oil/gold/coffee futures + this am...

paring back on uxg here...

Hi Bill,

congratulations!

On top of your nice rant i think we have to include the rating agencies.

S&P has lowered a total of 15 subprime bonds sold in 2005, or 0.31 percent of the total, and 32 sold in 2006, or 0.68 percent.......

S&P abandoned seven-year-old criteria for determining a bond's protection against default in February

Of the 300 bonds in ABX indexes, the benchmarks for the subprime mortgage debt market, 190 fail to meet the credit support standard

Most of those, representing about $200 billion, are rated below AAA. Some contain so many defaulted loans that the credit support is outweighed by potential losses. Fifty of the 60 A rated bonds fail the criteria, as do 22 of the 60 AA rated bonds and three of the 60 AAA bonds.

All but five of 120 securities in BBB or BBB- rated portions of the mortgage-backed securities would have failed S&P's criteria, according to data compiled by Bloomberg.

None have been downgraded, though S&P and Moody's have parts of three pools of securities linked to the index under review for a downgrade.

READ THIS TWICE!

Congratulations Bill and Mrs. Cara.
My wife and I celebrate our 31st anniversary this year.

You mean the red wine isn't doing it's job?
You might have to increase the dose!

I was watching Bloomberg this AM and noticed Gold and some miners like Barrick were upgraded by Morgan.

Stay in the green!

mkt pretty active this morning, is it because it is iphone day?

Strong start to the market this morning. Whether this move will be faded waits to be seen. Qs nearing 52 week highs.

..can they keep it going into July 4...

..for the same reason markm was waiting for a final spike down in gold, i don't think we've seen the final spike up (exhaustion move) in the broad mkt yet...still think the risk is on the short side..

too quiet on the KRY front...don't think i would be shorting/selling right now..

Dear Bill,

What you said about Bush Sr. isn't fair, he COULD get elected sherriff in a small texas town. He's competent, at least.
Speaking of competent, I did not do a great job of selling into this morning's rally. I am kind of transitioning from swing trading to a more short-term thing, and it's a whole new skill set. I'll be watching closely for a re-purchase oppty. Have a nice weekend everybody!

chas,

It's the end of quarter, so fund managers will be doing window dressing/ portfolio pumping to look good for quarterly performance.

I plan to buy some DXD and SDS before the close today.

Sold SBUX with a 4% gain in 4 days.
Sold MER, BMD and looking to sell some UXG at 5.5 today.

Holding MS for the Discover(DFS) distribution today.

Morgan Stanley will distribute one share of DFS common stock for every two shares of Morgan Stanley common stock outstanding on the record date(June 18).

Happy anniversary to you and your wife, Bill.

And thanks very much for today's report.

JogyP-ultrashorts into the close may not be a bad idea, as i would look for a negative monday that can be ramped up into the close on tuesday...

Agriculture on a tear also since the open. Check out WBD move (no position).

TRA (Long) and other fertilizers (ferts as Craig writes) moving.

Exact reason why I wrote puts on SBUX last week. Bill wrote--"(i) you don’t mind owning the stock at the strike price less the put premium you earned, or (ii) you intend to close the short put soon after the stock price that had been well over-sold later comes back."

how it is helping anyone but naked short sellers. Anybody with a 5 years school education will do better to look at the CCI (commodities index) for estimating how high prices have gone. All the simple people can do is buy a bit physical here and there especially on price deeps.

By the way, anyone know why the gld gold holding are not changing everyday , how the gld managers decide if they buy or sell and in what frequency ? Is insider trading taking place ?

I think it is a set amount of gold, but its worth changes because of the gold price. I could be wrong though?

I've got a full position in GFI.

I notice recently that in the premarket GFI has been available as low as $15.43

I got some this AM for $15.45
Not bad for a trade or to build a position, but thought I would point it out to the list so you can keep an eye out and maybe take advantage.

My Scottrade screen (which can be whacky sometimes) says the 52 wk low is $15.48

Bill,

When you talk about a longer-term perspective for silver, what kind of timeframe are you considering? I notice that your longer-term perspective for platinum may be on the order of 3 months ("through the summer")...

Thanks.

Seamus you dog!
As I recall you wrote those puts for something like $22.50! Very nice.

I got into SBUX near the bottom of this recent move, but the chart doesn't say "hold me".

The ferts are on a rip! I see TNH went from 120 to 132 and back and forth today, plus a pretty good dividend. Scary volatility though.

I got Mom into some DBA on the last dip.

Bill - I like your last line: "... yesterday was also wedding anniversary #38. And, you know…"

Yep, I know (last weekend was my 25th) - you go get champaign - you go out to eat a fancy meal - and you go to the jewelry store where diamonds are the preferred item, and then lots of smiles ...

BTW, I once met a couple who were celebrating their 75th with a sparkle in their eyes. I made the customary remarks about the length of time, and the wife smiled and immediately quipped "... yes, but I'm only now just STARTING get him trained ....

Congratulations!

Let's also not forget the misleading practices of the ratings companies regarding the suprime bonds. S&P, Fitch and Moody's mask $200 billion of subprime bond risk. Downgrades would force a lot of investors to sell holdings, and roil the market for securities backed by subprime debt. The last chapter of this story has not been written yet.

---> June 29 (Bloomberg) The highest default rates on home loans in a decade have
reduced prices of some bonds backed by mortgages to people with
poor or limited credit by more than 50 cents on the dollar and
forced New York-based Bear Stearns Cos. to offer $3.2 billion to
bail out a money-losing hedge fund. Almost 65 percent of the
bonds in indexes that track subprime mortgage debt don't meet the
ratings criteria in place when they were sold, according to data
compiled by Bloomberg.
``You'll see massive losses from banks, insurance companies
and pension managers,'' said Joshua Rosner, a managing director
at investment research firm Graham Fisher & Co. in New York and
co-author of a study last month that said S&P, Moody's and Fitch
understate the risks of subprime mortgage bonds. ``The longer
they wait, the worse it's going to be.''
Rosner estimates that collateralized debt obligations, which
have packaged thousands of bonds and derivatives into new
securities, will lose $125 billion.

Appears that Richard Marin, Bear Stearns Chairman and CEO of Bear Stearns Asset Management, is a blogger:

"This (picture) pretty much sums up my last two weeks trying to defend Sparta against the Persians hordes of Wall Street. Nothing like a good dog fight 24X7 for a few weeks to remind you why you chose the life you chose. The good news is that after two embattled weeks both I and my loyal staff are still standing to fight another day. If you want details....pick up any WSJ for the past week and we were in the top three stories every day. It's nice to know you can have an impact on the world....next time I'll try to make it a slightly more positive impact......"

http://tinyurl.com/2fs5j5

BMD...closing the rest of my ST position here

2nd:
BMD: Very nice nicely done!
You the "Birch Mountain Man"

Re KRY and Robert Fung's paltry shareholding therein:

Having reviewed SEDI filings, I report that during his tenure as a director, Fung has exercised options and liquidated the shares derived therefrom for a gain of $2,537,117.

regards all

Joey

Echo that 2nd, good job!

food stock watchers:

ADM is quite a laggard, any thoughts? Classically/? in the AZ. Took off today. I have a position from a week ago.

Congratulations on your 38th Anniversary! We're in our 32nd. Thanks for the report on KRY. It's much appreciated. Have a great weekend! NT

Craig:

@11:55AM Fidelity says the low for GFI today was 15.54, did you transpose your #?

15.48 is the 52 week low by Fidelity charts.

Re: BMD, currently a bid of 140,700 @ 3.50...

Joey -

Curious that Mr. Fung chose to reap short-term benefits from his KRY options, and not hold for the long-term gain.

