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June 15, 2007
Cara’s Daily Commentary, Fri., June 15, 2007, 8:45 AM
Market Chat
From 1:30pm on Wednesday, the moment the capital markets switched from cash to (debt plus) stocks and bonds, the anticipated sector rotation into commodity price sensitive stocks occurred. Traders who had been waiting for the coiled spring to release in this segment were rewarded for their Buys.
Yesterday morning I pointed out that the Cara 100 segment that had been getting the most oversold on the Daily RSI-7, which was the GICS 10 Energy, GICS 15 Basic Materials and GICS 20 Industrials, had closed strongest Wednesday, with most of the gains in the last 2.5 hours of the day: (XLE +2.0 pct) (XLB +2.4 pct) (XLI +2.4 pct).
During yesterday’s session, this sector rotation continued: (XLE +1.7 pct) (XLB +0.8 pct) (XLI +0.5 pct). That means that after the last 9 hours of trading, the following (very approximate) results have occurred: (XLE +3.7 pct) (XLB +3.2 pct) (XLI +2.9 pct).
On the other hand, just as I pointed out before yesterday’s session started, traders who thought the market would favor the Consumer segment were disappointed. Over about 9 hours, the GICS 25 Cons. Discretionary (XLY +1.9 pct), GICS 30 Cons. Staples (XLP +1.0 pct) and GICS 35 Healthcare (XLV or IYH +1.1 pct) did not fare as well.
As I like to say, every day the market laboratory teaches stuff like this. It is really fascinating.
Yesterday, the market leaders were Oil Services (again) ($OSX +2.3 pct), Oil ($XOI +2.0 pct), Natural Gas ($XNG +1.8 pct), Airlines ($XAL +1.8 pct), Goldminers ($XAU +1.4 pct), Transports ($TRANQ +1.2 pct) and Commodities ($CRX +1.2 pct). These were the groups that had been knocked down by a rising interest yield market.
In yesterday’s report, I wrote, “As long as Bond prices now rally (yields drop), (commodity price sensitive sectors and industries) will continue to be lifted. That's not entirely what I had in mind to say, which was that bonds must stop crashing here before stock prices will rally strongly, which in both cases is what I expect for the near term.
In case you failed to notice, Goldminers ($XAU) are up +2.8 pct in the past 9 trading hours.
Today at 8:30am ET, the US Consumer Price Index (CPI) report comes out. Yesterday, it was the Producer Price Index (PPI) report. Traders fear the Fed will have to clamp down on rising inflation by tightening credit, which will move interest rates higher.
Initially, higher rates and yields hurt rising commodity prices because the $USD is strengthened, but after a while the exercise becomes one of chasing the dog’s tail, and the tail (in the form of higher prices) usually manages to stay ahead until the dog gets exhausted and the game is over.
Same thing happens in economics and market prices. But it is this lag effect (as central banks stay behind the curve) that pulls prices higher.
I have often thought this scenario plays out because central bankers are constantly telling us that inflation is not a serious issue until after we observe the tightening we change our opinion. Then we focus on the factual and anecdotal evidence, which tends to drive those prices higher, faster than the central bankers can arrest the growth.
In any event, two remarkable events occur: (i) rising rates tend to support the $USD and knock down $USD-denominated commodity prices early in the cycle, and then (ii) the cycle becomes pronounced, which is a self-propagating driver of higher commodity prices, until really tough medicine is administered by central bankers.
Where we are today, I think is just past stage one. In a Goldilocks world, central bankers would ratchet up rates quickly and bond traders would suddenly become shocked that inflation is destroying values, causing them to sell off bonds. But in the real world, central bankers are always behind the curve and bond traders in 2Q05 (two years ago) saw inflation was (i) higher than being reported, and (ii) likely to become a problem, so they started selling bonds.
And all along, I was saying here, “Don’t buy bonds”. In the 2Q of 2005, the US 30-year Treasury Bond ($USB) reached a cycle peak of 119.72. A year later, the $USB dropped to a cycle low of 105.31. Then along came Treasury Secretary Henry Paulson and interest rates were dropped, the Fed bought up the bond inventory from HB&B, giving the major banks the cash to finance Humungous Private Equity Corp (didn’t ex-Treasury Sec John Snow see the writing on the wall and quickly joined HPEC Cerberus!) bond prices, and bond prices lifted – for a while.
After hitting a cycle peak of almost 115 on the $USB in the 4Q06, suddenly the inflation cracks started to appear in countries that could not hide the facts as well as say America. Rates started higher, bond traders started looking at the inflation data, and concluded that bonds should be sold from portfolios again. That capital flowed into equities this year, pushing the US broad markets to records, and that enthusiasm spread around the world.
So, are we traders ready to chuck our positions in stocks and bonds at this point? Soon, I keep saying, but not quite yet. The big cycle in stocks usually ends with the roll-over of the commodity price sensitive sectors/industries, starting with oil, then metals, and finally gold.
As I haven’t yet seen that final push to the top for oil, metals and gold, I am hanging onto my belief that equities are still moving higher.
