along those same lines.....

http://www.yieldsz.com/

Exactly!!

When will this binge on credit end? I think the bulls (that understand this issue) don't think that any piece of the US government (Fed, Treasury, Administration, Congress, etc.) want this credit cycle to end. The financial services industry doesn't want it to end. Who wants it to end? Where is the risk in continuing on this course? I guess there is none - I'll keep my longs on for a bit longer...

Looking at the VIX, I guess the risk is low. Can it rise from here?

Looking at the "hidden M3" (http://www.nowandfutures.com/key_stats.html), I guess the gov wants to inflate it's way out of any current (but unknown to us) issues or possible future issues. Looking at the chart, growth is accelerating and it looks to be going vertical soon. What should we take from this? No clue, we are in uncharted territories. Or are we? If you look back through history (I won't bore you with history that some people will scoff at due to how advanced we are today, compared to then, but open some books for yourselves), credit creation at these levels have always led to collapse. But no one knows what the future will bring, so keep my longs on for a bit more...

Looking at CNBC, the market makes new highs seemingly everyday. Their economist who must be good, he is on TV you know, spins every data point in the positive but I guess it sounds good to me.

This reminds me of 1999 when every broker dealer put out it's list of stocks for the desert island. Ones that you could buy, crash your plane, wash up on shore and when you were rescued years down the road, you find that you could retire. What were some of those? CSCO, C, NTAP, AMAT, MU, HD, WMT, etc. A lot of Nasdaq as I recall. Not an impressive basket for the buy and holder. Glad I stayed on the ground.

BTW, a number of years ago, I met a very successful stock option trader who took his girlfriend down to South Beach, rented a convertible and got into a terrible crash that put him into a coma. A truly terrible thing. What made it worse was that when he awoke a few days/weeks later, he found that he was in debt. You see, this trip was the weekend before Black Monday and he was long. His clearing corp. had to liquidate his positions at losses and when he awoke, although the market was off it's lows, he was too late. I don't think he ever really recovered...hope he did. True story. It can happen again.

You know, one of the nice things about this blog is that anyone can voice their opinion on the markets along with some evidence to suppport it. Or, you, or I, can simply ramble on to open dialog or simply help get your thoughts together. So I'll continue.

Not a lot of readers this week to bore, I am guessing.

Anyway, I was walking my dog yesterday morning and I started thinking about Goldman Sachs and the bonuses paid. I don't know anything about it really, but I started thinking about the Amaranth collapse. Hedge funds like Amaranth clear their trades through money center banks/broker dealers who have risk management teams in place. The broker dealer makes money on the transactions, plus the money lent to the fund on margin. The risk management guys pay attention to the trading activities to protect the firm. In other words, the broker dealer knows the positions of the hedge funds and can figure out where they are at any given time (please correct me if I am wrong on any of this, I am looking for clarification, btw). If I recall correctly, at the time I read that there was $60B in energy traded and Amaranth had on $6B worth of Nat Gas alone. Ridiculous, really. So, Goldman decides to change it's commodity index weightings and starts a broad commodity selloff. The Goldman house traders were probably not net long in these areas because we know now that they made an awful lot of money trading this year. An awful lot. So; were the house traders short before the GSCI reweighting? Do you think that the various parts of a firm that was private up until a few years ago, talks among it's various branches? Do they think about their year end bonuses and how their various activities may benefit from dialogue? I have no idea and I am NOT saying that they set this up. Anyway, after Amaranth had lost somthing like 60% of it's clients assets (and Nat Gas was extremely oversold), the Goldmans and JPMorgans of the world were so kind as to offer to take the positions off of Amaranth's hands. If I recall correctly, Goldman lost the bid and Citadel took over the positions which immediately were huge winners (if you were watching the story and had some experience you would have probably bet that Nat Gas had bottomed - and you would have been right). Boy, Amaranth sure had a run of bad luck, lol.

I'm just asking.

BTW, this is the kind of story that you could start to tell a retired, wizened veteran trader and he would finish it for you. In other words, there is nothing new here.

Ok, so my thoughts then turned to Bill's "Social Equity". Even if my suspicions (which I won't lay out directly here) are not true regarding the house traders trading against the hedge fund clients, I have seen enough in my 20 years in the industry to buy in to Bill's "Social Equity" cause. Bill's past clues you in to what he has seen, so maybe we all have to just trust in that experience. So, I am making a New Years resolution to try to add as much as possible to this blog in 2007 and beyond. I will try to offer up more analysis that may help others understand a little more about how the market works.