Traded in some UXG (5.5) for NXG (2.88)

Bankers, lawyers and “all” politicians are fair game being pond scum universally. However, my respect for you declines a notch every time you spew your sophomoric criticisms of Republican only politicians and the United States, a country I might add without which Canada would have zero economy and double the taxes if it had to provide for its’ own defense. I know it is fashionable and so very easy to bash the country that has made you a wealthy man, but apparently you do not see that it makes you look so small, that it demeans your prodigious knowledge of the markets. While it is not as bad as Buffet dumping on a tax system that he avoids, it is close. You are correct in that it really is the economy stupid, so do yourself and readers a favor and stick to economics and the markets. If you really must indulge your Canadian, United States envy, elitist, liberalism, at least salvage some credibility and turn the spotlight half of the time on your own backyards’ many scat piles.

debianman,

"Small?" What is "smaller" in a global context than the end of one's own nose?

"Traded in some UXG (5.5) for NXG (2.88)

Posted by: JogyP at June 29, 2007 12:10 PM"

Awesome idea!

DUG/SDS: ok, i think that might be it for today's rally...going south in a hurry, and i'm adding ultrashorts...better early than late...clearing off the ST positions..

Debianman,
If you regularly visit this blog, you will find that corruption and social inequity is a target of this community wherever it resides, be it the United States, Canada or elsewhere in the world.

First time poster

Enjoy reading you daily, Bill. You now say it is time to buy gold.

When this whole house of cards collapses and the margin calls are invoked will there not be a huge dump of gold by hedge funds etc in an attempt to pay down obligations? Or will the rush to gold be greater?

I believe everything (commodities, stock etc.)is overbought at the moment and gold is not immune to a price correction short term. Long term gold is the place to be, I agree.

Jasper—My 2 cents worth. ADM and others have been a beneficiary of a U.S. tariff on sugar. It’s protected corn ethanol. Unfortunately, while supporting U.S. farmers, it has caused closing of many candy manufacturers in the U.S. due to the cost of sugar that foreign manufacturers don’t face. (i.e. Chicago has lost candy manufacturers because of this.)

It’s possible the tariff may be lifted and this would certainly allow more competition to corn ethanol (spread & tariff) with sugar cane ethanol which is 5 times more sufficient than corn. From what I understand ADM is getting into sugar cane ethanol in Brazil. It will be a smart move if the U.S. tariff is lifted. Overall, I don’t think it’s a bad idea.

I'm American and I wonder why it's always the rest of the world that is told to examine themselves before casting aspersions on the king of the heap. We Americans need to get out of our own stew and see something of the rest of the civilized world so we could have a more accurate view of our gluttony and it's impact on the rest of the planet's inhabitants.

So you won't mind if everyone here, whatever country they might be viewing this blog in, takes this as one of those "the truth hurts" type of responses.

It is clearly a time for introspection, not immature outbursts.

This illustrates the problem with many modern republicans - substantive criticism is met with ad hominem attacks with no attempted rebuttal of the issue in question. That is small.

Why is it if some disagree with your position on a topic, they immediately shout “liberalism” or “elitist” whatever?

I remember years ago the Republican party regularly backed law enforcement issues. Switch to today. The current administration cut the programs placing more officers out on the street in neighborhoods. Someone objected and talked about backing the police program. The response was something like “you’re a liberal” or "elitist”. It gets old.

It seems when someone talks common sense and the overall good, someone always shouts liberalism and starts attacking. It doesn’t carry much weight with true Americans whether they be democrat, republican or independent.

ALOHA !!

Bill ... You are a lucky man to be happily married for 38 years! That itself these days is quite an award winning feat! CHEERS!

Beautiful monologue on the symptoms of a corrupt "fiat" monetary system! Essentially we have nothing but the "faith and credit" of the US government backing the dollar and Wall Street.

Some people here and elsewhere consider much of my "rants" as "conspiracy theory" and that is their peroggative. I guess "conspiracy theories" are in the eye of the beholder! The truth is there ... seeing it is a choice ...

One of my e-mail articles I sent out recently was exactly about your theme for today.

ZIMBABWE AND THE DOW
By Stephen Wellman

June 29, 2007


What does some Third World African country half way around the World have to do with the USA or the DOW? Why should we even care?

I contend that the US markets like the DOW are essentially smoke and mirrors for hidden agendas of both the US government and Wall Street. We are experiencing huge monetary and credit expansion ... witness the M3b (running close to 12% per annum increase in money supply) and government and consumer debt levels including
mortgages. Both political parties want to stay in power. They both realize the only way to do that is to essentially buy off the voters by pumping money into the markets and economy and handing out welfare, which includes US corporate welfare at the top of the list. Both parties realize they will be history if the US has another 1929 style depression. The Chairman of the FED, Ben Bernanke, knows this better than most and has stated in the past that he would drop money from helicopters if he had to in order to avoid a depression. Imagine that ... money falling from the sky! Only question is would his helicopters only drop the money on Beverly Hills or would he also drop a lot on East LA?

What's the alternative to a depression? Well, in the past you could look at examples like the Weimar Republic of the 1920s or you could look at Zimbabwe today. It does not matter which you study the end result is a "depression" because at some point people just give up on the currency and confidence in the government. Zimbabwe is headed there and that usually means a power void that some violence will fill with yet another Mugabe only with a different name! And so it goes ... The people will always be victimized so long as they remain ignorant to monetary and economic principles.

Read this article and see if you see any similarities starting to appear here. It seems "printing money" has a lot to do with the problems in Zimbabwe just as it does here in the USA.

Link to article: http://www.mises.org/story/2532

A truly amazing article on a truly amazing monetary mess in Zimbabwe ...

The biggest secret the US government and the FED don't want you to know or understand is that the DOW is not going up but the purchasing power of THE US DOLLAR IS GOING DOWN. The dollar is going down because of our fiat monetary system and a government that finds it easier to "print money" than tell the truth or be honest. Like the "other superpower" the USSR the USSA is yet another colossal central government. History shows these types of governments never succeed in the long run. Is our "long run" done? Don't worry we're always the last to know!

What was our monetary system like before we started this "fiat game"? In 1933 your elected officials the Reps and Dems turned over control of our monetary system to the Federal Reserve Bank known today as the FED. The FED is a group of private bankers printing money for their own agenda and the massive agenda of egocentric politicians that we blindly elect every year.

Look at this chart of inflation in the USA from 1800 to 2004. Prior to 1933 before the FED took over we were on the gold standard. Look at what happen to inflation after 1933. Since the FED took over inflation rates in the USA have been above 0% for 57 years now(since 1950 after WW2). Prior to 1933 the longest period of high inflation was 5 years. Discount the CPI rate since 1990 since the US government has adjusted the CPI to reflect as little as possible. Does anyone who pays bills or buys food really think prices have only gone up 3% to 5% annually? In reality the CPI should be closer to 10% now.

CPI chart link 1800-2004: http://www.nowandfutures.com/download/cpi1800-2004.png

The vast majority of years prior to 1933 were spent below the 0% inflation rate, while the vast majority of years after 1933 were spent above the 0% inflation rate.

One thing is made clear by this chart is that times of war are very expensive and highly inflationary even with a gold standard. The lesson there is to be more like the Swiss and avoid going to war.END

The motto to this whole fiat game is to stay as close to the "money spigot" as possible! Like Zimbabwe today, stock certificates during the 1923 Weimar Republic became more valuable than the German mark ... but gold and silver trumped them all.

Re. NXG. CIBC's report mentioned by Bill a couple of days ago states that over the next couple of years it will have declining production and increasing costs. The stock is cheap vs NAV and CF because of this, rated as Underperformer.

WGDF--It appears to me that it is clearing an important USD milestone of $2.42. I don't claim to be a competent technician. I do own this (courtesy of Bill/board) stock.

I also happen to like at this juncture, for the more daring among you, Yamana Gold at $11.13 (AUY)

debianman appears to have mastered the ad hominem argument, attacking the speaker rather than discussing the point at hand.

Democrats would get equally reprobated if they were in power and demonstrating such blatantly manipulative tactics of handling all state affairs, from the economy to fighting "terrorism".

