The Schilling/ Lawler home price wars

You can reduce all this nonsense to one paragraph, but let's start with the WSJ journal first:

Yale University economist Robert Shiller has often dazzled audiences with a chart showing home prices from 1890 to present. Someone even used Mr. Shiller's chart to make a YouTube video that puts its viewer on a roller-coaster ride over peaks and valleys in home pricing. It's a bumpy ride.

Now another economist, Thomas Lawler, says Prof. Shiller's chart is "bogus." Mr. Lawler says Mr. Shiller cobbled together data that are inconsistent and sometimes unreliable. Mr. Shiller defends his work and accuses Mr. Lawler of making "wild allegations."

But that doesn't stop analysts from extrapolating from what may be dubious data. In a March 30 report, T2 Partners LLC, a New York hedge-fund manager, drew on the Shiller chart to conclude that on average U.S. home prices need to drop another 13% to get back in line with the long-term trend.
http://online.wsj.com/article/SB124051414611649135.html

This is just nonsense--home prices have bottomed, as advertised here, on the exact day of the low. On March 23, when we had a world that didn't believe that the market and homes were bottoming:

Since the bears didn't like the 666 bottom on the S&P 500, I'll give them some more math that they'll have a hard time swallowing.

As it quite evident now, the stock market, even to those who missed the lows, has bottomed. The stock market, is a forward looking indicator, and even though the news has been bad, this news is already discounted in prices.

It's the same with housing.

And house prices, will now be going up, and these price increases, along with the rising stock market will get those who haven't bought, or who are contemplating buying a home, off of the sidelines, and it will help engender confidence in banks who love algorithms and models, but hate common sense!

Let's do the math. The numbers on the average home sale price came out today at $165,400. That my friends is the absolute low reading that you will see in this housing cycle, so get on board, or get run over by the train.
http://aaronandmoses.blogspot.com/2009/03/housing-math-for-bears.html

You can read the article. It's just simple math. More foreclosures in higher end properties, will cause the average price of homes to rise. The bad news in housing, will actually cause the average home sale price to go up!

What was the average price that they came out with today? $173,400. Up 4% from last month! You will never see those average prices in homes, that we had in March again, as I advertised.

If you want to chart graphs and argue minutiae like Schiller and Lawler, go ahead and waste your time, and then waste more of your time listening to T2's bearish prognostications on housing.

The bottom in home prices has now been in for thirty days.

You got the bottom of the stock market on the exact day, and you get the bottom on home prices, on the exact day also.

And time will show that the average price of homes, hit it's botton on March 23, just like time has shown the market bottom was on March 9th, and advertised here.
http://aaronandmoses.blogspot.com/2009/03/time-to-get-busy-buying.html

and here
http://aaronandmoses.blogspot.com/2009/03/market-bet.html

and emphatically here
http://aaronandmoses.blogspot.com/2009/03/we-go-higher.html

Even if Ben N Dover, Meredith Whitney, Roubini, and every other bear on the planet disagree.

They are just flat out wrong.

Rabbit hunting!

The latest fear point bandied out by the bears is the spread between short rates and long rates. How are short rates so low, when long rates are going up? Supposedly, if the economy is getting better, shouldn't short rates inch up?

But since short rates are so low, doesn't that mean the "fear trade" is in vogue?

Let's look at this argument for a second. The bears parsed BofA's earnings, but didn't they parse BAC's excess liquidity? Where do you think they are parking that extra $130 billion? Where is Morgan Stanley parking their spare change?

Short term rates are low, because the banks are hoarding cash. So trash-can the conspiratorial stories that this spread is a presage for danger. It is, but only to those silly rabbits! Because it's hunting season! And the crocodiles favorite food in neighborhoods is rabbits!

The first silly rabbit is David Rosenberg, strategist from Merrill Lynch. Remember his piece on Wily Coyote? That piece is just another bunch of croc, so appropriately, that rabbit is getting prepared to be eaten!
http://aaronandmoses.blogspot.com/2009/04/trades-gone-awry.html

The next silly rabbit is Pimco's McCulley, who came up with this croc yesterday, when he said, that the economy is in a bottoming process, but not in a recovery.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a8HNh4dOyabw

Why wouldn't he say that? As the largest bond holder in the country, he is on the other end of the curve than the banks, and long rates are going up, pushing down the prices of his bonds. Why would he recognize a recovery when it would hurt his position?

