Bill Cara: Cara’s Daily Commentary, Thurs., May 31, 2007, 8:22 AM

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May 31, 2007

Cara’s Daily Commentary, Thurs., May 31, 2007, 8:22 AM

Market Chat

To start the Week In Review #21 this past weekend, I wrote, “There is clearly a different technical landscape unfolding here, but I am not yet convinced the Bulls have lost control. Soon maybe, but not quite yet.” It's Thursday and the landscape has taken on a different shape again.

Yes, I had been reading some analyses on the weekend that market prices were about to swoon. Goodness I have been there and done that. But my instincts were telling me not to stand in front of the Bull’s horns. There is life in the Old Bull yet.

The 2:00pm ET release of the Fed’s FOMC Minutes yesterday served as the basis of the storyline that rocketed the US equity market through to the close. Basically the Minutes stated that the FOMC members are more inclined to fear the impact of inflation than they are of a slowdown in the economy.

Although qualitative reports of this kind can be spun pretty much any way, I do think it is important that, despite high energy costs and severe weakness in the manufacturing and construction segments, these bankers see the risk of recession as a limited factor in their policy-setting decision-making. What that means is that monetary policy can support a stronger USD. And, if true, that is important.

I have been saying all along in these pages that rates are not coming down until after a Bear market commences and that it will be the rapid decline of equity prices that will cause the Fed to cut rates.

The US is now essentially a services-based economy, which is reflected by the evolution of companies like IBM. A low $USD helps these companies sell their services abroad. It also helps manufacturers like Boeing, Honeywell, Caterpillar, and United Technologies sell their high-end products abroad. It helps domestic manufacturers who sell mostly to local markets compete more easily against cheap foreign goods. And, it helps increase in-bound domestic tourism and slow out-bound tourism.

The downside, of course, is that oil and metal prices will remain high. But that is where the Administration can play a role by intervening with sales of precious metals from their presumed stock in Ft Knox, which keeps the prices low. Some people are beginning to call that “naked shorting”. And the Administration can, on demand, cause the price of crude oil to drop when so-called strategic petroleum reserve inventory requirements are changed.

I refer to these moves by governments as interventionist only because they trade in capital markets without the same transparency requirement as the rest of us, and for policy reasons that too often are at odds with our need (i.e., the private sector) to trade these markets with conventional portfolio management objectives. I think that is eminently unfair.

I believe a buck is a buck, no matter who owns or manages it, and that we should all play by the same rules, government and the sell-side included. The conflicts of interest in the present system are so extreme that I believe it is ridiculous to call the capital market a level playing field.

You can say that it is what it is, but I can assure you that unfair control systems (“might is right”) didn’t keep the Soviet Empire from collapsing swiftly when the People decided to make the change.

We are all entitled to our opinions. Mine is that Paulson’s Pride is going to look like something pretty awful when the coin is flipped. At the end of the day, the People’s interest will prevail, and markets will revert to the mean.

Henry Paulson puts his pants on same as you and me. He and his friends at Goldman Sachs are not capable of suspending the principles of financial markets for very long.

Economics Calendar and Reports

Economic calendar from Econoday

Econoday weekly report.

Econoday analysis of FOMC Minutes.

US Equity Markets Review

Yesterday, the US equity markets rallied strongly through the closing bell after the FOMC Minutes were released at 2:00pm ET. America’s central bankers, including Goldman Sachs (LOL), now hold the opinion that the US economy, despite its problems, will not go into a recession (or worse).

That was a confidence-inspiring move. The issue however is that Industrial Production is no longer the driver of the American economy. Today it’s about services, largely financial and technology-related services that can be sold abroad.

As I see it, the polarization of American society is near complete. The service sector has been split in two: high-end and low end. The high end, of course, is mostly financial and technology and the low end ranges from the fast food type work to, surprisingly, careers in education, military and emergency services (police, fire, border and coast guard), and healthcare support (nurses, clerical, physical maintenance), where the majority of the people (in America, just so our international readers understand what is going on here) are borderline poor.

I use that ‘borderline poor’ expression when referring to a class of people who struggle to make ends meet at the end of the month, relying on the support of credit cards, high cost loans (now called sub-prime as part of the spin), speculative price increases in their homes (which extends them additional credit), and even food banks and medicaid to get by.

When I first started this blog in April 2004, on Easter Weekend, which, like Thanksgiving and Christmas, is a time of celebration in our family, a time to consider our personal values and our blessings, I was focused on the social ills of the world as it is today, and how the capital markets are such a causative factor.

I called it “Bill Cara… Capital Markets & Social Equity… perspective and discussion” so we (you and I) could talk about these matters of great importance. After all, what matters more in life than personal values and blessings.

I admit, it was difficult at first. People would ask, “What’s that all about? … I never heard of social equity; how does that possibly link to stock markets”, and so forth.

Then along came the third most powerful hurricane in recorded history to hit the US on August 29, 2005, and subsequent events unmistakably exposed, via real-time telecasts, the guts of America to the rest of the world and to their own people. That was Hurricane Katrina, and the aftermath was that Americans began to question the social mores of the country, i.e., was America really the Land of Opportunity for all – or a prison for many?

Not to put too fine a point on it, but the answers do not lie with Goldman Sachs and HB&B. The answers, my friends, lie in our own hearts and minds. We know what the problem is, and it is up to us to solve it.

Global Equity Markets Review

DJIA (interactive) chart

NASDAQ Composite (interactive) chart

There has been a powerful rally in the Far East today, led by Tokyo and Hong Kong.

