Bill Cara: Saturday’s Commentary & Chat, 10/06/2007 7:25 AM ET

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October 6, 2007

Saturday’s Commentary & Chat, 10/06/2007 7:25 AM ET

The start of Q4. The home stretch. Prelude to the Bear Market. Fasten your seat belts.

Yes, I think the evidence is mounting – probably overwhelming at this point – that the equity market is at the top of its long-term cycle. As I see it, half the world is in a Bull market and half has already started the Bear cycle. In the Week In Review (WIR) that I will publish Sunday morning, I’ll explain Why.

Although probably 99 pct of you disagree, in naming Bull or Bear, the Who comes easy. The equity markets of the US, Japan, UK and Germany have topped out, whereas another intermediate-term bull phase can be expected from India and China, Hong Kong and Singapore, Russia and Brazil, Canada and Australia.

What I am saying is that the super powers have spent their ammunition, and need time to re-load.

It won’t be a pretty sight watching. Something like 1973-74, or maybe 81-82, hopefully 87, and hopefully not like 2000-2002. Nobody knows at this point. All I know is that the cancer is terminal, and life in these markets continues hoping beyond hope, pumped up by the desperate Talking Heads of the corporate kowtowing financial media.

The second group doesn’t need hope at this stage. A developing middle class of consumers and savers in India and China -- well over a third of the world’s population -- is driving economic growth and corporate employment and profitability. The ammunition I spoke of came from you know Who.

The relatively small offshore centres of Hong Kong and Singapore serve as financial bridges to those huge emerging markets, while Russia, Brazil, Canada and Australia provides the natural resource commodities that rapidly growing Chindia requires.

But international trade and commerce does not operate in a vacuum. The fiscal, economic, financial and/or currency ills of the super-powers will at some point – likely not more than six to nine months later – spread to the rest of the world.

That’s not a scenario that is either popular or promoted in today’s media. Nonetheless, based on my observations and analysis of capital market prices, it’s how I size up what’s happening to the world today.

First there was the popping of the housing bubble, then the credit market bubble, and soon to come will be the presently developing commodity bubble.

Reversion to the mean. It’s how markets work. The market is us. In the long run, averages win.

This is not rocket science.

Table 1: Cara ETF List

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

XLF 35.77 0.37 1.05% 4.59% 3.38% 8.39% -3.11% -2.00% 0.03% 1.39%

XLY 37.97 0.61 1.63% 3.38% 2.35% 5.68% -1.43% -4.62% -2.27% 5.65%

XLU 40.90 0.32 0.79% 2.43% 1.44% 4.82% 11.08% 2.07% 0.49% 18.86%

IYH 72.38 0.62 0.86% 2.25% 2.33% 5.57% 8.91% 2.68% 5.46% 9.62%

XLB 42.91 0.67 1.59% 1.88% 3.22% 10.68% 23.98% 4.15% 11.57% 34.81%

XLI 41.58 0.45 1.09% 1.41% 2.34% 7.41% 18.02% 5.11% 16.05% 21.15%

IYZ 34.18 0.08 0.23% 0.97% 0.97% 5.07% 15.24% -0.78% 8.13% 22.91%

SMH 38.45 0.48 1.26% 0.39% -0.34% 1.69% 14.54% -1.13% 12.30% 12.46%

XLE 75.04 0.29 0.39% 0.13% -0.87% 6.80% 32.63% 6.36% 21.52% 42.55%

XLP 27.90 0.09 0.32% -0.14% 0.87% 4.34% 6.16% 2.42% 2.99% 9.80%

Table 2: Senior oil & gas equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

PBR 78.82 2.67 3.51% 4.40% 7.82% 22.89% 58.18% 21.17% 54.31% 93.99%

ECA 62.61 0.62 1.00% 1.23% 0.00% 6.10% 38.09% 0.81% 20.24% 36.23%

SU 95.56 1.46 1.55% 0.79% -0.38% 5.03% 29.29% 4.79% 23.30% 39.87%

XOM 91.36 0.44 0.48% -1.30% -1.03% 6.54% 23.28% 7.28% 18.31% 35.71%

CVX 92.32 0.48 0.52% -1.35% -2.66% 5.33% 30.08% 6.64% 22.10% 44.52%

CEO 164.04 9.88 6.41% -1.44% 5.96% 34.32% 74.01% 39.38% 85.99% 101.82%

IMO 48.55 1.14 2.40% -2.04% -3.17% 8.27% 36.15% 2.73% 28.64% 48.38%

TOT 77.89 -0.01 -0.01% -3.88% -4.36% 3.44% 9.75% -5.07% 10.08% 19.65%

STO 32.40 -0.04 -0.12% -4.48% -6.41% 7.11% 26.12% 0.40% 18.81% 40.38%

Table 3: Senior metals and steel equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

GGB 28.38 0.84 3.05% 8.24% 13.52% 20.56% 72.84% 6.73% 50.40% 104.61%

PKX 189.18 0.66 0.35% 5.82% 3.94% 25.40% 138.17% 49.16% 77.87% 187.95%

TCK 50.46 2.45 5.10% 5.76% 5.08% 24.13% -27.13% 14.11% -30.04% -20.35%

RTP 348.55 10.28 3.04% 1.50% 6.07% 18.25% 70.77% 7.36% 45.71% 86.17%

TS 53.36 0.24 0.45% 1.41% 2.91% 18.11% 9.98% 6.44% 15.65% 51.59%

BHP 79.52 1.26 1.61% 1.17% 9.64% 23.90% 104.58% 24.48% 60.71% 110.82%

MT 78.00 1.87 2.46% -0.46% 2.48% 21.91% 91.18% 20.52% 42.28% 119.47%

AA 38.79 1.13 3.00% -0.84% 3.72% 11.24% 32.25% -6.19% 12.14% 40.70%

RIO 33.56 1.51 4.71% -1.09% 10.21% -33.78% 16.45% -29.30% -15.57% 50.83%

NUE 58.04 1.05 1.84% -2.40% -2.45% 7.74% 6.50% -2.54% -12.73% 11.66%

Table 4: Senior capital goods makers and transportation

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

ERJ 47.93 1.67 3.61% 9.13% 8.81% 8.07% 17.53% -1.70% 1.63% 16.82%

ABB 26.97 0.08 0.30% 2.82% 5.43% 16.35% 51.35% 13.51% 50.67% 99.63%

MMM 95.85 1.60 1.70% 2.43% 4.55% 7.79% 22.48% 9.22% 24.89% 26.25%

CAT 80.33 1.69 2.15% 2.42% 2.78% 9.38% 31.34% 3.66% 18.78% 17.72%

FDX 106.06 1.31 1.25% 1.25% 1.88% -1.99% -3.38% -3.91% -2.54% -6.08%

GE 41.77 0.07 0.17% 0.89% 1.26% 7.79% 10.01% 8.38% 19.27% 15.10%

HON 59.82 0.23 0.39% 0.59% 1.93% 9.34% 32.64% 2.50% 26.58% 39.86%

UTX 80.84 0.75 0.94% 0.45% 1.78% 9.55% 28.71% 12.09% 24.50% 22.78%

BA 102.25 -2.25 -2.15% -2.61% -0.33% 7.81% 14.67% 3.95% 12.98% 22.28%

Table 5: Senior consumer discretionary equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

