Bovine Spongiform Encephalopathy

by Larry Levin


The market took another one the chin Friday closing below 11,900, the worst close since Oct. 11th 2006. The bull market clearly suffers from bovine spongiform
encephalopathy (BSE) - Mad Cow Disease. And don't get too close or you'll surely catch the human form of BSE, Creutzfeldt - Jakob disease, which "value buyers"
suffer from in spades. The transmissible disease is said to be caused by prions; however, during this mad-cow market, the disease spreads between analysts and investors via "buy & hope" as well as desperation.

"Turn out the lights the party's over," wrote Joseph Brusuelas, U.S. chief economist for IDEAglobal. "We are in a recession."

Until today most experts on financial shows did not want to admit the bull was sick; it just had a case of the sniffles. With today's employment report and the prior month's revisions, however, most believe it's now a mad cow. The clearest proof of a recession yet was given this morning: U.S. nonfarm payrolls fell by 63,000 in February, the second straight decline. It was the largest drop in payrolls since March 2003, when the economy was struggling through a jobless recovery. In addition to February's dismal result, the payroll data for December and January were revised down by 46,000.

According to the separate survey of households used to derive the jobless rate, employment fell by 255,000 in February. The labor participation rate fell to 65.9% from 66.1% in January. The employment rate fell to 62.7% from 62.9% and a peak of 63.4% in late 2006.

"Folks, based on today's employment report, if we are not in a recession, it is a darned good imitation of one; we are in an unprecedented real estate and credit crisis that is whipping its way through the U.S. economy," said Kevin Giddis, managing director, fixed income trading, Morgan Keegan & Co.

Oil closed north of $105-barrel today - the same day that Goldman Sachs predicts oil will trade $200.00-barrel with just one "major disruption."

In order to fix the "deleveraging" mess in the mortgage market, Paul Miller of Friedman-Billings-Ramsey says it needs $1-trillion. I wonder if he said that with his pinky-finger near the corner of his mouth like Mike Myers..."ONE TRILLION DOLLARS". Heh, heh, I can see mini-me now expressing shock at the number.

Mr. Miller estimates that $11 trillion of outstanding U.S. mortgage debt is supported with roughly $587 billion of equity. That's a leverage ratio of 19 to one! There are two ways to resolve the problem, he says. Either inject $1 trillion of new capital into the mortgage market, or allow prices of mortgage securities to fall, which increases interest rates on home loans. Since the mortgage market won't be able to raise $1 trillion, prices have to fall.

In today's "Ironic File" we see that the government dragged more people to the Hill for more silliness, grilling past and present CEO's over compensation packages.

"The pay they received from their companies and their stock sales was extraordinary," said Rep. Henry Waxman, D-Calif., the committee's chairman. "Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down."

Reread the comment above coming from the Congressman...and now think of the state of the economy. Think of the U.S. dollar. Think of the U.S. policy on oil drilling/exploration and think of the price of oil. Think of Congresses preposterous scam known as Ethanol, then think of its result: skyrocketing commodity prices driving up everything at the local supermarket.

Now you can see how ironic it is that these bozo's have the nerve to grill these CEO's, join me in telling Mr. Waxman and the others to "SHUT UP SIR!" Get your own house in order before throwing stones! The U.S is in deep doo-doo mainly from a profligate spending Congress. Many people say Congress spends money like a drunken sailor on leave, but that's wrong: The sailor spends HIS OWN money!

Anyhow, according to one of these idiots known as congressmen, one of Countrywide's pools of mortgages from 2006 had a default rate of 18% on the very first payment. Said another way, of the investment grade rated pool of assets sold to insurance companies and other investors, 1 in 5 borrowers failed to even make the very first payment! How in the world wasn't this front page news? And now our tax dollars are going to bail-out these deadbeats?

Real Time Trading Signals*for

Trade Date: 3/7/08

E-Mini S&P Trades*
(before fees and commissions):

1) B/away sell @ 8:35am at 1293.00 = +1.50 & -2.00

2) FT sell @ 8:45am at 1302.50 = -1.50 (1 lot)

3) VA buy @ 9:50am at 1310.50 = -2.00 & -2.00

4) OTF sell @ 11:55am at 1298.50 = +5.50 (1 lot)

5) FT sell @ 1:10pm at 1291.00 = +2.50 (1 lot)

6) FT sell @ 1:45pm at 1285.50 = -1.75 & -1.75

7) OTF sell @ 1:50pm at 1291.00 = -1.50 & -1.50...-4.50 points

E-Mini Russell Trades*
(before fees and commissions):


1) Buy @ 9:45am at 667.1 = +.5 & -1.3

2) Sell @ 10:53am at 664.5 = b/e & -1.1 (Ambac pop)

3) Sell @ 11:18am at 660.8 = +.5 & b/e

4) Sell @ 11:45am at 662.8 = -.4 & -.4

5) Sell @ 1:27pm at 656.2 = +.5 & -.9

6) Buy @ 2:42pm at 661.0 = +.5 (1 lot)...-$210


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