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June 6, 2007
Cara’s Daily Commentary, Wed., June 6, 2007, 7:28 AM
Market Chat
As inflation concerns settle into capital markets, traders look for profit-taking. Yesterday, the DJIA dropped -80.86 pts (-0.59 pct) and the NASDAQ was down -0.27 pct. As interest yields popped during the session, the effect was seen on the interest-sensitive REITS ($DJR -1.78 pct), Utilities ($UTY -1.47 pct), Homebuilders (XHB -1.30 pct), Broker-Dealers ($XBD -0.88 pct), Banks ($BKX -0.76 pct) and Insurance ($INSR -0.77 pct).
At this point, interest rates in the US are the key to trading decisions. Equity prices had been rising because interest rates (bond yields) had been falling or perceived to be falling, which was helping to support the US bond and debt markets. That’s no longer the case. The minutes of the last FOMC meeting plus the reports of other key central bankers has made it obvious to traders that rates are on the rise.
“Sal” sent along this note this morning: “Nouriel Roubini offered his comments to a John Berry (Bloomberg) article about how the present world liquidity situation is reminiscent of the conditions in 1998 when Russia defaulted and LTCM collapsed. This time, they are suggesting that the situation is worse than it was then. You might find this interesting.” Thanks, Sal.
Economics Calendar and Reports
In this slow week for econ reporting, the European Central Bank will decide any changes to monetary policy with a release scheduled at 7:45am ET. The ECB is expected to raise the benchmark rate by +0.25 basis points (bp) to 4.00 pct, which will put some pressure on the $USD.
Economists anticipate even higher rates from the ECB later in the year because the 13-country European economy is growing at a healthy (but above 2.0-2.25 pct target) rate of about +3.0 pct. Unemployment in Europe has dropped from about 8.0 pct to about 7.1 pct in the past year.
The economy has been flying in Australia too. Reports today state the economy grew at a faster-than-expected +1.6 pct in the Quarter ending March 31 over the prior quarter. The Australian Dollar is now at its highest level in 17 years against the USD as traders anticipate the central bank will lift interest rates to cool inflation in that nation.
What has happened around the world, with growth bursting in most countries – above the target rates -- is the result of central bankers printing money at excessive rates to offset the printing by the Fed, otherwise the $USD would drop even faster. The flip side of that coin is that economies grow too quickly and wage and cost of living inflation rises even faster than economic growth rates, and speculative activity abounds. Hence the c.bankers must raise their benchmark lending rates.
What happens then is that rising debt service costs reach a breaking point causing traders to reassess risk. At some point they sell equities in order to lock in trading gains, and that sets off a broad selling wave. Many economists then say that the equity market should not be falling because the economy is expanding rapidly. But the issue is really related to the growing risk associated with the economy’s ability to meet debt service costs.
Every cycle, that risk becomes elevated, possibly extreme, based on the levels of wage and cost inflation, personal savings rates, interest rates, labor productivity, and so forth. In this cycle, because of a situation of far too easy debt expansion (“Liar Loans” it is called in the US) related to house-buying, the risk of credit failures is very high, even with interest rates that are relatively low compared to previous cycle highs.
I have opined previously that I believe in the US market, a 10-year and 2-year Treasury rate of maybe 5.25 pct would be the level at which assets would be sold to pay down debt. Yesterday those yields rose to 4.97 pct, up in a month from 4.62 pct (10-year) and 4.65 pct (2-year), which is an alarmingly fast rise. Bondholders are getting killed here. If the equity market continues to rally, even more capital will flow from bonds to stocks, causing bond yields to rise even higher and bond prices to drop more. At some point, two areas of concern will become flash points: (i) debt service on rolling over debt simply becomes out of the reach of the creditor and the loans fail, and (ii) the return on bonds fails to meet the needs of the investors and there will be failures there, eg, under-funded pension plans, social programs, govt budgets, and so forth.
At some point, there must be a readjustment between the value of non-consumable commodity prices, like gold, and debt-backed paper money. In other words, the price of gold must rise. Beyond that, the global monetary system must be re-balanced in order to facilitate the levels of international trade (ie, imports-exports) that is required for all nations to sustain target growth rates.
It will only be after currencies are re-balanced (which means the Yuan must float or be moved to a higher level) before gold versus paper assets (stocks and bonds) reach an acceptable risk equilibrium. If central banks would allow capital markets to move freely, by not selling gold – one central bank versus another – in their effort to stabilize currency rates, the gold price would find a fair level (higher) that allows the G-20 to see a range of currency relationships they could negotiate and then adjust their internal monetary policies to. But, for now, c.bankers are chasing their tails, and the risks to capital markets are growing, and interest rates and gold prices are going to rise along with that worsening situation.
At 8:30am, the US Administration will release its revisions to Q1 Labor Productivity and Costs. This report is usually spun, but the impact on markets is expected to be minimal.
Economic calendar from Econoday
Econoday prior week's international economic report.
Global Equity Markets Review
US Equity Markets Review
NASDAQ Composite (interactive) chart
Here’s the closing data of the Asia-Pacific equity markets.. Trading was mixed today.
Here’s the chart of the Shanghai equity market.. Shanghai consolidated the prior day’s gain, but traders remain nervous.
Here’s the latest session data for the bourses of Europe. Solid red arrows (7:10am) suggest a worry that ECB is going to not only raise the rate by +25 bp today but also talk of inflation concerns in their 7:45am report.
Bonds & Yields Review
Here is the T-Bond chart.
Bond yields dropped and prices popped at the open yesterday, but then proceeded to get ugly again.
And that may continue today. If so, the equity prices may come off as well.
Forex Review
Here is the $USD chart at the close of the prior session.
The $USD (at 6:31am ET) is at 81.871, not too different from yesterday’s 81.926 at about this time.
Commodities Review
The $CRB softened Tuesday to 314.64 from 315.63 as yields/rates started to rally.
Here is the $CRB Index chart.
Oil Review
At 7:00am ET this morning, the e-MiNY Jul-07 contracts for Crude Oil was 65.50, not too much changed from yesterday’s 65.775 at this point in the day, but up from 64.80 at same time Monday.
Here is the e-miNY July-07 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Here is the $WTIC Crude Oil chart.
Gold & Precious Metals Review
In the WIR, I opined that Gold was ready to move much higher. But with yields/rates on the rise, there is a short-term freeze (chill) on Precious Metal prices. Longer term, PM prices rise along with yields/interest rates which would be rising partly because the price of paper money is falling in relation to PM.
Spot gold at 7:10am ET today is 668.90 down from 671.93 at 8:10am yesterday, and (correction) down from 670.40 at 7:28am Monday.
Here is the Recent Spot Gold chart.
At 7:10am ET this morning, the AG spot was 13.66, down from 13.70 at 8:11am yesterday, but the same as the 13.66 at this time Monday.
Here is the Recent Spot Silver chart.
