Fed wants reform in the U.S. financial system before cutting interest rate.

http://www.atimes.com/atimes/Global_Economy/IH23Dj01.html

Wells Fargo Gorges on Mark-to-Make-Believe Gains:

``If you see a big chunk of earnings coming from revaluations involving Level 3 inputs, your antennae should go up,'' says Jack Ciesielski, publisher of the Analyst's Accounting Observer research service in Baltimore. ``It's akin to voodoo.''

http://www.bloomberg.com/apps/news?pid=20601039&sid=aY8m0nta94GA&refer=home

Fed wants reform in the U.S. financial system before cutting interest rate.

What kind of reforms? Wouldn't all the sovereigns have to be involved?

Wasn't the Japanese problem different in the sense
that everybody owned everybody else and that the banks and majors corps were all intertwined through MITA? Kinda of a facist thing where the goernment directed the action? Has that changed?
Wasn't it if one company tanked then all would?
Are we in the same boat?

TIA sto

i have a pdf copy of the most recent Don Coxe's Basic Points,
id like to share it with everyone but not sure if its copyright infringment because its restricted to subscribers, and i dont know how to attach it.

thx

BOJ begins two day meet today . . anticipate them holding rates now due to response by Central Banks providing liquidity to the global market.

As Everbank’s Daily Pfennig says about the BOJ raising rates: “most observers felt the BOJ would probably raise rates at this meeting... But not now, Japanese officials have had the bejeebers scared out of them by what happened.”

GFI up 2 ½% in pre market . . . received upgrade to buy from Matrix Research on Monday (Disclosure: long as of yesterday).

GFI-the extended hours game has not changed...pre-market ask tuesday was 3% below the close, pre-market bid today is 1.6% above the close...

Moin from Germany,

funny news from WCI...

For the three months ended June 30, 2007, the aggregate value of Traditional and Tower Homebuilding net orders fell 96.2% over the same period a year ago to $9.1 million, while the number of unit orders declined 82.6% to 50

DEAD MAN WALKING!

XAU is looking good this AM. Besides GFI, hopefully a positive tell for the metals and miners. AUY and SLW looking better too.

What's the take on UBS's downgrade of ETFC and the merger?

IBKR is probing its 200 Day Moving average. Anyone buy some calls yesterday? Looks like this online broker space is getting tight with the AMTD/EFTC merger talks. I have seen a lot of good exposure for IB lately as well as a lot more online/television advertising.

Just looked back up and IBKR blew through to $26.

UNG, man-when it's down, it gets really depressed...when it's up, you can't get it to shut up (lol)..

Bill,
The ECB is injecting still more funds with 40 B EU 30 day refi.

I think PM's will see global demand rise as most debtor fiat currencies seem to be sinking.

We'll see a collapse somewhere in the airline industry soon. In all likelyhood, asset backed commercial paper re-liquified the bankruptcies, and as such are probably no longer paying out. This means an immediate crisis of bridge financing for some of these companies.

Given that much of the paper backing these companies is probably no longer liquid, they will directly affect the quality of these instruments. A sign to watch for is the unannounced disappearance from the balance sheets of their cash positions.

And if asset backed paper is made up like mortgages, then as airlines are the sub-prime corporate borrowers, they will drag down the rest of the tranches.

ALOHA !!

Seamus ... BOJ now and last week BOE(Bank Of England)! My FIAT AVALANCHE analogy of three skiers in an avalanche holds true. If all central banks hold interest rates steady then they all look the same and nobody sees the trees flying by and hence create a false sense of calm as they all head for the cliff in unison! All it takes is for one central bank to get real or one big bank blow-up for the minions to see the trees(truth)!

Bill ... Are you saying that with this ETrade merger that you would put the merged company back into the Cara100 and remove Interactive Brokers? Or keep both Interactive Brokers and the "new" Etrade?

Brazil has made a remarkable economic recovery, however they are expanding their money supply(M3)as fast as the USA. In fact all BRIC economies are.

Link to BRIC M3: http://tinyurl.com/2f3ovr

Speaking of debt to GDP ... here is a historical perspective on the subject and as you can see we exceeded the 1929 level over two years ago. However unlike 1929 US M3 and government debt far exceeds 1929 and our savings levels are negative.