What will help that, of course, is that interest rates/yields do not rise. They don’t have to fall, but the right conditions for a normal market cycle rotation would exist if interest yields did not push the competition for capital, and hence let prices rise (and earnings yields fall) to a point where traders just refuse to price risk so cheaply.
I conclude then and the anecdotal evidence is all around us, that the world is going through a phase where commodity price increases are being tested in the consumer market. Corporations are trying to determine how much pricing power they have before they have to back off.
As somebody who professionally tests these datapoints said to me this week, in a local store the price of ground beef is now $4.00 per pound, up from about $1.00/lb a year ago. His inquiry was met with the remark that the price of corn to feed the cattle has risen with the ethanol market driving prices higher, and with the rising cost of fuel to get products to market, etc. But, he says, those factors cannot cause a quadrupling of prices, so he has determined that the retailer is attempting to find an acceptable price for beef products, and maybe that turns out to be $2 or $2.50, where the consumer is happy not to pay $4.00 any longer.
We see the same with gasoline at the fuel pump. In the US, there seems to be a push for $4 per gallon, which will permanently erase the memory of $1.25/gallon, so that when the price settles in (for the future) at $2.50, everybody is relieved the cost is not $3.50 and $4.
In every inflation cycle, this re-pricing scenario exists. It is happening today in housing because the government needs more tax revenues from real estate sales and property taxes and so forth, like they get from higher gasoline prices and cattle prices and so forth. As I say, the govt desperately does not want a housing market collapse because it needs the higher taxes that are pegged to higher prices.
In every inflation cycle, the value of fiat money drops, ie, it buys less. The only standard (also called storehouse) of value is gold, so traders who want to stay even with inflation, which destroys wealth, buy gold, and govt want them to believe that gold has less value, so they sell their stocks into the market to drive down prices, and at the same time they report highly biased consumer prices that understate true cost increases.
A former Canadian Minister of Finance, by the way, made that statement, which is that civil servants are naturally biased to the policies of the government of the day (whatever political party) because these govt employees fear losing their jobs. I believe that, and wish that more politicians would be so frank.
It is the pervasive intellectual dishonesty that tears at the financial system – things like a downgrade rating to HOLD really (wink, wink) means SELL, or a Financial Advisor is a representative who is licensed by regulators to advise, when the truth is they hold a license to sell. Today we are going to be told that Consumer Price Inflation is a reasonable +2 pct, when we all know it is not. When we (families, students, business people, whatever) compare our costs – apples to apples – of products and services we buy today versus a year ago, our costs have risen much more than +2 pct.
So the truth is we live a lie. And then we trade prices based on lies, which makes the task almost impossible.
But we do what we can.
Economics Calendar and Reports
Today, there are some very important economic datapoints coming up in the US and Europe. Yesterday we were told that the US Producer Price Index report was “tame”.
Economic calendar from Econoday
Econoday prior week's international economic report.
At 8:30ET yesterday, there were two important US econ reports published. Econoday provided a summary.
Econoday report on the US Producer Price Index..Econoday report on US Jobless Claims, which is an indicator of the strength of the jobs market..
The important report today at 8:30am is the US Consumer Price Inflation data.
Econoday report on the US Consumer Price Index..
There are also reports on the Current Account, the Empire State Manufacturing Survey, US Industrial Production, the U of Michigan Consumer Sentiment Survey, and speeches by Fed Chair Bernanke and, later, by San Francisco Fed Pres. Jane Yellen. This is a big day for the spinmeisters.
Global Equity Markets Review
The US market continued to rally yesterday, although most of the move was over by 10:30am.
US Equity Markets Review
NASDAQ Composite (interactive) chart
Here’s the closing data of the Asia-Pacific equity markets.. Except for India’s Bombay Sensex 30 index, which was a little soft, it was all green arrows across the Asia-Pacific region today.
Here’s the chart of the Japanese Nikkei 225.. The Nikkei Dow gained +129 points (+0.72 pct) today, which was on top of the previous day’s +109 point gain. Reuters is reporting that investment trust assets are surging, which I gather is like the phenomenon here where mutual fund assets are surging. That money flow will sustain higher prices.
Here’s the chart of the Shanghai equity market.. Shanghai has traded sideways for three straight days, following a burst of higher prices late in Tuesday’s session.
Here’s the chart of the Bombay India Sensex 30 index.. The very volatile Indian equity market was in rally mode until late in the session, and then sold off hard, closing down -47 points (-0.33 pct) on the BSE index.
Here’s the latest session data for the bourses of Europe. There is a broad rally in Europe today (as of 8:22am ET) as interest rates are under control. There seems to be some sense that the US CPI at 8:30am ET will be ok.
Bonds & Yields Review
Here is the T-Bond chart.
Bond prices drifted off yesterday. The T-Bond closed at 106.03125, down a bit from 106.1875.
Forex Review
Here is the $USD chart at the close of the prior session.
The $USD (at 7:56am ET) is at 83.108, up a bit from 83.083 at this time yesterday.
Commodities Review
The $CRB closed yesterday at 316.59, up sharply from 311.69 on Wednesday.
Here is the $CRB Index chart.
Oil Review
At 8:29am ET this morning, the e-MiNY Jul-07 contract for Crude Oil was 67.425, up sharply from 66.575 yesterday and from 65.150 Wednesday at about this time.