JCP 68.71 2.39 3.60% 8.43% 3.35% 5.59% -11.98% -3.73% -18.26% -2.43%

BC 24.21 0.67 2.85% 5.91% 8.23% 4.26% -24.15% -25.58% -24.60% -23.99%

WHR 94.29 2.36 2.57% 5.82% 2.26% 1.64% 11.37% -15.88% 9.30% 9.23%

CCL 50.80 0.80 1.60% 4.89% 3.23% 13.60% -0.29% 5.70% 8.66% 5.24%

DIS 35.47 0.57 1.63% 3.14% 2.51% 5.60% 3.71% 2.43% 1.60% 14.16%

NKE 60.35 0.99 1.67% 2.88% 5.40% 10.33% 23.59% 1.68% 12.85% 35.59%

SBUX 26.84 0.32 1.21% 2.44% -2.29% -1.18% -23.86% 1.90% -14.52% -30.63%

TM 117.67 1.38 1.19% 0.69% 2.27% 3.86% -13.03% -7.48% -6.97% 1.99%

EBAY 38.75 -0.41 -1.05% -0.69% -0.64% 9.93% 28.44% 20.08% 14.95% 27.22%

Table 6: Senior consumer staples equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

ABV 80.65 3.07 3.96% 10.28% 11.30% 22.68% 64.26% 11.83% 43.48% 74.04%

WFMI 53.20 2.12 4.15% 8.66% 18.14% 23.35% 16.97% 39.89% 17.23% -14.12%

WMT 45.37 0.37 0.82% 3.94% 2.58% 7.03% -4.58% -5.66% -6.01% -6.28%

BUD 51.60 0.68 1.34% 3.22% 2.04% 3.53% 4.84% -0.96% 0.98% 9.25%

DEO 90.44 -0.17 -0.19% 3.09% 4.28% 5.59% 13.72% 8.44% 10.36% 25.45%

KO 58.07 0.20 0.35% 1.04% 2.69% 6.37% 19.53% 10.25% 17.27% 29.53%

PG 70.83 0.00 0.00% 0.70% 2.08% 8.19% 9.75% 14.85% 12.43% 11.51%

PEP 73.74 -0.13 -0.18% 0.66% 3.22% 8.47% 17.57% 11.88% 15.80% 13.83%

MO 69.56 -0.13 -0.19% 0.04% 1.49% 3.22% 7.15% -2.25% -1.68% 18.22%

WAG 39.30 -0.47 -1.18% -16.81% -13.46% -10.99% -14.70% -10.50% -15.01% -9.43%

Table 7: Senior healthcare equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

PFE 25.58 0.28 1.11% 4.71% 4.03% 5.48% -2.70% -1.24% -1.01% -8.61%

BMY 30.09 0.35 1.18% 4.41% 3.76% 8.20% 14.06% -5.70% 8.16% 22.72%

GSK 54.07 -0.07 -0.13% 1.64% -0.30% 1.88% 0.48% 3.76% -3.86% 0.22%

JNJ 66.25 0.14 0.21% 0.84% 1.74% 7.41% -0.23% 6.37% 7.64% 1.75%

AMGN 56.84 1.45 2.62% 0.48% 2.56% 11.67% -16.90% 3.61% -2.55% -23.94%

DNA 78.28 0.28 0.36% 0.33% -1.39% -1.02% -4.30% 2.06% -6.14% -6.48%

BMET 45.99 0.06 0.13% 0.24% 0.31% 0.48% 10.90% 1.05% 8.47% 41.68%

AET 53.83 0.75 1.41% -0.81% 2.85% 7.15% 25.54% 6.70% 19.62% 30.78%

NVS 54.30 -0.17 -0.31% -1.20% -1.45% 1.69% -6.60% -2.07% -2.62% -6.86%

UNH 47.70 0.32 0.68% -1.51% -4.43% -3.03% -9.26% -9.06% -13.79% -5.86%

Table 8: Senior financial company equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

MS 68.90 1.79 2.67% 9.37% 6.92% 10.24% -15.58% -5.54% -14.20% -7.59%

UBS 57.75 0.32 0.56% 8.45% 6.85% 10.87% -5.93% -4.67% -4.88% -5.28%

MER 76.67 1.89 2.53% 7.56% 2.60% 4.77% -18.10% -8.62% -10.93% -6.25%

HBC 98.71 1.18 1.21% 6.60% 6.64% 10.89% 6.17% 7.21% 10.07% 4.81%

GS 228.50 2.55 1.13% 5.43% 8.82% 27.67% 13.84% 3.24% 9.89% 30.20%

DB 135.16 0.10 0.07% 5.27% 4.55% 9.01% -0.13% -7.44% -1.88% 9.02%

CS 69.61 0.18 0.26% 4.94% 4.85% 7.49% -0.71% -3.77% -3.72% 16.52%

JPM 47.58 0.33 0.70% 3.84% 0.95% 9.33% -1.02% -2.48% -2.44% 0.36%

LEH 63.98 0.76 1.20% 3.64% 2.04% 20.83% -18.63% -14.26% -10.44% -15.58%

C 48.30 0.67 1.41% 3.49% 1.66% 6.20% -12.58% -6.58% -6.34% -5.28%

Table 9: Senior technology equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

INFY 52.43 1.38 2.70% 8.35% 12.46% 9.87% -6.08% 4.46% 1.16% 9.16%

CTSH 85.79 2.45 2.94% 7.52% 13.07% 20.71% 10.33% 15.29% -1.12% 13.72%

QCOM 43.36 0.58 1.36% 2.60% 6.20% 14.44% 15.75% -0.41% 0.14% 19.58%

ORCL 22.18 0.42 1.92% 2.44% 0.90% 10.01% 26.66% 8.24% 18.79% 21.33%

ADBE 44.64 0.39 0.88% 2.24% 6.41% 3.91% 11.82% 9.06% 4.76% 16.92%

ADSK 50.56 0.59 1.18% 1.18% 3.78% 11.98% 24.65% 10.42% 27.84% 43.80%

SAP 59.23 1.34 2.31% 0.95% 1.01% 6.99% 11.33% 16.99% 26.78% 16.50%

INTC 25.54 -0.06 -0.23% -1.24% -1.28% 0.27% 25.50% 3.82% 30.44% 23.03%

CSCO 32.65 0.50 1.55% -1.45% 1.08% 3.58% 17.70% 15.08% 25.28% 36.44%

SNDK 52.10 -1.09 -2.05% -5.44% -2.73% -1.57% 24.88% 8.34% 17.08% -6.26%

Table 10: Yahoo Finance U.S. Treasury Debt, Municipal and Corporate Bond Yields

US Treasury Bonds
Maturity Yield Yesterday Last Week Last Month

3 Month 3.85 3.81 3.64 4.20

6 Month 4.02 3.97 3.91 4.22

2 Year 4.07 3.97 3.97 4.00

3 Year 4.11 4.00 4.01 4.01

5 Year 4.33 4.20 4.24 4.14

10 Year 4.64 4.52 4.58 4.46

30 Year 4.87 4.76 4.83 4.77

Municipal Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 3.46 3.39 3.40 3.59