Another thing I was thinking about was how the economic data calculations by the government have changed over the years. For example, the largest component of the CPI is "owners equivilent rent". When housing prices were rising rapidly, the rent numbers weren't and this was reflected in the low CPI. Not a peep from that economist from CNBC about how this was downplaying the CPI that people felt, but now that rents are rising, I heard that same economist cry about "owners equivilent rent" making the CPI rise. Why the crying now? He is an economist, not a cheerleader, right? Why is he a permabull? Paid to be, told to be, simply understands that is his role, or is this truly him??? It seems like the government can continue to change data calculations and if the tape continues to "believe" the data while talking heads discuss the data, the stuff can go on forever. Like Kudlow the other day saying that money supply growth is basically flat (referring to M1 or M2). He is not lying, but he is not being totally truthful. His credibility is zero, no, it's actually negative in my book. Also, if I hear Maria B. use the word "catalyst" one more time, I will puke.

I think that the public is starting to catch on the the government "fibs". Within the last month I have spoke to two very conservative friends who now say that the Bush Admin has completely blown the Mid East conflict. In other words, former Koolaid drinkers are switching to water. Eventually the markets will do the same, but the timing is unknown.

Sorry for getting off topic.

Thanks for letting me vent.

Have a safe and happy New Year and a prosperous 2007!

Disclaimer - long: stocks, bonds, gold, oil and cash. (2006 was a good year)

As for awash in capital...

We here in the US owe a huge amount of money. We are involved in a very very expensive war, which, we will have to pay for sooner or later. So, we (the US) can either default on our loans (unacceptable), print money or borrow more.

If we borrow more, we have to print money to pay it back. So print money, we will.

Now, the rest of the world to whom we owe the money can either take our cheap inflated money, or print more of their own to “balance things out�.

Either way, IMHO, the US will roll out the printing presses as never before.

Stocks should go up, bonds should go down, gold, real estate and commodities should do well, and those foreign markets (whose printing presses can't seem to keep up) should out perform the US.

The rich, who own this “stuff� will get richer; and the poor who don't, will get poorer.

Not right, not nice, but pretty much the way it's been for a very very long time.

Have a safe and happy new year.

...david...

g034--interesting rant and no apologies needed.

Though I'm spending most of my time today reviewing contracts (as opposed to cookie duty and elf duty a couple of days ago when I plastered the head of my dearly beloveds and friends on the Office Max elf toon), when I peek at my screen, I'm seeing lots of horizontal lines on my screen--similar to Labor Day.

g034:

You woke up my thoughts on NaturalGas in your tale above on this chilly December day.

Once upon a time I was led to believe there would be a shortage, then Hedge funds sinks under the weight of billions of cubic feet and nowhere to store it, then my local NG supplier with no competition gets the OK from the State Commissioners to increase the cost so now I'm paying more and the price of NG on the commodity market keeps going down.

Does anybody really know what time it is???

I just love this blog.

Happy New Year to all.

To Bill, g034, MarkM and all of the other contributors,

I want to extend sincere thanks to all and wishes for a Happy New Year!!

I hear the music now and I think I am beginning to learn the dance!

Hope to contribute more next year,

Miggs

Trying to load the boat on NGAS. I have an order at intermediate support at 6.55 with another 1K lot at 6.35 major support. Low of the day was 6.59. I may get my shares if the inventory report is bearish for oil and natty Thursday and Friday. The chill will come and this stock will fly along with natty gas. JMO.

stktrader
Me too. Yesterday, I bought a small intro position in ECA and a little SU, have been thinking that the whole energy complex is possibly oversold.
It keeps getting colder here in Maine.
Best to all in 2007.

You can rant anytime you please, g034. btw, I'm also long: stocks, oil, gold and cash (but no bonds.) My year has been disappointing overall, thanks to so much cash. I'm hoping to make up for my '06 performance in a "correction" that I assume is going to come sooner rather than later.

I passed information about this blog to a friend. He told me tonight that he considers Bill Cara's blog the best of all he's read. I think my friend speaks for lots and lots of us. Thank you so much for creating this blog, Bill. Happy New Year to you!