again NOT confirming the NEW DOW HIGHS and leading the way DOWN.

As we approached the all time high in the DOW, the number of stocks also hitting 52 week highs was already declining, and the strength was coming from a selective few stocks, large tech and a few multi nationals, this past week many of THOSE stocks appeared to have blowoff tops, GOOG, HANS, AAPLE, BIDU

Speculation was rampant in stocks like FSLR a chinese solar play up $50 in one day!

WED's decline had 94% downside volume, the 3rd 90% day in last 30 days, none have been followed by 90% up days, a sign of renewed buying interest. BUYING interest seems to be DRYING UP. must read threats to our economy.

WHAT makes up for the $500B per year in consumer spending taken from home equity?

Finacials lead stealth bear market

Pity bounce may be near, it will get sold IMHO, AUG lows to be challenged


Tuesday, November 06, 2007


November 05, 2007
Tax Reform Promises Treats, Delivers Tricks
by Ron Paul

Representative Charles Rangel's recently announced plan to address the impending Alternative Minimum Tax's application to middle-class Americans demonstrates limited economic understanding.
The Alternative Minimum Tax (AMT) began in the late 1960's because 155 wealthy taxpayers had become savvy enough with loopholes that they managed to avoid income taxes altogether. Very few Americans avoided taxes completely this way, nonetheless, policy was enacted that now threatens 25 million Americans.
Rangel's plan boasts loudly about repealing the AMT, but under the Democrats' pay-as-you-go rules, actual tax cuts are not allowed. Congress must replace any tax revenue reduction with an increase somewhere else, and of course, there are no rules preventing tax hikes. Thus, a new 4% surtax on incomes over $150,000 for singles and $200,000 for couples is proposed to "pay for" the estimated lost revenue. This simultaneously raises $36 billion MORE than simply leaving the AMT alone, and creates a huge new marriage penalty tax. It won't be long before $150,000 is an average income, and middle class taxpayers will again face the situation we see coming today from inflation and the AMT. Overall, the Rangel tax plan is estimated to increase taxes by $3.5 trillion over the next 10 years.
With the leadership in Congress calling for this massive tax hike, spending levels promising to absorb all that and then some (thanks to our ambitiously misguided foreign policy), as well as the Federal Reserve's again cheapening the dollar, American taxpayers are wondering where their purchasing power went. We are working harder than ever before, as our standard of living falls.
The founding fathers never saw taxation as a method to direct social behavior or enforce equality. Equality to them was equality under the law, not equality of outcome, or income. It was not the founding fathers' job to manage the economy, or make American businesses competitive. That was up to the free market and American businesses. The founders sought to provide only protection of property and civil liberties such that job creation could happen naturally and peacefully in a stable, prosperous environment. They never sought to take from the rich to give to the poor, or rob Peter to pay Paul. But today, the top 5% of earners in this country pay over half of all income taxes collected, but only bring in a third of the income. One third of Americans pay nothing or receive subsidies from government.
Tax policy should not be based on the premise that government owns you and allows you to keep some arbitrary amount of your labor. Thus, the AMT should be repealed. The estate tax should be repealed. Capital gains taxes should be repealed. The income tax should be repealed. We don't need to overhaul or adjust tax policy, we need to scrap the whole thing and start over.
But this message is not getting through to the leadership of Congress. Congress has ensnared itself in rules so that the only changes in tax policy allowed are increases, while the administration is obsessed with spending, especially spending us into oblivion by spreading this dead-end war when we should be coming home.
If Washington can only do wrong, then let's hope for gridlock, until a more sensible Congress is in office. Sometimes a do-nothing Congress is a lot better than the alternative.

Dr. Ron PaulProject Freedom


The Greenback Is on the Run
2007-11-06 - Steve Christ

War fighting may be tough on boots, but it's murder on the wallet.
Unfortunately, that's a lesson that Captain Allan McClain needed to learn the hard way. Incredibly, he had to lay out $600 for new a set of footwear. And to add insult to injury he was charged a whopping $10 for a simple spool of thread.
And while that hardly seems like a fair deal for an American fighting man, it really did happen. The year was January 1781.
Captain McClain wasn't fighting terrorists but chasing the Redcoats around a new nation. He was a soldier in the Continental Army and he was paid in Continental Dollars. Needless to say, he probably deserved better.
Created in 1775, the Continental Dollar was a series of notes designed to support the revolution. Its plates were crudely engraved by Paul Revere himself and printed on such thick paper that the Brits referred to it derisively as "the paste board money of the rebels."
Clearly, The Brits were on to something.
At the behest of Congress, two million dollars worth these of "paste board" notes were to be created. And by July of 1775 they became part of the currency of the day.
More Dollars = More Inflation
But to the surprise of no one, those two million notes weren't nearly enough to cover the bills. So almost as soon as those new "dollars" hit the street, the Congress decided to print some more of them, and by the end of 1775 there were over six million of these notes in circulation.
The money supply had more than tripled.
But guess what? It seems that even our sainted founding fathers simply couldn't help themselves when it came to money. So much so that by its final printing the aggregate amount of Continental Dollars in circulation had skyrocketed to a stunning $242 million in as little as five years!
Needless to say, this massive devaluation of the currency through the inflated money supply simply devastated the notes. In fact, it was so bad that by the end of 1781 it took $16,800 to purchase a mere $100 worth of gold.
In the end, the Congress never did redeem the bills and their part of the debt was not assumed by the new U.S. government. So in six short years the Continentals became completely worthless.

