A year ago, when very few people were aware of what subprime meant or what it meant for the health of financial markets, Doug Kass and negative commentators like yours truly were sending out the warning message. Of course, the usual response back then was that we were just permabears looking for a reason to overemphasize a problem. We’ve come a long way in a year and at every point along the way bullish investors, commentators and journalists have tried to minimize this issue, say it was contained or claim the worst is behind us. To be honest, despite the facts, the happy people have won. Investors seem to believe all the lies and exaggerations and even if they fear subprime, I get the sense that they feel it will be healed by the never-ending supply of government intervention. Just look at CFC on Friday for a proxy of the message of ignorant optimism. Nevermind that if investors had listened in October or November….or April or May or June about the risks of subprime and actually sold, they’d be in much better shape with the relevant stocks. So, now, if investors feel good about listening to the people who told them not to worry about subprime all the while things crumbled, if they really feel like these same morons are now telling them subprime is in the past… I wish them luck of the subprime quality.

The Squawk Box crew at CNBC just “reported” about the jv between News Corp and NBC to compete with Google’s YouTube. They acted surprised and made it seem like it was new news. Of course, even dangerous bloggers like me (according to CNBC) mentioned this story in June after it was announced by the networks in March.  Talk about a slow news day!

I was reading Jack Stevison’s blog tonight and found out that the NYSE is doing away with program trading collars or “curbs” in the jargon that CNBC uses and FBN tries to explain every few seconds. I guess now that the 20-year anniversary for the reason the collars were implemented has come and gone, the NYSE feels it is safe to get rid of them.   You can count on the real reason for ending this rule has to do with the NYSE making more revenues so please don’t buy into any stories about how this is going to help investors.  I know that the program trading collars were easily circumvented and therefore getting rid of them may be a non-event so I won’t complain too much (yet.)

However, I always enjoy hearing of mysterious changes to trading regulation like this. Remember when the SEC eliminated the “uptick rule” against short selling when a stock is falling? We didn’t hear a complaint until the first market decline and then suddenly permabulls were blaming it for taking their record highs away. Which of course was bullshit but if it gets repeated enough, it gets mistaken as truth. So now that it’s time to uncurb your enthusiasm, you can count on the next decline that exceeds 190 points on the NYSE index will bring out the bitching from the bulls. On the other hand, if we get a 190 point increase on the NYSE index, the bulls will be cheering that the collars are not slowing down the momentum they earned. Funny how it works that way.

The market is extremely volatile. Program trading makes it more volatile. Getting rid of the collars will probably increase the extreme moves on the days they occur but I suspect that it will not be a big change over what we have now. Besides, if there is a big decline you can always count on the rumor of Fed intervention to serve as a more effective tool to halt declines!

Subprime will NEVER go away. You see, I don’t look at subprime solely as mortgages made to borrowers that should never have qualified for a home loan under any terms…predatory or not. To me, subprime is much bigger than all that. It’s about what our country has become. It’s about citizens feeling they are entitled to the American dream… not the pursuit of the dream… not about working for the dream …but just skip all that and give me the damn dream. It’s about the belief that personal accountability is not so important anymore and that it’s just too much to expect that a borrower would insist on understanding the terms of the biggest contract that most of them will ever sign. It’s about a high percentage of those borrowers that did in fact know they didn’t qualify for the loan, couldn’t pay for the post-teaser payments and who were willing to lie about their incomes and financial statement to get the mortgage anyway. It’s about liberal and conservative politicians that pressed for more access to credit for the disadvantaged members of society. It’s about politicians that failed to regulate to prevent the creation of a problem that are now trying to regulate the creation of a solution. To me, subprime is about the exploitation of cheap credit and liquidity provided by the Greenspan Fed.  Much like the effort to save the credit markets and pump up liquidity by the current Fed.  It’s about business people that are willing to sacrifice integrity and common sense to make a buck. Yes, some of the lenders were predators … you see, predators have been around throughout the history of capitalism even before William Shakespeare wrote of Shylock over 400 years ago. Subprime isn’t just about writing sneaky loans, it’s about securitization. It’s about complex financial engineering and derivatives. It’s about investment banks who packaged this stuff in fancy acronyms like “CDO” and floated it through conduits with equally-fancy acronyms like “SIV” so they could make a gazillion bucks. Subprime is about the institutional investors like pension funds and insurance companies that were impressed by the complexity of it all and who are on an insatiable pursuit of incremental yield. To me subprime will NEVER go away. It’s about who we are, what we’ve become. All of us… we are subprime. We are all representative of one aspect or another of this mess. If you are reading this post, you are one of the people I mentioned and so am I. Saying that subprime will go away implies that we will all go away. It suggests that our financial systems will somehow be cleansed and pure when the last trace of subprime has been removed from the myriad simple and complex places it now resides from money market funds to pension funds to money center banks and beyond. It’s just not possible. The things that created subprime mortgages are systemic and they will survive.

