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Jeff Bailey : 9/23/2008 12:24:16 AM

Rosen Replay (Part II) ... Caller "Aimy" about taxing oil companies' oil in the ground on leases.

This is what some actually want to do!

Jeff Bailey : 9/23/2008 12:21:00 AM

FAS #155 ... (.pdf file) Link ... Eyes glaze over... roll back in head.

Now I know, it is time for bead.

Jeff Bailey : 9/23/2008 12:12:12 AM

Rosen Replay (part II) ... Then listen to Dennis (says he is/was an underwriter of CDO's) ... talks about how FAS "mark to market" changes/requirement to include CDO's has really accelerated writedowns, where many are still "performing." This is a "shocker" and is something that needs to be addressed IMMEDIATELY!

IF it is true that one (1) house in a neighborhood is "non performing" or a $0.00 mark down, should the entire neighborhood also be "marked-to-market" of $0.00?

Jeff Bailey : 9/23/2008 12:05:43 AM

Rosen Replay (09/18/08 Part II) Link

Background of Resolution Trust Corp. (RTC), then Federal Deposit Insurance Corp. (FDIC) and savings/loan debacle.

How the properties the RTC acquired from S&L crisis, ended up as revenue surplus of $+28B by 1993 (Clinton elected 1992), 1994 $+8B, 1995 $+18M, 1996 $8B, 1997 $+14M, 1998 $+4B, 1999 $+5B ...

Jeff Bailey : 9/23/2008 12:05:39 AM

"Linda in Littleton, CO" ... she's the mortgage underwriter I mentioned in Monday's Market Monitor ... Listen to what she says was going on at her place of employment ... "forced to do loans they didn't want to do because the government was so involved..." (i.e. CRA)

Jeff Bailey : 9/23/2008 12:05:34 AM

As you listen to the "Rosen replay, (09/18/08 Part I) " Link one caller hits a very good point as it relates to the "stated income borrower." One area that the Fed/Treasury and on down missed, was the opportunity to let a "performing ARM loan" that was about to reset, the opportunity to "lock in" at the current market rate.

Jeff Bailey : 9/22/2008 11:32:42 PM

New Agency Proposed to Oversee Freddie Mac and Fannie Mae (NY Times 09/11/2003) ... Link ... The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.....

Jeff Bailey : 9/22/2008 11:22:30 PM

The Community Reinvestment Act (1977) Link

One eventual "problem" was the CRA Rating. It became ... if you (lender) aren't making some "subprime loans" then your CRA Rating will fall.

Jeff Bailey : 9/22/2008 10:58:45 PM

Bob Herz, FASB: "Lessons Learned, Relearned, and Relearned Again from the Credit Crisis- Accounting and Beyond ... (.pdf file) Link

One point that became "crystal clear" Saturday morning (did you listen to the Mike Rosen replay on KOA?) was the "failure" of our regulatory system, in part due to government programs for "more affordable housing and lending practices."

The "dot.com" bubble slightly different, but today, CEO's sign off on the financials. If the books are cooked, the CEO can now spend some time in the big house.

While some of the "poor lending practices" are a result of the government pressure to lend, the derivatives, of derivatives, of derivatives should have been more closely watched/regulated as once the yield curve flattened, these "hard to value derivatives" simply emploded.

Jeff Bailey : 9/22/2008 10:37:08 PM

Democrats Mulling Bill To Fund Govt. Through March'09 DJ- Administration sources say House Democrats are mulling a bill that would continue funding the government until March 6, 2009, after a new president and Congress are in place.

A discussion draft dated Sunday would fund most federal agencies at current levels unless Congress acts before the March deadline.

The draft, which is subject to change before Congress leaves town to campaign for reelection, would provide $5.1 billion for home heating assistance and some $25 billion in loan guarantees for the auto industry.

A vote on the continuing resolution, likely the last bill that sees congressional action this year, could occur this week.

Jeff Bailey : 9/22/2008 10:32:22 PM

Closing Internals found at this Link

Jeff Bailey : 9/22/2008 10:23:02 PM

Closing U.S. Market Watch found at this Link

Note: With today's termination of the Nymex Oct. Crude Oil (cl08v) futures contract (big squeeze into today's termination), I'm "rolling" to November for oil, unleaded, heating oil, nat gas in U.S. Market Watch.

Keene Little : 9/22/2008 10:16:20 PM

Tuesday's pivot table: Link

As big a drop as we saw on Monday it easily fits within a normal correction of last week's rally. SPX and the DOW came close to their 50% retracement levels near 1200 and 10972, resp. We could now see a continuation of last week's rally, shown in pink on the daily charts, or a continuation of the decline (maybe after a bounce to correct Monday's decline), shown in dark red:
SPX daily: Link
DOW daily: Link

NDX would be the least tolerant of any additional decline since it has already retraced a little more than 62% of its rally (near 1670). Below 1640 would be bearish as it would then be greater than a 78.6% retracement and that usually leads to a complete retracement. If the bulls can drive it back up to a new high above Friday's I see the potential for a push up to the 1830 area.
NDX daily: Link

Jeff Bailey : 9/22/2008 10:14:52 PM

Congress, Bush team agree on some bailout terms ... AP Story Link

Jeff Bailey : 9/22/2008 10:10:39 PM

China Yuan Official Parity Rates For Tuesday at this Link

For those new to the Market Monitor, China is in the process of trying to let its currency (yuan) "float."

Jeff Bailey : 9/22/2008 10:02:45 PM

dj- USD/CNY Central Parity 6.8009 Vs. Monday Parity 6.8243 ... Central Parity Set At Record Modern-Era Low

OI Technical Staff : 9/22/2008 9:59:59 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Tab Gilles : 9/22/2008 4:00:11 PM

Canadian NatGas LP's...

PenWest (PWE) $26.16 +$0.66 (2.67%)

PenGrowth (PGH) $16.63 +$0.51 (3.16%)

Jane Fox : 9/22/2008 3:59:56 PM

Here is a chart of the Crude October contract. Volume in this contract today has been 31K. Link Whereas the November contract has traded 312K so be careful of which contract is being reported if you hear crude reached $130.00 today. Link

Tab Gilles : 9/22/2008 3:57:59 PM

Apple (AAPL) $131.58 -$9.40 (6.7%)

Google (GOOG) $430 -$19.00 (4.11%)

Tab Gilles : 9/22/2008 3:56:19 PM

$VIX Link

$VDX Link

$VXN Link

$RVX Link

Jeff Bailey : 9/22/2008 3:46:02 PM

I have to leave for a meeting ... will update things, thoughts, observations later this evening.