Link debt/GDP: http://tinyurl.com/2h7t6p

I am flying to Honolulu for the day ...

craig-the wgdff tour sounds fantastic...right now, planning to get our oldest to uci that saturday, but things may change enough for us to make the tour...

Excellent point Fransix. BTW, have a look at Transat today. "Tour operator Transat A.T. Inc. says almost half its $340-million in cash holdings is tied up in a problem variety of debt investment at the heart of a credit squeeze". These companies will come out of the closet one way or another, the soft way or the hard way.

Could someone here with access to intra day daily RSI let us know whether MCO has crossed about 30?

AMTD & ETFC "toxic" romance seems to resurface at times of relative weakness in both stocks. Rarely when one or both fly high. Despite the obvious benefits they could draw from a transaction, I cynically observe the short-term pop in stock prices and await an announcement of substance...

JML

P.S. My money would be on BAC taking out an online broker (ETFC/Schwab) to immediately scale up their retail brokerage presence as they did with MBNA in the credit card business. Just a musing here...

Bill,
Interesting comments from Karl. As I think Craig alluded... this sets up gold stocks for what could be LT up trend. The BRIC population is getting wealthy; they have a history which supports high demand for gold; and, the u.s.d will get weaker which will drive demand domestically for a different reason.

Would love to get IFN back in the stable. I have 40%cash and just itching since Monday to put money back to work. I salute those that have the conviction to buy for an intermediate hold when it looks oversold. Today, it's chasing a gap up that might just be resistance. Knowing behind the scenes fundamentals, like Bill does, is a huge leg up.

Kaimu,
I don't think its appropriate to include the BOE, since it was a (relatively) small amount, and from their discount window. To my simple mind, there's a bit of a disjoint here - ECB starts throwing large amounts, Fed follows with big bucks, but BOE hasn't blinked, yet there's probably as much slime sloshing around in London based hedge funds as anywhere else. Only conclusion I can draw is that UK based banks have a lower exposure, or else they're better at concealing it or don't even know yet (think Barings).

Otherwise I have similar views to yours.

jasper-as you point out, for all who bought into last thursday's drop, miners are hitting resistance right about now...the real "tell" will be if/how we get through it...monitoring my own emotional take on it, which is to sell into it>usually generates an internal memo to hold...

Move coming.....

The plan before this latest bunch of bodies was the USD falling VS foreign fiat currencies and getting the PM bounce that way. I'm probably stating the obvious, but now that we see these slimeballs sold these bad loans to everyone, everywhere, requiring their CB's inject liquidity to remain solvent. So most other fiat currencies will do as Kaimu says, fall together.

The trees *should* be of gold and silver.

GRZ:
Up over 7% in the last few minutes.
Possible reason:
Tradwinds Global buys shares of GRZ worth 22 million

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=KRY:US&sid=a8nhFepyR8nI

Long GRZ

So the ECB shifts from "fine-tuning" liquidity injections to "a ($54 billion) supplementary liquidity-providing longer-term refinancing operation." The operation will last for 3 months. This is another example of a CB using inflation to attempt to keep economic growth humming. The (negative) payback of the inflationary liquidity injections will be higher interest rates 18-24 months from now.

We suggested in previous cara posts that the U.S. equity market will rally for 1-3 weeks after the initial short-term bottom (reached last Thursday, 8/16). A few days after the U.S. Labor Day holiday we expect the stock market to once again turn down. If this scenario plays out, check our website http://www.2globalmarkets.com for a new research report that we are preparing now. After Labor Day, investors will begin to focus on the ECB's next policy meeting (Sept. 6th) where the CB has pre-announced their intention to hike rates another 25 basis points. The U.S. dollar would then come under new downside pressure with negative consequences for stocks and bonds.

SiO2: MCO daily RSI (7 day) on my real-time chart is 19

Si02,

Transat did not experience bankruptcy and did not require financing, though they placed their cash in asset backed paper. In this situation, I would expect the operating costs to shift.

Thanks northforker. MCO has dropped $2 since I asked earlier today. I wonder how high the RSI was then.

UNG:
Took a small position in UNG at 36.36, Plan to add more if it goes below 35.

KRY and GRZ should have a very good day today.

In addition to GRZ($21 Million)
Tradwinds Global bought 41 Milloin worth of KRY also.