Here’s the closing data of the Asia-Pacific equity markets..

Here’s the latest session data for the bourses of Europe.

That rally in Asia-Pacific markets has now extended to Europe, where in mid-session, the arrows ar all green.

Bonds & Yields Review

Bond prices sank and yields popped after the FOMC reported at 2:00pm ET that, rather than an economy headed toward recession, the nation’s central bankers were more concerned about inflation. The implication is that the economy is healthy, and that increased inflation and speculation would be met with higher interest rates. That means it would be better to hold equities than debt, and that commodity producers would be favored.

At the end of the session, the US equity sector leader board had Energy (XLE +2.10 pct), Materials (XLB +1.17 pct) and Utilities (+1.02 pct) well ahead of the pack, with only Healthcare (XLV -0.25 pct) not scoring par.

The 30-year US T-Bond ($USB) dropped -0.15 pct to 109.09. Capital was coming out of bonds at the long end and also at the short end, and moving into equities. Short-term Yields ($IRX +0.43 pct) moved up to 4.705 pct.

The yield on the 10-year and 30-year Treasury paper is now 4.878 and 5.010. Should the economy not quickly prove to be in a growth mode that can handle such relatively high yields, then I believe the equity rally will not be sustainable.

Here is the T-Bond chart.

Forex Review

Since just past noon (12:00pm ET) yesterday, the $USD has weakened through the evening and night into this morning.

Here is the $USD chart at the close of the prior session.

The $USD was trading at 82.353 at 7:03am ET today.

Commodities Review

The $CRB lifted yesterday to 309.25 from 307.01 the previous session, owing to the FOMC Minutes that reflect that inflation is growing, and the economy is healthy enough to support that as long as it doesn’t get to the point where interest rates have to be lifted.

Here is the $CRB Index chart.

Oil Review

Here is the e-miNY July-07 Crude Oil chart.

At 7:10am ET this morning, the e-MiNY Jul-07 contracts for Crude Oil was 63.175. The price has been falling back into a comfort level in the middle of the 55-65 range, which although high, represents a new price point that Americans are going to have to bear.

Bear in mind however that when Summer driving season, possible hurricanes and renewed economic growth (as the c.bankers are suggesting) combine, the price of oil is not likely headed too much lower.

Interactive Chart of Weekly Crude Oil:

Interactive Chart of Daily Crude Oil:

Gold & Precious Metals Review

Yesterday, June Gold futures closed at 653.1, down from 653.5 at about 8:00am ET. So, during the day, the futures gold price did not move too much.

Here is the Jun-07 Gold futures chart.

Spot gold at 7:48am ET today is 656.60.

Here is the Recent Spot Gold chart.

At 7:49am ET this morning, the AG spot was 13.22. A nice run Tuesday and yesterday helped.

Here is the Recent Spot Silver chart.

Spot Platinum is showing signs of recovery. Last trade (7:53am ET) is 1269. There appears to be a Tuesday low of about 1250.

Here is the Recent Spot Platinum chart.

Palladium is presently 363, up +1 since yesterday morning.

The 3-month chart shows that Palladium is still in a growth pattern.

Here is the Recent Spot Palladium chart.

Precious Metals Stocks Review

The goldminers ($XAU) have been pushed down since mid-April. There will be a summer rally, I believe. I also believe it will be a rather strong one.

The timing seems imminent.

Here are the Daily and Weekly Data charts of the indexes, courtesy of StockCharts.com:

Interactive Chart of Daily U.S. Goldminers Index:

Interactive Chart of Weekly U.S. Goldminers Index:

The U.S. goldminer share trust ETF trades under the ticker symbol GDX.

The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.

Here are the Daily and Weekly data charts for the TSX Goldshares (XGD) index:

Interactive Chart of XGD Daily data:

Interactive Chart of XGD Weekly data:

To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:

ABX NEM GG GFI KGC AU HMY AUY BVN
Interactive Daily data
Interactive Weekly data

MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data

CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data

NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data

Here are the key Silver miners and the SLV ETF:

SLV SIL CDE HL PAAS SSRI SLW MGN

Interactive Daily data
Interactive Weekly data

The Cara Global 100 Stockwatch

This data is supplied every day by the folks at KNOBIAS, Inc.

Here are the previous session’s Cara 100 gainers

Interactive chart of the top 12 Watch List gainers

Here are the previous session’s Cara 100 losers

Interactive chart of the top 12 Watch List losers (Interactive link)

Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the previous session

Here is the current Relative Strength Index (RSI) analysis of the Cara 100 company stocks

Here, from “Chris”, are the interactive charts of up to a dozen stocks with (unsmoothed) RSI-7 above 70 and below 30:

RSI-7 > 70 (12 of 19)

RSI-7 < 30 (1)

Using data from “Chris” – which he takes from BillCara2.com, which is not smoothed like David’s data (from Worden), the Cara 100 Company stocks that are below 30 on the Daily RSI-7 numbered just 1 yesterday versus the 19 above 70.

Here, from “David”, are the stocks in the Cara 100 trading with the highest and lowest Daily RSI-7 sorted by (i) daily and (ii) monthly values, for the previous session.

Here are the stocks in the Cara 100 trading with highest RSI-7 with Monthly-Weekly-Daily all either >70 or <30

Here are the stocks in the Cara 100 trading with RSI-7 Daily all >70 or all <30

In Focus

UBS increased the rating from Neutral to Buy for China Life Insurance (LFC).

