Bill Cara: Saturday’s Report & Discourse, 11/17/2007 10:08 AM ET

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November 17, 2007

Saturday’s Report & Discourse, 11/17/2007 10:08 AM ET

Capital markets have ceased functioning as effective pricing mechanisms. I discussed the reasons why this week.

It all starts with the general rule: “Those who print the money, make the rules” and that happens to be the governments, the private sector bankers that I call Humungous Bank & Broker (HB&B), and the go-between central bankers.

As always, rotting fish begin to stink at the head (well known proverb).

Rotten liars are destroying the capital markets.

The syndication of Liar Loans involved vast amounts of fraud as much as bad judgment on the part of their creators. Both reasons (ie, fraud and bad judgment) were permitted to exist by HB&B self-regulatory organization (SRO) rules. Those rules, which omitted the most basic checks and balances, like transparency and a mark-to-market requirement, facilitated Liar Asset Values.

Ultimately, it was the Pension Funds and the Hedge Funds (ie, the organized end of the Buy-side) that said to the financial services industry (ie, the Sell-side), something like “Enough is enough, we no longer have the confidence the value is there in light of foreclosures in the real estate market”.

After the Buy-side started selling these SIV’s back to HB&B and their proprietary Funds in June and July in huge numbers, the jig was up for HB&B.

After that point, the Federal Reserve Bank did its job of protecting HB&B to the extent it could, regardless of the negative impact on the $USD, by lowering rates and pumping liquidity into HB&B by record-level purchases of their Treasury and mortgage asset holdings. The NYSE did its job of protecting the listed companies that were caught up in the exploding mess, by failing to require “full, true and plain disclosure” of the phony assets of so many of its companies. The US government did its part in loosening rules for the Government Sponsored Agencies and other mortgage lenders, and in putting out a sequence of Liar Economics reports.

Financial Entertainment TV even did its part to protect HB&B and its near-bank, money-lending sponsors like General Motors (Ditech) and General Electric (GE Capital) by rolling out another Trans-America Caravan, the “America is Open For Business 2007 Tour” -- similar, by the way, to their well-timed “Real Estate is Red Hot 2005 Tour”.

Throughout this shameful period, the Securities and Exchange Commission, whose mandate it is to “Serve and Protect the People”, went AWOL. I could go into the political reasons why the SEC failed its leadership responsibility, but the plain fact is that the People have been left holding the bag with worthless SIV asset-backed holdings in pension plans, both directly and indirectly held by private and public sector Funds, and by the much higher interest rates that are soon to come once HB&B declares the system healthy and strong. At that point in a year or so, the People will simply be told that interest rates must rise in order to check the rise in commodity prices and soaring inflation.

That’s cute -- steal the people’s wealth now and make them pay for it later.

Without an effective securities regulator, where do the people turn?

Some, like you, come to blogs like this one. Regrettably, when the pain starts to show, we even have to suffer the remarks from idiots among us, saying the negativity here is too strong. Don’t let that stuff distract or stop us. We know we have two jobs: (i) we primarily focus on prices and trade the opportunities to accumulate or distribute positions, and (ii) we secondarily plan for that day in the future when we the People wrest back control of our capital market from the Sell-side, and we put them in their rightful place as product creators and sales people.

What is needed of course is an apolitical voice for the People that is organized. To accomplish our goals and objectives, it will take an organization on our part to beat the ones that work against us.

In fact, different types of organizations are needed: one, say, a well-funded formal investor advocacy strategic planning and spokesperson group, and another one, a type of guerilla tactical fighting action group, of the kind this Community is rapidly shaping into, with multiple units on the ground, working in the trenches.

At the end of the day, effective leadership will come not from government, HB&B or central banks. It will come from us. The simple reason is that we are the Buy-side, the people and corporations who do most of the world’s value-creating work and own most of its wealth.

It is time we stopped those who are misguiding us, and stealing from us, as they meet their own goals and objectives. We need to organize to meet ours.

Enjoy your day. I will return tomorrow with the Week In Review #46-07.

And keep positive because in time we are going to win.

