SPECIAL BOND BUBBLE ISSUE

Featured Trades: (RESIDENTIAL REAL ESTATE), (BAC)

2) Another Nail in the Coffin for Residential Real Estate. Those few, like myself, who believe that the residential real estate market has another down leg ahead of it, got their smoking gun yesterday. July existing home sales cratered 27.2% to a seasonally adjusted rate of 3.83 million units, the sharpest month to month drop in history, and the lowest sales pace since 1995. YOY sales are off 25.5%, and the June figures were also revised down. Inventories are now at a 12.5 month supply, the highest on record.

Low end buyers totally bailed on the market. It looks like the baby boomer effect is hitting the market big time, as I have been detailing in my endless posts on the subject (click here for 'The Hard Truth About Residential Real Estate'). It is also now screamingly obvious that the net effect of the $8,000 first time home buyers tax credit and similar, complimentary efforts by the states has been to pull forward purchases of homes, not create new demand. Like this was ever in doubt?

I can tell you one thing for sure. Bank share prices have not yet discounted weaker home prices, and the bleeding collateral this implies. The 36% decline that Bank of America's (BAC) shares have suffered since April may not be enough. Again, rent, don't buy, unless you plan on living there for ten years, and don't mind giving up your first born child for collateral.

SPECIAL BOND BUBBLE ISSUE

Featured Trades: (TREASURY BONDS)

4) Its Official: China is Unloading its Treasury Bonds. It looks like the smart money these days is found in China. While American investors have been scrambling over each other to buy more Treasury bonds at historically low yields, China has begun quietly unloading some of its own enormous holdings. In June, the Middle Kingdom sold $21.2 billion of?? paper, reducing its net long to $839.7 billion. This is little more than 10% of the total $8.18 trillion in federal debt that Uncle Sam has outstanding.

Total foreign ownership of US Treasury bonds amounts to $4 trillion, up from $2.4 trillion in three years.?? Instead, the Chinese have been buying Japanese government bonds, which today carry a paltry 0.9% yield, but have the merit that they are denominated in a rapidly appreciating currency. The Mandarins in Beijing have also been picking up a variety of bonds in Europe which have seen yields pushed to near records, thanks to the debt crisis there.

Officials at the People's Bank of China say that it is all part of a broader diversification effort away from the greenback. PIMCO's Bill Gross has apparently been taking Mandarin lessons on the sly because he has also been paring back his own massive holdings in longer dated Treasuries. To understand why, take a look at the chart below of the spread between the Dow dividend yield and the ten year Treasury yield which has turned positive for the first time since 1955.

China Can't Unload Those Treasury Bonds Fast Enough

Featured Trades: (BEHAVIORAL TARGETING)

1) So You Think They're Not Watching You on Your PC? Hey! You there, staring at this monitor. This is your PC talking to you. No, not you over there standing in the background. I'm talking to the guy sitting in front of me poking at my keys. Ouch! That one hurt!

So you thought no one was watching, did you? Let me straighten you out. About a month ago you clicked on a certain website, and I installed myself as a cookie on your computer, which is an innocuous little text file that you can't see. Since then, I have been tracking your every move, recording websites you clicked on, the pages you visited, and the stuff you ordered. I then used this handy little algorithm to build a profile of exactly who you are. I now know you better than your own mother. In fact, I know you better than you know yourself.

For example, I am aware that you make more than $250,000 a year, live in a posh zip code in San Francisco, belong to a fancy country club, and drive a Mercedes. You donate to Republican political causes, send your kids to a prestigious private school, and bill it all to an American Express Platinum Card. Did I leave anything out?

Because I know every detail of your life, down to your inside leg measurement, I am able to harness the power of this machine to more precisely service your every need. That includes directing advertising to you, which you have a high probability of clicking on. The more you click on my ads, the higher prices I can realize for those ads. The ad campaigns you now see are unique to your own personal computer because they are tied to your IP address. My program, called 'behavioral targeting' is the next 'big thing' in online advertising. It's all part of the brave new world.

I see you have been shopping for a new car. Check out the new Hyundai at http://www.hyundaiusa.com/ , which offers the same quality as your existing ride, at half the price. Your clicks this morning suggest you're taking your 'significant other' out to dinner tonight. Might I suggest Gary Danko's on Bay Street at http://www.garydanko.com/site/bio.html ? The rack of lamb is to die for there. Your visits to http://www.travelocity.com/ and http://www.expedia.com/ tell me you're planning a vacation. I bet you didn't know you can find incredible deals in Las Vegas at http://www.visitlasvegas.com/vegas/index.jsp . Thinking about buying a condo there? They'll even pay for the trip if you promise to check one out while you're there.

