Moin from Germany,

beautiful!

Just when the markets are reaching new highs the "Merrill Lynch Fund Manager Survey" is hitting 16 month highs....

69 percent overweight equities in their portfolio ( up from 66% in June ).

As most already know, GOOG and CAT both laid an egg and are dragging down their respective indexes.

Is anyone buying GOOG today?

Also, KB Home's CEO admitted today that the housing market won't likely recover until 2009.

I also follow Mohawk (MHK), a carpet and floor covering maker that reported earnings last night. I saw their forecast coming but alas didn't short going into today's earnings. Anyone who has followed this around earnings knows why.

CFC reports earnings next Tuesday. That should be a very interesting report.

Is there a free website where I can find the RSI of stocks? Looking for AU - Thanks in advance if anyone can provide links for RSI of individual stocks or specifically AU.

Moin Number2son

Masco and Brunswik also warned.....

But no worry.....

the housing slump is "contained"

Have a nice and golden weekend!

AdamG,
stockcharts.com and investertech.com are two free sites that will give you RSI information.

gorgeous pics. looks like paradise. enjoy.

Gold Futures are making a nice move on Bloomberg at 682.90. PMs appear mixed though.

Hi All,

We should all be aware that risk is being repriced in the markets as we speak. No where do we see this more clearly than in the debt markets. Yields are backing up considerably. Historically when this has occured these dramatic shifts in the flobal fixed income and high yield markets presage similar adjustments in the global equity markets.

Rumors in New York are that the real craters aren't near Grand Central but in the hedge funds with leveraged sub prime and corproate CDO exposure finally being forced (1) to post more margin collateral or (2) properly mark their securities to market. It is long overdue and it is not pretty. Liquidity is getting reigned in...

The other crater appears to be building on the money center balance sheets. Exposure to hung bridges is now in excess of $20 billion with a foward overall buyout financing calendar of $225 billion. Rest assured Citi, BoA and others will move that bridge paper to get it off the b/s and that will have an adverse pricing impact.

Last night I got a call regarding Chrysler. The auto giant being taken private by NYC buyout firm firm Cerberus is in the market with a $20 billion financing package: $8 billion for the Chrysler and $12 billion for the auto buisness. The $12 billion auto package is structured with a first and second lien. Dealers are having trouble placing the second lien. Last night the offer was L+750 basis points plus 3 points of original issue discount for nearly a 14% current yield. That's right a 14% "secured" piece of paper. Now, it's the auto industry I know. But still...14% with all the Cerberus dough underneath you?

Risk is being repriced...

KKR puuled its proposed financing for the Alliance/Boots LBO in Europe. That deal was thought to be the largest buyout in Europe. DB was the agent on the debt and couldn't "get it done".

That makes two deals the famed KKR has pulled in the last 2 weeks with Dutch Maxeda being the other.

Bill and others have spoken about the subprime problem in mortgages. Most financial pundits have said the problem is "contained" - whatever that means.

We have also spoken in the past about similar leveraged credit vehicles called CDOs and CLOs that are filled with corporate buyout paper. This is a game of scale since the fees stink (50 bps !!) so managers are incented to get a lot of these vehicles up and running. And then they lever the holy bejesus out of them in hopes of generating an adequate return. Trouble is folks have begin to reprice risk. There's that phrase again.

KKR and others can't get their financing packages placed. Bridges are hanging. The market says it doesn't want PIK Toggle covenent lite paper anymore. Pricing for seasoned paper with those terms embedded is heading south fast.

This repricing (similar to the subprime area) is casuing CDO and CLO managers to sell crappy paper fast....if they can find a bid.....

There is a rumor of a significant corporate CDO levered investor in trouble in NYC. I will try to confirm. If tru that would cause a major flight to quality and thoroughly rankle the global equity and credit markets.

Thanks Noodle,

here comes another shocker!

Tribune Debt Default Risk Tops 50 Percent, Swaps Show

Tribune Co. has a 50-50 chance of missing interest payments on some of the $13 billion in debt it will have after real estate investor Sam Zell buys the company, trading in the company's credit-default swaps shows.

