Market Complacency Rising

We are not out of the woods yet. This market continues to remain volatile. I was wrong about Iranians not having any incentive to release the 15 British sailors and marines. Apparently they did. Although they are scheduled to be released tomorrow, April 5, 2007 Thursday, I will truly believe it once it actually becomes reality. This is a regime that is notorious for deception and propaganda. It is said that Syria had a role in the release of the 15 British captors but again, I will believe it when I see it.

One must really admire the way Countrywide has held its ground in light of the subprime melt down and ALT-A Option ARM crisis. The noise surrounding the ALT-A Option ARM and CDO (Collateralized Debt Obligations) is getting louder, yet the market continues to shrug off this warning. Right now, the market seems to have priced in subprime and mortgage issue as a non issue. Yet, the ISM numbers and Factory order numbers continue to weaken, oil still hovers above$64 despite the news that the British captors will be released on Thursday. This inflationary pressure may have to do with supply side issues more so than the news surrounding the Iran hostage issues. Nevertheless, this summer will continue to put upward price pressure on oil.

Did anyone also see the hurrican forecast for this year? The national weather services is forecasting at least 17 hurricanes this season. I wonder what that will do to the already high oil prices?

Judging by the way everyone is claiming victory for the bulls, is a reason for me to believe that another leg down is not far ahead. The discounted impact of ALT-A Option ARM loan crisis and CDOs will resonate hard and furious once its significance is realized. Additional fallout from New Century (NEWC.PK) continues to resonate for Countrywide and other lenders. It is apparent that Countrywide ranks at the top of the food chain in terms of those lenders who hold New Century's debts. I will venture to guess that it is a lot more than anyone imagines. Already, this issue should blow some holes in Countrywide's assertion that its subprime exposure is 7% or less. My guess is that it will be upwards of 25%.

This market is fickle and punishes thos that are complacent. Keep your eyes on the ball and do not trust this market or what the analysts tell you. As always, stay safe.