JP Morgan increased the rating on Yahoo! (YHOO) to Overweight.

UBS dropped their rating on (Cara 100) ICICI Bank (NYSE:IBN) from Buy to Neutral.

I noticed some recent downgrades on Cara 100 company chip stocks like LLTC and MXIM. This might be a reason.

Wall Street upgrades

Wall Street recent downgrades

There are various sources for up/down grades by broker-dealers. One is at Briefing.com. Traders ought to check everyday for ratings changes. That website updates in the morning.

Community Chat

As equity markets power north, in a pattern that looks like a melt-up that will end in a severe blow-off sometime this year, traders ought to be looking at methods for wealth preservation. Yes, these are days and weeks where price increases can grow your portfolio wealth, but if you don’t hedge with puts and/or increase your protective stops, then you may be suddenly stuck in a situation like 2000-2002 where it took seven years to return to former cycle highs.

Particularly interesting to me, at this point in the cycle, is the flood of interest by punters in the penny dreadfuls. That is a dangerous game to play for the majority of you. If I ever get myself well organized I may be able to come up with a Cara 100 Penny Dreadful watchlist. Those are the ones that have little or no income, but are positioned with sufficient financial, management and property resources to give their speculative backers a shot at big-time gains. These are not the Cara Micro-cap 100 project companies. The Penny Dreadfuls are the companies that rely for their continued existence on a motherlode of some kind. This is in fact treasure hunting. It tends to happen late in the stock cycle.

Caveat emptor.

Posted by Posted by Bill Cara on May 31, 2007 08:22:19 AM | Category: Cara's Daily Commentary

Discourse

guten morgen from germany,

U.S. first-quarter growth weakest since late 2002

20. U.S. 1Q GDP revised down to 0.6% annualized from 1.3%

spin is that this are old numbers etc..... but they are bad old numbers.....

i think this from roach has the potential for the quote of the day or even the month

"Reverse Marshallplan"

There is a striking twist to the current globalization. Unlike the globalization of the early 20th century when capital flowed from the rich countries of the developed world to the “settlement economies” such as Argentina, Australia, and Canada, the opposite is true today. In the current globalization, the incremental saving for the advanced economies of the developed world has been provided almost entirely by the transfer of capital from the poor countries of the developing world (including oil producers). The United States, with its massive current account deficit, is the major beneficiary of this “reverse Marshall Plan” – absorbing more than 70% of the world’s surplus saving over the past three year.

Posted by: jmf at May 31, 2007 8:41 AM [link]

Another wayward soul, and capital from trusting clients lost forever .

http://tinyurl.com/ynoyrm

Posted by: Bill Cara at May 31, 2007 9:10 AM [link]

Caveat Emptor indeed!

I've been heading into ETF's instead of smaller issues to broaden exposure/divesify a bit and to get into issues with big wide doorways (high liquidity/big float) so when the mob turns against itself there is room to exit if needed.

There were some decent deals yesterday at the open for some of the commodity country ETFs like Brazil. I was lucky to have my buy finger in the right position yesterday. Unlike the pennies you can put on a tight stop and the float is huge.

I even held my nose and bought some PS golden dragon.....I'm up enough in a day to put in a profitable stop in case China tries to eat my lunch.

Glad to see the PM's holding here.

Best of luck to everyone today...make money!

Posted by: Craig at May 31, 2007 9:10 AM [link]

Gold at 660 already this morning

Posted by: chas at May 31, 2007 9:16 AM [link]

Are BigBanks going to the "exit"?
http://itulip.com/forums/showthread.php?t=1399
It says:
"Goldman Sachs Group Inc., the world's most profitable securities firm, hired Andrew Wilkinson, the lawyer who advised creditors in the bankruptcies of Eurotunnel Plc and Parmalat Finanziaria SpA, to help lead its restructuring business in London. Morgan Stanley, the third most-active merger adviser this year behind Citigroup Inc. and Goldman, added seven bankers in the past year, boosting its group to 61. Blackstone Group LP, poised to become the world's largest publicly traded buyout firm, is starting a corporate restructuring group in Europe."

It seems to me that "they" are preparing for the exit, and for the financial mess that will follow. Maybe it's early, yet, but it's a signal; I wouldn't invest too much in the current bubbles now on.

Posted by: Lelik at May 31, 2007 9:28 AM [link]

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Posted by: cb at May 31, 2007 9:45 AM [link]

Lelik,
There were some stories out yesterday about the financials lawyering up for the future unwinding.

So, like HB&B, we should adopt the Boy Scout motto: Be Prepared. HB&B is.

Posted by: Craig at May 31, 2007 9:51 AM [link]

Anyone else notice that China 's market had a full correction this week? From the close on Tuesday to the low in the first hour on Thursday morning, the market was down over 10%, the standard definition of a market correction. Whew, that was painful, but the good thing is now we can start going back up again. It took the rest of Thursday to rebound 6% so China should be fully recovered by about noon tomorrow :)

Posted by: bb at May 31, 2007 9:53 AM [link]

This morning I received a letter from ANON that I wish had been a comment, so I'll put it here.
-------------------

Bill, Being the contrarian that I am, I cannot help but to wonder at the latest campaign from the "gurus" and talking heads, newspapers, etc.

It appears that we are being told that a collapse is imminent, yet, everytime it looks like China or another market is ready to do so, the
bulls come in with a fresh round of support.