Prices of the swaps, financial contracts used to speculate on a company's ability to repay debt, have jumped $331,000 since the first step in the sale was completed in May. It costs $770,000 to protect $10 million of Tribune bonds for five years, according to CMA Datavision, indicating a more than 50 percent risk of default. That's up from 32 percent on May 24, based on a JPMorgan Chase & Co. pricing model....

But as long as they can buy back shares.....

On May 24, Tribune bought back 126 million shares, using more than $4 billion borrowed from four banks, including Citigroup Inc. and JPMorgan Chase. Tribune plans to borrow another $4.2 billion by year-end to buy its remaining stock.

Who was it that said yesterday that they weren't going to let the daily swings in KRY jerk them around anymore? Well, today's latest tossing notwithstanding, that is very good advice. Take a position that you're comfortable with, wait for the news, don't follow every tick, and look for other trading opportunities elsewhere.

I just think it's funny that we are lucky enough to get a bird's eye view into some of what's going on in the risk market from an obviously serious player, a person almost certainly worthy of respect and accomplishment in the capital markets, and his name....is 'Noodle!' Cracks me up every time.

Welcome back, Senior Pasta. Thanks again for the inside view.

Mike
NYC

Thanks again Noodle for the inside info. I'm starting to realize the debt and derivatives markets are the tail that wags the equity market dog. And very few people have the visibility into those closed markets.

I was reading about the london based hedge fund that is closing down. It was run by a 20 something college dropout who made thousands by first flipping houses and then hundreds of millions by levering up on this subprime garbage. He gets to walk away with the fees those. Unbelievable.

I shorted MBIA last week to balance out my longs. Several of its officers, including its CEO quit earlier in the year. I'm going to sell my longs as soon as gold spikes.

Would you guys be shorting XLF here knowing the problem in CDO's and LBO financing?

moab:
I bought a put vertical on MBIA a few weeks ago and have already made 100% profit on it. I'm just wishing I put a larger chunk of cash on it at this point -- I mean, how can you go wrong shorting bond insurers with all the subprime mess going on?

number2son:
Well said on KRY. I just buy another call option every few weeks when the price dips. The daily movement is 99% noise. There either will be a spike in the price or not, and that's the only price movement worth paying attention to, IMO.

Craig,
I have a small short position in XLF and it's been trending the right way.

jogyp-finally a good day for the ultrashorts!

I have a chart on Adjustable Rate Mortgage Resets, but the link is dead. I have it saved on my computer in Adobe PDF. If someone can tell me how I can post a PDF file here I will. TIA

Senior Pasta aka Noodle, mucho gracias.

...anyone besides jogyp having a good day?

ALOHA !!

Yesterday I mentioned I was waiting for confirmation that the US Dollar has indeed broken down a 30+ year support level and highly psychological level of 80. This morning I awoke to see the USDX sitting exactly at 80! WOW ... its amazing that such a huge market as the currency market can stop on a dime! Now the USDX is at 80.06! Presto-Changeo !!!

Way back during the beginnings of WW2 Winston Churchill coined a phrase to describe government's perceived responsibility to lie for the good of it citizens ... "terminological inexactitudes"!! I believe this same phrase can be applied to the US government and Wall Street HB&B on a daily basis to hide the truth in order to further their "agendas of enrichment"!

Today we are witnessing an oft used tactic of deception whereby the PPT/HB&B leverages the HUI and XAU down while the POG soars. This is done to make PM shares look bad when the DOW and US Dollar are crashing. They can't have gold and gold equities stealing the limelight ... In the past when this occurs it has been a signal that the POG will be bashed no later than the following day if the HUI/XAU close down and the POG closes up!

What happens when the DOW finally hits the iceberg Titanic style? Gold equities will plunge and the PPT/HB&B will do their best to skewer the POG. The simple reasoning deciphered using "terminological inexactitudes"(TI) for us by CNBC is that gold stocks are just like any of the DOW stocks like GM or GE! When in reality a gold producer produces "real money" the exact opposite of what a US Dollar or a Euro is, in direct competition against the global fiat regime of today. How long can the other G-20 countries allow the US Dollar to make their exports expensive?

Now is not the time to be loaded up on margin or debt ... Like Noodle says risk is being repriced ...

Intervention is on deck ...

2nd:
Actually I am not having such a good day!
SDS and DUG are doing OK.
I got fooled by the early move in financials yesterday morning and bought some MS, it is really hurting now. Debating if I should add more or staty away from buying on the dip.