2yr AAA 3.39 3.45 3.49 3.62

2yr A 3.37 3.43 3.47 3.67

5yr AAA 3.50 3.48 3.48 3.60

5yr AA 3.45 3.47 3.49 3.62

5yr A 3.72 3.70 3.70 3.82

10yr AAA 3.76 3.78 3.77 3.99

10yr AA 3.74 3.76 3.78 3.97

10yr A 3.89 3.91 3.90 4.22

20yr AAA 4.29 4.44 4.33 4.59

20yr AA 4.48 4.64 4.73 4.62

20yr A 4.30 4.45 4.33 4.65

Corporate Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 4.77 4.68 4.81 4.88

2yr A 4.88 4.84 4.89 4.98

5yr AAA 4.77 4.45 5.06 4.97

5yr AA 5.19 5.06 5.14 5.27

5yr A 5.24 5.13 5.21 5.21

10yr AAA 5.52 5.45 5.38 5.40

10yr AA 5.71 5.62 5.79 5.82

10yr A 5.80 5.68 5.78 5.83

20yr AAA 5.95 5.87 5.96 6.18

20yr AA 6.32 6.25 6.33 6.29

20yr A 6.28 6.21 6.29 6.32

Table 11: Interest-sensitive securities

Sorted by 1-Week Price Performance.
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

FNM 67.30 -0.09 -0.13% 10.67% 7.30% 7.65% 12.43% 0.64% 23.87% 17.21%

FRE 63.43 0.24 0.38% 7.49% 5.10% 6.95% -6.57% 4.15% 5.93% -5.31%

CFC 20.25 0.37 1.86% 6.52% 3.26% 11.20% -51.91% -44.75% -39.84% -44.60%

SHY 80.97 -0.09 -0.11% -0.36% -0.26% -0.28% 1.16% 1.50% 0.96% 0.99%

TLT 88.28 -0.96 -1.08% -0.50% 0.44% -2.24% -0.89% 5.36% 0.60% -1.03%

TIP 101.30 -0.60 -0.59% -0.72% -0.30% -0.91% 2.09% 3.35% 0.73% 0.62%

IEF 83.20 -0.74 -0.88% -0.81% -0.28% -1.99% 0.63% 3.78% 0.59% 0.18%

AGG 98.87 -0.79 -0.79% -1.15% -0.84% -1.33% -1.04% 1.22% -1.05% -1.03%

Table 12: Senior gold equities

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

AEM 51.78 2.38 4.82% 3.98% 3.96% 5.27% 33.04% 30.76% 38.08% 72.72%

NEM 45.56 0.51 1.13% 1.86% -4.21% 3.05% 3.08% 15.11% 4.42% 8.92%

BVN 48.64 1.02 2.14% 1.80% 6.02% 14.69% 76.17% 25.62% 55.55% 94.17%

KGC 15.24 0.36 2.42% 1.74% -1.55% 16.87% 33.45% 23.10% 7.02% 27.21%

ABX 40.92 0.37 0.91% 1.59% 2.15% 11.65% 37.18% 36.26% 39.52% 39.56%

MDG 33.46 0.68 2.07% 1.09% -2.36% 14.35% 27.27% 18.69% 22.43% 38.49%

GG 30.86 0.47 1.55% 0.98% 2.05% 18.74% 12.87% 23.64% 20.22% 39.70%

AUY 11.86 0.24 2.07% 0.68% -5.95% 0.68% -3.81% 2.86% -19.97% 39.86%

GFI 18.12 0.43 2.43% 0.17% 0.17% 11.99% -1.15% 15.19% -5.53% 0.39%

Table 13: International equities perspective

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

FXI 191.60 10.20 5.62% 6.44% 13.72% 30.54% 64.60% 43.52% 79.07% 131.12%

EWZ 77.64 3.46 4.66% 4.79% 12.00% 27.20% 66.25% 21.54% 51.49% 95.08%

QQQQ 52.82 1.05 2.02% 2.74% 4.88% 9.51% 22.15% 8.55% 18.53% 27.27%

EWC 33.58 0.63 1.91% 2.60% 4.42% 12.05% 35.95% 9.95% 25.49% 41.57%

EWJ 14.65 0.19 1.31% 2.30% 6.31% 7.40% 3.17% -0.34% -0.20% 5.70%

EWU 26.38 0.38 1.46% 2.25% 3.78% 7.37% 12.02% 2.33% 8.16% 19.04%

SPY 155.85 1.83 1.19% 2.14% 2.55% 6.64% 10.24% 2.41% 8.05% 15.29%

TRF 70.09 2.09 3.07% 2.07% 8.38% 16.04% -20.85% 0.49% -4.30% 4.53%

IEV 121.00 0.90 0.75% 1.86% 3.07% 8.42% 14.58% 2.18% 9.10% 23.85%

IFN 54.57 1.36 2.56% 0.50% 7.29% 18.60% 20.36% 21.32% 38.50% 23.60%

Table 14: Dow 30 List

Sorted by 1-Week Price Performance
Symbol Close 1Day
Change 1Day
%Change 1W
%Change 2W
%Change 4W
%Change YTD
%Change 3M
%Change 6M
%Change 12M
%Change