Here is my dilemma, as you are always teaching that we should not believe the gurus on CNBC, why should we now get out because of the current
parade of 'experts' advising us to do so? Is it not possible that GS and whomever else CAN keep the market going until the 2008 election or
beyond? Perhaps until Paulson et al are ready to retire?

A true trader should just delight in the current environment and attempt to trade with the powers instead of against them, as we are.

Just my thoughts as I see the other Asian markets shrug off the latest China market drop and the US
exchanges set more records afterwards.

thx and best regards as always
/ANON
----------------------

I replied,

ANON, I am not a guru who says get out or get in. I say that when markets, sectors and stocks get into the Distribution Zone and then pull back to a Sell Alert, you have to protect yourself.

I am speaking to the majority of my readers, who happen not to be nimble day traders. Most are professors, engineers, doctors, lawyers and retired persons, and what I am saying to them is there are certain times in a bond or stock cycle that they need to take extra precautionary steps and other times when they can ignore the talking heads and exercise more risk in decision-making.

Yes, it is possible that equity markets could remain high for another year or two because of global econ expansion.

And yes, this is a good market for nimble day traders. That means if you go home flat overnight, you won’t wake up to find your capital has gone missing.

/Bill

Posted by: Bill Cara at May 31, 2007 10:04 AM [link]

Bill,
Up to 4.90 on the ten year.

What do you suppose the breaking point is before rates turn this market?

Posted by: Craig at May 31, 2007 10:07 AM [link]

It is always interesting when government reports are juiced at a time of need, and revised after a day of double digit gains.

http://tinyurl.com/yowpfy

A good reason why some traders put their trust in Gold.

Earlier in this blog I wrote that rates can rise but there has to be a simultaneous growth in the economy, otherwise we have stagflation where rising rates will stocks and bonds.

Subsequently, the Administration has released revised estimates that the US economy is almost at a zero growth rate. It is very interesting also that this revision came out less than a day after FOMC Minutes stated the central bankers were not worried about econ growth in the US.

Which clown is next to get on the stage?

Posted by: Bill Cara at May 31, 2007 10:08 AM [link]

looks like a bond squeeze......

Posted by: jmf at May 31, 2007 10:14 AM [link]

Canadian Pacific to build line into Oil Sands Region

http://tinyurl.com/2ay678

This could use a lot of crushed rock.
Another customer for BMD?

Posted by: Stokbot at May 31, 2007 10:27 AM [link]

Hmmm, I don't know. The FOMC spent a bit more time on housing and the duration of "the correction" which I still think they are seriously underestimating, but that is their MO, right? It's all head fake. So it appears the next clown has a beard as we know the premise for the whole picture is a sad one.
Like "Titanic" we already know how this movie ends.

Posted by: Craig at May 31, 2007 10:30 AM [link]

Regarding the idea that the bear market might be postponed to late 2008 or later because of the upcoming U.S. election... That timeline could also work well for China given that the Summer Olympics are scheduled for 08/08/08. Personally, I would rather the shoe dropped now.

Posted by: northvan at May 31, 2007 10:32 AM [link]

Gold, typical ongoing gorilla options players repositioning before inevitable melt up.

Posted by: real1 at May 31, 2007 10:34 AM [link]

Do you have any information about Starcore (sam.v - Toronto)?
http://tinyurl.com/2rlbra
Today, it's behaving great, and technically, I like this company.
But I can't find a lot of info.
It seems they have good probable reserves.

Posted by: Lelik at May 31, 2007 10:49 AM [link]

Lelik. Resourceinvestor.com have done a couple of interesting articles on Starecore. Google Starcore International.

Posted by: Horatio at May 31, 2007 11:13 AM [link]

Hi Bill,

I've not commented here before but would like to give my opinion on where a top can be expected. My projections say 2640-2650 on the $compq which will end a 5 wave move up from Aug 04. We are almost at the end of the 5th & last wave up & will be correcting a 900 point move.

Posted by: Gary at May 31, 2007 11:14 AM [link]

Anyone thinking of busting their teeth nibbling at the PMs here? I'm considering adding to underwater positions in Kinross and Goldcorp, both of which have near identical technical patterns (recent daily RSI cross above the 30 line, stochastics and MACD poised to turn positive).

I suppose it'd be prudent to wait for a break above the downtrend lines, which has saved me thus far from additional grief.

Posted by: doug11 at May 31, 2007 11:15 AM [link]

I'm giving HB&B time to react and try to push the gold price down before I bite. I may nibble at some of the bigger companies though, NEM and UXG perhaps?

Posted by: chas at May 31, 2007 11:18 AM [link]

I meant ABX, not UXG

Posted by: chas at May 31, 2007 11:21 AM [link]

Interesting little bit of info on Gold.

http://www.reuters.com/article/reutersEdge/idUSL314785620070531

Posted by: Horatio at May 31, 2007 11:25 AM [link]

ALOHA !!

Bill posted: ON THE US DOLLAR ... "And, it helps increase in-bound domestic tourism and slow out-bound tourism."

One reason to own property in Hawaii, aside from the Asian attraction. I still want the State Of Hawaii to secede from the USA and become the "Bahamas Of The Pacific"! Why not cut ties with a "welfare state"? Sooner or later the welfare will run out anyway ... then what?