Sadly, what was true in 1775 is still true today. Bankers love to print money.
The reasons for this are twofold. One is that central bankers believe they can somehow "manage" the economy through the manipulation of interest rates and the money supply.
The second is that the government printing press is necessary to monetize the escalating federal debt that politicians not only hunger for but thrive on.
You see, we don't sell war bonds or raise taxes anymore. That would be too restrictive.
Besides, why bother when you've got tons of paper and the keys to the printing presses?
In short, it's a combination of hubris, greed, and blind ambition and it cannot end well.
Other countries, of course, can see this too, and because of it they are moving away from the dollar as fast as they can.
Rate Cuts Crush the Almighty Greenback
But few Americans actually get the picture yet. How could they?
After all, we don't remember the Continental, and our modern nation has never suffered from inflation so severe that it destroyed the dollar.
That's something that happens in other countries.
And what we know about the Fed, for some reason, couldn't fill a thimble. Ben Bernanke is by all accounts the second most powerful person in the country, and the vast majority of Americans could not begin to tell you a single thing about what the Federal Reserve actually does. (Why is that?)
So instead we believe the bankers and the politicians. We see soft landings.
We have lived our whole lives at the top of the world heap. How could tomorrow be any different?
The truth is it could be very different. The rapid expansion of the money supply ensures it, because when we devalue the currency by creating huge volumes of dollars out of thin air, the result is inflation.
In 1781 it was $600 boots. Today it's $96 dollar oil and $800 gold.
Inflation is a monetary phenomenon and history proves it.
In fact, a dollar from before the creation of the Federal Reserve is now worth only about four cents.
That's why the soaring prices of gold and oil are not just some anomaly. It's a worldwide vote of no confidence against the Fed and its dollars. That was the case in 70s, and it is the case today.
Heck, even a supermodel can figure it out. Along with Warren Buffett and Jim Rogers, Gisele B√ľndchen is also bearish on the dollar. She recently demanded that Proctor & Gamble pay her in Euros.
So as long as the world is restless over our increasing money supply, our trade deficits, our unfunded liabilities, and the complete inability of Congress to rein in government spending, the price of gold and oil will continue to rise as the dollar continues its freefall.
In fact, Helicopter Ben is just getting warmed up with his cuts.
Bailing out the banks will take rates much lower than the current ones.
Of course, the dollar likely won't have the same fate as the Continental, but it won't be pretty.
It's called inflation and its coming to a boot store near you.
Wishing you happiness, health and wealth.

Steve Christ, Editor

Monday, October 29, 2007


Are you better off today than yesterday? if valued in Euro's the DOW is still off 30% from previous bubble top, Dow valued in GOLD (AKA real money) had hardly budged from 2002 lows.
Dollar has lost 40% from 2000 highs, this chart shows potential breach of head and shoulders pattern, which could lead to another 40-50% dollar devaluation.
OIL at $93
US $$ at lowest levels ever
Housing CRISIS
FED cures by rate cuts? how so? with dollar at precipice?
Financial powerhouses REELING from subprime crisis, MOST of losses being kept OFF BALANCE SHEETS similar to ENRONOMICS.
I think market could get ugly post FED meeting

Monday, October 01, 2007

DON'T TAZE ME BRO nothing like free speach

NEW highs for market, ain't the beer cold? I am close to positioning for the end of days....


Saturday, September 29, 2007


You might ask yourself, self is it true that what goes up must come down?

IMHO there is mounting evidence that the bull market that began some 50 months ago is an accident waiting to happen, a DOA, a flesh eating wound, a bear trap.

Strap this one for size.

The weakest sectors of economy are consumer, financials, and industrials. A SELECT GROUP of LARGE CAP DOW Stocks are pushing the index higher just as the larger group of stocks get sicker and sicker.

Health of a rally is usually shown in NUMBER of stocks ADVANCING VS DECLINING, currently the advance decline line of stocks PEAKED back in JUNE!!! According to market research when this happens usually for 4-6 months from this peak is when a significant market top can appear, that time frame begins NEXT WEEK!

Higher highs just as buying enthusiasm is heading north a rather peculiar phenom.

WHO, of sound mind is going to argue that HOUSING did not lead this economy OUT of the BEAR doldrums back in 2002-2003?????

Recent report says existing homes for sale increased to 4,581,000 (weldon's money monitor), what is astonishing is that is a 1M increase just from March!

And this total is DOUBLE what it was in 2005.

And this total is a RECORD.

And so is the avg time it takes to sell a home 10 MONTHS. in Jan it was 6.6 (source weldon)

WE are seeing the emergence of home price DEFLATION (no wonder FED is trying to INFLATE??? and has abandoned any support for the US $$)

NEW HOMES inventory up to 8.2 months!!!!!!!

Can we agree this points to a REVERSAL in consumer credit fueled by rising housing values and fueled by cash outs that went directly into consumption?

Would this NOT also point to probability that the SECULAR (long term) credit BOOM has POPPED?

(again from Weldon) Consumer loans outstand fell to $780B down by around $10B in one week. Weldon explains this equals a 67% Yr/Yr contraction.

Consumer Sentiment surveys are PLUNGING.

The US $$$ is in uncharted territory, it broke the previous monthly lows set back in 1992. A WEAK DOLLAR could put pressure on interest rates, even after the FED Lowered rates last meeting, longer term yields have RISEN!!

A falling dollar has fueled golds rise, OIL near records, anything denominated in dollars should rise like any imports??

Local governments like Maryland's are preparing a $2 B tax increase!!

We have seen a HISTORIC BULL RUN, longest in history! It has been fueled in part by an ever expanding credit and debt feast, this appears threatened if not OVER!

AT VERY LEAST, credit is NOT as easy to obtain as it once was, Banks are cautious, how can this be good for economy?

BUST is usually EQUAL TO OR GREATER than preceding BOOM, so I am worried the BOOM is done.

The effects of housing and its course to be run will take MUCH longer than when stock bubble popped, the stock market is VERY liquid, but not so for housing.

A delay of inevitable is being attempted, we already know that when gov and Fed meddles the results can be disastrous down the road......and I think we are at that forked tongue in the road.....choice PAIN A or PAIN B.

I am IN CASH WAITING FOR MUCH BETTER VALUES. we already know I am unltra conservative and do not like to hold debt....


WHAT WENT UP..........

HOUSE OF DENIAL click for story

Friday, September 21, 2007


This CAN go on for awhile, is how 2000 top was set up, trannies topping 6 months ahead…….or more.

Trannies currently under their 50 and their 100 and 200 EMA !! NOBODY saying peep about it

ALL the while the BDI is setting records, that is because we have REAL inflation and cost of moving the raw materials keeps setting records.

When this comes apart it will get awful ugly.

Long yields have moved UP near .3% since BEN CUT!!

Housing BOOM added HUGE VELOCITY to economy, it now is limp biscuit.....and you MUST ask yourself, WHY isn't it being reflected in the data?


Thursday, September 20, 2007


NEW LOWS BROKE 79 !!! story our "friends" the SAUDIS trying to "break dollar peg"??
Can ANYONE explain to me why the stock market isn't CRASHING????
NO WONDER LONG TERM RATES ARE RISING!!!! and NO ONE saw the PLUNGE in foreign purchases??? to almost no existent last report?
ALL this with near record 2 day advance in Russell
Playing with fire folks, OIL staying above $82 Gold up another $7 BERNANKE'S desperate move appears to be backfiring....when the US $$$$$ weakens....NO it's plunging....EVERYTHING COSTS MORE!!!
On the backside you have PLUNGING LIQUIDITY.................some $200B went POOOOFFFF
....IF DOW sniffs all time high we get DOUBLE TOP and HUGE sell off into normal OCT lows

Tuesday, September 18, 2007


A bold move? the right move? only time will tell, but even if I'm the only one who feels this way a RISKY MOVE!