Here is the e-miNY July-07 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Gold & Precious Metals Review
Spot gold at 8:31am ET today is 650.48, up from 646.80 yesterday morning at this time.
I think it is time for gold and the PM bullion and stocks to rock and roll.
Here is the Recent Spot Gold chart.
At 8:33am ET this morning, the Spot silver (AG) was 13.06, up from 12.98 yesterday morning. I think silver will likely rally here depending on the CPI that is being released as I write this.
Apparently the MarketWatch headline reads: “Split Decision.” Must be a sporting contest of some kind. (LOL)
Here is the Recent Spot Silver chart.
This morning at 8:34am ET, Spot platinum is at 1276, up just +1 since yesterday at this point.
Here is the Recent Spot Platinum chart.
Palladium (at 8:37am ET) is at 366, down -1 from this time yesterday.
Here is the Recent Spot Palladium chart.
Precious Metals Stocks Review
After three or four heavy selling days, $XAU stopped plunging Tuesday afternoon. Wednesday there was a further gain of +1.39 pct, and yesterday that was extended by +1.35 pct.
As I have written, “With the ETF’s today, it is rather easy to hammer this market, but in retrospect, the goldminers are making good profits, and new resources are not being discovered or brought into production as fast as reserves are depleting. The price of gold and hence the goldminers will rise in the long term… The long base pattern for the goldminers, stretching back to the beginning of 2006 is a powerful one, like a spring coil ready to pop. I would feel more confident when $XAU moves into the 144 level. As you can see on the Weekly chart, once $XAU rises above the 150-155 level, there is little to stop this index from rallying to the long cycle high of 171.71 that was set in May 2006.”
There are many analysts who hold the view that gold stocks ought to be sold here. I don’t share that view. I said that yesterday, two days ago, and maybe the day before that. (LOL)
Here are the $XAU charts, courtesy of StockCharts.com:
Interactive Chart of Daily and Weekly US 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
Two days ago, I wrote in this space that KRY should not be the baby pitched out with the bathwater, and in fact if it dropped to an extreme low, the stock ought to be bought. Yesterday morning the company issued a news release that the remaining permits were forthcoming according to the govt correspondence. Share price and volume exploded to the upside.
I suspect the story will continue. I’ll try to attend the AGM in Toronto at the end of this month.
The other goldminers have advanced smartly in the past 9 hours of trading when the market tide reversed.
The Cara Global 100 Stockwatch
This data is supplied every day by the folks at KNOBIAS, Inc.
Yesterday, in a fairly strong market, at least 25 of the Cara 100 stocks gained +2.0 pct or more.
Here are the previous session’s Cara 100 gainers. Interactive charts of the top 12 Watch List gainers.
Please note that I dropped ADSK from the Cara 100, but have not yet changed the table at Knobias. Also note that (in response LOL) Goldman Sachs dropped their rating from Buy to Neutral or ADSK.
The big losers (of the Cara 100) included (see below) Goldman Sachs (GS), which had a huge increase in selling volume and was down -3.4 pct. Here is where traders need intra-day price and volume data to be able to make informed decisions. You never know when a monster SELL order (or BUY order) is complete until it is reflected in the price and volume studies.
Here are the previous session’s Cara 100 losers. Interactive charts of the top 12 Watch List losers.
Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the previous session. Fourteen new highs and zero new lows.
Here are the Cara 100 stocks that had extreme volume changes in the previous session. This is a good list to watch anytime markets start trending in the extreme. It pays to watch the price and volume extremes. That btw is called Money Flow.
Note the pct change plus the volume increase over the average daily volume for that stock. The data shows that GS took a big hit in capital outflow.
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:
“Chris” takes this data from BillCara2.com, which is not smoothed like David’s data (from Worden). I ought to be able to introduce a Wilder Smoother to this data in upcoming months.
Here, from “Sergey”, are the stocks in the Cara 100 trading with the highest and lowest RSI-7 sorted by (i) daily and (ii) monthly values, for the previous session. As “David” is on course this week, “Sergey” has kindly taken over.
Other Recent Wall Street upgrades
Other Recent Wall Street 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 is updated later in the morning.
Most of the recent initiated coverage ratings are positive.
Community Chat
As I pointed out yesterday morning, I believe that both the equity and bond markets and commodity prices are going to start lifting again. I don’t think bonds will do much though because the Fed is concerned about inflation and bond traders are not going to jump back in for anything more than a flip trade.
As I say, Paulson and Bernanke are in the shadows doing the heavy lifting. Prof Bernanke does come out with a speech today, which ought to be interesting. But these are the types of speeches that are spun either way depending on communications that go on behind the scenes.
Have a great day.
Posted by Posted by Bill Cara on June 15, 2007 08:45:57 AM | Category: Cara's Daily Commentary
Discourse
Thank You Bill.
I am relieved we made it accross the Cassandra Crossing with our caboose and without having to throw mama from the train.
Good luck to all today.