This morning at 7:13am ET, Spot platinum is at 1290. Yesterday at 8:13am, it was 1289.
Here is the Recent Spot Platinum chart.
Palladium is at 362, down -3 since yesterday, and -4 from Monday morning at this time.
Monday morning I wrote, “Palladium is still in a growth pattern for the past year, but as of the past couple days, the price rally seems to be slowing.” Yesterday I added, “I still look for an upside break-out, not just for Palladium, but for all the PM group.” It’s kind of hard to do that if, as and when c.bankers are raising rates.
Here is the Recent Spot Palladium chart.
Precious Metals Stocks Review
$XAU downticked yesterday, closing at 140.45, down -1.04 pct on the day. Depending on what the ECB reports today and Bank of England does tomorrow, there could be an impact on goldminer share prices, both directly and also as part of the broad market, should it pull-back.
Here are the Daily and Weekly Data charts of the indexes, courtesy of StockCharts.com:
Interactive Chart of Daily U.S. Goldminers Index:
Interactive Chart of Weekly U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Here are the Daily and Weekly data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Daily data:
Interactive Chart of XGD Weekly data:
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
ABX NEM GG GFI KGC AU HMY AUY BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
The Cara Global 100 Stockwatch
There were some strong gains in the international oils (PTR, CEO, SU) and the chemicals (LYO and DOW). GOOG set a new intra-day record of $519, and the financial strength and operating metrics are looking very sound. Also, the new deal with Salesforce.com will help Google sell online advertising, which is pushing the current stock price.
This data is supplied every day by the folks at KNOBIAS, Inc.
Here are the previous session’s Cara 100 gainers. Interactive charts of the top 12 Watch List gainers.
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
Here are the Cara 100 stocks that had extreme volume changes in the previous session.
Note the change in Money Flow, which is the volume times price change, which can be compared to the total capitalization. Traders can see this effect by going to charts labelled “On Balance Volume (OBV)” or “Money Flow (MF)”. As broad markets top or bottom out, it always pays to watch what the big capital pools are doing to the usual market leaders, and whether that leadership is changing in a way that a rally or pull-back would likely be sustained.
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: There are 22 with RSI-7 >70 and two <30.
“Chris” takes this data from BillCara2.com, which is not smoothed like David’s data (from Worden). I may have an opportunity to introduce a Wilder Smoother to this data in upcoming months.
Here, from “David”, are the stocks in the Cara 100 trading with the highest and lowest Daily RSI-7 sorted by (i) daily and (ii) monthly values, for the previous session.
Here are the stocks in the Cara 100 trading with highest RSI-7 with Monthly-Weekly-Daily all either >70 or <30. RSI-7 is the calculation of seven periods (of the monthly, weekly, or daily data series) of whatever time-frame is under consideration.
Short-term traders (swing traders as opposed to day traders) primarily use the Daily data series only to calculate technical indicators like RSI, MACD, STO etc.
Intermediate-term traders (those who like to be long say from 3 months to about a year) use a combination of Weekly and Daily.
Long-term traders (typically capital managers of $1 billion and up, who may be invested in core positions for over ten years or more, but who make adjustments to their portfolios say once every one to three years) tend to use a combination of Monthly, Weekly and Daily.
Since I know the chat here is mostly day trading (where the trading signal calculations are made on the basis of Daily and Hourly and 5-minute time series data, some of which I temporarily no longer have available at BillCara2.com), but that the majority of you in the Cara Community are conservative long-term traders, I principally use the M-W-D based trading signals.
Here are the stocks in the Cara 100 trading with RSI-7 Daily all >70 or all <30
Notes
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.
Here are the Cara 100 stocks that had upgrades or downgrades most recently.
Community Chat
Have a great day. But watch those rising interest yields/rates. That could put a damper on prices.
This just in: 7:38am from "W". Thanks for the heads-up.
"Bill
MS in Europe advices to sell:
Morgan Stanley has advised clients to slash exposure to the stock
market after its three key warning indicators began flashing a "Full
House" sell signal for the first time since the dotcom bust.Morgan
Stanley warns the 'mid-cycle rally is over' Teun Draaisma, chief of
European equities strategist for the US investment bank, said the
triple warning was a "very powerful" signal that had been triggered
just five times since 1980."Interest rates are rising and reaching
critical levels. This matters more than growth for equities, so we
think the mid-cycle rally is over.
Our model is forecasting a 14pc correction over the next six months, but
it could be more serious," he said. Mr Draaisma said the MSCI index of
600 European and British equities had dropped by an average of 15.2pc
over six months after each "Full House" signal, with falls of 25.2pc
after September 1987 and 26.2pc after April 2002. "We prefer to be on the
right side of these odds," he said.The first of the three signals MorgaStanley
monitors is a "composite valuation indicator" that divides the
price/earnings ratio on stocks by bond yields. It measures "median"
share prices that capture the froth of the merger boom, rather than
relying on a handful of big companies on the major indexes."If you
look at all shares, the p/e ratio is at an all-time high of 20," he
said. The other two gauges measure fundamentals such as growth and
inflation, as well as risk appetite. "Investors are taking far too
much comfort from global liquidity. Markets always return to
fundamental value, so people could be in for a rude awakening. This is
the greater fool theory," he said. "The trigger may be rate rises by
the Bank of Japan, or a widening of credit spreads. There are lots of
little triggers."Morgan Stanley is not predicting a recession,
believing bond yields will fall during a correction and act as an
"automatic stabiliser" for the world economy. Once the market shakes
off the latest excesses, it's back to the races.
Best,
/W"
Posted by Posted by Bill Cara on June 6, 2007 07:28:39 AM | Category: Cara's Daily Commentary
Discourse
I had some uploading problems this morning, and had to kill some mail in the process. Sorry.
The ECB did raise as expected to +4.00 pct.
I see that Prudential has dropped all equity research. With respect, it wasn't very good compared to UBS, CS, ML, MS, BMO, etc.
Posted by: Bill Cara ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 6, 2007 8:07 AM [link]
moin moin from germany,
mish (please google to find the site)has an excellent piece on leverage and the effects of deleveraging...
Forced Unwind Example
Assuming a hedge fund leveraged 4.0x (20% margin) were operating near or at maximum permissible leverage, the fund could be forced to sell as much as 25% of its assets in the event of an initial 5% price decline in the value of its assets.
Any collective, downward pressure on prices in the market arising from the hedge fund unwinding or an increase in margin requirements from the prime brokers would magnify the total amount of assets the fund is forced to sell. For example, an increase in the prime broker’s margin from 20% to 25% on average would require a fund to deleverage as much as 40% to meet its margin calls and restore leverage to within acceptable limits.
i highy recommend to read the entire piece!
I just finished When Genius Failed - The Rise and Fall of Long-Term Capital Management by Roger Lowenstein.
Excellent book that relates to your comments on the conditions of 1998 and how they relate to today's markets.