The most humorous statements are those aimed at belittling Canada as a nation, as if a nation can be considered in such an atomic manner. I see that mentality as the very essence of Americanism: thinking that America is a single powerful unit standing against the world, with people having the inability to recognize that even America is vastly different from coast to coast, and at times only linked by this common skewed notion of patriotism (which is often fueled by the unrelenting dissemination of "patriotic" imagery and verbiage through common media outlets).

Canada definitely has problems. We live with inane politicians who make questionable decisions every day. But to say that America is the reason why Canada prospers is misleading, since China, India and Canada are major contributors to America's prosperity. Canadian timber, fresh water, and oil drive part of the American economy. Until recently, before the USD plunged, a great deal of American manufacturing was done in Canada, especially in the auto sector.

But all these points are moot when compared to a simple fact about why America is in the spotlight, and Canada is not: America is 10x larger by population, the world's largest economy, the world's largest military force, the world's largest consumer of natural resrouces, the world's second largest polluter, and the center of almost all world affairs. That's why we place the Fed, and the US administration under the microscope and censure their acts of ad hoc wealth generation and destruction.

Si02... Granted what you say re NXG, but the chart looks good.

kaimu, you are far from a conspiracy theorist in my book. I look forward to your posts. Keep them coming.

Bill, nice response. I always admire your ability to respond graciously, whether it's to an antagonistic commenter, or my occasional pie-in-the-sky emailed thoughts.

I think if debianman would step back and take from the buffet that is your blog he would be a lot better off financially and intellectually, of course, and then hopefully he would not need to sound quite so angry, bitter and, frankly, rude.

Regards, all

Mike
NYC

Speaking of Canada, let us never fail to mention the quality of the beer and the beauty and charm of the women in Montreal. Now if you could get that hockey thing fixed, all would be right in the Great White North.

My question: Does anyone know if it's difficult for a Yank to get working permission in the IT (email administration) field up there? 'piles' aside, I would give anything to be able to leave the Big Apple for Vancouver or even the desolate oil sands areas. I KNOW oil sands companies are hiring.

Regards

Mike
NYC

fazeli-"the ad hominem argument"...beautiful, learn something new on this site every day...

Jasper:

I, too, took a small position in ADM a few weeks ago. The tipping point was a report that Soros had just bought a ton of it. Did someone plant that report with me in mind and I gulped down the bait like any stupid trout? It stumbled some just after I bought it (where have I heard that story before?)but hopefully it will yet work out.

2nd_ave - go to fallacyfiles.org - you will find a whole list of things you can use in arguments. Personally, I think it should be required reading for anyone who wishes to engage in such talk. People, especially Americans (yes I am one), fail to stick to the issue at hand, and usually resort to a whole host of illogical statements that "sound" good. the price you pay for "talking points" and "town hall meetings".

MikeNYC: It all depends on the company you wish to work for. My personal understanding is that it would NOT be difficult as an American to get a working Visa for Canada. Montreal, Ottawa, Toronto, and Vancouver are all excellent world class cities with their own charms and tradeoffs...

But if you want to go to the Alberta BOOM and work with the Oil Sands, you'd have to hit up Edmonton or Calgary, which are both nice cities, but not up to par to the other 4 I mention (imho).

re: AUY
if one is inclined to buy Yamana, the warrants YRI.wt.a, trading on the TSE are the way to go, imo - 2.8% premium only - 1/2 the premium of an option with 16+ months to expiry.

I'm not inclined to buy Yamana, tho'.

Interesting article in the Globe & Mail with the columnist opining that the deal makes sense and creates a wee moat for other prospective bidders for Meridian; Yamana/orion offering a premium price for Meridian and proposing to pay for
much of it with Yamana's overpriced shares.

regards all

joey

Hi Bill,

I wanted to highlight several important themes that we are going to hear much more about in the coming weeks and months as they to the overall markets. And they are (1) opacity, (2) conflicts of interest, and (3) Linkages particularly across markets and products.

Let's talk first about the opaque nature of asset valuations and how that is impacting the markets today and likely in the future. It is a huge problem that gets at the confidence underlying the global financial markets. Bill hit on the issue squarely this morning stating that "HBB have tried to hide the problem by not pricing those assets to market". This is correct. The fact of the matter is that there is little transparency as it relates to asset valuations in all but the most liquid of securities and assets. This is especially true on Wall Street as it relates to the structured subprime and corporate CDOs. I wonder whether it would surprise any of you to learn what the number one area for hiring has been on Wall Street for the past 3 years straight? M&A? Nope. Corporate finance? Nope. Rather it has been structured finance and credit. HBB can't hire them fast enough and for good reason. True, and at virtually every HBB, structured credit is the goose that laid the golden egg and many of them at that !!

You see, HBB raises the equity for the CDO's, then raise the debt which is used to purchase the underlying collateral (mortgages, high yield, 1st lien and 2nd lien bank paper - it doesn't matter). The point is that the HBB is making money coming and going. A veritable fee tree if there ever was one. And HBB will do everyhting in its power to keep the gravy train going. The problem of course comes in the valuation of the underlying collateral for reporting and manager compensation purposes.

Bill is right. No one in this chain wants to be the bearer of bad news. It might piss off the CDO manager or worse, cause a run on the bank as it did with the Bear Stearns CDOs. The valuation process as it relates to these assets is opaque. There is no market for the more exotic and illiquid of these assets forcing more of a WAG or wild ass guess. But beyond the lack of market transparency neither is there an independent regulator or series of regulations which might provide a level of comfort by injecting a some form of conservatism into the valuation equation. Let me explain what I mean.

In the case of the sunprime CDOs there are black box models used to determine securities valuations. Sounds quite like LTCM. In other words put in a bunch of assumptions and presto you've got a waterfall of results. Where is the independent capital markets or regulatory authority however, with the gravitas and experience to test and quaetion these assumptions so as to come at a reasonable mark for these assets? The fact is folks, there is no such body operating effectively in the North American securities markets. So what happens is that the CDO managers (hedge funds) go back to the dealers for the month and quarter end marks. This wouldn't be such a proble, except that nearly $500 million of this stuff was sold in 2006 and upwards of $1 trillion could be placed by the end of 2007. The forward calendar alone on junk and levered paper now stands at $250 BILLION. So the fox is guarding a very large hen house.

The same problem occurs in the corporate CDO market. Now here the securities are more liquid and value is more easliy ascertainable. But there is still a problem. YTD there have been $2.7 trillion of m&a deals completed and nearly $600 billion of buyouts with the final 2007 number likely to exceed $1 trillion.

Assuming the buyouts are financed with 75% debt that means that nearly $750 billion of paper will be issued and scooped up by CDOs this year alone. And much of that paper won't have proper covenants or structures. Remember our friends at KKR have told the dealers they will only issue paper covenant lite paper from this point forward. And the dealers who take $150 million annually in KKR largess are only to willing to oblige. Who is going to tell KKR otherwise? Moreover to those massive hedge funds that have grown assets under mananagement largely through levered CDOs such as Blackstone (did I just say that?) who is going to tell them that the $200 million of covenant lite Dollar General paper they just took down isn't worth par? Nobody has any interest in discerning the truth. Because in this case the truth really, really hurts....

Now let's go to conflicts of interest. I highlight a few above. Want another one? The same HBB that are creating and financing the CDOs as well as issuing buyout related debt are in fact investingf side by side their private equity clients. Let's take an example with the ServiceMaster transaction. A CDR deal. Sort of a crappy lawn and garden servicer. Nothing special. $5.5 billion deal financed with $1.4 billion and $4.1 billion of debt. Assume the debt is poorly structured and lacks covenants which it does by the way. $800 million of equity comes from CDR with the rest from the debt arrnagers. Namely JPM, Citi, and BoA.

Now what type of debt do you think the arrangers want when their own money is underneath? If you answered debt with no covenants you'd get the prize. What we have in essence is massive equity optionality for the sponsors and in this case the HBB at the expense of the debtholders - the same debt which by the way will quickly find its way into a levered CDO.