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

XLP 28.57 0.13 0.46% 2.47% 2.00% 3.03% 8.71% 7.73% 3.66% 10.52%

IYH 71.02 0.48 0.68% 1.85% 0.45% 0.87% 6.86% 6.48% -1.36% 8.03%

IYZ 29.69 0.26 0.88% 1.40% -6.04% -9.34% 0.10% -5.11% -10.95% 5.06%

XLF 30.40 -0.29 -0.94% 0.86% -4.58% -6.86% -17.66% -8.30% -19.81% -15.98%

XLY 34.08 0.04 0.12% 0.50% -4.51% -5.33% -11.53% -3.46% -13.28% -10.74%

XLI 38.75 -0.05 -0.13% -0.44% -3.53% -2.39% 9.99% 3.00% 1.15% 9.53%

SMH 32.79 0.09 0.28% -0.46% -4.26% -7.97% -2.32% -8.92% -12.44% -7.50%

XLU 41.68 0.01 0.02% -0.60% -0.57% 5.20% 13.20% 8.83% -2.39% 15.78%

XLE 72.40 1.60 2.26% -2.75% -4.26% -2.75% 27.96% 11.21% 10.20% 27.85%

XLB 40.31 0.01 0.02% -2.94% -5.44% -4.25% 16.47% 10.74% 0.40% 18.49%

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

CVX 85.98 1.82 2.16% -1.47% -2.83% -3.69% 21.15% 5.64% 6.50% 25.43%

PBR 105.77 5.99 6.00% -1.85% 13.37% 31.05% 112.26% 97.48% 98.67% 137.05%

XOM 85.10 0.61 0.72% -2.01% -3.22% -7.64% 14.83% 5.49% 4.48% 17.10%

TOT 79.99 2.00 2.56% -3.24% 0.97% 1.07% 12.71% 14.26% 9.53% 14.34%

ECA 68.04 0.68 1.01% -4.91% -6.13% 4.44% 50.07% 19.39% 12.59% 38.21%

IMO 52.91 0.66 1.26% -5.25% -3.83% 7.61% 48.37% 34.60% 25.05% 45.80%

SU 102.27 2.50 2.51% -5.86% -5.78% -1.87% 38.37% 21.17% 22.48% 35.40%

CEO 163.26 -3.19 -1.92% -7.24% -21.13% -8.54% 73.18% 68.27% 80.48% 91.08%

STO 30.87 0.38 1.25% -7.49% -7.66% -6.11% 20.16% 18.69% 14.80% 15.66%

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 30.03 1.06 3.66% 3.44% -0.30% 6.11% 82.89% 54.87% 35.64% 99.93%

TS 48.25 1.27 2.70% 3.43% -6.33% -5.60% -0.56% 13.37% 6.23% 10.79%

PKX 158.95 2.34 1.49% 1.85% -4.48% -0.25% 100.11% 27.67% 40.44% 118.37%

RIO 35.40 0.90 2.61% -0.84% -2.69% 6.43% 22.83% -7.35% -22.01% 35.06%

BHP 74.73 0.63 0.85% -1.42% -10.75% -9.57% 92.26% 42.97% 44.94% 86.41%

AA 36.31 -0.02 -0.06% -2.10% -5.84% -3.02% 23.80% 13.75% -6.99% 28.26%

MT 70.75 1.20 1.73% -3.10% -6.56% -8.86% 73.41% 31.46% 23.39% 73.11%

NUE 52.46 1.48 2.90% -4.25% -9.41% -11.28% -3.74% 14.39% -20.96% -4.95%

RTP 442.43 1.47 0.33% -7.51% 19.34% 29.69% 116.77% 88.55% 55.88% 114.87%

TCK 42.12 0.25 0.60% -11.03% -13.23% -12.70% -39.18% 12.14% 3.41% -39.93%

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 48.83 0.87 1.81% 5.49% 1.98% 1.86% 19.74% 16.26% 3.48% 14.33%