One of the biggest problems that LTCM had was it's arbitrage positions betting on spreads & swaps.
From wiki:
http://en.wikipedia.org/wiki/Long-Term_Capital_Management
The total losses were found to be $4.6 billion. The losses in the major investment categories were (ordered by magnitude):
$1.6 bn in swaps
$1.3 bn in equity volatility
$430 mn in Russian and other emerging markets
$371 mn in directional trades in developed countries
$215 mn in yield curve arbitrage
$203 mn in S&P 500 stocks
$100 mn in junk bond arbitrage
no substantial losses in merger arbitrage
Could have been worse... their outstanding swaps were over $1 Trillion! (with a capital T)
When you have to call Warren Buffett on a Sunday evening you know there are problems...
If anyone is still looking for a reading list, the Ivey MBA blog has a few titles, including the one I just commented on.
Years of Global Growth Raise Inflation Worries
Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing.
Link:
Today's WSJ Front Page ( Subs Required).
http://online.wsj.com/article/SB118109624836326011.html?mod=home_whats_news_us
My comments:
Analysts: It's the core CPI that really matters in a 24/7 globalized economy. Oh Yeah !
Greenspan magic of globalized work force to keep wage inflation at bare minimum levels about to disappear.
Bond Vigilantes says no rate cut for this year. But did not the mkt rally on expectation of rate cut ? What happened to that story that the GS/ML/UBS WS mafia were touting and screaming from the WS roof towers that FED Ben had it all wrong.
Posted by: marginnayan at
June 6, 2007 8:48 AM [link]
Dallas Fed's Fisher Changes His Tune On Globalization's Inflation Effects.
Link:
Today's WSJ
http://online.wsj.com/article/SB118104889855525001.html?mod=home_whats_news_us
Analysts: Mergers & LB Buyouts Miracle will continue to lift mighty US markets to record highs by the year end. There is no question about it. Oh Yeah !
Posted by: marginnayan at
June 6, 2007 8:49 AM [link]
Prudential group to discontinue its equity research operations and to close offices. Sell Side analysts have absolutely no crediblity and investors are no longer buying worthless sell side research any more. - Bloomberg Live
Booming merger & LBO. Oh Yeah !
Posted by: marginnayan at
June 6, 2007 8:50 AM [link]
Bill - What made you tilt towards the bullish side last week ? Just looking at the tape.
Posted by: marginnayan at
June 6, 2007 8:51 AM [link]
The Prudential situation is interesting, for the press release includes their closing down their trading ops, too. I wonder if they have an investment gone awry.
In the event that we have a hedge fund meltdown, and in one paper that I read, the average attrition rate of hedge funds (forget about systemic blowups, but just normal times) is anywhere from 8-11% per annum. Not terribly good odds. And in the event of systemic meltdown a la LTCM, 10 of 13 investment styles lost money. So investors who think that they they are "hedged" may be in for a rude awakening. The unfolding of a systemic risk means just that--it is systemic so there is no real safe harbor in the markets.
The link the the original paper that I read no longer works, and this paper, though I've not read the entire thing is by the same authors and is re-wrought if you have an interest in reading more that what gets reduced into media blurbs. (http://web.mit.edu/alo/www/Papers/fail5.pdf)
Lead lining around US data
Posted by: jk484 at
June 6, 2007 9:17 AM [link]
marginnayan,
I opined that I saw some strength in an old and weakening Bull based on money flows, rising global exchange indexes and high international econ growth rates (Europe and BRIC economies). I also thought the bond sell-off might reverse trend for a brief rally before continuing on the track for higher rates.
But, longer term, nothing's changed. A couple days ago the Daily RSI-7 for the Cara 100 was 30 of 100 > 70 and zero < 30. That was way over-bought and the market has pulled back.
Now we have to watch the impact of interest yields this week on the equity market pull-back. If yields don't come off, then I think that equities will continue to pull-back.
Before the full 4 or 5 year stockmarket cycle is played out, I still believe traders will see a 1000 point down day on the DJIA. And when the primary and secondary selling wave is over, I expect the DJIA to reach say 9800 or worse.
Posted by: Bill Cara at
June 6, 2007 9:17 AM [link]
Curious phenomena, perhaps apropos of nothing. This morning, when I logged onto ET Pro, a few of my stocks had traded as late as 8:59 p.m. and 9:00 p.m., last night. While I often note stocks trading as early as 7:30 a.m, *before* pre-market trading begins (even though ETrade clients cannot trade then), I don't believe I have ever seen stocks trading *after* after-market trading has closed. It wasn't all my holdings, just SLW, KRY, and a health care stock. Any thoughts on what could be going on, anyone?
M.-
Posted by: writersblock at
June 6, 2007 9:27 AM [link]
PRU charts should be watched carefully at this point.
Note that the double-top breakout in April happened right after the RSI-7 dipped below 70, which would have whip-sawed many traders. The day after they sell, the PRU takes off. Algorithmic trading models today are so efficient that short-term trading patterns can be exploited -- but once traders see that, they will adjust.
Posted by: Bill Cara at
June 6, 2007 9:27 AM [link]
So productivity increase was as expected 1.0% Q/Q, and wage increase was above expected at 1.8% Q/Q?
People getting paid more for productivity that isn't there! The productivity numbers also fell from the previous Q and wages raised substantially from the previous Q. This isn't a very healthy trend is it?
Posted by: Fazeli at
June 6, 2007 9:36 AM [link]
Anyone else noticing the move up in gold in the last few miuntes
Posted by: JogyP at
June 6, 2007 9:39 AM [link]
Effect of Brazil Cutting Interest Rates?
Article on Bloomberg (http://www.bloomberg.com/apps/news?pid=20601086&sid=aChjaJhEGPBk&refer=news) talks of Brazil possibly carrying out its biggest interest-rate cut of 2007.
Can someone please enlighten me as to the effects on Brazilian Banks (BBD, UBB, etc.) from such a move? E.g. if rates drop, is it bullish or bearish for banks?
Thank you,
Learn2Invest
Posted by: Learn2Invest at
June 6, 2007 9:43 AM [link]
thanks for pointing that out...
is anyone starting to load up on the inverse funds (eg, rrpix for rising rates, or any of the indexes)...if the djia in fact drops to 9800, it would be a 28% return on dog or 56% return on dxd...
Posted by: 2nd_ave at
June 6, 2007 9:45 AM [link]
The timing on the inverse funds is tricky, especially the 2x ones! I'd be willing to miss out on a few % just to improve my timing and not have to sit around with a paper loss until the actual correction.
I'd definitely take small positions in DXD and QID when the turn comes.
Posted by: Fazeli at
June 6, 2007 9:47 AM [link]
RE: ET Pro: nevermind - it appears that ET Pro is screwed up this morning, at least mine is. I'm not even showing KRY as having traded yet, even with a restart, and the main site says it has.
