Interesting graphic, the idea being follow the trail of hot money.

http://panzner.typepad.com/photos/uncategorized/2007/10/11/speculativeconvergence.jpg

Bill,
I have updated Retail Sales and CPI.
The YTD annualized rate so far for Real Retail Sales is 1.3%. It has been less than 2% for the last 12 months!

via WSJ: "The largest U.S. banks along with financial regulators (Treasury Secretary Henry Paulson) are in confidential discussions to find a solution for a lack of cash liquidity in one corner of the short-term debt markets, according to people familiar with the situation. The plan, which has been in the works for three weeks, is aimed at helping bank-affiliated investment vehicles that issued tens of billions of dollars in short-term debt, including commercial paper. According to the people familiar with the situation, the plan would be to create a "super conduit" that would issue short-term debt and serve as a buyer of assets currently held by so-called SIVs. These assets include securities tied to U.S. mortgages as well as debt pools called collateralized mortgage obligations" Also, a Bloomberg article on the matter: http://tinyurl.com/327qbx

a year ago it was nothing but lender ads on KCBS while driving to work...which have all but disappeared...friday was the first time i heard an 800-number to call to buy gold coins->which they will [of course] "buy back at any time you wish to sell."

what lenders and and dealers leave out is the person in the shadows waiting to literally buy it all back from you ("the shrewd investor," no less) at lower prices...i don't expect a proliferation of these ads until gold peaks in 2010 (a scenario i agree with), but even one ad right now tells me a counter-trend correction is not far away...

radio ads mark tops (in this case hopefully only an intermediate top), not bottoms...these ads cast a wide net->basically reaching out to anyone at this point...where's all the gold for sale coming from->leave that to your imagination...

Carl Icahn and the Nasdaq 100

Board,

Am I alone in my suspicion that the latest trick to prop QQQQ to new heights, driving the combined market valuation even higher, is stories targeting individual component companies? Markedly, in the last 24 hours or so, two of these stories involve Carl Icahn.

Right after Thursday's late selloff, there comes the Oracle bid for Bea Systems (BEAS), reportedly encouraged by Icahn. By the way, check the Yahoo! news on the company: Tuseday to Wednesday, it was all doom and gloom, including announcements of additional charges by the company, and a downgrade by Bank of America. Then BEA jumps +18% on the news. Coincidence?

Yesterday (Friday 12) we get a similar story regarding the sale of Biogen Idec (BIIB), also involving Icahn, and we get a +17% jump in after-market price which will likely have a similar impact on the index Monday morning.

It seems that if the index can't go any higher on purchasing efforts alone (which have been stalling in intensity lately, if one watches the ebb and flow in the leading QQQQ components), a +17% or so gap-up in a component's price will do the trick- for now.

I am not debating whether these moves make individual business sense or not -they apparently have from the cash-out perspective of a large activist shareholder- but it is their back-to-back timing, the implied SEC and HB&B go-aheads and the glitter they add to the 'all is great after all' story served that makes me wonder how close the turning point is.

I have begun to short QQQQ here - Jan 09 long puts- but it can only take another rate cut on Oct.31 to signal a final orchestrated blowup in the likes of China and India, given how things have been playing out lately.

Interesting and dangerous times. With UBS rating Technology to overweight a few days ago, and HB&B likely grouping together to retain their self-marked valuations for a final run -see JIM's posting above- this could be 2000 in the making all over again.

Bill,

Time to try a Mac.

Correction to my previous post,

BEAS jumped +30% on Oracle's offer, not 18% as I mentioned above. Still, the essence is the jump itself and its impact on the index.

This is by far the strangest week (in the equity markets) that I can recall (without thinking too hard).

The tables above reveal striking divergences, one of which is the QQQQ-SMH one. There are others.

As Polonius once remarked, "This likes me not."

my current thoughts on the fed's next move
end of October:

with commodity prices that much higher,
and markets up across the board,
i think the fed will be able to manufacture the
following propaganda pieces:

1. inflation concerns remain noting the run up
in commodity prices

2. while there is still concern about the credit
markets they are monitoring things closely

3. w/ markets up and the phoney job numbers
looking good, coupled with robust global
growth

no need for further rate cuts at this time, but
include wording that another cut is still in the cards.

this would give hope to skeptics that another rate cut may come and markets could continue to rally. it could also see markets correct but hopefully not to the August lows which would give the medica pundits all the more reason to cry
"buying opportunity" and hope by election time
and olypics things are looking rosy again and people forget about the credit mess.

all while the ECB is wondering whats better:

fighting inflation
or cutting rates and turning the Euro into the Gyro.

im also wondering how a european rate cut would afffect gold via a jump in the USD, or would a ECB rate cut signal mass paper creation which gold will drive up in spite of a boucne back in the USD?

any thoughts appreciated.