You don't reinflate a bubble which has popped and get same bang for buck as when first inflating it, the moves the FED can make here are limited and this will not force banks to loosen lending standards or lower mortgage rates, the 10 yr yield was basically unchanged after actually rising on the FED decision.

When you satiate demand, it takes awhile to work off the excesses, this has not been done yet. Slack demand could also be the result of a vaporization of exotic mortgage rate schemes as well as unaffordable prices, there are tons of unsold inventory to work through.

There is a good chance market will keep momentum and rise to new highs and I wonder if smart money is buying or selling, if stocks never reached prices low enough to entice buyers back why will higher prices?


I can always take a trade, and I never trade on FED DAY, too volatile, I'll let the dust settle and see what shapes up and if its on the long side that's OK.

The US DOLLAR is nearing uncharted territory, I have 1992 low of 79.12 almost tested today, GOLD shot up (no inflation?) OIL near $82 !!!

If someone tells you there is NO inflation.....Keep an eye on long term rates to which mortgages apply, irregardless BILLIONS of LOW LOW payments will reset MUCH higher going forward. the BDI is the rate shippers charge for DRY BULK....raw all time highs

The WORLD is stable or raising rates.....the US needs to attract buyers of their debt (which dropped dramatically last week with only $12B foreign purchased) and they DO THIS by LOWERING the rate of interest?



Greenspan: Crisis 'an accident waiting to happen'

As his new memoir pulls back the curtain on the mysteries of the Fed, Alan Greenspan spoke to Fortune's Andy Serwer about market mayhem, housing prices, and his new critics.

By Andy Serwer, Fortune managing editor

(Fortune Magazine) -- Alan Greenspan's memoir arrives with remarkable timing for two reasons. One is that at a time like this, with financial markets in upheaval, we yearn for guidance from the oracle who presided over 18 years of relative peace and prosperity in the U.S. economy.

The second is that a wave of revisionist thinking holds that the reign of Greenspan may not have been so great after all, that he bears some responsibility for the twin bubbles of dot-com mania and the recently deflated housing boom.

In The Age of Turbulence (The Penguin Press, 505 pages), Greenspan gives his side of the financial saga, holding forth with his trademark wonky curiosity about statistics and the appreciation of human nature that he learned from author Ayn Rand (see Daniel Okrent's review).

In an interview with Fortune managing editor Andy Serwer, the legendary Fed chief gives an up-to-the-minute diagnosis of the financial situation, his outlook on housing prices, a prescription for the coming Medicare crisis, and his take on the Bush administration's virtues and vices (read the full interview).

What's going on in the capital markets and the housing sector? Could you explain it to us, please?

This was an accident waiting to happen. If it weren't subprime, it would have been something else. We have been through this type of event innumerable times over the centuries. We get to a state of extraordinary exuberance which, when confronted with reality, turns to unrelenting fear, huge withdrawals, extraordinarily little liquidity, and considerable credit fears.

We know where it's going. We just don't know the actual, specific resolution. We have never had the capacity to defuse a bubble, and I suspect the reason is that until we essentially reach the climax of euphoria, the speculative fever doesn't break. But when it does, it turns on a dime.

How bad is it going to get? Is it going to cause a recession?

We do know that the housing market has a significant way to go on the downside. The real issue is whether house-price declines spill over into consumer expenditures, as they did on the upside, and cause the economy to shrink. That we're slowing down significantly is unquestionably the case. Whether it actually tilts into a meaningful decline is still on the table.

How would you judge chairman Ben Bernanke's response so far?

I think it's been a very sensible one, because the board is confronted with something I was not confronted with, namely, evidence of finally coming out of this disinflationary trend. Cost pressures are beginning to build around the world.

This suggests that, longer term, the Fed's going to have to be tighter. It means that stock prices are going to have some difficulty moving forward. Shorter term, clearly, it's got problems with very significant credit disruptions and turmoil. [In my tenure] we had a relatively easy task in lowering rates without concern about triggering inflation. I regret that that is no longer the case.

Now, of course, people are pointing fingers at you, saying you're at least partly responsible for the housing bubble because of what you said in 2004 about adjustable-rate mortgages being prudent. How do you respond to those critics?

I think revisionist history is coming on with a rush. Remember, subprimes were not on the horizon. They were there, but they were very small. The speech I made actually referred to a Fed study that had demonstrated that the [cost of the] insurance you're getting to have a fixed-rate mortgage was very high, and that a number of people would do far better with ARMs.

A week later I said that I may have not made it clear that what I was focusing on was a very small segment; I just gave you the pros and cons. Indeed, those who took out ARMs within the next few weeks after I made both of those statements, had they refinanced into fixed-rate, 30-year mortgages 18 months later, would have come out way ahead. So the bottom line is, take your choices, but I would have written the same speech I did in 2004.

How do you reconcile the fact that some people - namely, Bob Woodward - call you Maestro, and then there are people out there pointing fingers at you because of the housing problem or blaming you for the bubble of 2000, calling you Mr. Easy Money Fed Chairman. Which one is it?

It's neither. I think I got undue praise for what was essentially the inevitable consequence of the fall of the Soviet Union, which was obviously a seminal geopolitical event but was also a very important economic event.

Prior to the fall of the Berlin Wall, we had two competing economic systems - central planning and market economies - and they would vie with each other. It was not clear which had the winning side. When the Berlin Wall came down, and we really looked at what amounted to an economic experiment in Germany, where two countries [had] an identical history, the same culture, it was remarkable. East Germany, which had been expected to have the average standard of living of about 75% of West Germany, indeed had half that.

And the shock was so great in the Third World, which had been playing with central planning, that without any fanfare, the shift toward market economy, especially in China, created a huge change in the world economy. It went into a seriously impressive disinflation, which brought all interest rates down, made a huge boom in the economy, a huge increase in assets.

And when lots of people would come up to me and say, "Thank you for my 401(k)," I was embarrassed, because I had nothing [to do with it]. I do grant that the Federal Reserve understood largely what was going on, and I think we calibrated monetary policy to fit the circumstances.

We realized that bubbles will not run out until they essentially come to an end - you can't stop them prematurely. But what we can do, and did do, is make sure that the economy was sufficiently flexible and that the decline was absorbed in a sufficiently liquid environment.

And the recession that occurred subsequent to the dot-com boom is now very difficult to find in the revised data. In other words, we had a terrible decline in stock prices, lots of people lost huge amounts of money, but not many people lost their jobs.

You served many Presidents. Who's your favorite?

The person I liked the best was Gerald R. Ford. He was the most decent man in politics I ever had any relationships with.

Did he have the intellectual firepower to be President?