M.-
Posted by: writersblock at
June 6, 2007 9:49 AM [link]
WFMI.
Any comments about entry price?
~S
Posted by: srolaser at
June 6, 2007 9:51 AM [link]
very tricky...leisa's trade into and out of SRS was instructive, not to mention my own forays into DXD in May...at least i'm working my way into the "Unskilled and Maybe Aware of It" category now...
Posted by: 2nd_ave at
June 6, 2007 9:54 AM [link]
WFMI:
I am looking to buy some at 35. If the market goes down for a few days, we could easily see 35.
I think they will beat the Anti-trust case just like ORCL did, but it's going to take a few months.
Posted by: JogyP at
June 6, 2007 9:55 AM [link]
"Spot gold at 7:10am ET today is 668.90 down from 671.93 at 8:10am yesterday, but up from 670.40 at 7:28am Monday."
Bill,
668.90 is also down from 670.40
Fred
Posted by: Fred at
June 6, 2007 9:58 AM [link]
Fred, I was seeing things in my crystal ball. A few minutes ago, spot gold hit 671.75 before backing off. :-)
I shall correct my notes.
Please everybody; if you see these errors, please comment. It drives me nuts to make errors. But it makes me even crazier to slow down to read what I have written.
Posted by: Bill Cara at
June 6, 2007 10:13 AM [link]
fred, bill has a stream-of-consciousness writing style which unavoidably leads to omissions and typos all the time...if you try to turn that off, then i think we risk missing the parts of his musing that stem from the "unconscious," which would in turn be to our detriment...
Posted by: 2nd_ave at
June 6, 2007 10:13 AM [link]
...i remember someone trying to correct my swing (baseball) once, and it totally messed up my game..
Posted by: 2nd_ave at
June 6, 2007 10:16 AM [link]
This morning ALL 31 of the Hemmscott/Media General major industry groups are down, as are 205 of the 208 sub-inudstry groups.
Rather a down day so far !
Given the risks associated with the credit cycle, credit expansion and printing of money, what is the best strategy for exposure to precious metals for the next few months? Bill suggests that gold will probably have a significant melt up, or at least increase with the currency rebalancing. But at the same time, gold is exposed to risks associated with asset sales and deleveraging. should one sell gold related assets now and wait for a drop, or remain heavily exposed to catch a possible melt up?
As a related little excercise, last weekend I did an analysis of the past year's fluctuations in the ^GOX, the CBOE Gold Index. I found that since June 1, 2006, there were about 13 significant upswings or downswings in the index, showing the familiar increasing sine wave pattern in gold prices that we've seen during the past several years. The average upswing was 17% in the index, taking an average of 31 days. The average downswing was 14% taking an average of 21 days. I did the analysis because I was depressed at the bottom of the recent downswing and was considering selling a portion of my PM holding, but I realized I was giving in to the "psychology of the bottom" due to the cyclical nature of gold pricing (and the influence of speculators who buy, increase the price, sell and take profits, and then buy again). so I decided to hold my positions since it appeared we were at a bottom of a cycle (139 when I did the analysis; we're now at 145 a week later....).
Any comments on a strategy for PMs for the next few months given the risks in the broad market?
Thanks.
Posted by: allen at
June 6, 2007 10:20 AM [link]
2nd_ave
I love how Bill writes and was just acting in accordance with his expressed wish to be notified of errors and typos. I too make typos and I've seen at least one of them fixed here.
Fred
Posted by: Fred at
June 6, 2007 10:26 AM [link]
ok,man...did you notice it's not the first time one of his slips has been prescient...
Posted by: 2nd_ave at
June 6, 2007 10:28 AM [link]
Weekly US oil inventories up, prices coming off here.
Posted by: Bill Cara at
June 6, 2007 10:33 AM [link]
WFMI
Lemmings selling because Morgan Stanley cut it to equal weight from overweight due to the merger concerns. WFMI was trading in the low 40's before the merger was announced. I think they will beat the FTC's opposition. I expect this to bounce back later today.
Posted by: holdenll at
June 6, 2007 10:34 AM [link]
All-
A few quick notes. FYI I have not pulled the trigger on gold and miners.
I would expect that any pullback will be shallow (4%+/-)unless we get negative headlines. The money pump still looks relentless and housing has quite a ways to go. (I am glad the Fed is now seeing it my way. But then again I called this over a year ago.LOL)
Good luck and good trading all.
Posted by: MarkM at
June 6, 2007 10:40 AM [link]
I sometimes read the comments of Chuck Butler in the "Daily Pfennig" for futher amplification of some of your remarks regarding rates and currencies:
http://www.dailypfennig.com/
His remarks, this morning, were particularly interesing to me on several fronts.
Disclosure: no connection with the suggested link.
Posted by: spot at
June 6, 2007 11:06 AM [link]
Alright, we know what's weak today...
What is getting whacked less?
I notice GLD, MOS, ATU, LOOP, BMD either not down much or making $ today.
Miners are a bit weak on a general sell off, but PM's seem to be holding their own in light of oil/gas weakness today.
TYT yield slightly weaker here, but seems determined to get to 5% +.
Thanks for the warning yesterday Bill. Took my profits on URZ, some GRS, SLW, EWZ, PGJ.
Still holding a bit of Brazil though...
Posted by: Craig at
June 6, 2007 11:06 AM [link]
adding to SLW...would like to add to GFI, but waiting for it to catch a bid...looking to reload OIH back to a full position...
Posted by: 2nd_ave at
June 6, 2007 11:22 AM [link]
BNN is interviewing Andre Douchane CEO of Starfield Resources (TSX: SRU) at 11:30am here. If you cannot watch live, watch the Replay. This one is interesting (speculative).
Readers, please feel free to add your research here.
Posted by: Bill Cara at
June 6, 2007 11:34 AM [link]
IBKR:
-June 13 will be 40 days after the IPO.
We could see upgrades from underwriters HSBC, Sandler O'Neill and W.R. Hambrecht
-Valuation looking more attractive with the recent move up in AMTD and ETFC.
Already holding too many shares (Bought between 24.7 and 33.5), so I am not adding here.
Posted by: JogyP at
June 6, 2007 12:08 PM [link]
Interesting analysis on the WFMI and Wild Oats deal
Posted by: traderray at
June 6, 2007 12:29 PM [link]
Dang, I should write analysis. That's basically my call from yesterday.
WalMart is obviously someone's close friends and family.
WFMI should either merge with HAL or XOM or relocate their home offices to Dubai so the FTC doors will open wide.
Posted by: Craig at
June 6, 2007 12:56 PM [link]
Dear Writersblock,
Don't know if this helps or not, but KRY did not trade for something like 8 full minutes into the session, and there was a 2 penny standoff that lasted at least 2 minutes while I was watching. Obviously the sock is falling and i have not been in it, not even nibbling, but the question now is, does KRY hold 4.25 support or does it fail and break down? Or, conversly, does the little guy with the tv stations grant the permit?