McCulley, of course, is famous for his conversations, with Bun Bun, his Netherlands Pet Bunny.
http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2008/GCB+December+2008+McCulley+All+In.htm

In that dialogue, Bun Bun said, "In my world, that’s called the survival of the fittest. Wouldn’t make sense for government to try to overrule that force of nature, I agree."

And that's this Darwinian market. The survival of the fittest. The bears, and the rabbits, are going to get eaten. That's the nature of this bull market beast!
http://aaronandmoses.blogspot.com/2009/03/we-go-higher.html

And the crocodile doesn't need to be fast, when you hunt by ambush!

Even, if it hasn't changed the last few hundred million years!

Now that's an evolutionary thought!

Paulson and Bernanke told Ken Lewis to keep quiet

The WSJ is reporting that Ken Lewis was told by Secretary Paulson and Chairman Bernanke to keep quiet about the deteriorating state of Merrill Lynch in December, according to his testimony with the AG of New York.

Now maybe someone could ask Treasury Secretary Geithner, for clarification.

He would tell you, "I'm not a regulator" or "I'm not a banker" or "I'm not a lawyer" but "I would be happy to get back to you, after I think it over!"

Here's the testimony Ken Lewis gave:

Q: Were you instructed not to tell your shareholders what the transaction was going to be?

A: I was instructed that 'We do not want a public disclosure.'

Q: Who said that to you?

A: Paulson...

Q: Had it been up to you would you [have] made the disclosure?

A: It wasn't up to me.

Q: Had it been up to you.

A: It wasn't.

Goldman's upgrade of China

April 22 (Bloomberg) -- China’s economy will expand faster than previously forecast this year and next as the government’s 4 trillion-yuan ($586 billion) stimulus package spurs domestic demand and boosts investment, Goldman Sachs Group Inc. said.

The world’s third-largest economy will expand 8.3 percent in 2009, from an earlier estimate of 6 percent, Hong Kong-based economists Helen Qiao and Yu Song wrote in a note published today. CLSA Asia-Pacific Markets also increased its estimate for growth this year to 7 percent from 5.5 percent earlier, according to an e-mailed note.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUnSHaqsTGx0&refer=home

Last night on Fast Money, one of the traders recommended shorting Potash into today's numbers. My question is---if China is going to grow faster, and stock markets are getting healthier, when is China going to negotiate their magic potash contract--the one that Goldman Sachs analyst Bob Koort was so concerned about on Mosaic's earnings conference call two weeks ago?

Today, Wall Street will get some clarity from Potash on the fertilizer situation around the world.

Quite frankly, shorting these numbers down here, on the lowered guidance today just doesn't make sense. It makes as much sense as buying these numbers when they were up there just one year ago--at 3X today's prices!

Don't be Wall Street's stool pigeon!

Dandelion tea bags for the bears?

I thought I would help readers with the stage of denial that the bears are currently under, with a simple stool chart, that will go with my piece this morning on the bears stools with the legs falling off!
http://aaronandmoses.blogspot.com/2009/04/legs-are-following-off-bears-stool.html

It's even more appropriate today, since a black bear was sighted in Weston, South Florida. Unlike Wall Street, they couldn't find the bear. But he left tracks!
http://www.miamiherald.com/news/broward/breaking-news/story/1011851.html

And like the Wall Street bears, their stool is quite similiar. It's full of nuts, and hard to pass. And as you can see from the chart above, the bears, in their public proclamations are still at Type 1; the stage of constipation! They're still full of themselves!

However, a "channel check" of the toilets around Wall Street, shows a markedly different chart pattern.

Behind closed doors, the bowls are splattered.

That would indicate that the bears, are really sh*tting their pants, while spraying the bowl.

While seated!

And that would make some sense. After all, at stage 6, stool is characterized by "fluffy" pieces. Isn't that the latest research from the bears?

