Tuesday Update

Month over month PPI comes in at a horrid 1% increase (expected .4%). Do you think the producers will be keeping these extra costs to themselves or passing them on to the consumer? Case/Shiller home price index down 9% - ouch! Consumer confidence way below expectations, with the future index at it’s lowest point in 17 years. Oil at a new all-time high. Foreclosures up 57%. Home Depot, first ever annual sales decline. Our state raising the gas tax for the first time in 20 years. Little bit here, little bit there and it’s all adding up – with all the benefits going to big business and Wall Street while joe-6-pack gets kicked a little harder each day. The ONLY piece of good news to come out today was IBM doing a stock buy back. That’s it. Oh, and it’s being done with debt – sounds like *great* news to me. But the market rallies on. The complete disconnect becomes more and more clear.

Here is that Case Shiller price index in graphical form. Anyone still believe HOV's CEO who came on to CNBC for about the 8th straight month to call the housing bottom? Well anyone other than the market, that is. That is a flippin' steep slope.

http://tinyurl.com/2lg86z


As for those foreclosures - since it takes about 6 months from the time you stop paying for it to happen, so these are from last July. Subprime resets don't even *peak* until next month! Ohhhh boy have "they" set us up nicely.


On to the interesting stuff:

Washington Mutual, the biggest savings and loan in the country, has MAJOR issues. 93% of their July pool of loans were rated AAA. A mere 8 months later 15% of that pool is in foreclosure! $514M in loans – after 8 months there shouldn’t even be 15 *houses* in foreclosure, much less 15%!!! This is shockingly unreal. Open those wallets a little wider taxpayers.
http://tinyurl.com/2lwcr9

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Banks begging for a bailout – this is shockingly disgusting. But some of the comments are quite humorous:
http://tinyurl.com/ypofqc

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A chart of the supply of homes on the market – notice that December of past years was always the low point – guess what this chart will look like in about 6 months…
http://tinyurl.com/2eh6xx

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Just plain scary what will happen with these option ARM’s (after the subprime debacle I noted above)
http://tinyurl.com/3ygvpv

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One of the dumbest quotes I’ve heard in a long time.
"We know they shouldn't be rated AAA, but just look at what will happen if they are downgraded, we should just leave them alone."

So that’s how the “ratings” agencies work?

And the monolines get their AAA ratings upheld yesterday. The ratings agencies now have zero credibility. You aren’t forced to borrow at 14% interest if you are AAA. You don’t have bailout rumors floated about you if you are AAA. Ah, to be corrupt and in charge, a lovely combination.

Mish’s view on it. The sub-paragraphs half-way in from Minyanville are absolutely top notch.
http://tinyurl.com/2thqaj

Oh, and after the market closes (after a run-up on that glorious MBIA news), MBIA cuts their dividend, says they will split up within 5 years (they won’t be around), and their CEO says he won’t sign off on 2007 results as he “questions” them. Nice.

Follow up: "Is there any other way to interpret the above ratings other than incompetence or corruption?"
http://tinyurl.com/2waftf

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http://tinyurl.com/3626nv
Wow – I think I wrote this exact article in an email exchange with one of you after my stick-save comment on Friday. Its all about trust, people. It’s gone. Imagine when foreign countries stop feeding our addiction for their money because our entire system proves to be a sham.

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"Is there a snowballs chance in hell Citigroup is solvent?" I've been saying no, but this guy always says it better.
http://tinyurl.com/2mruk2

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Ignore the market for a bit, and tell me how any or all of this gets resolved??? This is only two flippin' days worth of news!


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Two articles of non-required reading, but I found them interesting, if you made it this far.

This article interested me as it touched on the disconnect between main street and those at the top. That will grow.
http://tinyurl.com/2kwpbd

Interesting to see how people are thinking. Borrow at 8.5% to earn 3%?
http://tinyurl.com/26wpbr