Target same store sales for April are down big time.

Last night I put up a couple of links to the newest John Hussman and Jeff Saut commentaries. Both raise intriguing points each week, and might lend other perspectives.

Best,

Ron

Hmmmm.... X missed this AM.
The first chink in the commodity/international build-out armor?

I'm looking forward to the wealth protection portfolio Bill. Many Thanks!

Economic data at 10am today is going to be important for market direction. Already "everyone" is saying the worst is over, ... well, except for GM!

Ooops, sorry, X met but issued disappointing guidance.

Hey Bill,

I'm just wondering if you are going to be discussing options at all in your new book? I can't wait for it to come out! Do you think you'll sell some autographed copies through the site? That would be great.
Thanks again!

Bill:
A big Thank you for all your information in getting a street view of how the market works.

Another company FDMLQ (Federal Mogul) was put in CHP.11 bankrupcy due to an asbestos lawsuit of a company it acquired. A private equity firm will most likely acquire it for pennies on the dollar and take it private.The individual investor again will be the most likely loser.

taking a position on CDE

Kaimu,

thanks for that report on CNU, I actually caught that one the other day at yahoo finance. i bought a little before the drop, then added 1/3 near the bottom of that day when it was down like 8%. I have also kept my eye on ECU and took a small position today after reviewing there website and doing some due diligence. Thanks for mentioning those opportunities in the past.

After watching that slide show on naked short selling, and hearing about it a lot on other sites (financialsense, which i consider the 2nd best site on the web, after this one), there have been instances where maybe this has been taking place right before my eyes. It's all so strange, how it's legal, or at least 'overlooked'. Not to mention those poor people involved in the whole Stelco debacle. I used to live in Hamilton, (moving back in a week), and it is just crazy to see this happening so close to home. I don't know enough about our government to make any comments but I agree that the Securities regulators have to start focusing on the more important issues. I'll be a union member!
Cheers.

Existing home sales came in soft for March.

http://tinyurl.com/3297xn

Market was expecting 6.4M, and came in at 6.12M. And the median price is down again this month.

Remember folks, this is a lagging indicator. So the full effect of the mortgage seize up is still not reflected in these numbers.

Silver Wheaton Acquires Silver Production From European Goldfields

http://www.silverwheaton.com/news_releases/index.php?mod=cnt&act=cnt&id=90

Interesting note on Federal Mogul...

When this stock was in the $70's......the highest it had ever been.....no one would sell it. As a matter of fact you couldn't talk people out of buying it.

CDE for the trade, right? I see it's not far above the 52 wk low of about 3.98 or so.

Kinda a disturbing trend on a longer term chart.
Clearly breaking down since 5/05 (I'm pretty sure that's the approx. date).

Lower highs and lower lows since then but holds around 3.98.
Volume is rising the last few days though.
Decent upside as long as it doesn't break 3.98 as it goes to around $2 to find support if it does.

Bill has taught us to watch the broker/dealer index ($XBD in US) and XLF for clues as to HB&B market support.

Today, $XBD is down 1.3%, XLF down almost 1%.

Heads up...

t4k

I do agree that the level of short/bearish bets is propping up this market. My take is "be the last one to short" - that is, take the trade when you see volatility jump AND indexes drop. Today we have the former without much of the latter, in effect providing more fuel for the market to move higher.

Bill,

I heard many times about the Stelco story. Do you have a post that discuss all the details? I wish to read more about it. I'm truly disgusted by what has happened, though not surprised. Too many greedy people on the capital markets. They just can't uphold their ethics and refrain from dipping their hand into the honey pot.

Frugal

A couple of weeks ago, Bill expressed a cautionary note about BNI, whereupon
I bought deep in the money jan08puts.

This morning I read a research report released this morning by Standard & Poors. Conclusion: overvalued. Recommendation: sell.

Then, BNI released 1Q earnings this morning, reporting a weaker earnings. Share price is down a few %.

Thank you, Bill.

Regarding "Silver Wheaton Acquires Silver Production From European Goldfields". SLW paid big cash upront plus $3.90/lb U.S. for the delivery of silver in the future. Has anyone in this community been able to do the math on SLW's transactions to calculate their future cash flow and net? I'm long SLW. Thanks.

Fred

with the exception of Birch Mountain, everything's a trade right now...i would assume that anyone with a 6-12 month price target would have to look beyond a likely market drop within that time frame

Bloomberg had a few interesting articles this a.m.

First, they had an article about the real estate implosion in Spain. That implosion is also bringing down their banks.

Second, there was an article about the people getting left holding the bag on our own mortgage lending fiascos--that would be the bond holders.