Yes, he did. He was not as smart as Nixon or Clinton, but I think there was enough to make up for that, which made him an extraordinary man.

Your relationship with both Bushes was strained at times. The elder Bush blamed you in part for his defeat.

I wouldn't cut rates sufficiently, quickly. Actually George W. Bush was very cognizant of the importance of having an independent Federal Reserve. Never did he in any way second-guess the Federal Reserve. I very much appreciated that.

Where I had difficulties were on the fiscal side. We had a situation where the Republican Party had the presidency and both houses of Congress and the surplus. And I said, "Nirvana." We dissipated it. In the election of 2006 the Republicans deserved to lose, and the reason is that they had originally come to office with major policy initiatives, and they went out of office solely seeking power, and in the end they achieved neither. And I find that very saddening.

What should we be worried about most right now in terms of the economy?

Strangely enough, I think it's politics. We have a dysfunctional political system in the sense that there are very serious fiscal problems out there, most importantly Medicare. As best I can judge, when the baby boom retires, we are going to have to either raise taxes very sharply or cut benefits by half. No politician wants to confront this. And this is a very sad event because what's at stake here is the fiscal stability of the American government.

How will it be resolved ultimately?

Probably the least politically difficult is essentially to make it akin to a welfare program, but those who are supporting social insurance think that is anathema. The problem is that the arithmetic is inexorable here. I don't see how you get around that.

Prudent policy would be to adjust the longer term now, not when it becomes a serious problem for people who have already retired and are told after the fact that they will not be getting the real Medicare that they expected. Tell them now, when they're still not retired and have the choices of working longer or doing other things to adjust.

I think it's unethical and immoral for a government, when confronted with these types of events, not to take action. What do we elect people for?

What should the average American who owns a home be thinking right now? Should he be scared?

Well, there is no question that there is an overhang of inventories, especially newly constructed, unoccupied single-family homes. I judge there are about 200,000 units that are excess. And at the rate we're going now, we're running off a very small number of these inventories a month.

These units are going to overhang the structure and move prices inexorably lower. So I think we're going through a period that is not over yet, and it's important that we bring this to an end sooner rather than later, because it has a corrosive effect on the economy.

Bill Gross at Pimco suggested bailing out homeowners. Would that be prudent? Is there anything that can be done?

Well, you can, and as President Bush suggested, have a government-guaranteed organization like the Federal Housing Administration essentially guarantee loans and refinance them. That's a very difficult political decision, and it's a very expensive one if you do it in a wide-scale basis.

I'm not sure where I come out on that one as yet. I've always been in favor of enhancing home ownership in this country, even though it is risky in the subprime area. I don't know where you draw the line, because a lot of the subprime lending has been frankly truly egregious and I think in many cases, criminal fraud.

Is the great derivative blowup still to come?

You've got to remember, there are derivatives and there are derivatives. I mean, corn futures is a derivative.

Well, credit derivatives, esoteric ones.

Credit derivatives are an extraordinarily valuable thing. What they do is move the credit from the initiator of the loans, which are highly leveraged financial institutions. They sell the credit risk to those with less leverage [who are] capable of absorbing losses. That's had a very positive effect on international financial systems, had a very positive effect on American banking.

What you have to be careful about is collateral debt obligations, which have gotten much too sophisticated, are priced by extraordinary mathematical models, and are very difficult to value. I think people are going to be frightened to deal with those things for a long time. A lot of them are just going to disappear, because they've been tried; they don't work.

But the big derivative markets continue to increase at a very rapid rate, and the reason is that they are important instruments for risk dispersion throughout the world.

Do you communicate with Ben Bernanke and others at the Fed?

On occasion, but I've tried to stay away from anything remotely discussing monetary policy. With the exception of going to the Fed barber who does my hair. He's got a very easy job - I don't have enough of it to make a difference.

You seem to be much more at ease talking to me here, vs. your Senate testimony. Is it nice to be able to speak your mind?

Yes. There's only one restriction that I'm involved in. I don't talk about what the Fed is doing. They have enough problems without somebody carping from history about what they're doing.

Still, people have criticized you for speeches you give, saying, "Why doesn't he just shut up?"

Well, I ask them, What would they like me to do? I have been looking at the world economy since 1948. That's my profession. Do they want me to become a logger or a brain surgeon? If I had been presented with a request that, yes, we would like to appoint you chairman of the Federal Reserve, but subsequent to your term you're not allowed to discuss anything about the economy, I would have turned it down.

Is your wife, Andrea [Mitchell], happy that you're retired or does she find you just being a pain around the house?

If I were around the house, I would be a pain. She may have experienced the extent of my retirement for a minute or two, because that's about as long as I was retired. Top of page

Find this article at:

Saturday, September 15, 2007


Can the VIX and the SPX/VIX be used to help identify important market turning points is what I investigate as I look back 10 years for clues.

Friday, September 14, 2007


Northern Rock Granted Emergency FundingFriday September 14, 2:56 pm ET

By Tariq Panja, Associated Press Writer

Leading UK Lender Hit by U.S. Subprime Shakeout; Granted Emergency Funding by Central Bank