Jeff Bailey : 9/22/2008 3:45:15 PM

dj- Invesco: NYSE confirms company stock covered by SEC short-sale ban ... IVZ $24.27 -10.11% ...

Jeff Bailey : 9/22/2008 3:41:27 PM

One adjustment I'm having to make right now is how to think not only as a "capitalist," but also a "socialist."

Where's the RISK and where's the REWARD.

Jeff Bailey : 9/22/2008 3:38:54 PM

dj- Morgan Stanley Ups Disclosure Requirement On Holder Proposals

DJ- Morgan Stanley (MS) said Monday that shareholders putting up proposals for a shareholder vote will have to disclose complex derivative positions or short sales in the company. Shareholders in the past have typically only disclosed their holdings in Morgan Stanley common shares. Morgan Stanley last week issued a press release expressing concern over the activity of short sellers and advocated that the Securities and Exchange Commission temporarily halt short selling in financial stocks, including Morgan Stanley. The New York bank said in a regulatory filing that it amended its bylaws to expand the disclosure stockholders must provide.

Jeff Bailey : 9/22/2008 3:38:00 PM

dj- Pacific & Western Bank Closes Another $C43.1M Of Insured Residential Mortgages

Jeff Bailey : 9/22/2008 3:35:14 PM

UNA-VT from 09/11/08 NAKED entry currently $0.60 x $0.70

USO $87.89 +6.36% ...

VIX.X 33.21 +3.55% ...

Jeff Bailey : 9/22/2008 3:33:35 PM

09/19/08 Nymex Crude Oil Open Interest screen capture Link

09/12/08 (capture) Link

Jeff Bailey : 9/22/2008 3:27:15 PM

Nymex November Crude Oil (cl08x) ... settled up $6.62, or +6.44% at $109.37.

Jeff Bailey : 9/22/2008 3:24:05 PM

Nymex October Crude Oil (cl08v) ... terminates at $120.92 +15.66%, or +$16.37.

Jeff Bailey : 9/22/2008 3:21:52 PM

I do agree that there needs to be regulation of things. Especially those where government has given "mandates, or benchmarks" as to lending to "subprime" applicants.

Keene Little : 9/22/2008 3:21:18 PM

The NDX pattern for today looks like it's just stair-stepping lower and I don't see any bullish divergences to speak of. The 30 and 60-min charts look like price has further to drop. It has now fallen back inside its down-channel from August and a drop below 1640 (that's another 50 points lower) would suggest we're likely to see NDX head for the bottom of the channel. NDX 120-min chart: Link

Otherwise a bounce back up to a new high, shown in pink, would give us a good setup for a short play, probably up near 1830. I don't trust the upside enough to recommend looking for a buying opportunity but as I said in the morning, I'm watching to see what plays out today and tomorrow as I think that should provide enough clues as to whether we're just pulling back today or starting the next big decline.

Jeff Bailey : 9/22/2008 3:19:19 PM

dj via CNBC - Sen Clinton: We Need More "Sensible" Regulation ... (full) - Sen. Hillary Clinton, D-N.Y., Monday called for more "sensible" regulation of the financial markets while saying she was confident that the U.S. will weather the current economic crisis. Clinton, who spoke to CNBC after meeting with New York Federal Reserve President Tim Geithner, also said the Treasury Department's control over the bailout should be limited in the long term. "In the immediate short run, to have (the Treasury Department) run it may be the only choice, but it's not a good long-term decision," she said. Clinton said it was "imperative" to start considering an entity similar to the Depression-era Home Owners Loan Corp. to buy and modify mortgages and save homes. "There's no doubt that we have to get this infusion of cash into our markets, and buy up these illiquid assets as soon as possible," the New York Democrat said. "But I think we need a commitment from the administration that we will begin working on something like this."

Jeff Bailey : 9/22/2008 3:12:06 PM

What I (capitalist) "fear" is what we saw this morning ... General Motors (GM) $12.14 -7.18% ... being added to the "no short" list.

Any other companies out there want to be added? "Socialism: Hey, why not add me to the list!?"

Jeff Bailey : 9/22/2008 3:09:29 PM

Webster: Capitalism Link

Jeff Bailey : 9/22/2008 3:07:37 PM

Webster: Communism Link

Jeff Bailey : 9/22/2008 3:06:52 PM

Webster : Socialism Link

Keene Little : 9/22/2008 3:05:08 PM

In percentage terms the techs and small caps are leading to the downside today. NDX is now close to the 50% retracement level at 1690 and just closed Friday's gap near 1693.

Jeff Bailey : 9/22/2008 3:04:33 PM

See communist China banks ...

Jeff Bailey : 9/22/2008 3:04:17 PM

Goldman Sachs and Morgan Stanley Change Status to Bank Holding Companies ... AP Story Link

Keene Little : 9/22/2008 3:03:50 PM

The DOW could end up with a 300-point drop today and amount to only a 38% retracement of the 2-day rally. That's some volatility. The same 38% level for SPX is at 1215.13.

Jeff Bailey : 9/22/2008 3:01:07 PM

Company: Fifth Third Bancorp (FITB) Fannie/Freddie Exposure: $16.79 -11.06% ... $53 million in preferred stock at June 30 Date of disclosure: Aug. 7 Notes: n/a

Jeff Bailey : 9/22/2008 3:00:15 PM

Pound CurrencyShares (FXB) $186.41 +1.29% ...

Jeff Bailey : 9/22/2008 2:59:47 PM

Euro CurrencyShares (FXE) $148.56 +2.25% ...

Jeff Bailey : 9/22/2008 2:59:22 PM

Yen CurrencyShares (FXY) $94.80 +2.08% ...

Jeff Bailey : 9/22/2008 2:58:48 PM

Company: Mitsubishi UFJ Financial Group Inc. (8306.TO) Fannie/Freddie exposure: ... Y3.14 trillion in securities arranged or guaranteed by U.S. GSEs, including Fannie and Freddie Date of disclosure: Aug. 6 Notes: n/a

Jeff Bailey : 9/22/2008 2:58:14 PM

Company: China Merchants Bank Co. Ltd. (3968.HK) Fannie/Freddie exposure: ... $180 million in debt at end of June, including $110 million from Fannie and $70 million from Freddie; also had $75 million in mortgage-backed securities guaranteed by Fannie and Freddie. Date of disclosure: Aug. 18 Notes: China Merchants had an unrealized gain of $830,000 on the investment. The investment accounted for no more than 1% of its bond portfolio.

