1) A new credit crisis has exploded on to the scene. The Auction Rate Securities Market has failed. This is a $300 billion market for floating rate notes for municipalities. It is the primary vehicle for public authorities to raise cash to pay short term bills. For example, Port Authority of New York and New Jersey bonds, which normally yield 4%, are now yielding 20%. Usually dealers step in to soak up any warehouse excess paper in the market, but they can't now because they are all capital constrained and in risk reducing mode. If this problem is not sorted out soon cities will have to start laying off employees and suspending services for lack of funds. This is a totally unnecessary crisis because no municipality has defaulted since Orange County did so in 1994. At the very least this will increase borrow costs for public entities.

2) On the good news front, Morgan Stanley and Bear Stearns managed to place $1.2 billion in mortgage backed securities last night, the first such placement this year. They are yielding 235 basis points over treasuries vs. 60 basis points a year ago. It?s just a toe in the water. Granted, this was for a package of commercial real estate loans and not residential loans, and the size is very small, but it is an important step in the risk repricing and market reopening process. Now others have a price they can trade around. History shows that these initial deals after any crisis always turn out to be immensely profitable. Please recall people buying S & L loans in the early nineties for 10 cents on the dollar. The same happened in Japan. This has a 'light at the end of the tunnel' feel to it.

3) The Swiss bank UBS announced a quarterly loss of $11.3 billion, the largest in history.?? It has remaining exposure in sub prime of $28 billion. I was a director of this company for a year and have to say that I am not surprised. They were always the most aggressive of the Swiss banks.

1) Masco, a major building materials supplier, announced terrible earnings, citing a fall off in new housing starts among its customers of 25-33%. The stock got slammed. Still no light at the end of the tunnel in housing.

2) Sub prime related law suits against directors and officers are skyrocketing.?? In 2007 there were 191 law suits with $3.9 billion in claims initiated, four times the previous year's figure.

3) Fund manager cash levels are at the highest levels since 2001, all fuel for the next bull market.

4) Private business jet sales in 2007 totaled 1,138, up 28%, an all time high. Fractional ownership has been the big driver as businesses try to avoid the post 9/11 hassles of airport travel. The rich are definitely getting richer.

5) Global wheat stocks are at a 30 year low and US stocks are at a 60 year low. The inflation adjusted all time high is $20 a bushel, the target that traders are gunning for this year, compared to last week's high of $12.

6) We are ?? of the way through the fourth quarter earnings reports. Excluding financials US corporate profits are up 13%, a great year for anyone with international business. The problem with the economy is not with corporate earnings but expectations. We may be talking ourselves into a slowdown which is not warranted by fundamentals.

7) US retail sales came in at +0.3% compared to an expected -0.3% spurring a 173 point rally in the Dow.

1) Did you know that if the rest of the world ate like Americans the world food supply would have to increase 2.4 times? This is one of the factors driving up commodity prices. Some 24% of US corn production now goes into ethanol. Commodities markets are so small that one hedge fund could buy the entire open interest in any one of them. That is why when they go up, they go up really fast. It is like trying to get a billion dollars through the eye of a needle. This will provide strong underlying support for many commodities for the next decade.

2) Treasury secretary Hank Poulson announced the 'Hope Now? coalition of five major banks to initiate a 30 day moratorium on all foreclosures. This is another feel good measure that will not work. A popular Wall Street expression is that 'hope turns to bloat.'

3) Warren Buffet has offered to buy the entire $800 billion municipal bond portfolio of the three bond issuers, Ambac, MBIA, and FGIC. This will never happen because it would mean spinning off the only profitable parts of their business and leaving them only with sub prime toxic waste. It does underline the extreme cheapness of muni bonds at the moment, and Buffet's offer will stand as a stop out in case the above three insurers go under. Muni bonds rocketed on the news. I mentioned the attractiveness of muni bonds in my February 8 comments.

4) William Lerach plea bargained to a two year prison sentence and $7.6 million in restitution for illegal payments to his plaintiff witnesses. There was no figure more universally despised in Silicon Valley for his bogus class action suits on earnings shortfalls. It's a great deal. He will go to a camp, be out in a year, and gets to keep the $2 billon he made in the racket. Stamps anyone?

