Moin from Germany,

wanted to update something from the Lennar/Homebuilder call (via Minyanville)

And what about those sales incentives?

The company reported higher sales incentives offered to homebuyers of 9.6% in the first quarter of 2007, compared to 4.9% in 2006.

In this quarter the company reported sales incentives surged to $43,700 per home delivered, compared to "just" $24,700 per home delivered a year ago.

Keep this in mind when you hear the next relatively "stable" new home prices.... :-)

Interest rates
I'd like your opinion about this: interest rates in 1-2-5 years. Would you consider well a big hedge operation for a company to fix/protect the (current) interest rate on its debts paying some money, or paying a spread, instead of letting the market determine the cost of interests, higher or lower it be?
I read that many experts' opinions are about (much) higher interests in the future, including the comments from Greenspan. Maybe because (I guess) the confidence in debts will be lower, and the issuers will be forced to offer more actrattive yields. But, why not to look at Japan? After the big bust, they had deflation and many years of forced low rates in the hope of stimulating the economy. Do you have any suggestion for good articles about what happened in Japan, and what's different today in the Western countries? I'm more inclined to think that maybe we could have higher interests for a short while (1 year or so), and then lower rates to stimulate the economies, or just to fight each other for currency competition. After all today, with so many debts, what do we have? If Western countries keeps on raising the rates they will strangle the economy, if they lower the rates then the carry trade will fall (with an earthquake in the rates of exchange between yen and anything else). Can we only hope that Japan and China raise rates and the domestic inflation to reduce slowly the excesses in the rest of the world? What do you think? I hope my comment is not off-topic in this great blog!

Why China won't revalue

http://www.atimes.com/atimes/China_Business/IF28Cb02.html

Holden/Jasper: Sorry I couldn't respond yesterday - set my stops and hit the links.

RE: HOV and the RSI 7/14/21 values around 3/20 and RSI values “confirmation”

Holden: Your point about keeping the sector activity/outlook in mind is, in my view, absolutely correct. While some stocks can go against their sector trend, one expects them to be dragged down/pulled up with their sectors until and unless you have some/enough technical indicators, news, etc. showing a possibility of counter-trend price movement.

While the RSI values crept over 30, looking at other technical indicators of HOV activity around 3/20 might have signaled caution: (Along with RSI, I use Full Stochastics, ADX, and CMF as my primary chart template indicators). Personally, I like to see RSI 7 lead the RSI 14/21 into the 50 level to confirm the 30 ‘alert’. Stoch also crept over 30 (my alert level) around 3/20 but never got to a level of 50 (my comfort zone is trending strongly upward from 30 through 50); ADX trend strength (from beginning of March) grew and reached 40+ on 3/19. It continued higher thereafter and has remained strong through yesterday. CMF has been essentially negative since the beginning of March as well; folks were/are not putting money into the stock. Also in the prior 7 days you had 3 days of very high volume (3/9-12-13) driving the price down significantly followed by 2 high volume up days which didn’t move the price above the 3/13 high. HOV hasn’t done much since except follow the sector down.

All the above is presented with the hope that other chart watchers/technicians correct my mistakes, offer their interpretations and discuss other indicators they use - and that no one forgets that these indicators do not work all of the time for all people in all markets.

Soulek1-Re time horizon for gold: I understand exactly where you're coming from...I think gold could easily go to 550 or below, or it could retest 690, all in the space of a few days...and anyone who takes a mid-long term position in gold needs to clearly understand what that means in a very volatile sector (ie, if you don't like the volatility, then change the time frame or the sector)...speaking of time frames, there's ST and there's very ST, and right now I would not want to play positions in the 3-6 month period-there's too much risk...I prefer opening/closing positions quickly...the LT strategy has not changed, other than it's hedged ST...I (believe) I have capped the downside risk to the LT holdings at maybe (12.5%) if looking at the total portfolio...thanks for putting the possibility of a major sell off on the table, I am certainly not ruling that out..

“I feel a little like Bear Stearns today. I need a bail-out. And I’m not even under water yet.”

Dear Bill,

Since we are all connected, I have assailed the Gods on your behalf therefore, you will not go under.

Please know that the energy you put into the ether every morning, reaches out and lift up many lost hopes and boosts confidence. On all our behalf, I thank you for your generosity and send out waves of strength your way.

I may have sent you this before but since, I do believe that only energy is real and all else is illusion and that we can work with energy for benefit to ourself as well as others, I hope you and others will be so inclined as to peruse the following: http://tinyurl.com/2zzghb

Thank you all. May this day be filled with calm and quiet in our minds.

