Propeller Skies

Holy. Fucking. Shit. J.P. Morgan Chase (JPM), just bought Bear Stearns (BSC) for a whopping… wait for it… $2.00* a share. Goddamn it - I sold my Morgan Stanley puts based on technicals Friday. I made a few ducats, but cockroach theory (there’s never just one) says some other investment banks are fucked - I should have held on. This is just the first round - this shit is going to make the dot bomb bust look like amateur hour.

I wish I had bought some lottery ticket puts on those fools at BSC early in the week when they claimed not to have solvency liquidity issues - but based on technicals and the greeks, they were overpriced, so I passed.

[UPDATE: Trading in Asia is now open, and the Nikkei is not liking the purchase - the index is down 1.25 percent. ]

notes:

See: JPMorgan Buys Bear Stearns for $2 a Share After Clients Flee at Bloomberg.
* BSC closed at $30.00 (worthless) U.S. Dollars on Friday - down $27.00

Goddamn, Ben Bernanke is one sorry fuck. Taking it in the ass from a Freedom citizen is weak fucking sauce.

After global stock markets roached hard on Martin Luther King Day, Mr. Bernanke cut interest rates by an almost unprecedented 0.75 percentage points before the U.S. markets opened. For the record, the alleged job of the Federal Reserve is to fight inflation and maintain full employment, not bail out the stock market.

Later in the week, it came out that Freedom citizen Jerome Kerviel made tens of billions of dollars in bets in the futures market that stock markets would go up, with his employer’s money. I think it is 100 percent certain that Societe Generale’s unwinding (selling) of the positions caused and then exacerbated the global decline, leading to Mr. Bernanke’s bitch ass, and completely unnecessary, rate cut.

We here at the Prizzo Skeezy respectfully submit that Mr. Bernanke drag his sorry ass back to Princeton before doing any more damage to the United States.

notes:

In the interest of being all fair and balanced, please note that I disagree completely with the policies of the Bernanke Fed. In a nation of subprime addicted debt whores, punishing savers by lowering interest rates is completely counterproductive. Additionally, lower rates equal higher inflation - which stealthily reduces paychecks for everyone. Finally, lower rates make U.S. bonds less attractive to foreign investors, who then sell dollars driving the value down and the cost of imports up. Guess what we don’t import? Nothing is the correct answer! Basically, Mr. Bernanke has been fucking the working man up the ass with a cock large enough for a pachyderm while his Wall Street cronies pocket record bonuses. I realize that Wall Street bonuses were down this year, but after $100 billion and counting of bad debt related writedowns, a meager five percent reduction in million dollar bonuses is insulting to those of us who are required to be competent to hold down a job. Especially when the Wall Street cocksuckers run to the government like a bunch of whiny little bitches and ask for a bailout at taxpayer expense every single time they fuck something up and lose money. Fuck that.

Normally, Housing Panic bashes Lawrence Yun quite well. Unfortunately, the chief cheerleader* recently made this dumbass statement, “although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” which is so blatantly retarded that I have to weigh in and call bullshit. Sorry, Mr. Yun, but housing is going down like a University of Georgia sorority girl.

This morning, KB Home (KBH) reported a loss of almost $10 a share. For the fourth quarter. The stock promptly fell 9.2 percent. For perspective, KBH earned $5.82 per share in 2006. There is essentially no difference between new and existing homes, so when new home sales go in the shitter, existing home sales do too.

It gets better - fourth quarter revenue at KBH fell almost one billion dollars**. New home deliveries dropped 22 percent. Continuing the gravity theme, average selling price fell from $280,000 to $247,800, or 11.5 percent. By the way, just in case anyone thought real estate was local, KBH saw a nationwide decline in orders.

Stable, my ass. This is a horrible time to buy and Mr. Yun damn well knows it.

In other news, I wish I had not sold my KBH Jan 30 puts back in November for what seemed like an absurd profit of 240 percent. Had I kept them, I would be watching big titted lesbians have relations in high definition on a sweet new 50″ plasma right now instead of typing this for 3 readers.

notes

* Lawrence Yun’s official title is economist, but my toilet knows more about economics than he does, so I can’t in good conscience call him one.
** All figures are year over year.

Prizzo Skeezy readers down with the Countrywide (CFC) debacle will recall Bank of America (BAC) provided them with a two billion dollar capital injection (like a meat injection, except with cash money and no messy clean up) a few months ago. As part of that operation, BAC gained the right to convert the shares at a strike price of $18.00. This seemed like a great deal for BAC, since CFC closed at $22.02 on the day the deal went down. CFC, much to my amusement*, closed at less than half the strike price yesterday.

So what’s a middle eastern retard with too much money and not enough brains to do? Why blow $7.5 billion on convertible Citibank (C) securities, of course - similar to the deal discussed above. Except these fucking morons didn’t even buy securities with an in the money strike price! Unfortunately for our Abu Dhabian friends, they will be paying between $31.83 and $37.24 for shares that closed at $30.32 today. The clue meter is reading ZERO up in this bitch. [UPDATE: As usual, Smoove did a slacktastic job of analysis. Market Ticker notes the actual strike is between $20 - $25 when the interest on the coupon is factored in. However, the basic premise of Smoove's argument, paying good money for a stake in a soon to be worthless company is dumb, holds - Ed.]

Now this might be a good investment, if C was not on the express train to insolvency. Currently, C is having problems maintaining their target capital ratio because of write downs on fucked mortgage investments. This is about to get worse, because C has a fuckton of off balance sheet SIVs (think Enron) that are losing value faster than the Falcons lose football games. When** C has to pull the SIVs back on their balance sheet, the liabilities will roach their Tier I capital ratio. The Feds require 6 percent, and C is at 7.3 percent right now, down from their target of 7.5 percent. Never mind all the Level 3 mark-to-myth dreck with (likely) highly overstated book values C has floating on their balance sheet right now. I highly recommend C change their ticker symbol to F - for fucked.

I wish I was still short C, but I closed my puts for an easy 60 percent profit in October. Had I waited, I would be rolling in the dough right now. However, as the ubiquitous they say, no one ever went broke taking profits.

notes:

* Of course I am shorting those fools.
** Don’t think it won’t happen - our friends at Holy Shit Buffalo is Cold gave up and did it today.

I had the misfortune of being at Lenox Square - a major regional mall in Atlanta - yesterday. While the Apple store seemed pretty happening, the rest of the mall was deader than a freshly grilled Bubba Burger (i.e. about the same size crowd as usual). In contrast, the mainstream media (MSM) keeps ejaculating about an alleged strong start to the holiday shopping season.

As usual, the MSM is full of shit. However, as Lenox Square is anecdotal at best, my experience does not prove a damn thing. What does call bullshit on the MSM, however, are the Port of Los Angeles and Port of Long Beach statistics. Calculated Risk has some interesting historical charts regarding port volumes buried in Roubini on Recoupling. Note the year over year decline at both ports in October, traditionally when volumes increase prior to the holiday shopping season. Somebody (i.e. retail buyers) does not seem to be expecting a cheery Christmas.

Trucking companies have been reporting crap results for a while now, so the easy money to be made shorting is gone. My guess is Union Pacific (UNP) and CSX Transportation (CSX) are going to be reporting some fucked fourth quarter numbers. During good times, both railroads are less profitable than their competitors based on operating ratio and return on assets - making them less likely to do well when volumes are down since fixed costs remain the same. My money is where my mouth is - I have puts on UNP and CSX.