Look at Nouriel Roubini's writings. How well was his latest work held together?

Roubini thought he was clever, intoning, while the world sees "green shoots" he sees "yellow weeds!"

How appropriate. The most common yellow weed is a dandelion, the traditional medication for constipation!

Instead of throwing tea bags over the White House fence, maybe somebody better send some dandelion tea bags to Wall Street!

Let's have a Wall Street tea party with David Rosenberg, Meredith Whitney and Nouriel Roubini as the invited guests!

Served on fine China!

Today's market action

The financials were weak, but that was attributable to two events and nothing more. You had a note by Goldman Sachs that was bearish on them, and tomorrow, Larry, Richard, Lloyd, Ryan, Paul, David, Patrick, Gordon, Christoper, Pam, David, William and Kevin; the unlucky 13 executives of credit card companies, get summoned to the White House for a discussion with Obama regarding credit card fees and rates.

Obama told the bankers that his administration was the only thing that seperated the bankers from pitchforks. So what do you think he'll say to these credit card executives?

After the close, AAPL's earnings, as usual were inscrutable, and QCOM and BRCM are amicably looking to settle their differences, so all of these numbers are trading higher.

So let's look at the bears footprints the last few days.

How did their gang rape on BRCM workout by the bears that slammed this number when they said they would make a hostile bid for ELX? Yesterday BRCM was trading at 18ish in the pre-market; it's now at 24 and change in today's afterhours!

How about the gang rape on ISRG last Thursday in the afterhours at 108? Today it traded at 139. 31 points! How did that work?

Ignore the bears, and their machinations.

Today was just a meaningless churn, by the bears attempting to manipulate the market down again.

Monday they gang raped it.

Today they tackled it.

Tomorrow they'll beg for mercy.

A prediction even Wall Street can make!

Apple beats estimates.

Oh my, is that a surprise? For those who can't for the life of themselves figure out why AAPL always beats the numbers; and since the number of life is 18, here's Apple's last 18 quarters of estimates and the last 18 quarters of beats.

On January 12, 2005 Apple reported earnings and gave this guidance:

“We’re pleased to report 74 percent revenue growth, 26 percent Mac unit growth and 525 percent iPod unit growth,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second quarter of fiscal 2005, we expect revenue of about $2.9 billion and earnings per diluted share of about $.40.”

Revenues were $3.24 billion, and earnings were .68 cents. On April 13, 2005, Apple gave this for guidance:

“Looking ahead to the third quarter of fiscal 2005, we expect revenue of about $3.25 billion and earnings per diluted share of about $.28.”

Revenue was $3.52 billion, and earnings were .37. On July 13, 2005 Apple gave this guidance:

“Looking ahead to the fourth quarter of fiscal 2005, we expect revenue of about $3.5 billion and earnings per diluted share of about $.32.”

Apple posted revenue of $3.68 billion and a net quarterly profit of $430 million, or $.50 per diluted share. On October 11, 2005 Apple gave this guidance:

“Looking ahead to the first quarter of fiscal 2006 which will span 14 weeks, we expect revenue of about $4.7 billion. We expect GAAP earnings per diluted share of about $.46, including an estimated $.03 per share expense impact from non-cash share-based compensation, translating to non-GAAP EPS of about $.49.”

Apple posted revenue of $5.75 billion and a net quarterly profit of $565 million, or $.65 per diluted share, in this 14-week quarter. On January 18, 2006, Apple gave this guidance:

“Looking ahead to the second quarter of fiscal 2006, we expect revenue of about $4.3 billion. We expect GAAP earnings per diluted share of about $.38, including an estimated $.04 per share expense impact from non-cash stock-based compensation, translating to non-GAAP EPS of about $.42.”

The Company posted revenue of $4.36 billion and a net quarterly profit of $410 million, or $.47 per diluted share. On April 19, 2006 Apple gave this guidance:

“Looking ahead to the third quarter of fiscal 2006, we expect revenue of about $4.2 to $4.4 billion. We expect GAAP earnings per diluted share of about $.39 to $.43, including an estimated $.04 per share expense impact from non-cash stock-based compensation, translating to non-GAAP EPS of about $.43 to $.47.”