Finally let's talk linkages. The smartest folks from Wall Street to Bay Street tell me there are no linkages, no contagion. I don't believe them and neither should you. The mess in the subprime markets is just beginning. What will likely happen is a revaluation of risk. And when the dialing down of risk comes, and CDOs/hedge funds look for quotes on their underlying collateral, they will likely soon be met with the chorus that markets have "changed" and bonds and covenant lite bank debt that used to be worth par are no longer.

And when that occurs CDOs and hedge funds will be forced to do something they have so far avoided - mark securities to market. And in doing so they then threaten their very own compensation. And when that occurs it will be katy bar the door. The selling will beget selling.

MikeNYC:
if considering living in an Alberta boom community, you might find your housing options limited to your car...
what? hailing from NYC, you don't have a car?
tsk. tsk. you might get cold and devoured by blackflies...
Of course, you would be a man on the ground for oil companies analysis...
regards
joey

Bill mentioned HOV has entered the accumulation zone and would consider selling naked out of the money puts to either collect the premium or pick up the stock at a discount. This in an excellent strategy to consider when the implied volatility readings are historically high. The current levels in all time series are in the 96th-100th percentile-a great time to sell premium. Traders are fearful and willing to pay up for insurance. An alternative strategy for those more bullishly inclined (and one I've used from time to time in gold stocks) is to buy an out of the money call and finance it by selling an out of the money put. Give yourself enough time for the position to work, and make sure you don't mind owning the stock if it continues lower. Today one could buy the Jan 08 22.5 call and sell the Jan08 12.5 for no cost. This means you own the stock for 12.5 dollars if the stock is under 12.5 at the time of January 08 expiration, or own the stock at 22.5 if the stck is over 22.5 at the same expiration. Great leverage to the upside and in reality if stock starts heading higher by autumn or sooner this postion will make money long before the stock hits 22.5. Just another way to play an upside move in HOV.

Thanks Fazeli. I will look into it. I miss nature, I miss the open skies, the open roads. I miss my Jeep. A lot. I miss not having a dog and I won't keep a 60 pound pet in a 600 sq foot apartment.

And I would like to work in a field that produces something besides discovery motions, if you know what I mean. The good thing for me is that in downturns I think people sue each other a lot, so I guess that's security. And we have a robust Bankruptcy dept....

Mike
NYc

Thanks for the bloomberg article on bonds/mortgages jmf.

I'm revisiting my insurance holdings now (especially life companies) in consideration of what is going on in the bond market. Normally I would be keen to hold insurance companies through the next couple of years as they tend to be steady performers in what will likely be turbulent times and the insurance market is still exhibiting reasonable discipline, but I am concerned that they may take a significant hit if they have been aggressive with their bond portfolios.

This is pretty action for those "whackos" like Leisa and I who faded yesterday's pop. Not sure it lasts though.

Hey Mike NYC, there really are other things in life besides depositions and motions in limine. I left those behind (and partnership) 9 years ago and haven't lookd back.

craig-the volume finally kicks in on bmd, could be a good day..

sticking a toe into UNG...how does this fit in with DUG? well, i think both go up...

if silver is the "tell" it's not looking good for PMs into the close..

MarkM, I'm guessing it's easier to walk away with a little partner money in your pocket. :-) I'm a back office minion. Truthfully, if I weren't being mature about it and working towards retiring some obligations, I'd give away every single thing I own on Craigslist (except my silver) and look for a gig on an oil rig or one of kaimu's farms or something.

Thanks for the encouragement. I know there's more to life out there and I'm working towards getting it.

Mike
NYC

seamus et al..re: food sect

BG/bunge looks interesting....positioned to participate in global ethanol and fertilizer production...but, not gonna step up to the plate just yet...i like this theme, just wish I had grasped it earlier...

other peers of interest to watch
gmk: mexican mfg of tortillas
cresy: s.a. corn,soy, sugar
seb: diversified intl and transport
calm: domestic poulty

and, to broaden the theme I would include a water etf/pho

craig-that was definitely a 140k block buy..

Harpsound-

I agree with you regarding gold. Good LT, not so hot ST. The great asset liquidation is coming and gold won't be immune. I recently sold a large portion of my CEF position that I've held since '05. Still holding the rest, just in case...

AZ_Cowboy

MikeNYC:

I can vouch for Fazeli's mention of Ottawa. There's lots of IT jobs here what with high-tech and government. Many of the big tech companies have major presences here--RIM, Alcatel-Lucent, Nortel, Cisco, not to mention dozens of mid-size and smaller ones.

If you google the 2007 Mercer Quality of Living survey, you'll see a bunch of Canadian cities ranking in the top 20 (Vancouver, Toronto, Ottawa, Montreal, Calgary). I believe Ottawa came in with the cheapest cost of living of the major Canadian cities.

Good things about Ottawa--clean, safe, 30 minutes from the outskirts to downtown (~25km) in RUSH HOUR. You can get a beautiful new home on a 'rural' 2 acres 30km from downtown for $700K. In the more desirable 'burbs, you'll get a new 3000+ sqft home in the $500s. You can also find perfectly nice town homes in the low 200s. Other good things: less than 2 hour drive to Montreal, less than 5 hours to Toronto, lots of good golf courses, and the full 4-season experience! Great place to raise a family. Algonquin park nearby (I did a week long 100km canoe portage trip there a few summers ago, and it was phenomenal!). Gatineau park just across the river in Quebec--great trails for hiking, mountain biking, and cross-country skiing.

Bad things. Not as 'happening' as Toronto or Montreal, definitely somewhat sleepy in comparison. Prone to cold spells in the winter, though not so bad recently. You can, however, get a week of -40C in February.

The only other Canadian city I'd rather live in would be Vancouver, because its simply gorgeous, but man, not sure its worth the increased cost of living (for me).

Have a great weekend everyone; Happy Canada Day to all fellow Canucks!

Doug

jasper

BG has been on my list. BG is known for soybean production among other things. As soon as I heard soybeans hit its daily cap ceiling this a.m., I checked it. If things were a little different, I'd jump but risk is being repriced as we speak and I expect a pull back/drop after the 4th or the week thereafter.

I do have a soybean interest in Brazil thru a Minnesota global company. It's less affected by market drops/plunges.

On a selfish note, if you know what I mean, I wish that Bill take interest in both his body and this board.

Some Water ETFs--just happen to have some notes on my desk. Do your own due diligence.

FIW U.S. focus, slightly more large cap.

PHO U.S. focus, more small caps.

CGW Global focus (U.S. 28%, FR 20%, JP16% UK 14%, 11 other countries)

MikeNYC:
There's lots of opportunity in IT in Vancouver and surrounding areas. In my opinion, the way to go is to be a self-employed contractor. That's what I do. Have a look at online postings at some of the agencies such as Annex Consulting, Quartech Systems, S.I. Systems and WPGC. I'm originally from Toronto and found that when I moved out here for work it was like taking a permanent vacation. The pace is slow compared to what I was used to and it does rain. However, I don't have to shovel snow. Oh, the mountains and the ocean are okay too! Housing is expensive but, renting is not.

MarkM,

Add me to the "whacko" list, I grabbed some QID yesterday aft at $45.58. There's a pretty well defined stop around the prior low, so what the hell.

Did someone push the sell button at 3pm sharp or what?

Bill,
Speaking of UXG, do you have any opinion regarding whether McEwen might revisit Coral Gold (CGR) as an acquisition target for his group?

weekend frets? .xau was still positive a moment ago.

JogyP-nice call, ultrashorts kicking in into the close...i think it follows thru monday

JogyP-nice call, ultrashorts kicking in into the close...i think it follow thru monday

Yoyo moving up now

noodle,
Can you point to an example or explanation of the debt covenants? I would like to know more about how that works.

Thanks again for the ringside seat.

Mike
NYC

After selling not too terribly well this morning into the fleeting rally, I got back in KRY at the close at 4.10

Happy Fourth of July!

Chris

UXG gave back a couple pts into the close.

Nice action with BMD today 2nd. Sure jumped with that big order to 4.63. Not a bad finish.

SLW gave some back, but if it goes any lower I'd be a buyer.