HD 34.22 0.48 1.42% 5.49% -0.73% 0.03% -16.68% -14.08% -9.99% -8.16%

PFE 25.58 0.28 1.11% 4.71% 4.03% 5.48% -2.70% -1.24% -1.01% -8.61%

GM 38.20 0.88 2.36% 4.09% 9.33% 29.27% 29.71% 3.92% 19.75% 15.30%

WMT 45.37 0.37 0.82% 3.94% 2.58% 7.03% -4.58% -5.66% -6.01% -6.28%

JPM 47.58 0.33 0.70% 3.84% 0.95% 9.33% -1.02% -2.48% -2.44% 0.36%

MRK 53.51 0.65 1.23% 3.52% 3.26% 7.95% 21.56% 7.41% 17.50% 29.19%

C 48.30 0.67 1.41% 3.49% 1.66% 6.20% -12.58% -6.58% -6.34% -5.28%

MCD 56.37 0.33 0.59% 3.49% 2.86% 14.48% 28.49% 10.08% 23.13% 41.63%

DIS 35.47 0.57 1.63% 3.14% 2.51% 5.60% 3.71% 2.43% 1.60% 14.16%

AXP 61.10 1.34 2.24% 2.91% 3.07% 5.80% 1.23% -0.46% 9.19% 7.86%

AIG 69.39 0.47 0.68% 2.57% 3.21% 9.19% -3.83% -1.25% 3.21% 3.20%

MMM 95.85 1.60 1.70% 2.43% 4.55% 7.79% 22.48% 9.22% 24.89% 26.25%

CAT 80.33 1.69 2.15% 2.42% 2.78% 9.38% 31.34% 3.66% 18.78% 17.72%

HPQ 50.90 0.43 0.85% 2.23% 0.73% 4.20% 22.30% 10.89% 21.77% 34.51%

VZ 45.22 -0.20 -0.44% 2.12% 1.89% 9.39% 19.57% 7.72% 19.00% 22.51%

MSFT 29.84 0.13 0.44% 1.29% 4.15% 4.92% -0.07% -0.50% 4.52% 6.80%

KO 58.07 0.20 0.35% 1.04% 2.69% 6.37% 19.53% 10.25% 17.27% 29.53%

GE 41.77 0.07 0.17% 0.89% 1.26% 7.79% 10.01% 8.38% 19.27% 15.10%

JNJ 66.25 0.14 0.21% 0.84% 1.74% 7.41% -0.23% 6.37% 7.64% 1.75%

PG 70.83 0.00 0.00% 0.70% 2.08% 8.19% 9.75% 14.85% 12.43% 11.51%

HON 59.82 0.23 0.39% 0.59% 1.93% 9.34% 32.64% 2.50% 26.58% 39.86%

UTX 80.84 0.75 0.94% 0.45% 1.78% 9.55% 28.71% 12.09% 24.50% 22.78%

MO 69.56 -0.13 -0.19% 0.04% 1.49% 3.22% 7.15% -2.25% -1.68% 18.22%

DD 49.55 -0.08 -0.16% -0.02% -0.28% 4.32% 1.04% -4.82% 0.47% 14.12%

T 42.14 0.15 0.36% -0.40% -0.92% 8.80% 20.57% 2.88% 7.31% 31.98%

AA 38.79 1.13 3.00% -0.84% 3.72% 11.24% 32.25% -6.19% 12.14% 40.70%

INTC 25.54 -0.06 -0.23% -1.24% -1.28% 0.27% 25.50% 3.82% 30.44% 23.03%

IBM 116.30 0.61 0.53% -1.27% -0.41% 0.65% 19.56% 7.64% 20.49% 40.26%

XOM 91.36 0.44 0.48% -1.30% -1.03% 6.54% 23.28% 7.28% 18.31% 35.71%

BA 102.25 -2.25 -2.15% -2.61% -0.33% 7.81% 14.67% 3.95% 12.98% 22.28%

Posted by Posted by Bill Cara on October 6, 2007 07:25:03 AM | Category: Saturday Report

Discourse

Bill,

Agree in full.

Looking forward to read the WIR.

Thank you for your inspiring leadership.

Cheers from a sunny European afternoon.

Posted by: maromatics at October 6, 2007 8:04 AM [link]

Now that Research In Motion Ltd (NDQ: RIMM, TSX: RIM) has come clean about their underhanded options grants to insiders, and changed their corporate governance practices, I am going to put the Company back into the Cara 100.

http://thestar.com/Business/article/264156

Posted by: Bill Cara at October 6, 2007 9:22 AM [link]

Bill,

Here is an article I found by the economist Robert Kuttner that echos much of what you have been saying about cleaning up financial markets and corrupt corporate governance. He links these problems directly with how the same type of problems led to the depression of the 1930s, thus providing a historical backdrop to what we are seeing today. In reading the article, I couldn't help but think that inflated asset bubbles certainly serve the interests of parasitic elements in our society--those acting as middlemen carving out fees for themselves leaving little or no real economic return afterwords.

http://prospect.org/cs/articles?article=the_alarming_parallels_between_1929_and_2007

Posted by: aucourant at October 6, 2007 9:53 AM [link]

Bill
I have posted "Unemployment 5.3%" supporting your view for a coming bear market.
I have shown that 176K new monthly jobs are needed to maintain the same unemployment rate.
At 110k, we can see 5.3% in a year.

Posted by: Will Rahal at October 6, 2007 10:31 AM [link]

Folks, this will require a VERY LARGE display:

Stockcharts.com Bovespa Weekly Chart - 1600

http://tinyurl.com/33pjuh

(much smaller chart follows using SSEC, small screen friendly)

Stockcharts.com SSEC Weekly Chart - 780

http://tinyurl.com/2xcgt6

Posted by: FranSix at October 6, 2007 10:49 AM [link]

aucourant and others, thanks for these excellent contributions. This site is becoming Trading 401.

btw, rather than insert a link beginning with www., please replace that with http:// and you will provide a working link that will save the readers from having to cut and paste. Thanks.

FranSix, excellent charts... Proof of Concept that 100,000 sets of eyes sees more than any one of us.

Quote of the day: I had remarked that an associate was "an interesting person, with involvement in law, music, film, civil rights for immigrants and support for children who are in difficult circumstances in foreign countries".

He wrote back, "interesting person" yourself. As my father used to say: "If you live long enough... you get old."

Posted by: Bill Cara at October 6, 2007 11:26 AM [link]

A word of caution, the Bovespa resembles the housing market in many ways, so I don't believe it will be done in October. The same goes for the SSEC, which resembles the Nasdaq. Both those indeces will probably match previous bubbles, but not until they reach their peak.

Posted by: FranSix at October 6, 2007 11:42 AM [link]

Bill:
I enjoyed very much your analysis. However, don't you think that the build up of infrastructure in Chindia will offset or at least delay the onset of a bear market in those countries. The new middle class will demand both goods and services that can only be supplied internally with external commodities. What is your opinion of the coming infrasturcture bull market there.

Posted by: barpat309 at October 6, 2007 11:51 AM [link]

A question for Bill and other readers in regard to Bill's prediction about a commodities bubble.

With the total de-valuation of the dollar do you still see a commodities bubble? Which ones, oil, gold,etc. and why?

Given the political situation in the middle east I don't see oil or gold going down anytime soon.

Posted by: rick s at October 6, 2007 1:19 PM [link]

barpat309,

My point is that a Bear will be delayed in the 8 markets I listed -- partly for the reasons you gave -- but we don't trade in a vaccum. The weighting of the indexes in US, UK, Germany and Japan as a percent of the total is massive. After prices drop sharply, the best quality assets in the world will be available for fire-sale prices. Traders from around the world -- including in the US, western Europe, Middle East, and Japan, who have capital presently invested in the BRIC markets, will pull it out because it will be relatively over-priced, and they will invest in their own markets. The relatively light-weight BRIC markets will suffer, but the wealth transfer back will not be sufficient to start a new Bull market in the huge markets elsewhere. That would require a resolution to the problems that affect it today.