Chris
Posted by: shark_attack at
June 6, 2007 1:02 PM [link]
taking sds off the table here...which probably means this will be the one time the market tanks..
Posted by: 2nd_ave at
June 6, 2007 1:24 PM [link]
Shark -
I take Chavez - and his impact upon my trading - rather more seriously.
He has lots of influence in OPEC. VZ virtually founded OPEC. Pulling out of the IMF directly challenges US economic hegemony.
He pulled RCTV's license because they participated in attempts for violent overthrow of VZ's elected government.
If a US-TV network advocated violent overthrow of the US gov't, would they still be on the air?
is anyone holding paas, and thinks it looks good here..
Posted by: 2nd_ave at
June 6, 2007 1:30 PM [link]
Jock,
Purely as a theorhetical exercise, I am imagining "what if" a U.S. network challenged the legitimacy of the U.S. government, and I consider your underlying question, whether or not they would still be on the air, to be quite an invigorating one.
BTW, I didn't mean, implied by your reaction, to suggest that I do not take Chavez's impact on my trading seriously. Apparently, you are more sanguine about his participation in your trading strategies than I am.
Chris
Posted by: shark_attack at
June 6, 2007 1:40 PM [link]
Where's Dan Rather? Did he rise to calling for overthrow or something less?
How about Bill Moyers on PBS? See him around lately? Surely we never saw him call for overthrow of the government.
These gentlemen sure were thrown under the bus.
The list is a lot longer.
This raises the even more vigorous question: Is there more tolerance of speech in VZ or the US?
Posted by: Craig at
June 6, 2007 1:47 PM [link]
2nd_ave,
I hold PAAS, SSO and SLW as full core positions for as long as I believe in silver. PAAS has been good. SSO has been very good. SLW not so much.
Anyone know why Goldcrest Resources (GCL.V)is up over 100% during the past week (18% today) on huge volume? I can't find any news to justify the rocket move. No position.
Fred
Posted by: Fred at
June 6, 2007 1:58 PM [link]
yeah, i don't know what to say about SLW...maybe it catches up eventually...i would have expected 14-15 by now on its way to 18...
nice u-turn in GLD...can't say the same about the miners...
Posted by: 2nd_ave at
June 6, 2007 2:22 PM [link]
Re the goldminers: A couple days ago, I opined that $XAU was rallying near 140, but needed to cross up through 144+ before I turned bullish again. The index then stopped at 142.50. I expect it to base as the broad market cycles through this negativity. Hopefully there will be some relief on the rising yields/falling bonds situation, and that the broad market picks up some oomph. I still do not believe the major pull-back in equities is ready yet, and that the next rally will carry the PM stocks/bullion to new highs. If however, the broad market continues south at this rate through the close on Friday, I may change my mind. In that case, I think there will be another intermediate-term pull-back (with the primary bull intact), where the magnitude of pull-back might be in the order of say 8 pct.
The thing about trading is that, late in a primary bull cycle, especially an over-entended one like this one, the next pull-back can be THE BIG ONE. You never know.
Posted by: Bill Cara at
June 6, 2007 2:36 PM [link]
Here are YTD's for some metals, mixed bag. Shows the importance of getting the right instruments. ETF's not stellar but solid, and not as sexy as juniors. Used Continoue Gold Futures contract which maybe why it lags.
Food for thought.
Stock YTD as of 6/5/07
GLD 4.99
CEF -0.75
AEM -9.82
KGC 12.71
GFI -10.01
GOLD FUTURES 2.78
SLV 6.5
SLW 13.74
Posted by: Telestar3d at
June 6, 2007 2:37 PM [link]
RE: SDS
I have been prepared to take a position here for two weeks, but didn't this week because I thought the drop in the S&P would be limited to 1.5%, which wouldn't make it worth my time given the fees. However, it seems the Fed has decided to change their tune, and I'll have to do some more research in order to find the sheet music.
Chris,
Those delays in the opening trading of the stock that shall not be named are not bid standoffs. I quit playing when I put in premarket order to sell with a limit well below the open that morning. A paltry 200 shares traded over the first 9 minutes, then my order magically got dumped with 9 minutes of backlog, which put a dent in my profit. An optimist might think the exchange has suffered from a technical glitch each morning in recent days. I take the darker view that someone is delaying trading to see which way the wind blows before executing their strategy for the day.
Posted by: Skrymir at
June 6, 2007 2:37 PM [link]
Bill: Thanks for your openess and honesty on the current situation for gold. I determined on my own last week that really almost anything is possible at this point. If you are dealing with funds that you cannot afford to lose it does not hurt to play it safe a bit.
Thanks to all here for their meaningful input and observations!
Posted by: agaunv at
June 6, 2007 2:48 PM [link]
With respect to systemic risk - to put things in perspective - LTCM was leveraged 1:1. Besides making a stupid bet on Russian solvency, it was that leverage that was their primary undoing. By comparison, most hedge funds today are leveraged 3:1 or more.
Think about that for a sec.
There are already talks of many hedge funds getting antsy about mortgage readjustments preventing defaults, because it doesnt allow them to cash in on their nice default swap positions.
Nothing says "maybe our risk is not quite hedged the way we thought it was" like that.
When you factor in the sheer gargantuan amounts of money involved, this isn't just a top heavy, unbalanced ship. This is like the Empire State building perched on a container barge on the Mississippi river.
Posted by: GTT at
June 6, 2007 2:48 PM [link]
KrrSplashhh!
Posted by: agaunv at
June 6, 2007 2:51 PM [link]
At Stelco AGM today, it was announced the company has sold its iron ore royalty assets. Probably sold some land too. I figure I know who got a commission.
At the time of the pre-meeting stock rally, recently, did I not suggest this was going to happen? And did I not tell you that the BAM modus operandi is as clearly obvious as the Dow being down -142 points at this point.
They would like to be called Private Equity. They used to be referred to as Vulture Capital. But that was before BAM discovered a judge and an army of lawyers who would help them do these things with Other People's Capital. Now, among people I know, it's just called Vulture.
I'm wondering when they get the Canadian taxpayer to take the Stelco employee unfunded pension liability off their hands. That's probably a requirement of the company they sell their control block shares to.
Posted by: Bill Cara at
June 6, 2007 3:07 PM [link]
Is that the Titanic theme song playing?
Credit swaps are many times higher than what they were in 1998 too.
"Notional amounts of all types of OTC contracts rose by 12% to $415 trillion at the end of December (Table 1), after a 24% increase in the first half of the year. "
http://www.bis.org/press/p070521.htm
I would take a couple rounding errors from that figure any day.
Speaking of hedge-fund blow-ups, Amaranth's former trader has started a new fund and is suing bloggers if they decide to advertise it.