Brazil ETF (EWZ) is now up 13x since 10/02. I figure the CAGR (cumulative annualized growth rate) to be:

69.5% !!!

People, that's an entire stock market. Amazing!

On tech -

Knowing both, I think MAC's ARE much better than PC's, but they're still computers. AND, lots of trading/investing SW is ONLY in PC format.

Problem is that digital tech won't leave us alone. There is ALWAYS something which suddenly doesn't work, and takes several precious hours to restore.

When you've talked through India's scripts, and wasted a few hours, and call in a tech, he'll invariably say, "I've been working with this technology for X years, and I've NEVER seen THAT before!"

The stuff is just too complicated, with software hairballs on top of kluges. Even if you're a perfect "digital citizen" (always back-up, run virus scans, etc.) you'll pay for all the razzle dazzle with the occasional mega-frustration!

Condolences, Bill ...

Fundamental Analysis

Several analysts have been suggesting that the market is reasonably valued, based on the fundamentals. Is this really true?
Take PepsiCo (CARA 100 PEP) for example, which reported the results of its third quarter last Thursday. PepsiCo North American operating profit reportedly rose 7% to $1.52 billion from $1.42 billion a year ago. The company's international operating profit for the quarter was $707 million, compared to $595 million in the previous year, representing an increase of 18.8%.
The unit of measurement used in the financial statements of Pepsi, being the $US has declined by about 10% over the past year, according to the New York dollar index. It may therefore be stated that in constant dollars, North American operating profit has declined by $52 million, while international profits rose by $41.3 million, or almost 7%. On a net constant dollar basis, total operating earnings declined by $10.7 million.
Over the past year, the price of gold has risen by about 30%. Against the price of gold, PepsiCo’s North American earnings have declined by some $356 million, or approximately 25%, and international operating profits have declined by 16.82%.
How should we expect these results to impact the share price of Pepsico?
The company’s shares are valued in $US. One year ago, Pepsi’s shares were trading at $62.45. Today, they are trading at $71.78, for a gain of $9.33, or 15%. However, adjusted against the New York dollar index, they are up by only 3.4%, and against the adjusted price of gold, are in fact down by 19.5%.
All of this is by way of trying to explain (to myself as much as to anyone who might read this) why the US markets apparently continue to rise in the current economic climate. In constant dollar terms, they are not rising, and in fact are failing to keep pace with the devaluation of the currency unit in which they are reported, the $US.
The analysts therefore may be right.
However, the challenge for the investor is to determine whether they want to own shares in a company that appears to be struggling to grow its earnings on a constant dollar basis. It perhaps explains why the shares of PepsiCo actually declined after the earnings announcement, even though the results apparently beat Wall Street estimates by 3 cents per share.

Hi!

WHAT IF the fed cuts again in October?

I see it as a nightmare for the economy, but I wonder if the Board wishes to comment.

Cheers from sunny Europe.

CARA100 Table with RSI data: http://www.tradersquest.de/cara100.html

Have a nice weekend,
Olaf

Good Saturday Bill and Friends,

It is an inexorable law of history that power will accrue to the powerful, and that democratic ideals cannot occur in a vacuum. A market-only social/economic structure will, given enough time, impoverish the vast majority.

Now, the greatest transfer of real estate in the history of all nations is about to unfold. Post World War Two, land began to be distributed by the wealthy to the poor, and more and more, as time's gone by as the impetus to distribute (i.e.higher prices) has increased.

Now it's about to go the other way. Adjusted for inflation, and after the deadwood has been shaken out of the housing market, land will regain it's luster as an investment class, provided that there are no structures on the land and it will not be taxed to death.

Yes folks! I am expecting a period of "reverse development" in which crap houses in decent places are bought on the cheap from the legions of bankrupts to come and removed, thereby "unimproving" the property for tax purposes for long term storage.

I expect that the smart money will buy up much residential real estate in the next few years for a long term investment.

The key are the two converging trends of

a) Rampant dollar value decrease (INFLATION) and
B) Zillions of poor people crapping out of their houses, plus "retiring" baby boomers, etc.

