If homeowners equity in mortgaged homes averages less than 15% then the low prices received for mortgages bundles at Lehman and other auctions reflect more than just the distress in the sale, they reflect that the banks have 85% skin the game not 55%

I’m printing out comments and articles along the lines of what you have written. As time goes by the number of possible scenarios diminishes. I don’t see your scenario 3 ocuring soon. I bought this rally and sold it several weeks ago thinking that something like what Chris Whelan writes about in relation to the mortgage industry would hit the headlines. It hasn’t happened. I don’t think it will very soon either.

I think SB should cover some of his shorts with options or something because the rally can correct and then grind higher. Just eyeballing the charts shows that there is a huge space between where an orderly bear market would have gone and where this one went. In other words symmetry seems to imply that this short covering rally could go on a lot longer. Also the impetus for the down legs has been coming from the banks and the banks can now hide there losses for a good bit longer.

I see this rally continuing as the real economy improves and then deteriorates again in a less steep downward direction. After last years massive moves and the recent rally the market could just consolidate in this area gradually working higher in small steps causing more and more pain to the bears.

I think the thing that could cause the next leg down might be accelerating unemployment figures and social welfare costs. Increasing government cost and decreasing tax receipts will cause the administration to turn on the banks and say no more. A look at seasonal charts to see when this might occur could give a handle on timing for the next leg down.

Phone surveys are always shakey to begin with and people tend to overestimate the values of their homes, especially in a fast falling market.

If total homeowner equity in the article is (was) 43% and 1/3 of homes are owned outright then the remaining equity is closer to 10% than 15%, then subtract the brokers commission!

If Steve Berry is correct about Case-Shiller going another 25-40% south then every TBTF bank is toast – I mean the US taxpayer is toast because turbo Timmy will keep finding really tough & complicated ways to keep giving them our money for our “own good”!

My take on market manipulation is that I have no proof of it…but it would be very easy to do in such light volume. For example, since I follow QQQQ so closely, the 100 day MA for volume on QQQQ was 220M as of November (this reflected high volume selling). After a sideways move, then move up, the 100 day MA stands today at 151M…one third of the volume has disappeared. So we have some short covering (the few that are left) and some program trading…no real money flow. Some of the data on GS increase in VAR and program trading they do compared to their rivals definitely raises eyebrows…and I have long thought that the PPT existed and was powerful. I predicted last July that Obama would be elected and the PPT would let the market tank …seems like that is what may have occurred. Obama got his team in place and they turned the pumpers back on. I believe that it will be futile to stop what is about to occur.

Of course there is plenty of negative data out there. Just like there was in Oct ’07 when the market was 80% higher than it is today. The difference being that a lot of the bad news is now behind us. Certainly more is behind us than was the case in Oct ’07. Maybe that means a level of SPX 1575 today is more reasonable than it was in Oct’07. Do i think we’re going there? Uh, no….just saying that this is far less crazy than lots of other times in the past.