Since we're chatting here mano a mano, I noticed that that last pair of jeans you ordered from http://us.levi.com/home/index.jsp had a 42-inch waist, up from the 40's in your last order. Better lay off those cheeseburgers. Pretty soon, they'll be calling you 'tubby' or 'fatso'. Better visit http://www.weightwatchers.com/Index.aspx soon, or the legs on that chair might buckle out from under you.

Worried about privacy? Privacy, shmivacy. There hasn't been privacy in this country since the first social security number was handed out in 1936. And don't expect any relief from Congress. I doubt half those dummies even know how to turn on their own PC's.

Don't even think about trying to delete me. I'm a 'flash cookie', an insidious little piece of code that reinstalls every time you try that. Think of me as a toenail fungus. Once you catch me, I'm almost impossible to get rid of.

I hope you don't mind, but I've been passing your personal details around to some of my buddies at other websites. That's why when you clicked on http://www.nfl.com/ you got deluged with product offers from your local team, the San Francisco 49ers.?? I've got friends at Google, Facebook, MySpace, and pretty much everywhere. Can I help it if I'm a popular guy? I bet the view from those 50 yard seats is great, isn't it?

I noticed that your spending habits don't exactly match with the income you reported on your last tax return. Do you think the IRS would like to know about that? I bet you didn't know the agency offers a 10% reward for turning in tax cheats.

How did you like those triple X DVD's you bought last week? Whoa! Hot, hot, hot! I hope your employer never finds out about those. It might not go down too well at your next performance review.

I thought it was lovely that you bought your spouse a two carat, yellow, vvs1, round cut diamond ring for $26,000 from http://www.bluenile.com/ for your 30^th wedding anniversary. But who is Lolita, the Argentine firecracker, in Miami Beach? Does the old wifey know you sent her a $2,000 pair of diamond stud earrings? What's it worth to you for me to keep mum on this? Maybe you should take a quick peak at http://www.divorcelawfirms.com/ and see what you're in for?

Naw, I'm just pulling your leg. This is all just between friends, right? Think of it as a doctor/patient relationship. I'll tell you what. See that leaderboard ad at the top of the page? Just click on that and we'll call it even. Oooh that felt good! Click it again. Oh, baby! Not too many times. You'll trigger my anti click fraud program.

Now you see that wide skyscraper add over on the right? Click on that too. Oh baby! Click it again! And there's a little button ad at the bottom of the page. No, not that one. A little lower. What was that little cutie's name in Miami again? Aaaaah.

Featured Trades: (THD), (TF), (F), (NSANY), (TM)
iShares MSCI Thailand Investable Market Index ETF
Thai Capital Fund

3) Thailand Punches Through to New Highs. With hotel occupancy in the dumps at 20%-30%, and parts of downtown Bangkok still in ruins from the May riots, you would think the call to buy Thailand (THD), (TF) two months ago was a complete bust (click here for the piece).

You would be wrong. Since then, the Thai ETF has tacked on an amazing 20%, the Thai Capital Fund is up 24%, and the Thai Baht has strengthened, making it one of the top performing stock markets of 2010. Even with the collapse of tourism, GDP is expected to come in at a healthy 6% this year, a figure American economists would kill for.

The country's robust manufacturing sector, which accounts for 66% of Thai GDP, versus only 6% for tourism, continues to drive the country onward and upward. Think of Thailand as China, with the infrastructure already built out. Ford Motors (F) has announced the construction of a $450 million plant to build the Focus, while Nissan (NSANY) says it will assemble its compact. Toyota (TM) and GM are expected to follow suit with the expansion of existing facilities.

Carl Van Horne, then the chief investment officer of JP Morgan, once taught me a rule that I have found incredibly useful: follow the direct investment; the stocks markets always play catch up. Thailand continues to be a place where international investors want to be. Buy on dips, if we get any.

'When I look at the Treasury market, I get a really 1998 sort of dotcom feeling. You knew they were going higher, you knew that it would end badly; you just didn't know the timing. At a certain point this becomes a disaster,' said Barry Ritholtz, CEO of hedge fund Fusion IQ.