Can you legally "unimprove" an already taxed property (house) in a town and basically take it off the tax rolls? Let me know.

Hugh, you've hit the nail right on. The US stock market has gone down, not up. What do P/E ratios represent now?

Unfortunately, the USD is what it is now: funny money. No wonder nobody wants to be holding a bag of those. No wonder Bill has been calling it wooden nickels. It's all an illusion for the US consumer. Trouble is, oil and other necessities priced in real money will have to get more expensive. Oil at USD$85/barrel is actually quite cheap and yet some people claim the price is too high!

Right now food and energy are not considered in the core CPI (as they are not essential :-) ), but the thing will blow off elsewhere, cost of living increasing perhaps (rent). Perhaps the CPI formula will be changed again though.

BTW, every point on this map shows a foreclosure in Cleveland: http://playumbrella.com/earnings/cleveland.jpg

There are thousands of them.

All these people will have to rent.

http://projects.info-pull.com/moab/

www.macfixit.com

For those following the Commitment of Traders (COT), this week net long positions in Gold held by non-Commercial (speculative) investors reached over 190K. As a point of comparison, the Sep 21 report Bill shared from Citigroup noted that the previous high for was October 2005 at 185K.

JIM, I recommend everyone with an interest in the new animal called the M-LEC visit the Calculated Risk blog for an expert discussion. Expect a formal announcement shortly after Citigroup reports its dismal results on Monday.

Olaf -

teriffic chart ! - thanks ...

There has to be a place where you could go to post comments and charts. Its all a matter of where people go to obtain quotes real time or delayed, and can access information on a daily basis such as charts or morning reports.

If I were running an iMac using Netscape(for instance), then this would make blog posting easier at places such as beta.stockhouse.com. Simply copy and paste.

Charts:

Here's that same chart excerpt with some small changes:

HGX (small screen friendly)

http://tinyurl.com/2dtg5g

Or here:

http://tinyurl.com/2qsjdp

Published: Friday, October 12, 2007
Bylined to: Roy S. Carson
Gold Fields’ executive Glenn Baldwin says Venezuela "still a great opportunity!"

http://tinyurl.com/35grn7

Here's the linear scale chart from AAPL since 2002:

http://tinyurl.com/32wsgw

or

http://tinyurl.com/2wtoec

(really, I don't know which image source works with everyone's computer.)

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
-- Henry Ford, Founder of Ford Motor Company

kaimu- update on foreclosures in the bay area:

http://tinyurl.com/24nqdd

Corporate Earnings Worry Wall Street
By JOE BEL BRUNO,
AP
Posted: 2007-10-13 06:06:15

“the big focus for most market players will be what they say about the future. Right now, both S&P and Thomson project about a 13 percent growth rate for 2008.

"Looking forward is the nature of the business," he said. "And, it is a good thing if the credit crisis was contained and we only took one quarter to get over it."

http://tinyurl.com/2uallt

I won't claim the blog is any good, but the music videos are pretty good, and the references have merit...

http://ronsen.blogspot.com/2007/10/dont-worry-be-happy.html

Water Shortage:
With the upcoming cuts on January 1 of 30% of last years normal supply to growers and others that recieved discounted water from Metropolitan Water in Southern California, is there a way to "invest" in this regional dynamic? It reads as though this could affect even retail users of water in this area if we do not have a good rainny season this Winter/Spring. The last time this happened was in 1991 but I was not trading in that time frame to notice the stocks that advanced/declined.

Bill,
First of all I want to thank you. I first started following your blog a year ago and because of it have been buying a small amount of gold stocks each month. I want to purchse an autographed copy of your book.

You indicate that "the Bull is in its final months" It seems to me that at least through the election in October of 08, with the wave of foreclosures coming that credit expansion will be the primary concern with increased inflation and a decreasing dollar a minor concern - at least as long the the change is gradual. Also the Chinese and others are starting to move out of the dollar- ie the recent purchase of the Canadian oil & gas company. The Chinese will be reluctant to rock the boat untill after the olympics are over. If everyone starts moving out of the dollare in a major way what would they do with the money but buy assets and stock.

Shouldent this give us a great stock market (and natural resourse market) for at least the next year - maby even two years before inflatiion expectation force the fed to "Volker" the market?

Thanks

I've done a simple backtest of the Global Cara100 stocks using Bill's RSI method of above 30 & below 70 RSI and here are the results:

http://www.mediafire.com/?bknic2wxwxy

I've include the input parameters to run the backtest (in worksheet at the bottom) and I've also include a summary and detailed level of results, which speaks for itself.