Jeff Bailey : 9/22/2008 2:57:31 PM

Company: JP Morgan Chase & Co. (JPM) Fannie/Freddie exposure: $42.64 -9.37% ... $1.2 billion par value perpetual preferred stock. Date of disclosure: Aug. 25 Notes: JP Morgan estimated the stock declined in value by $600 million in the third quarter to date. The securities are marked-to-market.

Jeff Bailey : 9/22/2008 2:55:03 PM

Options market makers in WFC-VE's look willing and able to stand their ground.

Jeff Bailey : 9/22/2008 2:54:37 PM

WFC $35.01 -12.03% ...

WFC-VE $0.50 x $0.60

VIX.X 31.84 -0.71% ...

Jeff Bailey : 9/22/2008 2:53:09 PM

Yes it is ... her husband was proponent of loosening lending standards. Surplus in part created as commercial/housing sector improved.

Jeff Bailey : 9/22/2008 2:51:18 PM

Is that Senator Clinton talking on CNBC? ...

Jeff Bailey : 9/22/2008 2:48:49 PM

Company: Wells Fargo & Co. (WFC) Fannie/Freddie exposure: $35.03 -11.98% ... Perpetual preferred Fannie securities available for sale at cost of $336 million, Freddie for $144 million Date of disclosure: Sept. 8 Notes: Wells Fargo will take a third-quarter write-down on its Fannie and Freddie securities investments.

Keene Little : 9/22/2008 2:48:06 PM

This afternoon's bounce is clearly corrective so whether it drops from here or a little higher first, we haven't seen the lows yet for today's decline.

Jeff Bailey : 9/22/2008 2:48:05 PM

Company: Sovereign Bancorp (SOV) Fannie/Freddie exposure: $8.06 -21.21% ... $622.6 million preferred stock at June 30 Date of Disclosure: September 8 Notes: Sovereign had an unrealized loss of $34.4 million on the preferred stock at June 30, and expects to record a non-cash, other-than-temporary impairment for the quarter ending September 30.

Jeff Bailey : 9/22/2008 2:47:22 PM

Company: Shinhan Financial Group (055550.SE) Fannie/Freddie exposure:

No stock investment; exposure "very small" Date of disclosure: Sept. 8 Notes: Shinhan Bank had $50 million in Fannie, Freddie senior debt at the end of June but sold or redeemed much of the debt.

Jeff Bailey : 9/22/2008 2:46:32 PM

Company: China Citic Bank Corp. Ltd. (0988.HK) Fannie/Freddie exposure: $1.18 billion in mortgage-backed securities, $403 million in corporate bonds at the end of June Date of disclosure: n/a Notes: China Citic's figures come from a Sept. 8 Dow Jones Asian Equities Report story. According to the story, the bank provided those figures "earlier."

Jeff Bailey : 9/22/2008 2:45:33 PM

Company: BOC Hong Kong (Holdings) Ltd. (2388.HK) Fannie/Freddie exposure: HK$5.5 billion at end of June. Date of disclosure: n/a Notes: BOC Hong Kong provided exposure figures in August, according to a Sept. 8 Dow Jones Asian Equities Report story. The bank is 66% owned by Bank of China Ltd. (3988.HK)

Jeff Bailey : 9/22/2008 2:44:40 PM

Company: Bank of China Ltd. (3988.HK) ... Fannie/Freddie exposure: $12.67 billion in bond holdings related to Fannie and Freddie as of Aug. 28 Date of disclosure: Sept. 8 Notes: The bank sold $4.61 billion of Freddie and Fannie debt in July and August.

Jeff Bailey : 9/22/2008 2:44:02 PM

Company: PNC Financial Services Group Inc. (PNC) Fannie/Freddie exposure: $76.91 -5.29% ... $80 million in preferred stock Date of disclosure: Sept. 9 Notes: PNC expects to record a "significant" other-than-temporary impairment charge in the third quarter.

Jeff Bailey : 9/22/2008 2:42:08 PM

Company: E*Trade Financial Corp. (ETFC) Fannie/Freddie exposure: $3.53 -9.71% ... None as of Sept 8; $150 million in preferred stock as of July 21. Date of disclosure: Sept. 10 Notes: E*Trade booked a $150 million pre-tax realized loss in the third quarter on preferred equity holdings. The company sold all remaining Fannie, Freddie holdings as of Sept. 8, saying it liquidated most holdings in July.

Jeff Bailey : 9/22/2008 2:41:19 PM

"insignificant" and "moderate" ... still terms I find tough to wrap my arms around.

Jeff Bailey : 9/22/2008 2:40:09 PM

"Unlike LEH disclosure," C does have/give FNM/FRE amounts

Jeff Bailey : 9/22/2008 2:39:29 PM

Company: Citigroup Inc. (C) Fannie/Freddie exposure: $20.00 -3.14% ... $50 million in preferred and convertible preferred shares at Sept. 8; "insignificant" exposure to Fannie/Freddie common shares Date of disclosure: Sept. 10 Notes: Citi reduced its net exposure to $50 million from $1 billion at June 30. The $50 million exposure, as of Sept. 8, is mainly held in its Institutional Clients Group trading account, which is marked-to-market through revenue.

Jeff Bailey : 9/22/2008 2:38:38 PM

Company: WellPoint Inc. (WLP) Fannie/Freddie exposure: $47.00 -2.14% ... About $243 million in preferred stock Date of disclosure: Sept. 11 Notes: WellPoint expects a third-quarter impairment charge. The stocks are classified as available-for-sale in its investment portfolio and have declined in value by about $214 million as of Sept. 8.

Jeff Bailey : 9/22/2008 2:37:51 PM

Company: Progressive Corp. (PGR) Fannie/Freddie exposure: $17.28 -1.53% ... $38 million fair value in preferred securities, plus common shares Date of disclosure: Sept. 11 Notes: Progressive wrote down $324.7 million in securities determined to have had an other-than-temporary decline in market value, of which $278.2 million related to Fannie and Freddie preferred and common stock.