From yesterday's New York Post:
"HEDGE FUND BEAR-ISH ON SUBPRIME RELIEF
By RODDY BOYD
June 5, 2007 -- A big hedge fund on one whopper of a winning streak is picking a bitter fight with Bear Stearns over whether renegotiating loans for homeowners struggling with subprime mortgages is fair play.
Paulson & Co., an $11 billion hedge fund, has written regulators over concerns that Bear and other investment banks may be engaged "in market manipulation" when the banks' mortgage-issuance units modify loans so that homeowners can avoid foreclosure.
The Madison Avenue-based Paulson is ready to do major battle."
Get some popcorn, sit back and watch this exciting new, but totally expected, phase of the housing bubble/battle.
Bear Stearns' eagerness to form their "Mod Squad" to help stall foreclosures makes a lot more sense since it helps boost their side of those MBS trades. Somehow I knew they weren't doing it out of the goodness of their hearts.
Mike
NYC
Posted by: MikeNYC at
June 6, 2007 3:16 PM [link]
Now all we need is some Geo and Geo-political events along with this market action and increasingly apparent inflation.
Oh wait we already have them, Cyclone in straight of Hormuz, it is effectively closed for the next 48 hours, Turkey is invading norther Iraq Putin is attmpting to upstage the G8 by acting like Iran's leader and Brent crude is back up to 72 or so. What the hell else can happen (rhetorical question)?
Posted by: agaunv at
June 6, 2007 3:22 PM [link]
The tale of two Goldminers today
----
GFI: Gold Fields declares 93.8m ounces in reserves, a 44% increase
http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=21883&sn=Detail
Down 2%
GG: JP morgan upgrades to Overweight
Up 2% today
Long GG and GFI
Posted by: JogyP at
June 6, 2007 3:35 PM [link]
GoldCorp doing quite well today for some reason; GG and KGC are both green, GG has been green all day.
Posted by: SiO2 at
June 6, 2007 3:37 PM [link]
GTT - Wasn't LTCM leveraged 100:1? BTW, Bookstaber's new book Demon of our own Design attributes LCTM's fall almost COMPLETELY to their leverage.
Bill -- Help me understand the rationale for a PM rally as equities decline. In 5/06 & 2/07, PM's declined alongside equities (miners included).
Because (both times) hedge funds seemingly unwound leveraged PM positions. Open Interest in gold futures continues up.
Doesn't this portend a similar outcome this time around? Isn't it really about unwinding of leverage, and aren't all asset classes therefore equally at risk?
Isn't shorting assets (or long SDS or QID) the only way to win when this market buckles?
Thanks in advance for your thoughts.
I forgot to mention the latest shoe to hit me in the head, which is the nasty backside of the housing bubble-default-debacle.
Monday I received a nice letter from my local county assessor. Guess what? In FOUR YEARS the assessor says my property value went up over 80%.
So until the rest of the voters get a snoot full of this BS, guess what will happen to everyone's property taxes?
Now I don't expect anyone here to cry a tear for me, but think about all those nice folks that lied to get into that overpriced house with the overpriced mortgage. As they are trying like mad to bail their fat and credit from the blaze, along comes the blood sucking tax collectors to put a nail in their coffin, just in time for their property values to plummet.
And politicians wonder why they are so popular.
Posted by: Craig at
June 6, 2007 3:51 PM [link]
Colin Twiggs writes in his last trading diary that strong crude prices should support demand for gold.
Bill also writes that "It will only be after currencies are re-balanced (which means the Yuan must float or be moved to a higher level) before gold versus paper assets (stocks and bonds) reach an acceptable risk equilibrium."
Can anyone help me understand why? (Any good online resources?)
Hallvard
Student
Posted by: Hallvardo at
June 6, 2007 3:54 PM [link]
There seems to be a lot of noise preparing the market for a rise in the Yen. If that is true, do folks like FXY, a straight yen play, or JYN (Yen/USD) as a better choice, given that rises in the yen seem to go hand in hand with declines in the buck? It seems playing the cross may be a stronger choice given a reverse correlation of the currencies.
Yen futures and Yen/USD in the forex market are a little outside my risk capacity, and the ETF seems a safer way to make that bet.
Just wondering what folks here think of one vs the other or am I way off base?
Regards,
Mike
NYC
Posted by: MikeNYC at
June 6, 2007 3:57 PM [link]
Dipped my toes in FXY last Friday and this Monday. It seems like a safe bet from here.
Posted by: cb at
June 6, 2007 4:03 PM [link]
Craig,
I think it was the NY Times that recently covered a squad of extremely angry ladies who are spending a LOT of time and energy uncovering and fighting mortgage fraud in their town for EXACTLY that reason. One or two of them started getting these crazy assessments and began tracking it and unraveling the onion. She met up with others in the same boat and they formed a team to take this head on. They were having great success but it was taking a lot of their time and energy. As I recall, one of them might have been an attorney and/or involved in the mortgage industry in some capacity, which helps, of course.
I'll see if I can find the article.
Regards,
Mike
NYC
Posted by: MikeNYC at
June 6, 2007 4:06 PM [link]
Jock,
From what I remember reading you are correct. LTCM was leveraged an insane 100:1. I saw the 1:1 figure and was scratching my head.
The fall can be attributed to leverage and lack of risk management. While they held many, many positions they were all basically the same involving some form of swap, hoping that spreads would converge.
Posted by: brianr at
June 6, 2007 4:15 PM [link]
Craig,
Here you go.
Anyone facing gigantic assessment increases and suspects 'flippers' and mortgage fraud have been happening in their area might want to check this article out.
ATLANTA — The three women call themselves the All-Broad Fraud Squad.
Nearly a decade ago, concerned that mortgage fraud was threatening their pastoral towns, the women — two full-time mothers and a mortgage executive then in their 40s — got together to write down license plate numbers of suspicious cars in their neighborhoods, scour public documents for housing titles and deeds and seek the help of local law enforcement. At first they were ignored, written off as bored housewives.
Today, the three women — Ann Fulmer, Alicia Sheppard and Julia Barrette — are helping train F.B.I. agents, speaking to lending associations across the country and lecturing college students on how to identify mortgage fraud.
“For us in the industry, we could deal with mortgage fraud during the day but go to our homes at night and forget about it,” said Matt Wade with Fannie Mae in Atlanta. “But for these gutsy women, it was personal.”
Hope this helps somebody out there.
Regards,
Mike
NYC
Posted by: MikeNYC at
June 6, 2007 4:30 PM [link]
Our favorite stock-that-shall-not-speak-its-name seems to be making a bit of a run in afterhours. OR, is that just more of the same shennanigans that has ET Pro reporting fewer trades today than the main ET site. Inquiring minds would sure like to know.
M.-
Posted by: writersblock at
June 6, 2007 4:31 PM [link]
Jock, you were asking if goldminers could enjoy a rising trend as and when the broad market sells off. Gold has often traded counter to the broad market.