The selected a time frame: Sept 2000- Sept 2007 Entry trade # shares = 100

Very interesting results, esp. for MU

I can run tests for each of the other Cara100 groups if requested.

Link to Telegraph Uk,giving bar chart info that illustrates well for me sector rotation.Maybe others might find interesting too.

http://tinyurl.com/37ua7o

onlineaces, this looks very useful. Does it mean that the total number of transaction for MU was 5 (4L + 1W) in those 7 years?

Do the buys only happen when rsi crosses over 30?

Is it possible to do a backtest with buying say a fixed $1,000 every time a buy should be placed (instead of 100 shares)?

Would it be possible to then calculate the annual return on each stock and and the the return?

Then it would be great if it could show what was the maximum capital required.

Just suggestions, looks like it can be very useful. Thank you.

Hi Si02,

Q:Does it mean that the total number of transaction for MU was 5 (4L + 1W) in those 7 years?

A: YES. If you look at the bottom you will see a second worksheet with suffix "Detailed" there you will see the individual trades made and their dates. Notice that the simulation has an open buy order on 8/17/2007 that has not closed yet.

Q:Do the buys only happen when rsi crosses over 30?

A: YES. Only when rsi crosses ABOVE 30. There is a column header named "SIGNAL" in the "Detailed" worksheet that shows what condition triggered the trade.

Q: Is it possible to do a backtest with buying say a fixed $1,000 every time a buy should be placed (instead of 100 shares)?

A: YES! I will run another backtest and post the results.

Q: Would it be possible to then calculate the annual return on each stock and and the the return?

A: YES! I will run another backtest and post the results combined with the prior request.

Q: Then it would be great if it could show what was the maximum capital required.

A: YES! Great idea and I'll post the results combined with the prior request.

Very good questions! I hope my answers we just as good~.

For newcomers to Bill's site, the lesson here is that the RSI method of buying/selling does work but do realize that you can incur losses on some trades using this system.

Position sizing your trades is IMPERATIVE! Just because a trade signal becomes active, does not mean you put 20% of your capital into a single trade! You may lose money so spreading your investments over all of the cara100 stocks (as the signals come in...) would yield a very nice profit as the spreadsheets show...

Onlineaces -

Thnx for that backtest. Most interesting. I'd just like to understand how much capital you began with, i.e. how much the initial 100 shares of all 100 stocks represented at day one.

And how did the overall results (presumably $148K) compare to the overall results from buy and hold.

Thnx in advance.

Onlineaces -

Thnx for that backtest. Most interesting. I'd just like to understand how much capital you began with, i.e. how much the initial 100 shares of all 100 stocks represented at day one.

And how did the overall results (presumably $148K) compare to the overall results from buy and hold.

Thnx in advance.

Hi Jock,

Q: I'd just like to understand how much capital you began with, i.e. how much the initial 100 shares of all 100 stocks represented at day one.

A: If you take a look at the "Detailed" worksheet (there a 2 worksheets in the file) and menu Data->Sort by Date (select entire worksheet by clicking the cell above row 1 and left of column A first!) you will see when the initial trades are activated by a BUY signal. Your question implies a position for all cara100 stocks from the first day. That is not what is happening here. The stock are only purchased when the signal to buy is activated (meaning the rsi for the stock rose ABOVE from below RSI 30. That is why position sizing is so important.

Onlineances,

Congrats on your effort to backtest and to share. Perhaps I missed it, some questions: how much money is placed on each trade; do you yet have a finite portfolio amount; is this just daily rsi's; and do you have a benchmark?

Bill,

're stunning drop friday of SMH..signs of nervousness"

It would be quite impossible for the SMH to be down almost 3% friday when the SOX was +1%. Of course ,the SMH etf isn't a perfect reflection of the SOX, but very close.

D.

Hi Jasper,

Q: how much money is placed on each trade;
A: the current .xls posting purchases 100 shares when buy signal activates. I am posting a new worksheet that will open a position $1000 worth of stock as per SiO2 suggestion.

Q: do you yet have a finite portfolio amount;
A: No. I am posting a new worksheet that will open a position $1000 worth of stock as per SiO2 suggestion. Since there are 100 stocks it will be a $100,000 portfolio.

Q: is this just daily rsi's;
A: YES. Very good point. So this is not Bill's method afterall!. This is just a daily rsi, however I will develop a backtest for the daily, weekly and monthly test scenario soon. Great question.

