The last time I wrote about the VIX, I noted that the 12.5 level was a key line in the sand. The fact that it could not break below that despite the market rising to new highs was a glaring bearish divergence.

Now, a new level is telling us something just as important. As the chart below shows, during this most recent bull market (over the past 4+ years) the VIX has pretty much stayed below the 20 level. In fact, the last time the Index spent any real time above 20 was during the last bear market (March, 2000 to March 2003). With this latest weakness in the stock market, the VIX has convincingly broken 20 again, which suggests to me we may be witnessing more than a mere correction:

The bear market may, indeed, be coming out of its 4-year hibernation but, for right now, I believe this selloff may be reaching a climax.

Less than 10% of the stocks trading on the NYSE now trade above their 50-Day Moving Average, a historically rare occurance suggesting the market is oversold:

New 52-Week lows on the exchange are also reaching an extreme level.

In addition, the total Put/Call Ratio is making all-time highs. In other words, there has never been a time where more puts were bought (traders betting on a decline) relative to calls (traders betting the other way):

This contrary indicator is sending its most bullish reading ever.

There are also some signs in the S&P that it may be reaching important support. We are now testing the March lows in the index (technical support on the chart) at the same time this second wave of selling is nearing symmetry with the first wave (both 128 points). 1375ish on the index, then, is another line in the sand that bears watching:

Finally, another market is showing signs that panic has overtaken the financial markets. Traders are rushing into the safety of Treasury Bills at breakneck pace. According to Bloomberg, the yield on the 3-Month Treasury Bill has fallen harder (prices rallied) than any time in nearly 20 years.

This rare kind of panic indicates that investors are doing everything BUT acting rationally…

As Jimmy Rogers says in the classic book Market Wizards, “just about every time you go against panic, you will be right if you can stick it out.”
LIV

The last time I wrote about the VIX, I noted that the 12.5 level was a key line in the sand. The fact that it could not break below that despite the market rising to new highs was a glaring bearish divergence.

Now, a new level is telling us something just as important. As the chart below shows, during this most recent bull market (over the past 4+ years) the VIX has pretty much stayed below the 20 level. In fact, the last time the Index spent any real time above 20 was during the last bear market (March, 2000 to March 2003). With this latest weakness in the stock market, the VIX has convincingly broken 20 again, which suggests to me we may be witnessing more than a mere correction:

The bear market may, indeed, be coming out of its 4-year hibernation but, for right now, I believe this selloff may be reaching a climax.

Less than 10% of the stocks trading on the NYSE now trade above their 50-Day Moving Average, a historically rare occurance suggesting the market is oversold:

New 52-Week lows on the exchange are also reaching an extreme level.

In addition, the total Put/Call Ratio is making all-time highs. In other words, there has never been a time where more puts were bought (traders betting on a decline) relative to calls (traders betting the other way):

This contrary indicator is sending its most bullish reading ever.

There are also some signs in the S&P that it may be reaching important support. We are now testing the March lows in the index (technical support on the chart) at the same time this second wave of selling is nearing symmetry with the first wave (both 128 points). 1375ish on the index, then, is another line in the sand that bears watching:

Finally, another market is showing signs that panic has overtaken the financial markets. Traders are rushing into the safety of Treasury Bills at breakneck pace. According to Bloomberg, the yield on the 3-Month Treasury Bill has fallen harder (prices rallied) than any time in nearly 20 years.

This rare kind of panic indicates that investors are doing everything BUT acting rationally…

As Jimmy Rogers says in the classic book Market Wizards, “just about every time you go against panic, you will be right if you can stick it out.”
LIV

Cascade Bancorp released their 10-Q (quarterly SEC filing) yesterday. I have been following the company’s numbers fairly closely for some time now simply because I believe they are one of the best guages of the health of the local economy.

Digging straight into them, non-performing assets (NPA: delinquent loans) were, in the words of the bank’s press release, “modestly higher,” and continue to grow at an annual rate over 1,000% (11-fold). As of June 30 this year NPA grew to nearly $10 million, more than tripling since the beginning of the year. Bottom line: since the vast majority of the bank’s loans are to builders and home-buyers, the dramatic growth in delinqencies shows a rapid deterioration in the health of these two groups.

Taking a look at another stat, demand deposits (DD) at the bank continue to decline. Over the past year depositors have withdrawn over $150 million in DD, a drop of 24%. Bottom line: local businesses and consumers have 24% less cash on hand than this time last year, signaling a serious drop in general economic activity. $150 million ain’t peanuts, folks.

So while the headline reads, “Cascade Bancorp earnings up 6.9%,” the REAL numbers tell a more enlightening story.
LIV

Cascade Bancorp released their 10-Q (quarterly SEC filing) yesterday. I have been following the company’s numbers fairly closely for some time now simply because I believe they are one of the best guages of the health of the local economy.

Digging straight into them, non-performing assets (NPA: delinquent loans) were, in the words of the bank’s press release, “modestly higher,” and continue to grow at an annual rate over 1,000% (11-fold). As of June 30 this year NPA grew to nearly $10 million, more than tripling since the beginning of the year. Bottom line: since the vast majority of the bank’s loans are to builders and home-buyers, the dramatic growth in delinqencies shows a rapid deterioration in the health of these two groups.