..in case anyone is wondering, Soulek1's comments can be found under the "Goldminer Report" heading for June 26..

COP, ConocoPhillips said it will record a charge of $4.5 billion to write off its Venezuela projects.

Orders for durable goods came in quite soft. The SPX is going to open below that much ballyhooed 1490 level. Question is, how low will it go and how soon will this be followed by a rebound?

KRY update

Headline and partial story from Tuesday night's VZNews suggests that the paperwork still needs to make it's way over to the proper minister's office, and according to the source,

"We're just wrapping up the review and drawing up the file that will be sent to the minister, so we are still working on that process," a high-ranking official at the ministry told BNamericas.

Suggests that the permiting may not happen for days/weeks.

I didn't purchase at the close due to the way Monday's action was disrespected on Tuesday. The price action suggests a bottom at 4, But I'm hoping for a bargain today.

Chris

Not much talk here in Comments about Silver (SLV). Here is a wkly chart that I posted elsewhere. Bottom line is that although SLV is heading into the AZ (below 30 on the wkly), I don't think I will be "dipping" until I see some kind of upward confirmation.

Good luck!

http://tinyurl.com/2an3v5

personally, i would like to see a major sell-off sooner rather than later, with/without gold selling off even harder, and just get it out of the way...we all know there are major problems with money supply and credit expansion (my wife and I have wondered for years how people "just like us" can be spending so much more than we can afford), wealth redistribution, budget and trade deficits, and hedge fund/derivative risk...the party can't go on forever, and it would be nice to turn off the lights and tell everyone to leave now..

if COP is writing off it's VZ projects, can that be good for KRY..

2nd_ave, you may be right from a psychological p.o.v., but this looks like an event that is only bad for COP.

http://tinyurl.com/2fnpub

Exxon (XOM) has also pulled out, with lesser pain. But other producers met the terms of the VZ gov't.

"ConocoPhillips, the third-largest U.S. oil company, slid after it said it will record a $4.5 billion charge to write off Venezuela projects."

Obviously, 2nd Ave, this stuff casts a pall over the idea of investing in VZ.

Ask Bill about HB and B employees. Not to generalize here, but they tend to scatter when the kitchen light goes on, and they have a twitching, kneejerk aversion to appearing to be wrong or worse yet, irresponsible. This should quell interest on the part of big establishments.

Looks like 4's resistance now, at least for the time being.
Chris

"if COP is writing off it's VZ projects, can that be good for KRY.."

I think it's stretching to make the comparison.

COP has millions/billions in hard infrastructure invested in VZ, KRY is a small miner waiting for a permit to enrich Hugo.

I will remind all, strategy and intelligence would dictate seizing resources AFTER their development, not before. The permit will come as will development. THEN political worries can flourish but not until the wealth is materialized, like the oil.

Anyone looking at AG plays, they appear to be on sale. Check out MOS and MON.
I wish I had bought TNH at $79 a few weeks ago...

Craig,

Your notion is incomplete. The market is a big discounting mechanism, blah blah blah, it takes into account all available info and translates it into price, blah blah blah. In other words, you're describing the behavior of cows or chickens. Human beings, traders, specifically, will discount the thing at the permitting stage.

GROOVY IDEA FOR A CONTEST(with Bill's blessing): LET'S TAKE "BETS" ON THE PRICE OF KRY AT CLOSE OF DAY OF PERMIT RECEIPT. ANY TAKERS? CLOSEST TO WINS ROUND TRIP TO NASSAU...

LOL... who's going to bet first? I'm reserving my guess until I see others take a stab :)

This latest news tidbit could be propaganda as much as it could be valid. Eitherway, the stock is 10 cents off from the price before the news was released 2 weeks ago. This is all a shame for me, because my average buy-in after selling all shares is quite a bit higher than where we sit now.

But it's all a moot point when the permit arrives.

Weely inventory report for oil is out.
OIH to go up from here.

KRY:
my bet on
KRY AT CLOSE OF DAY OF PERMIT RECEIPT is 4.80

numbers2son - A good technical analysis that may answer your questions is here:

http://www.minyanville.com/articles/index.php?a=13206

IMO there will be a bounce here to defend 1490. If that fails you may have a fast move lower. At least that is my thinking.

So far the test of the June lows has provided a nice bounce point. Unless the bulls can develop some volume, this looks suspect although I will not be surprised at green screens today.

chris-what's up...you have enough points to buy a RT ticket, or you're betting you'll have enough money by then to buy one..lol

Chavez knows that they trend is your friend. Does he want to maintain ties to a declining global economic power, or jump on the boat with another power that that is aggressively positioning itself for great power in world energy markets?