Posted by: Craig ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 15, 2007 9:17 AM [link]
Morning Guys,
I continue to be surprised by the lay-up that people are getting right now, as far as being able to pick up KRY stock cheap. One never would have thought that there'd be this much apparant opportunity this close to the event, God and Nature willing.
Chris
Posted by: shark_attack at
June 15, 2007 10:11 AM [link]
Bill,
I received a great deal of interest in my petition yesterday which I believe was partially precipitated by the blog postings here. I also received some feedback via e-mail citing some deficiencies in the site. One being the petition cause was not easily understood. I drafted this memo that may aid viewers and should be put up shortly. I did want to post it here as well in response to the comments.
Dave
www.investigatethesec.com
June 15, 2007
Fellow Investors,
I received an e-mail last night informing me that this web site lacked the information necessary to make a conscious and informed decision on whether to sign the petition or not. The individual asked that I address specifically whether naked shorting is illegal and if so, what specific laws were being violated.
Since the site has been up and running for several years now I have to admit that basic information has become lost in the maze of other commentary and documents.
So here are some simple answers:
Question: Is naked shorting illegal?
Answer: It depends. There is legal and illegal naked shorting and the difference is relative to the foundation of the trade itself
Ø Market Makers making a bona-fide market in a security can legally sell stock they do not have in inventory, nor have they entered into a contract to borrow, in order to provide liquidity in a market where liquidity may otherwise not exist. The SEC defines this as a temporary condition where for example, large and unusual buy side interest comes into a security with only limited sell side interests. Regulators have created the market making exemption to allow the market makers to sell into this demand so as to not over-inflate the stock in this temporary buy side environment.
Ø Market Makers who are shorting a stock in a house account, without meeting the standards of bona-fide market making and use the exemption to avoid a borrow on the short sale are executing an illegal trade. The failed trade is an illegal naked short.
Ø Broker-Dealers who execute client short sale orders without a proper locate and fail to attempt to borrow a share to meet the 3-day settlement window are executing an illegal naked short sale.
Question: What specific laws are being violated when an illegal naked short sale is executed.
Answer: There are several laws that become involved in the short sale process and the settlement process.
Ø Exchange Act of 1934 Section 17A (http://www.law.uc.edu/CCL/34Act/sec17A.html). This section pertains to the requirements of broker-dealers and clearing firms in the execution and settlement of a trade. It requires that for the safety of the investor and the markets, all trades must settle promptly and accurately.
Ø Exchange Act of 1934 Rule 15c6-1 (http://www.law.uc.edu/CCL/34ActRls/rule15c6-1.html). This rule defines the settlement cycle for a trade execution. The rule requires that a broker or dealer shall not effect or enter into a contract for the purchase or sale of a security (other than an exempted security, government security, municipal security, commercial paper, bankers' acceptances, or commercial bills) that provides for payment of funds and delivery of securities later than the third business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the transaction
Ø Exchange Act of 1934 Rule 15c3-3 (http://www.law.uc.edu/CCL/34ActRls/rule15c3-3.html). This rule again applies to the broker dealers and requires that they take all necessary steps to obtain prompt custody of , and thereafter protect, all securities which have been purchased and paid in full by the client. When a naked short is executed, the purchaser is being denied protection under this rule as their broker dealer has failed to enforce the contracts of 15c6-1 and has failed to obtain the prompt custody of a share paid in full.
Ø NASD Rule 3370. This is the Affirmative Determination rule that requires that in the execution of any short sale the selling broker-dealer representing the short seller or house account, must have engaged in a locate of a share available for borrow before the execution of that trade is made. Once the trade is executed, to be in compliance with rules 15c6-1 of the Exchange Act of 1934 the firm must then borrow those shares to settle the trade. To locate the shares without the intent of the borrow for settlement would be a contract violation of 15c6-1.
Ø Chairman Cox Opening Remarks to SHO Reform June 13, 2007 (http://www.exchange-handbook.co.uk/index.cfm?section=news&action=detail&id=67616 ). “Finally, in addition to today's measures, and because abusive "naked" short selling is illegal under the general antifraud provisions of the federal securities laws, I have asked the staff to draft a recommendation for a future rule proposal that would specifically state that abusive "naked" short selling is fraud. Such a rule holds the potential of streamlining the prosecution of this apparently rare form of market manipulation and, if today's measures leave any doubt, would direct still more Commission power to stamping out such abuses.”
So the Issue:
The SEC has made many statements such as that of Chairman Cox above but the Commission does not walk the walk to the comments made.
In 2003 when the SEC proposed the short sale reforms under SHO the SEC never presented an option for a “grandfather clause” to past persistent settlement failures. The public did not have opportunity to vote on such a reform and comment on the legalities of the proposal itself. By all rights these fails raise doubt as to whether they all fall under the “legal” standards allowed for a trade to fail settlement.
By 2005 the SEC had aided the fraud in the industry, as the grandfather clause became law despite the questionable legality of the law. By allowing a free pass to these large and persistent fails the SEC violated their own laws regarding prompt settlement of securities and the legal terms of a contract in the execution of a trade. Consideration is also being given that the SEC violated shareholder 5th Amendment rights by taking the property of one (shares fully purchased) and giving such property to another (failing broker dealer) without providing compensation for such.