MMM 81.57 1.92 2.41% 2.59% -3.91% -5.83% 4.23% -4.48% -5.16% 1.59%

UTX 74.30 0.35 0.47% 1.07% -1.78% -2.24% 18.29% 4.53% 8.50% 11.29%

GE 38.65 0.34 0.89% 0.70% -4.17% -3.47% 1.79% 3.90% 4.94% 7.48%

CAT 69.44 -0.29 -0.42% -1.38% -7.12% -5.61% 13.54% -4.88% -8.57% 13.15%

FDX 96.80 -4.57 -4.51% -2.95% -5.50% -6.31% -11.82% -7.07% -11.14% -18.06%

HON 55.88 -1.28 -2.24% -3.25% -5.85% -4.18% 23.90% 3.25% -3.89% 28.99%

BA 89.99 -1.35 -1.48% -4.48% -7.95% -4.16% 0.92% -2.97% -5.61% 1.44%

ABB 27.97 0.22 0.79% -6.58% -9.10% 3.06% 56.96% 31.44% 38.12% 75.80%

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

SBUX 23.17 -0.93 -3.86% 2.66% -9.24% -11.23% -34.27% -12.93% -17.84% -41.33%

CCL 44.91 0.21 0.47% 2.32% -2.58% -4.95% -11.85% 3.27% -6.22% -10.00%

TM 110.20 -0.28 -0.25% 2.17% -2.48% 3.57% -18.55% -3.26% -10.05% -10.10%

WHR 76.16 -2.19 -2.80% 0.95% -3.75% -11.59% -10.04% -17.93% -31.75% -13.78%

NKE 62.64 -0.41 -0.65% 0.69% -1.93% -1.09% 28.28% 17.77% 18.21% 31.54%

DIS 32.53 0.13 0.40% -0.64% -4.10% -3.79% -4.88% -0.15% -9.66% -1.60%

EBAY 32.74 0.61 1.90% -2.15% -6.51% -10.84% 8.52% -2.68% -1.53% -1.71%

BC 20.51 -0.70 -3.30% -3.62% -7.32% 2.55% -35.75% -14.61% -37.55% -36.81%

JCP 43.19 -1.14 -2.57% -7.89% -18.95% -21.97% -44.67% -32.66% -42.96% -47.09%

Table 6: Senior consumer staples equities

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

JNJ 67.75 0.87 1.30% 3.97% 4.58% 5.48% 2.03% 9.93% 7.45% 1.83%

UNH 53.42 0.40 0.75% 3.39% 9.15% 12.58% 1.62% 9.33% -0.71% 12.18%

PFE 23.39 0.10 0.43% 2.45% -1.18% -2.83% -11.03% 0.00% -14.39% -12.59%

AMGN 55.49 0.70 1.28% 2.23% -2.00% -0.82% -18.87% 12.31% 2.14% -23.40%

NVS 52.84 0.05 0.09% 1.42% 0.44% 0.48% -9.12% 1.91% -8.01% -9.24%

AET 54.92 0.07 0.13% 0.55% 0.99% 3.92% 28.08% 12.40% 5.49% 32.59%

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

DNA 74.99 0.46 0.62% -0.13% 0.21% -0.01% -8.33% 2.42% -4.51% -7.10%

GSK 48.95 -0.33 -0.67% -1.55% -3.68% -3.57% -9.03% -1.71% -13.82% -5.81%

BMY 27.79 0.04 0.14% -1.77% -3.77% -5.22% 5.34% 1.53% -7.61% 12.69%

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

LEH 62.38 -0.59 -0.94% 7.42% 3.76% 9.02% -20.67% 13.94% -14.96% -17.85%

GS 225.25 -1.77 -0.78% 6.59% -1.89% 3.47% 12.22% 32.62% -0.82% 14.50%

MER 56.11 -1.19 -2.08% 5.33% -2.04% -15.32% -40.06% -21.12% -39.33% -38.39%

UBS 47.55 -0.20 -0.42% 4.07% -3.49% -12.78% -22.54% -8.79% -25.27% -22.21%

C 34.00 -0.58 -1.68% 2.72% -9.89% -19.74% -38.46% -28.50% -38.08% -32.89%

JPM 43.09 -0.44 -1.01% 1.84% -0.14% -4.29% -10.36% -5.23% -18.67% -9.95%

DB 123.48 0.45 0.37% 1.38% -2.43% -1.22% -8.76% -2.12% -21.38% -2.86%

CS 60.28 0.03 0.05% 1.23% -4.33% -8.39% -14.02% -7.69% -20.80% -7.83%

HBC 87.31 0.04 0.05% -0.71% -7.83% -7.02% -6.09% -0.31% -6.31% -7.50%

MS 52.90 -0.37 -0.69% -2.40% -10.19% -14.61% -35.19% -10.29% -37.08% -32.77%

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

QCOM 41.36 0.55 1.35% 8.56% 0.05% 2.60% 10.41% 12.00% -8.19% 9.42%

