Posted 2007-07-24 09:03
by Karl Denninger
by Karl Denninger
No, really!
Now that's not something I've seen lately. CURBS IN. Booya!
It is trash day here. Big green carboy thing that goes to the curb in the morning.
In there today we have a whole host of stocks, including my favorite whipping boy, Countrywide Financial (CFC). All I can say with this one is - its about damn time. Gee, got PUTs? And here's the best part of it - a big part of their problem this time around were prime loans! Oh oh..... prime loans eh? I thought this was just a subprime story, confined to those with crappy credit? Maybe, just maybe, its really a RECESSION story, and its staring us square in the face!
I guess it was the wrong move to take the PUTs off yesterday. That's ok - I have plenty of others in the lending sector, and they're going to be standing proud today. You know, bears, bulls and pigs - don't be a pig, be happy.
McDonalds (MCD) reported a loss on sale of Latin American restaurants, but inline otherwise. They're getting hammered a bit, but not too badly.
DuPont (DD) reported flat profits; no material gain year-over-year at all. That's not so good! I thought globalization was going to save everyone? Oh wait - its not! Hmmmm...... let's see, CAT and now DuPont? Maybe this housing market spillover thing really is bad? For how long can you ignore the evidence right in your face?
KKR, one of the big "hedgistan/PE guys", are having all sorts of fun today, apparently deciding that they're going to force banks to eat deteriorating bridge loans. That could blow up in their face, if not immediately, down the road. They're known as hard-nosed negotiators but there is this saying about biting the hand that feeds you...... It may also roach the LBO/PE market generally, especially if it causes actual losses at those banks.
And then you have this:
Or, if you prefer....
And let me remind you - the premium I calculate on the S&P500 due to the implied threat of an LBO on virtually anyone? THIRTY PERCENT. Now think about what the averages look like with that gone. Oi!
Then there is this - putting the lie to the claim that "this is all subprime". In a word: bull****.
The market's action today could only be described as panic selling. Countrywide kicked it off and it only got worse from there. The DOW finished down 215 points, with the S&P down nearly 30 and the Nasdaq off almost 50.
Amazon reported sales up 35% and EPS of 19 cents, estimates were for 16 cents. The market spiked them down hard initially, then up a bit, but is now trending back into the trading range for the day before rebounding a bit. We will see how that one plays out; note that the stock sold off nearly $3 in the last two hours of the regular session, so the claimed "aftermarket spike" isn't really very accurate. Guidance was raised just slightly for the year. Gross operating margins came in a 4% on a GAAP basis, which is pretty decent. (Maybe someone can tell me how a company earning 4% can justify this sort of P/E?!) In any event it appears that the street's "first level" take on it appears to be pushing the shares higher - a lot higher, approaching 10%. Psst: you might want to look at what is happening to the housing and banking sectors! How do people spend on all sorts of crap when they're getting pinched?
Centex (CTX) reported a loss of $1.05/share (versus estimates for a nickel a share) and was immediately hammered. No good way to spin this one; I guess the analyts got the "nickel" part right, but forgot the DOLLAR! The stock was hit moderately in the aftermarket on an immediate basis - like with Amazon, we'll see how this pans out overnight and into the morning hours, but I can't imagine anyone's going to like that. They also took $192 million in impairment charges, which was all their loss and then some.
Cheesecake Factory (CAKE) reported same store sales up 1.1%, which isn't all that hot, but isn't awful. Earnings came in at 33 cents which beat lowered estimates (which were dropped in the last two months.) The stock got a modest pop out of that before settling back. Of note this stock has been slaughtered over the last few months, and there's no evidence that we're going to get any sort of significant support out of this report.
The ABX continues to deteriorate and the CMBX isn't having a good day either. Ain't this pretty?
Just incredible. Never mind this one:
You have to watch out for that idiot Kudlow saying that "spreads aren't that bad." Oh really Kudlow? What do you call eight hundred basis points, with one hundred of them showing up in the last week?!
Someone needs to whack that fool upside the head with a Clue-By-Four.