The question posed is, does the SEC have the legal authority to decide for all shareholders whether or not each should promptly receive what was fully paid for?
The SEC mission is that of investor advocate. Yet taking the property rights of investors and giving them up to protect the financial liabilities of industry members who choose, for financial reasons, not to enforce the contracts required under securities laws is a direct contradiction to such advocacy.
During the June 13, 2007 hearings on SHO reforms, members of the Commission staff repeatedly confused forcing the settlement failures with market manipulation through a short squeeze. The SEC feared pricing volatility and upward movements associated with the settlement of these failed trades despite the SEC’s admittance that a failed trade can be illegal and can be used to illegally depress the price of a security.
Under the Exchange Act of 1934 the SEC does not have the authority to price fix securities in this manner as price fixing is considered stock manipulation. The SEC engaged in price fixing nonetheless and did so to put the interests of those who manipulated our markets with excessive and abusive trades into settlement failures above those who purchased into these trades.
It is for these reasons above that we, the administrators of this petition, request your support in asking Congress to look at the possible criminal activities of the members of the SEC. Our nation can only survive and grow if our capital markets are considered fair and safe. Companies will choose alternative to going public and investors will place investments elsewhere if the markets are considered rigged and dangerous.
Our communities thrive over a tax based generated by employed citizens and the companies that employ them. Destroying investor portfolios and destroying public companies based on market induced and regulator ignored fraud will have a lasting impact on these communities where such abuse took place.
These markets are here for the investing public and not the investing public is here for these markets. The SEC needs to understand this accountability and we seek to enforce it.
This is a very complicated issue made so by the political gibberish of the SEC. I hope this simplifies it somewhat.
Thank-You
Dave Patch
For more information and presentation on naked shorting please direct your attention to www.thesanitycheck.com.
The bulls have taken control right out of the gate. The last two hours will be telling.
Best market chat ever on bonds, Bill.
In a environnement of make belief,telling the facts is a revolutionary act.
You are the Ron Paul of investing and the
antidote to the mainstream media.
Posted by: HugoB at
June 15, 2007 10:27 AM [link]
Miners are off to a good start this morning without much help from POG.
GRS not participating.. Might be a late starter like last time..
Posted by: JogyP at
June 15, 2007 10:36 AM [link]
oih and rig at new highs...dia and qqqq headed for 52 wk highs...did anyone see this coming tuesday morning...which drives home (for me) the importance of a longer-term holdings, as i would not have wholly participated if i had tried to time it...
Posted by: 2nd_ave at
June 15, 2007 10:58 AM [link]
to be fair, i did take a little oih off the table 6/14 and was looking to re-enter lower, but i timed it wrong and never did re-enter...
Posted by: 2nd_ave at
June 15, 2007 11:01 AM [link]
2nd_ave,
Considering the overbought conditions, I am thinking of writing July 180 or 185 calls on my OIH position. Not sure if I should wait a couple of days longer........
Posted by: jragusa at
June 15, 2007 11:21 AM [link]
if you read the headlines the past few days, the majority of financial commentators got it wrong...and many of the ones who weren't outright wrong were hedging their bets...barring any major shocks, it should take a few weeks for all of them to turn bullish...and we can start to really worry..
Posted by: 2nd_ave at
June 15, 2007 11:29 AM [link]
july calls may not be a bad idea...you would earn 6% in a little over a month on the 185 calls even if they took it away from you...
Posted by: 2nd_ave at
June 15, 2007 11:35 AM [link]
2nd ave, if i read you right i'm fighting the same demon:short term noise.
if interested in oih sector, a micro cap is OMNI, a cohort made the suggestion to me, accumulating under 12, they raised guidance last month. i have this one as a long term hold.
picked up cara 100, ibn; another expected long term hold alongide inp/india etf
Posted by: jasper at
June 15, 2007 11:36 AM [link]
jasper,
short-term noise is exactly what i'm fighting, which is why i opened ST positions in gold a few days ago...i made the mistake of cashing in part of a LT holding in OIH last friday, and learning from it today...
btw, i cashed in my short-term positions in GFI and SLW this morning, not so much out of pessimism but b/c i don't want to be caught over-exposed over the weekend...
will look into omni, thanks...
Posted by: 2nd_ave at
June 15, 2007 11:43 AM [link]
..and for some reason, short-term noise to the upside is a more difficult battle for me than downside noise...
Posted by: 2nd_ave at
June 15, 2007 11:50 AM [link]
Who are these idiots, and yes, I do mean idiots, who are selling their KRY in the $4.40's? You could get a lot more than that right now if you'd just STOP SELLING.
Chris
Posted by: shark_attack at
June 15, 2007 12:01 PM [link]
LOL! Don't feel alone 2nd.
I sold into the strength this AM but still have core positions that I will hold.
I'm back in and up on most I sold, how unlike me.
More chance of political/global unrest pushing oil and PM's higher than sudden fiscal downside over a weekend, IMO. We're getting all that possible downside noise today, before our relaxing weekend.
I'm not liking the GRS action but if it pulls back to 12.50's or so I'd bite. I was kinda hoping I'd be making $ on GRS today. Oh well, another day.