Lastly, there is an attempt by the Chocolate Manufacturer's Association (due to the pricing pressures brought on my the 40% increase in cocoa butter prices) to petition the FDA to rule that synthetic crap (no cocoa butter, but artificial sweetners, hydrogenated fat and transfats) can be called chocolate. I was so angered that I went to the Guittard site which had a nice way to lodge a complaint with the FDA). Unbelievable.

Consumer Confidence down. Existing Home Sales down. Dollar down.

Private Equity buyout ups. Mergers & Acquisitions up. Share buybacks up. Financial Engineering up. Managed Earnings up.

Here is the real American econmy where people chase their American dream. Wow !

a suggestion for finding with strong patent advantages - www.oceantomo.com

would be interesting to see how many of these are also in the Cara 100 :)

1st millionAt33
Just type in Stelco in the search area provided on the home page here, gives you lots of related article that Bill has written

Also 1st, the saga is continuing with all the changes occurring, its not over with yet.

us dollar is firming....is this going to hurt gold or just a very temporary bump?

i've gotten commodity overweighted and anxiety is creeping in. Rotated out of EPP...so overbought and bought OIH yesterday and now think more commodities based asset was a mistake. Is cash going to be king, short term, or does this mkt have more to go and worth the risk?

on 4/10 got a buy signal for xlu/utilities...which I did not take action, but now see utilities as solid during current volatility. for the past yr, up 32%! Rotation into this defensive sector has had legs. Preparation for economic slow down continues?

http://research.stlouisfed.org/wp/2007/2007-017.pdf

Here's a manageable read from the FED. I copied the abstract, plus the attribution. There are some interesting working papers at these fed sites.
------------------------------------------------
Affiliated Mutual Funds and Analyst Optimism
Simona Mola
Arizona State University

Massimo Guidolin
Federal Reserve Bank of St. Louis

February 2007
Abstract

Prior studies have shown that investment banking affiliations place pressure on analysts to produce
optimistic recommendations on the investment bank’s stock-clients. Our analysis of a large sample of recommendations issued from 1995 through 2003 indicates that a mutual fund affiliation also affects analysts’ research. That is, analysts are likely to look favorably at stocks held by the affiliated mutual funds. Controlling for a variety of factors including the investment banking affiliation, we find that the greater the
portfolio weight of a stock for the affiliated mutual funds, the more optimistic the analyst rating becomes when compared to the consensus. Reputation partly restrains the optimism of analyst recommendations. In fact, the presence of other institutional investors as shareholders of the recommended stocks curbs analyst optimism. Nevertheless, from 1999 through 2001, star analysts report the most optimism when they
recommend stocks in the portfolios of affiliated mutual funds.

Gold getting crushed!
http://www.kitco.com/charts/livegold.html

Anyone know of any reason?

Ouch!
I went from happy Dorothy on the YBR, to the Hammerhead ride at the fair, and no one to hold my change while I'm upside down!

Not to worry (although this is NOT comfortable) Do we think the USD is going higher?
Fed rasing rates? NO?

Then no worries right? I'm going to try to use this opportunity lower some of my PM basis if we go lower.

UXG down 5%.
Buying UXG here at 5.99 for a trade.

Bill, or others..

No question, they are the pros and I am the fledgling amateur. It's really new behavior for me to learn how to be strategic, taking both short and longer term action. Good was that I raised some cash from overbought sector (asia ex japan), but missing was buying on weakness. I did feel warned that PMs would get some weakness along the way. But, what I don't understand is how poor domestic economic data would hurt the dollar. I thought that an increased chance of a rate cut, dut to poor data, would actually lower the dollar.
So at this point, I am back to familiar amateur territiory of waiting and hoping that the commodity positions will bounce back and upward.(i'm here to learn, if an old dog can learn new tricks)

Last night I watched the fabulous 1976 film 'Network' and was absolutely stunned by the Howard Beale scene in which the 'Western World Funding Corporation' was mentioned and the Arthur Jensen/Howard Beale scene in which the de facto end of nations, the new corporate nations and the inexorable recycling of petrodollars was offered by Jensen.

The film should be remade with FNN (Financial News Network) replacing UBS and Jim Cramer playing himself replacing Howard Beale. Cramer is an absolute natural for the role. "I want you all to get up from your chairs, get up from your sofas and your chairs and go over to the window open the window and stick your head out of the window and yell as loud as you can, 'I'm as mad as hell and I'm not going to take this anymore.'"

In any event, how the hell did we end up back where we were three decades ago?

esbisworried,

"In any event, how the hell did we end up back where we were three decades ago?"