I think this news is a good short term catalyst for KRY and GRZ.

http://tinyurl.com/287lvh

2nd ave

I capitulated and bought into strength this morn. Reduced cash from 40 to 25%. Ewy/korea came up on list for weekly rotation; rotation software is biased toward 3 or longer monthly holds. Hitting leaders that were the same before the correction. A broad etf surfaced for the first time: dgt....global mega cap. Shortterm could be a bear trap. TA charters point to strong resistance at 50dma; hence, better to wait until old lows are tested if one is in for a sustanined rally. 1998 is considered a good comparison. Interesting analysis by one of the most followed traders at stochcharts.com. I wish I could post it but I get blocked out.

S&Pwave/S&Pwave.swf

Jogy,
That news came out almost a week ago, so I'm not so sure that's why KRY and GRZ are moving today. But I do think that something must be causing this bump.

I'll contact Western Goldfield's CEO Ray Threlkeld today for an update. >>>>>>>>>>

Thanks for the upcoming update Bill. I never know quite what to ask when I call.

Hoping the 50+ new drill hole assays add a decent amount to the resource.

Tom

Citi tapped the discount window for 500 million...to service customers

fourier123,
Looks like the news is old, but it is getting a lot of attention on the other message boards today.

UNG - Previous support at 37.26 snapped at the open. Now has support @ 36.25 and resistance @ 36.70, having traded in this range since 10:15EST.

Jesse Livermore would've gotten short around 36.90 soon after the open.

OG-good move...
EWJ-selling into strength here...think a good recovery on the Nikkei has been priced in for now...

On Fidelity real time daily chart, rsi(7) is above 30....46.39

jasper . . . EWT trades similar to EWY . . . may also be a rotational play as you cited.

2nd. . . thx for the PPT report last night

Bill . . I think northforker and Si02 were talking about MCO not MU. MU RSI7 is at 45.68 on my screen.

BTW, Bill, will your book be available in U.S. stores or only via the internet from the U.S.?

Got into KRY at 3.05 on TSX this morning.
Chart looks good to me.

Re: Interactive Brokers

In light of the fact that ETrade is rumoured to be having problems relating to its mortgage arm I'm wondering if anyone has heard anything about IBKR's solvency?

I have a brokerage account with them. Do i have anything to worry about?

Thanks,
Take care,
Brendan

So the kabuki play unfolds with the money center big brothers showing the way.

Upon closer inspection, the Federal Reserve may still be bailing a handful of hedge funds (despite public denials)

"Citibank, a unit of Citigroup [...] said it took out a $500 million, 30-day loan from the New York Fed's discount window program for its clients. The company didn't identify those clients.

"Citibank stands ready to continue to access the discount window as client needs and market conditions warrant," the bank said in a statement. "Citi is pleased to inject liquidity into the financial system during times of market stress and to support creditworthy clients." (end quote)

So does FRB take creditworthy collateral that Citibank can no longer absorb b/c their exposure would exceed risk management limits? If so, does Citi hold less worthy collateral? I would love to hear who he lucky clients are anyway. Could it be Eddie L.?

On a related subject, does anyone have any insight on the capital adequacy standing of the major players here and on the possible impact a wholesale recharacterization of collateral risk would have on the banks' capital needs?

JML

Link for quote in my previous post:

http://tinyurl.com/2ftjvm

Just wondering for those of you that follow UNG, would it be a good idea to sell some Jan. 38 puts. The premium on same is around $6.50 and I'm thinking that A)it get exercised and cost basis on the stock would be $31.50, or B)It expires and I get to keep the premium. I guess the question is, how likely is it that UNG would go below $31.50?. Any comments would be appreciated.

seamus,
yes. ewt/taiwan, ewy/korea, and fxi/chian...cluster together..but I try to go with whichever one has the highest alpha value. On very slight weakness, I took a postion on ewy which is up today quite strongly. Trailing stop losses set on every trade, too. Gold stocks, for better or worse, are on their own until I clear the deck.

UNG - Here comes another headfake up to 36.25 area (former support, now resistance). Has to clear 36.70 before I become a believer.

Bill: right, SiO2 & I were talking about MCO, which is now at 18. MU rsi-7 is 36

northforker,
re MU
Just to check my Fidelity chart...I have an open rsi-7 at 36 but real time at 46...Are you talking about the open or the later?
Are you accumulating?