After all the criticism that Countrywide’s CEO has taken for selling his stock, it must be a great day for Angelo Mozilo. A few days ago, many of his stock option strikes were above the market price. Poof! Write off billions and then make positive comments about next quarter and he’s in the money again. I love how this works. Pretty soon, his 10b5-1 plans might even allow him to start selling more shares again. After all, he needs the money to send his grandkids to school. I know that sounds stupid, but that’s the reason he gave, not me. And you might think that he’d never dare to sell more shares on a bounce when he is being investigated by the SEC. Yeah right. But hey, that would cause a bit of a problem now wouldn’t it? If he did nothing wrong to justify the investigation, then stopping when he was being investigated would look suspicious - wouldn’t it?

• MER is up 5% on the rumor that Stanley O’Neal is going to be fired.  I guess that is more important than the financial bombs that any new CEO would inherit.
• TWX is up 3% on the rumor that CEO Richard Parsons is on the way out.  Maybe the new guy will have all the answers for the media mess that has prevented TWX from appreciating over the last 4 years.
• C is usually up every time CEO Charles Prince is rumored to be replaced in the perpetual Citi management shakeups.  Are lawyers really supposed to be CEOs?

Given all the rallies that these examples are showing, it looks like the market would jump about 5% if every CEO in the S&P would be fired!   That would give us new record highs.  If you think this logic is absurd, you are correct.  But then again, so are the examples I just mentioned and yet, I am seeing investors buy up this nonsense and cheer.  That is equally absurd.

In the end, we’ll get what we deserve when we…

• believe we have tame inflation.
• believe home sales are bottoming.
• believe the credit crisis is over.
• believe that a weak dollar is great for the economy.
• believe that high oil prices are not a problem.
• believe that consumer debt is not a problem.
• believe that low interest rates will prevent economic weakness.
• believe that this market is as cheap as it can get.
• believe that protectionism is good.
• believe that budget deficits are not a problem.

After Microsoft’s results last night, I have a tough time calling them “Mister Softie.” I need to give credit where it’s due despite the fact that I don’t like Microsoft very much. Note that it’s not that I dislike the stock, I’ve had an UP signal since October 15th. So it’s not the stock, I am just not a fan of the company. And it’s not that I dislike Microsoft, I just don’t like them. There is a difference. Besides, it’s not healthy to hate things.

One of my big frustrations with Mister Hardie is their product lines that I either use or could use. According to the earnings report, Vista sales were very good. I have Vista and cannot stand it. Because my perfectly functional earlier version of Excel kept generating errors when I tried to make it work with Vista, I bought Office 2007. It’s a bit overloaded with features I don’t need and makes it harder to find the ones I do need, but overall Office 2007 doesn’t suck. It’s just that I had no problem with the old Excel and didn’t like being pressured into buying the new ones because of a pain-in-the-ass Vista OS that was forced upon me when I bought new hardware. Halo game sales gave a lift to the Entertainment and Devices revenues and yet, this division has been a giant money loser. When is Halo 4 coming out? By the way, I have never played Halo and I don’t have an XBox. I do have a Nintendo Wii and played it last night.  As for the Zune, I’ve seen them on the store shelf but I love my iPod.

It’s funny. I don’t like AAPL, the stock, but I love Apple, the company. The opposite is true with MSFT and Microsoft. It mostly comes down to innovation and consumer choices. Apple is a great innovator, Microsoft attempts to be a great imitator. Consumers feel empowered to choose Apple products over competitor offerings. With Microsoft, the consumer has products shoved down their throat through the Windows and Application software monopolies. I am impressed with their ability to drive sales and the effect that has on the stock - I just don’t like how they do it and how that makes me feel about the company.

If the slide in their stock over the past couple of years is now over, then why did they not use up the remaining $12.8 billion on their share repurchase plan? You know I have not been a fan of buybacks in general and I wrote about Microsoft’s pathetic performance with buying their own stock (click here for that.) However, in this case, I just wonder why they didn’t buy the stock when it was at its cheapest lately.

Let me sum this up - Microsoft earnings impressed me. Their “me too” products and acquisition strategies do not impress me much. The stock looks good right now but I still don’t like the company.

Countrywide is indicated higher today and is up about 20% in premarket trading. Despite its crappy results which had losses of $2.12 per share versus analyst estimates of a $1.28 loss, investors are buying. Obviously, there’s a bit of short covering going on but if you follow the media spin, the real reason for the CFC optimism is the belief that they threw in all the subprime kitchen sinks from every house they lent to. Come on people! After all the prior comments from Mozilo and Sambol when they were writing the loans they are now writing down, you believe these guys? - Come on people! Aren’t you forgetting how CFC problems were over when they got bailed out by government intervention? Aren’t you forgetting how CFC problems were solved when Bank of America invested $2 billion? Aren’t you forgetting how CFC problems were solved when they got new bank financing? Oh hell - why bother. So now that CFC management says they are going to return to profitability in the 4th quarter, investors believe it. Seems to me we’ve heard that one before. Just ask Citi investors.

In my doom and gloom piece from Sunday called “Off A Cliff”, I said:

Don’t be surprised to see the Fed inject liquidity similar to the July / August intervention.

It hasn’t gotten much attention but it is happening. Check out this Wall Street Journal article or if you prefer another source, Reuters has this news. Add it all up, so far its about $56 billion this week and the amount appears to be increasing. It’s worth keeping an eye on this.