You have to in order to be in this market.

Futures up a full 1% overnight from the 4:15 PM close, with the NDX up 1.2%. On the back of what?

People will cite RIMM. Ok, RIMM had a nice report. Is one company the market? How were Circuit City's retail numbers? Oh, they lost a buck and a quarter a share...... a buck and a quarter! That was quite a bit beyond consensus, to put it mildly.

And don't look at Micron. Collapsing margins and prices in the memory space. When have we seen this movie before..... I'm not sure if I recall the exact script, but I do think I remember the ending.....

The oft-cited reason for this "fuego" is that "foreign investors are recapitalizing Wall Street."

This is good? Uh, has anyone bothered to ask why it would be good if you have to "recapitalize" something that would otherwise blow up? That's an important question, right?

So is the interest rate.

So far all these "injections" have come with Guido-style terms. If I had that kind of money in this situation I'd want Guido terms too, and you can bet I'd hedge off the risk as well (heh, free money is hard to turn down!)

Oh, and while we're at it, let's talk about the over 150,000 bonds placed on negative ratings watch last night - yes, you read that right, over one hundred fifty thousand issues. Most of them municipals, and all on the back of the threatened downgrade of MBIA. Today, another batch of the same basic size went off underwritten by Ambac, bringing the total threatened with downgrades over the last two days to approximately 300,000 issues.

No, you're not reading that wrong.

300,000 bonds over two days have been placed on the "threatened" list for downgrades in their ratings.

This is, for all intents and purposes EVERY SINGLE BOND INSURED BY THESE FOLKS OVER THE LAST THREE OR FOUR YEARS!

Never mind that Moody's, S&P and Fitch, were they actual proactive ratings agencies who had some sort of belief that they had a responsibility to protect actual investors, would have already cut this entire sector's credit ratings deep into junk territory.

But you see, there's a little conflict of interest problem with that. The Investment banks and "guarantors" are the ones who do business with these agencies. In fact, they are the only people who do business with these agencies!

Do you really expect them to bite the ONLY hand that feeds them?

In my view, all three of these agencies need to be investigated and stripped of their "crowns" given the outrage of the ACA situation and the continuing outrage with the other monolines. Here's a company that had to be delisted before there was a ratings action taken. DELISTED! And its not like this company just got delisted out of nowhere either - their stock price has been in the dumper since JUNE!

They're now issuing "warnings" to get these guys to post more cash, claiming they're in violation of ratings guidelines. What's this "warning" nonsense? They either meet the requirements or they do not! The warnings were appropriate as they approached those limits, but once you exceed them on the downside, the correct action is to issue the downgrade.

TODAY.

This horse**** game of "ratings chickren" MUST STOP and if necessary Congress needs to get involved to step on these boyz necks.

Let's cut the BS right here and now - the reason that none of these CDO-based swaps and "hedges" have been paid off is that they never can be. There is simply no money there to do so. The people who wrote this "credit enhancement" did so without ANY margin supervision, ANY regulation, or ANY proof of ability to pay. In point of fact THEY CANNOT PAY!

OUR GOVERNMENT AGENCIES, including but not limited to the SEC and Federal Reserve, have abdicated their lawful and proper responsibility in insuring orderly markets - that is, if you promise to perform on a contact, you have a reasonable expectation of being able to do so! This is why YOUR margin capacity is strictly controlled and limited in the equities markets.

This will come to light in the fullness of time. When it does it will force monstrous restatements on balance sheets and effectively destroy the CDO structures affected, with monumental losses - likely 100% on a lot of these issues - being taken, due to the inherent leverage in these deals.

President Bush was on the air saying that "banks must take their marks, and must stop the off-balance sheet games." Ok Mr. President. I happen to agree with you, and in fact, have sent you a couple of letters by fax, along with a few thousand copies of a petition on exactly this point.

Thank you for listening.