If operarational costs can be affected by the loss of returns on asset backed commercial paper, then this will wind up in Q3 reports.

I have a real-time at 36 right now, @ 11.37.
No, I'm not buying. I generally play the ETFs.

Amazing how four of the biggest banks in the U.S. all decide on the same day to borrow $500 million each from the Fed discount window. In any other market, other than the financial markets, that would be considered collusion.

The effective fed funds rate has been trading below 5% the last 7-8 trading days. So why would these four banks borrow another $2 billion of liquidity and pay the 5.75% discount rate at the Fed window? My hunch is that the Fed, in exchange for the banks showing the world that the discount window has been tapped, has promised these banks that they will be officially lowering their cost of funds (the federal funds rate) to at least 5% (and maybe 4.75%) on or before their September 18th FOMC meeting.

Si02
AG play . . .SFD reports tomorrow . . . picked up some today at 29.80 . . . looks like Daily RSI7 went up thru 30 yesterday.

jasper: I just logged in to Fidelity. That rsi is a 14 period not a 7. The rsi-14 is at 46 or so, as you indicated. The RSI-14 on the Fidelity chart doesn't seem to be adjustable. The rsi-7 on my other chart is 36

northforker,
Great to see another who uses etfs...day/week trader or something longer?

fwiw, i just checked the rsi on MU real time at stockcharts...it says 46....not sure why we are getting the discrepancies.

northforker,

If you have active trading platform, yes, it's adjustable...actually, fairly nice.

day/week, generally, -but longer in strong trends.

46? for a 7-day rsi, not 14 days? strange.

MU:
I get a 5 min/7 day rsi of 55.87
10min/14 day at 55
daily/30 day 36.89

With Scottrade

northforker,

If you have active trading platform, yes, it's adjustable...actually, fairly nice.

JWibbs -

Could it be that banks are using the discount window will take subprime CDO's as collateral?

Mine agrees with Craig's and I use IQCharts
Active trader pro @ fidelity didn't support Macs when it first came out so I have never used it.

UNG: 2nd, winter's coming, right? LOL. Nothing like averaging downnnnn.....

I'm trying to schedule the WGDFF tour.

correx: Craig, I read your post too quickly-I thought all 3 that you posted were 7 perod RSIs. My daily 30 period is 33

moab -

If FRB's procedures are applied, the answer is a resounding no. Banks are putting whatever investment grade collateral (agency only) they have secured from their clients or some of their own for an additional fee to these accounts. My discomfort with Citi's statement is that it contravenes whatever tough stance officialdom has towed so far (let 'em fail as long as they are not large banks). Why are some of these accounts getting these 30-day monies? Better yet who is not getting it?

JML

Craing - Here's what Jesse L. had to say about averaging down:

"People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up."

Suggestion reference the prior discourse. Before the market opens, pick a Cara 100 and check your RSI 7 & RSI 14 D/W/M against the lists Bill posts each morning under Market Chat.

Many of the readers have refined their own systems as noted here. I think old goat recently outlined his S/T system on something like a 3 minute chart.

Good luck

craig-UNG-didn't want to overdo the posts on this one, but following both you and OG on (basically) adding all the way down...i think it's a relatively non-correlated asset class and gives me something to look at when everything else is going down ;)

Yes I know....that's why he offed himself.

He screwed up like I did.....

Northforker, I'm getting a 36.71 on daily/30 right now.

..and now maybe i'll switch to adding all the way up (lol)...

craig, what are you getting on a daily/7?

UNG traders -

While I appreciate the temptation to jump in / average down on such a violent down move, I would advise caution in managing a nat. gas position. One gets easily over-exposed to the widow maker (in a past life, I dealt with some power/nat. gas/coal trading). Although I have not reviewed recently the fundamental supply/demand picture for the medium term, I recall that, during the last mild recession, nat. gas traded in the $2-3/MMBtus for extended periods of time.

JML

It's patriotism!
from Marketwatch:
The biggest names on Wall Street accepted the Federal Reserve's plea, borrowing a total of $2 billion from the discount window in a show of support for the Fed.

In the past, borrowing from the Fed's discount window was akin to asking a priest to come and deliver the last rites: Only a dying bank would be desperate enough to tap the Fed for operating cash.