Posted by: Craig at
June 15, 2007 12:04 PM [link]
Relax Chris. It's just short term.
I was watching yesterday thinking about how much volume and short covering there has to be going on with a specualtive $4.50 stock and how little price motion there was.
You are now playing the Globetrotters. Just hold the ball and make them foul you.
Posted by: Craig at
June 15, 2007 12:09 PM [link]
whereas a week ago i would have said the risk for gold was to the downside, today i think it's to the upside...the direction which will hurt the most people is the lane to be driving, unfortunately...i think shorts on oih/xau/djia will be driving things up, which is what a "coiled spring" is all about...i can honestly say that my sales this morning were all about risk reduction and do not reflect my thinking (heavily influenced by bill's thinking, of course), that a big advance could happen anytime...my LT positions are where i place my bets..ST moves are purely due to the need to have fun...
Posted by: 2nd_ave at
June 15, 2007 12:27 PM [link]
ALOHA !!
I finally got my entire investment theory that I have been using since 2001 VALIDATED ... By who you may ask? None other than the US Federal Reserve Bank Chairman ... thats who!! Well, he may have been the FED Chairman back in 1978, before Paul Volker, but some things never change in the World ... like highly inflationary periods.
Look at this chart of the price of gold(POG)shown using "inflation adjusted" money, based on 2005 US dollars. You will notice that 1978 was an important date because just after 1978 gold and interest rates went through the roof.
Link: http://www.nowandfutures.com/download/gold_cpi_adjusted1970-2005.png
Yesterday I had one of my articles entitled "Repeating 1978" published at another website. In my article I quoted a statement from the 1978 FOMC meeting minutes attributed to then FED Chairman Burns(back then Paul Volker was Vice Chairman). Now imagine what would happen to the DOW and gold if Ben Bernanke and Hank Paulson were as honest and open as the 1978 Fed Chairman Burns. The following is a direct quote from Chairman Burns published in the 91 page FOMC meeting minutes dated 1/17/78:
CHAIRMAN BURNS:
Next I must say that the spurt in consumer spending which has made some people happy has disturbed me. It is being financed in very large part by credit. We’re having something close to an explosion of credit in the consumer area. Installment credit and mortgage credit have been used in large part to finance consumer spending. I believe that the spurt will not continue and I certainly hope so. On home building, I’m with the staff or more optimistic than the staff. The significant point I think has been mentioned. You know, the American public, in contrast to some or many of our politicians--perhaps most of them--is very deeply concerned about inflation. People all over the country have been asking themselves the question: What can I do to protect my family? What can I do to protect my children, my family, and myself against the ravages of inflation? And gradually the thought has evolved and is spreading rapidly that, on the negative side, putting money in the bank or a savings and loan account is no protection. Buying bonds, Treasury bonds or corporate bonds, is no protection. Buying common stocks is no protection. It used to be a major protection but it no longer is. Then what is left? Well, gold or paintings. But the average man cannot invest in gold; he doesn’t know how. It’s not something he’s accustomed to. Likewise with paintings. What will he turn to? Well, there is farm real estate, a remarkable record there. But the average man doesn’t know how to buy farm real estate. He realizes that location can make an enormous difference. But there’s one thing the average man is capable of doing. If he doesn’t have a home, be can buy a home. If he already has a home, he can buy another. The average man is also capable of judging neighborhoods. All he has to do is get into an automobile or walk and he can locate areas where the prospect of maintaining good conditions in the neighborhood or some improvement are pretty good over the next ten years or twenty years. People can do that. And they’re doing it in increasing numbers. It’s surprising to me. I hear it from college professors; I hear it from young people; I hear it from my own children. The movement is spreading. And the interest rate on mortgages? Yes, what Mr. Partee has said may well turn out to be right, but I don’t think people are going to be deterred by an increase in mortgage interest rates of one half of one percent or even a full one percent. And the money will be available at a somewhat higher interest rate. So, I believe that this will continue. Whether that is a cause for optimism or not is something else again. We may easily get ourselves into a condition of overbuilding in this area, such as we had in 1972-73, but in the year ahead we’ll have plenty of activity in this field.END
WOW ... he even validates "farmland" which has been a great hedge against inflation ever since 1972. Here is a chart showing that.
Link: http://www.nowandfutures.com/download/farm_real_estate1900-2003landvalues.png
Lately Marc Faber has come out to say that owning gold and farmland offers the best hedge against corrupt global fiat monetary policies for the forseeable future.
In my article I go on to say just how similar the financial landscape was in 1978 compared to today. All the same "bubbles" were happening except back in 1978 US debt was measured in billions not trillions!
So whats different about FED Chairman Burns and now FED Chairman Bernanke ... essentially in my view it is "hype and spin and a fiat endgame"! Like rocks their chemical makeup does not change over 100 years and neither does basic economics. What changes economics is how those in control of markets (HB&B)want you to see and perceive their data! Hence you get Keynes(not Mises)and GDP, CPI and BLS jobs data(aka: BS)... So-o-o today the DOW rallies! WHAM BAM !!! But you better be thinking and acting "long term" and not just for today!
I cannot provide a link to my article since the other website is protected by a paid subscription.