IBKR: Looks like it has finally bottomed around 22.5

2nd,
Surely not a great day, but I made $ on GME on the usual swing.

WGDFF is still holding.

I can't complain. In fact I must thank Bill again.

In the last few weeks my investment acct has put on over 10% while I maintained over 50% working cash and I iced most of my profits away.

I'm only hanging on a few hundred $ today. So far.....

Thank You Bill!

2nd,
I'm down about 2% today but I'm still up about 4% on the week in PMs. Most holdings hovering around my average cost.

I've been loading up the last few days on VAL, CNU and EVR at what I think are very cheap prices.

Kaimu,

The tape says that more often than not gold miners do indeed get treated like equities, particularly when the bear takes a big bite. However, like you say miners are producing real money. From your post, are you saying miners will continue to be as unsafe as anyother equity? A little resistant and/or slow on getting clear on the risk holdling miners.

No worries Kaimu!

I was reading currency stories last night on bloomberg.

Iran is accepting onlt yen in payment for oil shipments to Japan, Russia is reducing USD reserves, Russian citizens are stressed holding USD good for 26 rubles when they bought at 30.

The story now is the flight FROM the USD.

IMO we may see a short-term USD oversold bounce, but not for long.

This AM was more news of the euro union raising rates again. The USD isn't going to last against that kind of pressure. Add sub-prime and that 70 handle is on it's way.

Notice we're right at resistance for gold too!
They stopped TWO currencies on a dime, er, two wooden nickles.

Bill, thanks for that intro discussion of the appropriate technical indicators for different needs depending on the market phase. Investing has been at least a part time occupation for ten years now, trading on and off for about six. The currentcy (pun intended) of my information is one of only three assets I have. The others are capital and my understanding of markets. I need alot of understanding because I am prone to emotional decisions. I have many treasured sources of information and wisdom on this wonderful tool, the internet, and your's is much appreciated. I would tell newcomers to the field to read, read, read. Start slow, risk little. Learn. And don't kid yourself, There is always going to be a bull market somewhere in the future. It is easy to make mistakes when one takes positions because of anxiety from thinking "I have to do this because the opportunity is (only) right now."

Bill, thanks for that intro discussion of the appropriate technical indicators for different needs depending on the market phase. Investing has been at least a part time occupation for ten years now, trading on and off for about six. The currentcy (pun intended) of my information is one of only three assets I have. The others are capital and my understanding of markets. I need alot of understanding because I am prone to emotional decisions. I have many treasured sources of information and wisdom on this wonderful tool, the internet, and your's is much appreciated. I would tell relative newcomers to the field to read, read, read. Start slow, risk little. Learn. And don't kid yourself, There is always going to be a bull market somewhere in the future. It is easy to make mistakes when one takes positions because of anxiety from thinking "I have to do this because the opportunity is (only) right now.

UNG-adding here...

Craig,
I thought there was a follow-up story that indicated Iran was not at all insisting on yen payments?

I'm having an ok day. WGDFF is pretty much all I have in play, aside from a silver spread and a natgas spread. I'm leaving those alone for now.

Kaimu, from your comments, it sounds like you think a 'hit' is about to be carried out on shares. I wonder if it's a good time to book my small gains on WGDFF?

So here it is - the hard part of trading - fear, greed, fear, greed, fear, greed....

I'm looking at a chart of GLD and using a stochiastics overlay that says sell above 80 and buy below 20, the sell point is here. I guess that answers my question. I entered WGDFF without a real plan but I think I have one now.

If only I could borrow Bill's crystal ball.

Mike
NYC

jasper-note mike's post, and think about making at least a few sales here...would hate to see the "port" retrace too far..

Mike,
I've been in WGDFF since 1.93 and dips to 1.81 and I'm not selling.

The chances of getting a lower basis are slim at this point IMO.

While it dies now fluctuate some, it isn't by much. You could get back in on a possible dip to 2.70 or so. but it is unlikely you will see it go there for long and we seem to be moving to a new upper range.

2nd, UNG is in my IRA and I'm tapped, so no adding more than I got yesterday. Bummer.

ALOHA !!

Looky here ...