So why would Citi, Bank of America, J.P. Morgan, and Wachovia pay a monetary penalty (on top of the possible damage to their reputation) by borrowing from the Fed? See full story.
Patriotism is one answer. The banks simply want to show support for the Fed in hopes that the smaller banks will also take advantage of the Fed's lifeline.

But the banks aren't being entirely selfish. It's in their interest for the credit markets to recover fully. Anything they can do to persuade lenders and creditors to talk to each other again is good for business.
-- Rex Nutting

Scottrade won't give me daily/7, I have to go to 5 min/10min/60min over 7 days. So they will vary some @ that point. Daily is by the month.

thanks seamus. good idea. I would like to maintain confidence in my trading platform

Should probably pair NG with a fert/ag play.
If the NG is taking a beating the ferts should be up lower costs.

moab:

the Fed's 8/17 press release stated "The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets."

"related assets" mean they would take CDO securities especially if the liquidity crisis gathers steam again. however, the securities are subject to Fed's collateral margins so if the value of the CDO then collapses, pressure on the borrower increases to deliver more collateral, borrow more, etc., etc.

craig- I think the "7" refers to periods of time, not days. Thus a 7- period RSI on a 5-min chart encompasses the last seven 5-minute periods, or 35 minutes. No?

craig- I think the "7" refers to periods of time, not days. Thus a 7- period RSI on a 5-min chart encompasses the last seven 5-minute periods, or 35 minutes. No?

So maybe they are using the discount window to exchange these CDO's for cash for however long they like. How do you value these CDO's anyway? Mark-to-model?

That would be worth the penalty.

For those of you with funds in Altamira, I found the Rocket fund in two of their Income funds. Look for the financial statements and search for "rocket" (http://tinyurl.com/ywgr82). I am not sure 3rd party ABCPs are included in the NB bail out, but this is not good at all.

JML-thanks

Seamus, thanks a lot, I am in.

xme/mining just crossed above 20ema and macd has made the turn upward. Looks good at the close and volume is decent.

Yes, I think you are right..I have to set the rsi period. DUH.

The shortest daily I get is 30 days, everything else is intraday by the min. (ticks,1 min/5min/10min and so on.

The daily 7 for 30 days is 19.69

Those of you who trade UNG should really familiarize yourselves with the weekly injection report that comes out on Thursday mornings:

http://tonto.eia.doe.gov/oog/info/ngs/ngs.html

If more gas was stored into the ground than expected, then gas producers are generally unable to get high prices for gas. Right now storage injections for the lower 48 are pacing 14.7% above the 5-year average. Another huge injection reported tomorrow without a 'cane on the horizon could lead more pain. That's why natgas is so volatile - if it has no place to go, it has no value.

Mark M,

Do you think that this is a bear rally trap that will test old lows when s&p hits 50dma?

jasper-

I would think there would be a lot of resistance near 13450/13500.

Today's action was very bullish IMHO. At 11am I gave the signal for the market to sell off. ("Move coming....")It then began a decline but only retraced to about a 60-65 point gain on the Dow then slowly built back up with a nice finish. That's pretty action from a ST overbought condition.

To answer your question, the extreme weakness underneath says a retest should be coming. That's the "classical" view.

wonderful piece on Bloomberg today:
mark-to- market, mark-to-model, mark-to-make-believe

http://www.bloomberg.com/apps/news?pid=20601039&sid=aY8m0nta94GA&refer=home

GFI block trade of 116,300 sh @ 14.75 at 16:03.
Overall, GFI nice move today but would like to see more total volume.

HL now above 200 EMA.

UNG:

Thanks Billy for the link and Jumble for the perspective and advice.

Ultyguy -- the chance that UNG will trade below 31.50 on the third Friday in Jan 08 is reflected in the cost of a 31 or 32 put, which you could purchase to limit your risk in the event of a precipitous decline; this would, of course, eat into your premium on the 38 puts you sell and still leave you exposed to a maximum potential loss on the position of perhaps two or three points, which would occur were UNG to end anywhere below 38 less the difference between the two put premiums.

Per the DOE EIA Short-Term Energy Outlook dated 8/7/2007:

"The Henry Hub natural gas spot price is expected to average $7.45 per thousand cubic feet (mcf) in 2007, a $0.52-per-mcf increase from the 2006 average, and to average $8.06 per mcf in 2008.