Kind of a funky up and down end of mo, week, Q but it finished alright. I'm still in the DXD so it cna go either way and I'm good.

Have a great weekend everyone.

Thank you Bill.

Kicking myself for selling my UXG on yesterdays jump and not waiting for today! Wondering if there is any real news behind the move or if the short space just got too crowded during the sell off. Really appeared to be teetering on the $5 mark for a bit there.

Had to play the process of elimination game near the close today and parted with some MPEL that I turned a profit on this week. Still like it and will look for a dip to get back in.

And finally, one of my super-spec stinker stocks came back to life today....INVC (up 8.64%). This company has no revenue and is fairly illiquid, but I love the possibilites for its credit card technology which ships Q3. Opinions appreciated as this one doesn't even have a msg board on yahoo. Any Micro Cap Teamers looking for a good idea might take a look - last time I mentioned this one the TypeKey monster ate my homework.

Re: Food and water sectors /Jasper

Two other water ETF's which offer a more global
position in the water sector are CWG and PIO.
Whereas, PHO is about 85% US, CWG's holdings are 28% US and PIO are 38% US. Expense ratio's average .70% and PE's are in the low to mid 20's.
Both are selling at a slight premium to NAV.

DBA, a food ETF which is intended to reflect the commodity prices of corn,wheat,soy and sugar. It has an expense ratio of .91.

Here's a good article on CRESY who has added Tyson to a partership which will vertically integrate their operation and expand production in Argentina. Pricy though at 17x sales and pe in the 40's.
http://biz.yahoo.com/pz/070112/111797.html

Bunge....owned it a couple of years ago but sold as it just vacillated between $50-60...now about $80. SWC...should-ah, would-ah,could-ah.I only make a few bucks and missed the big run.

Bunge may be a good way to invest in the agriculture sector. It is well connected in South America where agriculture has upside potential. It's not so easy to invest in the sector as many of the large global food companies are private...ex:Cargill.

Side note:
A good way for the US government to promote biofuel development would be to eliminate the ban on growing hemp. Archaic regulation disallows this crop... which is superior in the production of a plethora of products. It requires minimal inputs and is easy on the land. The top of the plant provides the highest quality and healthy edible oils and the rest of the plant can be made into biodiesel,paper,
cloth,cosmetics,etc."Reefer madness" has only inflicted government and law enforcement. The drug war is a fraud. Everyone in the world who wants to smoke already is. What's even more ironic is that government allows and profits from alcohol which causes death and violence, and family and social destruction
Another problem is nobody would need Monsanto GM seed and Round-Up.And agribusiness would lose those subsidies.North Dakota just changed it's laws to allow hemp growing but one has to GPS their field, be interrogated by homeland sedurity and DEA, submit to biometric ID and give up their 4th ammendment rights to grow it plus other big brother stuff. Time to get intelligent.

Also, if America was real serious about using less energy, it could raise taxes on gasoline and reduce it on diesel. Modern diesel fuel plus the latest diesel enginge technology is very clean. In Europe, over 50% of passenger cars are diesel
where in the US it is about %5. Average mileage could be pushed to near 40mpg if diesels were substituted for the gas engine.

Mike,

I would be delighted to discuss covenants.

Covenants are the specific terms that govern the agreements between an borrower and a lender. Covenants can be found in lending agreements of all sorts. Thus for example in a senior secured credit agreement governing bank debt as well as indentures governing high yield as well as investment grade bonds.

Covenants were designed to protect the lender. If you think about an institutional lender gives its money to a borrower and the borrower then has the use of that money. In a sense Mike the borrower has the dough and thus the upper hand.

Covenants were designed to protect the lender from bad things and if bad things were to occur then to enable the lender to get a seat at the table as in a bankruptcy proceeding so as to protect its position and recover capital where possible.

There are two broad types of covanents: affirmative and negative. Think of it as the following: "Thou shall do the following" as well as "Thou shalt not do the follwing". Again, both affirmative and negative but all designed to protect the lender.

Now let's look at some typical affirmative covanents. The "borrower" agrees among other things to (1) file reports in a timely fashion with the SEC, (2) prepare financial reports according to US GAAP, (3) keep its insurance up to date, (4) pay interest and principal on time subject to any cure periods (5) "maintain" a certain specific level of profitability, (6) maintain a specific tangible net worth, (7) maintain a specific interest coverage or fixed charge coverage ratios etc... Items 5,6,7 are known in the trade as maintenance covenants. I am sure you can easily see what is going on here Mike.... The covanants on one level are designed to protect the lender. The lender was kind enough to lend the dough and the covanents are designed to set basic performance levels and if those levels are violated then to give the lender a voice as to how things can be fixed or how the ship can be righted.

Other than maintanence covenants there are things called incurrance covenants. These are covenants that enable the borrower to do certain things provided certain conditions are met and maintained on a pro forma basis. Thus for example a company (e.g. a borrower) can acquire a target provided that the pro forma debt to ebitda levels don't exceed 4x. That type of thing....

We also have what are known as negative covenants. These prohibit certain activities. Thus for example borrower agrees not to (1) change its primary line of business, (2) engage in treansactions with affiliates, (3) transfer assets in whole or in part without prior lender approval, (4) engage in a merger, recap etc... without prior lender approval.

So taken in their totality covenants are designed thus to protect the lender.

When I started in this business covenants were a very big deal because in the mid 1980's many of the clients of defucnt Drexel Burnam cleverly usedthe absence of covenants or holes in the covenants to do very bad things that while enriching the "raider" resulted in a serious deterioration of the "credit" meaning the financial position thus leaving the lender in a far worse position the prior to when he/she started. Asset strippers like Ricklis, Icahn, Steinberg and many others frequently made fortunes at the hands of unsuspecting creditors. Let me give you an example. Say you we a lender to a buyout by Ron Perelman and Perelman all of a sudden transferred out the crown jewel of a company to another company controlled by him. If the lenders had no covenants preventing that bad behavior then they would be screwed....Understand? This happened all the time.

So now we have come full circle and we live in the world of excess liquidity with buyout firms having gobs and gobs of dough and all falling all over themselves to buy companies and put money to "work". In fact money is so plentiful that the lenders such as banks, hedge funds insurance companies (yes they are some of the biggest player sin the buyout world - cavaet emptor), pension funds are so competitive that they competing on the basis of price and terms, Simply put Mike these bonehead institutions are offering money at the lowest possible rates with no covanants or protections. That's right - they are giving the monsy away in the hopes of earning a return and they are telling the Thomas H Lee's, Bain's and KKR's of the world that they don't require virtually any meaningful covenants.

In fact it is so bad that arrogant KKR has told the Wall Street cabal that lender requiring covanants will no longer be welcome in their deals. That means that KKR and others (I don't mean to pick on KKR by the way) can do virtually anyhting they want with these target companies and the financial condition deteriorates or other bad things happen tough tootie for the lender. The lender no longer has virtually any meaningful say.

Quite a world Mike. Quite a world indeed. Let me know if you need more.

Bill Says: "Oh my, this is not PhD thesis stuff, and moreover, to all those who write in here to say to me ‘Stop the conspiracy theory stuff’ I say find yourself another blog to read. This stuff is in your face and mine every day. The problem is so bad that I truly think that people like Marc Faber and Nouriel Roubini ought to be awarded Nobel Prizes for warning us. In fact, I don’t know how Paulson, Bernanke, and their cronies who head up HB&B, can even sleep at night."

Kaimu Says: "Some people here and elsewhere consider much of my "rants" as "conspiracy theory" and that is their peroggative. I guess "conspiracy theories" are in the eye of the beholder! The truth is there ... seeing it is a choice ..."

I don't know if these comments are directed towards my recent posts.....but I wanted to make perhaps my last comment (I am not here to antagonize everyone if I am not welcome):

I have not been trying to attack Bill or Kaimu or anyone else here personally as that other guy did earlier today.

I am just trying to debate the relative value of analyzing the gold market as some giant cabal controlled by Illuminati type machinations, versus applying some other alternative types of analysis.