Posted by: kaimu at
June 15, 2007 12:29 PM [link]
I was wondering if anyone could point me to a chart of YEN/CDN$. I figure if yen have again been dropping against US$, and CDN$ has been rocketing against US$, the Yen must be really plunging against the CDN$, no? Wouldn't mind hedging away some currency risk, yen looks as good as any...
Thanks in advance...
Posted by: proudPapa at
June 15, 2007 12:47 PM [link]
ONT update: VP6 codec in HD Demo
Posted by: Stokbot at
June 15, 2007 1:19 PM [link]
"Lately Marc Faber has come out to say that owning gold and farmland offers the best hedge against corrupt global fiat monetary policies for the forseeable future."
Speaking of fiat currencies, there is an essay by Henry Liu on why an increase in interest rates is not going to stop the decline of the USD (referenced by RobBoss yesterday via a link from leisa's blog):
Posted by: 2nd_ave at
June 15, 2007 1:20 PM [link]
Bill & Company
Thought I would share this article on Thorium.
The media ought to have more interest in
this type of nuclear technology.
Thorium Nuclear Fuel
Posted by: Stokbot at
June 15, 2007 1:33 PM [link]
the lack of volatility today bodes well...anyone who shorted tuesday has so far not been hurt too badly, and they may be encouraged to average into those shorts today..whereas i don't sense too many longs adding to their position so far...this set-up may be what gives rise to the admonition against shorting a dull market...
Posted by: 2nd_ave at
June 15, 2007 2:30 PM [link]
proudPapa - Yen/Cdn$ in StockChart symbol is shown the link below. You can also see it in more recent history by interchanging the symbols on that chart with FXY:FXC which are the etf's. Hope this helps.
Posted by: spot at
June 15, 2007 2:40 PM [link]
Craig,
I'm hip to the basketball metaphor, but answer me this. Did I drink the Kool Aid yesterday, or to what do you attribute the drop in price today in a stock that now should, by all indications, be worth significantly more soon. I would have figured that fear of a quick permit would now induce bulls to bid up the stock. And what/who the sellers are, I don't get that either.
Craig, why don't you go ahead and explain the Globetrotter thing too.
Thanks, Chris
Posted by: shark_attack at
June 15, 2007 2:47 PM [link]
proudPapa - and here's the Sept 07 Futs chart but you have to look at it upside down.
Posted by: spot at
June 15, 2007 2:49 PM [link]
And Craig, you deserve applause for guessing that the lows of yesterday would be revisited.
Posted by: shark_attack at
June 15, 2007 2:55 PM [link]
chris,
let me take a stab at the kry action...outside of a few friends, i don't think anyone, market makers included, expected yesterday's announcement...so a lot of the buying you're expecting today happened yesterday (the price did jump 15%, after all)...today the MMs are a) building inventory by not allowing your expectations for further gains to materialize, b) fueling the fire by drawing in more shorts, and c) giving smarter shorts a chance to get out...much of the selling is from flippers who wished they had sold at yesterday's highs...this will continue until the volume dries up, leaving the stock in stronger hands...at which time the next spike up commences...so i think you have nothing to worry about, and i think craig is simply advising you avoid allowing what are undoubtedly very slick stock handlers to get you to drop your position...
Posted by: 2nd_ave at
June 15, 2007 3:17 PM [link]
Chris,
I think you're just seeing some profit taking after yesterday's jump. I know for myself, psychologically it's hard to take new positions after missing a 14% one-day jump--I'll think to myself, rightly or wrongly, "man, I missed out, think I'll wait a few days to see if it crawls back some".
Further, with KRY, we've had multiple repeats of the pending permit for months now, although the latest seems much more "official", I think there's always going to be a little skepticism until it actually _is_ official and in hand.
Finally, I think some weak hands are taking the opportunity to cash out, given that they held through the last run up to $5.70 CDN only to see it collapse from there at a rather alarming rate.
Myself, I'm long @ $3.20 CDN from months ago. It's the only position I've ever had. It's less than 2% of my total portfolio, and its totally speculative--I'm holding until there's a buyout, or until it fails miserably to the point where I'll take a small gain--probably I'll worry if it breaks below the 200 day MA now, around $3.88 CDN.
There's also a whack of open $5 US call options for July and October, which I'm hoping bodes well--and thinking, hmm, maybe I should get me some of that.
Anyway, just some thoughts. Good to see the miners recovering here. I'm only a few percent underwater on Kinross now, which has made a nice move with good volume the past two days. MACD and stochastics are also looking good.
Have a great weekend everyone. Many thanks to our host and all the commenters. This blog is nothing short of fantastic.
Doug
Posted by: doug11 at
June 15, 2007 3:19 PM [link]
Thanks for the info 2nd_ave and doug11...
And you both are right.
I'm in it to win it now, and with a lot more than 2%, due to my relative youth, bravado and frankly, abject poverty due to crazy college bills and beer requirements.
Thanks Guys!
Posted by: shark_attack at
June 15, 2007 3:39 PM [link]
Chris,
someone here used the Globetrotter/Washington Generals analogy. We are the loser Washington Generals and the pros will tend to make us look like, well amateurs. Our job is to take a safer position and to, as @nd so correctly pointed out, not let them shake us out on noise.