Taking a look at another stat, demand deposits (DD) at the bank continue to decline. Over the past year depositors have withdrawn over $150 million in DD, a drop of 24%. Bottom line: local businesses and consumers have 24% less cash on hand than this time last year, signaling a serious drop in general economic activity. $150 million ain’t peanuts, folks.

So while the headline reads, “Cascade Bancorp earnings up 6.9%,” the REAL numbers tell a more enlightening story.
LIV

“Alarmed by weakness in the housing market and rising foreclosures, investors who buy loans and securities backed by mortgages have fled the market for almost any loan that isn’t guaranteed by Fannie Mae or Freddie Mac, Doug Duncan [chief economist of the Mortgage Bankers Association] and others said… For other types of loans, Mr. Duncan said, ‘there is no market.’” -The Wall Street Journal

“France’s biggest listed bank, BNP Paribas , froze 1.6 billion euros ($2.2 billion) worth of funds on Thursday, citing the U.S. subprime mortgage sector woes that have rattled financial markets worldwide… ‘The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly, regardless of their quality or credit rating,’ it said in a statement.” -New York Times

“The investment-grade corporate bond market has ground to a halt, making it difficult for companies to access capital and hard for investors to find a place to put their money to work… ‘The market is just frozen up,’ said Jim Cusser, a portfolio manager at Waddell & Reed in Overland Park, Kan.” -The Wall Street Journal

“I’ll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don’t have a deep-pocketed parent or hedge fund as a sugar daddy you’re likely to be out of business by year-end, probably sooner. In the 20-plus years that I’ve been covering residential finance I haven’t seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s. One subprime executive who closed his shop a few months ago told me, ‘This is a liquidity crunch the likes I have never seen.’” -Paul Muolo, National Mortgage News

Is this what Cramer means by, “Armageddon?”
LIV

Today’s Wall Street Journal Reports, Money Funds May Hold Supbrime, Too.

This is why I have always advocated using Treasury-Only Money Market Funds: unless you know exactly what they are invested in you don’t really know just how safe your money is.

Over the course of the nascent credit crunch, how many money funds will, “break the buck?”
LIV

“Alarmed by weakness in the housing market and rising foreclosures, investors who buy loans and securities backed by mortgages have fled the market for almost any loan that isn’t guaranteed by Fannie Mae or Freddie Mac, Doug Duncan [chief economist of the Mortgage Bankers Association] and others said… For other types of loans, Mr. Duncan said, ‘there is no market.’” -The Wall Street Journal

“France’s biggest listed bank, BNP Paribas , froze 1.6 billion euros ($2.2 billion) worth of funds on Thursday, citing the U.S. subprime mortgage sector woes that have rattled financial markets worldwide… ‘The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly, regardless of their quality or credit rating,’ it said in a statement.” -New York Times

“The investment-grade corporate bond market has ground to a halt, making it difficult for companies to access capital and hard for investors to find a place to put their money to work… ‘The market is just frozen up,’ said Jim Cusser, a portfolio manager at Waddell & Reed in Overland Park, Kan.” -The Wall Street Journal

“I’ll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don’t have a deep-pocketed parent or hedge fund as a sugar daddy you’re likely to be out of business by year-end, probably sooner. In the 20-plus years that I’ve been covering residential finance I haven’t seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s. One subprime executive who closed his shop a few months ago told me, ‘This is a liquidity crunch the likes I have never seen.’” -Paul Muolo, National Mortgage News

Is this what Cramer means by, “Armageddon?”
LIV

Today’s Wall Street Journal Reports, Money Funds May Hold Supbrime, Too.

This is why I have always advocated using Treasury-Only Money Market Funds: unless you know exactly what they are invested in you don’t really know just how safe your money is.

Over the course of the nascent credit crunch, how many money funds will, “break the buck?”
LIV

I am sick and tired of hearing people blame, “subprime.” The subprime sector of the debt market is not the cause of anything. It is merely a symptom of the popping of the twin real estate and liquidity bubbles.

Last week, Countrywide said, “more borrowers with good credit were falling behind on their loans,” and you would think that the media would get the idea that’s it’s not about subprime.

The Wall Street Journal reported that lenders are tightening standards across all credit sectors and you would think their affiliate, CNBC, would stop “reporting” about, “worries over subprime.”

Fraud discovered at the absolute highest level of the real estate market still doesn’t dissuade people from talking about the subprime sector.

The reason they won’t acknowledge the truth is this: admitting that it’s not subprime means admitting the problem is not, “contained.”

“Never underestimate the power of denial.” -Wes Bentley
LIV

I am sick and tired of hearing people blame, “subprime.” The subprime sector of the debt market is not the cause of anything. It is merely a symptom of the popping of the twin real estate and liquidity bubbles.

Last week, Countrywide said, “more borrowers with good credit were falling behind on their loans,” and you would think that the media would get the idea that’s it’s not about subprime.

The Wall Street Journal reported that lenders are tightening standards across all credit sectors and you would think their affiliate, CNBC, would stop “reporting” about, “worries over subprime.”

Fraud discovered at the absolute highest level of the real estate market still doesn’t dissuade people from talking about the subprime sector.

The reason they won’t acknowledge the truth is this: admitting that it’s not subprime means admitting the problem is not, “contained.”

“Never underestimate the power of denial.” -Wes Bentley
LIV