The Company posted revenue of $4.37 billion and a net quarterly profit of $472 million, or $.54 per diluted share. On July 19, 2006 Apple gave this guidance:

“Looking ahead to the fourth quarter of fiscal 2006, we expect revenue of about $4.5 to $4.6 billion. We expect GAAP earnings per diluted share of about $.46 to $.48, including an estimated $.03 per share expense impact from non-cash stock-based compensation, translating to non-GAAP EPS of about $.49 to $.51.”

The Company posted revenue of $4.84 billion and net quarterly profit of $546 million, or $.62 per diluted share. On October 18, 2006 Apple gave this guidance:

“Looking ahead to the first fiscal quarter of 2007, we expect revenue of $6.0 to $6.2 billion and earnings per diluted share of $.70 to $.73.”

The Company posted record revenue of $7.1 billion and record net quarterly profit of $1.0 billion, or $1.14 per diluted share. On January 17, 2007 Apple gave this guidance:

“Looking ahead to the second fiscal quarter of 2007, we expect revenue of $4.8 to $4.9 billion and earnings per diluted share of $.54 to $.56.”

The Company posted revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share. On April 25, 2007, Apple gave this guidance:

“Looking ahead to the third fiscal quarter of 2007, we expect revenue of about $5.1 billion and earnings per diluted share of about $.66.”

The Company posted revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share. On July 25, 2007, Apple gave this for guidance:

“Looking ahead to the fourth fiscal quarter of 2007, we expect revenue of about $5.7 billion and earnings per diluted share of about $.65.”

The Company posted revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share. On October 22, 2007 Apple gave this guidance:

“Looking ahead to the first quarter of fiscal 2008, we expect revenue of about $9.2 billion and earnings per diluted share of about $1.42.”

The Company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share. On January 22, 2008 Apple then gave this for guidance:

"Looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94.”

The Company posted revenue of $7.51 billion and net quarterly profit of $1.05 billion, or $1.16 per diluted share. On April 23, 2008 Apple then gave this for guidance:

“Looking ahead to the third quarter of fiscal 2008, we expect revenue of about $7.2 billion and earnings per diluted share of about $1.00.”

The Company posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share. On July 21, 2008 Apple then gave this for guidance:

“Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion and earnings per diluted share of about $1.00.”

The Company posted revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share. On October 21, 2008 Apple then gave this for guidance:

“Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter. We are providing a wide range for our guidance, targeting revenue of $9.0 to $10.0 billion and earnings per diluted share between $1.06 and $1.35.”

The company posted revenue of 10.71 billion and net quarterly profit of $1.61 billion or $1.78. On Januray 21, 2009 Apple gave this guidance:

“Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1.00.”

The Company posted revenue of $8.16 billion and a net quarterly profit of $1.21 billion, or $1.33 per diluted share. Today Apple gave us this guidance:

Looking ahead to the third fiscal quarter of 2009, we expect revenue in the range of about $7.7 billion to $7.9 billion and we expect diluted earnings per share in the range of about $.95 to $1.00.”

The 18th beat comes in July.

Now that's a prediction even Wall Street can make!

Wall Street has now found life!

(If you want to read all of Apple's earning press releases, in all their glory, the link is here):
http://phx.corporate-ir.net/phoenix.zhtml?c=107357&p=irol-news

The legs are following off the bear's stool

It's now patently obvious that Monday's downdraft was an orchestrated move by the bears to crack the market.

And it's now patently obvious, that we have already had the price and time correction in this bull market.

We corrected 5%; so that was the price correction.

And the time correction was one day.

The fundamentals of the economy are getting better, so we now have had the time correction, even though it was only one day, because the economy is healing that quickly.

And the correction that we had, that was manufactured by the bears, on the heels of the stress test pre-release by a white supremist, means that the desperation of the quants that are short, and those not invested are at a fever pitch---just look at who they had to use!

So the legs of the stool that supported the bears are now broken. And now the bulls will extract every penny from the bears hides who remain short.