Such as:

1) Gold prices might reflect market participants' inflation expectations

AND

2) Asset deflation in the housing market and slowing economic growth might filter through to also cause lower gold prices over the next 6 months, due to lower inflation expectations.

I don't know what is so SUBVERSIVE about this concept! And about the conspiracy theories - what I am saying is I don't know how you measure the Central Bank manipulation? How do you measure Paulson's corruptness? If Paulson is really corrupt today then we should buy gold. But if instead it looks like Goldman Sachs and the Fed are REALLY REALLY colluding then we should buy MORE gold.

I just can't put it in perspective other than to hold a core position as a long-term investment and during those time periods when I am particularly bullish take on positions in the individual market.

I have appreciated everyone's feedback in the past and I apologize if I am somehow bursting everyone's bubble. I am trying to present an alternate viewpoint focused on THE ISSUES without attacking anyone's character.

So I guess I will end my last comment with this quote from Jim Rogers in the first Market Wizards book - I think it is apt:

"In every bull market, whether it is IBM or oats, the bulls always seem to come up with reasons why it must go on, and on, and on. I remember hearing hundreds of times, 'We are going to run out of supply.' 'This time is going to be different. 'Oil has to sell at $100 a barrel.' 'Oil is not a commodity (he laughs).' 'Gold is different from every other commodity.' Well damn, for 5,000 years it has not been different from every other commodity. There have been some periods when gold has been very bullish, and other periods when it has gone down for many years. There is nothing mysical about it. Sure it has been a store of value, but so has wheat, corn, copper - everything. All these things have been around for thousands of years. Some are more valuable than others, but they are all commodities. They always have been, and they always will be."

Thanks, noodle. I had an idea it was something like that.

1. I assume the absence or presence of covenants would, or should in a more normal, accurately-risk-priced world, anyway, change the 'price' of the borrowed money? That is, I get covenant-free money but pay a higher price than money that comes with covenants.

2. In the KKR example above, aren't they simply maximizing the terms of the loan from their perspective? As a business, isn't there almost an obligation to seek that out, assuming covenant-free money is better for the borrower, that is. After all, I am free to ask for anything in the world. The boneheaded move is in the giving, not the asking, no? I just re-read your post and I guess that is one of the things you are saying.

It will be interesting to see these chicken come home to roost, but I guess there will be a lot of pain.

Thanks again.

Mike
NYC

Bill:
A very fine response to debianman. Congrats. Isn't it amazing what people omit from their comments when it serves their purpose? W has utterly destroyed America's respect in the world by leading the most inept and corrupt administration in history. I'm sure debianman voted for him twice. If I didn't have young kids, my wife and I would move north to Canada in a NY minute- no handguns, better healthcare system, politicians with at least a small brain and many other advantages over the USA. Yup debianman, you can count me as a liberal elitist.

Republican Party

The Flight of the DoDo Bird. Dick Morris

I figured it would be for their lack of diversity, maybe a little corruption not a massive dose of nonstop incompetence.

Soulek1,
I think there is a little bit of truth to what you are saying, but here is what I think:

I think, I know, that there are forces suppressing gold, for now. Just as there are fundamental factors at play, as well.

When you use body english on a pinball table, it's best if you slam the table in the direction the ball is going. That way you maximize your impact. I think the gold suppression 'team' knows there will be days when the dollar shows strength, and applies the downward pressure maximally. That way Maya at Marketwatch can report "Gold down on dollar strength."

There is also no doubt that sudden spikes are turned back into hairpin drops in ways that make no sense whatsoever, and then the price is walked back down to where it was, hour by hour through the rest of the trading day. On any given day where, gold positive news is released in the morning, and it goes vertical, you will see this hairpin happen. And then through the Tokyo trading day, and Hong Kong, and into London, it gradually, steadily, is put back where it was. Sure enough, by the time London is halfway through their trading day, the price is close to where the spike began 24 hours earlier, NY opens and then those guys finish the job with no subtlety whatsoever.

I have spent far too many hours watching the price of gold seemingly around the clock, minute by minute, to not see this happen.

In addition, try to plot gold and silver against most other metals. Seemingly alone, gold and silver are stunted while the other metals have continued their runs up. Why?

Lastly, there are simply bold statements from central bankers that they are moving the price of gold. I don't see how you can call it a baseless conspiracy theory, if indeed you are, when the conspirators have spoken out loud about what they are doing.

In the "I heard it" anecdote area, a friend of a friend, etc., of someone who worked at the Fed posted that Greenspan was constantly checking the price of gold. Why would he do that? And I 'heard' that Japanese authorities have made it clear that the yen carry trade is not to be used to purchase gold. Why should they care?

That's one of my fantasies: get hooked up to that Yen-money spigot and turn around and buy a couple hundred tons of silver or so. But I don't want a visit from the Yakuza.

Anyway, have a good weekend, everyone,

Mike
NYC

I don't know how many people read Jim Jubak at MSN Money. My guess is a lot! Today he has written a very clear heads-up called "Deepening debt crisis hits close to home. Who's likely to get badly hurt as the subprime lending crunch assaults various pools of high-risk debt? Pension funds, mutual funds and other victims shockingly close to your wallet." I was pleased to see Mr. Jubak's comments reinforce what so many on this site have been saying for so long. I think you will be too. When the 100th monkey finally gets the message maybe something positive will happen.
http://preview.tinyurl.com/phv8w

C.note,
Sorry I didn't get to your post. You wrote: "@11:55AM Fidelity says the low for GFI today was 15.54, did you transpose your #?
15.48 is the 52 week low by Fidelity charts."

Most brokers only chart whatever happens during market hours, so whatever happens in the pre or after market happens more or less in a black hole.
So when GFI was selling for as low as $15.43 this morning in the pre-market it didn't show up on your chart or hi/low. Your chart likely had yesterday's close and today's open, just like mine, which is what they use.

So no, I'm happy to say I didn't transpose those figures!

I'll try that Tinyurl for Jim Jubak again. http://tinyurl.com/phv8w

Re the gold "conspiracy": you could make a case for calling it a gold "policy" (in fact, that's probably what they call it)..as Mike said, they're upfront about it, we all know they do it, and (i hope) they're doing it for reasons other than to mess us up.

astra125..thanks for the commentary

2nd_ave, if they are doing to hide inflation, and I think they are, they are definitely doing it to mess us up. And if GS has the inside track on it and profits, as Bill and Sinclair seem to say, that's just predatory and illegal.

Well, not really. The Bush admninistration has granted immunity from prosecution to all sorts of companies that are working with the government.

I bet you a 1/10 GAE that should they ever come up on charges of manipulation they pull out some provision of some security bill that grants them immunity.

Mike
NYC

OPTION ORACLE - Question re HOV & selling puts: The 30 day IV has been above 40% for most of the past year & is now @ 48%, but HOV has fallen from 30 to 17 over that time. So isn't the high IV due to the stock's fall, i.e., does the high IV not mean it could (should?) fall some more? The RSI also, is still heading south.

Thank you for the vote of confidence.

To Bill: Re- gold as not a commodity. I will just say that I respect your opinion. But I also greatly respect that of Jim Rogers.

and to MikeNYC: My point is not about whether or not a gold conspiracy exists. My argument is that even if WE ASSUME that one does exist (I do) - it is impossible to use that information to invest off of. I guess its biggest use would just to put everyone on notice that a price move may be generated by other than purely economic expectations.

Mike-yeah, I certainly feel messed up...

Out of gold and scaling into Natural Gas for the next short-term play...I have no take on ST market direction or ST gold direction right now...whereas I think NG prices have a chance to recover...in addition, see little reason for the price of NG to be correlated with market direction (if I'm wrong, would appreciate having that pointed out)...just seems like a good time for a break from the gold sector (no change in LT holdings)...

Craig:

How to you buy GFI stock before the US market opens?

This morning, the Globe&Mail had its monthly magazine insert - this one featuring the 'Top 1000'.