Onlineaces,
Don't forget, if you don't mind, a benchmark. For example if the 100k had been invested in the russell 3000 what would have been your return across the same period of time?

Good luck on incorporating weekly and monthly rsi's. For comparison, I wonder what would happen if the criteria was relaxed to the 40 (monthly and weekly) range for entry. However, the beauty of using a more conservative 30 number is less trading, better sleep, and just allowing a stock to work out.

Hi Jasper,

Right. What benchmark do you want?

I can include any index you want. Let me know.

As per 40, is this just for the buy signal (Weekly, Monthly only?) instead of 30?

OK,

I'm using the etf SPY as a benchmark. The buy/sell criterion is that which we have been taught RSI (D,W,M) RSI crossing above 30 for buy signal and RSI crossing below 70 for a sell signal.

The trades are made in $1000.00 amount of a given stock when the signal is generated. Also, I have added a Buy&Hold column as per SiO2. Probably leaving something out, but I've think I've captured all the requests so far, which were great! Keep them coming.

I will be posting the results soon after I've formatted the output. Disregard the original posting. I will be removing it.

Looks very very interesting.

onlineaces
when I go to your link for your backtest it comes up that the file is set private..so I can not access.. Am I doing something wrong?
Thanks

onlineaces,
I can't believe the timing on that Henry Ford quote.

I suggested a small oil stock to my sister and her friend. It's a four bagger since June, and she and her friend are in for a two month double+. Anyway, I sent her an email yesterday that included this:

"The sad thing is these gains in resource stocks are just offsetting the inflation that is eating us alive. But better to have them than not.

Everyone screams about taxes but if people would wake up to the rampant theft from inflation that is going on there would be a revolution."

Yup. Me and Henry Ford - great minds thinking alike!

Onlineace,
I personally prefer $rua which is 80% of the total domestic mkt, whereas the popular .spx only covers large growth.
Putting together a mechanical trading system of Bill's rsi method can get tricky. No matter your findings might offer a perspective with regard to frequency of trades and winning percentage, as well as total performance. As for "the system" I'm not sure if it is as simple as all rsi's on all time frames be crossing 30 or 70. If one waits for the monthly to "cross" the entry/exit may be overly delayed. Not too many folks posting today. Perhaps others could give you some feedback about parameters.
FWIW, I use software for mechanical trading and one of the most important components is a trailing stop loss which varies from 4-8 percent...but that is for etfs only.

Hi mikede,

No. You are not. I'm updating the file as soon as time permits.

OnlineAces,

Very cool and useful info.

Some thoughts about benchmarks and performance...

Depending on the exact dates you choose, the SP500 (SPY) about even and DJIA was up about 30%. NASDAQ was down 25%, EFA (international developed index fund) and EEM (emerging markets) didn't start until about 2001 and 2003, but VGTSX (Vanguard International Index Fund) was up about 75%. So an aggressive, diversified buy and hold portfolio of 50% VGTSX, 20%SPY 20%DJIA, 10% NASDAQ would have yielded about $140K (excluding dividends and without rebalancing). So it on first glance would appear that you could just buy and hold and get the same performance.

However, before we write off the RSI system, we should note that for much of the time, the $1K you allocated to each of the stocks will not be deployed. So in fact, with a $100K portfolio, you'd have on average $2K per transaction if stocks are "in play" 50% of the time, $4K per if "in play" 25% of the time, etc. You have more money to place on each bet. Thinking about it another way, the way we have currently run the backcheck, perhaps $50K at any given time is just sitting around as cash,while the other $50K is tied up in the market waiting for a Sell alert, when it actually a good portion of it could be "engaged" in the market making money. This would significantly increase the gains (and losses) of each trade, and on balance would result in a bigger final result.

Another factor is that as your bets win or lose, you also have more or less on a percentage basis to place on each bet, and this will affect your returns. Since there was overall profit, I would think that the compounding effect would cause the actual returns to be bigger as you place bigger bets (by the end, your bets may be $1500, for example)

Finally, hopefully there would be a stop loss system of some kind to limit your losses. Those losses of $2K, $3K, 4K losses can really hurt performance. One would think you'd stop out at some point set percentage. This would help returns.

