Upbeat

by Larry Levin

Well, I received another raft of emails recently asking me to be "upbeat" or lay off the "doom and gloom." If the emails came from new readers of this blog let me assure you that I know full well that the market is rallying. Also, we buy as readily as we sell short; we love buying. It's not my fault that the reality of what's happening is gloomy. But you want "upbeat?" OK, let's try it.

The Case-Shiller home price index was positive again today. Home prices are slowly rising. You see, this is "upbeat" news. I feel warm and fuzzy inside.

How is this happening some are wondering? Oh come on now, don't spoil the party. Oh ok, I'll try to give the whole story. Housing prices are rising because people don't want to miss out on the government cheese being handed out - the $8,000 tax credit for home buyers that was just extended. With this in place, people are willing to buy homes now rather than wait to see if prices fall tomorrow thus supporting prices. Of course this is extremely expensive for the government and in the end will not make a difference, other than blowing another hole in its balance sheet. However, that doesn't matter either because it's all funny-money fiat (or newly printed) currency anyway so it's all good. Just trying to be "upbeat." No reason to worry there.

Oh yeah, and those newly minted homeowners that are getting your FREE tax dollars aren't very good credit quality. You see, like the banksters paying massive bonuses again, Congress hasn't learned a thing either. Congress has turned the FHA into the latest version of the subprime lender this time directly with your money.

It was just reported a day or so ago that the FHA is in need of a bailout. It too is already broke. Default rates are now at a staggering 22-23% and rising. But let's be "upbeat" and see it from another side: the borrows probably "meant to pay it back." Even though they will stick the rest of us with the bill - at least they had good intentions. Yeah, that makes me feel better.

Hmm, more housing news? Wow, it's all over the place. Why just today the Wall Street Journal reported an interesting fact: one in four borrowers are underwater on their mortgage. "These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply."

What's wrong with this reporter? Why is she letting statistical facts get in the way of what should be sunshine & lollipops for all? I mean seriously, doesn't she understand that it could have been 1 in three homeowners that were upside-down on their mortgage? Ahh yes, 1 in 3 would be much worse, so just 1 in 4 is rally not that bad.

In a somewhat housing-related story, more news of the FDIC broke today. The banks are turning as sour as 3-month milk because of their dodgy real estate investments. The FDIC, as I'm sure you have heard, is in trouble because it is letting banks implode long...long...after the FDIC should have shut them down, thus costing the FDIC more money than it should have. In short, and surely from Congressional pressure, the FDIC is not doing its job.

So today's news tells us that the FDIC deposit fund has a negative balance of -$8,200,000,000.00. The FDIC now has the equivalent amount of money backing your TRILLIONS of so-called "insured" bank deposits as Bernie Madoff had backing his so-called investments: nothing! But let's be "upbeat." Let's be real. It could be worse; it could be a negative balance of -$8,200,000,001.00. Again, now I feel better.

Finally we have the latest GDP data. It was 20% worse than originally reported. Uh huh - WAY OFF. With the theme of being "upbeat" I'll just assume that the government statisticians are overworked and not incompetent. And they're surely not scamming all of us to post wildly inflated data to goose equities higher. Yeah, they're just overworked, and the data could have been wrong by 21%.

Wow, that was fun. I should ignore reality to be "upbeat" more often.


Previous Day's Trading Room Results:

Trade Date: 11/24/09

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


1) No "Secrets" trades filled today.

2) Algorithm positions (0)

3) "Reading the Tape" positions (14) ...combined Secret's, Algo, & "Reading the Tape" total...+7.50



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