As for tomorrow, it will be interesting. Amazon's report resulted in quite an immediate pop, although as I put this to bed its starting to fade some. I wonder if people are getting it through their head? CTX's report was horrifyingly bad, although it didn't move the market much - I guess after being down nearly 4%, how much worse could it get? Of course Countrywide got slaughtered for over 10% today, and the rest of Cramer's "Horsemen" didn't do so hot either, with Apple down 6%, RIMM down almost 4%, leaving GOOG the only standout - up 0.29%.
The futures, post-4:15 PM reset, are basically flat, with the S&P up 0.2% and the Nasdaq a zero, so whatever people got, they got it up front with no follow-through afterhours. So far.
Oh, one final thought - with the reports already in on the S&P, the profit increases are running at about 7%. Note that just Friday Kudlow was saying that it was 10%! Well, it was - not anymore!
Now with a 7% profit increase rate, why are you paying more than somewhere around 7-14 on a P/E? But the P/E on the SPY is 15.6, and if you take out the energy stocks its in nosebleed territory, approaching the early 2000 levels!
Watch out guys...... tomorrow is going to be interesting.
PS: We got another Hindenburg today! The final stats hadn't updated on the WSJ's page when I posted this originally, but I was alerted to it and went back to check - yep. That makes eight, I think.... including three in a row!
Now that's not something I've seen lately. CURBS IN. Booya!
It is trash day here. Big green carboy thing that goes to the curb in the morning.
In there today we have a whole host of stocks, including my favorite whipping boy, Countrywide Financial (CFC). All I can say with this one is - its about damn time. Gee, got PUTs? And here's the best part of it - a big part of their problem this time around were prime loans! Oh oh..... prime loans eh? I thought this was just a subprime story, confined to those with crappy credit? Maybe, just maybe, its really a RECESSION story, and its staring us square in the face!
I guess it was the wrong move to take the PUTs off yesterday. That's ok - I have plenty of others in the lending sector, and they're going to be standing proud today. You know, bears, bulls and pigs - don't be a pig, be happy.
McDonalds (MCD) reported a loss on sale of Latin American restaurants, but inline otherwise. They're getting hammered a bit, but not too badly.
DuPont (DD) reported flat profits; no material gain year-over-year at all. That's not so good! I thought globalization was going to save everyone? Oh wait - its not! Hmmmm...... let's see, CAT and now DuPont? Maybe this housing market spillover thing really is bad? For how long can you ignore the evidence right in your face?
KKR, one of the big "hedgistan/PE guys", are having all sorts of fun today, apparently deciding that they're going to force banks to eat deteriorating bridge loans. That could blow up in their face, if not immediately, down the road. They're known as hard-nosed negotiators but there is this saying about biting the hand that feeds you...... It may also roach the LBO/PE market generally, especially if it causes actual losses at those banks.
And then you have this:
Hehehehe.... you think?"If you look carefully, you can almost see the mangled and bloodied bodies of the CDOs, the CSDs, the RMBS and the other shaky debt-instruments being pulled from the wreckage and tossed unceremoniously on the bonfire.
Is this how it all ends?
The first whiff of trouble in the housing market and then—in a flash--all the funds in 'Hedgistan' begin teetering towards earth? 'No Value' - 'No Bids'"
Or, if you prefer....
Or for that matter:"The Wall Street money-machine known as collateralized debt obligations is grinding to a halt, imperiling $8.6 billion in annual underwriting fees and reducing credit for everyone from buyout king Henry Kravis to homeowners.
Sales of the securities -- used to pool bonds, loans and their derivatives into new debt -- dwindled to $3.7 billion in the U.S. this month from $42 billion in June, analysts at New York-based JPMorgan Chase & Co. said yesterday. The market is 'virtually shut,' the bank said in a July 13 report."
"The cheap financing that fueled the leveraged buyout boom is over, according to Bill Gross, manager of the world's largest bond fund."Oh, is that good? Or is it just accurate enough to say "Told 'ya so".
And let me remind you - the premium I calculate on the S&P500 due to the implied threat of an LBO on virtually anyone? THIRTY PERCENT. Now think about what the averages look like with that gone. Oi!
Then there is this - putting the lie to the claim that "this is all subprime". In a word: bull****.