Bill you left out "welfare" from your Goldman essay. Would Goldman be the bank it is without the US government "contracts" they possess? Would Lockheed be profitable without their lucrative US government contracts? How many US corporations are on the US government payroll directly or indirectly? I'd say most are ... I call that "welfare"!! The USA of today is closer to the USSR than at any time in history ... This is the total opposite of what our Founding Fathers fought for and is totally opposite of true capitalism ... its closer to "communism" where the government takes care of ALL THE PEOPLE and that surely includes 98% of the BIG US CORPORATIONS.

Back in the 1970s my Father used to tell me that the US government produces nothing ... it only redistributes wealth created by "We The People" who work and pay taxes! There are far too many free-loaders feeding off the US Taxpayer and corporations are at the top of the list! If you do not believe me then just look at the Bush Fiscal Year 2008 Budget ... Corporations pay 1/10th the taxes citizens pay yet they reap 100% of the rewards!

The US government has been the average hard-working American's worst enemy ever since 1913, yet we keep voting the same elite banker puppets into office every four years! It matters not one bit if these politicians call themselves Dems or Reps ... it never has! The fact that you can no longer purchase any thing for a penny is proof of that!

Posted by: kaimu at May 31, 2007 11:56 AM [link]

Wachovia buys A.G. Edwards.....Goldman handles deal...

Posted by: maggy at May 31, 2007 12:07 PM [link]

Here are London broker Deepak Lalwani's insights into the India market.

http://tinyurl.com/3aosv2

Posted by: Bill Cara at May 31, 2007 1:09 PM [link]

MPEL

Showing a nice bottom with daily divergence btw price and rsi.

anyone nibbling?

Posted by: jasper at May 31, 2007 1:18 PM [link]

SLW-whoever was complaining about the underperformance of SLW relative to SLV is probably feeling better today...

BMD-thanks for the link, stokbot...glad to see a vote of confidence by Canadian Pacific...I'll take the aggregate sales for now, but if/when the oil sands takes off, the revenue generated by sales of reagent grade limestone will relegate the aggregate business to byproduct status...

Posted by: 2nd_ave at May 31, 2007 1:30 PM [link]

ALOHA !!

Well, she finally has realized what our Founding Fathers warned of over 200 years ago. The last US president that made such a warning was Eisenhower.

Who is "she" ...

Link: http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/31/EDGGTP3F9M1.DTL

The two party aristocracy revealed ...

I urge every reader here to go to this link for some "first-hand" insight into the corrupt American political system.

Posted by: kaimu at May 31, 2007 1:45 PM [link]

www.fmnn.com
Ron Paul on FMNN Radio, Thursday, 2PM EST
Thursday, May 31, 2007 - FreeMarketNews.com

Posted by: moneygenie at May 31, 2007 1:50 PM [link]

Kaimu and All,
Unbelievable.

I just told my wife we have a problem. My family has been Dems since the beginning of time. Greatgrandparents, Grandparents, Parents, siblings, myself.

That all ended when the Dems voted to send additional funding for GW's lie.

As I *promised* my local, state and national representatives, I will not vote for anyone that supports a lie that kills for one more second than it takes to recognize it.

So now I'm without a party or a country I can approve of. Pretty sad, eh?

I really do relish the fact that Bill can let it rip here and the jackbooted thugs can't touch him. Here they would find a way to send me to Guantanamo or at the very least get an audit notice. Maybe I need to make a permanent visit to my Canadian relatives! This place is scary.

Is this what government by and for GS is like?

Posted by: Craig at May 31, 2007 2:28 PM [link]

AP reports that:--

"A 27-year-old man described as one of the world's most prolific spammers was arrested Wednesday, and federal authorities said computer users across the Web could notice a decrease in the amount of junk e-mail. Robert Alan Soloway is accused of using networks of compromised "zombie" computers to send out millions upon millions of spam e-mails." -AP

The man hopefully would be a resident of China and be caught taking bribes. Prison here would be too generous for his kind.

Posted by: Bill Cara at May 31, 2007 2:34 PM [link]

Kaimu,
Cindy's letter is heartbreaking .... and I don't think that Canada is any better, except perhaps that we have less penchance for aggression and war. Canadians are globally known for being "polite and nice". At some point your old rotten house becomes uninhabitable and unfixable. You can either knock it down, let it collapse on top of you or move out. Cindy chose to move out. Seems like a smart move!
Fred

Posted by: Fred at May 31, 2007 2:34 PM [link]

Craig....

Of course there is an alternative.....

http://www.dailypaul.com/node/213

Posted by: maggy at May 31, 2007 2:36 PM [link]

Spot Silver is at 13.40, after a high earlier at 13.49.

http://quotes.ino.com/chart/?s=FOREX_XAGUSDO&v=w

That's quite a move from 12.73 last Thursday.

Posted by: Bill Cara at May 31, 2007 2:44 PM [link]

Jasper:
MPEL is looking good here.
I am tempted here for more, but I already maxed on MPEL Percentage (6%) of total holding.

Posted by: JogyP at May 31, 2007 2:46 PM [link]

Bill,

Fantastic write-up today, as always. It's really like a nice breeze from the north on a sultry day to read your blog. It's easy to see why people are so devoted to this site. Your integrity, honesty, and willingness to call a spade a spade--in a word, your moral courage, are what make you a real leader. Thanks for providing a counterweight to all the corruption and self-dealing we see around us.

Pat

Posted by: aucourant at May 31, 2007 2:47 PM [link]

Two comments and then a question...

1. The Untied States conquered Iraq to ultimately control the flow of oil therefrom and to influence the flow of oil from surrounding states.
The 'events on the ground' have not gone 'exactly as planned' but the megabases have been built and the only remaining question is the number of deaths required for final pacification. There will be no complete withdrawal ever under any administration for the simple reason that 'this country needs energy.' The ruling elite has made the decision to get the energy regardless of the consequences.

