THE DOT - if this turns orange or red be alert

Thursday, September 16, 2010

Brainmstorming Thursday

1. A good read about how phony this whole rising markets con operation is including the steep erosion of Mr Buffett's last bit of dignity - no double dip - we are in a depression with over 20% p─čeople out of work and he says no double dip. Being heavily long banks is insane as about 3 mio households are 8 months and more behind in mortgage pays and have not even received a letter from a bank. Lets make some simple math 3 mio times avarage house of 200k is 600 bil. - in real terms banks will have to write off half of that 300 bil. - those numbers are almost 10 fold what banks are processing right now so all the bullshit that prices have risen is just as much phony as the stock market. Still sentiment and other factors support the upside for a few more days before first corrective wave will kick in around Full Moon 23rd.

excerpt 1

US foreclosure activity rose in August from the previous month, and banks and lenders took ownership from homeowners at a record pace, according to a new report released Thursday.

Fuse | Getty Images

Bank repossessions, often the final step in the foreclosure process after a home fails to sell at auction, increased about 2 percent from the month before to 95,364, a record high. At the same the number of properties that received default notices—the first step in the foreclosure process—decreased 1 percent from a month ago and fell 30 percent from a year ago, a sign that lenders are focusing on their backlog of foreclosure inventory before tackling new distressed loans, according to foreclosure listing website RealtyTrac, which released the report.

Overall, foreclosure fillings rose 4.18 percent in August from the previous month, and were down 5.48 percent from a year ago. In all, 338,836 properties were in the foreclosure process. One in 381 U.S. households received a foreclosure notice in August. (Foreclosure notices are defined as a default notice, auction sale notice or bank repossession.)

excerpt 2

The following must read presentation by Wolfe Trahan puts every last piece of the economic puzzle together, confirming there is no other outcome but an economic crunch, affectionately known elsewhere in the MSM as a Double Dip. It gives you all you need to know when confronted with the nattering nabobs of neanderthalism, most of whom tend to reside on CNBC. Feel free to do a side by side comparison of this presentation with that put together by Russell Napier earlier, and decide on your own, which one you believe is far more credible. Yet its greatest value-added is the thorough discrediting of the three chief classes of permawrong prognosticators: sell side analysts, company management and economists.

Key summary highlights:

Be Wary Of Sell-Side Forecasts, Economists' Projections And Company Guidance!

Sell Side: A full 70% of S&P 500 stocks currently carry an average rating of "buy" from sell-side analysts. This is higher than at any
other time in the post Sarbanes-Oxley era.

Company Management: Managements’ guidance tends to lag leading indicators by roughly a quarter or two. This leads to misplaced
optimism and pessimism following a peak or trough in leading economic indicators.

Economists: Most economic models were optimized under a period of very different economic circumstances (i.e., 1980s - 2007):

1) Lower Fed policy rates led to more bank lending, private investment and residential construction activity.

2) Increases in consumer’s net worth led to equal or greater increases in consumption (via leverage).

Today’s reality warrants unconventional GDP models: Banks are not lending, private investment remains weak and consumers are
saving more of their income. QE2 is a given in our minds, but will it work?

An environment of decelerating leading indicators requires a different investment approach and is a game changer for all asset
. The series that forecasted a sharp recovery in leading indicators a year ago are now flagging a continued deceleration in LEIs.

In 2009, hyper-cyclical sectors such as Financials and Technology performed best as investors tried to get the most bang for their
buck. As leading indicators decelerate, investors should continue to seek out more stable, counter-cyclical sectors such as
Staples, Telecom and Utilities.

Courtesy of Mike Mansfield

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