Now of course I know noise = RED balances, so I'm with you there, but we have to have faith in our strategy.
Just slightly above avg volume in the states, but that's a lot of buying and selling and the pros know how to get in and out without causing a stir. All you can do is take the opportunities you're given.
I'm offline for the close, make money you guys.
Posted by: Craig at
June 15, 2007 3:44 PM [link]
Thanks a bunch spot!
RSI's on Yen/Cdn$ are 24/16 on the daily/weekly, couldn't find monthly, but looking at chart it's gotta be down there as well.
took a small position today...
Posted by: proudPapa at
June 15, 2007 3:48 PM [link]
These big trader guys get really good at buying lots of stock without bidding up the price, when possible.
Posted by: shark_attack at
June 15, 2007 3:50 PM [link]
Recently sold L/T Rydex weak dollar fund and took profits.
As a hedge now, scaling into FXY. Plan on adding more prior to Japan's August Tankan business confidence survey and next BOJ rate hike consideration. Today's BOJ inaction drove yen down, but looks like opportunity. Long FXY.
Posted by: Seamus at
June 15, 2007 3:52 PM [link]
Today's move has been received with skepticism after the open's synthetic trade. While the slow drift down during the afternoon may be a partial explanation, VIX rose steadily through the day and closed higher than yesterday. Unbelievers buying protection aggressively?
JML
Posted by: Jumble at
June 15, 2007 4:01 PM [link]
I was considering picking up some KRY Oct 5 calls until I looked at the spread - bid 0.75, ask 0.85. If I were to buy this call now, I would immediately be set back ((0.85-0.75)/0.75))*100 = 13.33%. Should I choose to sell my position prior to expiration, I would loose another 13.33% (this amount would of course vary with sell price). So, presuming the spread remains the same, and the price does not fluctuate dramatically, I would loose nearly 30% on the trade right from the start. Even if I put in a limit order at 0.75, the only way I will get a fill is if the ask price moves to 0.75 at which time the bid will be 0.65, or 0.70, at best. Either way, I will loose at least 14% on the round trip. This is nuts! Only MM (read market manipulators, not market makers) can get away with such nonsense.
The BOX (Boston Options Exchange) reported recently a dramatic rise in volume in options trading since they initiated the penny spread program (QQQQ, WFMI, etc.). I think I will restrict my trading to these options.
Posted by: jragusa at
June 15, 2007 4:05 PM [link]
xau/gdx closes at the high...tuesday's close is fading quickly in the rear view mirror...riding the gold market is a real roller coaster...a great weekend to all...
Posted by: 2nd_ave at
June 15, 2007 4:08 PM [link]
Here's the first of the commentators to switch from looking for a short-term pullback to focusing on three sectors that may be poised to move much higher (commodities, oil=USO, semis):
Posted by: 2nd_ave at
June 15, 2007 7:09 PM [link]
Seamus
I agree on FXY, had some too early, but looking to re-enter. I think the yen has farther to fall, but eventually this will become a monster trade. I wish there was a leveraged ETF to play.
Kaimu
Short of travelling to Iowa for "livery of siesen (sp)" (are you aware of that ancient practice?), is there a way to invest in farmland?
Any REITS that you or others know of?
Might be a timely way to play a real estate investment not coupled to problems in the RE market generally.
Thanks to all of you. This is a great community, only to get better.
Leisa, where are you?
Wondered what wine you uncorked se soir...
Bon chance.
Posted by: Rigdon at
June 15, 2007 7:29 PM [link]
Rigdon, what a coincidence. I came back here to ask the same question:
kaimu, do you know a way to invest in farmland without actually, you know, buying farmland?
Mike
NYC
Posted by: MikeNYC at
June 15, 2007 8:22 PM [link]
Bill,
Trying to trade based on government lies is like building a long term relationship on pickup lines. The only one who wins is the bartender.
Chris McGavisk
Posted by: Chris McGavisk at
June 15, 2007 8:22 PM [link]
I don't believe anybody said anything about trading on based on government lies. There are references to what has happened and is happening and observations about how that may affect price trends and sentiment. But really we all know that the reported numbers are highly manipulated and that caveat emptor is the rule when taking these reports into account.
Posted by: agaunv at
June 16, 2007 4:10 AM [link]
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moin from Germany,
speaking of debt and Goldman & co........
from the Goldman Sachs F2Q07 (Qtr End 5/25/07) Earnings Call Transcript via Seeking Alpha
“Our Investment Banking backlog increased during the quarter and reached a new record level, surpassing for the first time the prior record set in the second quarter of 2000″
Bear Stearns Press Release
Average customer margin debt balances for the quarter ended May 31, 2007 reached a record average of $95.4 billion, up 40% from an average of $68.4 billion in the quarter ended May 31, 2006. Customer short balances averaged $101.9 billion during the second quarter of 2007, up 27% from an average of $80.2 billion in the second quarter of 2006
don´t know if the Goldman should be read as a "omen"....
Posted by: jmf![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 15, 2007 9:09 AM [link]