In fact, not to give any further opinion at this point, I think there is a strong possibility that gold bullion and the related producers could start a counter-cyclical rally. If that happened, it could be based on any one of several reasons: (i) risk of increased military conflict, which devalues fiat currency (ii) continuing downward pressure on the USD tied to a continuing flood of capital into emerging economies, (iii) the free float of the Chinese Yuan, (iv) stagflation of the US economy, which takes down the broad market, but also devalues the currency against non-consumable commodities that retain value, or (v) a portfolio hedge for large capital pools who have to invest new capital somewhere. I probably missed several other legit reasons.
Every cycle is different. Typically gold rallies with inflation; but during the Great Depression of the 1930's, gold was one of the strongest investments.
Gold represents an unallocated asset, like cash. It is a place to be when real wealth is not being created as fast as money is being printed (ie, as debt is being created), which tends to pull down the value of equities. But there are times (like war) when you don't want to hold a fiat currency, especially the USD which is the currency that gold is priced in. Then it makes sense to go to gold. The miners may have a PE contraction, along with the broad market, but, longer-term, if the price of gold is rising faster than the costs to mine it, and the reserves and production are increasing rapidly as well, then the underlying value increase will drive the price higher.
We'll see what happens.
btw, can you do the Impulse Report for the Cara 100? I have written a couple times but didn't get a reply, or if you sent one then my mail filters caught it.
Posted by: Bill Cara at
June 6, 2007 4:31 PM [link]
Absolutely right - I think I meant 10:1 and 30:1. However LTCM was itself actually leveraged 30:1 so I would have been wrong again, foot in mouth. THat was rare then, but I think now many hedge funds are leveraged by more, is the point to take i suppose.
Posted by: GTT at
June 6, 2007 4:34 PM [link]
Thank you Mike, I'll try searching on it as well.
I seem to recall another related story, but it only cited the impact on subprime loans.
Just wait until everyone else gets the bill!
All the tax control advocates and their voter initiatives will have all the ammo and voters they need.
I know my neighbors aren't happy.
Posted by: Craig at
June 6, 2007 4:35 PM [link]
I see that run in you-know-what on yahoo finance. Perhaps someone knows something? I was just starting to lose patience - and I have loads of patience.
Posted by: moab at
June 6, 2007 4:39 PM [link]
Re: LTCM leverage
Based on this article from Apr. 99 Derivatives Strategy (http://tinyurl.com/2y6gqv), LTCM ended up with 100:1 ratio AFTER the crisis wiped them out. The accumulation of losses led to a mechanical overleveraging that managers did not correct through liquidation because they expected capital inflows to correct the early imbalance.
"Although LTCM’s leverage ratio eventually reached 100:1, its leverage before the crisis was about 25:1, with about $4.7 billion in capital and $125 billion in debt. In their post-bailout presentations, LTCM partners compared the firm’s targeted 25:1 leverage during that period to the 34:1 leverage common at securities firms and the 24:1 leverage common at money-center banks."
JML
Posted by: Jumble at
June 6, 2007 4:51 PM [link]
Approximately 2 hours ago I asked "Anyone know why Goldcrest Resources (GCL.V)is up over 100% during the past week (18% today) on huge volume? I can't find any news to justify the rocket move." The stock ended the day at .82 up 34% on 4.9 million shares traded. I still can't find any news. No position but, very curious.
Fred
Posted by: Fred at
June 6, 2007 5:09 PM [link]
Bill - I did respond to your email, and I must be caught in your spam filter. Yes, I can do impulse for Cara 100. To do the history would be very laborious, but to report weekly on those which are red or green, I can do easily. For this Sat. if you wish.
Follow the trail. GRZ 1,724,000 traded after hours. with only 4 transactions.
If this is a glitch in Nasdaq reporting please correct me.
Posted by: NYUgrad at
June 6, 2007 5:45 PM [link]
And - one last thing re: LTCM - while their mind-boggling collapse was due to the extreme leverage - the spark that lit it was the Russian default. They were far too exposed to Russian bonds, so that default whacked them good. This started the forced liquidation of other positions that spiraled out of control (due to the excessive leverage). Once other fund managers got wind of their problems, they had nowhere to hide - no one would be willing to take on the positions they were liquidating. This led to more losses and more forced liquidation, etc.
Posted by: GTT at
June 6, 2007 6:00 PM [link]
lastly, Chavez was on tv today reportedly. feel free to use any Spanish/English translation tool online. i think this bodes well for any miner in VZ. but things can change down there in a ny minute.
Original Spanish version: http://tinyurl.com/ynt8z3
Google translation: http://tinyurl.com/29gr6m
Posted by: NYUgrad at
June 6, 2007 6:01 PM [link]
MikeNYC,
JYN can potentially give you better returns, but it is not an ETF, it's an ETN. So, if Barclay's survives it's probably ok, but if it goes caput you lose 100%. Maybe it is not likely but anything is possible given the likely scenario.
BTW, unlike the US, Japan's uses nominal inflation not the the pretend core CPI. Food inflation should show up there, thus rates go up and then - run for cover!
Posted by: SiO2 at
June 6, 2007 6:42 PM [link]
WFMI and the FTC makes me think of this scenario...
FTC opposed to Ferrari and Aston Martin merger. "reduced competition in the category could prompt Ferrari to raise prices and cut its quality and services"
Posted by: moabmatt at
June 6, 2007 6:52 PM [link]
For anyone interested in WFMI this maybe of interest.
I have just seen piece on UK main news about Whole foods launch of first store 80,000 sq feet in London today .I think UK buying public could be interested in this companies products,Organic produce is currently popular with shoppers here.
Walter Robb co president of Whole Foods Market said about the launch in London.
"We're saying by 2010 we expect we can have 300 stores in the U.S., and the UK and Europe are around the same size market. Maybe we could have something similar here."
Posted by: john uk at
June 6, 2007 7:28 PM [link]
According to the bloomberg article out today chavez said he does not plan to nationalize mining companies operating in Venezuela. Check out the second to last paragraph.
Forgot to provide link in the previous post. Here it is:
http://www.bloomberg.com/apps/news?pid=20601087&sid=agYwz7ksECBI&refer=worldwide
Posted by: Bonsta at
June 6, 2007 7:32 PM [link]
NYU Grad --
I translate the end of the article referenced in your post as:
"We have the authority to nationalize, as we did with CANTV and the Electric Co., and a referendum would not be needed to do this".
I don't see anything in the article you referenced which suggests Chavez could NOT nationalize mining. I wouldn't trust google's computerized translation on this point.
(BTW, I don't think Chavez WILL nationalize mining, but nothing in this article prohibits it.)