"Current spot prices at the Henry Hub reflect an inactive hurricane season thus far in the Gulf, storage inventories that recently surpassed the corresponding level of a year ago, and mild summer weather in the West South Central region (which represents about one-third of the electric power sector’s total natural gas demand). As a result, the average monthly spot price has declined for 3 consecutive months (May, June, and July). However, the hurricane season runs through November 30, and current price projections remain vulnerable to potential storm-induced supply disruptions during that period. Taking into account EIA’s current assumption about hurricanes, the Henry Hub spot price is expected to average $6.66 per mcf in the third quarter and $7.96 per mcf in the fourth quarter. For the year, the Henry Hub spot price is expected to average about $7.45 per mcf in 2007 and $8.06 per mcf in 2008."

Sep NG futures closed somewhere around 5.62 today, down about 0.20. Key too downtrend reversal will be "storm-induced supply disruptions", if any. Per NOAA, no storms taking shape off the coast of Africa at this time.

Interesting leg up on moderate volume. SPX & RUT stopped just shy of their Aug. 13 highs (last move up before the monster V last week resp. @ 1,466.xx & 800.xx). If we poke through tomorrow, I would expect another visit to SPX 1,490-1,500 (a lot of history there now with 50DMA in the mix) & RUT 810ish (convergence of 50 & 200 DMAs with crossover expectations).

JML

Not that I'm a big Cramer fan, but I thought that Barron's was harsh and unfair in their treatment of him last weekend. There's now a rebuttal on thestreet.com...
http://www.thestreet.com/s/putting-cramers-mad-money-picks-to-the-fire/newsanalysis/investing/10375137.html?puc=_tscs

But the really interesting thing is how poorly Barron's picks fair when measured to the same standard and the advantages they give themselves when measuring their own success.

The other thing that they do which drives me nuts is brag (in an article) about how a stock will move up on a Monday after they write it up on the weekend. So, let me see, you pump up a stock, exclude this bounce from your results, but can't see how Cramer's picks very often move up in post-market and the next AM and count this against him. Good for magazine sales I guess but not for credibility.

Thank goodness for sites like this!

sundance-great, thanks for the link

northforker, many thanks for the level 3 gains link, the jewel of the day. Quotes from it:

"In other words, it's a safe bet the losses were real, while the gains had all the substance of a prayer".

"If you see a big chunk of earnings coming from revaluations involving Level 3 inputs, your antennae should go up,'' [...] ``It's akin to voodoo.''

I am tracking something similar with the mutual funds I metioned. I wonder if mutual funds can restate their daily closing values since they include CP that cannot be valued in their portfolio, yet their daily value kept going higher.

MarketWatch' spin on HBB cueing up at the discount window as a "patriotic act" could possibly be the stupidist article I have ever read. I feel dumber for having spent the minute to scan it. No one taps a credit facility "on behalf of clients" for 1.25% more than they could have gotten the same funds this A.M from Fed Funds (4.5%). If they did it as advertised, the clients should fire them.

Bill,

Did you read the article on thestreet.com where they rebut the Barron's article? I guess the real point is that numbers can be made to prove either side of the story. Will be interesting to see if their is any sort of letter to the editor in next week's Barrons.

As far as Cramer himself goes, I only catch his show maybe once a month, but his detailed analysis of picks is usually pretty good and he can be quite funny. Never watch his Lightning Round though as it is a complete waste of time.

Funny how stock traders react. BAC invests $2bn in CFC convertibles @ 7.25% p.a. coupon and $18 conversion price. Very attractive terms as long as CFC doesn't go under. So on the message that HB&B will preserve CFC from bankruptcy (GS advised CFC on the deal), the stock shoots up 20%+ and S&P futures 10 points. What I see is a great deal for BAC with an open look into CFC's business for a while, a significant toehold in a competitor/industry leader and a reasonable option on a future deal. Last fall, rumors were flying re. a deal with BAC paying north of $45-50 per share. Today, CFC begs for survival.

As for CFC stock, I cannot believe that the knee-jerk reaction will hold for long. The financing is very onerous and shows CFC's precarious standing in their own and their peers' eyes.

JML

Hello All,

The credit markets continue to be a mess. Ultimately that spells trouble for the rest of the markets - particularly equities.