Maybe he will try to straddle this position, he is going to need cash to buy those subs you know!

Shark, remember these guys and gals are not always hitting on all 8 cylinders, they are people and can make mistakes just like the CEO's of BofA and Fannie Mae coming out and saying the housing and subprime things will not be bad.

Dear Jogyp,

Hoping we actually have Bill's blessing. Your guess, if true, is bound to disappoint many, and strikes even pessimistic me as being, if true, an excellent reason to visit the bar.

I'm thinking...$6.25

(finding my water wings)

I thought SDS was supposed to be "ultrashort" the $spx, yet I have been watching it trade lower with the S&P this a.m. What's the deal? I thought this was supposed to move in the opposite direction. Am I missing something?

Actually 2nd_ave, if you win, you will boarding a merchant marine vessel in Vancouver, and going to the Bahamas via Panama. No women on the boat.

Chris

SDS: Holders are discounting the probability that the PTB will engineer a rally today or tomorrow, also maybe some profit taking. If you have a position do not worry, it will look good next week and probably a lot better in coming weeks.

I will be glad when KRY gets/does not get it's permit and can be just another company. All this sturm and drang...aren't there other companies with value that can be looked at without the angst? Or is the edge of the seat, permit/no permit, back and forth just part of the 'fun?' "Everyone gets from the market exactly what they want?"

I will be glad when Bill finds a way to let himself offload some of his plans. Bill, you have the plans. You know where it all needs to go. But when I read even a portion of it _I_ feel tired. I get worried about you. Which is a weird thing to say about some retired securities professional with a blog whom I've never even met (to put it in the starkest, most simplified terms) but you are right, "We are all connected." Delegate, man!

You are tired of me saying it, no doubt, but at least get an intern or two or something. Other successful, growing bloggers have done it. You gotta let some stuff go or delegate or something. Isn't there someone you trust, with the knowledge and experience, who wants to participate in the Cara Empire?

I will be glad when people in the US wake up, even if it will take reaching a breaking point.

It might be happening in the UK right now. See this Guardian article:

http://business.guardian.co.uk/story/0,,2110761,00.html

"The middle classes have discovered they've been duped by the super-rich

Never have so many of us appeared so well-off yet felt so poor - and we used to believe obscene wealth was victimless"

Middle class England is living in 'million pound flats' but can't afford a beer at the pub. And they are getting pissed.

Plenty of people here do care, Bill. But when our congressmen get bombarded with calls and faxed from constituents about the immigration bill, and the response is to unplug the fax and make a back room deal, can you see how discouragement can set in?

By the way, Mayor Bloomburg just donated 30 million to charity. But he won't renegotiate the contract with the police union that starts a new cop, with a wife and two kids, at a salary that makes him eligible for goddamn food stamps. The same cops, by the way, that, for example, conquered violent chaos in my Washington Heights neighborhood, thereby unlocking billions in real estate value. So there you go: rich guys giving to food banks while stiffing your average person.

What can we do?

I guess we can look after our families and ourselves and try to do the right things and hold people accountable when they need to be. But none of it is easy.

Regards, all,

Mike
NYC

Well I think most notions are overthought.

I actually don't think Hugo ponders KRY much.

i can't help every knee jerk reaction, my job is to take advantage of them. If people bail on KRY because of COP, then I'm sticking with XOM who is staying with the talks past the deadline.
Apparently XOM isn't a knee jerk reactionary.

If it were all black and white and easy to read we wouldn't make a dime on it.

KRY will exceed it's current high on the day the permit is announced and that's all I care about.
Right now I could probably buy two RT tickets with my losses....and a room for two for a couple weeks with my current loss from UXG.

Your observation, Mike, is astute. There is excitement, which I hope not to become caught up in. But you're right, it probably is stupid messing with this stock. It's funny how much money you can lose buying into "sure things", isn't it?

Lots of people die trying to get gold out of mines.

KRY-alright, I'm in...permit in hand > 8.14 high for the day...

shark, I hope no one thinks I meant they are stupid for looking at this. It just seems like an awful lot of energy. Maybe the payoff is worth it. I honestly don't know, as I have not looked at the fundamentals.

I hope it works out for everyone.

It feels a little like gambling. But I've thrown a die or two. It's fun. The free drinks from the pretty little girls in the fake 'Indian' miniskirts make it worthwhile. Now I'm picturing Chavez in a mini with a drink tray. Yuck!

Good luck!

