The Rocky Mountain News. “‘The (real estate) industry’s biggest problem right now is loan fraud,’ said Chris Mygatt, president of the largest residential real estate company in Colorado.”

“‘We have been seeing many more homes on the market, and average prices (in most months) are going up, which does not make any economic sense,’ said independent broker Jerry McGuire.”

“Two days ago, a broker severed a listing agreement with the seller of a home priced at $850,000 because the broker suspected he was involved in a fraudulent sale. ‘For five or six months, the home received zero offers,’ Mygatt said. Out of the blue, the seller received an offer for $1.1 million, $250,000 above the asking price.”

“Mygatt suspects the buyer will pocket the $250,000 and let the house go into foreclosure. But before that happens, the home will be listed as a $1.1 million sale, helping to skew the Metrolist numbers higher, he said. He said these kinds of deals, often with lower-priced homes, are becoming increasingly common. ‘This could not work without appraisal fraud,’ Mygatt said.”

“Mygatt said he thinks about 25 percent of the near record 31,450 unsold homes on the market will ’statistically never sell’ because their mortgages are higher than their potential sale value. That means those houses eventually will end up in foreclosure, he said.

Lowry’s (a market timing service, with substantial institutional following, but not one that I use although I tried a subscription) notes “The rally in big-caps has been deceptively narrow. As of Thursday’s close, with the DJ Average within just a few points of a new all-time high, none of the 30 components rose to new all-time highs. Further, 63.3% of the components showed losses of -20% or more from their individual all-time highs, and 43.3% showed losses of -40% or more. As of Thursday’s close, 5.7% of domestic common stocks rose to new 52-week highs, while 26.7% already show losses of -20% or more. A concern for the future is that this degree of selectivity has typically been found near major market tops.”

Quote borrowed from Hussman, “Superstition And The Fed“.

Having said the above, watching the market this morning the program pumpers clearly haven’t given up their quest to jam the Dow to new all-time highs. Jam the semis and hope the market follows (it usually does). The market probably won’t go down much, if at all, until the lust for the semiconductor (high-beta) stocks is over. My guess is the likely trigger will be a warning from Nokia that all is not well in cell-phone land.

Two months of vigorous rally, euphoria even, while stuck on the short side has done its damage to performance. Will the pain end? At least with options, losses are limited thank goodness. Two disasters in the tech shorts didn’t help. FSL (Freescale) was bought out to be taken private at a big premium (private equity for a capital-hungry foundry? You have to be kidding), and then RIMM (Research In Motion) was the subject of a huge short squeeze when they theatrically made a bullish forecast, but disclosed no financials because they’s been cheating on the stock options.

And of course whacking the prices of commodities, especially energy and gold, didn’t help either, nor did Newmont’s announcement about production impairments. But I’m less anxious about these for the long term.

Relative performance is based on Fidelity Magellan, FMAGX.

9/30 portfolio.