LONDON (AP) -- The Bank of England provided emergency funding to mortgage lender Northern Rock PLC on Friday after the bank, citing the global credit squeeze triggered by the U.S. subprime mortgage crisis, said it was unable to line up short-term loans from other financial institutions.
Even after the central bank issued a statement saying Northern Rock was solvent, slow moving lines of customers snaked through its doors to make withdrawals.
"I would not put a penny into that company again," said Tony Looch, a 68-year-old customer, who withdrew his savings after standing in line for nearly two hours outside a branch in central London. "There are a lot of older people who must be really scared."
Shares in the bank plunged 31.46 percent to 438 pence ($8.88) in London as revelations of a cash shortage spooked investors.
Northern Rock CEO Adam Applegarth announced that profits would fall to between 500 million and 540 million pounds ($1 billion and $1.1 billion) -- as much as 147 million pounds ($298 million) less than expected.
The bank has been unable to raise funds since last month when the wholesale money markets it relied on for cash choked up. Applegarth said the problem was likely to continue for the rest of the year as bad U.S. loans continue rattle the market.
Though substantial funds at a penalty rate were requested by the bank, Northern Rock had billions of pounds in cash at its disposal, Applegarth said.
"We can't tell when the global (credit) freeze is going to unwind. On that basis, it made sense to get this facility now," he told Sky News. He did not disclose how much the bank had borrowed.
Financial experts, agreed, saying there was little risk of the bank, which holds 113 billion pounds ($226 billion) in assets, would collapse.
That meant little to investors, who began dumping shares of other British Banks. Alliance & Leicester PLC and Bradford & Bingley fell between 6 and 7 percent Friday. HBOS PLC and Barclays PLC fell by around 3.5 percent.
Treasury chief Alistair Darling said there was no threat of insolvency at the bank and urged customers not to panic.
"There's plenty of money in the system," he said. "All the banks have money, but at the moment they're not lending to each other in the way they usually do."
Uncertainty over exposure to the U.S. subprime mortgage markets has played out in the interbank lending rates, a facility that is the cornerstone of Northern Rock's business model.
A statement for the central bank said said "The decision to provide a liquidity support facility to Northern Rock reflects the difficulties that is has had in accessing longer term funding and the mortgage securitization market, on which Northern Rock is particularly reliant."
In Britain, the key three-month interbank lending rate, or LIBOR, now sits at 6.82 percent -- more than a full percentage point above the 5.75 percent base rate and just above the Bank of England's emergency lending rate of 6.75 percent.
"This isn't about solvency, this is about a short-term problem that the Northern Rock has in getting liquidity -- that is, getting some cash from the normal interbank lending market," said Angela Knight, chief executive of the British Bankers' Association.
"I think that anybody who is waking up this morning who is either a saver with Northern Rock or has got a mortgage ... can be absolutely confident that they have got their money with or they have borrowed from a very sound financial institution," she told British Broadcasting Corp. radio.
Bankers warned against making parallels between Northern Rock and troubled Countrywide Financial Corp. in the United States-- which is releasing 13,000 employees and has been forced to borrow billions of dollars as it struggles to weather a wicked downturn in the U.S. housing market.
The British bank is more diligent in its lending policy, no longer has a subprime book and has a repossession rate of less than 1 percent, said Eric Leenders, an executive director of the British Bankers Association.
"It's a very healthy business which has run into a simple liquidity issue owing to the market jitters around the U.S. subprime mortgage market," Leenders said.
The Bank of England's intervention is the first of its kind since it assumed the role of "lender of last resort" when it was made independent from the British government in 1997.
Northern Rock PLC:

Thursday, September 13, 2007


Fed can't stop recession

Even if the central bank starts to cut rates aggressively, many of the risks for the U.S. economy are beyond its reach.

By Chris Isidore, senior writer

NEW YORK ( -- Problems in housing, the financial markets and the first job decline in four years have made a Federal Reserve rate cut next week all but certain. But it has also raised talk about a recession - and whether the Fed is able to prevent one.

While most economists still don't believe the nation will fall into a recession, there is general agreement that the economy now faces a greater risk than there was only a month or two ago.

But many economists also say that the Fed can do little at this point to address many of the factors threatening continued economic growth. Some economists even argue that rate cuts could make matters worse.

The mortgage market would seem to be where the Fed could have the most effect. Most directly, a rate cut will reduce the rates for adjustable rate mortgages, one type of loan that has caused the problems for lenders and subprime borrowers, those with less-than-perfect credit.

An estimated 2 million homeowners face sharply higher mortgage payments when their current loans reset over the next year. So a Fed rate cut could possibly stave off a wave of foreclosures.

That's key since more foreclosures could have the potential to hurt consumer spending as a whole, said David Wyss, chief economist for Standard & Poor's.

"About 1 or 2 percent of the population is going to be seriously affected by these resets. That's not trivial," said Wyss. "One thing a Fed rate cut will do is reduce that reset shock fairly quickly."

But others say a rate cut won't solve the problem for those who have been paying low teaser rates on their mortgages with the expectations that they would be able to refinance before rates reset. The fact that investors no longer are willing to buy securities backed by such non-traditional mortgages could make it impossible for hundreds of thousands of those homeowners to refinance.

"A rate cut even down to zero percent doesn't make those attractive investments," said Edward Leamer, director of the UCLA Anderson Forecast, which now puts the chance of recession at about 30 to 35 percent. "The Fed is in the situation where they should not be thinking about saving housing. They should be thinking about isolating the problem strictly to the housing sector."

The mortgage problems have clearly led to a broader credit crunch in financial markets, which has already put a crimp on the financing of some proposed mergers.

While a Fed rate cut may help get those markets functioning more fluidly once again, there is debate among economists about how great a risk the credit crunch poses to the overall economy.

"It's pretty hard to draw strong lines between the credit crunch on Wall Street and the economy, except in real estate," said David Kelly, economic adviser for Putnam Investments. "If there are some deals delayed, it's not a problem for real economic activity. In fact, usually mergers and acquisitions cost jobs. They don't create jobs, except with Wall Street firms. Outside New York, there shouldn't be much impact."

But Gus Faucher, director of macroeconomics for Moody's, said that getting the credit markets working again is important for business confidence, which is a key driver in decisions by companies whether to hire new workers and invest in plants and equipment.

"Businesses are still sitting on a ton of cash. The question is if they are going to go out and use that," he said. And he believes this is an area where a Fed rate cut can have the most positive effect.

"They need to know if the Fed is on the job and ready to respond," he said.

But Putnam's Kelly said that if the Fed signals that next week's cut is the first of a series of many, it could put some needed spending by businesses and consumers on hold, as they wait to see how low the rates will fall, and how much the economy is going to slowdown.

"The Fed could contribute to the problem while fixing it if they're not careful," said Kelly. "If the Fed promises further cuts, it gives people reasons to have doubts about the economy and a reason to wait to make investment decisions. If you're trying to pick up a house at a bargain, will you do it now or wait six months? You'll wait six months."

Another risk to the economy would be a drop in foreign investment here, according to some economists. And a Fed rate cut might cause more problems than it fixes because lower rates would make some U.S. investments, such as government-issued Treasurys, less attractive to foreigners.

Leamer and Wyss said a steeper drop in foreign investment would be a big problem for the economy because that flow of funds has been key to keeping long-term rates low.

"Last year we had $1 trillion come in net foreign investment, most of it into the bond market, and most into private bonds, not Treasurys," said Wyss. "If that money stops coming in, that's going to be a big increase in borrowing costs."

A sharp drop in foreign investment would also feed into the slide in the value of the dollar, which hit a record low against the euro on Thursday. While that would make U.S. exports more competitive, it also would likely raise the price of imported goods and hurt the spending power of U.S. consumers, who have come to count on low-price imports for everything from food to clothes to cars.

Wyss and Leamer say they're not predicting a sharp drop in foreign investment, but that it is a concern. And economists say there's relatively little the Fed can do to keep investors from outside the United States from pulling back on U.S. assets if it is cutting rates.

"The Fed has to make its primary concern what is happening to the domestic economy," said Wyss. "You can't focus on the dollar."

The Fed also has little ability to affect another risk to the economy: high oil prices. Crude oil prices hit $80 a barrel for the first time Wednesday.