2. The ruling elite in the United States has devided itself into two pseudo-gangs for the purpose of distraction of the 'masses.' Sort of like the two wings of an 'inner-party' in a totalitarian state. (where being a garden-variety 'party member' means very little)

Question...anyone here know of a VIX tied ETN in registration??? I would like to conveniently work with VIX (long only) but the existing options carry out-of-this-world premiums.

Posted by: esbisworried at May 31, 2007 2:47 PM [link]

ALOHA !!

Fred and all ... This entire system is where it is simply because of a corrupt "fiat" monetary system. So long as any government can print unlimited amounts of paper there is no end to war and corruption.

I find it very interesting that Cindy is selling her Crawford property and so is Bush. While Cindy retreats to her family in the USA the Bush family retreats to a 92,000 acre compound in Paraguay next to a US military base! Hummmmm, who is the more patriotic? I believe our Founding Fathers, if they were alive today, would award Cindy a metal and put Bush in front of a firing squad as a traitor! RUSH ... you can quote me on that one!

Posted by: kaimu at May 31, 2007 2:57 PM [link]

Isn't that the same trick as beads for land?

Hell, paper isn't even as good as beads.
Now make it gold beads and you're talking.

I think my last post got hijacked to security as I mentioned v14gra! Sorry Bill.

Posted by: Craig at May 31, 2007 3:02 PM [link]

good to see the miners catching a bid...if you bought in yesterday, you now have the (nicer) problem of not letting yourself get taken out too soon...

Posted by: 2nd_ave at May 31, 2007 3:04 PM [link]

2nd_ave : hello all!

Pray tell, how to do with KGC ? opine pls.

Posted by: moneygenie at May 31, 2007 3:21 PM [link]

Kaimu, please...

Enough with the Bush bashing. I think less is more.

I do think that the previous actions and today's letter ("Goodbye America") by Cindy Sheehan touched the hearts of a lot of people. It is a sad situation, and I have written here before that there are no winners in such a discussion. So it's probably best to internalize it now and work for change when you can.

My rhetoric ("the rotting of the empire") is even too much for me to re-read at times, and I don't feel comfortable for putting it out there. Frankly it is not the most intellectually persuasive argument.

So, hopefully we will all try to cool it down to a level of controlled passion.

It's also best that we try to analyze these situations so that when we switch from Buy to Sell and vice versa, we traders are not seen as political advocates. Looking forward, I too do not relish the thought of a "firing squad" when I happen to opine that Gold must be sold.

A couple days ago I suggested we have have a reader-based editorial board here that speaks up when some of us (including me) go overboard. I'll try to get that done in June.

Posted by: Bill Cara at May 31, 2007 3:46 PM [link]

Gammon Lake Resources Inc (GRS) does not seem to be participating in the PM rally party today.

Some of the big winners today: GSS,GG, MDG, SLW, KRY and KGC

Posted by: JogyP at May 31, 2007 3:53 PM [link]

2nd_ave,

Yes, I'm feeling much better about SLW today. Over the past 2 weeks I had been looking at how SLW would follow the down trend in silver, but would not follow the up trend nearly as well. Today though the SLW buyers believe that this rise is silver is here to stay for a while.

I'm looking forward to the silver charts tonight when Asia and Europe trade their silver, and I'm hoping that HB&B aren't able to stifle this reversal in the most recent short term trend.

Posted by: Quentusrex at May 31, 2007 4:04 PM [link]

Re Gammon Lake, here is the latest BMO research comment (May 22):

Gammon Lake Resources Inc. (GAM-TSX, C$15.65)
Outperform Target: C$25.00

• Gammon Lake announced that it has begun work to develop a third mine (second underground mine) at the Ocampo project in Mexico.

• The new mine is intended to exploit high grade veins that extend below the limits of the open pit mine.

• The company has already begun driving a 4.5 metre by 4.5 metre ramp toward the high grade zones, which is expected to access the mineralization in Q3/07.

------------------------------------

Note: I have an associate (not from BMO) traveling this weekend to Guyana on a mining analyst junket. If there is anything that readers want to know, pop the questions into a comment, and he'll read it (or I'll send it along). Hopefully, we'll get an update.

Posted by: Bill Cara at May 31, 2007 4:06 PM [link]

Yeah, about .60% for GRS, but on almost double normal daily volume. Hopefully it will catch-up.

Posted by: Craig at May 31, 2007 4:16 PM [link]

Great article on Bloomberg today exposing the corrupt ratings agencies and how much money they have made off inflating ratings of risky CDO's. While Minyanville beat them to the punch on exposing the conflict of interest, this article has much more detail and some real numbers to boggle your mind. Now that we know many of these subprime-backed CDO's are going to implode, I have a question to pose to the community: what is the best way to invest, directly or indirectly, on the collapse of some of these securities? In my traditional brokerage account with a big US broker, I have no way to trade the swaps that the big boys use to hedge their risk on the toxic waste.

Posted by: GTT at May 31, 2007 4:52 PM [link]

Bill,

I'm curious about Guyana Goldfields (GUY) and even more so about two companies which they are associated with. GUY recently purchased shares in Gold Port (GPO). Rob McEwen personally invested an equal amount in GPO. GUY also recently exercised a back-in deal with Aranka (ARK). I believe that the CEO of GUY, John Patrick Sheridan, is also CEO of ARK. GUY is clearly creating a bigger footprint in Guyana. Meanwhile, I haven't seen significant news recently from any of the three companies except for these business transactions. My gut tells me to pay very close attention to these companies and find out whatever I can.