From NYUGrad's link to El Universal:
Además descartó la nacionalización de la industria minera. "Nosotros tenemos potestad de nacionalizar como lo hemos hecho con la Cantv y con la Electricidad y no haría falta un referéndum para eso
Translation by hand:
Furthermore, he put aside/rejected/ruled out the nationalization of the mining industry. "We have power of nationalization, like we have done it with the Cantv and the Electricity, and a referendum would not be necessary for that."
The Bloomberg article seems to be a about the same as El Universal's. It would be great if someone had a transcript of the conference since the last part about not needing a referendum lends support to the idea that he simply doesn't feel it is necessary right now. No guarantees about the future, of course.
Posted by: Skrymir at
June 6, 2007 8:10 PM [link]
Asia markets down on fear of the impact of US inflation. On tap for tomorrow; initial jobless claims, consumer credit & wholesale inventories.
Hmm if jobless claims are up, that indicates the economy is slowing. Down, threat of inflation increases especially with rising cost of production.
Par: I bet the number meets expectations, that is the only way that they can spin this!
Spot gold: Rock solid stuck at 669. Actually after watching the arrows go up one minute and down the next on my Kitco Kcast it becomes a bit humourous.
Posted by: agaunv at
June 6, 2007 8:44 PM [link]
Re Chavez, Venezuela, and Crystallex:
The nation owns the land at Las Cristinas and has only contracted out the mining rights. Those rights require the environmental permits to be issued before the company can proceed with the mine plan. In the case of Crystallex, this is not a matter of nationalizing or not. Venezuela already owns the property.
Other than the environmental permitting, the only issue, as I see it, is how President Chavez and his government intend to treat the foreign companies who intend to exercise their legal rights there. According to the Canadian government, which has agreements with Venezuela, I understand they believe that business contracts of this sort (ie, with Crystallex) will be honored.
I don't think the political and business world has yet begun to debate the real issues that President Chavez has started, but in the case of Crystallex, I do believe the issues are comparatively minor.
Not being an expert, I hope that is the case.
Posted by: Bill Cara at
June 6, 2007 8:50 PM [link]
Dear Bill and Co,
Somebody liked the sound of the article, 'cause KRY did about a quarter-million shares in the evening session, and at about 30 cents above today's close. Wish I'd bought some today.
Chris
Posted by: shark_attack at
June 6, 2007 9:21 PM [link]
Correction: KRY "closed" about 18 cents above the close, not 30 from what I can tell. I was playing golf this afternoon anyway. Fore!
Posted by: shark_attack at
June 6, 2007 9:25 PM [link]
the real story to me is the AH action on GRZ. 4 trades totaling 1.7M shares.
16:11 $ 5.73 320,400
16:10 $ 5.73 541,600
16:05 $ 5.73 232,900
16:03 $ 5.73 629,100
Posted by: NYUgrad at
June 6, 2007 9:37 PM [link]
Dear sweet people,
please s-p-e-l-l out the names/symbols of the stocks to which you are referring for those of us not in the 'inner ring'.
Thank you.
Posted by: bbcmoney at
June 6, 2007 9:50 PM [link]
bbcmoney: Anything that appears to be of any interest to me is immediately looked up in Yahoo finance and added to a portfolio to be tracked.
If you have any desire to pursue investing this is like being able to tell a debit from a credit in your bank account.
Posted by: agaunv at
June 6, 2007 10:42 PM [link]
bbcmoney. It is tough on someone who maybe starting out trying to track names to symbols. Aganuv is right in his recommendation. Google Yahoo Finance is a great place to start. They do a good job and I highly recommend if you are a novice.
For example KRY will give you Crystallex which is listed on AMEX and Toronto. KRY will give you AMEX and KRY.TO will give you Toronto.
Go ahead and give it a try and have some fun. If you need any more info just ask our resident experts in the community.
Posted by: Horatio at
June 6, 2007 10:56 PM [link]
One of the comments in the book about LTCM was on how Goldman Sachs employees came in and were seen downloading all the positions that LTCM held to their laptop.
Apparently after that it was like a game of Duck Hunt - they kept sniping away at LTCM's trades.
From the book:
"Steve Black, the Salomon Smith Barney executive, heard from his troops in Tokyo that Goldman was 'banging the s---' out of Long-Term's trades, especially swaps. Goldman said Salomon was doing the same in Europe."
I seem to remember seeing Amaranth's positions released to the world in a similar fashion. It would be interesting to see what their portfolio would be worth now.
Note that according to this article, Amaranth was leveraged just 4-1.
But according to this article, it was estimated at 8-1.
http://quantrecruiter.com/blog/?cat=10
However, with risk, the key number the banks and regulators look at is VaR (Value at Risk)
http://en.wikipedia.org/wiki/Value_at_risk
Here is a good comparison on Amaranth and GS's VaR.
http://www.toomre.com/GoldmanAmaranthLeverage
According to this article, it isn't leverage that is risky - you can borrow as much as you want from the dealer. The value at risk is how much you have in the pot on the table, and what the chances are that you're going to lose it in a given timeframe.
Another interesting article here on Enron and how its creative accounting methods kept debt off the books, and descriptions of its VaR model.
http://orm.sagepub.com/cgi/reprint/9/4/456.pdf
Traders at Enron were penalized if they went over their trading limits, but it was a fixed penalty so when they went over, they were told to go over big.
How about this little tidbit?
"According to former Enron employees, on the sixth floor of the company’s downtown head-
quarters was a set,designed to trick analysts into believing business was booming...former
employee Carol Elkin said that it was all an act,and that no trades were actually made there.
The people on the phones were talking to each other."
:)
SUN After hours up 3.95%
don't ask how I stumbled on this)
Posted by: agaunv at
June 6, 2007 11:57 PM [link]
I tripped across this website yesterday. You may or may not already be aware of it. It's called Mining Nerds. It provides a 15 minute delay on most of the Canadian mining stocks that I'm interested in.
Fred
Posted by: Fred at
June 7, 2007 12:27 AM [link]
NYUGrad,
You're right, GRZ looks like it could, as it crosses the 20 day to the good side, be a winner in this game of Latin American Russian Roulette. Accumulation here portends higher prices.
Chris
Posted by: shark_attack at
June 7, 2007 12:28 AM [link]
Fred,
Since no one has attempted to answer your question regarding Goldcrest Resources, i shall attempt to. The only reason i can think of for the move in Goldcrest is a recent (June 5th) research update by Graeme Currie on it in which he basically went over the May 23rd news release and painted a favourable picture for Goldcrest.
Just to add to what I said earlier about Whole foods markets first store in UK.This is link to main Uk newspaper article ,which states Organic supermarkets are threat to main stream Supermarkets.
http://www.thisismoney.co.uk/consumer/article.html?in_article_id=421082&in_page_id=5
I dont own any of this stock,just passing on what I see maybe useful to others.
John
Posted by: john uk at
June 7, 2007 7:44 AM [link]
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cnbc should be entertaining tonight with all the excuses they dream up.
Posted by: NYUgrad![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 6, 2007 8:04 AM [link]