Mike
NYC

2nd ave, we cant compare your high of the day with our close of the day?
Which will it be? I believe it sniffs at 7 for a high.

and Mike, Chavez in a mini skirt? You have been spending WAY too much time staring at your computer screen!

Anyone shopping for GFI below the 52 wk low?
We have a new intraday low of $15.48

Strawman is in for more at 15.50
Now where is that damned dog, the kid and the tin man, we have to get to Oz!

HOV up 3%? Apparently we still have whackos out there.....

Someone has way more huevos than me.

Mike,

Right now KRY is a bet on permit approval.

KRY, IMO is better than gambling. The odds for getting the permit is very high after GRZ's permit approval.

Chris,
The permit day I expect a lot of selling on the news, but the permit rally will last for few days and I think we will see 6+.

We saw 5.25 on the hint of a permit, we'll exceed 6 no problem on a real permit.
I think 2nd is close, but it may go higher still.

Music city man,

are you looking at the S&P 500 or the SPY? SPY trades till 4:15 and fell off dramatically yesterday after the 4:00 close of the S&P 500, so the open of the SPY was out of kilter.

Turnaround?

KRY-close of the day > 7.89

bb,
I'm just looking for a fair hedge. I'm not too smart about options trading and "greeks" and all so I just don't know what makes a good hedge. Some of the short funds have a penalty for "early" withdrawal of funds. I guess I'm just surprised to see DXD and SDS trading in the same direction as the indices they are supposed to be short. Just another case of the average investor getting skimmed and fleeced by those in the business I guess. Maybe cash (or physical metal) isn't so bad right now...

Red Flag ---

Hi everyone, I wanted to point out what I think is a very dangerous situation developing in the hopes of creating understanding and avoid danger.

The danger is in the US credit markets. We are all no doubt aware of the problems at Bear Stears or BSC. The fundamental problem is that BSC and the creditors to those leveraged sub prime CDOs are unable to accuartely measure the underlying collateral value. I am told by friends on the BSC mortgage desk that it is chaotic as best. The issue is really one of linkages in the credit and capital markets and how a problem in one are can create a problem elsewhere and cause a real synchronized problem I believe we could be facing exactly that mega problem now.

Confidence plays a huge part in the global capital markets. When I have confidence in an underlying collateral pool I might be tempted to lend money to that vehicle. When confidence is lacking that same desire to lend money and liquidity evaporates. That's essentially what has happened in the subprime cdo markets. And now a trillion dollar market has a crisis of confidence.

That lack of confidence has begun to spill over to the corporate world. What Wall Street and HBB did for structured mortgage products they also did for structured corporate CDO products fueling the recent buyout wave. As in the subprime markets the value of the underlying collateral value for corporate (buyout CDOs and CLOs) is being called in to question. And why not. Mcuh of this paper has no covenants. That's right no maintenance or incurrance covenants on bank debt no less. Banks (HBB) no longer hold paper but are distributors to the real people ultimately holding the bag - you and me.

Trouble in buyout land started when big buyers of CDO and buyout paper all of a sudden started to question the terms of a paper being offered. There are rumors of potential hung bridges on certain large buyouts meaning HBBs are being forced to actually hold paper. HBBs are being forced to do this at exactly the same time the sub prime mess is exploding. Rest assured committees at HBBs everywhere are being told to reduce risk. Just as in the subprime market liqudity in the corporate CDO market is erroding and will likely soon evaporate. Just as the owners of subprime paper woke up and couldn't determine their collateral value so it is likely that a large subset of the nearly one trillion corporate CDO market will wake up and question the value of paper with no covenants financing very overleveraged buyouts.

And Blankfein and Paulson and Bernanke tell us not to worry that there in no peak and no bubble. Folks there is real trouble out there. Risk is being repriced. The difficulty in the credit markets could force a global reduction in risk and at the very least remove the underlying private equity bid from the market. This is all occuring against a backdrop of a stretched US consumer and decling durables orders. Liquidity is an ephemeral thing. One day it is here and the next it is not.

And the HBB tell us not to worry. I am very worried and I ask where are the regulators? They are nowhere to be found.

You are referring to the spread, which has been discussed here. There is more liquidity with some of these ultrashorts, so the bid ask runs a bit. They tend to converge at times of change.

if you put up a chart of DJI ($DJI)the Nas ($comp) and the S&P ($SPX) with RSI, volume, MACD, etc. you will see the best time to get into/out of hedges.

Keep an eye on support levels for these indexes via Colin Twiggs reports or from the nice folks here. Right now, IMO, the S&P is the index to watch as it is nearer it's support of 1490 and Twiggs money flow is UNDER ZERO indicating distribution.