Posted by: Bill Cara at October 6, 2007 2:04 PM [link]

rick s,

I don't see a "total de-valuation" of the USD, but I do see that all currencies are being slowly devalued, which will continue to lift commodities prices.

I think precious metals will be the winner for a couple reasons: (i) total costs of the goldminers is actually close to the current price, whereas with oil there is a substantial margin, so the price of oil could be knocked down in a serious recession/depression, but that can't happen with gold say because the goldminers would go out of business, and the loss of supply would drive up prices, and (ii) gold is not a consumable, but is an "investable". It is money. It is easily hoarded and stored, and is recognized for use in any country in the exchange of goods and services.

No govt wants a gold standard because that would restrict them from writing cheques they cannot cash (without printing more money and diluting the monetary base). But, the People of the world will hold them to a standard, which they can because of the universality of gold.

Interestingly, there was a rush to securitize gold, like real estate mortgages, by HB&B. Given that the govts hold so much of the physicals, and the banks control the paper (ETF's etc), they think they control the gold market. But what kaimu has been preaching is the right thing in that bullion coins and bars is the place to be because, free of debt, that ultimately will be the controlling factor in global money.

Oil and the Middle East is a nebulous situation. The world is growing short of oil, but long on alternatives. New technologies in solar, wind, biomass, hydrogen, etc, and changes in consumer lifestyle, will likely play a major role in future oil prices.

Posted by: Bill Cara at October 6, 2007 2:22 PM [link]

I found this on Nouriel Roubini's blog today, written by Pete, CA, a frequent contributor. "Greenspan agrees with Kaimu" might be a good way to refer to these comments:

GREENSPAN on DEFICIT SPENDING and GOLD

No, these are not the latest pronouncements from Alan Greenspan's book.

Ironically, this quote below comes from Greenspan a long, long time ago. It spells out in detail how the USD Gov't deliberately rips off its citizens through deficits anbd inflation, and why the Fed sees the price of gold as its "mortal enemy". These words bear contemplating today, as the Fed now shifts into high gear by increasing the flow of credit into the system:

----------
Alan Greenspan ...

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
-----------------------

Posted by: aucourant at October 6, 2007 3:01 PM [link]

Anon wrote today to say:

Your site continues being a great source of education...again thanks....

Question?? why has HOV remained in the cara100 best...after the beating it has taken and continuing fallout of the housing market ...why do you still believe in this company...what do you see...???

Question??...for the un experienced in charts or technical's why do you not make it more clear on the web site which cara stocks enter the accumulation ,sell,etc zones..... so that the unexperienced can understand.

thanks for your wisdom and web site....we gratefully appreciate your hard work

----------------------

Thanks Anon,

This is not work. I love doing it, so let's call it a passion.

Re Q#2, I plan on doing a graphic that does make it easier to see which of the Cara 100 stocks are in the AZ or DZ and which of those have given a Buy-alert or Sell-alert.

Re Q#1, you are mixing up the stock HOV with the company Hovnanian. The Cara 100 is a list of companies that over many years have a good track record. Let's say I think they are good at what they do, even if this might not be the best time doing it. Like you and me, we have our bad days too, but that doesn't make us bad people.

With regard to the stock, if I were to concede your point with a Housebuilder, then next (late in the Bear) I will be asked to concede one of the Financials. The point is that if you keep a watchlist of 100 companies and you monitor their news and the share trading, then you can cycle out of the ones whose stocks have had a Bull run (like I warned about HOV in the summer of 2005) and into others that are early in their Bull phase.

If you could stand back and realize that you have a portfolio to continuously manage, and you are in control of all the ideas and decisions, then you will have an easier time understanding what it is I am doing this blog for.

Hope that helps.

Posted by: Bill Cara at October 6, 2007 3:31 PM [link]

"Question?? why has HOV remained in the cara100 best...after the beating it has taken and continuing fallout of the housing market ...why do you still believe in this company...what do you see...???"

Stock prices of good companies taking a beating is a recurring theme in the capital markets, and also one of the most reliable ways to make serious money over time. HAL was in single digits 5 years ago over asbestos concerns, not it's at 40. Airlines and hotels getting hit in Q4 2001->buying opportunity. San Francisco Marina District real estate after Loma Prieta->buying opportunity. The 1990-95 correction in Bay Area housing prices was relentless->talked Dad (and Mom) into moving out west after his retirement in 1994, and they bought a home in Hillsborough which has since quintupled in value. So Bill suggested selling HOV in 2005 at 70 and because of the housing downturn now it's 12->was it a better company in 2005...was it a better buy? Is it a better buy now? May still be a year or two away from bottoming, but if I had only the choice of buying today or 5 years from now, I'd buy it today.

Posted by: 2nd_ave at October 6, 2007 4:33 PM [link]

Bill

You certainly have amassed an incredible group of talent on this blog. Over the years the level of discussion and the investment aptitude have grown by leaps and bounds. I congratulate you and all those with great input in making this one of the most outstanding and educational blogs ever.

"If you live long enough... you get old." I think I qualify as an "interesting person". My grandfather used to put it a little differently. When asked how he was doing, he always replied, "Still Vertical". LOL

ps: Fransix, your charts are fantastic.

Posted by: jfs at October 6, 2007 6:15 PM [link]

Bill/All,

In regards to HOV, I'm a big follower of Reggie Middleton Blog and consider his research and DD better than I could ever achieve myself.

This September 2007 article says it all concerning HOV:

http://tinyurl.com/227wyz

Posted by: onlineaces at October 6, 2007 6:54 PM [link]

Hello All,

I've been a lurker on this excellent blog for about a year now. I can't even remember how I stumbled across it, but I'm certainly glad I did. The amount of knowledge I've gained in reading not only Bill's excellent posts, but also the comments/posts of kaimu, leisa, shark, 2nd ave and others has been a tremendous help and confidence builder for me. As I begin to get my feet wet in the trading arena after many, many years of conservitave saving I look forward the continued excellent discourse of Bill's blog. My thanks to Bill and everyone else. I hope to make a positive contribution going forward.

Cheers, -mojo

Posted by: mojo at October 6, 2007 8:38 PM [link]

Hello all

This blog has been a wonderful educational experience...and with Mr Cara's expert advice whether you agree with Mr Cara's opinions or not he has created a forum for us to think, question,debate and educate each other and with all the wonderful people participating in this blog all over the world i thank you all for the wonderful comments that i have enjoyed reading throughout the year well Mr Cara what can i say you are a man of the people with truly a mission to teach us all...you are truly a rare human being.THANKS FOR THE FREE EDUCATION

Posted by: sv at October 6, 2007 9:45 PM [link]

Education is never free, for the price of education is that the material must be learned by the student.