The back testing includes a bear market 2000-2003, which is good. However, during that time, I think Bill's system uses more restrictive trading criteria. You need an RSI of 20 or 15 to enter a trade, and then an RSI of 50 to exit. In a bear, everything tends to be oversold, so you have to be more selective. And stocks hit RSI 70 less often so if you use that as a Sell alert you'll never get there, the stock retreats and you're still holding when you should have sold at RSI 50. Hopefully the ideal back testing could account for that criteria change.

The academicians say that buy and hold a balanced, diversified portfolio has been proven with backtesting, but I guess that if we could incorporate the three factors above, the RSI daily (or weekly or monthly) system, would do better (I hope so, because I'm using Bill's system!)

I know I'm making it complicated, but if we're going to compare, we got to do apples to apples and oranges to oranges as best we can.

Very interesting. Thank you.

Onlineaces,

another thought on what benchmark....

One could try to use the asset allocation I suggested earlier, or one could allocate based on what percentage of the Cara 100 is NASDAQ, EEM, EFA, DJIA and SP500.

OR, a simpler way would be to use the Cara 100 as the benchmark.... add up the value on Sept 2000, and then divide into the Cara 100 Sept 2007 value.

There may be some value to simply buying and holing the Cara 100. Presumably, the Cara 100 should do better than their respective indexes because you're not owning the loser companies that the index funds own.

In a simple low maintenance system, one could use the RSI monthly for the DJIA. I'll bet you'd get 20% annual results if you had simple stop losses and placed bigger bets as you got more capital (compounding effect). In 20 years, most of us would be doing very, very well if we contributed $4K per year and got 20% annual returns.

Thanks for doing the work. I'd be very interested to see any different changes you did to your calculations.

Thank you very much onlineaces, awesome work.

I suspect that if you add weekly and monthly RSI the number of transactions will drop drastically. It would be very interesting to see this and compare with daily only.

An interesting optimization problem would be to somehow automatically run the simulations for varying values of RSIs, with the intention of finding out which RSI levels produced the highest profit. This is a lot of work.

You know, a student could publish a paper out of these results.

Hi Bill and All

Greatly appreciate finding this site a few months ago, excellent learning experience without all the static and hype. Thankyou very much for all your efforts.

I stopped watching the talking heads years ago when I found they would continually try to explain (with so called 30 second experts), how the last few hours of trading are affecting the world markets and then extrapolate those few hours into a prediction of what the market will look like in 6 months to a year. Of course with this type of analysis their predictions swing wildly from day to day, hour to hour, making them useless for my medium term investing range.

I'm a semi retired ex Nortel engineer, (downsized a few years ago, just before pension eligibility, not my choice). I started taking control of my own investments in 2000 and quickly learned there was a lot of misdirection and things could go down, way down. With my technical background I became very interested in TA and have been learning ever since.

The big problem I've been struggling with the last few months is how to believe the charts and how to properly value things. The charts in many areas are becoming more and more misleading to me and I'm struggling to find a common point of reference for real value.

I see this problem has been discussed by a few others this week with respect to mostly Gold or Gold ETFs traded in the US or Canada. Many are concerned why there are differences and are looking to switch from one to the other. The following is my attempt to analyze this subject.

I track many stocks which trade in both the US / Canada and when looking at the charts I get different TA signals, one has broken out and the other is just coming into overhead resistance, but both are the same thing "Gold".

I put together the following charts GOLD ETF's, US GLD vs Canadian IGT, Year to date, to help see the difference and similarities.

http://img187.imageshack.us/img187/6533/gldvsigtchartsmh7.png

1 very simple TA chart GLD vs IGT.to, they look quite different, breakout or not ?

2 GLD vs IGT.to in terms of percentage (in country of origin), GLD up 18%, IGT.to down 1.5%, are they really different or are they really the same, depends on your point of reference.

3 GLD normalized to $Cdn vs IGT.to, now they are the same.

So from my point of view they are the same, but the TA charts look quite different and give different signals. I see the same situation with Goldcorp or Encana, ie any heavily traded cross boarder stock which is closely tied to a commodity price based in USD with any exchange inefficiencies quickly taken care of by arbitrage traders.

I basically look at this situation revolving around world exchange rates and world commodity prices, both of which are set DAILY and referenced back to the $USD, thus adjustments are immediate, there is no lag or product in the pipeline. So as a Canadian it really doesn't matter whether I buy gold etf's in the US or Canada, in the end when I bring the money back home, to the original point of reference, its all the same. But not all things are adjusted daily or even weekly or monthly, nor are they adjusted to an international CONSTANT point of reference. Mass, volume, length etc. are international constants, but Fiat money as a point of reference is becoming quite variable, (wooden nickels per Bill).