Since when does the next generation learn anything from the previous? We're smarter, right! Or in more academic terms, its 'cycle' theory or alternatively history just repeating itself again, and again, and again ....

esbisworried,

Which is why you need to carefully heed Bill's words about PMs etc. and how that market behaved 20 to 30 years ago. We are and will see the same scenarios. They won't be identical but the similarities might be astonishing.

An interesting view on the Dollar, and how it will not collapse..

Dollar collapse?

Will the U.S. dollar experience a catastrophic collapse? Books and articles galore have been showered upon the public in which the writers purvey a coming dollar crash, a scenario which they say will destroy the U.S. economy as well as render the dollar a has-been among the major world currencies. Could such an event actually transpire in 2007?

Dollar bears point out that the dollar’s weakness so far this year is due to a perceived deterioration in “U.S. economic fundamentals as well as a rise in implied inflation.” (Financial Times, April 20). A chief currency strategist at Danske Bank was quoted as saying, “Historically, a stagflationary environment has been bearish for the dollar.”

With monetary liquidity making a major rebound in the U.S. and the growth stock outlook looking most promising, capital inflows will end up sustaining the dollar and preventing a stagflation-type of environment that the gloom-and-doomers keep preaching. The simple fact remains that the dollar is still the world’s reserve currency and as long as it maintains its top status it will be supported and kept from crashing. There will undoubtedly be periods of weakness, perhaps even extreme weakness, but such weakness won’t be allowed to develop further into an outright collapse. The dollar has been likened by one observer to a cancer patient: the poor unfortunate is given chemotherapy to the point of death, then resuscitated with vitamins and allowed to restore white blood cell count for a while. Then back to the chemo and the inevitable decline in health that follows.

Same story with the dollar: strong dollar, weak dollar, strong dollar, weak dollar….it’s all part of how the global financial system operates -- a fact which apparently escapes the dollar perma-bears. They don’t seem to grasp that currency fluctuations are part and parcel of how the world’s financial markets and economies are run; further, that periods of weakness, sometimes prolonged weakness, are inevitable.

The news media will also use the weak dollar as a proverbial “big stick” to beat the public on the head and scare them into selling stocks whenever it is needed, as was done in part during the late February/early March stock market correction. This is all part of the gamesmanship that keeps the average retail investor out of equities while the smart traders buy stocks on the cheap. Therefore it shouldn’t be surprising if the recent talk surrounding the sub-prime mortgage market is soon supplanted by talk of an “imminent dollar collapse.” But as weak as the dollar is now, it won’t be allowed to suffer a catastrophic decline.

The latest headline in the Financial Times has once again put the spotlight on the latest dollar weakness. Now it’s time to watch for the dollar bears to come out in full force, growling all the way. The U.S. dollar index has fallen to a major benchmark low at the 82 level and is threatening to test the major long-term low at 80. Support should be encountered in the dollar somewhere between the 80 and 82 levels followed by a period of base building and eventually a reversal of the weakness. Already the dollar index has made a downside “channel buster” which normally implies exhaustion of the short-term downtrend. The dollar index has made three successive channel busters below the lower boundary of the downtrend channel that has been intact since January of this year. See chart below for details. A triple channel buster usually succeeds in at least ending the short-term downtrend.

Another point well worth considering is the relationship between the dollar and interest rates. In particular, the 3-month T-Bill Discount Rate can be used as a leading indicator for the direction of the dollar. As Carl Swenlin points out in his Decision Point web site: “The direction of interest rates is an important element affecting the dollar. Rising rates give the dollar strength and falling rates bring weakness. Changes in interest rate trends tend to lead the dollar by about a year.” Note the dollar vs. interest rate chart below.

As you can clearly see, the T-Bill rate has been rising steadily since 2004. It’s time for the dollar to respond by establishing support above its long-term base line and reversing its current weakness, an event that should be witnessed in the coming months.

Clif Droke is editor of the daily Durban Deep/XAU Report which covers South African, U.S. and Canadian gold and silver mining equities and forecasts PM trends, short- and intermediate-term, using unique proprietary analytical methods and internal momentum analysis. He is also the author of numerous books, including "Stock Trading with Moving Averages." For more information visit www.clifdroke.com

****

Clif Droke is editor of the 3-times weekly Momentum Strategies Report which covers U.S. equities and forecasts individual stocks, short- and intermediate-term, using unique proprietary analytical methods and securities lending analysis. He is also the author of numerous

npmg,

True, especially if we have just finished step one of the 'Arthur Burns two-step.'

Step one = 'maybe a little inflation will not be so bad.'

Step two = 'hey, that WASN'T so bad...maybe a little more will be OK.'

npmg,

Prefer EPP to the metals complex, but only after a hit.