Thanks Noodle for the heads up. I've been waiting for the repricing of risk. It seems to be here.

Craig,

Took another 1/3 position in GFI at 15.50. This makes my avg cost 15.59 with another buy order for my last 1/3 at 15.25.

GRS looking buyable here

Here is a comment I saw on Nouriel Roubini's sight which I thought would be of interest (for the whole comment, this was posted by "Stuart" on 6-21-07, I quote: "The rumors in the currency trading circles are that the auction was also continued so the big lenders have time to position themselves with options on the downside of xx vs. yen pairs because (and here’s the great part) the big houses need to unwind the carry trade *right now* to have liquid funds available for margin and leverage calls when it becomes apparent that over $1 trillion of CDOs being held are worth considerably less than face value." The auction refered to is the 350 million plus other amounts totalling to around a billion for the BS hedge funds.

Twiggs on Gold
-------
"Spot gold edged toward a test of primary support at $630. Corrections in a bull-trend are normally a lot sharper, as in March 2007, and the present gradual decline is a sign of (primary trend) weakness. Strong crude prices support demand for gold, but this is being offset by a strong dollar.

In the longer term, the primary trend remains up. A rise above $695 would indicate that the primary advance will continue, while a fall below $630 would signal reversal"

Yep, GRS is looking good here.

Nice buy on GFI Chas, below the 52 wk closing price. 15.25 would be a steal.

Did everyone hear Bill Gross's take on CDO's yesterday?
"CDO's in 'Hooker Heels' fooled Moody's and S&P."

No kidding, Moody's and S&P missed the adam's apple and scars and took home a couple trannies, nevermind the heels!

Moab,

You are most welcome.I ahve been in and around the buyout and distressed markets for 20 years. Bill knows my background and I would prefer to remain annonymous. But share information nonetheless to help the community deepen understanding.

The HBB amen chorus repeating the theme that "there is no problem" simply doesn't square in my judgement.

The signposts are all there for us to see. Word this morning is that BSC will not save the most leveraged of ts vehicles. That will put further pressure on the subprime market for sure resulting as I pointed out earlier an evaporation of credit.

Further this morning we have now heard that HBB's are in fact holding meaning amounts of unsold poor structured buyout paper. US Foodservice, First Data, ServiceMaster are among the names.

Two weeks ago I sat with one of the largest buyout firms in the world. They told me that they can no longer achieve a 15% gross IRR without employing 9x told debt to EBITDA. We should all think about what this statement from some of the smartest folks in the market means. There has been and remains incredible reach for risk in the global capital markets.

The move out on the risk curve for returns has been caused by extreme liquidity. Everyone is loooking for returns. State, local corporate pension plans, hedge funds, mutual funds etc... Everyone is reaching for risk. And it is chaotic.

The HBB has provided the grease in this game in the form of leveraged CDO's. They fund them, strcuture them and distribute them. Institutions everywhere have been reaching for risk, Chief among them are the hundreds of CDO's and hedge funds all competing for collateral driving up the prices of fundamental collateral to unheard of levels.

The HBB simply don't care as they distribute paper today and hold virtually nothing - sunprime or corporates.

The thing that blows my mimd is that the small investor is unprotected. The auditing firms audting the CDOs every year know that the paper with no covanents financing buyouts at 11x cash flow are going to have a problem and probably aren't worth the paper they are printed on. How do we know? Because we have over 30 years of date indicating will likely happen and has happened in periods very similar to today.

Further where are the boards of directors at these banks who are pushing EPS over the expense of the stability and health of the markets?

Finally where are the SEC and other government watchdogs? The fact is, no one is looking after the little guy - the small investor.

And when this house of cards comes down and that last buyout gets hung the little guy will hurt and hurt badly. Because he or she will have put their savings into a mutual fund or speculated in the market thinkung in the post Enron world things were safe - when in fact things are not.
And when liquidity doesn't flow so quickly and risk gets repriced equity and asset values across the board will decline and the little guy will get crushed. And that IS WRONG.

Music City Man,

Take a look at the attached chart. It compares the SDS, the SPY and the S&P5000 for todays trading http://tinyurl.com/2oppka

You'll see that the SDS does trade quite well as an inverse to the S&P500. It does not however match up nearly as well with the SPY. The reason for is that the S&P500 fell about 5 points after the 4PM close yesterday. Because trading on the SPY does not close until 4:15, that extra drop was reflected in yesterdays close price for the SPY, but not the S&P500.