While the economy has kept growing with oil in the $60s and $70s, economists say rising prices are a bigger risk now given how vulnerable the economy is. High oil and gas prices would be just one more thing for an already nervous consumer to worry about.

"I think if this lasts for two to three months, it's going to be a problem," said Faucher about oil prices. "If this was happening when the economy was going great guns, I wouldn't be as concerned. But more than just the costs, this can affect consumer psychology. If it shows up at the pump, then we've got some problems." Top of page

Saturday, September 01, 2007


Remember the internet bubble back in 2000? remember what happened next?

Do you want to argue with me we didn't have a real estate/mortgage/credit bubble after that?

Do you want to argue that this bubble has now gone splat?

When was the last LBO DEAL? IS M and A activity still HOT?

Do you think the FED can bail out the worlds economies and banking system?

Do you find it odd last 30 days we have experienced the wildest volatility in last 60-70 years?

Volume on decline was massive, on the rallies weak, not a sign to me THE BOTTOM is in.

Many of my investing friends are LONG, I am not of course given the usually bad Sept-OCT seasonal is here.

I await a signal that internal strength has been restored to market for a safer ride.

The slew of 90% DOWN VOLUME days came when the market was not yet oversold, but more neutral, so I think we have some rough seas ahead, and I don't think we have seen the worst just yet.


Friday, August 31, 2007



Utility avg weak sister, if LOWER rates coming, I find it odd dividend paying utes are lagging badly.


Tuesday, August 28, 2007


Fed: Response Needed If Conditions Worsen Reuters
Home Prices Post Steepest Drop in 20 Years AP
Consumer Confidence Plunges But Tops Estimates AP
Fed Saw Danger of Credit Crunch AP

WE got sold out, and the future generations that have to PAY for all that was promised and can't be delivered.

Price drop says "3%" well I know people under market price at $310,00 and ONLY offer was $250,000 and this is in area just reported homes on avg increased 2% !!??

THis is all pure BS, consumer confidence is falling for many reasons. DEBT is their lover I dare not speak his name....

IT gets inflated away or it gets defaulted away...oh or paid down...

Key DOw areas I am watching 13,132 and 12,900 area, if broken I think good chance we test reaction lows of few weeks ago. VOLUME TODAY SO FAR IS 90% DOWN!


Wednesday, August 22, 2007


August 22, 2:07 pm ET By Adam Schreck, AP Business Writer
JPMorgan Chase, Bank of America and Wachovia Join Citi in Borrowing $500M Each From Fed
NEW YORK (AP) -- Four major banks said Wednesday they each borrowed $500 million from the Federal Reserve's discount window, lending weight to its efforts to restore liquidity to tight markets.
Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wachovia Corp. each stressed they themselves have "substantial liquidity" and the ability to borrow money elsewhere.
In a joint statement, the latter three said they decided to borrow directly from the central bank to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks. It was not clear if other banks had also decided to borrow from the Fed.
On Friday, the Fed took the dramatic step of cutting its discount rate on loans to banks, to 5.75 percent from 6.25 percent, in an attempt to alleviate Wall Street's credit crunch. It also made technical changes to make it easier for banks to get discount loans, including extending the credit period to up to 30 days.
Tapping the discount window had previously been seen as a last resort for banks in trouble, a perception the Fed sought to eliminate.
Citigroup was the first to announce its decision to borrow the money, "on behalf of its clients" at Citibank.
"Citi is pleased to inject liquidity into the financial system during times of market stress and to support creditworthy clients," the company said. "Citibank stands ready to continue to access the discount window as client needs and market conditions warrant."
It was followed minutes later by the three other banks.
"The companies believe it is important at this time to take a leadership role in demonstrating the potential value of the Fed's primary credit facility and to encourage its use by other financial institutions," their statement said. The three added that they hoped their actions would "promote broad acceptance of the use of the facility."

Saturday, August 04, 2007


A focal point of my Macro Credit Analysis has for some time been the grave risks posed to markets and economies commanded by the seductive elixir of speculative liquidity. I have compared the current backdrop to that of 1929. For too long our Bubble Economy and Bubble Asset Markets have luxuriated in liquidity created in the process of leveraging speculative securities positions (especially in the Credit market). We are now witnessing how abruptly euphoric boom-time liquidity abundance can transform to a liquidity crisis.

I apologize for appearing overly dramatic. But this evening I have nagging feelings that for me recall the disturbing emotions following the terrible 9/11 tragedy. I know the world has changed and changed for the worse – yet I recognize that I don’t know how and to what extent. I fear for our markets, our economy, our currency and our system. I received an email this week on my Bloomberg that said something to the effect, “You all must be happy in Dallas.” I can tell you we’re instead sickened by what has transpired during the late-stages of this senseless Credit and specualtive orgy. The Great Credit Bubble has been pierced, and there will now be a very, very heavy price to pay. And, as always, I hope I am proved absolutely wrong.


NOTE** VIX did make a higher high FRIDAY



WE have situation with MILLIONS of NEW home owners in NEVAUX STYLE LOANS, sub prime, piggyback, and LOW LOW Introductory interest rates that WILL reset with payments skyrocketing. It seems to me we have not felt the worst of it, market is warning.

I have looked at a few weekly charts, NONE are OVERSOLD!!!! ALL have gobs of room for MORE DECLINE!!

Some like SPX cam right down to a rising trendline near 1433. You get END of (and could be very ST moves) moves with MAX volume readings....why always good to sell winners on news as volume comes in and usually you see ST peak price.

DOW P and F shows 13,100 as exceeding previous low O move, says "bearish price obj met" but maybe not with another O in place!

CALL ME F'ING nuts, this mkt has fooled a lot of us, it certainly sems like MONDAY could be a CRASH DAY with NO BUYERS showing up....IS THERE A PPT? a special mkt group? IF so will they come in and buy SPX calls like NO tomorrow? IF not MOnday when?

I thought copper holding up well, maybe so, but P and F IS in Bear mode.
Gold in Bull mode
Silver Bull mode unless $12 broken (P and F)
Bank index in bear mode

BZH P and F price Obj $0

HOV from $74 to $12 !!

Cramer meltdown.

Unwinding of Yen carry trade with FXY break out

Inverted yield curve.

Cat business hurting.

Retail business slowdown.

BSC meltdown.


Housing has been old news.....just mkt was able to mostly ignore...not so now, bottom dippers got BURNED, LOTS OF BAG HOLDERS IN MKT LOSING BIG MONEY!!! LOSING IT ALL.

Stock prices are in the GDP next reading may surprise on downside.

During all this CHINA mkt new highs??!!!