AMGN SNDK MU

AMGN - sold 2nd half of my postion today. Overall return was 8% in less than 1 month.
SNDK - out April 19th for 15% gain in 1.5 months.
MU - out April 17th for 4% loss.
Not seeing any longs of interest at the moment.

on the dollar.
I agree with Droke's analysis..and see the dollar bottoming in this area.

Regarding valuation of Silver Wheaton's most recent acquisition. Doing a PV calculation for 2 million ounces/year for 27 years (total 54 million ounces proven/probable), assuming silver price of $10 and cash cost of $3.90, you get an NPV of about $112 million. Certainly better than the $57.5 they paid, but who know's what silver will be priced at in 5 years.

On the other hand, my finance prof said when valuing gold properties (so by extension I'm assuming it applies to at least silver also, if not all mining), you just multiply current margin by total reserves. You don't use a discount rate for NPV since price of metals goes up with inflation, so an ounce of gold now is worth an ounce of gold in 20 years.

By that logic, 54 million ounces X $9 margin (assuming $13/ounce price) = almost $500 million.

The simplest way to look at it is at 2 million ounces would take 5 years to break even. Since they are only producing 1 million now, you could say it might take 7 years to pay back initial investment.

At any rate, it looks like a good deal, especially at todays silver prices.

proudPapa, Thank you.
SLW will be a real cash cow. I'm not sure about assuming a 27 year mine life but, a 5 to 7 year break-even sounds good to me!

Fred

Micron at an interesting juncture here, up 3.7% on decent volume. Current price nudging up against the downtrend line dating back to last fall and the 50 day MA. MACD and stochastics looking positive also.

Long MU.

t4k -

Putting blame on the stubborn shorts for fueling this market has become a conventional wisdom statement everywhere I turn (financial entertainment, most of the blogosphere). While I don't disagree with the premise, I am not sure that they retain sufficiently broad positions to be rolled over again and again (last fall's move and, indeed, the past three years have not been a short-friendly environment). I witness a lot of me-too short strategies that lead to outrageous short positions (homebuilders at the end of last year, some regional banks last month,some industrials recently) from copycat players. Naturally, since a lot of weak players also pile on, a minor whiff of good news shakes out the tree beyond expectations (see examples above plus some chip stocks, WHR today). Over the past few days, I keep hearing that a lot of the put buying are essentially bullish (e.g. Najarian from optionMonster) as large players are loading up on hedged longs. Finally, market commentators repeat ad nauseam that shorts are doomed and scared away since this market enjoys implicit (Fed liquidity/cut) and explicit (PE) supporting bids.

So I reckon that we witness a lot of short accidents of late on specific stocks (well-reported on FET) due to overbearing short bets, but I am starting to doubt that shorts are still healthy enough to place bets of sufficient size to propel this market on covering. Conversely, the market may be moving up on momentum only and because none is willing to stand in the way short naked. If so, when the music stops...

JML

Too bad Droke's dollar doesn't live in a vaccuum. The trouble starts when it lives in a world with other caveat currencies rising in value and yield. Bummer. The dollar lives in a neighborhood with declining property values while stronger currencies live in neighborhoods with rising values. As noted on this site by many, the flow of said wealth and the direction of the flow doesn't seem to be up for debate.

gdx for a trade, but keeping it small. getting worried about the market, including PMs. cash looks good, some of the junior miners look good. adding to uxg. long cde. guess i blew it on mu.

AMZN joins the buy back party (on the heels of good (not great) results). IBM, LLTC, KLAC, AMZN, etc. scooping up their own shares at/near 52-week highs. Where were they last July?

JML

colonel Fitzwilliam - You were looking for a replacement for the WSJ. A couple of months ago, the FT dropped their rate to US$99/year. Even I could justify THAT cost. It's a MUCH more thoughtful paper, with a broader perspective on the markets.

I hope someone will post this for tomorrow. Bloomberg just reported this today about subprime loans. It seems that there hasn't just been lax subprime rules, but that there has even been widespread cheating on the forms.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aonxuz3OYwLg&refer=us

Sorry to post again, but what happened just before noon today(tuesday)? There was a huge drop in the USD and at the same time there was a large drop in Silver, and Gold.

What could cause a large drop in both? Roughly at the same time? Or was one a reaction from the other? Did someone see the huge drop in the USD and dump gold and silver to try to compensate?

-Quentusrex

I think I'm just landing on all kinds of everything tonight. Here is a report about how people inside the US administration have personally benefited from the administrations actions.

http://money.cnn.com/2005/10/31/news/newsmakers/fortune_rumsfeld/?cnn=yes