Frogman

October Finale: Trick or Treat?

Art Cashin has been looking for the Woossh which we never got in October...somehow "this is different"...ha right! There is more pain to come.

Take for example, In California many areas are experiencing 40% drop in home values from last year to this year. (See data from National Association of Realtors by zipcode) .>>YES 40%

People can't sell (to upside down), nobody will buy (because it isn't the bottom) and who the hell will be left (even after it bottoms) to pick up the great deals? Anyone who bought in the past 5 years has bought! So with tighter lending standards to boot the problem is that very few will qualify.

Next Quarters GDP will make history and this slide will continue in a bad bad cycle that will build on itself. (Roubini is right BTW) JPMC just came out with a 'mortgage plan' and so did the FDIC after taking over WAMU and how do you save some? That is like having two children drowning but you only have time to save one who are you going to save...?>! Either way you won't be able to live with yourself after the fact. In many cases (read the article) the FDIC couldn't negotiate until a homeowner is behind on their payments so there is a total incentive to not pay! Truly troubling!

Those who stepped into the market this past week will feel some real pain because this is by no means is over. Those of us who patiently wait will be rewarded for nothing has changed relative to transparency and information flow from these banks and mortgage market. In summary, THE CONSUMER IS AGAINST THE ROPES AND THERE IS NOBODY TO CALL THE FIGHT! Already we have heard of politicians allowing people access to their 401k's...which they do have the ability to draw from now but there are no more home equities to draw from, no credit cards to max out (see AMX call -highest delinquencies, and charge off's expected to get worse) so where will the consumer go to get cash? (The only place is the market if they have anything left)

So what catalysts do the bulls see on the horizon? "its cheap" I hear...yea relative to what ?!? An over leveraged consumer!!! If the market is forward looking (6months+) do you really think that we will be outta this in 6 months? Or even 9? Most economist (even the conservative ones) have said that we are in for a SERIOUS recession and yet we ignore the flashing red lights...take for instance our currecny?!? RECORD appreciation after the FED swelling its balance sheet in 30 days by 1 TRILLION dollars?!?! Is this stable? Hardly... perhaps the parallel can be drawn from an interview with an fellow Navy SEAL when he was asked, "How are the SEAL's so good?" He responds intuitively, " its not that the SEAL's are that good its just everyone else sucks!" Perhaps his wisdom applies here to the dollar.....either way keep your powder dry and don't be a hero. Live to fight another day...