"Defaults on some so-called Alt A mortgages packaged into bonds last year are now outpacing those from subprime loans, according to Citigroup Inc."Apple (AAPL) got roached in the premarket this morning. Its about damn time. The cause? A CIBC report out which alleges that iPhone demand, after the initial Jim Jones KoolAid Rush, has fallen off precipitously. Not helping was AT&T's report, which while ahead of estimates, did not meet expectations. There were "street" expectations for up to 700,000 activations in the last two days - the real number came in at 146,000. Also rumored on the street are very high "buyer's remorse" returns, permitted under law everywhere on new cellphones, typically within either 2 weeks or 30 days. Its about damn time; Apple is just about the definitition of an overvalued stock. It will be interesting to see how we trade through the day on this one.
The market's action today could only be described as panic selling. Countrywide kicked it off and it only got worse from there. The DOW finished down 215 points, with the S&P down nearly 30 and the Nasdaq off almost 50.
Amazon reported sales up 35% and EPS of 19 cents, estimates were for 16 cents. The market spiked them down hard initially, then up a bit, but is now trending back into the trading range for the day before rebounding a bit. We will see how that one plays out; note that the stock sold off nearly $3 in the last two hours of the regular session, so the claimed "aftermarket spike" isn't really very accurate. Guidance was raised just slightly for the year. Gross operating margins came in a 4% on a GAAP basis, which is pretty decent. (Maybe someone can tell me how a company earning 4% can justify this sort of P/E?!) In any event it appears that the street's "first level" take on it appears to be pushing the shares higher - a lot higher, approaching 10%. Psst: you might want to look at what is happening to the housing and banking sectors! How do people spend on all sorts of crap when they're getting pinched?
Centex (CTX) reported a loss of $1.05/share (versus estimates for a nickel a share) and was immediately hammered. No good way to spin this one; I guess the analyts got the "nickel" part right, but forgot the DOLLAR! The stock was hit moderately in the aftermarket on an immediate basis - like with Amazon, we'll see how this pans out overnight and into the morning hours, but I can't imagine anyone's going to like that. They also took $192 million in impairment charges, which was all their loss and then some.
Cheesecake Factory (CAKE) reported same store sales up 1.1%, which isn't all that hot, but isn't awful. Earnings came in at 33 cents which beat lowered estimates (which were dropped in the last two months.) The stock got a modest pop out of that before settling back. Of note this stock has been slaughtered over the last few months, and there's no evidence that we're going to get any sort of significant support out of this report.
The ABX continues to deteriorate and the CMBX isn't having a good day either. Ain't this pretty?
Just incredible. Never mind this one:
You have to watch out for that idiot Kudlow saying that "spreads aren't that bad." Oh really Kudlow? What do you call eight hundred basis points, with one hundred of them showing up in the last week?!
Someone needs to whack that fool upside the head with a Clue-By-Four.
As for tomorrow, it will be interesting. Amazon's report resulted in quite an immediate pop, although as I put this to bed its starting to fade some. I wonder if people are getting it through their head? CTX's report was horrifyingly bad, although it didn't move the market much - I guess after being down nearly 4%, how much worse could it get? Of course Countrywide got slaughtered for over 10% today, and the rest of Cramer's "Horsemen" didn't do so hot either, with Apple down 6%, RIMM down almost 4%, leaving GOOG the only standout - up 0.29%.
The futures, post-4:15 PM reset, are basically flat, with the S&P up 0.2% and the Nasdaq a zero, so whatever people got, they got it up front with no follow-through afterhours. So far.
Oh, one final thought - with the reports already in on the S&P, the profit increases are running at about 7%. Note that just Friday Kudlow was saying that it was 10%! Well, it was - not anymore!
Now with a 7% profit increase rate, why are you paying more than somewhere around 7-14 on a P/E? But the P/E on the SPY is 15.6, and if you take out the energy stocks its in nosebleed territory, approaching the early 2000 levels!
Watch out guys...... tomorrow is going to be interesting.
PS: We got another Hindenburg today! The final stats hadn't updated on the WSJ's page when I posted this originally, but I was alerted to it and went back to check - yep. That makes eight, I think.... including three in a row!
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