Anybody know what an IRS form 1040 looked like in 1913? Anybody know what the tax rate was in 1913?

Try 1% !!!!

1913 1949 Form Link: http://www.nowandfutures.com/download/1913_1040_1.gif

So taxes go up as money supply increases ... Yet another domino effect of "monetary inflation" and BIG government agendas!

ALOHA !!

Bill, I wish you had a way to edit spelling and typos ...

By accident I typed 1949 and left off 1040 on the link ...

1913 Form 1040 Link: http://www.nowandfutures.com/download/1913_1040_1.gif

2nd and Craig,

I share your sentiment that natural gas has been overly bashed. However, I think that there is easily another two months of downside here and another 10% to 15% drop. I hold a small amount in some of the majors but, I am looking at buying a basket of juniors in September. Why do you think that now is a good time to accumulate?

Fred,
NG and oil have diverged and I don't expect oil to substantially weaken to close that divergence, so my bet is NG rises to close it.

That and we're entering hurricane season and the hear of summer heat/cooling demand.

fred-i'm not necessarily "accumulating," rather trading the 4% swings, which have occurred with a little too much regularity (is that a real word, or just an euphemism for laxative ads) for me... also not great at timing bottoms, so another reason for getting in now is just to have some exposure..

Craig,
Staying in. My position is small and I don't want to eat up my gains with transaction costs. Also, I entered it with a longer term focus. No need to change my plan. I think there is news due soon, too, so I want to be in for that.

I need to do some detailed dd on it. My available research cycles are elsewhere at the moment, but the more I do it, the more I see that that kind of work pays off. I agree with Kaimu that the hit on gold will be carried out soon. I've seen it far, far too many times. But I'm not playing these WGDFF shares that way.

Good luck everyone. I'll be watching gold open in Tokyo Monday morning and at the open in NY. We'll know by those two things if Uncle Bennie is whacking gold at the knees to start the week.

Mike
NYC

fred, by September there may be an attractive gas junior or two appearing on the Micro100 list. That would be awesome if it all came together that way for you.

ALOHA !!

jasper ... Some of my articles are published on this subscription website ... The Trading Doctor ...

Link: http://www.thetradingdoctor.com:80/

On the home page in bold letters and big fonts is the following sentence ...

When Too Many Traders are Thinking
Alike, Very Few are Really Thinking!

I am cautious now ... I only buy into select stocks and I use no margin and I have no personal debt. I can afford to sit out a downturn. Too many signals to ignore that a short term intervention is in order. Long term the USA has a gazillion reasons why the USDX should be at 70 or below all of which I have mentioned here many times in the past.

Think about it ... If your country is dependant on exports and you possess large amounts of US Dollars(China and Japan)would you want to shoot yourself in the foot and stifle export revenues from your largest trading partner? Would China and Japan want the value of their US Dollar reserves to crash now? I believe there will be a joint intervention ... Someday they won't!

2nd and Craig,

I wish you good fortune.

GSS has some positive chart features:

A cupping price action daily
A positive gap on the daily
A 1/2 correction of a prior move that exceeded the move before on the daily

I am looking to get into this today "at the low".

Question for Bill: How can you tell the weekends from the weekdays down there?

I agre Mike.
My screen tells me almost everything but WGDFF sold off some on this weakness. USD is still at record lows againt euro/pound, etc. but short term Kaimu may well be calling a temporary pullback.

Think about it, we're at a nice round .80 cent USD, resistance of 690 +/- on gold today, and a market correction based on sub-prime fears pushing the USD weaker. It's good and bad.

Technically it corrects, fundamentally it doesn't go far. WGDFF won't go too far negative one way or the other, but all the others I sold partial positions on any strength today. (GFI, UGX, GLD) I got out of a partial in GDX and reloaded on the pullback.

MikeNYC,

Talking heads visiting BNN.CA have recommended quite a few Canadian nat gas juniors with good fundamentals which have been destroyed in the past few months. I think that buying several of them which have current production and real projected growth over the next year is a safe way to go once the commodity price stabilizes. I hope the upside will be 40% from September to March with little risk. Craig is right however that if hurricanes hit this summer I'll miss a 20% move.

My sister bought one of my Micro100 research assignment oil juniors two days ago.

+36% in two trading days.

Is that a lot?