Jeff Bailey : 9/22/2008 2:36:21 PM

Company: Cohen & Steers Inc. (CNS)

Fannie/Freddie exposure: $11 million in preferred stock Date of disclosure: Sept. 11 Notes: Cohen & Steers recorded an other-than-temporary impairment charge of about $10 million.

Jeff Bailey : 9/22/2008 2:35:39 PM

Company: Vanguard Group Inc.

Fannie/Freddie exposure: No fund held more than 0.5% of its assets in Fannie or Freddie stocks as of Sept. 5. Date of disclosure: Sept. 12 Notes: Vanguard said several index funds seeking to follow the performance of large companies, value stocks or the financial industry had the most exposure, but no fund had "a large exposure."

Jeff Bailey : 9/22/2008 2:34:56 PM

Company: M&T Bank Corp. (MTB) $87.56 -6.35% ...

Fannie/Freddie exposure: Preferred stock with $162 million cost basis, fair value of preferred stock fell to $120 million at June 30 Date of disclosure: Sept. 12 Notes: M&T will book an impairment charge, the size of which will be determined Sept. 30.

Tab Gilles : 9/22/2008 2:33:39 PM

I'd asked last week...How many barrels of oil could an ounce of gold buy? Link Link

Possible causes to the spike today? Link Link Link

Jane Fox : 9/22/2008 2:29:37 PM

Then the unthinkable started to happen, the housing market started to unravel. Around October 2006 the bottom of the food chain workers started to see mortgages defaulting before they were able to sell them up the food chain. Investment houses then started to back away and were not buying the riskiest RMBS anymore. Smaller banks were highly leveraged and when the money started to dry up the smaller banks started to fail.

Tab Gilles : 9/22/2008 2:26:19 PM

Ohhh Boy! Here we go...short squeeze.

Tab Gilles : 9/22/2008 2:25:26 PM

$WTIC $127.80

Jeff Bailey : 9/22/2008 2:25:11 PM

02:00 Internals at this Link

Tab Gilles : 9/22/2008 2:20:39 PM

Oil Service HOLDRs (OIH) $171.00 +$4.01 (2.4%) Link

Chesapeake Energy (CHK) $$43.31 +$1.55 (3.76%) Link Note* that bullish divergence and bounce off of $35.

Jane Fox : 9/22/2008 2:17:45 PM

Then came the CDO, Collaterized Debt Obligation. What a CDO? The RMBSs were sliced into pieces called trances and a CDO was a pool of these trances, in essence a pool of pools. So there were CDOs of the riskiest mortgages but they ended up with a rating of triple A .

Jeff Bailey : 9/22/2008 2:14:45 PM

Oooooe! MASSIVE short squeeze in the October Crude contract at today's expiration. MASSIVE.

Jeff Bailey : 9/22/2008 2:13:04 PM

DJ - US Bank Group Says Nearly 1/3 of Banks Hold GSE Stock

DJ (full) - U.S. banks are more exposed to Fannie Mae (FNM) and Freddie Mac (FRE) than banking regulators have indicated, the American Bankers Association said Monday. Nearly a third of banks hold the firms' preferred shares and 3.4% hold auction-rate securities backed by the preferred stock, according to the results of a survey released by the ABA. The Federal Housing Finance Agency suspended dividendson Fannie and Freddie stock after seizing the companies on Sept. 7, causing their share prices to plummet. Bank regulators and Treasury Secretary Henry Paulson have said that only a small share of firms have holdings of the government-sponsored enterprises that are significant compared with their capital. Banks will have to write down the value of their GSE stock by the end of this quarter, which will trigger a capital charge. On average, banks' exposure to the firms' stock amounts to 11% of core capital, the ABA said. "The negative impact on banks - particularly Main Street community banks - is far greater than the regulators first thought," ABA President Ed Yingling said in a statement.

Jeff Bailey : 9/22/2008 2:12:01 PM

dj- MMS: 995,684 B/D Oil; 4,849 MMCF/D Nat. Gas Off Line in US Gulf
76.6% Oil; 65.5% Gas output still off line in US Gulf.

Jeff Bailey : 9/22/2008 2:10:34 PM

Let the finger pointing begin !

Tab Gilles : 9/22/2008 2:10:22 PM

Jane, no problem on Bullish Divergence post. Just wanted to add to your comment by reposting the chart I annotated. I felt early on noting the divergence, in part that by using the 8,18,6 versus 12,26,9 setting on the MACD it sometimes gives a false reading. Link

However, on a weekly chart the divergence is evident in both settings along with a "doji" weekly candle. Link *Note the PnF P/O of 1510. Link

Jeff Bailey : 9/22/2008 2:10:22 PM

dj- Frank: Bush Administration agreed to oversight board for Treasury plan

Jane Fox : 9/22/2008 2:06:08 PM

One more piece that helped to move this crisis to the point it is at now was all the software investment firms were using showed defaults were not a problem. All the data they had to use showed defaults were no problem because it was data on safe mortgages, not toxic waste.

Jeff Bailey : 9/22/2008 2:04:13 PM

Seeing DJ list of companies with FNM and FRE exposure

Jeff Bailey : 9/22/2008 2:03:33 PM

Most Actives ... AIG $5.06 +31.16%, SPY $122.68 -1.17%, QQQQ $41.87 -2.40%, EEM $37.46 -2.62%, MSFT $25.87 +2.86%, WM $3.32 -21.88%, C $19.95 -3.38%, WB $16.59 -11.57%, XLF $21.00 -6.16%, CSCO $23.93 -1.48%

Jane Fox : 9/22/2008 2:03:04 PM

Some of the people who were at the bottom of the food chain, the ones who actually wrote these mortgages, became very very rich. One I talked about earlier was a bar tender turned mortgage loan officer and was making 25K a MONTH!!!

Jane Fox : 9/22/2008 2:00:42 PM

One of the very first investment houses to start buying the no income no asset type loan was Bear Sterns. Those who had been in the business for years hated these loans but everyone was offering them so eventually it got to the point that if you were a little guy you had to offer them or you were out of business.

