Thursday, June 28, 2007

News conforms to the Tape

KBH reported numbers today and like Lennar yesterday the numbers are awful. Speaking of Lennar they lost $1.55, writedowns and other related debacles accounted for $1.33 so the loss was $0.22 and the street was expected a$0.05 profit. How's that for cutting edge analysis. Sounds more like 1 kid in the class did the homework, everyone copied his, (with some slight alterations mind you, remember this is Ivy League stuff!) and guess work its all wrong! I saw this happen before with Bre-X. Egizio Bianchini was the preeminent authority on it so everyone copied his work, its the only logical conclusion unless you consider outright fraud. The point I wanted to make when I started this rant is that when KBH was trading at its highs back in the summer of 2005 all the news was rosy then the stock started dropping yet all the while nothing but good news. This news comes out with the stock down over 50%. Same story goes for RACK, AMD, the list goes on. We now have the why. News conforms to the tape. Enough said.

The garage sale at GM continues. Bankruptcy dead ahead for this debt saddled shell of its former self pretender. The true car guys who started this thing must be rolling in their graves.

Aaron over at ML Implode-o-meter, who does excellent work digging up the pieces of the housing bubble reports that as of now 91 lenders are bust. Yeah the sub prime problem is contained, just keep repeating it over and over again and maybe they will start believing it, by the way its Merrill's turn today. A friend of mine in politics ofter says to me if you're explaining, you're losing. While we're on the subject of lenders, in what has to be filed in the category of balls of you know what, the former execs of belly up MLN had their license application for a new home mtg company turned down by state regulators in Connecticut. You would think they would lay low, stay out of sight, with a low profile. Nope, right back at the trough again. Gotta hand it to em', hubris of the first order. Just shows you the arrogance of invincibility in this market environment.

The Dow (see chart above) - numbers to watch 13,250 and 13,200 short term. This would penetrate and prior reactionary low and also the 50 day MA. A move thru 13,693 would break this rectangle and the bulls get new wind and another lease on life but really don't have to wait for that as 13500 should contain the upside here if this thing is ready to move down.

Crude is thru $70 which is nice for us bulls. The 7 handle should get a lot of air time on bubble vision aka CNBC. I play USO and OIH due to the nice liquidity. OIH led the run up here and is catching its breath. Deep down I feel the commodity is the way to play because if guys like Matt Simmons, Colin Campbell, and Samsam Bakhtiari, are even halfway correct regarding peak oil, governments are going to be stepping in and confiscating (oops nationalising) energy interests all over the globe and I just don't mean places like Venezuela and Russia, but across the spectrum. It is too valuable an asset to have in the hands of the private sector. They will need assistance getting it out of the ground, so I continue to favor the companies that provide equipment, services and expertise as opposed to the explorers. Call me crazy but this is my simple minded thinking and I definitely need to keep it simple.

Most of you heard what the BIS had to say yesterday so all I can add is caveat emptor.

My grand father loved commodities due to the fact all you had to worry about about was supply and demand(for the most part) and a little weather. He was simplifying things for me but he felt with commodities you never woke up to management embezzlement or options backdating. As if the marketplace itself wasn't bad enough Beazer shareholders can add this to their list of worries. That's it for today, good luck and good trading.

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