Some notables:
RIM - ranked #1 for %age annual profit growth 1996-2006 - 164.1% and then there was this Q!

SLW- Most profitable - ranked #3 for profit as %age of revenue 2001-2006 - 52.6%

regards all

joey

C.Note-I'll take the liberty of answering your question, b/c of all the gold stocks I follow, GFI is consistently the one with the largest pre-market gaps (up or down), hands down...I don't why it is, but quite often GFI will have pre-market bid/ask quotes well below or above the previous day's close...if I'm holding GFI and sell at the pre-market bid, odds are very good that I will sell well above the opening price...and if I buy GFI at a pre-market gap down, I can almost be assured of being able to flip it later in the day...as to "how"-assuming you have an on-line trading account, simply use their extended hours trading option...

2nd ave (and anyone else interested in oil, NG plays)

I found this link from another blog, and it sure is useful as far as timing goes

http://tinyurl.com/2n6qb6

PK:-
I'm interested...but can't access the piece with the link provided...

joey

Well, I'm 2 for 2 screwing up these tinyurl links. How about this one

http://tinyurl.com/2bwjqg

tx PK.
It is an interesting article.

regards
joey

PK...can't tell the difference between a NG chart and a gold chart ;)..guess I was born to play commodities...

Soulek1, I agree with you there, to a degree, on trading the manipulation.

Except...

I know some people who use the volatility, real or artificial, to trade SLV and have achieved the wonderful state of 'free shares.' They have used the trading band and volatility to do OK. But as long as you assume it will always come back up and don't hop in and out too much, you can use the simple moving averages and do OK. In general, you don't get shaken out of the ETFs if you are patient and trust the bull to bring you back up. If you chart SLV and the 200 and 50 MA you can see a pattern.

In futures, it seems like you need a very overcapitlized account to ride out the downturns and a quick finger.

I did OK trading gold minis by accepting small gains and having plenty of margin. But it almost wasn't worth the time, energy, idle capital (margin) and lost sleep. I found I could do better in almost any other commodity by joining a powerful trend.

Unfortunately I ignored Rule #13 (do more of what works and less of what does not) and kept getting pulled back to trying gold and...well, let's just say that little account was fun while it lasted.

I think you can use the manipulation, if you really watch the price movement a LOT, get a feel for it, and accept that it's not like trading too many other things. The sudden unexpected bombing of the prices, or spikes when they take the pressure off, are every difficult to handle with small margin or with a weak stomach.

Those patterns, if 'THEY' are indeed in control, are designed to shake us off.

Man, I hate that the more and more I look and learn that I sometimes sound like I've joined the tinfoil hat brigade.

Mike
NYC

Congratulations on your anniversary Bill!

And Happy (premature) Birthday to the greatest country in the world!!!!
It is only lately, (recent undergraduate) that I have become so patriotic and thankful to live in Canada. I'm very proud.

Today's posts were great, awesome all week, it's been a week (read: year) of learning for me that's for sure. Everything from the depth of discussing covenant's to Zimbabwe's "amazing returns" to the PPT GDP UXG Q/Q subprime CPI POG Vancouver...........ahhhhh, information overload!!! No wonder my basic math skills are now non-existent. 2 45's, a 10 and a 2.5 on each side is = ???? calculator please!

Bill I salute you for creating this fountain of knowledge. To all the professional people in this community who freely share this incredible real-world information, À votre santé. I feel lucky to be privy to your contributions.

Mike,

Im interested in starting to trade the futures on different commodities. I have traded equities and options on equities for a few years now. I have read a few books about futures (both of Schwagers books.) It seems like the important question in Futures is how much leverage you are planning on using.

I have found that anything above 5 to 1 leverage in equities through options tends to get me in trouble, but anything under that I can trade comfortably assuming that there are not too many positions and the position sizing is done correctly.

Just curious if you still trade futures and when you have bad trades if it was also coincidental with say 10 to 1 or 20 to 1 leverage?

Do you use Interactive Brokers?

MikeNYC,

The answer to your questions.

(1) Oddly NO. Covenant lite doesn't imply higher pricing -YET. Stay tuned the night is young...

(2)Yes. Sponsors should absolutely be taking full advantage of cov lite deals. It is their fidiciary duty. Period. Full Stop. Doesn't mean I have to buy it - YET. Everything has a price as Bill says. Massive optionality has inurred to the benefit of the sponsor. Massive. But the night is young my friend. Very young.

There's a lot of "in your face" discourse going on these past few years, on TV shows in particular, and debianman's comments attest to that.

I, for one, don't like knee jerk political reactions to any comment, left or right. For instance, I don't like to hear people called a liberal just because they feel compassion for a disadvantaged person or group. I will be glad when we get back to civility. I'm tired of the Ann Coulter type of behavior I hope that's not a knee-jerk reaction to her! :-)

A side note: Mike of NYC, I loved your comment about not having a 60# dog in a 600 sf apartment. It shows your compassionate sensibility! Good for you. NT

Soulek1,
The best way to play the futures is through options on futures. There one can find an instrument that is out of place to the high or low side and place a position out of the money on the other side. Go a few months out and let the position come to you. Crude did that a lot at the end of last year. Coffee when it hit 1.00/pound. The saying is that 10% of the players take home 90% of the profits is for real. You will get killed in the pits with the hedges and the local boys. It is to thinly traded and the locals play the other side for "fun" to lure you in and then swing it back to take you out. It is like playing RIMM in fast market conditions all the time, day in and day out. Is that for you?

Soulek1, believe me, I'm a bad person to ask for trading advice. But I use XpressTrade for commodity trades and I just use the standard margin for the contracts.

I don't trade equties on margin. My friends who were trading SLV were, as far as I know, just trading the ETF normally without margin. Small time stuff, hoping in and out with the swings.

I'm with Sinclair on this one - using margin for silver and gold is for pros and the deep pocketed. And the brave. I still think the volatility is backed by a strong uptrend, giving you a safety net to hop in and out of the day to day moves. But others here, almost everyone here, know a lot more than I.

I only have a few small equity positions, but when/if I have a larger amount to trade with I would use IB, without a doubt. Low commisions, fast execution, a great selection of exchanges. I have heard nothing but good things about them (unless you need help and their rep is they aren't too friendly on the phone - by design I suspect.) Their futures contract choices are limited compared to XpressTrade, but for the Canadian shares, which is something we should all be looking at, they seem to be tops for US citizens.

I'm a real beginner with futures. But I had a lot of small success recently. I traded kerosene in Tokyo with a lot of succcess, short and long, and joined the big move downard in sugar for a little success. Then I came back to gold, went too big and didn't get out of the way fast enough during a big, fast downturn. Uh oh! I gotta remember that Rule 13 and stick with the mining shares and the sock drawer full of metal.

But seriously, I feel like an ass giving tading advice on this blog. I really have experienced very little, and there are some serious players here.

I do disagree a tiny bit with stktrader. If you know yourself and what you can handle, futures can really work out well. Play the more liquid commodities, the slightly less volatile futures, with smaller margin requirements (and smaller returns, of course,) looking for the nice trends and then watch it like hawk. I did OK there. But the thinly traded futures, the crazy volatile ones, ah, it's like the craps or crack of trading. Win big lose big, it all can happen so fast. You'll never in a million years see me trading natgas - I know I don't belong there. But a couple of wheat contracts, I dunno, it seems like a whole different, not quite as risky game.

Stktrader, it seems like some of these futures options are so thinly traded that you are even more at the mercy of the locals, no? And the wasting asset thing is a bummer. But like I said, most here know a lot more than me.

noodle, keep the SBUX flowing :-). It sounds like you have a long night ahead of you. I know we'll hear the stories here before it makes it into the papers. I can't wait.

Mike
NYC

2nd & Craig:

Thank you for opening up avenues I didn’t realize were that handy to an individual trader. My broker is Fidelity and they provide pre & after hours trading I had not explored until Craig ‘hooked’ GFI at a price I had been fishing and waiting for “the stock to come to me.”