5) The global FIFO phenomenon is generating a major hedge fund trade at the moment. The idea is that since the US will go into recession first it will be the first out, with Europe lagging. Hedge funds are shorting US Treasuries and going long European bonds in massive size to take advantage of this. It looks like a good trade.

5) The Sports Illustrated annual swim suit issue came out today. For the last 45 years when blondes are on the cover the Dow Jones goes up 11.6% that year. With brunettes it is only 2.2%. This year the cover girl is blonde. BUY!

1) Toll Brothers is seeing a 61% cancellation rate for Florida condos. The market is so bad that a family feud has erupted within the company. Even Bruce Toll's daughter, Wendy, has defaulted of the purchase of a $2.5 million unit there.

2) Amazon has announced a $1 billion share buy back.

3) Yahoo has rejected Microsoft's bid, saying it won't consider anything less than $40 a share. Microsoft will probably raise its bid to $35. The company has so much cash that it can pretty much do whatever it wants. Yahoo has 500 million users worldwide.

4) Dow Jones is rebalancing the Dow Jones index, taking out Altria (the old Phillip Morris) and Honeywell , and adding Chevron and Bank of America.

5) In the last two weeks the futures markets for euro interest rate futures has moved from no chance of a cut, to a certain cut of 0.75%. This is why the euro has backed off from $1.49 to $1.45.

6) Today's disaster d' jour is AIG which announced $5.2 billion in sub prime losses.

7) One stock I want to follow is Harley Davidson, partly because I like the ticker symbol (HOG). The luxury brand retailer has seen its stock fall from $72 to $35 since June. However, it may be a little early to go into high end consumer discretionaries.

8) CNBC has been running a series on the history of Nike. Nike paid a student at Portland State $35 to come up with the swoosh logo which became one of the most famous in the world. It was so successful that ten years later the company felt guilty and gave her some stock and a diamond ring.

TRADE RECOMMENDATION

Apple (AAPL), one of the four horsemen of 2007, is now selling for only $119 with a PE multiple of 20. If you ignore all of the hype, PR, and media manipulation about the Iphone, the IPOD, etc. the stock is worth buying at this price for the Imac business alone. A new category of stock has emerged, the value growth stock, i.e. a growth stock selling at value price levels and this is one of them. The stock is a screaming buy here, a rare opportunity to buy a best of bread company at a fire sale price. Load the boat!

1) There are an usual number of anomalies in the market piling up right now. Tax free municipal bonds are now yielding more than taxable treasury bonds. This is happening because there are fears about the muni bond insurers going under, which is pointless since muni bonds rarely default. In normal times muni bonds yield 30% less than treasuries. Normally hedge funds would step in and buy munis and short treasuries against them and eliminate this anomaly. But the hedge funds are being hit with margin calls as a global deleveraging unfolds. Hedge Funds call this kind of trade ?buying a dollar for 70 cents?.

4) Here is another one. GE common is yielding almost double 2 year treasuries. The stock has fallen from $43 to $33 in 4 months and now yields 3.2% vs. 1.9% for notes and you get all of the future growth in GE earnings for free through stock appreciation. Jeff Imelt says that 10% revenue growth for 2008 is 'in the bank'. One opportunity for GE is in the fact that Los Angeles is expected to have power brown outs this summer and GE has a 40% market share in gas turbines.

3) The stimulus package has been passed by congress and is expected to add 0.7% to GDP growth this year. The $300 checks go out in May and will start being spent in June. By then the recession will be over so it will be useless in terms of heading off the current slowdown, especially if people just use the money to buy a Chinese made CD player. This is basically just a feel good program in an election year.

4) Wheat has been limit up every day this week for a total move of 15% to 1,150 cents a bushel. A global food shortage is developing as several rich countries like Brazil and China scramble for supplies. Poor countries in Africa can no longer afford to pay. This could be the year of food as a big trade.

5) A record $3.4 trillion is sitting in money market funds yielding close to zero. When the markets turn they will rocket because there is so much firepower available.

6) Another quiet day. No one doubts that this is anything but a calm between storms. One is increasingly hearing the term 'tape bomb.'