Posted by: shark_attack at October 6, 2007 10:50 PM [link]

ALOHA !!

aucourant ... What is left out of the Alan Greenspan quotation you have posted is that he stated those words in 1966, when he was running his own investment firm in NYC. He sold out and joined the Federal Reserve Bank for fame and fortune. Yet a true monetarian like he is cannot deny that gold is "honest money" and has an eternal store of value. Over 6000 years has proven that.

The Greenspan quotaion you post is even truer now in 2007 than it was in 1966. I saw the 60 Minutes Greenspan interview and I loved how he is still a "sell out" and a slave to the BIG HB&B when he was asked ... "What personal investments do you have now?" He answered by saying, "That is one question I cannot answer." He also admitted in a roundabout way that he was seeking fame all his life. I still would bet a British Sovereign that he has one BIG stash of gold in Switzerland. When he and the FED ran the POG down to $280USD I picture him buying hand over fist on the "down low"!!! I may not live long enough to see it but I would not be surprised to see in the end that on all these POG dips the heads of the elite banking families were buying physical gold with gusto! Selling the people's gold and filling their offshore vaults! Why wouldn't that surprise me?

A few years ago I caught sight of the NM Rothschild Bank give up their seat at the LME-London Gold Exchange. At that time they were part of the FED & GOLDMAN group that were shorting gold. Why did they dump a seat they have had for over 60 years? I believe they turned buyers of gold back then. If so, perfect timing on their part!

Can you imagine what would happen if Greenspan announced on 60 Minutes that he recommends buying GOLD??? Even at that, Warren Buffet or Bill Gates or George Soros ... The POG would either skyrocket or the FED would have to sell half of Ft. Knox to cap the price!

Seriously ... do any of these people that run the US money system actually give a flying crap about "We The People" ... The epitome of that proof was the 60 Minutes interview and seeing the baseball fans bring $1 FRN notes over to Greenspan for his autograph! Those "fans" are totally clueless about what "real money" is and how they have been duped all their life! To me getting Greenspan to autograpgh a $1USD FRN is like Cindy Sheehan asking George Bush and Dick Cheney to autograph her Son's death certificate!

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

Posted by: kaimu at October 7, 2007 3:55 AM [link]

Bill-

The bottom callers in the housing stocks were out in full force last week and found a "useful idiot" to act as their mouthpiece in a Mr. Kim:

http://seekingalpha.com/article/48925-another-absurd-homebuilder-rally

The author does a nice job of pointing out Mr.Kim's earlier piece which seemed to call a bottom some 10 months and billions of dollars ago. Mr. Kim's phrasing of his calls makes him " an artful dodger". Notice that he never quite says what he appears to want his readers to think. This kind of behavior is abhorent to Bill and I and Bill's constant ferreting out of the truth regarding the shenanigans of Wall Street and HB&B make his blog a must read. Read this piece and learn.

Posted by: MarkM at October 7, 2007 5:58 AM [link]

Should read "Note: This kind of..."

Posted by: MarkM at October 7, 2007 7:35 AM [link]

Good day everyone!

I'm thinking about doing a term-paper on the yield curve as a predictor of recession, so I have a couple of things I thought maybe this community could help me out with:

1: Does anyone have excel data for either Japanese or UK treasuries (e.g. 3-month and 10-year) going back to the sixties? If so, and if anyone could send it over I would be really thankful. I tried Datastream but only came up with US data.

2: Can anyone explain why an inverted yield-curve should signal recession? Is there any logic behind it? Any good web-resources I could check out?

If you can help me out with some data, please send it to hviken@hotmail.com

Greetings from Norway!

Posted by: Hallvardo at October 7, 2007 8:13 AM [link]

Hallvardo: SFO Magazine did a terrific article on yield curve http://www.sfomag.com/articledetail.asp?ID=1946685477&MonthNameID=July&YearID=2

It looks like you have to purchase it. The magazine used to be free, and the articles available that way as well.

Posted by: Leisa at October 7, 2007 8:51 AM [link]

"Can anyone explain why an inverted yield-curve should signal recession? Is there any logic behind it? Any good web-resources I could check out?"

With short term yields being higher that longer term, this would permit speculation in the credit markets where you can borrow for the short term and lend for the long term.

Usually this implicates lending in the housing sector. Mortgage lenders have often engaged in legerdemain when lending for real estate, because the profits are very easy to obtain when the short end of the curve is higher.

But in the corporate sector you have junk bonds issued on the same basis, which are passed off with a higher investment grade than should be assigned.

The onset of a recession usually comes on the heels of the yield curve steepening. With the steepening of the yield curve, short term rates decline as longer term rates increase. This also has the effect of widening credit spreads, so any profits to be made in this way are obliterated.

Borrowing comes to a halt, since the London Interbank Offering Rate increases, since Banks are required to raise interest rates on the higher interest rates.

House prices decline and forclosures occur as adjustable rates go higher, as well as corporate junk bonds decline in price as their yields increase. Junk bonds can no longer be turned over, and thus the asset value is lost.

The onset of recession comes in when this process turns growth to negative.

Posted by: FranSix at October 7, 2007 8:57 AM [link]

Michael sent this note, and my reply is good for anybody who cares to join us,

Bill, For those that wish to meet up with you at the (Toronto) Cambridge Gold Show (Oct 21-22) (to learn what it is I should look for and ask of the companies), do you suggest Sunday or Monday? And is there a specific area where we will meet?

My reply: I think Sunday is better since most people are working on Monday, and also many come in from out of town. But either day is fine.

I'll be outside the Speaker Hall at 9:45-10:00am Sunday, and at 8:45-9:00am Monday.

See you then,

/Bill

Posted by: Bill Cara at October 7, 2007 10:17 AM [link]

Cara Trending Portfolio

I started this back in August with a balance of around $950million. (yes this a virtual portfolio). It is up 10% in just under 2 months.
Current Balance is $1.046m. When looking at the history, go back to August 15. Prior trades are not Cara100's.

I posted earlier how these Cara100's are chosen for both purchase and sales.

Link to portfolio. http://tinyurl.com/yoe5j2
Link to transactions: http://tinyurl.com/2hd44p

This week sold CHL for 21% gain, PTR for 25% gain.
added VIP, ECA and SU to the portfolio this week.

Posted by: holdenll at October 7, 2007 11:15 AM [link]

Olaf from Germany sent this really considerate mail today. Thank you. Let's hear from others. I'll put up whatever algorithms you want on the server, either here or at http://billcara2.com which I need to update with real-time (intra-day) prices and price data from international exchanges. Alternatively, especially if it gets these projects done faster, I am sure the community won't mind links.

------------------------------

Hi Bill,

I currently develop a software to support my trading. One module is for generating all kinds of watchlists. Just for the fun of it I took the Cara 100 from your previous posting and built an overview with gains and losses similar to your ETF/Dow30/etc lists and added the distance of the current price to the SMA50 and SMA200 as well as the values for the daily, weekly, and monthly RSI7. You can find a preview at http://tradersquest.de/wp-content/tables/2007/10/cara100-2007-10-05.html

If you and/or your readers are interested in such a table in addition to the great Excel sheet of Quentusrex and Hoosier, we can publish it about an hour after market close on a daily basis.

