Wednesday, October 21, 2009

Morning Update/ Market Thread 10/21

Good Morning,

Equity futures are down slightly this morning following more weak housing data and a slew of earnings reports:

The dollar is down slightly as are bonds, oil and gold are down as well.

The MBA Purchase Application “report” came in at down 7.6% for the week and that follows a 5% drop the week prior. Don’t know what to make of these reports, they are hiding the data from us and percentage moves on a weekly basis tell us NOTHING. Yet another report that belongs in the waste basket. Seriously, our system is degenerating very quickly… I was certainly HOPING that Obama would have a spine and fix some of the B.S., but unfortunately, he is proving to be working in concert as a part of the problem. Here’s Econoday’s report on Purchase Applications:

Housing data may be taking a turn for the worse. MBA's purchase application index has been moving backward the last two weeks, down a steep 7.6 percent in the Oct. 16 week. The unadjusted index, reflecting the Columbus Day holiday, fell 16.7 percent. The refinance index also fell in the week, down an adjusted 16.8 percent. Mortgage rates all moved higher including for 30-year fixed loans which rose 5 basis points to 5.07 percent. Existing home sales, to be released Friday, will offer the next look at the housing sector.

What I do know is that when large percentage moves week after week are not a good sign for the housing market.

Wells Fargo joined the other criminal institutions in reporting RECORD profits of over $3 billion for the quarter, twice what it “made” last year!! Want to know how they did it? Here’s what CNN says:

Despite facing an ongoing recession and related loan losses, the San Francisco-based bank said its third-quarter results were lifted by strong performances in its mortgage lending business and other divisions.

They made it in their mortgage lending business! “Strong performances,” too! That’s funny, how do you imagine, with the housing and mortgage business at depression levels that they manage to make record profits? Uh, huh, you know how… with a pencil, some paper, and a complicit government, that’s how.

And John Mack over at Morgan Stanley is wisely hitting the road before the pitchforks come out. Let’s read how their quarter went:

NEW YORK (Fortune) -- Morgan Stanley posted its first quarterly profit in a year.

The New York-based investment firm said Wednesday it earned $757 million, or 38 cents a share, for the third quarter. That's down sharply from the year-ago profit of $7.7 billion, or $7.38 a share. But it was much better than the 30 cents per share profit that analysts surveyed by Thomson Reuters were expecting.

Revenue fell to $8.7 billion from $18 billion a year earlier. Revenue at the global wealth management unit nearly doubled, to $3 billion, but revenue at the institutional securities business plunged 69% to $5 billion.

Revenue fell to $8.7 billion from $18 billion a year earlier? Are you kidding me? That’s a one year plunge in total revenue of 52%!!! In other words, MS is less than half the size it was a year earlier. John, John, John… it’s a good thing you’re leaving, you should have known how “strong” the mortgage business was and you should have been more busy marking your mortgage “assets” to your own model. See ya!

While WFC is faking $3 billion gains on paper, over in the real world, Boeing wrote off $3.5 billion in losses taking a $1.5 billion loss for the quarter. Now, for all you pencil necks who call that a “one time charge” and subsequently don’t count it against your price to earnings ratios, well, all I can say is that you are about to be taught yet another lesson in historical valuations and what happens to those who rely on Enron type accounting to make the world look a little more rosy than it actually is.

Yahoo, a fraction of its former self, managed to beat lowered expectation by posting a 15 cents a share profit over estimates of 13 cents.

Futures fell below the 1,090 pivot, but the SPX is right on it. Support below that is at 1,061, and overhead is at 1,107. Most of the indices are approaching new sell signals on the daily stochastics, but they would be working against the still bullish Elliott Wave count. The short term stochastics are all in the middle with the 60 and 30 minute stochs sitting on buy signals. I still would not be fighting the EW count, not if you respect your account, as we are still, by my count, in wave 3 up of c. Yes, we're getting close, but we are not there yet and as long as we are allowing companies to make up their own fantasy earnings, based upon fantasy dollars, then we shouldn't be standing infront of their trumped up runaway train until we are certain the train has been derailed - and it will be, it's only a matter of time.

We are truly a mark-to-fantasy nation, I can only laugh (and cry) at the audacity of firms like Buffet’s Wells Fargo. Truly “magical” if you believe in such fiction… It'll just blow your mind!

Lovin' Spoonful - Do You Believe In Magic: