Great point Bill for all to think about as they think about daytrading. The prop desk traders have an enormous advantage over us. And we have to know they ARE TRADING AGAINST us every chance they get.

craig/bh ->60% on DUG/FXP/QID/UNG...may be a long trek across the Plains, especially if daily rsi7s go back above 70...position size and the process of accumulation->once you get used to it, you mentally build the stair-stepping into your expectations...pretty sure you had the same experience trading GDX/GLD on the way up...

Question for the group.

When a company releases earnings after the close, and has the conf call the next morning, rather than same day, is this typically an indicator in either direction or non event?

is gold showing weakness in being unable to continue moving above $810 resistance,
or is it basebuilding around the $790 range...

ive gone to a higher cash position to wait and see, i already feel a bit better!!!

i worry that gold will fall to the $775 range if the US dollar index moves above 76 with conviction
the next few days, or will re-test old highs over the next few weeks if it slides back below 75 signifying that any sort of rally has again failed.

good luck!

just a guess, but companies located in the east may prefer to go home at a reasonable time and conduct the call the next day, whereas west coast participants have all afternoon to take questions...

NYUgrad,

I've asked myself the same question. Although I've kept no score card, it seems to be a non-event IMHO.

Regards

2nd,
Notice YEN strength this AM. Weak US markets.

Not unhappy about holding my short positions.
Not happy either...LOL!

you entered all your positions on weakness, right->in which case i think the odds of prices going above your basis within the next week or two (simply on the basis of volatility) would be about 100%...then you can decide whether you're happy ;)

2nd...that's my new mantra-- thanks

No worries, I've seen the charts.

CT says the last two days (5% gain) altered the odds of a bear from 80% to 75%....or 5% less chance.

If you get odds of 75% are you going to take the bet?

2nd_ave

Re. 10:05m, am of the same mind. Thank you.

2nd,
Are you watching the yen? FXY works.
Very close correlation to our markets.

2nd said; "you entered all your positions on weakness, right->in which case i think the odds of prices going above your basis within the next week or two (simply on the basis of volatility) would be about 100%...then you can decide whether you're happy ;)".

My point exactly! If you wait until the security is in the accumulation or distribution zones and THEN take tactical action, your trading returns improve AND risk decreases significantly. This is not Investors Business Daily / momentum trading. IMO, momentum trading is much easier if you are bullish on the broad market, but a high RSI / high momentum in a non-trending to bearish market simply means overbought, not time to buy. Is this a bull or bear?

Buying in accumulation zones and selling in distribution zones is Bill's / My way and, btw, is much easier for any relatively new trader. The problem with the relatively new trader is they won't be patient, they tend to buy on up days because they feel that they are missing out. Simply be patient, have your lists on hand and in time, there will be something to buy/sell. Patience is a virtue.

Hi.

I understand why all the Bears are so frustated and anger. I think most of the time people forgot that FED exist. The Big Banks & Brokers exist and they have huge advantages over small home retail trader.

Yesterday was a very good day and I had my share of the profits. If the big players want the prices to climb why the hell should we scream to they drop? Read. Study the markets. Try to figure out what the big boys go and go with them.

Forget economics, forget inflation and the dollar. Traders trade prices and everything else doesn't matter.

Why shouold we think the markets are fair and there's justice in the market?

Cheers,

P.S. Remember, I told we would see S&P 500 at 1600 before we would ever see it at 1300.

The Korvus RSI app really knocked the cover off the ball with the CRDN buy alert last week!

I think a telling sign....The fact that this rally has not taken out the Nov 14th high...

If the bulls are really in control we should see that level fail pretty easy...Has not happened...I am staying short...

craig- you mean negative correlation, of course...but as bg pointed out yesterday, 401(k) legislation was drafted to "protect" americans from the unpatriotic act of making money during corrections...senators/congressmen on that committee undoubtedly well-tutored on LT uni-directional projections (same presentation probably resulted also in members' accounts transferred to funds managed by said tutors)...

Randgold prices offer at $35.25, raises $211.5 mln

http://www.reuters.com/article/marketsNews/idUKL2916547020071129?rpc=44

Trading just above offering price this morning.

Good day to all;

SIVs have been on everyone's menu, including the state of Florida's investment pool. It contains ACBP, a portion of which is now defaulted.

http://tinyurl.com/2f4ypm

It is our job to trade prices up and down.

I made a lot of money on short positions in the last month. More than I'm down today as I bought on weakness as noted above. Same for my long positions as there was good opportunity the last 30 days for many good trades and a couple longs. At yesterday's worst I was buying FXP. My long positions, although fewer, made money yesterday. My trades made some more.

I still hold both long and short positions.

It is not even minded or balanced to hold only one view, although I am leaning in favor of the fundamentals and less to hope.

To me, the tell seems to be the continued flight to treasury's. 3 month below 3%.

http://www.bloomberg.com/markets/rates/index.html

Bill

I thank you for your time and effort you put into this blog.

Your strength and wisdom is invaluable during times like these.

-Best

2nd - You must be channeling Jesse Livermore:

"If you begin right you will not see your profitable position seriously menaced; and then you will find no trouble in sitting tight."

2nd, Yes, negative correlation (I knew you would see it) and don't get me started on politician's knowledge of fiscal matters. That's why they all started as lawyers.

Bought into more SKF this AM, took forever to fill or show up on my screen.
Used a trailing stop which just executed at 98.70. Will look to reenter should it come back to me.

OG- you must have that book highlighted and indexed (or memorized) ;)

Both!

Bill,
Today's report is very helpful, Thank you.

I didn't realize so many indices were below August's low.

Professor Roubini wrote a good piece on recessions and the stock market:

http://www.rgemonitor.com/blog/roubini/229403

How about that:
http://www.marketwatch.com/news/story/us-economy-avoid-recession-next/story.aspx?guid=%7B4486A45F%2DDB8E%2D4DAF%2D859C%2DB697556C6A24%7D&dist=hplatest

greetings from Italy

Satyen

Adding QID...right here 37.99

i read this blog every day. it felt really sad when Bill said he would not blog yesterday. For some time now i have been thinking that his efforts require a lot of work & a lot of mental effort, and a lot of time. not many people could or would do that, at least not for free. even many paid sites do not put in so much effort.

yes - i wish i would be able to come here and read all your contributions every day - but all good things come to an end, so i will just keep appreciating this blog, and enjoying it, and learning from it, and being sooo thankful!!! while it is here........

Right behind you BG. 37.78

I think there is a defenite mood change in the market and it may be better to wait before adding to QID, FXP.

It's trading on the long side until December 26. The vested interests will give the golden egg (retailers) a fighting chance to make the best numbers they can. After that the consumer is over done and cooked/burnt.

Don't disagree, but as you note, moods change. Fundamentals are more difficult to alter.

We may be in tough for most of December.

Bills write up today, very powerful.
Is late December the most like time for the shank to be delivered, or will come at any time?

Personally,started yesterday establishing gold/gld position. Could go lower, trading range lower ? 72-76. Meanwhile 78.5 getting support. But I do hear Bill's warning that the other powerful ones will want the dollar higher, and that means gold lower for the short term.

RE: UXG bottom fishers

Per my charts RSI 7 on the monthly is still above 30. A 3 yr. chart shows possible support in the $2.90ish range from what I see. It's important to point out that chart reading can sometimes be largely subjective, so take my comments within that context.

On the daily time frame, the UXG chart does not appear to show any signs of support showing up as prices continue to drift lower.

I'd suggest being very patient in adding to, or initiating a position, into a declining trend; regardless of who is running the company or which industry or country it operates.

One needs to determine, "do I want to 'be right' or do I want to make money" ?

Forgot to add ...

DISCLOSURE: Long UXG

JogyP & stktrader,

I'm thinking along similar lines.

I'll be looking to add to QID & SKF in the month ahead and hope to sell my few remaining longs during the next 4 weeks.

Regards

Any ideas on the USD and election year?

Dang Bill, you really can write! When does the book hit the stores, I'm too cheap to pay $20 shipping. Thanks for all that you do.

JohnC

Bloomberg:
Yesterdays sales were the defensives in favor of momentum players.

Today the defensives are back on traders screens.
I always ask why.

Financials:
Anyone here besides Bill an auditor?
You know they are Certified and have to sign off on all those bank book audits.....

Added small bite to SKF.

Bought the book a while ago and shipping too. Can't wait to receive it. Could buy a *small* library with what I made on NOT.

Golfer...

Willing to bet we will see 70 before 80 in the USD...

stktrader...Are you willing to go short if we close under that magical number 12845? (already happened once) Where is your line in the sand so to say???

Remember Abby Cohen called for 1600 in the s&p by end of year..Jan s&p calls were trading for around 20.00 beginning of Nov..NOW 4.00..I'D SAY NICE HOLIDAY FIRE SALE.

Thank you Bill
Your word from yesterday afternoon & this morning, while not directed at me personally, were just what I needed to hear to encourage me to stick to my plan.

Adding to; DUG @ 42.25

Breaking silence to opine that today's Daily Report was one of Bill's All Time Greatest. We have our differences but I have to pause and give respect to brilliance when it is due. And it is due today.

Good luck and good trading all. (See you on the other side of this Pig.)

I read this yesterday and felt sick to my stomach. I truly believe EVERYONE should read this as it is currently an escape hatch (for a time) I didn't know existed.

http://www.mises.org/story/2772

A few questions that arise:

1 - With a few posts lately, I have been clearly on the side that thinks the financials - despite being oversold and bearing currently low multiples - are still prime for shorting based on imminent insolvencies stemming from Level 1, 2, and ESPECIALLY 3 assets that total in the trillions and have yet to see true market writedowns. But, with a constant stream of lower-than-market rate financing in the tens of billions per company, can they miraculously coast to a time where the value on their debt portfolios (AAA, AA, etc.) will return? That's obviously the only play they have.

So....how would you play this over time? Would you extend out the timeframe of your puts? Or is it just too volatile - and too many unknown variables - to stake money on? For you chart wizards, if there's anything you see in the empirical data, I'd love to hear it.

2 - Being that we may see defaults on these taxpayer-funded dollars from government banks, is there anyone who isn't furious about the potential for another few hundreds of billions tacked onto our bill as a society?

Thanks all - especially Bill - and good luck out there.

Sharkie,

Follow the instructions in the link below to change your IP address and see if you can post.
(My guess is that your IP is in the MT blacklist)

http://tinyurl.com/jsl2v

Jock,

I would offer you the philosophers stone, and you, unkowingly, would have me turn it back into a base metal... gold.

During the inflation cycle in the 70's when silver went through the relative roof, thieves were driving around in vans with smelting pots in the back. They would target the elderly in FLA, steal their silver and melt it down immediately for resale in the commodity markets. My great grand-parents suffered the loss of silverware in this manner. THis was family silverware that had survived the great depression and two world wars. To our family, it represented history and heritage, and the loss was substantially felt.

As kaimu suggests, much that we consider valuable is merely a matter of perspective and circumstance.

Kaimu,
This substance is easily mined from salt water (I imagine you have ready access to this resource) and does AMAZING things for plants ;0)

I wont discuss this issue anymore. I dont feel it is quite apropriate for Bill's blog. The information is readily available on the internet to those who wish to satisfy their curiousity. Dig deeply.

Sincerely,

FYI, 12 CARA 100 stocks hitting AZ past 4 days.

KB - 4 days ago
UBS - 4 days ago
BC - 4 days ago
INFY - 2 days ago
BBBY - 2 days ago
SBUX - 2 days ago.
MU - 1 day ago
HOV - 1 day
JCP - 1 day
MCO - 1 day
C - 1 day
TGP - 1 day

I took an initial hen peck :) (1/3 position) (for self) in INFY at 40.15.

I have been doing quite a bit of studying of TA the past few weeks to get better at recognizing better entry points. By my amatuer reading the MACD (just learned it)of all of these are not that strong. Some show positive bullish convergence but that doesn't seem to be that reliable.

Any care to comment on any of these and your game plan please feel free to post.

My hat's off and full credit to Richard Russell.

I read it here first at BillCara.com.

Ten year yield back to 3.90. That's down 3% from yesterday. Looks like not too many people were fooled by the bull trap, at least not the people loading up on "safe" treasuries. I'm mainly short but was hoping for more of a rally than that so I can offload my March C calls. Maybe next week they'll charge again. I think what happened yesterday was the same thing that happened when the FED cut rates by .5 back in Sept. Remember that huge rally. This one was early because too many people would expect the rally right after the rate cut. If the market can hold up until the rate cut it will be "sell on the news"

Good luck out there

Thanks, Bill!!!

Rob.

BG,
I don't have a take on DOW support. I did sell off my Indian stocks today due to their lack of follow through. Small profit. It was in my wife's IRA. I should trade all stocks like I trade hers. I would be more careful. I almost always win in her account. Accountability issue!
I bought a book on Amazon yesterday by Benjamin Graham. Security Analysis is the title. I want to become a better analyst from the fundamental side. Try to be less reactive to prices and more proactive.

There are a bunch of Health and Biotechies I follow on the RSI as well. LGND flashed a buy alert after sitting in the AZ for 6 days. Check out today's action on zero news.

Can someone point to a resource for the tax implications of investing in foreign markets? I'm trying to figure out if a US investor will pay Canadian tax on Canadian ETFs like XGD.TO. Thanks.

Bought 500 share of uxg today as a start to scaling in at 3.55.

U.S. Foreclosures Almost Double:

http://tinyurl.com/2v4wam

Investors Racing To Pull Out Funds From Florida State Investment Fund:

http://tinyurl.com/ytfdsf

How's the Goldilocks doing today, Larry?

Many times that information can be had at the web site of the equity you have in mind.

geckojb- fyi, believe HOV and C no longer part of the Cara 100...

Thanks 2nd, Mention it to Korvus as well the next time he's around as these still show up in his application for the 100.

golfer,

If you look up a symbol on Yahoo Finance, click on the Historical Prices link on the left and look at the dates -- you want the earlier date to be at least 8 months away (probably over a year if you want to trust the monthly RSI value). If there is enough data, the ticker should work on my RSI site.

I got a similar complaint from a friend this morning (that some tickers weren't showing up), and I determined that my script was a little too quick to blacklist a ticker based on a temporary problem talking to Yahoo Finance. So I changed it so it will retry a few times before blacklisting it.

I went ahead and cleared the listing of blacklisted tickers, so you can try those two again that weren't working this morning. If they still aren't working, let me know what they are and I'll try to find out why.

Nov. 29 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest securities firm by market value, advised investors to sell gold on expectations turmoil in financial markets will ease and a slump in the dollar will slow.
http://tinyurl.com/2r758k
This should pave a nice path to a U.S. interest rate cut.

If you are seeing *H on your quote system 0n various quotes or positions, Scottrade informs me that the AMEX has issued a floorwide halt on AMEX listed stocks. Can still be trading in the OTC market, for example QID.

korvus,
Have you thought about changing the 'hover text' to the name of the company? Is that possible? It would help those of us who don't yet have all the symbols memorized. In fact, it would help me to learn them.

From AMEX:

"New York, November 29, 2007 - Due to an issue with LAVA Trading Inc., which connects the Amex to the other equity markets, trading has been halted in equities, ETFs and UTP stocks. We are working with LAVA to resolve their issue. "

Too many people crowding the exits, or too much money flowing in? Any guesses?

It looks like all the ETF's including QID on my screen are still trading.

How about ETFC? Down on the news. I thought it was good news that they sold their mortgage portfolio for 27 cents on the dollar and lost 8 billion in customer accounts fleeing.

That should prove to everyone that this bull bounce is window dressing for mutual funds and banks fiscal year end. I'm assuming their fiscal year end is the end of this week. After that they can let things drop.

Rob.

Out of CBH after a big program trade... with the money flowing in the wrong direction.

8% gain in 2 days... thanks Korvus!

About Lava Trading Inc.
Headquartered in New York City, with locations in California, Connecticut and the United Kingdom, Lava Trading Inc. is an innovative technology firm that develops high-performance trading solutions for the financial services industry. Lava products are created as true ASP solutions built to withstand maximum volumes in the most volatile conditions. As a cost effective and neutral provider, Lava's OTC, Listed and Foreign Exchange solutions are used by leading broker/dealers, including most of the top U.S. investment banks, as well as market makers, hedge funds and institutional investors. With its patented technology and capital markets expertise, Lava creates value-added trading solutions that combine speed, intelligence and reliability. Lava is a wholly owned, independently-operated subsidiary of Citigroup, Inc. (NYSE: C) and is a member NASD/SIPC. For more information, visit www.lavatrading.com.
================
This could be fodder for a Monty Python skit.

GLD and Spot Gold

I thought that GLD represents 10% of the spot price of an ounce of Gold. However, I noticed there seems to be a divergence - for instance, as I write this, Spot Gold is bit @ $794.5 and GLD is bid at $78.52! Does anyone know why this is so?

Also, does anyone know of a good place to trade Spot Gold with low margins, tight spreads and preferably no commissions?

Thanks

MIkeNYC, hover over the * for the weekly chart to pop up. You have to click then hover for the chart to pop up - you might have to play with the cursor but should work. The name of the stock shows up on top of the chart.

2nd_ave/geckojb,

Yeah, I know I haven't put the latest Cara100 update in yet. I'll try to get to that today.

MikeNYC (and whoever has similar questions):
I'm actually starting to work with the technical team for billcara.com, so I'm not going to make any 'feature' updates to my RSI site for the near future. This is partially because at some point it's functionality will probably become part of this site in some manner, and at that point it will stop being my baby and start being a team effort, and it's partially because I consider the billcara.com stuff a higher priority. I'll try to keep it running in the meantime (quick bugfixes and updating the Cara100 list), but that's it. Once things are integrated, I'm sure Bill will be open to feature suggestions.

korvus November 29, 2007 3:21 PM

"...I'm actually starting to work with the technical team for billcara.com..."

Yes great work on the RSI tool just visiting your site and checked it out. I play around a little but doubt I will ever have your skills.

thanks for all your efforts

TradinSux,
if you read the prospectus here:
http://www.streettracksgoldshares.com/
you will see that there are various 'fees' associated with the GLD etf that makes the ratio only approximate.
TimG

Bill

That was quick, sorry just as I pushed the post button I thought maybe I should use my other skills to track done Jeff's email and send it to him directly.

Would be a nice addition to the new system if we could send messages between members. Also some systems allow a 15 minute edit period after you've posted to make corrections.

Again great market intro today as usually, along with the week in review. Always helps to keep me focused on the bigger picture.

thanks

Greetings Bill and community,

Been lurking for the past few months and enjoying the learning experience. I ran across something that I thought might be useful for some members of the community, I found it quite informative. This is a 47 minute documentary type show explaining banking and the creation of money as a bartering system, namely the fractional reserve system. It is really explained in simple terms, so very good for the novice. I would also add that it explains a lot of what we are experiencing in the credit markets recently. When Kaimu and other gold bugs such as myself go off about the disaster of fiat currency, this video is what we are talking about.

Rather than trying to post a link or tinyurl on my first post I will just suggest that you go to goggle video.com and search on “Money as Debt” . There you will find the full length 47 min. video along with shorter extracted portions. To get a sense of the video you might just try a few minutes of part (3/5) to decide if it is worth your time. The first 10 minute segment is a little slow but does have useful intro material to set the stage.

I hope some here find it useful.

Namaste

Sorry, I should add that I can't vouch for the validity of this video as I am not familiar with the author. However, it seemed believable to me and I would certainly be interested to hear if it contains false information. Thanks.

For long term oriented types seeking a place to diversify cash holdings.

I have had some nice success using a few long short funds the past 2 years. I am using these currently as an alternative to some cash holdings and bond replacements. I track a number of these and the one that I have used the longest with the best results is the American Century Long_short fund (ALHIX). Up 8% year to date and 5% last year 06. There are close to 100 Long Short funds out there now and there is very little consistency between them as an asset class so you have to follow, read and understand the mechanations on how they work.

I also use the Hussman Strategic Growth fund in the same manner but it's not a long-short fund per se.

If you are a long term investor seeking an alternative to cash or bonds you might want to check one out.

Is Goldman's frontal attack on Gold something to be concerned about for Gold longs in the ST?

NYUgrad,
Did you see H&R Block have their earnings release on DEC 11th. Interesting choice for a date. It's the same day I predict the markets to crash again if they can hold on until then. Even if someone does buy their Option One unit for 27 cents on the dollar like Etrade's deal, I can't see it being good news for their stock.

I hope everyone else has a great trading day tomorrow. I'll be gone, dropping the kids off at the grandparents and then off to Vermont for some much needed R&R.

See you all Monday.

Thanks again, Bill, this is a great place to hang out.

Rob.

I think Goldman telling people to dump Gold is just like what Bill was talking about. Gold will dip to the low 700's and Goldman and their pals will buy tons of it and ride it all the way up. Why else would they advise people to sell. They trade against us and want to get it at a good price!!

Rob.

Fingerlakes,

I did see that. I was suspecting as such. when their ir dept told me it was dec 6th, than retracted and said "we dont know anymore" i was guessing it would be dec 11.

With the rate cut 99% expected, I sold my puts. I am all cash and will see what happens first.

I might hold off until end jan 1 before i build my put position.

I ask myself one thing about the price of gold:

Over the past two days the market (stock market, to be precise) is supposedly pricing in a cut by the Fed. Fine.

What is the POG pricing in over the same time?

If the gold market were pricing in a rate cut we would see something different than another huge downward move.

Recall that about this time before the last Fed cut, the POG sank just like it is now.

My tinfoil hat comes out and I stare into my ball o' mud:

Here it is: The price of gold is regularly driven down and suppressed before a rate cut. Once the rate cut occurs, gold is 'allowed' to rise back up to about where it was.

That's my conspiracy theorist pronouncement.

Goldman and other bullion bankers will ride this back up and make money both ways. The thing is, if you are smart and lucky, you, too, can take advantage of this, if you are aware of what is going on.

Gold was capped in the 600 range for about a year. If you watched it long enough and knew what was going on (GATA) you could make some money. Problem is, if you are on the wrong side when it busts out in these explosive moves, it can hurt.

Sometime before the rate cut comes, take a small position in GLD with a tight stop and see if my ball o' mud was right. I will do something similar.

Geologix & Goldcorp - GIX has fallen 20% from its high of 2.85 nine trading days ago. Newsletter writers Peter Grandich and John Kaiser have both lavished praise on the company. More importantly, Kaimu and Aussieontop are big supporters of GIX(!)

Now comes indication that GIX' Mexican San Martin property may be on the scale of Goldcorp's nearby Penasquito mine. Word is that Goldcorp is significantly increasing production plans for Penasquito without the huge increases in capital or operating costs seen by others such as NG.

This may bode well for GIX's prospects at San Martin.

Also, it raises the question of whether Goldcorp. might soon again merit Cara100 status.

Finger Lakes,

Looks i might have sold my puts on HRB 1 day too soon.

http://tinyurl.com/37hzqu
H&R Block unit taps credit line a sixth time (another $75M)

Isn't it interesting that various sources provide night & day contrasts on what lies (emphasis on 'lies') ahead - Castlemoor is saying hold 88% cash; Sy Harding is saying Be Careful!; John Hussman provides the evidence on the pending recession...and yet the Dow climbs more than 300 points in one day. Kudos to Bill for explaining the fraud that lurks in the background. I think Robert Prechter's quote about cash is quite appropriate at this juncture: "There is nothing wrong with cash. It gives you time to think."

Bill,
I want to add my thanks to the others for your "comments" entry today. It's hard to believe that those of us who hang around this site get to see the thoughts of someone so knowledgeable and experienced day after day.
Not only are you experienced and wise in the ways of the market dance, your generosity is remarkable.
Wayne

Does anyone believe that this market is going higher?
Those dudes that work the HB&B desks. Do you think they are putting their and their grandma ma's savings into the equity markets?
They are told what to do with your money (under miss-management) to try to save their jobs, but what do you think they are doing with their own personal accounts.
As a matter of fact, why aren't their personal investments made a matter of public record. You know, full disclosure and transparancy? Wouldn't that seem logical considering their position?
I think there will come a time when investors will demand this, and I think it is only one more "crash" away.
When are we going to insist these criminals be prosecuted and new legislation put in place to hold them responsible for their crimes?

Sorry, a little too emotional.

not at all...(if)/when market manipulation and/or mis-management of funds is shown in a court of law, we'll be fighting for the chance to ask if the cuffs are too tight...which is why i hope spitzer becomes a front-runner in 2012...have to admire someone who simply takes care of business->Gambino/Grasso/and no less than 10 of the HB&B conglomerate->he's taken them all on...and won...

Excellent post on gold carry trade at Nouriel Roubini's blog. "Bernard" has been a pivotal poster and has gotten a lot of recognition. He was the main source for pointing out how the big investment bankers are insolvent:

London Banker,

Yes, I agree with AFFG that you may have hit the nail on the head with regard to Goldman Sachs' sell recommendation on gold. I translate their SELL recommendation as a screaming recommendation to BUY GOLD. They and their investment bank cohorts may possibly have a large short position in gold.

Sell gold due to alleviation of concern over bank balance sheets (resulting in US dollar appreciation)? Is that some kind of a joke? Who are they trying to fool?

The self-reinforcing asset/liability downward spiral of US real estate/mortgages has only just begun. This is nothing less than disaster for the world financial system and the US dollar.

The central banks of the world have engaged in a persistent effort to suppress the price of gold for over a decade. They do so by lending out their gold reserves to the investment banks at an ultra-low lease rate like 1%. The current 1-year lease rate showing at kitco.com is literally 0.4%---try borrowing at this rate even in Japan right now.

The investment banks (like GOLDMAN SACHS) would sell the gold short into the market and then use the proceeds to invest in higher yielding instruments (this is the gold "carry trade"). This de facto central bank intervention (via gold lending) is far larger than direct central bank gold sales.

Frank Veneroso has done a brilliant analysis of how much of the world central bank gold reserves have been lent out. It is likely at this point that maybe 1/2 to 2/3 of the world's total central bank gold reserves (30000 tonnes) have been lent out and are no longer in the vault. There is no way on earth that this gold can be repaid. The gold that the investment banks have sold short is bought on the other side of the trade mostly by jewelry producers and CONSUMED by the public. The gold is no longer available in the market to be repaid.

If enough shorts decide they need to cover, where is the physical gold available to cover it? The sheer tonnage required makes it impossible---it is probably in the range of 15000-20000 tonnes.

The total amount of gold lent out in dollar value would now amount to $400-600 BILLION (15000-20000 tonnes x 35840 oz/ton x $800/oz). Each further $100 rise in the price of gold will inflict about $50-70 BILLION in additional losses. A short squeeze could possibly cause the investment banks terrible losses (if they now have a large net short position).

The huge losses from Japanese yen appreciation on the yen carry trade may appear to be insignificant compared to the losses on the gold carry trade (when gold has a parabolic spike upward). The reason is that the gold price COULD RISE AT A FAR FASTER RATE than the Japanese yen in percentage terms (even if the total gold carry trade may be 1/2 of what the yen carry trade amounts to in dollar terms).

For a comprehensive and systematic review of the evidence supporting the conclusion of a concerted government campaign to suppress the price of gold, I highly recommend this report by Sprott Asset Management:

http://www.sprott.com/pdf/not_free_not_fair.pdf

For more on Frank Veneroso's brilliant analysis of central bank gold lending:

http://www.gata.org/node/5275


I now have my own blog at the Wall Street Examiner:

http://wallstreetexaminer.com/blogs/ducalion

Written by Bernard on 2007-11-29 10:00:43

For those interested, Tom Whipple writes a weekly "Peak Oil Review" at http://www.aspo-usa.com His review is concise and lacks the sensationalism that many Peak Oil writers tend to favor.

Its a bit late, but the report from the 19th is especially interesting because it talks about OPECs third ever summit: http://tinyurl.com/22w43q Of particular concern is the author's conclusion that OPEC ministers believe that $100 oil is fair given the current market conditions.

Considering that severe spikes in oil prices generally precede recessions and that the reduced demand during recessions can cause years of lower revenue for oil producers -- it's a curious stance. Certainly OPEC knows from experience how oil prices that are *too* high can hurt their profits. I doubt that they would justify maintaining such a price unless other factors such as the weak dollar and supply concerns outweighed demand considerations.

Dow, a look at the chart from a couple of different angles.

Lots of talk out there on the justifications for up down and sideways in the near term. I'm currently in Bill's camp, but still trying to be conservative and weighted to cash, ie keeping my powder dry for the next battle.

My gut and my view of the charts is that it may take several weeks to sort out a trend. I highly doubt the recent highs can be taken out, but do believe we have room to make a run at them with plenty of volatility. If we do continue the uptrend I feel it will only be due to further debasement of the USD and thus portfolios go up but actual buying power is net zero and probably even down by the time the next order of imported goods hits the shelves. So just trying to conserve cash right now, mostly in Canadian dollars.

So if this one's going to be a good down trip I thought I would look at the 1987 trip down on the charts in a little detail, that was also a good one and I don't want to miss out a ride on the short side. I looked at the Dow, Nas and S&P, all about the same, so just put together the following chart on the DOW, 1980 to YTD, with close ups before and after the crash, and the Dow for the current 6 months. I can't force the scales to be the same but I think you can see the picture. If it turns out to be like the 2000-2003 down trip there will be lots of entry points.

On the first chart I added the USD to show the divergence, hadn't looked at in that way before, kinda interesting with respect the buying power discussion. The close up charts show that even in that surprise crash there was still a prior battle and setup somewhat similar to the present. I wasn't in the market then but I was surprised to see on a closer look that it didn't really happen all that fast. As I hear Bill say now the warnings are there, get ready, protect, but when it did breakdown those without a plan were totally lost in two days.

Dow summary, 4 charts
http://tinyurl.com/yqbbos

And thanks again Bill for all you do, much appreciated, I just hope some day I can help contribute.

Bill

Thank you for your comments and this blog. To use the school analogy you employed during your computer adventures - I'm really looking forward to graduating from kindergarten in this school of investing so that I can get to grade one.

stktrader -

Your early afternoon posting regarding your wifes IRA hit home with me. I have also had better success in my wife's RRSP than my own RRSP and our joint investment accounts. (RRSP is roughly the Canadian IRA equivalent). I am very careful not to lose money in that account and take a conservative approach in her account. It is surprising how much energy I expend and activity I generate for smaller annual gains in the other accounts. I think there is a very important lesson here that I seem to be too stubborn to learn!

Stocks On The Move
Asian Stocks Gain, Led by BHP Billiton; JFE Holdings Advances
By Chen Shiyin ,Nov. 30 (Bloomberg) --

Asian stocks rose, helping a regional index to its best weekly gain in two months, after copper prices climbed to a one-week high and Credit Suisse Group raised its recommendation on some Japanese steelmakers.
BHP Billiton Ltd., the world's largest mining company, climbed to a three-week high. JFE Holdings Inc., the world's third-largest steelmaker, jumped the most in two months.
The MSCI Asia Pacific Index added 0.6 percent to 161.64 as of 10:02 a.m. in Tokyo, set for its highest close since Nov. 15. A measure of mining companies and steelmakers jumped 1.5 percent, the biggest advance among 10 industry groups.
The benchmark has gained 4.4 percent this week, the most since the five days ended Sept. 28. Gains helped trim the MSCI index's November loss to 6.1 percent, its worst monthly performance since May 2006.
Japan's Nikkei 225 Stock Average gained 0.7 percent to 15,623.06. Benchmarks climbed in other markets open for trading, Except New Zealand. The Philippines is closed for a holiday today.
Most U.S. stocks dropped yesterday, halting a two-day rally, after Sears Holdings Corp. reported lower profit and Goldman Sachs Group Inc. said banks' losses on home-equity loans may double in 2008. More than three stocks fell for every two that rose on the New York Stock Exchange.
Federal Reserve Chairman Ben S. Bernanke said volatility in credit markets has ``affected'' the economy's prospects and policy makers must decide whether the risks between growth and inflation have shifted. He spoke a day after remarks by Vice Chairman Donald Kohn fueled speculation the central bank will lower interest rates for a third straight meeting on Dec. 11.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net .
Last Updated: November 29, 2007 20:08 EST

On a separate note, I plan to buy GLD (I know kaimu -- just paper) when (if) it hits the 50 MA. I agree with Bill's suggestion that prices could come down significantly more (mid to low 700s), but I'd rather be in on weakness after a month's cool-down rather than be left in the dust trying to catch the bottom.

Plus, I need the diversification. Everyone's discussion yesterday about getting married to a particular stock/company really hits the nail on the head with me. I eloped, tied the knot, and cut all ties (with reality) when I allowed myself to keep averaging down on ENER over the past year or so. I still beleive it's grossly undervalued and manipulated but I definitely need to "sell into strength," reduce exposure, and diversify.

... and Bill, I want to add my name to the long list of individuals that are utterly grateful for everything you've given us here with your hard work (and $$). Some of the most logical and thorough perspectives are presented in this space for all to profit from freely. Thank you!

Goldman's positions on TOCOM - thanks to whoever brought this one up before...

http://tinyurl.com/7exnh

Some serious analysis on this here.

"We know that keeping a lid on the gold price has been the key to making big profits in the currency, stock and bond markets, which is probably why the $100 million loss on TOCOM gold has been allowed."

http://tinyurl.com/2toeq6

Goldman appeared to start doing this in late 2005.

Hmmm... look at the price of gold (well, GLD) since late 2005?

http://tinyurl.com/2rgjz3

If anyone wants to do some historical analysis here are the positions pages from Internet Archive. You can also download the CSVs from the historical section. This sometimes works for other data that is unavailable on the web site.

http://tinyurl.com/33ld9k

Sachs has less short positions than in 2006. If their shorts are a purposeful money loser, as the article above suggests, this may mean a downturn in the short term price of gold. Convolution anyone? Anybody figure out what's going on here?

From the "Short Gold in '08" story...

:The team anticipates that the greenback, which had a tough time in 2007 against global currencies including the Canadian dollar and the euro, will find its footing next year as the U.S. Federal Reserve Board cuts interest rates and thereby lowers the risk of a recession, and the U.S. trade balance improves further."

Hmmm... what to believe...

"The goods deficit with China increased from $22.5 billion in August to $23.8 billion in September. Exports decreased $0.3 billion (primarily raw cotton and nonferrous metals) to $5.6 billion, while imports increased $0.9 billion (primarily TVs and VCRs and other household goods) to $29.4 billion."

http://tinyurl.com/697l

Quasi,

Awesome charts, thank you. If we were to have a 1987 setup, I would guess that it would be more likely if we worked back up to DOW 14000 - 14200 range (but no higher) and *then* showed serious weakness. I think someone else on here said something to that effect yesterday -- but the 1987 chart definitely shows that sort of price action. On the other hand, the long-term chart shows that the buildup to 1987 was far more drastic, with steeper trends in both the DOW rise and USD collapse.

For some reason I don't feel like we would have a blowoff that severe because it seems that the market has been climbing a wall of worry for some time now. This gut feeling probably stems from my only experience with a bull to bear transition, where in 1999/2000, over-abundance was the word. Things feel much different now then they did in 2000.

Does anyone remember what the general atmosphere was like in 1987? Was recession on the tongues of market commentators?

Yuck...

"Canada's current account surplus with the rest of the world (on a seasonally adjusted basis) decreased $5.3 billion in the third quarter of 2007 to $1.0 billion. The lowest current account surplus since the second quarter of 2003 resulted mostly from a large drop in the goods surplus."

http://tinyurl.com/2abblu

"In the capital and financial account (not seasonally adjusted), both outward and inward investment flows slowed appreciably in the third quarter of 2007. Nevertheless, Canada's net foreign assets advanced by almost twice the pace of its net international liabilities, despite the first quarterly reduction in Canadian holdings of foreign securities in over 12 years and large foreign takeovers of Canadian companies."

That's an ugly chart and a fugly report. The last bar in the debt securities chart is drowning.

What's the best way to short the TSX? I don't think it's going long in Gold... Any suggestions?

"Capital flows into the Canadian economy by foreign direct investors surpassed the $20-billion mark for the fifth consecutive quarter, reaching $28.6 billion in the third quarter of 2007. This was the highest quarter of foreign direct investment inflows since the tech bubble in 2000. Most of the inflows served to acquire Canadian firms ($18.8 billion)."

We don't have much time... TSX will be foreign-owned soon enough. Anyone buying Abitibi?

So, We give them absolute power to abuse us any way they please without impunity !!!

Fed will protect economy, not individuals: Mishkin
Thu Nov 29, 2007 6:30pm EST
By Scott Malone
CAMBRIDGE, Massachusetts (Reuters) -

“The Federal Reserve will act to protect the wider economy from financial turmoil but not to shelter individual investors from losses, Fed Board Governor Frederic Mishkin said on Thursday.
"The fact that people lose money is just fine with me as long as I do my job of keeping the economy on an even keel," Mishkin said after a speech at the Massachusetts Institute of Technology outside Boston.
"People are supposed to lose money when they do stupid things. We actually still need to respond if there is an effect on the credit markets, because aggregate demand is going to go down," he said in response to a question.”

http://tinyurl.com/yto9bb

IRS publication covering tax treatment of US investors of Canadian stock
http://tinyurl.com/2cp6dr

Monthly close of gold above $800, do people think it will happen tomorrow? It's never happened yet.

re: Quant of Quants

James Simon, still relatively unknown, runs Medallion, not only the most successful quant fund, but now the largest. He commands fees of 5% and 44% of profits! Here, from Bloomberg, is the most detailed article I've seen on him and his fund:

http://tinyurl.com/yoptjj

Jock - thanks for the post on James Simon - interesting read...

Greetings from Horse and Buggyland.

Here are today's Cara 100 U/D's:

Downgrades:

UBS - to Peer Perform @ Bear Stearns
DB - to Underperform @ Bear Stearns
ETFC - to Market Perform @ BMO

New Coverage:

AET - Outperform @ BMO

Target Changes:

DELL - $43 > $40 @ Bear Stearns
ETFC - $12 > $6.50 @ Friedman Billings

Have a great day everyone.

Stktrader and jsaxman:

re: wives accounts...

We have three accounts...1 outside RRSP...my RRSP acc't and 1 Spousal RRSP (my $ input but our money)

My approach to the wife's account is similar to yours but it is part of the plan.

That is where the vast majority of our low to "no risk" and very long term investments are.

Since, statistically she should live longer than me I want to make certain HER account is greater than what it was when I started. Thus, it is both a "part of the investmenting plan thing' and a psychological thing... If I do die die before her and WE do not spend it all before I die she won't be able to say...That so and so lost all MY money. :>) and LOL.

"a published report that the White House and the mortgage industry are nearing a pact that would temporarily freeze interest rates on some subprime home loans before they roll over." from TDWaterhouse

Makes sense to me ...

EOM mark-up(s) underway...
Nymex Dec NG set to open up 1%...

New Zack's report on Cara 100 component NOK:

http://tinyurl.com/23yds6

Of note to some:

"...CEO Sheldon Inwentash of Mega Uranium (MGA) bought 81,800 shares in the public market'

Interesting to look at his trading history and what happens after he buys and sells