Extensions and additions are possible (e.g. color-coded entries for those stocks where the daily RSI7 increased above 30 while the weekly and the monthly are still below 30).

I would like to give something back for this great site you are offering for free and for the invaluable insights from the discussions of the community here.

Best,
Olaf

Posted by: Bill Cara at October 7, 2007 11:52 AM [link]

Leisa,

The article you refer to is still cached by Google. Use this search:

http://tinyurl.com/3d7vbx

Then click on "Cached" and it pops up.

Posted by: TimG at October 7, 2007 12:05 PM [link]

The above URL does not work because there is a dot at the end of it. The correct link is
http://www.tradersquest.de/wp-content/tables/2007/10/cara100-2007-10-05.html

Posted by: TradersQuest at October 7, 2007 12:32 PM [link]

as a novice investor i am amazed at what this website has shown me with all the goings on the financial community. i enjoy very much the discourse and appreciate all the work that bill does. thank you

Posted by: shopper at October 7, 2007 1:04 PM [link]

US Treasury - is now a partner to the Mortgage Lending Industry? Here are some remarks that were made by US Treasurer Anna Escobedo Cabral in a speech that was made on Oct 5. The need is to work harder to make new innovative unsecured loans to new immigrants in places such as Texas?? Didn’t see much about this speech in the press, did you?

A couple of clips but the whole speech is worth reading:

“ ... Treasury is beginning an aggressive outreach campaign to connect with the homeowners who could face foreclosure in the next 18 months to two years. We want to encourage these homeowners to reach out to their lenders before they're hit with the payment shock of a mortgage reset. We know that for many people, products exist to help them. We want these homeowners to begin paying attention to their mortgage statements and talk to their lenders to determine their options early in the process...

“ ... The challenge to reaching struggling homeowners is similar to the challenge of reaching the unbanked. Just as we have to find creative ways to break down the barriers that keep borrowers from contacting their lenders, we must be innovative in our approaches to welcoming people into the financial mainstream. Our progress in reaching the unbanked population is only as strong as the partnerships we can create with each other...

“ ... In Chicago we learned of effective partnerships and saw examples of the great work the Chicago Fed, community banks and others are doing to reach unbanked populations and new immigrants. In Texas, we learned about the unique challenges in border communities and saw creative business models community credit unions have adopted to bring in new customers. For example, one credit union offered small loans without a credit check on the condition that the individual receive broader financial education. Earlier this year, at the conference in Seattle, we heard about the efforts of Washington Mutual to reach out to the unbanked. We also heard about the unique challenges faced in serving diverse communities. ...”

-more at link-
http://tinyurl.com/246qyq

Posted by: spot at October 7, 2007 2:51 PM [link]

Bill,

Terrific new photo! Does this mean you're positive on the economy? I hope you are using a super sunscreen.

Sarah-Hadassah

Posted by: SH at October 7, 2007 3:04 PM [link]

ALOHA !!

Say China invades Taiwan, which the Chinese government threatens on a regular basis. The USA has a pact with Taiwan that in such an instance the USA would intervene with economic sanctions and if need be military actions against China. Of course at this point I believe that "pact" is as symbolic as the Iraqi government is for a democratic Middle East!

The following is part of a letter from Sean M Thornton who is the Chief Council of the Foreign Assets Control Division of the US Treasury. This letter was in response to a letter written by GATA back in 2005 regarding the intervention of the US government into US and foreign markets during an emergency or a declared war.

In this part of his letter Mr. Thornton addresses securities held by US citizens and what the US government could do under a Presidential Executive Order tied to the 1917 law still in effect known as the "Trading With The Enemy Act"(TWEA) that deals with "war time" trade issues. The "International Emergency Economic Powers Act"(IEEPA) deals with "peace time emergencies". It is obvious that many ties with declared enemy states would be severed, but what would a "peace time emergency" be? One would be where China dumps huge amounts of US Dollars in an effort to cripple the US economy, which was in the news not long ago, referred to as "China's economic nuclear option" ...

READ ON:
US TREASURY TO GATA ...
"Under TWEA during times of war -- and also under the International Emergency Economic Powers Act, 50 U.S.C. Secs. 1701-05 ("IEEPA") during peacetime national emergencies -- the president has broad powers to regulate property in which there exists a foreign interest. See TWEA Â§ 5(b)(1)(B); IEEPA Secs. 1702 (a) (1) (B).

Consequently, the president may restrict shares in any company owned by foreign persons consistent with the purposes of any declared emergency.

In this respect, foreign-owned shares in gold and silver mining companies are no different from foreign-owned shares in companies in any other industry..."END

Therefore, Mr. Thornton has exposed, in writing, that "globalization" lasts only as long as the US government says so. Please be aware that no matter what you believe in terms of globalization or even domestic "free markets" we are just one missile away from an Executive Order declaring "GAME OVER"! I would also expect that our declared enemy would inact similar laws against US companies within their borders.

This to me is the danger that exists with the current concept of "globalization" and the idea of "free trade". The massive imbalances that currently exist not only financially between major trading partners(China, Russia, India), but also geopolitically(Iraq, Iran)are ever growing and in historical terms ... "unprecedented"! For a US sitiing Vice President to stand in front of a national TV audience and announce "deficits don't matter" is the same as a slap in the face to all countries that export goods or services to the USA. It is also a HUGE slap in the face to the Middle Class that voted him into office! When the leaders of this country have systemmatically dismantled our manufacturing base and our Middle Class over the past 40 years from failed greedy domestic and foreign policies we are now more vulnerable than ever to such economic sanctions being initiated by Executive Order. This is what happens when BIG CENTRALIZED GOVERNMENT is voted into power ...

When we make our Nation import vulnerable and abandon policies of "self reliance" and "austerity" then the chances of US government intervention and "confiscation of assets" rises dramatically. There are consequences to "imbalances" ... there always has been and there always will be. DEFICTS DO MATTER !!! When we allow BIG CENTRALIZED GOVERNMENT to take over our lives and our property then we lose any US Constitutional protections and we turn itno the American USSR ... the USSA ...

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

Posted by: kaimu at October 7, 2007 3:16 PM [link]

In today's WIR Bill writes:
You know, I have been doing a lot of thinking about the reasons for such huge dividend payouts and share buy-backs by the leading American corporations. I think its part of a plan to transfer capital to wealthy persons who are re-directing it into China and India, where the economic returns (on capital) are acceptable.

