The mutual frauds kept on pumping today, enough to hold the major indexes in place. Every sag was met with a program to jam it up. They’d better get some big inflows in the next couple of days or they’re going to have to start selling to repay the credit lines that they must have drawn down, given the very low levels of mutual fund cash. Anyway enough ranting about the crooks, how did we do for July?

Relative performance is based on Fidelity Magellan, FMAGX.

7/31 portfolio.

Well the nascent reversal on Thursday was stopped in its tracks by the month-end window dressing on Friday as the mutual frauds pump for month-end, as they always do. Not always, but mostly, successfully, especially where they are pumping individual issues. A quick look back this year shows the day before the last day of the month positive 6 times out of 7. Coincidence? I don’t think so. I suppose with those odds I should trade it.

Anyway, we’re now pretty overbought. John Hussman is (for him) extremely bearish: “In my view, Friday’s rally on a distinctly stagflationary GDP report represented a good opportunity to do some lightening up of stock market exposure for investors who have not already done so, and would not easily tolerate a decline of 30% or so in the major indices.” In other words, don’t let the door hit you in the back.

I’m still pretty short so I would be happy were he to be correct.

Nourel Roubini, an economist and NYU professor who runs the best economics site in the world according to The Economist, gives an interview that is well worth the listen. I agree with him in most all respects, except that I think the recession may begin a quarter earlier than he does. We’ll see.

Goldman Sachs figured out that the housing market is tanking and we will see declines in nominal prices. No kidding.

And an weird data point. M1 is falling like a rock, according to the St. Louis Fed. WTF?

Says he hopefully. Anyway, the 5 RSI trade finally closed yesterday with a small loss. Unusually, the 5 RSI is down for the year. This indicates the real weakness in the NASDAQ 100 stocks. I added substantially to my index short positions yesterday. Today was a modest move in the right direction. Interestingly, the banks I am short (FNM, CFC, COF) are finally showing signs of weakness. Hopefully this means folks are figuring out that the housing bubble is going to do some severe damage to the lenders as it deflates.

Tomorrow morning is the GDP release for Q2. Although widely watched, this is strictly rear-view mirror at this point.

National Mortgage News says that, according to a new report by the Mortgage Asset Research Institute, “stated-income loans” deserve their nickname of the “liar’s loan.” MARI says that almost 60% of the stated-income amounts are exaggerated by more than 50%. See the Monday edition of NMN for the story by Brian Collins.

MARI is an industry association with the mission of combating mortgage fraud.

I found a new blog this weekend - Sacramento Area Flippers In Trouble - which provides listings where speculators are in the process of getting burned. Last year, even the National Association of Realtors (NAR) admitted that 40% of sales were to “second home” buyers. That doesn’t include the liars who claim they are buying a primary residence even though they are not intending to move in (to get a better mortgage rate), or the “stealth” speculators who are, in good faith, buying a new family home but who do not sell the old one.

As Warren Buffett famously said, “When the tide goes out, then you see who is swimming naked”.