Fred

Posted by: Fred at May 31, 2007 4:54 PM [link]

jogyp,

Yesterday I went with the good chart, WYNN, as a casino holding. Can you remind me why MPEL trailed downward over past weeks? Vaguely, I'm thinking that the breakup of the company was the beginning....and the recent news about travel restrictions on residents (to protect them from themselves). I'm still uncertain if I want more casino stock,but if bill put mpel on a cara list that would be another story.

Posted by: jasper at May 31, 2007 5:03 PM [link]

fwiw,
i'm getting sent to the malicious review reader frequently

Posted by: jasper at May 31, 2007 5:15 PM [link]

Fred,

My associate will be reporting to me soon on the situation at GUY, GPO and ARK, in addition to others, including VAL.

As you may know, I also happen to know Patrick Sheridan and Rob McEwen as well as Stephen Wilkinson at ValGold. I have met personally with Rob and Patrick, separately, in recent months.

I would encourage readers to do their own DD and I will attempt, as I have, to supplement that through independent research.

Presently I have no position in any of these companies, only because I am too busy preparing for my move, but I have a high regard for all the people, the properties and the country.

I am presently negotiating to personally take control of a small, private gold operator in Guyana that is not associated in any way with these people, but that too has been sidetracked because of my commitments elsewhere.

------------------

jasper,

I have been told that MT/Typekey have recently changed procedures. Unfortunately I have been too busy to look into the problem. I too am frustrated, but at least I am being told that the problem is at my end, and hence resolvable. Everything takes time.

Posted by: Bill Cara at May 31, 2007 5:41 PM [link]

esbisworried -

The VIX options are european options, only exercisable at expiration. Until then, you may sell them, but not exercise them. As a result, they don't track movements in the VIX as well as "american style options" (exercisable at any time) track their underlying securities.

As I learned through bitter experience, the VIX itself may have risen 80% above the strike price, but the VIX call will only rise about 20%. If you want to bet on volatility, it's better to simply get index options on the S&P or NAZ.

Posted by: Jock at May 31, 2007 5:57 PM [link]

Dear Bill,

I must begin by saying that I have been an avid reader of yours for just nigh a year; thus far finding your impassioned insight both objective as well as instructional. I am a semi-pro trader / broker / advisor who follows approximately 25 - 30 sites / blogs daily if not hourly; point being that I can say with wholehearted certitude that your time and efforts are not only "honest" but also punctually efficient. Folks, if there were more (seemingly warranted) impartial commentators out there I would not have such an easy time moving a 'Merrill Million a Day.'

With the aforementioned platitudes aside, I would greatly appreciate your input as well as that of your Guyana associate's in regards to the inherent validity of "diario de guayana" itself. I do apologize in advance for myself continuing the ever-mind-numbing stream of crystie hype/hubris/hamartia, and in direct response I will begin to share some of my own daily journals with your fine board. I sincerely hope that this finds you well and look forward to helping many of your Carans (or is it Carites) self-direct their accounts through increasing both the level and breadth of dialogue featured herein.

- brandon(alpha)

Posted by: brandonalpha at May 31, 2007 6:16 PM [link]

Thanks to Kaimu for his typically insightful answer late last night to my question on how to assess junior miners'drilling results. Other readers interested in the junior miners might wish to cycle back to that entry.

Posted by: Jock at May 31, 2007 7:11 PM [link]

moneygenie: I have no position in KGC. I know KGC is categorized as a low-cost producer. Other than than, I'll defer to someone who actually follows the company.

Posted by: 2nd_ave at May 31, 2007 7:45 PM [link]

Bill
Let's not discourage Kaimu from feeling free to express his opinions here.
I have not yet decided to move to Hawaii and grow... something...but I sure as hell enjoy his take on things.
If this is not a forum that can absorb extreme opinion, I would loose interest.
Good luck and good trading, my friends.
You all give me hope.

Posted by: Rigdon at May 31, 2007 7:48 PM [link]

Bill,

Just when I thought I had stopped hearing about Free Masons now all this focus on the overpowering influence of GS on government. It sounds like some sort of global conspiracy of the "One World Government" genre in the making. One wonders if deep in the bowels of the basement at GS headquarters a Star Chamber exists where incalcitrant members of the power elite ( such as the outgoing World Bank President ) are taken to task before being sent out on their next mission. Seriously, with all of the brilliant and accomplished minds available from so many sources we should wonder why GS seems to have a neck-hold on power and influence in the world. Like you said, they put their pants on in the morning, just like you and me.

Posted by: TerryC at May 31, 2007 8:30 PM [link]

Markets move in mysterious ways. Sometimes with the help of big brother. The best that a small investor can do is buy quality companies and keep a stop in place should the stock sell-off. And, from what I have read, most money managers can't even match the return of the indexes, not less beat them.

A point I would like to make is concerning countries that are establishing investment agency's to manage their trade surplus. China recently set up one of these investment funds which, I believe, invested in Blackstone Group. These investment funds could be part of what is keeping the US market up. You have a number of countries that are running huge surpluses these days and the money has to go somewere. So why not use it to buy equities in US companies ? maybe that is just what they are doing.