With respect to the Gold ETF investing example above there is still profit short term but it depends on where and how you spend it. The US investor in GLD took his $800 USD and turned it into $1000 USD, he goes out and buys a flat screen TV, (which has been selling for $800 USD for the last six months) and he pockets the remaining $200 USD. The Canadian investor in IGT.to, with the same value $1000 Cdn (exch 0.80 to 1), ends up net zero gain, he buys the flat screen in Canada for $1000, nothing left in pocket. But if he drives across the boarder and picks it up for $800 USD or $800 Cdn (exch now 1 to 1), he will also pocket $200. But they both have to do it quickly as when the next 6 month supply of TV's arrives, the pipeline will be empty, the pricing inefficiency will be eliminated and the cost will be the same $1000 US or $1000 Cdn.

Sorry for the round about analysis, just the way I was brainstorming tonight after a bottle of wine. Hope you don't mind if I post a few ideas or ask questions. I usually only read this blog at night, so it's a little difficult to follow or comment on many of the topics discussed. Now lets see if I can post after going thru all the type key hoops, it took many tries to get registered. Now the preview looks like all one paragraph, hopefully it won't post that way.

JMHO
thanks all, Quasi

Bill,

As usual great WIR. Interesting article in Bloomberg, by Rich Miller & Simon Kennedy on
the G-7s impatience with Treas. Sec Paulson on
his attempts, or lack thereof, to defend the dollar.(LOL) Seems the jig is up, and time is running out with the Ben & Hank Dog and Pony Show!

Banks to set up 80 Billion Dollar Fund to limit credit crunch:

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20071014&ID=7625950

yellowman98,
I like your commentary. In the real world, portfolio management can get complicated. A buy sell system can be great but still needs a structure to reside within...as you bring to light. I had similar thoughts about a proper benchmark but was hesitant to make onlineaces efforts even more complex. Since the Cara100 is global a true benchmark would reflect this with weighted multiple indices that reflect sectors that are global in nature. A number of "lazy portfolios" exist that are based on broad indices, but to stay true to the Cara100 which I relate to as industry/sector sliced... the best effort I've seen for a buy-hold port is by Roger Nussbaum over one year ago. One strategy that some have is to always have a diversified passive to semi-passive portfolio along with a trading portfolio. I emailed Roger not long ago to report on his portfolio's performance; by my estimate he had done pretty well. Roger expects to update this portfolio in the next week in order to capture more dividend and to use etfs that were not available in 2006.
http://randomroger.blogspot.
com/2006_06_01_archive.html

I want to thank SiO2, Jock, jasper, yellowman98 for the feedback. Great feedback. I encourage you to continue, but I don't know exactly how much I'll be able to deliver on everything requested. Ultimately, I think this effort will only offer a customized perspective at best. I will never be able to capture a "real"-world scenario, but I can try to nail down some of the variables (with your help) and generate results that might reveal something interesting.

With regards to a benchmark, jasper, I really appreciate your hesitation to make this more complicated, which it quickly has become! On the other hand, yellowman98 has really inspired me with his great feedback and in time I hope to achieve his recommendations, but for now, I'll have to strike a balance.

I want to make this simple enough to get a result that might be of some interest to everyone as my time is limited.

I hope to get a new file up on the server by tomorrow. This has been a great learning lesson for me so far. Again, thanks to everyone who replied. I will post the links here after I upload the files.

ALOHA !!

I am not very familiar with Wharton other than I hear it is a good school if you plan to study the field of economics in hopes of getting a job at any of the HB&Bs. I wonder if you had a resume with credits and a certificate from the Ludwig Von Mises Institute if that would carry any weight when job hunting at HB&B? I think Donald Trump's daughter Ivanka graduated from Wharton! Now that was an embarassing display of US business acumen ... The Apprentice! I am not so sure that Ivanka has ever heard of the Ludwig Von Mises Institute. Has her Dad?

I ask about resumes because I am currently going through a series of lectures through the Ludwig Von Mises Institute entitled "Fundamentals Of Economic Analysis-A Causal Realist Approach". So far I have not gotten very far in it but the little I have done has brought on a flurry of thoughts and ideas in terms of "economics". With all the varied economists throughout human history and the coinciding schools of economics they have spawned how can one really know which is better? Which offers truer analysis in terms of the "real world" of geopolitical and human evolution? I believe HB&B hand picked Keynes,etc. because his theories were best suited to their agenda of global monetary control. If you want to work at HB&B and move up to the higher ranks then you have to go to HB&B approved schools where you can learn FED SPEAK! Ask Alan Greenspan about that!