Mike
NYC

Ha!-only green on the screen today is BMD...now watch it join everything else on the downslope..

fred-don't be surprised if NG makes an 80% move..

I'll tip my glass to you all tonight!

Mike, aren't you glad you held WGDFF? I hope it holds for you at Monday's open!

Have a great weekend everyone, and Thank You Bill!

MikeNYC,
Your sister can manage my money! LOL I also think that select building material big caps such as Cemex and USG will be bargains after another 5% pull back. Uranium juniors with production are coming back onto my radar screen. They could still fall another 10% to 20% though. The same holds for major water stocks like Veolia. Disclosure: I have no position in any of these companies.

2nd,
I'll celebrate your success with a tip or two of my glass. Sincerely.

craig, I'm glad if only because I don't need to stress about selling or not. I'm in for the long haul on WGDFF.

2nd, 80% up on NG would be mighty fine. I need 9 by Oct. to maximize the value of my spread. I think that may require that Cat 4 or a maybe couple weeks of 100+ degrees in NYC or Chicago.

Fred, can you send me a link to those articles? I'm going to search BNN, but I am unfamiliar with the site.

Mike
NYC

Fred, that was all me. I mentioned it to her last month and she woulda almost had a double by now.

I'm worried she expects me to pull one of those out of my hat every week now.

BTW, I meant 'post' not 'send.' This board doesn't do email.

Mike,
Today's guest on BNN TV was Joseph Schachter. I find him to be genuine. I don't know his track record. Schachter recommended Sterling (SLG), Solana (SOR), Oilexco (OIL), Delphi, Accrete, Galleon, Duvernay, Talisman and some others. He is very bullish on nat gas but, warned that there may be more downside near-term.
http://tinyurl.com/2f34ld

Here's another URL that you might find interesting. It offers opinions on many resource companies by Schachter and many other Canadian analysts. http://tinyurl.com/2ebh77

Mike,
The first link was wrong. I'll try again. http://tinyurl.com/2zdzep

Re: Stochastic, MACD and RSI. The mathematics are such that you use MACD or RSI in a Trending Market. Stochastic or Wm%R in a Chopping/Sideways market. We are trending, so use Stochastic (just my $0.02, mikeNYC).

Kaimu - where's POG $600? (just a little good natured ribbing, I know that you are glad it hasn't happened yet, if at all).

Also, there always seem to be some consternation regarding when to buy/sell certain securities. Simply buy when oversold on downtrend break to upside (like my last/old post on bonds that pointed to buy point within a few days of post, even though I did't "like" bonds at the time it worked out perfectly) and sell when overbought on uptrend break to downside. The difficulty lies in having patience and dealing with emotion. Also, many times one will hear about a "trade"/story after the trend begins and doesn't have a chance of buying "low" - i.e. CCJ a while back. That's why Bill's list of stocks is great to have. Build your own list and use the buy low sell high technique to great profit.

2nd ave,
appreciate your input, perhaps an outsider is more prudent looking in, i took off the afternoon for the pastoral life of my friend's horse farm, ate ice cream, rode mountain bikes in the field, read, yakked, and planned a fishing trip. A few tech stock sales yesterday and today, no gold miner sales, tempted yesterday to sell into strength. Decided to use a weekly chart of xau for when to sell. But point well taken, protecting some profits are in order. Gold stocks move down quickly, as "intervention" gains traction. Selling is not my strength.

Bill:
This post is to communicate my appreciation for your lead-off educational piece this morning.

regards

joey

I guess Larry Ellison need a couple Bil to fund the bank account. He's selling 100 million of his 1.7 billion personal shares.

Does anyone foresee a pullback in gold? If so to what level.

I know this is hard to answer because fundamentally gold should be going to the moon given the weakened state and future prospects of the USD. However, I see the powers that be bashing it with derivitives to maintain consumer/investor/media confidence. Imagine what the price of gold would be without the derivitives market.

Thanks,
Rick
Dana Point, CA

Good day all,

Thank you, Bill for posting an item about the cash cost of mining gold.(June 19) I would have never assumed that the numbers are so much of a shell game. So now I look at mining with a different perspective, especially in the gold sector.

It strikes me as grandstanding that costs for mining an ounce of gold mentioned in the press can be so low compared to the analysis you put forward. So I will approach any cost/oz. hastily blurted out in the press as just that.