Jeff Bailey : 9/22/2008 2:00:19 PM

dj- Shell signs gas joint venture with Iraqi Govt. ... (partial) - Royal Dutch Shell PLC (RDSB.LN) said in a statement Monday that it has signed an agreement with the Iraqi government to develop infrastructure to tap natural gas produced from oil wells in the south of the country. The state-controlled Iraqi South Gas Company will have 51% in the venture and Shell 49%. The venture will oversee the gathering, processing and marketing of around 700 million cubic feet a day of natural gas and other related products currently burned off from oil wells in the province of Basra in southern Iraq, an area covering some 19,000 square kilometers, the statement said. It will own and develop new gas infrastructure such as pipelines and processing plants but not reserves in the ground. The joint venture will purchase the natural gas at the wellhead from existing upstream operations, the statement said. An Iraqi Oil Ministry spokesman told Dow Jones Newswires earlier Monday that the venture would be worth $3 billion to $4 billion. The joint venture will focus initially on producing natural gas and associated products for use in the domestic market.

Jane Fox : 9/22/2008 1:58:20 PM

The American housing market never went down did it? So why worry?

Jeff Bailey : 9/22/2008 1:57:47 PM

dj- Frank: Plan could start affecting markets from first day

Jane Fox : 9/22/2008 1:57:25 PM

Since these mortgages brokers were selling the mortgages up the chain and they didn't have to hold on these loans, it didn't matter how "toxic" they were because someone else would have to deal with the default. And then even if there was a default the bank would own a house that was going to be worth more than what they lent so what?s the problem? Why me worry?

Jane Fox : 9/22/2008 1:55:26 PM

In the beginning the "Pool" was only buying the safest mortgages but there came a point when all the people who qualified for a mortgages already had one but the "Pool" was just getting started and wanted more. Every month the lending rules got looser and looser to be able to give mortgages to more and more people and satisfy this insatiable appetite. Eventually you didn't even have to provide a pay stub to prove you were working they only had to state they had a job. Finally you could get a mortgage with no income and no assets.

Jeff Bailey : 9/22/2008 1:54:39 PM

The guy that is supposedly "overseeing" all of this ... Link

Jeff Bailey : 9/22/2008 1:53:30 PM

dj- Frank: Don't think hedge funds could take part in Treasury plan

Keene Little : 9/22/2008 1:50:37 PM

There's enough of a difference in the price patterns of today's decline in blue chips vs. NDX to have me wondering if this afternoon's leg down could be finishing the pullback. I think that's a decent possibility now and would look for a bounce back up (if playing the short side pull your stops a little closer now). The DOW came close to the 38% retracement level near 11093.

Jeff Bailey : 9/22/2008 1:51:27 PM

Quick and dirty explanation of how this financial mess got started.

In a free market economy, social programs were created to try and "help the poor" live the American dream (socialism).

American Dream used to equal: Work hard and take some risk; get paid for hard work and risk taken.

To make sure the "poor" could live the dream, lobbiest, lawyers, then government started placing "earmarks" on lenders to make sure they were not discriminating. (giving too many loans to "prime debtor" vs. "subprime debtor."

Socialism and free market doesn't mix.

In order for lendors and banks to meet some of the more "attractive" (like VA loan group), lendors and banks ended up lending to "subprime" even when they "knew" it was likely going to be a bad loan.

Loans were then sold to FRE and FNM.

Today, tax payer buys the loans and SOCIALISM is realized.

Government now tells us we can NOT short many financial (used to be able to).

Jane Fox : 9/22/2008 1:48:23 PM

Now the men and women in charge of this Giant Pool was becoming more and more anxious to find somewhere to put it all because they were not going to make any money investing in US treasuries. Unfortunately they fell in love with Residential Mortgage Backed Securities (RMBS). Here is how a RMBS works. You get a mortgage with your local mortgage broker, he sells it to a larger bank and they then sell it to an investment firm and then the investment firm pools thousands of these mortgages and sells shares of the monthly income he was getting. The Giant Pool of money loved these and the investment firms couldn't produce enough of them.

Jeff Bailey : 9/22/2008 1:39:38 PM

US Oil Fund (USO) $88.12 +6.64% ...

Jeff Bailey : 9/22/2008 1:37:44 PM

Alert! Oil Futures: Nymex Rules Halt Oil Trading For 5-minutes ...

Jeff Bailey : 9/22/2008 1:37:04 PM

dj- NY Fed Removes Lehman Bros. From Primary Dealer List

Jane Fox : 9/22/2008 1:36:18 PM

Here is a quick and dirty explanation of how we got into this financial mess. Well maybe not so quick so I will break it into a few posts. Around the world there are hundreds and hundreds of financial institutions that have a pool of money in fixed income securities; money markets, CIDs, all the money the world is saving in pension funds, etc. and collectively this pool of money was 36 trillion in 2000 but by 2006 it had doubled to almost 70 trillion because poor countries were becoming became richer making all the stuff we Americans and like minds wanted. Then of course the people looking out for this money wanted to make it grow and were looking for a place to invest but the world was not ready for all this capital infusion. Unfortunately just at the same time Greenspan said he was not going to raise rates and told this Pool of money to go find your rate of return elsewhere. More to come.

Jane Fox : 9/22/2008 1:22:05 PM

Tab - sorry to duplicate your work but heh two of us on the same page should mean something?

Jeff Bailey : 9/22/2008 1:15:07 PM

Amex Gold Bugs ($HUI.X) 352.59 +8.91% ... probes its 50-day SMA (352.59) from underneath. WKLY R1 (351.31) here too.

Jeff Bailey : 9/22/2008 1:03:32 PM

Should note ... that FNM and FRE weren't necessarily the "single source to blame." They were simply buying many of the subprime loans (high risk commercial/mortgage loans) that lenders and banks "had to originate" in order to stay within some of the federal mandates.

Tab Gilles : 9/22/2008 1:02:50 PM

Jane, I highlighted the "Bullish Divergence' on the $SPX this past Friday and the $NYA.

Tab Gilles : 9/19/2008 12:53:59 PM

$SPX Link PnF Link

$NYA Link

Jeff Bailey : 9/22/2008 12:57:45 PM

Senator Obama ... when he was an attorney, fighting for the "poor" in Illinois, was very active in "loan discrimination" and proponent of making lenders make "more affordable" loans.

Ex FNM and FRE heads currently "economic advisors" for Senator Obama.

Jeff Bailey : 9/22/2008 12:53:54 PM

AIG $4.99 +29.61% ....

Jeff Bailey : 9/22/2008 12:53:06 PM

I would have thought at least $0.90 offer. PREMIUM not as high as I'd have thought.

