Wall Street finally sees a recession coming

That's all the financial press has been writing about for the last few days. I don't think that this is any more newsworthy than Helio Castroneves winning "Dancing With the Stars." Actually, it's less important because so many people have been predicting it. Hell, Jim Rogers for months has been saying that we're already in a recession. If the press is now writing stories about it, than it must be an old story. Don't fixate on the magical 10% number for a correction, or get caught up in these huge sucker rallies that happen once a week it seems.

E*Trade and TD Ameritrade hooking up?

This rumor sent ETFC up 25% on Friday. It has since given back 10%. I think this is a very real possibility and that's why I bought the stock in the thick of it's mortgage problems. TD Ameritrade had been eyeing E*Trade for years now. The brokerage business scales incredibly well so being able to spread costs over an increased asset base will make the combined company more profitable. It's still unclear however, if TD Ameritrade wants everything or just the brokerage assets.

Freddie Mac gets the knife

Shares of Freddie Mac(FRE) hit the skids this morning. Fitch Ratings is has put the rating on their preferred stock on negative watch. This is not a downgrade. not yet at least. Fannie Mae(FNM) also got a haircut. Defaults are rising at both outfits. They are government sponsored-enterprises(GSEs). That doesn't mean that they are government-owned, but it does give them access to great interest rates and the perception that the government won't let him fail. I think that Uncle Sam will live up to this perception. At some point, another bailout is coming. These are the last bastions of liquidity in the housing market so everyone has a stake in them being healthy companies. I'm adding both these stocks to my watchlist. If they get under $20, then I'll pull the trigger.

Freddie Mac Conference Call

Dipping my toe in the E*Trade pool

After some more research, I've decided that the sky is not falling at E*Trade. Despite the kick in stomach it got from a full-page Wall Street Journal ad by TD Ameritrade, I know that the stock resembles Jan-Michael Vincent right now, but E*Trade is not down for the count. So far this morning, it's lost about ten percent. That's perfectly fine with me. I have no problem averaging down on this one. This company isn't going bankrupt. The only way it's folding is through a merger, probably with someone like TD Ameritrade. I don't see any better values out there. This stock is selling for half of book value. I know that more writedowns are coming in this sector, and maybe at this company. It's going to require patience to make money on this position, especially when things get uglier and the market as a whole is convulsing. It's these times of market uncertainty, when astute value investors step in and buy good companies for practically nothing.

Paul B. Farrell vs. Jim Cramer

Today is the Great American Smokeout, but let me suggest that we also declare it National Get Over Jim Cramer Day. Paul Farrell is the latest member of the financial media to take a shot at Jim Cramer. Last week, Paul Farrell wrote a MarketWatch column attacking Jim Cramer's trading strategy. In it, he acknowledges that he has only listened to "Mad Money" once but found it insufferable; I doubt if he's read Cramer's books. Farrell then goes on to make the usual anti-Cramer attacks: he trades to frequently, he's an irresponsible idiot, my passive approach is cheaper and takes much less time. Nothing new really.
So Cramer responded to Farrell's attacks, also on MarketWatch. Here is Cramer's defense of his picks. As usual, Cramer painted himself as a man of the people, the Huey Long of the stock market if you will, giving the people the means to live out their dreams. Farrell made the mistake of insulting Cramer's viewers, which allowed Cramer to break out his anti-elitist screed; his viewers are not idiots, they are fairly level-headed and sophisticated, they do their homework.
Cramer is part entertainer. He has never shied away from this role or denied it. He's not trying to be the august and patrician Louis Rukeyser. He is not the genial and folksy Warren Buffett and he knows it. He goes with what he has, manic enthusiasm and a near-autistic recollection of stocks. To this he adds sound effects. The show is not completely worthless fluff. Cramer's critics need to look past the buffoonery for just a minute. Cramer is one of the rare celebrities whose detractors' efforts to expose him only make him more popular. So just get over it.

Best-performing stocks year to date

This list of stocks was compiled by Bespoke. There are no real surprises; Solar power, mining/materials, and infrastucture stocks dominate the list. At this point, I wouldnt' touch any of these stocks, but I am going to put Mosaic and General Moly on my watchlist. I still believe the commodities story, but am waiting for some sort of pullpack. I own National Oilwell Varco and will continue to do so for the next few years.

Contemplating an investment in E*Trade?*%#@!

Surely you've seen that iPod Touch commercial featuring the song, "Music is My Hot Sex." That song is the work of a Brazilian band called Cansei de Ser Sexy which translates as, "tired of being sexy." That's exactly what's happened to the brokers. For the last five years, these stocks have been on a tear. They were like a "beautiful" woman that you met in dark bar and took home for one hell of a one-night stand. When morning came, you had a chance to really look at her and she wasn't pretty at all. Most of her was fake, and those parts that weren't were ugly in fact. E*Trade(ETFC) is now considered coyote ugly. It looks as if there are more writedowns on the way then they'd thought back on October 17th. So is the worst over? Maybe? Some analysts are predicting bankruptcy and it can't get much worse than that. Maybe not? Management once again guided lower, the fifth time in eight quarters. Looking at E*Trade's most recent monthly activity report for October, you'd surmise that this was a fairly healthy company. There will be the inevitable dead cat bounce, but I'm not talking about a trade. It's trading at 3x earnings and might might a good long term holding if they can avoid bankruptcy. This is a very hard call to make. A big, one-time, fixable problem is what every value investor love, but it's unclear if the term "fixable" applies to this situation.