I am holding GBN.V, as I believe this is a growth story somewhat similar to Western Goldfields. I am not into large cap trading, though I am more curious about it each day and rely on your website for market perspective.

For readers, an interesting series of video interviews is available here:

http://tinyurl.com/3dzqeg

Thank-you again

ALOHA !!

g034/rick s ... Are you kidding? I'd love to see POG below $600USD. I did predict an intervention by the "monetary authorities" below the $600USD level, but so far its a NO GO !!!

Intervention is my friend! Without the global Central Bank intervention into POG and POS and PM shares prices would be much higher by now. Their tactics have allowed me to accumulate a much larger portfolio than I could have if there had been no intervention.

As stated above I seriously doubt that China and Japan are ready to see their USD reserves plundered, especially China after creating a new GSE entity devoted to trading in some $200bil USD paper IOUs for real assets like metals and oil. Both countries have economies that are securely tied to exports, especially China. You can also include most other Asian economies like India, Korea, Vietnam, Indonesia, Singapore and Thailand. If the USDX goes down to the "70 handle" their exports rise dramatically in price to USA consumers and USA consumers are under enough debt pressure as it is from falling real estate values. If China and Japan perceive the USA consumer is dead then perhaps they would let the USDX crash. I just don't think they are ready for that now ... There are many ways to effect a USDX reversal. The one that cost Warren Buffet billions a few years ago was the profit repatriation of foreign US corporations at a 5% tax rate. What's next? The USDX is weighted so whats to stop that weighting from being adjusted with less exposure to Euros? Some 77% of the USDX value is assigned to the Euro and other European currencies, like Sweden and England. Only one Asian currency is represented, the Yen. If the ECB or BOE announced a rate halt or cut the USDX would fly up! Reweighting to more Asian currencies would have the same effect, except perhaps the Rupee.

USDX weighting link: http://www.dismally.com/images/usdx-pie.jpg

Reweighting is not a phenomenom. The CPI has been reweighted some ten times since the 1980s. Goldman Suchs reweighted the GSCI that caused the oil/NG crash last year. Currency interventions have been a staple throughout history and I doubt that will stop any time soon. Just one of the many perils of having a corrupt fiat monetary system ... instability makes for no real measurable or reliable store of value.

I would also expect this gold rally to fail when the bull market ends. I think the major moves in the gold price that most of us expect ($1K per oz, $2K per oz, etc.) - are closely tied to expectations of the US government's intervention in money supply and actual legislation to bail out the housing market / banking sector when this bull cycle of credit expansion ends.

The amount of money printing necessary just to keep prices level should be astounding. As Kaimu and Bill have pointed out Gold then can finally trade as real money / currency and the store of value that it is.

The more I read on the blog the closer I think that most of our thinking is. I differ from Kaimu and Bill mainly in that I think that the gold selloff will not come from Government intervention (at least not as the sole driver), but instead just historical (past 30 years) mistake of equating growth a la GDP growth as a driver of inflation, not growth as in excess money supply grwoth as the key driver. As long as people make this mistake we can expect gold to sell off initially based on assumption that slowing growth = slowing inflation.

Little do they know......

Go ahead flame me......:)

I expect the bull market in equities to end when the cost of capital is allowed to rise to a more sensible level. "Free" money is currently driving the private equity LBO machine and M&A activity. "Free" money is driving consumer overspending and demand inflation. Inflation is here and it is real. It's just a matter of time until interest rates ratchet up. When interest rates rise, the POG will move inversely to the falling equities market. The POG jumped in the early seventies when interest rates took off and I see no reason why it won't do so now.

The simple fundalmentals scream a long term gold increase.
1.The dollar is getting much weaker
2.REAL inflation is out of control.
3.Most currencies (EUro, Pound, Yuan) are fiat currencies and are unofficially pegged to the USD. WHen USD tanks, much faith will be lost in as Paul McCartney called it, "...funny paper..." regardless of who is behind it.

My gut tells me a pullback is in the near term (purely a gut instinct) so CNBC et al will report that all is well. I know the gov't can manipulate the POG through derivitives, but to what degree? I have heard $600 as a pullback, does anyone see mid $500s?