After all, it's a milking stool!

The leg of a financial collapse of the financials is gone--do suicides happen at financial tops?

The leg of bearishness from Goldman Sachs is now broken.

The leg of the next depression is now destroyed.

And that's what will happen to the bears, but in an inverse order.

This first leg up already has almost destroyed them, the second leg up will make them broken, and in third leg up they will finally be gone.

That's the stool of the bulls.

And the leg that the bears don't understand, is the leg of the stool that is going to get rammed into Mr. Benjamin N Dover's III posterior.

And that's the next leg up in this bull market!

It's the bulls stool check!

Delivered express, C.O.D!

Jan Hatzius getting dragged kicking and screaming into the bullish camp

The economist from Goldman Sachs that predicted the depression, is now seeing shoots and seeds, and improvements in exports.

"Modestly positive growth rates..."

He predicted the economy would shrink 7% in Q1 at the day of the market low.
http://www.chinapost.com.tw/commentary/bloomberg/2009/03/10/199471/Depression-dynamic.htm

Previously, Jan Hatzius said this:

“The potential for an economic implosion and subsequent world recession is huge and could surpass the biggest financial crash in history of that of the Great Depression”.

Now he sees a recovery! After he misses a 30% move!

Did Goldman cover their shorts?

IRA vs FDIC

In this FDIC report/counterpoint--billions in pushdown accounting by the acquiring banks to "massage" earnings and massage the FDIC's result (survivorship bias), and China balking at any more losses in bonds:

Foreign bond holders, like the government of China, have reportedly told the Obama Administration that further losses to debt holders of US banks will result in a boycott of US Treasury auctions.

Posts links are even "twittered."
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

Some seeds and shoots in the WSJ

Did some hedge funds get long? Amazingly, we have a couple of stories in the WSJ that actually have a bullish bent!

TOKYO -- The worst may be over for Japan's economy.

A rapid cool-down in global consumer demand for cars and electronic gadgets since last fall had pushed down Japan's exports sharply, throwing the nation in its worst recession since World War II. But recent indicators have shown that precipitous drops in exports and manufacturing output may be easing, raising hopes that the economy may begin to rebound, possibly as soon as the April-June quarter.
http://online.wsj.com/article/SB124036051789541499.html#mod=testMod

For the first time since the recession began more than a year ago, a host of major companies on Tuesday said the economy is approaching a bottom. But their tentative optimism triggered a debate with other firms that say it's far too early to call a floor...

Some policy makers see the earnings figures reaffirming their cautiously optimistic assessments of the economy. In a speech Monday night, Federal Reserve Vice Chairman Donald L. Kohn said the first three months of this year show that "consumption appears to have steadied some after a sharp drop" last summer and fall.
http://online.wsj.com/article/SB124035815202641191.html#mod=testMod

Freddie Mac CFO dead

Washington media reports said the acting chief financial officer of Freddie Mac has been found dead in an apparent suicide.

WUSA-TV and WTOP Radio are reporting that David Kellermann was found dead in his Northern Virginia home Wednesday morning.
http://online.wsj.com/article/SB124040188797343215.html#mod=testMod

Look what Freddie's previous CFO had to say last August:

"While we don't have a gun to our head, we confirmed our commitment to raise capital," Buddy Piszel, Freddie Mac's chief financial officer, told Reuters in an interview.
http://82.118.73.7/article/topNews/idUSN0642142120080806

The deflation argument

The Washington Post says their may be pay limits on the TARP. Does anybody really want to take that bet?

So now there is nobody to buy toxic assets because of pay restrictions. Oh my! Prices will be going down!

Treasury Department lawyers have determined that firms participating in a $1 trillion program to relieve banks of toxic assets could be subject to limits on executive compensation, contradicting the Obama administration's previous public position, according to a report to be released today by a federal watchdog agency.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/20/AR2009042003294_pf.html

Monday, after the market rout by the deflationistas, Tuesday morning, the NY Times comes out with an article saying that deflation is conquering the world--first in Spain, and then the rest of the world, culminating in the US:

With the combination of rising unemployment and falling prices, economists fear Spain may be in the early grip of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year.