Jeff Bailey : 9/22/2008 12:52:18 PM

Wells Fargo (WFC) $35.20 -11.55% ...

Quote check on WFC-VE for possible NAKED PUT are "just" $0.55 x $0.60.

VIX.X 31.37 -2.18% ...

Jane Fox : 9/22/2008 12:49:35 PM

WASHINGTON (MarketWatch) -- The odds of a merger between Morgan Stanley and Wachovia Corp. have grown longer as a result of Morgan Stanley moving to adopt the corporate structure of a bank holding company, according to a CNBC report. Late Sunday, the Federal Reserve approved applications by Morgan Stanley and Goldman Sachs Group to shift from investment banks. "One thing we know for certain, there won't be a Wachovia deal tomorrow, and probably ever," CNBC cited one unnmamed executive close to the firm as saying. "That doesn't mean things won't change, but the Fed has now changed everything for Morgan."

Keene Little : 9/22/2008 12:42:09 PM

The small consolidation near the lows of the day could be finishing very soon, to be followed by another leg down. After the completion of the next leg down is when we could get a long play to set up. At least I'll be watching for evidence of support.

Jeff Bailey : 9/22/2008 12:41:32 PM

Pacholder High Yield (PHF) $7.14 +4.23% ... 09/18/08 NAV was $7.61. Link

Jeff Bailey : 9/22/2008 12:37:42 PM

Euro CurrencyShares (FXE) $147.53 +1.54% ... has backfilled, and then some, its 08/29 to 09/02 gap lower.

Jeff Bailey : 9/22/2008 12:36:09 PM

Oil Service HOLDRs (AMEX:OIH) $167.98 +0.59% ...

Jeff Bailey : 9/22/2008 12:35:24 PM

XNG.X 567.96 -1.20% ...

Jeff Bailey : 9/22/2008 12:34:59 PM

OIX.X 798.05 +0.49% ...

Jeff Bailey : 9/22/2008 12:34:13 PM

dj- US Energy Dept To Make Announcement On $8B In Loan Guarantees

The U.S. Department of Energy said Monday it will make an announcement at around 2:30 p.m. EST in connection with soliciting bids for $8 billion worth of loan guarantees in connection with unspecified fossil energy projects. A DOE spokeswoman declined to provide more details.

Jeff Bailey : 9/22/2008 12:32:42 PM

AMEX 4 NH and 30 NL names at this Link

Jeff Bailey : 9/22/2008 12:29:54 PM

NYSE 11 NH and 32 NL names at this Link

Jeff Bailey : 9/22/2008 12:26:44 PM

DJ (earlier)- Microsoft Plans $40B Buyback, Boosts Qrtly Div 18%

MSFT $26.00 +3.33% ...

Jeff Bailey : 9/22/2008 12:25:17 PM

NASDAQ 16 NH and 17 NL names at this Link

Jeff Bailey : 9/22/2008 12:22:28 PM

US 13-week T-Bill Yield ($IRX.X) down 2.0 bp at 0.90% ....

Jeff Bailey : 9/22/2008 12:21:44 PM

dj- Ontario 3-month T-Bill Avg. Yield Rises To 2.351%

Jeff Bailey : 9/22/2008 12:20:26 PM

US Oil Fund (USO) $86.04 +4.12% ...

NAKED UNA-VT $0.55 x $0.70

VIX.X 32.06 -0.03% ...

Jeff Bailey : 9/22/2008 12:18:44 PM

DJ- Mexico: Jan-Aug Crude Oil Output Down 9.2% on Year at 2.83M B/D

Jeff Bailey : 9/22/2008 12:17:30 PM

Swing trade long alert! ... for 1/4 position in the iShares Silver Trust (AMEX:SLV) at the offer of $13.15 +5.53% ... Stop goes $11.75. Target $16.00.

Jane Fox : 9/22/2008 12:13:28 PM

I certainly don?t know if the MACD is worth anything right now but the SPX daily chart is showing a very nice bullish divergence. I like bullish MACD divergences as have already probably noticed. Link

Jeff Bailey : 9/22/2008 12:11:56 PM

12:00 Internals at this Link

Tab Gilles : 9/22/2008 12:05:01 PM

Watch NATGAS... natgas remains cheap relative to crude oil. Link Link

Chesapeake Energy (CHK) looks attractive here. Link

Keene Little : 9/22/2008 12:03:58 PM

So far the pattern for today's decline would look best with a small consolidation near the lows followed by another decline (to give us a 5-wave move down today). NDX would close Friday's gap near 1693 which is about 12 points lower than today's low so far. At that point we'd have a 3-wave pullback from Friday and a potentially bullish setup (at least a first test for the bulls).

Tab Gilles : 9/22/2008 11:53:28 AM

Commodites are again moving up big today...

USO $86.13 +$3.50 (4.3%); GLD $88.48 +$2.50 (2.9%); SLV $13.24 +$0.77 (6.25)

I'd posted this last week

Tab Gilles : 9/17/2008 11:10:26 AM

Look at the Bullish Divergence on the UNG chart. Link

Same goes for the GLD Link Link

SLV Link XLB Link

Jeff Bailey : 9/22/2008 11:39:13 AM

One of the "shockers" was that a loan officer did call into the show, and did say she would see loan applications that she deemed as "why are we giving this loan, applicant not qualified." What her superior told her was a bit shocking. And it goes back to some of the "Community Reinvestment Act"

Should you listed to the program, you will see where some analysts see a possible profit from the current bailout (similar to RTC bailout as assets recovered in value).

Jeff Bailey : 9/22/2008 11:33:38 AM

Social Program= Community Reinvestment Act.

Tab Gilles : 9/22/2008 11:28:16 AM

For those who didn't catch Carl Icahn on CNBC's "Fast Money" this past Friday. Check out his blog... Link

Jeff Bailey : 9/22/2008 11:34:34 AM

On Saturday morning as I was driving to the mountains I was listening to King of Agriculture (KOA) radio and rebroadcast of Denver conservative Mike Rosen. Mr. Rosen as well as Wall Street Journal and Investors Business Daily gives some background as to President Carter erra and program was called "Community Reinvestment Act."

While I would think "partisan" (Mr. Rosen very conservative), some very informative backround, and some of the "key players" that are still around today.