Here's what the Privateer had to say on the subject back in February:

The US Stock Market Price-Support Mechanism:

Neither the Dow nor the S&P 500 seems to have noticed the drop in earnings. Why? Well, the reason isn’t hard to find. It is stock buy-backs. At present, 28 of the 30 stocks in the Dow have programs where the companies buy their own stocks back from the markets. Were one to look across the S&P 500, one would find that 85 percent of the companies there have stock buy-back programs. The numbers are large, as can be seen in the Dow where the average stock buy-back comes in at $US 19 Billion. The average stock buy-back across the S&P 500 comes in at $US 3.7 Billion.

There is something hugely artificial in this situation, especially when it is compared to the huge fall in US new capital investments which have fallen to an annual rate of only 1.4 percent.

Investing In An Image - The Stock Price:

Funds which could have been used to invest in new and better capital equipment are instead being used for stock buy-backs. Funds which could have been used to pay down corporate debts and improve the balance sheet and the debt/equity gearing are instead being used for stock buy-backs. Funds that could have been used to increase dividends as a reward to loyal stock holders are spent on stock buy-backs.

The companies point with pride to their stock prices, which are doing wonderfully well, while at the same time not fully informing stock holders that there is a new buyer in the market for the company’s stock and that is the company itself. This also amounts to not fully informing stock holders that new capital investments are not being made and that maintenance and upkeep of existing capital is underfunded.

Invest In The Business - Or Get Out:

If business and corporate chiefs cannot find any better way to use the stock holders’ funds than buying the stock back from the market, they should be promptly replaced with a new corporate leadership at the first opportunity. Corporate management is hired to run a business and, over time, to improve the business and increase its market share in the product lines where it functions. Before any of this can be done, the
available funds of the business must go into the business to improve its own stock of physical capital.

It does not do any business any good to stand (for a while) in the glow of a high price for its stock if at the end of the line, its physical plant and equipment is aged, nearly worn out, and its product lines are being forced off the market by competitors entering it with new and better products because they had chosen to
constantly reinvest in their business. Under investment eventually always reveals itself in physical decay and when that is finally realised by the markets, stock prices of such companies can fall very fast indeed.

When Earnings Fall - Everything Slows Down:

With US corporate earnings heading for a contraction in the quarters ahead, it follows that even the funds for stock buy-backs have to contract for most companies. That, in turn, means that the present wave of US stock buy-backs also have to contract. And then, perhaps, the market will be without price supports.

Posted by: badius at October 7, 2007 3:27 PM [link]

This belongs with the above:
Copyright 2007 - The Privateer
http://www.the-privateer.com
capt@the-privateer.com
(quoted with permission)

Posted by: badius at October 7, 2007 3:35 PM [link]

A question about the RSI methodology and buy/sell signals. When you refer to RSI daily, monthly, weekly, what are the numerical period equivalents? Is RSI7 the daily figure? Weekly is RSI__? Monthly is RSI_? Also, a buy signal is generated when the daily RSI moves above 30, or when all of daily, weekly, monthly move above 30? Your responses greatly appreciated.

Posted by: Magnolia at October 7, 2007 4:20 PM [link]

magnolia- from bill's 9/29/07 commentary:

"In the words of Louise Yamada, “Over-sold is empirical evidence of selling. You don’t want to go back (long) into that market until that condition is alleviated.” That is a reason why I do not have a Buy Alert until the respective RSI-7 value that dipped below 30 rises above it. In other words, if I am short-term swing trading, I wait until the Daily RSI-7 jumps back across the 30 line, and if I am an intermediate-term trader, I wait until the Weekly RSI-7 moves above 30. If I am managing a long-term oriented portfolio, I wait until the Monthly RSI-7 moves up through the 30 level. In fact, I try to time trades that combine all three time horizons whenever committing the full amount to any trade."

Posted by: 2nd_ave at October 7, 2007 4:46 PM [link]

Herb Greenberg is one of the few financial journalists I will spend the time to read. Today he wrote a piece on (Cara 100) Citigroup that resonates.

http://tinyurl.com/2pjh7r

What has happened this week is that the various components of HB&B have gotten together to (i) cut their losses, (ii) tell us they have done a good job, and (iii) tell us their brothers have done the same.

That's why I call it HB&B. It is one big club. Them on the inside; the rest of us looking in.

But something important is happening in this world of the transparent Web. It is now easier for us to see behind the smoke and mirrors and recognize the fires.

The great equalizer is the growing numbers of people with guts like Herb Greenberg who aren't afraid to speak up. It used to be that if you ever spoke out against the industry, you'd be blackballed.

I like what I see. We are finally getting the transparency we deserve.

Posted by: Bill Cara at October 7, 2007 8:31 PM [link]

@ 2nd Ave.

I would have my doubts about buying HOV now in lieu of five years from now. It is a very risky venture and the chances of them going out of business are too great for me. See http://reggiemiddleton.typepad.com/reggie_middletons_perpetu/2007/10/there-is-this-s.html for an example of where the homebuilders stand.

And thanks for the encouraging words, onlineaces. Bill, do you live in the Bahamas? I spent some time down there boating. It's nice.

Posted by: Reggie Middleton at October 7, 2007 11:31 PM [link]

Bill, I just read the comments you made about me in your other post. All I can say is... Wow, I am shocked and a bit disappointed. The posters on this blog have such positive things to say about you, which makes me wonder why you would resort to such a personal attack, especially towards someone who you don't even know.

You publicly query about marriage and my appreciation for beauty and my children??? You make it seem like I said I made a lot of money??? Come on, now! That's uncalled for. What does this have to do about investment? I am actually insulted.

Let's get the record straight. I didn't make Ara Hovnanian out to be an ogre, but from what I have researched, I do have doubts about his ability to steer his company clear of this storm. There is absolutely nothing personal about this and I made it clear in my blog. Why do you make it so? If you agree, then you do, and if you don't then its a free country and more power to you. I also must ask what the age of the blog has to do with the credibility of the info on it?

I am definitely not going to get into any type of pissing match or confrontation since I do not like negative energy, but I am quite disappointed in what you posted and think that the quality of all blogs, including yours would improve if personal attacks were left off of them.

I will also state that I really must disagree with your comparison of HOV with Berkshire. You are comparing a homebuilder's equity price performance during the biggest real estate bubble in recent history with that of Berkshire Hathaway during the same very short period. What would one expect the result to be? Bubbles do not a long term investment make!!!

If you were to extend the comparison to 10 years, 15 years, or any substantial period outside of the real estate bubble of 2001 - 2006, Berkshire outperforms by a landslide. For 15 years, HOV returned 200%, BRK.A returned 1,200%, and did so with much less volatility. This is irrelevant, of course, since I have nothing against the Hovnanians and am actually impressed with what the family has built, whether it outperforms Berkshire or not.

If you were trying to prove a point, I don't get it. Yes, during the internet bubble, tech stocks outperformed Buffet too, but over time his performance is pretty hard to beat.

Posted by: Reggie Middleton at October 8, 2007 7:42 PM [link]

October 6, 2007

Saturday’s Commentary & Chat, 10/06/2007 7:25 AM ET

Discourse

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