Thanks Steve

I have been begging my friend Steve to write an article for my blog since I started it. I am extremely excited to be able to post his article on my blog. I first met Steve in late 2006, and he was bullish on gold to say the least. I owe more than 90% of my knowledge of trading and technical analysis to Steve, and I am extremely proud to call him a good friend.

Protect Your Capital

Indicators, as noted by Ira Epstein are showing that there is a very strong chance of a sharp drop ahead in the Dow Jones Industrial Average and the Nasdaq. This man is rarely wrong when determining if stochastics are embedding. He called the oil rally, gold rally, and the falling dollar. Listen to the man on short term trading. I would also like to note the the dollar continues to fall sharply against the yen and euro.

Mozillo's Top Ten List

Mozillo has some explaining to do. It looks like Schumer is on his case now with a list of questions. Pay particular attention to numbers 6, 7, and 8 as I expect those particular ones to bury him.

Sen. Schumer then asks Mozilo ten questions. Here they are (the last two appear to be based on actual comments the CEO made to the Senator:

1) What percentage of Countrywide's subprime mortgages came from independent mortgage brokers?

2) Does Countrywide pay independent mortgage brokers more for loans with prepayment penalties? Did it ever do so?

3) How many buybacks did Countrywide do in 2006? What was the value?

4) What percentage of Countrywide's subprime mortgages were refinancings vs. purchases in each year from 2000-06? Please include data from your retail branches as well as your independent mortgage brokers.

5) How much business in piggyback loans did Countrywide do in 2006?

6) "Inside the Countrywide Lending Spree," by Gretchen Morgenson, that appeared in the New York Times on August 26th, stated that a C-minus rated borrower with a 500 credit score could get a $500,000 mortgage from Countrywide. Does Countrywide provide, or has Countrywide ever provided, mortgages on terms similar to this report?

7) The same article stated that Countrywide would lend to borrowers who had been 90 days late on a current mortgage twice in the past 12 months. Does Countrywide lend, or has it ever lent, to such borrowers?

8) That same article also stated that Countrywide had profit margins as high as 15% on some subprime products. Does this article accurately report Countrywide margins for any existing or past products?

9) Please provide the documentation you discussed to support your claim that Countrywide makes the same amount of money on FHA loans as on other types of loans.

10) Please provide the documentation you discussed to support your claim that Countrywide had received accounting advice for not giving independent mortgage brokers 1099 forms.

Remember when he was on CNBC talking about CFC's long term value to shareholders??? If you don't remember , check out the video below. Here is a transcript of the interview on Aug 24th.

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Here is a link: to the CFC stock chart

What a bargain, thanks Angelo.

Sell The Rallies

Sell The Rallies

The short rallies in the INDU and the SPX are still being sold at every resistance. The market is having serious issues retaking the 13,000 mark even with the dollar falling more and more every day. The last time we were under 13,000 it lasted 3 trading days. This is a bear market.

I would like the stock market to go up just as much as every body else, but this is the time to listen to the market and protect your capital. Get short, buy puts, buy gold, yen, and the euro. All of the currencies are overdue for a consolidation before another downside move, but I am now convinced that the dollar will fall to 100 yen in the next 6-12 months.

The dollar is now at a 2 year low against the Yen.

Wheat is up the limit today to 800 cents per bushel, and soybeans are down 2.5 cents at 1084.5 cents per bushel. These numbers are not deflationary, especially with gold staying near $800/0z.

I expect gold to rally into the end of the year on concerns about the dollar, a weakening U.S. economy, and the fact that many large purchasers of gold will be taking delivery of the physical gold. I expect this to cause short covering in gold going into the DEC contract expiration on December 27th.

Protect your capital!!!!

and

Have a Happy Thanksgiving

Embrace the Horror

Shock youtube financial guru Jefferson Krull. Persistently tells his viewers to embrace the horror. It seemed to work pretty well for him in early 2000 when he purchased massive amounts of puts on high flying Nasdaq stocks and made millions of dollars.

Now is the time to embrace the horror of the coming real estate price collapse in the commercial property sector. It seems like the media is starting to catch on. A lead article today read:

"US commercial property sales down in October"

Here is a short excerpt:

U.S. office building sales fell 70 percent in October from a year earlier, yet another sign the credit crunch that began in the U.S. housing market has spread to the commercial real estate market, Real Capital Analytics said on Tuesday.

You can read the whole article here: Commercial Property Sales October

I am embracing the horror by purchasing long term puts in SPG, DDR, and LEN.

I really like the SPG puts because the stock still has huge potential for downside trading at close to $90/share.

It should also be noted that commercial real estate bond spreads are widening even further.

Here are charts of the worst rated bond BB and the highest rated AAA bond in order to show that the garbage has been spread across all ratings.

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These spreads are so huge that it begs the question:

How much are these things really worth???

The truth is that NOBODY KNOWS!

Jim Cramer pointed out one way that people can find out. You can watch the video here:

One Bank Has Got To Go

Pulte Home Put Buying Bonanza

50,000 January PHM 30 Strike puts purchased

In a transaction worth $90 million dollars, 50,000 puts on PHM were purchased. I would say that the odds of PHM surviving are slim to none with this kind of options activity. Charts of the transaction and of PHM stock are posted below. Click on the charts for sharper images.

It's An Ugly Market Ahead

The 300 point rally from last week is now completely erased as credit losses mount at Citigroup. Citigroup's total write off is now approaching $26 billion dollars. Or roughly half of the United States monthly trade deficit.

The real story today is about the homebuilders. The XHB has now broken through the most recent low. Expect to see some of the builders going out of business in the next 2-3 months. This time is different than last time housing was in a slowdown. Even if interest rates drop to 1% again, no one will be able to get access to easy money. The homebuilders are in a death spiral.

Many are in an every day struggle to stay alive.

Do not believe the talking heads on CNBC. This is not going to end for a few years. If you have an option account. I suggest long term puts on commercial real estate and the home builders listed in the above article. Otherwise, do not go bottom fishing in a market where the fish will bite back.