Posted by: Mikel at May 31, 2007 8:47 PM [link]

re: yield curve reversal

hey folks, while the $TNX (ten year yield) is going up the $IRX (3 month T-bill yield) is plummeting. you can keep an eye on the yield curve by watching $TNX:$IRX on stockcharts. this ratio can possibly be a bullish tell on gold stocks related to liquidity in the bond market. notice that the fed hasn't moved to lower administered (short term) rates yet, but they will because they will follow the $IRX, as they always do (follow, not lead, that is).

now, why would short term debt prices go up (yields go down)? why would participants suddenly want (demand) to be in short term debt? maybe because short term debt is really the closest to cash? things are changing in the credit markets. probably not for the better.

Posted by: schnauser at May 31, 2007 9:06 PM [link]

BMD: link to annual meeting presentations and slides (no sound until June 1):

http://www.birchmountain.com/Investor/Annual_Meeting/body_annual_meeting.html

The annual meeting took place in Calgary this afternoon.

Posted by: 2nd_ave at May 31, 2007 9:18 PM [link]

Both NEM and ABX gapping up today on almost 2x average volume, in the face of mostly negative recent commentary on gold in the media (except here, of course)...I think there's a good chance gold breaks out from here.

More "notes" on KGC: news on an upgrade by Salman from hold to buy crossed the wires at 952am today...KGC also gapped up on 2x normal volume...

Bill's comment in January about "gold being the asset class of the year" keeps playing in the back of my mind. His record on gold is one reason I'm making on overweight bet on the sector. McEwen's October '06 presentation is another. Once you define your downside tolerance and cap your risk, I think now is a good time to place your chips...

Posted by: 2nd_ave at May 31, 2007 10:00 PM [link]

Rig,

I never discourage Kaimu from anything short of saying he'd like to have the President lined up against a wall and shot. Even Kaimu has to laugh at that piece of rhetoric.

We all know he has given the readers a lot of names of juniors, and that's something I do not willingly extend to others unless I know the person. But Kaimu and I have spoken by phone, and I checked out some of his suggestions and know where he's coming from.

As Jock points out, Kaimu has earned the right to continue to do that because most of those picks have done well.

Posted by: Bill Cara at May 31, 2007 10:15 PM [link]

Bill,

I too am curious about Guyana Goldfields (GUY).There was a time when they thought it was "the" El Dorado. The best rum in the country is named El Dorado Gold.

Posted by: moneygenie at May 31, 2007 10:29 PM [link]

schnauser -

Wow, GREAT chart reference there. Makes the changes come alive.

Do you have any similar measure for credit quality: 10 yr. junk vs. 10 year treasury?

Thanks in advance. - Jock

Posted by: Jock at May 31, 2007 10:34 PM [link]

moneygenie,

I'll let you in on a secret. At the PDAC 2006, Mr Platinum was entertaining us with that El Dorado Gold 25YO Rum, and I wrote about it. At PDAC 2007, the bottles were right there in Mr Platinum's suite again, but I forgot to tell Jock and Jake. (LOL)

And you're right. There is a connection to GUY.

Posted by: Bill Cara at May 31, 2007 10:38 PM [link]

Good, Bill.
Opinions like Kaimu's (as extreme as they may appear to be...at times) are what we are here for, or at least I am.
He has tuned me into some interesting situations. We are "grown ups".
Some haven't paid off, some have.
Sorta like life.
Thanks Kaimu.

Posted by: Rigdon at May 31, 2007 10:49 PM [link]

ALOHA !!

Bill ... in terms of the "firing squad" ... I was speaking of a time when our Founding Fathers were alive and during those times many were shot or hanged for treason and done so for a lot less than what our elected leaders do today on a daily basis. For Christ's sake just stealing a horse back then was a hanging offense ... but obviously today we are more civilized and do not execute people for treason or stealing horses. As for "Gold" ... I am not sure how I equated selling Gold to a "firing squad"? At any rate I will attempt more self-editing of passionate discourse in the future. Its the "social equity" part that gets me fired up!

I rant because the system has been broken for many, many decades and it upsets me that the Cindy Sheehans of the World continue to blindly sacrifice their children's lives to the alter of the US Empire. I can only imagine the years of love and caring that woman put into her family only to have it all dismissed into a vapor of patriotic smoke and mirrors the likes we have not seen in this country since Vietnam! It galls me to see those like Bush, Cheney and Wolfowitz design warfare to suit their political agendas while not commiting a single child of theirs into the frey of Iraq and to top it off they themselves were either 4F or just plain chickens hiding out in the National Guard when it was their turn to serve on the front lines of Vietnam! Whose kids took Bush and Cheney's place in Vietnam and never came back home? Making war in this country has become much too easy ... yet paying the price is always relegated to an "after-thought"! It was in Vietnam as it is now in Iraq ... constantly consequences are pushed onto future generations to pay!

Like Richard Maybury says ... "Governments are bulldozers, large and powerful, but slow, clumsy and not very bright. The way they hide their blunders is by pushing the consequences into the future, like a bulldozer pushing a pile of manure ahead of itself ..."

Bill ... it is not so much "Bush bashing" as it is BIG GOVERNMENT BASHING ... Almost any politician in office today more than qualifies to be bashed! As I have said many times, it all boils down to ...

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY !!

Posted by: kaimu at June 1, 2007 12:12 AM [link]

For those interested, over at Wolfie's site, is an excellent presentation by John Embry of Sprott Asset on the Future of Gold.

Posted by: Telestar3d at June 1, 2007 2:54 AM [link]

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