So if you look at this morning's trading for the SPY and the SDS, they were both negative until 11:00AM. If you compare the SDS vs. the actual S&P500, you'll see the inverse relationship is quite strong.

bb,
Could you, for longer URLS, TinyURL it? When the long URLS kick in it makes the page hard to read for us FireFox users. Long URLS push the whole width of the page off the screen.

I don't know why the FireFox guys can't fix this one. Does anyone know an add-in or extension to fix this? It's a good product, but this really stinks.

Mike
NYC

BB is correct, that's why the close for the S&P was above 1490 but in reality it wasn't.

So those looking for a close below 1490 didn't SEE it but it happened, just a few mins later than close, that's all.

That was a good warning for today's open.

Red Flag -

Folks we are in the midst of a widespread sell off in the global high yield markets. I have been told from the dealer community that the liquidity I have discussed above is in fact evaporating. There are very few bids. And I will tell you that is a problem. As the high yield market goes so goes the broader US equity and global markets. Now it will get interesting.

If we have a global repricing of risk moving like a wave across the global (perhaps culminating in China where the average p/e multiple exceeds 45x) there is no way the Fed can raise rates. That leaves Bernanke and crew between a proverbial rock and a hard place.

MikeNYC
Firefox has an add-on, MR Tech Link Wrapper 2.1 that will fix the problem.

Oh, man. bobj, thanks.

Noodle, thanks for the ringside seat. We Little People know something is going on, but we just don't know what.

Mike
NYC

Thanks, bobj, it works like a charm.

Here's the link to MR Tech Link Wrapper 2.1:

https://addons.mozilla.org/en-US/firefox/addon/2547

Thank You Noodle.
That means yields will go higher and the price of notes lower as no one wants to buy so there needs to be a price adjustment to attract bond buyers/suckers. Those could get quite high as they have in past.

We have already seen what just a hint at higher yields (interest rates) does to equities, but it forces our view on PMs and accelerates the timeline of the inevitable.

The trip may require dramamine and an iron constitution.

Noodle-

Thanks for your contribution to Bill's community.

All- Unhealthy action out of the indices so far, Boys.

Is anyone expecting an end of quarter Window dressing / portfolio pumping for the next 2 days?

From Trade4keeps earlier in the year to fix long URL's and lines overrunning the screen in firefox......

Sounds like you may have the infamous broken word wrap problem, caused by long URLs that can break your browser. A nice workaround was posted a little while back - works great:

1. make a new bookmark and add it to your "Bookmark Toolbar Folder"

2. Right click on the bookmark, and select "Properties"

3. In the dialog, name the bookmark (mine is "FixWrap") and paste the following into the "location" field and save:

javascript:(function() { var D = document; F(D.body); function F(n) { var u, r, c, x; if (n.nodeType == 3) { u = n.data.search(/\S{45}/); if (u >= 0) { r = n.splitText(u + 45); n.parentNode.insertBefore(D.createElement('wbr'), r); } } else if ((n.tagName != 'STYLE') && (n.tagName != 'SCRIPT')) { for (c = 0; x = n.childNodes[c]; ++c) { F(x); } } } D.body.innerHTML += ' '; })();

Now when pages don't wrap, click on the bookmark to fix.

Waiting for a good bounce this week to add to shorts, but doesn't seem to be coming. With Fed announcement tomorrow and being the day before quarter-end, you'd expect it to be up, but anything could happen, so started adding to shorts a bit today.

There is talk that the fed may move the focus away from Core inflation to Headline inflation, so if this happens, could put further pressure on interest rates and stock prices.

This is just coming out the the blue but I've been wondering why we can't have a deflationary meltdown like the Japanese in the 80's and 90's. It's been suggested that that can't happen here because the fed will opt for inflation to avoid deflation. However, in Japan I recall that lowering rates was just like pushing on a string. This bubble and the bubble in housing could have been due entirely to easy credit and once the credit is gone prices of all asset classes could collapse, possibly including gold and miners. How do people think gold would react if we have deflation?

I'm back on the good ship Crystallex

China has closed 180 food factories after inspectors found industrial chemicals being used in products from candy to seafood, state media said Wednesday.

above is a headline story from a newservice, today.

One might add this one to a food story theme. My timing sucks as I sold dba a afew weeks ago in order to raise cash to buy equities now under water. fwiw, an elderly well travelled family member made many trips to the orient in the 70's and for the next 30 yrs. she was aware of the huge amount of money flowing into china but wondered if pollution issues would one day choke off its growth.

aucourant -

Gold price held steady in the Great Depression (it was fixed to $32). Homestake Mining went from $70 to $500 in four years as oil and labor costs declined and profit soared. As in the GD, the Fed will print money the likes of which you have never seen to reflate, which would be good for gold prices.