I was not able to take good notes, but will do so with these links Link from 09/18/08

Keene Little : 9/22/2008 11:26:55 AM

Two equal legs down for SPX from Friday's mid-day high (what looks like the end of a 5-wave move up from Thursday) is at 1226 so that could provide support. The pattern of the decline from this morning looks like it has much lower than that to go and the 162% projection is at 1209. The two other Fib levels of interest are the 38% retracement of the Thursday/Friday rally at 1215 and 50% at 1200.

Tab Gilles : 9/22/2008 11:21:42 AM

TED/VIX chart for previous post... Link

Jeff Bailey : 9/22/2008 11:18:11 AM

A couple of quick notes/thoughts ...

NDX/QQQQ and SMH and perhaps TNX.X and DXY are only "free market" indices (that is, don't contain NO SHORT stocks).

QQQQ's low last week marked at $-0.06 from QRTRLY S2.

BIX.X's high marked +2.6 from QRTRLY R1.

Tab Gilles : 9/22/2008 11:17:26 AM

Jane...

thanks for the TED/VIX article link per 10:11 post.

As the article states:

The fear index is not merely an indicator. The Chicago Exchange does a steady business trading bets on whether the VIX will go up or down. In these strange times, you can essentially buy and sell fear.

I'd posted this chart of the TED/VIX 2 weeks ago. Link

Todays chart... Link

$VIX Link

$VXD Link

$VXN Link

$RVX Link

Jeff Bailey : 9/22/2008 11:15:03 AM

Weekly, Monthly, Quarterly Index Pivot Matrix found at this Link

Jeff Bailey : 9/22/2008 11:11:39 AM

QQQQ $42.40 -1.16% ... TRADES QRTRLY S1 $43.27. Last week's low just undercut QRTRLY S2 ($39.57).

Jeff Bailey : 9/22/2008 11:08:48 AM

SMH $25.70 -3.01% ... also below its WKLY Pivot $26.07.

Jeff Bailey : 9/22/2008 11:08:19 AM

BIX.X 209.26 -9.29% .... has slipped below its WKLY Pivot 213.64. Set an upside alert there.

Jeff Bailey : 9/22/2008 11:06:53 AM

NYSE a/d 650/2,204
NASDAQ a/d 777/1,931

Jeff Bailey : 9/22/2008 10:30:51 AM

10:00 Internals found at this Link

Keene Little : 9/22/2008 10:21:57 AM

DOW's down only 140 points. Pretty boring day so far (wink). A 38% retracement of the Thursday/Friday rally would be at 11093 which would be a 390-point correction. All in a day's work don't you think?

Jane Fox : 9/22/2008 10:14:01 AM

Here is your daily chart of Crude (as if we care anymore :) ) I am not using the @CL chart today because it is still showing the Oct contract and the volume in the Oct is 14K whereas the November contract as 100K. Link

Jane Fox : 9/22/2008 10:11:33 AM

Here is an article talking about the VIX and the TED spread. Link

Keene Little : 9/22/2008 10:09:07 AM

Gold has had one heck of a run in the past week. Nothing like a little fear in the financial market to drive people into the perceived safety of gold. All this government money being used for bailouts is convincing many that we'll see much higher inflation and therefore commodities should benefit. I still believe we'll be talking about deflation next year and that gold will not be a beneficiary of that.

The pattern for gold is actually a good setup for the short side right now although you'd have to deal with a lot of volatility to trade it right now. Options is probably one of the better ways to reduce risk. The bounce off the August low counts well as an expanded flat a-b-c correction with the c-wave having achieved 262% (common in commodities) of the a-wave at 924.73 for the December contract of the emini (YG). Thursday's high was 924.90. Daily chart: Link

The pattern of the rally from the September low would actually look a little better with one more push to a new high (or test of the high) and the broken uptrend line from August 2007 near 932 would make a good upside target. That's about $40 higher at the moment. But I don't know if we'll see that last push higher or not and I consider the long side to be the risky side again.

Jane Fox : 9/22/2008 10:02:03 AM

We are going through the worst financial crisis in 80 years but the fear factor (the VIX) has not even got to the levels we saw July 2002 or in 1998. Link

Jane Fox : 9/22/2008 9:58:44 AM

Keene I never understood why the up tick rule was taken away and for sure do not understand why it has not been reinstated.

Keene Little : 9/22/2008 9:56:54 AM

It will be very interesting to see the number of changes made in the financial markets that reinstitute the same regulations that have been in place for several decades. It's probably just a matter of time before the uptick rule is back (maybe when Cox is fired, as he should be). These are all actions that are similar to closing the barn doors after the horses got out but better late than never I suppose.

The bigger question for us traders/investors is whether these actions conclude the bear market or are instead just parts of the recognition phase of it. I'm in the camp that believes we're only in the 3rd inning of what will become a nasty decline. The EW pattern and historical cycles are pretty clear and they're Not bullish.

Jane Fox : 9/22/2008 9:51:37 AM

AD line is a bearish -970 and AD volume is falling but the VIX is falling negating the bearishness in the AD line/volume.

Jeff Bailey : 9/22/2008 9:51:35 AM

S&P 500 Heavyweights at this Link

Jane Fox : 9/22/2008 9:47:52 AM

For sure you will be seeing more and tighter regulations and I don?t care if a Republican or Democrat makes up our next administration, it will embrace those regulations.

Jane Fox : 9/22/2008 9:43:56 AM

I'm sure you have heard already but both Goldman Sachs and Morgan Stanley will become bank holding companies subjecting them to the same rules that pertain to traditional banks like Citigroup and Bank of America and will need to maintain stricter regulatory control reigning in the leveraging. The FED will now be their regulator and not the SEC.

I heard a commentator on CNBC Friday say capitalism as we knew it is now over and the financial system will begin a major makeover. This is just one of those facelifts.

Jeff Bailey : 9/22/2008 9:36:06 AM

Dow Components (sorted by weight) at this Link

Jeff Bailey : 9/22/2008 9:34:10 AM

GM and GE added to "no short" list.

Linda Piazza : 9/22/2008 9:34:08 AM

I'm going to be taking today off. My family is awaiting MRI results on my oldest granddaughter and we learned Friday that one of her four-year-old deaf sister's cochlear implants has likely failed, meaning she will need surgery to reimplant her with another. Half our family and friends are still dealing with Ike's results, particularly the Port Arthur ones. Our 12-year-old dog is at the vet, having tests to confirm the liver cancer the vet thinks he might have, and we're in the process of making an appointment for our five-year-old dog with the opthamalic specialist who has been trying to save his eye, since we think he was having problems again this weekend. You don't want me helping you make decisions today.