See "derivatives" to me could have only come about in a "fiat monetary" environment. Anyone who believes they are really "hedging" anything using "derivatives" has to believe that a fiat monetary system and the economies it produces actually have a "store of value" ... or just plain "value". How can you hedge something that by its nature consistantly loses value and is therefore by definition "not a store of value" and then not hedgeable? All fiat currencies are designed to inflate due to human nature. We are conned into the belief that we actual possess "real money". In the BIGGER PICTURE, in actuality what "derivatives" attempt to do is hedge "time"! Time to maintain or improve your companies bottom line. Time is your biggest enemy in a fiat monetary regime, because the faster fiat expands the less time you have to maintain your lifestyle. Eventually you get to "survival mode" and that's when "time" has run out! Think of the definiton of the word "attrition" when you think of fiat money.

The very fact that the funds that HB&B have in their accounts have been leveraged already 10 to 20 times due to "fractional reserve" banking indicates "hedging" using derivatives is a losers game. You can't hedge fiat ... What do you get when you sell a Canadian Gold Maple Leaf? You're right back at square one only you hopefully have more "US Peso IOUs" than you started with. Your hedging "time" before your money runs out!

The first lecture in the Ludwig Von Mises series I am doing brings a point to view that is the most basic of the basics. According to the lecturer, Mr. Salerno, he states that basic Managerial Econ 101 as taught in most US colleges alleges that humans "create" production. His point is that humans "create" nothing. Production of goods cannot occur without raw materials like minerals and metals. Humans can only "rearrange and transfer" but cannot "create" ... only God creates ... the Earth creates ... we don't!

Further on Mr. Salerno, talks about "scarcity" and "utility" as two components that determine the value of a product. Well, I about fell off my beach chair when I heard that! Holy Cow ... Salerno baby ... you just defined the US Peso's problem!!!! YOW !!!! He uses the example of "air". Air is not scarce he says. The globe is covered with air, although quality lacks in certain areas. I thought to myself ... "Crap the US Dollar is as abundant as "air" in terms of "money" and so are all the other fiat currencies ... Those US Peso IOUs are practically falling out of the sky like rain! We're all choking on them like some coal plant in Harbin China!" Then comes "utility". Products are valued higher if their utility is greater. Since money is suppose to be a long term store of value then the US Dollar has practically no "true utility" as money. On those two counts alone the US Peso is doomed. I find it ironic that our wise elected leaders way back after WW2 were given the "privilage" of "global reserve currency status". The US Dollar was suppose to be "GOOD AS GOLD"! Every elected administration since then has completely squandered our monetary status in the World ... It was all doomed from the start of the Federal Reserve Bank in 1913 ...

Now lets apply "scarcity" and "utility" to GOLD. Its not hard to see gold is "real money". It passes the two tests of "scarcity" and "utlity" with flying colors compared to fiat paper! Over 5000 years have proven that fact.

Now you have to ask yourself ... "If we had gold as money in the past and the US Dollar is as "good as gold"(implying gold is the highest standard of all money), then why did we ever get off the gold standard in the first place?" If you've read any of my past posts here then you already know why. Look no further than the fact that you are in the HB&B Casino rolling the dice while they expand "Roulette" into "Derivatives"! What's your prize for winning the BIG SPIN? A fist full of pesos, courtesy of the Federal Reserve Bank the "chip manufacturer"! PLACE YOUR BETS ... HURRY !!! You don't want to miss your BIG chance to win a bunch of IOUs do you?????

kaimu,

It's interesting that you mention the Mises institute. I think it was you that told me to read into Austrian Economics. Even if it wasn't, I have delved into the depths of the Austrian view of the business cycle, and the macroeconomic view.

It is also interesting that you mention time. I am reading a book "Vienna & Chicago: Friends or Foes?" by Mark Skousen. In the book he just referenced the Austrian production model compared to the Aggregate demand model. The main difference I can see is that the Austrian production model includes the time factor for the different supply levels: Natural Resources, Manufacture, Wholesale, Retail.

I'm curious as to the views on the economic supply side of Bill and other members of the community. I'll continue reading in more depth about the Chicago and Vienna schools of Econ.

Hi,

Here is the latest SPIN from CNBC:

http://www.cnbc.com/id/21271391

Does anyone believe this?