Last week CFC told its banks that they were drawing on the full $11 billion in secured credit. This is a technique companies in grave danger pursue. I have seen this numerous occassions. The banks said "no". CFC said fine, we file for bankruptcy in California. The FED then intervened and said hold on and presto chango the discoint rate was dropped on Friday morning to stabilize. And today the BoA buys a chunck of stock. This is surface level activity. The mess below the surface continues - no matter what anyone says.

Today the world learned that mega NY developer Harry Macklowe was close to the brink. Seems he and Soros and Fortress hugely overpaid for a group of buildings including the GM building in NY. That property faces a normal contractual refinancing. The bank group said we will refi as long as $750 million of addtional collateral is posted. Macklowe said Friday he doesn't have either the cash or the excess collateral. Banks said too bad. He said "do you want the keys?"

Again, all signs of a continuing brutal repricing or risk and assets. It is only a matter of time before the repricing hits the equity markets - again on a hard and sustained basis.

There is a perfect storm for the markets that spells significant trouble: (1) spreading sub prime garbage, (2) disruption in the global CP markets, (3) $300 billion of secured and unsecured LBO bridge loans now resident on the banks' balance sheets, (4) crisis in the German banking system (asgors Germany so goes Europe), (5) clearly slowing US and Euro economies.

Credit markets are telling a clear story. The problem isn't liquidity. It is SOLVENCY. That is the difference between 2000, 1989 and today. And that is not a problem the Fed can solve so easily.

Hello All,

The credit markets continue to be a mess. Ultimately that spells trouble for the rest of the markets - particularly equities.

Last week CFC told its banks that they were drawing on the full $11 billion in secured credit. This is a technique companies in grave danger pursue. I have seen this numerous occassions. The banks said "no". CFC said fine, we file for bankruptcy in California. The FED then intervened and said hold on and presto chango the discoint rate was dropped on Friday morning to stabilize. And today the BoA buys a chunck of stock. This is surface level activity. The mess below the surface continues - no matter what anyone says.

Today the world learned that mega NY developer Harry Macklowe was close to the brink. Seems he and Soros and Fortress hugely overpaid for a group of buildings including the GM building in NY. That property faces a normal contractual refinancing. The bank group said we will refi as long as $750 million of addtional collateral is posted. Macklowe said Friday he doesn't have either the cash or the excess collateral. Banks said too bad. He said "do you want the keys?"

Again, all signs of a continuing brutal repricing or risk and assets. It is only a matter of time before the repricing hits the equity markets - again on a hard and sustained basis.

There is a perfect storm for the markets that spells significant trouble: (1) spreading sub prime garbage, (2) disruption in the global CP markets, (3) $300 billion of secured and unsecured LBO bridge loans now resident on the banks' balance sheets, (4) crisis in the German banking system (as goes Germany so goes Europe), (5) clearly slowing US and Euro economies.

Credit markets are telling a clear story. The problem isn't liquidity. It is SOLVENCY. That is the difference between 2000, 1989 and today. And that is not a problem the Fed can solve so easily.

CFC -- good thing I left my short position hedged. I knew something like this might happen.

For those following Parker Drilling (PKD), there was news today that their overseas tax dispute has been resolved in their favor:

http://biz.yahoo.com/prnews/070817/laf036.html?.v=101

I hope others used last week's weakness to take a position.

Aurelian (ARU) took another hit today (down 10%). The drop occured fast and late in the day on significant volume. I have a half position which I considered myself fortunate to get on sale last week. I'm thinking of topping up my position tomorrow. I think that the latest drilling results were inline. Is country risk the only thing pulling ARU back?

I find it appalling that there would ever be the possibility of such collusion between the Treasury Secretary and his former firm GS. It is bad enough that HBB has the deck stacked in the favor of friends and family, but if this were to be true we are all doomed. For such a so called " Moral Civil Servant" as Paulson is,(or should be) and a Christian Scientist to boot, in charge of our "Free Markets" to take part in what Bill describes, is hard for me to believe. Or I should rather say, I don't want to believe!

re: Aurelian:

I am a shareholder too. There was a story out of Reuters today about rewriting the Ecuadorian mining laws that originally only quoted the former mining minister, who is an environmentalist. It has now been revised to be less provocative with quotes from the current mining minister (a moderate and economist). None of the info in the article is new.