The Fed will inflate as long as they can. They have no other choice except a crushing deflation. But they are not all powerful. If deflationary forces are too much - no one wants to take out loans - they can do nothing about it.

Interesting discussion "Stock and Bond Bull Markets - The Beginning of the End?"
between Marc Faber,Mark Mobius(from Templeton),William Thompson and Christopher Wood(from CSLA)

http://tinyurl.com/32gm9m
This is what Marc Fabers response was to the question ,"How far will the market correct?"
Marc: Once the shares of Goldman Sachs are down by 20 per cent from their peak the phones at the Fed and at (US Treasury Secretary) Hank Paulson's office will ring asking them to cut interest rates to support the asset markets. So, who knows? But in real terms (in gold terms) US financial assets will be 'toast' for a long time.

Was so close to pulling the trigger on GRS at 12.30... hope I didn't miss the boat

My penny dreadful TBZ.V looks like it may have found its fulcrum point this week and is seeing some interest going towards AEUB permit approval in July. One thing I took away from the financing deal with M.Stanley on Monday was the reference that TBZ has identified other transmission projects past the big one they are working on. Kind of a unique play to get in on an electrical infrastructure startup as the biz is usually dominated by big utilites.

Also anyone get in on the bargain prices of SXR.to yesterday? Nice pop back for the Uranium sector today.

Markets seem to be doing the technical bounce today - we'll see if it lasts. However, I have a hard time thinking we will see "the big one" before we see earnings from the likes of tech heavyweights like GOOG and AAPL in mid/late July. I think we might need some disappointing data from the tech titans in order to tear the streamers of the wall and meaningfully drag down indices.

Noodle, aucourant great posts: Noodle thanks for sharing an inside view, much appreciated. This weak/no covenants financing is unreal. Talk about un-tethered greed.

Do you have a time table when you think the margin clerks will get involved?

kry/wgdf/bmd hanging in there...added kgc for a trade...

50 minutes to go...can we rally into the close, then into EOQ?

..took the DUG hedge off earlier around 50, putting back 1/3 at 49.10...reflecting my bias for a continuation of the rally into friday...

I think we're being set up for one of those flowery Fed statements extolling the virtues of easy $ on the mkt. It's been some time since we had a down day when Ben was BSing everyone.

I'm still in SDS but at a small cost and with the understanding it may need to go in a hurry tomorrow, or....

Will you look at that! The old stray WGDF came back from the depths.

And SBUX.....LOL!

Craig: HOV up - short covering - at end of May short interest was almost 50% of float.

Telestar, MarkM and others,

I am happy to contribute and be a part of this community. It is the least I can do as I have benefitted from all of you.

Telestar, you put your finger on it. "Untethered Greed." That is exactly what we have here. Is is peculiar how parallel the excesses of the subprime and corporate/buyout CDO markets are? Think about it. On the corporate side no covenants in the BANK DEBT for god's sake. Forget about the high yield - you can drive a truck through most of this stuff. By the same token over on the subprime side - few credit checks on borrowers, incorrect appraisals. The parallels are striking.

The common factor is Wall Street. Look at how BSC, Lehman and Morgan Stanley and others threw money at mortgage originators. This was nothing more than outsourced laboe designed to juice the HBB eps in two ways (1) reduced off balance sheet labor costs, and (2) juiced up fee income from distributions. WSJ has a good article today on how HBB gave heroin to the mortgage brokers and originators.

Similar on the corporate side. HBB is HUGELY influential in moving capital from pension plans, foundations and endowments to the big private equity firms like KKR and others. HBB then applies its structured finance expertise to corporate CDOs and presto chango we have HUGE buyer of buyout paper. Wall Street and HBB wins all the way around. They win as placement agents stewarding capital into the private equity funds, they win as fund of funds themselves, they win as structurers and financiers of CDOs, they win as advisors to the buyout funds and of course then as placement agents of the buyout related bank and high yield debt. They will all the way around. A virtuous and vicious cycle driven by greed as you so correctly point out.

As it relates to the timing of things such as margin call no one really knows for sure but risk is being reduced across the street as we speak.

Rest assured that this game is so profitable for the HBB that the amen chorus will be out in full force over the next few days and weeks lulling all us small guys into believeing everything is ok.

It's not ok and the debt markets are telling us that - no matter how many times Paulson and Blankfein tell us otherwise.