Bill, I'm with you on the CNBC thing, but Bill...

That sweet little Erin Burnett gets such a twinkle in her eyes when she talks about private equity acquisitions. You've got to admit, she's something special. Sometimes she seems so goshdarn happy first thing in the morning, it has me wondering what she did last night...Ah, perchance to dream.

Nuff said. Maybe 2 much.

i have a crush on erin

C.Note,
I'm really happy we could help.

I will also caution you, beware, the pre and post market are a wilderness, so have a plan and know what you are doing. GFI is a good example of how it can go well for you if you know your quarry and price range. Hard to go too wrong buying below the 52 wk low!

Scottrade requires limit orders and I would assume Fidelity does too. Just exercise caution as the globetrotters play the pre/post market as well (or better) as they do regulation.

I have the same reaction Bill. I decided to not watch CNBC anymore, it's simply too frustrating and mindless.

I can tolerate Dylan Rattigan, Liz Clayman and Mark Haines. They seem to actually have some journalistic skills and integrity. They seem to be able to have two guests on and not make it two to one, but to ask the key questions and let the chips fall as they will.

The others are nothing but political shills, exactly as I can already see and change the channel from on FOX. They can't control themselves and somehow feel their notion must prevail. Clearly not graduates of journalism school or observers of democracy.

Kudlow, Francis, Kernan, Carusso-Cabrerra, Bartiromo, Quick are all partisan opinionated hacks.

I think all of these people should be shunned along with people like Ann Coulter.

Shunning and changing the channel and writing letters is the way we get our free press back.

They will tell us that the market is all that matters. If that is true, then they should be the first victims. Change the channel and cancel CNBC over cable or satellite. I am.

I agree with Craig.

Also, Erin Burnett is perhaps the stupidest person on television. She is rather an emblem for a nation that is hopelessly ignorant, gullible and easily manipulated.

I agree that CNBC is worthwhile when news is breaking, and I also like Fast Money (not for stock tips, but for insights into the thinking of professional traders), but other than that it is worthless.

The internet is an essential antidote to corporate media, and is best exemplified in blogs such as this.

n2son: vaccine may be a better analogy...vaccination renders exposure harmless, but still allows you to pick up all that information necessary for trading...

Stktrader & MikeNYC:

Thanks for the comments re: futures. Wasn't so much looking for the advice because Im going to follow blindly, but just to see how you guys do it and I appreciate the feedback.

I guess I still don't understand "standard margin." I will have to read a bit more about that. My understanding with the futures is that if I have $100,000 and I buy long ONE contract the most that I can lose on that position is the contract value - so if contract is worth $45,000 - the most I could lose is that. Similarly if it goes down in value say 20% - then the most I would lose is 20% of the contract value or approximately $8,500.

The reason I ask regarding margin is I understand that if you trade too leveraged - say 20 to 1 so that you buy 20 contracts with $100,000 - you can be instantly wiped out with say a 5% decline in the underlying contracts. That is too much leverage for me.

Re: futures on options - I guess I will need to look closer at their pricing. One of the main reasons I was interested in getting into futures is the ability to gain MODERATE leverage without having to pay the premiums (2-6% of stock value) associated with equity options trading. If options on futures on priced similarly to equity options that would be a major negative for me.

Bill,

Maybe I'm projecting all my frustration at the lack of quality journalism in America on one person. Maybe I was unfair -- but still, if she were my daughter, I would not be proud.

It was after all, Ms. Burnett, whose journalistic tour de force on a recent morning included declaring that "housing has bottomed" and asking a British fund manager based in Baltimore if he was excited about the Orioles.

I usually don't watch CNBC when she is on, so maybe I just caught her on a bad day.

But after all, I expect both Ms. Burnett and her father, if they cared at all, could not care less what I think of her work. ;)

I gotta vote with Bill on this one...She's not stupid, that's part of what makes her so sexy. She's one in a million. I look at her and think, with HER I could actually be happy.

Life is sad, isn't it, really?

Bill,
I said they "seem to have some journalistic skill and integrity". I can't vouch for everything each individual says, they are human and bound to goof up sometime. I am not aware of Mark Haines positions on the French, but in a world where we reduced our brain power to come up with "American Fries", can anything surprise me? Overall I don't mind the people I listed.
If Mark has a problem with the French, he needs to join the stupid line with a lot of other fools. The French bashing is the same style of empty attack you endured yesterday. It's also the same now with discounting various sources unless they are sufficuently right or left for each extreme to argue. And this will get us WHAT? More name calling and extremism.

You pose a minor test of my morals, making me choose between Kudlow's evil female clone or Howard Stern. Talk about rocks and hard places. I'm okay with giving praise when praise is due, even when it makes me feel like taking a shower afterward, so kudos to Missy on her handling of Stern AND on her oil sector calls a while back. If she would do that all the time (the oil calls, I don't give a hoot what Stern does) and spare me her personal political opinion, then I'm watching.

Now however, I challenge you to watch her in the evening (late in your time zone) "On the Money" and watch her style of so-called 'journalism' and not see the comparison to Kudlow (or O'Reilly even), who she styles herself after. It isn't interview, it's attack commentary, ala FOX. Just like Kudlow, she espouses, without fail, the pro-business right wing agenda and usually teams-up with whatever pro-business, anti-citizen, anti-environment, anti-responsibility, anti-accountability right wing nutcase they could book to sing their tune.
Just like on Kudlow, it's two whackos to one common sense, or worse, two whackos to one opposing whacko so they can really stack the deck. Then afterward we are forced to again hear Melissa's personal diatribe when the guests are gone.
This is not journalism, it's political commentary in FOX drag.

Why watch that when I can watch Bloomberg FAIRLY interview the exact same people using actual journalistic integrity? Very rarely do I find myself angry with one of the Bloomberg staff.
I have even seen some point out various possible conflicts from past employment or other circumstances. I don't recall Bloomberg staff making editorial comments after interviews either. Why for example, do I care what Melissa feels about global warming? Or Joe Kernan? Are these people climatologists?
Isn't having two verified experts in a given field on and MODERATING a fair debate more informative? Or is it more important for the HB&B team to stack the deck?
The only time I've seen any CNBC employee reveal any conflict, ironically, is Cramer and maybe Erin as she IS a former Bloomberg draft choice.

What do I know about journalism?
I did a little research in choosing a university for my daughter, whom I'm very proud of. She graduated with a minor in Professional Writing from the Edward R. Murrow College of Journalism at Washington State University and her major was Zoology.

I have had many professional opportunities to develop a working knowledge of Roberts Rules of Order and have chaired many large meetings, committees, and organizations in the last fifteen years or so. I'm pretty good at spotting personal attacks in the guise of civil debate. The part of the interviewing journalist is much the same as a somewhat aggressive chair.
That is to ask good questions and then let fair debate reveal an answer to the whole, but certainly not to take sides.

If Melissa Francis would have the convictions of her beliefs enough to do that, to not constantly defend or drone on and on about HER views ala Kudlow, she might well be the great role model you think she would be.

In the meantime, do you mind if I just watch Bloomberg and when "On the Money" is on I'll be out filling bird feeders, watching our local Canada Geese, Bald Eagles or the squirrels or on a walk with my wife and the dogs? It's gotta be better than screaming at my TV like I used to with Kudlow.

Nowadays I'm voting with my remote, my wallet, and my feet. I'm shunning those that are on the same side as HB&B or using personal attack in place of fair debate. I do what I can. I change the channel and I don't buy their crap. I'm all for Elizabeth Edwards going after Ann Coulter, even if it is self-serving. I think we should fire Ann. The Edwards I entrust to the voters.

If you ask me, the reason Ron Paul is my choice is he's a Constitution/By-Laws process guy.
He knows if he sticks with the Constitutional process and allows fair debate everything else takes care of itself. Only REAL leaders understand this is the only true power. Who is it that wrote "All reactionaries are paper tigers"? Was that Sun-Tzu? Sun-Tzu knew GW before GW was born. But now so do others.