WHEN ARE YOU GOING TO DIRECT THE TREASURY TO ENFORCE THESE MARKS AND RETRIEVAL OF THESE "ASSETS" ONTO BALANCE SHEETS? WHEN ARE YOU GOING TO DIRECT OTS AND OCC TO CLAMP DOWN ON BANKS AND THRIFTS WHICH HAVE NOT DONE SO?

WHEN MR. PRESIDENT?

ARE YOU GOING TO TALK, OR ACT?

Let's be specific - all of the following needs to happen, and it needs to happen NOW:

1. All derivatives must be traded on a public exchange with a published bid, ask, and last. Ditto for bonds. No more backroom handshake deals.
2. Margin supervision must be enforced. The most effective means is by appointing a market "intermediary" with fiscal responsibility to "make good" on deliveries and clearing, much as the OCC does for equity and index options or the CFTC does for futures. This will provide the proper incentives to enforce these margin requirements because the intermediary sure doesn't want to eat the losses from failure to do so!
3. No more off-balance sheet bull****. PERIOD! If you have an interest in something of any sort it must be carried on your balance sheet. If a thing "cannot be valued", it must be carried at a value of zero! If and when you CAN value it via an actual bid and offer, then you can carry it on balance sheet with an actual market price.

Will we see President Bush actually act BEFORE or AFTER the markets implode?

China? Rumors are their GDP growth may be overstated by as much as 40%. Communism - you have to love it. Our largest export to them? Inflation. Theirs to us? Leaded toys?

Credit markets? Oh, don't look at 1 Week LIBOR this morning. It spiked - hard. Why? Not sure - yet - but usually when that happens it means someone is fixing to explode, or at least there's a fear that someone is fixing to do so. Justified fear? We shall see. Very short end, but.....

The PCE Core Deflator is now technically out of The Fed's "comfort zone" at 2.2% annualized. Headline was hot - approaching 4%. Oh, and spending outpaced income (gee, you think? Credit cards - where's that wall again?) Never mind that inflation cut half the "increase" off and worse, the calendar helped the numbers bigtime.

The market mostly ignored the release.... equities anyway. The TNX (10 year bond), however, did not, gapping higher and then continuing to run, taking back ALL of the last three days movement, a colossal 3.53% change on the day - upward.

The nasty part of this whole economic charade is that anecdotes on December's "holiday sales" are that they just plain suck.

When retailers are going to be open 24 hours over the weekend before Christmas, you know its bad, despite the spin that the media will try to put on it. That has simply NEVER happened before. Why open 24 hours? To try to salvage what is going to otherwise be a total BUST of a Christmas season, that's why. Oh, and how much profit do you make when everything is sold at fifty percent off? You wouldn't believe the number of "50% off everything" signs I'm seeing around here in the malls!

In January of course the truth will come out - good, bad or otherwise.

Is the equity market paying attention to the credit markets? Not this morning, and of course the pumpers are back out saying "there's a lot of cash on the sidelines just waiting to race into equities." Uh huh. This is what passes as "reporting"; never mind that 4Q earnings estimates for the S&P 500 are now negative, and full year 08 estimates have been cut in half over the last two months.

But gee, stocks are cheap, right? You pay just for a name, yes? Not for future earnings cash flow? I mean, who would be so silly as to expect that future earnings growth would be what you should be buying when you buy a stock? That's such old school.... just as it was in the last days of 1999.

If that's so, perhaps you can explain why we have weakening internals - and have had since the summer. Why we had 20 new highs - and over 200 new lows yesterday, when the market was up strongly - especially in the Nasdaq (which also posted equally bad new high/low numbers.)

Is the new thesis that only a handful of stocks make the entire market "good"?

If so - can I have some of what you're smoking?

Oh, we would have gotten a Hindenburg but for the 10 week moving average (if I'm computing it right, its negative right now.) While the indicator might not have tripped, the warning stands - new highs and lows are dangerously divergent, especially on a day with this strong of price action.

Never mind the other, far more ominous indicators... which are covered in......

The technical!