Financial stocks (GS,MER,BSC,MS, C) rallying into to the close with very nice volume.

noodle-how long do you think the amen chorus will keep things looking good..

...make the "can" keep things looking good..

Speaking of Crystallex, what are the odds that they will announce the permit at the AGM tomorrow?
Just dreaming out loud!

thanks for the reminder about the AGM-i guess if the trading volume or options activity starts to spike, then the odds of an announcement will look good..

Bill,

We'll be looking for your comments on the meeting, anything you can glean. KRY with a bullet!

Opel looks interesting, especially since Solar thermal and power have been hot topics as of late in Canada and elsewhere. I will definitely try and do my homework there.

I will try and make it to the KRY AGM tomorrow morning if I can clear up my morning obligations.

Quick Google and found this on Opel...

http://www.opelinc.com/invest.htm

Thats where i am gonna start my hw. Interesting, they moved to CT, outside NYC recently.

2nd Ave,

President Paulson just had a press conference in the Rose Garden. Commenting on the growing chorus to tax partnerships such as Blackstone President Paulson
said "we need to think comprehensively. We need to be careful of unintended consequences".

Ok even I had to do a double take on this....

President Paulson's previous employer Goldman Sachs is one of the biggest managers of alternative assets in the world. They have huge numbers of institutional partnerships for all asset classes just like KKR and others. So how comical is it that the fox is guarding the henhouse. This is now so utterly absurd it is a joke. Of course President Paulson wouldn't want to force ordinary income taxes on partnership gains and income, It would be counter to his erstwhile partners' best interests....

A new tax regime might alter the status quo. The status quo being the Wall Street machine that makes money at all points of the virtuous/vicious cycle.

How long "can" it last? A while longer as President Paulson and Vice President Blankfein do their best to maintain the staus quo.

But they can't control it for much longer. Once firms start to truly mark to market their collateral in these leveraged instruments - well then President Paulson will be as influential as say some dude named Bush.....

Once the genie is out of the bottle - the trouble starts until it is finished. And President Paulson's problems just get bigger to the extent Japan and China decide not to cooperate and to tighten the monetary regimes...

Another take on this, if these taxes go through, they will have something to blame for upcoming adjustments in the markets. Too funny!

I for one will sell this rally down to my core holdings, maybe going long the Yen. IMO all signs - technical, fundamental and psychological - all point to the last train out of town. Then again, anything is possible. We can only rely on probabilities.

To add to Noodle's excellent comments, Pring's book that Bill recommends indicates that almost all bear markets start with flight to quality in the credit markets. I thought this was happening earlier this year but I wasn't aware that these CDO's actually don't have a liquid market and therefore are marked to model, not to market. That is why HBB was saying no big deal when subprime exploded - they didn't have to recognize the losses!!! Once the market price is set for these things the charade is over.

Food for thought - every year ending in 7 has witnessed a panic in the markets, going back to 1827.

Now if only KRY would get the permit I could sell my position in that if the price is right.

OIH? Here? The index seems overbought to me and this one day pop doesn't change my view.

Fed days are usually good for a rally and I doubt this one is any different. Man the buyers came out at 1:30 and slammed the indices higher. I am probably going to fade tomorrow's push and buy more downside action.

Did anyone follow through on Bill's call that bonds were oversold? I have a nice gain in TIP.

Hi Noodle,

How would you best profit from this impending repricing of risk. Not being well versed in bond trading, I could only think of shorting ETFs like MBS (mortgage backed securities) or HYG (High Yld Corp Bond).

MarkM,

Bill's call on bonds... I bot IEF @ 79.88 on
6-12 . So far so ok.

Other positions: 100 IBKR at offering and bunch of CDE... OUCH!!

Regards
Tony

Wow, What a great job Ben and the boys have done to give all inflationary indicators a knock on the head, just prior to announcing in somber tones that it is OK to hold rates without appearing to be soft on inflation.
This looks to me like another performance, complete with smoke and mirrors, to hold up a market that is simply too top heavy considering the situation with bond rates, subprime collapse, and growing evidence that the 'big boys' are going to get stuck with their own worthless paper.
I know they are sitting around wondering why and how they couldn't suck all the dumb money (punters) in to buy their problems like the last time.

After those powerful posts from Noodle, we all need a good laugh about this subject.

http://tinyurl.com/3xwfz6

Sorry, 1st time trying tinyurl. Here's the link (now that you know where I got it!)

http://thepriceofeverything.typepad.com/the_price_of_everything/2007/06/junk-debt-crisi.html