Luxembourg, Portugal and Ireland have reported price drops, too....

In Germany, wholesale prices dropped 8 percent in March from a year ago, the steepest fall since 1987. In Japan, wholesale prices fell 2.2 percent on an annual basis. In the United States, the Consumer Price Index fell 0.1 percent in March, year over year, the first decline of its kind since 1955, though prices rose 0.2 percent excluding food and energy.
http://www.nytimes.com/2009/04/21/business/global/21deflate.html?_r=1&scp=2&sq=deflation&st=Search

That was their Tuesday morning discount!
http://www.tuesdaymorning.com/indexCatalogOff.asp

The NY Times missed Britain, but the Telegraph covered them!

Deflation returned to Britain for the first time in nearly five decades last month as prices measured by the retail price index (RPI) were lower than the same time a year ago.
http://www.guardian.co.uk/business/2009/apr/21/deflation-returns-rpi-negative

The deflationistas scoreboard is below:

• 1. Reduce nominal interest rate to zero. Check. That didn’t work...
• 2. Increase the number of dollars in circulation, or credibly threaten to do so. Check. That didn’t work...
• 3. Expand the scale of asset purchases or, possibly, expand the menu of assets it buys. Check & check. That didn’t work...
• 4. Make low-interest-rate loans to banks. Check. That didn’t work...
• 5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work...
• 6. Lower rates further out along the Treasury term structure. Check. That didn’t work...
• 7. Commit to holding the overnight rate at zero for some specified period. Check. That didn’t work...
• 8. Begin announcing explicit ceilings for yields on longer-maturity Treasury debt (bonds maturing within the next two years); enforce interest-rate ceilings by committing to make unlimited purchases of securities at prices consistent with the targeted yields. Check, and check. That didn’t work...
• 9. If that proves insufficient, cap yields of Treasury securities at still longer maturities, say three to six years. Check (they’re buying out to 7 years right now.) That didn’t work...
• 10. Use its existing authority to operate in the markets for agency debt. Check (in fact, they “own” the agency debt market!) That didn’t work...
• 11. Influence yields on privately issued securities. (Note: the Fed used to be restricted in doing that, but not anymore.) Check. That didn’t work...
• 12. Offer fixed-term loans to banks at low or zero interest, with a wide range of private assets deemed eligible as collateral (…Well, I’m still waiting for them to accept bellybutton lint & Beanie Babies, but I’m sure my patience will be rewarded. Besides their “mark-to-maturity” offers will be more than enticing!) Anyway… Check. That didn’t work...
• 13. Buy foreign government debt (and although Ben didn’t specifically mention it, let’s not forget those dollar swaps with foreign nations.) Check. That didn’t work...

http://globaleconomicanalysis.blogspot.com/2009/04/bernankes-deflation-preventing.html

Well, did anyone think deflation wasn't a surprise? We've been in deflation. It just took forever for our Government officials to recognize it.

So how is it possible for inflation then to start?

How are our august officials going to recognize the kindlings of inflation, when they couldn't recognize the deflationary forest fire?

So their policy will foster it.

Except no-one recognizes seeds or shoots, just Redwoods and Douglas Firs!

And Redwood seeds are 6666 to the ounce.

The bank stress test

According to the WSJ, regulators are going to give the banks the results of the stress test a week early, to give them time to "debate" (massage) the numbers and the results before they are revealed (and not this time through the radio version of The Turner Diaries).

Some of their assumptions used in the stress test:

Under a more adverse scenario, which assumes a 10.3% unemployment rate at the end of 2010, banks would have to calculate two-year losses of up to 8.5% on their first-lien mortgage portfolios, 11% on home-equity lines of credit, 8% on commercial and industrial loans, 12% on commercial real-estate loans and 20% on credit-card portfolios, according to a confidential document the Federal Reserve gave banks in February that was viewed by The Wall Street Journal. Regulators are expected to have used other assumptions as well when measuring a bank's strength.
http://online.wsj.com/article/SB124035671205840995.html

KC President Thomas Hoenig has a new proposal-Let firms fail. Does anybody believe that?