FTSE chart turns bearish and it SLICES and DICES thru 200 EMA like nothing was there. 6350 may not be surpassed.

NIKK swooning 15,850 P and F target

My MONTHLY TNX shows uptrend in yields still intact...but right at uptrend line....all MA'S I drew rising

Monday has potential to be an ALL OUT PANIC DAY, meaning it has high CRASH potential.

On bright side, my technical work is telling me several things, bull mkt not dead yet, but injured badly. 10% corrections used to be commonplace and normal so 10% off 14K is 12,500-12,600 area, not far from that, could produce a bottom of some kind.

It is also possible the 14K IS THE TOP it is in already, we just counter bounce, when done mkt plunges.

FEAR index rising, it might signal bear mkt s back, is might signal too much fear some kind of bottom is in, hard to tell.

Not good financials leading way down, BIG buys like BSC killed off their highs, JPM etc.

It appears to me, trend has aprubtly changed course, and ONLY HUGE BREADTH TO UPSIDE showing WIDE participation is likely to undo that.

A continuation of selling for much longer could indeed turn the longer term charts into Bear fodder. all IMHO


Friday, August 03, 2007

CRAMER GOES MAD you are going to LOVE THIS!

I hope most of my loyal readers are still with me, stay tuned. back on the 15th




Distillers (+1.5%) leads the way while Personal Products (+0.8%)and Soft Drinks (+0.5%) round out the top three. yeah, I can understand why BOOZE would do well here...

BSC getting shellacked! BOA analyst ran to his BOX and said selling was overdone, surely worst is over?

Financial stocks are leading the way DOWN? not good.

Why would S&P think of cutting BSC credit rating if the subprime woes were well contained?

BSC HIGH 2007 $171.85 close today $108.79 !!!!!!!!

MKT closes on the lows, selling quickened at close, volume was HUGE on NYSE. over 4 BILLION and we had yet another 90% down day!

Markets inability to rally when this oversold is an ominous signal IMHO. 10 yr Bonds yield now WELL below 2 yr and is screaming Recesion.
American HOme MOrtgage POOF, bankrupt, hedgies dropping like flies, financial sector slaughtered, engine of recent economy Housing clobbered, where is growth going to magically appear from?
Firms rich with CASH? WHY are they BORROWING BILLIONS to buy back OWN STOCK?
Where else you gonna get the straight dope? will be gone until the 15th, be safe, expect MORE volatility BULL lives on a thread....but lives. But I wonder what people will be thinking this weekend and what MONDAY will have in store? BLACK MONDAY?

Tuesday, July 31, 2007



I kept this chart simple, my opinion means nothing, the vote of millions of shares do. When the market sniffs out real TROUBLE or GOOD TOMES AHEAD it does so with it’s 20 and 50 week moving averages. The crossover highlighted in circle in 2000 CONFIRMED BEAR MKT in progress. IN 2002 that Blue Circle with upward crossover signalled NEW BULL MKT. That said, you can see weakness but NO crossover yet, if there is one Jo, then Bear is back IMHO> if not all is clear sort of.

Not one single other opinion was needed or necessary, the MA’S speak to me and tell the story and the action afterward proves it.

KEY IMHO is what to do, WHO knew small caps, real estate and gold would do well during 2000-2003 period? Or would lag recently as large caps outperformed.

Maybe one doesn’t run and hide like I did, but it is MOST DIFFICULT to see as it is happening the opportunities of long positions during a bear mkt, some DO and DID work, not the SPX 500, DOW or NAZ….but things did work, it is the quick adjusting of portfolios that makes the difference…..switching to defensive sectors may not help.

D....your bearish leaning, contrarian voice over your shoulder market observor

Wednesday, July 25, 2007


I cannot think I am alone here in retailville, and if sales DO NOT PICK UP HEADS WILL ROLL>

LOOK for unemployment reports when they rise out of current range it wont stop.

GOOD quality loans even now suspect per Countrywide

Money will be harder to come by (LIQUIDITY)

ONLY ASSET PRICES RISING…..will boost GDP (stock mkt)

Our electric and fuel bills for buildings and trucks have dramatically risen.

I think consumers are up against it here and when heads roll it gets worse.

Now we have HISTORIC DEBT, I am very worried for those on the edge. (lack of historic high in gold says to me they cant or haven’t INFLATED IT AWAY)

The alternative is DEFLATION, with little ammo left.

I think EASY money has been made, choppy times at best ahead.


Tuesday, July 17, 2007


1st half of 2007 it reached $2.7 T 62% AHEAD of 2006 !!!!

When M & A peaked in 2000 it warned of THE bubble top, we're building a bigger one now.


Tuesday, June 26, 2007


S&P/Case-Shiller Index Says U.S. Home Prices Fell in April for 17th Consecutive Month

NEW YORK (AP) -- U.S. home prices fell for the 17th month in a row with all regions showing the effect of the housing slowdown, according to a housing index released Tuesday by Standard & Poor's.
For April, the S&P/Case-Shiller index that covers 10 U.S. cities fell 2.7 percent from a year ago. It was the steepest decline since 1991.

If you have been reading my blog for some time, you know I WILL be paying attention. Business not DOA, and in future many potential drivers of global economies, but a BEAR MKT could be lurking in the way. LIQUIDITY IS SLOWLY DRYING UP< IMHO


Monday, June 25, 2007


Home Sales Trend is Worrisome Last Update: 25-Jun-07 10:12 ET

The housing market remains weak. Existing home sales for May were essentially flat at -0.3%. That was in line with expectations, but it still represents a very low level of sales. Sales are 10.3% lower than a year ago and the lowest level in three years. The median price on existing homes sold was down 2.1% from a year ago, continuing the decline of recent months.

The outlook is not good. The inventory of unsold homes rose to a very high 8.9 months supply. Mortgage rates have also risen in recent weeks with the backup in the 10-year note yield. This will hurt demand in the months ahead. A higher level of supply, and lower demand is obviously not good for the housing market. The housing market remains a significant problem for the overall economic outlook.
--Dick Green,

Saturday, June 23, 2007


Going Down by Jeff Beck

album: Best Of Beck (1999), Beckology (1998)

Well I'm going down
Down, down, down, down, down
I'm going down
Down, down, down, down, down
I've got my head out the window
And my big feet on the ground

She's gone
Gone, gone, gone, gone, gone
She's gone
Gone, gone, gone, gone, gone
I've got my head out the window
And my big feet on the ground

So I'm going down
Down, down, down, down
I'm going down, down, down, down, down
Down, down, down, down, yes I am
I've got my head out the window
And my big feet on the

Well I'm goin
Down, down, down, down, down
I'm going down
Down, down, down, down, down
I've got my head out the window
And my big feet on the ground
Gone, gone, gone, gone, gone
She's gone
Gone, gone, gone, gone, gone
I've got my head out the window
And my big feet on the

Well I'm Down
Down, down, down, down, down
I'm going down
Down, down, down, down, down
I've got my head out the window
And my big feet on the ground, yes I have
Well she walked out the door
And I crawled right out there

Friday, June 22, 2007


NEW YORK (AP) -- Bear Stearns Cos. confirmed Friday it will bail out one of its troubled hedge funds with $3.2 billion in secured loans, but the Wall Street firm sought to convince the broader market its troubles are "relatively contained."