The research I have seen has stated that the political risk in Ecuador is overstated.

The stock did not spike on good drill results yesterday as it has in the past. I don't want to sound like a conspiracy theorist but someone might be holding the stock down to acquire shares cheap, as we have seen with KRY.

Shanghi is currently trading over 5000
http://www.sse.com.cn/sseportal/en_us/ps/home.shtml

In 20 months it has gone from about 1100 to 5000
http://finance.yahoo.com/q/bc?s=000001.SS&t=2y&l=on&z=m&q=c&c=

Reminds me of the Nasdaq hitting was it about 5100 in 2000? then down down down.... Yeah, I know it's just a number....

Okay here is a question I would appreciate answered: "CME, on the venture exchange, took a soil sample and found 1% nickle in the sample, from the Voisy's Bay area. The drill results I have seen from Diamond Fields (the early owners of the nickle mine that they sold to Inco) show 1.5% nickle in the core. Can we expect the core to be higher then the 1% that was found in the soil sample once this property is drilled in the next couple weeks? It only makes sence to me that there should be much much higher percentages in the core verses the soil samples but I am ignorant on this subject.

I appreciate someones feedback on this.

hmmm,

everybody is up very late tonight.

quick read of press for morning and of talking heads suggest the "liquidity problem" has passed...

not convinced yet

Bill,

I don't want to put you on the spot if you're not comfortable standing there. However, you got my full attention when you wrote, "Bank of America (BAC) has apparently purchased $2 billion in either equity or debt of Countrywide Financial (CFC). Now the other major units of HB&B should step up."

This seems to suggest it's time for a trade in CFC. Do you agree? I'm not at all sure of the direction. Do you have any suggestions? Does anyone else? Also, should or will BAC stock be penalized for taking on more risk when people are beginning to wonder if risk is risky?

Thanks, Jack

Putin is going for the Gold!

http://tinyurl.com/387tdq

There seems to be a large decrease in the popularity of income trusts in Canada, even though many of the rules don't come into effect until 2011.

After the last few weeks, are these on sale?

Chartwell Seniors Housing REIT CSH.UN 14.35 +0.83 (6.14%)
True Energy Trust TUI.UN 5.02 +0.17 (3.51%)
PrimeWest Energy Trust PWI.UN 21.24 +0.64 (3.11%)
Extendicare Real Estate... EXE.UN 14.59 +0.24 (1.67%)

Hey wavesmash If your looking for a unit trust that looks interesting look at ENT.UN... It looks cheap at this level.

CFL.UN Is another very interesting Unit Trust good increasing distribution and very cheap considering its payout.

I agree with the poster above who analyzed the terms of the CFC deal by BoA. CFC essentially paid 7.25% for some ST money with a equity conversion kicker as well! Undoubtedly the $11B they drew down on their credit lines hasn't staunched the flow. Still, all news is blithely being interpreted as good news right now even if a cursory examination shows otherwise. So the psychology has changed and this is supporting the rally.

TECHNICALS: IFFY
FUNDAMENTALS : DETERIORATING (SLOWLY)
PSYCHOLOGY: BLINDLY POSITIVE

If it can pop above these levels then 13450/500 is where decisions must be made.

I don't think this plays out for months. What is happening says we are in a big hurry to get there.

Can someone kindly explain how a $2 billion injection of capital can materially change CFC's chances for long term survival?

Just the next 12 months' interest on the $11B emergency tranche from last week will eat this up, not forgetting the $145mil in preferred dividends to be paid.

I am neither long nor short on this stock; in fact I'm temporarily on the (stock market) sidelines. But I will say that the CFC saga is shaping up as one of the all time great option straddle plays. And every CFC move reeks of stock manipulation. But here's a chance for the little guy who has not capitulated already, SELL into the squeeze.

Jack, I wouldn't be a buyer of CFC now. In addition to the concerns mentioned by Robbie and MarkM, the SEC filing includes no restrictions on BAC hedging its position.

Robbie, isn't this all about re-establishing confidence in the secondary market? Judging by the excretions from the captive financial media today, most of them are singing from the same choir sheet today. Unfortunately it was delivered late to the folks on CNBC's 'Fast Money' last night.

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