Insolvent financial firms must be allowed to fail regardless of their size, and sheltering such "too big to fail" institutions risks making the financial crisis worse, a top Federal Reserve official said Tuesday.
http://www.cnbc.com/id/30324929

(ZH has Ben Dover as the hat tip on the Hoenig article!)

The day our Government decides to claw back an AIG bonus, is the day the aforementioned is a possibility.

Until them, it is just like their dealings with AIG--just smoke and mirrors.

Benjamin N. Dover's latest

How about these bears?

First we have a white supremacist "leaking" the stress test, and now we have another letter with "deep thoughts" from "Benjamin N Dover III" sent to the SEC.
http://www.sec.gov/comments/s7-08-09/s70809-130.pdf

Third or turd?

It must be a b*tch when the orchestrated sell-off rallies!

Polo horses die in Wellington

21 horses died from the Lechuza Caracas Polo stables at a Wellington, FL polo match.

What's your first reaction?

Poison feed from China?

Either that, or someone killed the horses.

The stables are owned by Venezuelan Victor Vargas, president of Venezuela's Banco Occidental de Descuento.

In October he paid $68.5 million for a Palm Beach mansion that he bought from George Lindemann, father of George Lindemann Jr., who was sentenced in 1996 to 33 months in prison for hiring someone to electrocute his Wellington show horse for insurance money.

China is hoping for a conspiracy.

Banks get back in the closet

The banks and financials were crushed so hard yesterday, that those investors that missed the first rally, will probably take a look at them at these levels.

Yesterday, no one liked the banks with their clothes off; today they'll put their clothes back on and they'll look better.

BAC is worthwhile here in the mid 7's.

The bears maul the market

What a mauling! The bears aren't so cuddly after all!

You had the fake bank stress test released by a white supremacist, and then Treasury coming out and denying the report.

You had buyers who were put stock on expiration who puked them up.

Oil got smacked, so did grains, gold rallied and the financials visited Heinlein's crater!

The deflationistas were out in force today!

You can't sugar coat this move down. The bears pressed and shorted, and they piled on the bulls. If it was an orchestrated move, it was done well.

The "message" of the market today was so obvious that this move seemed to have more than a few of the biggest hands helping the move along. But stocks correct, when they are extended, and we need to consolidate lower, to get the next leg up.

This move up in stocks had a lot of hope, and it also had a lot of hype, and it also had a lot of help from our Government. Hope, however, is not the basis of a new bull market, and the bears hope that that's all this move was based on! So they sold and shorted in size.

So we need to let things come in, and at least try and base a bit, churn, and consolidate at lower levels, until hope gets some help from the fundamentals!

IBM tells you that tech is also extended. Their earnings were fine, but where was the cash flow? Apple Computer reports this week, and in this atmosphere, I'm sure that number will get sold also.

So we need a time correction, and a price correction to position this market to move higher.

Sometimes when you fall into the bears cage, they fight back.

Today they did.

The bank stress test released??

Supposedly the bank "stress test" has already been released. Of course, this story isn't true, but it was necessary to bring some panic into the market.

From Zero Hedge
The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.

The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.

When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this "main stream media" report.

The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Put bluntly, the entire US Banking System is in complete and total collapse

Take a look at crude

Oil is at $47 and change, and that's about the best entry you are going to get in this pullback.

Hit oil, and the world will think the economy will go to heck in a handbasket; after all isn't that their script?

The banks are a different story-they look to finally get some rest.

Friday at the close, all the banks got hit with gigantic sell orders. BAC had a 15.6 million print at the close, 30 cents under the last print, along with every other bank.

BAC had "good" earnings but the street doesn't know how Merrill Lynch made the $3.7 billion, just like Goldman's $6.6 billion FICC number that came at the expense of the taxpayer, or Citi's $2.5 billion on CVA (credit value adjustments) mainly due to the widening of Citi's CDS spread.
http://www.dailyreckoning.com.au/citi-reports-469-billion-in-fixed-income-trading/2009/04/20/

So they hit em, because the market, and the quants and the financials need a rest.

Because there's no rest for the weary!