My 3:55:29 post Friday afternoon sets out my expectations. In it, I said that "the OEX charged up to likely strong rsistance on intraday and daily charts, up to about 581.20 on daily closes. The 8/19-8/22 daily lows were near that level, too, so there's some historical S/R there, too. The daily Keltner chart suggests that until and unless the OEX can produce daily closes above that level, it's vulnerable to pullbacks to about 563-564, where it might again find support on dail closes. A push above 581-584 that's sustained suggests a move up to 594-601. Remember Cashin's warning this morning that today's [Friday's] rally was inflated by 30-50% by short-covering, so that when those shorts are through, it might be natural to see a pullback to support . . . know the vulnerabilities here and the landmarks you should watch."

Jane Fox : 9/22/2008 9:31:47 AM

This just came in from Tradestation. "Pusuant to Rule 11890(b) NASDAQ, on its own motion, has reviewed and determined to cancel all trades in security UltraShort Financials ProShares (SKF) that were executed on the NASDAQ between 9:33:56 and 11:40et on 9/19/08."

Jeff Bailey : 9/22/2008 9:25:27 AM

Kraft Foods (KFT) $34.97 ... Replaces AIG in the Dow Industrials. At this morning's open, KFT will be #18 weighted @ 2.45% of total.

Keene Little : 9/22/2008 9:26:24 AM

I'm going to be watching NDX a little more closely today since it is slightly less affected by what's happening in the financial/insurance sectors. It may be a decent reflection of market sentiment which can help us trade the right side of the market. The first thing I want to watch for is what happens around NQ 1754.25 which is where the bounce off Friday afternoon's low would have two equal legs up (1752 is the high so far in pre-market trading). We could see a gap n crap if that level is tagged and then retreats from there.

The second level of interest is 1772.50 (NDX 1765.56) which is where the bounce off Friday morning's low would have two equal legs up and that could set up another leg down to equal the first drop off Friday morning's high.

Jane Fox : 9/22/2008 9:17:47 AM

Here are you overnight charts and they all are looking pretty healthy. I do not have realtime data for the new Russell 2000 cash market so it is not giving me a lot of overnight data. Link

Jane Fox : 9/22/2008 9:12:21 AM

Drum Roll please those five banks were: Bear Sterns, Lehman Bros, Merrill Lynch, Morgan Stanley and Goldman. And the one that was leveraged the most was Bear Sterns.

Jane Fox : 9/22/2008 9:10:11 AM

I have to admit that I am a big believer in free markets and capitalism but am becoming less and less so after the fiasco free markets and capitalism have left us with - I was going to say in these last few weeks but we all know it took a lot longer than a few weeks to create this mess.

I used to hate the word regulation for I have seen it run amuck too many times, case in point the government "protecting" us from ourselves and requiring 25K to daytrade equities.

I did a lot of reading over the weekend so I could come up to speed with how we got to where we are and came across some interesting tidbits that make it hard to not be on the side of regulation. Up until 2003, all investments banks were allowed "only" a 12 to 1 leverage (a regulation). Then in 2004 the SEC removed this regulation and gave five banks (and only five) the ability to leverage up to 30 or even 40 to 1. I would like you to guess which those five investments banks are and oh by the way which one was leveraged the most.

Keene Little : 9/22/2008 8:57:57 AM

Equity futures have made a big recovery off the overnight lows following the Sunday night opening. The extra push since the lows near 8:00 AM have futures near the flat line and techs (NQ) in the green. I have little doubt the futures are being helped by the Manipulators (what else can we call the government now in their blatant attempt to control this market?) in an attempt to keep the stock market up and not let the 2-day wonder rally reverse on them (that would be highly embarrassing). I will be watching from the sidelines to see how it plays out at least for today.

Linda Piazza : 9/22/2008 8:24:08 AM

I don't know if many readers saw my posts from this weekend, but William Brodsky, the Chairman and CEO of the CBOE, along with many others had bombarded the SEC with pleas to reconsidered their elimination of the exception to short-selling that had been afforded options market makers. Because I know the wording is awkward, let me say it the other way: they pleaded that options market makers be allowed to sell short to hedge their positions. My research this weekend had located a string of articles and webinars that pointed to the alarm and danger options market makers were feeling and their intentions to stop offering markets, at least in those financials covered in the no-shorts-at-all list. The words of William Brodsky, Chairman and CEO of the CBOE confirmed my feeling late last week, expressed here and in the weekend Wrap, that the order, as it was written last week, could change the whole landscape for options traders. Brodsky called the order "draconian" and said it would "result in the sudden and severe removal of liquidity from the marketplace." He went on to say that "[i]nvestors rely on a deep and liquid options marketplace . . . yet this action will severely compromise the ability of market makers to make markets." He further warned that "absent relief--market makers will be hamstrung. The lack of relief for options market makers will have serious ramifications for the reliability of the options markets and for the efficiency of our capital markets overall."

The pleas must have helped. News surfaced that the SEC was reconsidering. This morning, the SEC issued a statement that it was making changes in its original order "to ensure the continued smooth operation of orderly markets, and to coordinate to the extend possible with similar actions restricting short sales by foreign regulators." These changes "keep in place the exception contained in the original order for short selling related directly to bona fide market making in derivatives in the securities of any Included Financial Firm."

However, it's not exactly business as usual for options market makers since "this exception now requires that, for new positions, a market maker may not sell short if the market maker knows a customer or counterparty is increasing an economic net short positions in the shares of the Included Financial Firm." The idea is to follow "concepts included in the limitations on increasing net short positions imposed by the U.K. Financial Services Authority (FSA) in response to short selling."

I'm not sure how workable this is or how much it continues to hamstring options market makers. How difficult will it be for them to ascertain whether a customer or counterparty is "increasing an economic net short position"? Here's the press release: Link It includes a link to the order itself.

So, here's what I was hearing late last week: options market makers and others were warning that spreads would widen in those options still offered, an effect that would increase the transaction costs for options traders, making it necessary that they be very right in their options choices. One market maker said in an interview on "In the Money with Angela Miles" that if you pulled up your quote sheet, you would see quotes but that wouldn't mean anything was available.

So, be cautious until this is sorted out.

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