Bear said it stepped in to save the Bear Stearns High-Grade Structured Credit Fund because market uncertainty made it "difficult" to unwind the fund's assets -- mostly securities backed by risky mortgage loans.

Blackstone went public today, is this the height of GREED? CEO'S value near $7B ! nice payday, the rich get MUCH RICHER the rest get much more in debt.

This country is bankrupt with NO way to pay off debt nor pay for promissed benefits.

WE are into Chinese for $1.4 Trillion, and that comes with interest!!! They put $3B in Blackstone pre IPO ! Does this event mark watershed?

Most indexes challenging their 50 EMA (moving averages), UTILITY AVG broke down to new low for move. ALL indexes seem to be moving together to the downside.

This decline MAY HAVE TEETH, not saying one last run to new highs not possible.

Interest rates broek a trendline from 1981 !!! many think BOND BULL IS DEAD. How do stocks normally react in a rising interest rate environment?

I am IN CASH awaiting bargains, watching gold for possible breakout.....or breakdown.

Down market closing on lows with BX IPO today, not good IMHO!


Friday, June 15, 2007


Castles Made Of Sand Lyrics » Jimi Hendrix

Down the street you can hear her scream "you're a disgrace"As she slams the door in his drunken face,

And now he stands outside and all the neighbours start to gossip and drool.He cries "Oh girl, you must be mad,What happened to the sweet love you and me had?"

Against the door he leans and starts a scene,And his tears fall and burn the garden green.And so castles made of sand, fall in the sea, eventually.

A little Indian brave who before he was ten, played war games inthe woods with his Indian friends, and he built a dream that when hegrew up, he would be a fearless warrior Indian Chief.

Many moons passed and more the dream grew strong, until tomorrow He would sing his first war song,And fight his first battle, but something went wrong,Suprise attack killed him in his sleep that night

And so castles made of sand, melts into the sea eventually.

There was a young girl, whose heart was a frown,Because she was crippled for life, and couldn't speak a sound

And she wished and prayed she would stop living, so she decided to die.

She drew her wheel chair to the edge of the shore, and to her legs she smiled"You won't hurt me no more.

"But then a sight she'd never seen made her JUMP AND SAY"Look, a golden winged ship is passing my way"And it really didn't have to just kept on going.

And so castles made of sand slips into the sea, Eventually

Wednesday, June 13, 2007


BDI is a helpful tool is guaging what the world economies are up to, there is a good chance it has topped out, flashing another caution flag.
If 10 yr breaks and holds above 5.25%, that would become support for perhaps even higher rates.


Foreclosures jump 90% over last year
Figure pushed up by slowing real estate market, subprime meltdown.

June 12 2007: 5:29 PM EDT

NEW YORK (Reuters) -- Home foreclosures in May jumped 90 percent from a year earlier, reflecting a poor spring housing market and foreshadowing even higher levels later in 2007, real estate data firm RealtyTrac said Tuesday.
The May foreclosures - a sum of default notices, auction sale notices and bank repossessions - totaled 176,137, up 19 percent from April, the firm said in its May 2007 U.S. Foreclosure Market Report.
"After a barely perceptible dip in April, foreclosure activity roared back with a vengeance in May," James Saccacio, chief executive officer of RealtyTrac, said in a statement.
"Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year," said Saccacio. "Certainly not every community nationwide is seeing an increase in foreclosures, but foreclosed properties are becoming more commonplace and adding to the downward pressure on home prices in many areas."
RealtyTrac said there was a national foreclosure rate of one foreclosure filing for every 656 U.S. households during May.
The default rates in the subprime segment of the U.S. mortgage market, which caters to borrowers with poor credit histories, have jumped in recent months as the housing industry has slowed and prices have fallen.
More than two dozen lenders in the subprime mortgage sector have collapsed as rising defaults drove them out of business during a downturn in the housing market.
Market observers are keeping a watchful eye on the subprime crisis because it has triggered broader concerns that the fallout may spread to mainstream lenders and damage the economy.
A slowing housing market affects homebuilders, such as Centex (down $1.18 to $44.09, Charts, Fortune 500), Hovnanian Enterprises (down $0.86 to $20.31, Charts, Fortune 500) and Pulte (down $0.74 to $24.65, Charts, Fortune 500), as well as banks that make mortgage loans, such as Bank of America (down $0.39 to $49.66, Charts, Fortune 500) and Wachovia (down $0.65 to $52.95, Charts, Fortune 500).
Home prices: More pain to comeStudy: Rust Belt sees highest foreclosure riskMortgage applications hit by rates

Tuesday, June 12, 2007


10 yr has broken 5.20%
Certain forms of liquidity are drying up.
SPX fighting to hold above 1500.


Thursday, June 07, 2007


Mortgage Rates Hit 10-Month High AP
Growth in Consumer Credit Slows in April AP
Stores Post Modest Sales Gains in May AP
10-Year Treasury Yield Passes 5 Percent AP

At some point the lemmings sit up and take notice, not one thing, not the CHinese stock swoon, not sub prime mess, not gassed out housing, not 15 Million Mexicans sneaking under the fence, not an idiot for President, not historic highs in energy prices, not ongoing mess in Iraq, not gay priests, not the thought of HIllary as President?

The 10 yr busting out over 5% has got someone nervous, and now is a great place to take profits perhaps thought some others.

Little guy already grumbling that the market hasn;t gone up every day let alone fell by 200 points.

We had close to 90% DOWNSIDE VOLUME TODAY!

UTILITY stocks battered and broken support (they fell ONE YEAR IN ADVANCE OF 2000 TOP), higher rates will do that. 500 is price I am looking at as must hold. Closed today at 517. 509 is 200 EMA. could bounce there. (very near a sell signal of 20 /50 EMA cross)

SELLERS were in control, volume high and buyers nowhere to be found cept for AAPL stock.

Retail sales in general are very quiet. GDP had near qtr of no growth, costs pressures are there, inflation pressures there, BONDS were NOT safe haven today.

Corrections are not unusual during bull markets, I think this is first big test in awhile.