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.'

1) Rumors are rampant that Delta is going to merge with Northwest. What would the new combination be called? Southeast? This is leading to speculation of a United-Continental merger.

2) Technology has now taken up the downside charge in the market, leaving the banks behind. Apple has dropped from $202 to $122 in three months and is approaching value stock levels.

3) Goldman Sachs put out a report today predicting that there will be $200 billion in real estate losses this year. The bulk of these losses will be borne by the insurance industry.?? There was then a long procession of experts in the press proclaiming that they weren't seeing it. The Fed cuts will cause dividends to spike in the second half. Vacancy rates have been low. There has been little construction the last two years. However, investors who overpaid for properties at the top of the bubble will be punished. Conditions vary from city to city, with New York looking great and Detroit terrible. Detroit alone could account for the bulk of this predicted loss.

4) Cisco gave cautious guidance. The stock dropped 15% to $19 overnight where it is a screaming buy. It recovered during the day. Such is the manic depressive nature of the markets now.

5) A quiet day in the markets at last. It will give back offices a chance to settle the enormous numbers of uncleared trades. Whew!

1) The January ISM non-manufacturers index, which accounts for 80% of the economy, dropped from 54.4 to 41.9, the lowest level since the terrorist attacks of 9-11. It's as if someone turned the lights off on the economy. The Dow dropped 560 points from yesterday's highs on the news. The market has given up nearly half of the gains from the MLK low two weeks ago. The market would have dropped more, but the Super Bowl winning New York Giants football team had their ticker tape parade down Broadway today.

2) A Federal Reserve survey of senior bank loan officers showed that one third of all US banks and two thirds of foreign banks have tightened up commercial lending. When loans are going through they are on wider spreads over Treasuries. The most affected are small community oriented banks with large exposure to commercial real estate lending in areas like California where prices have fallen the most.

3) Google dropped below $500 in fears of the competitive threat from Microsoft/Yahoo. It is down a third from its peak of $750 and is a buy here.

4) The futures markets are now discounting a 100% chance of a 0.25% interest rate cut at the next Fed meeting in March.

5) United Airlines will start charging $25 for a second checked bag. The plan will generate $100 million in income, but is a terrible idea from a marketing point of view.

6) Even if we don't have a consumer lead recession, it will feel like it, with growth decelerating from 5% to 0% in one quarter.

Quote of the day: 'Losing your credit rating is like losing you virginity. It is easier to lose it than to get it back.'

TRADE IDEA

The first leg of the bear market is now complete, with the S&P 500 ($SPX) down 21% for its October top of 1586. Expect a period of digestion and range trading to follow. You can cash in on this by selling the June S&P 500 1200-1450 strangle. This involves going short puts on dips and going short calls on rallies. If the market stays in the range I expect profits to drop straight through to your P&L as the time decay accelerates. It's like having a rich uncle write you a check for your monthly allowance. If we break out of this range you can always hedge yourself with futures. Use volatility spikes to 30% to scale into these positions.