ORCL 20.80 0.38 1.86% 7.44% -5.58% 0.24% 18.79% 8.67% 9.53% 8.90%

CSCO 29.94 0.64 2.18% 4.76% -7.91% -4.95% 7.93% 2.18% 13.07% 10.28%

CTSH 31.40 0.31 1.00% 1.98% -23.23% -21.54% -19.24% -16.13% -19.18% -21.73%

INTC 25.51 -0.02 -0.08% 1.43% -4.81% -3.00% 25.36% 10.43% 15.01% 14.24%

ADSK 46.41 -1.05 -2.21% 0.54% -4.92% -1.17% 14.42% 8.92% 5.96% 25.43%

INFY 42.15 0.91 2.21% 0.33% -16.73% -13.49% -24.49% -7.97% -18.06% -25.12%

SAP 51.24 0.60 1.18% -0.60% -3.77% -4.33% -3.68% -0.70% 10.05% -1.02%

ADBE 42.19 1.37 3.36% -2.43% -11.88% -8.82% 5.69% 5.58% -0.24% 0.81%

SNDK 37.36 0.09 0.24% -4.08% -15.91% -12.53% -10.45% -27.62% -15.93% -19.98%

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 3.29 3.19 3.13 3.84

6 Month 3.42 3.40 3.49 3.99

2 Year 3.33 3.32 3.40 3.97

3 Year 3.24 3.22 3.36 3.99

5 Year 3.69 3.67 3.75 4.21

10 Year 4.16 4.14 4.22 4.55

30 Year 4.53 4.53 4.60 4.83

Municipal Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 3.30 3.31 3.32 3.39

2yr AAA 3.29 3.31 3.31 3.41

2yr A 3.42 3.43 3.42 3.45

5yr AAA 3.43 3.46 3.43 3.51

5yr AA 3.46 3.41 3.39 3.50

5yr A 3.53 3.56 3.53 3.76

10yr AAA 3.82 3.86 3.85 3.77

10yr AA 3.77 3.89 3.89 3.75

10yr A 4.05 4.09 4.08 3.90

20yr AAA 4.48 4.49 4.47 4.42

20yr AA 4.67 4.68 4.67 4.62

20yr A 5.13 5.13 5.07 4.43

Corporate Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 4.38 4.30 4.33 4.70

2yr A 4.59 4.56 4.49 4.85

5yr AAA 4.69 4.60 4.57 4.89

5yr AA 4.99 4.96 4.99 5.11

5yr A 4.83 4.86 4.90 5.14

10yr AAA 5.21 5.06 5.27 5.39

10yr AA 5.66 5.63 5.73 5.62

10yr A 5.68 5.74 5.79 5.68

20yr AAA 5.58 5.65 5.63 5.80

20yr AA 5.79 5.79 5.89 5.99

20yr A 6.04 6.10 6.05 6.14

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

TLT 92.41 0.13 0.14% 1.18% 1.50% 2.16% 3.75% 6.05% 5.17% 3.32%

SHY 81.99 0.00 0.00% 0.31% 0.76% 0.69% 2.44% 1.40% 2.27% 2.42%

IEF 86.10 0.00 0.00% 0.29% 1.19% 1.40% 4.14% 3.77% 4.19% 4.00%

AGG 100.99 -0.07 -0.07% 0.19% 0.44% 0.26% 1.08% 2.35% 1.08% 0.93%

TIP 105.12 0.21 0.20% -0.22% 1.09% 2.09% 5.94% 4.95% 5.15% 5.55%

FRE 40.72 -1.14 -2.72% -2.35% -15.75% -23.24% -40.02% -33.31% -39.52% -40.63%

CFC 12.07 -0.14 -1.15% -12.73% -15.89% -20.75% -71.34% -36.31% -70.07% -70.37%

FNM 40.69 -2.35 -5.46% -16.96% -22.66% -30.86% -32.02% -37.67% -35.65% -31.10%

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

MDG 37.60 1.73 4.82% -1.54% -8.14% -2.29% 43.02% 64.41% 50.16% 39.57%

AEM 50.90 1.41 2.85% -4.31% -11.32% -5.20% 30.78% 36.86% 48.14% 36.61%

AUY 13.08 0.14 1.08% -5.90% -12.68% -6.10% 6.08% 43.42% -0.23% 20.00%

BVN 56.00 -0.13 -0.23% -6.73% -3.05% 6.77% 102.83% 66.82% 72.47% 108.88%

KGC 17.44 0.41 2.41% -7.09% -14.47% 3.07% 52.71% 59.85% 34.15% 51.92%

GFI 17.74 0.22 1.26% -7.27% -0.11% -0.39% -3.22% 29.77% 3.68% 5.78%

GG 32.21 0.83 2.64% -7.34% -9.83% 0.97% 17.81% 49.40% 38.12% 22.47%

NEM 49.69 0.89 1.82% -8.05% -3.72% 8.83% 12.42% 25.99% 25.35% 12.32%

ABX 41.02 0.65 1.61% -9.73% -10.08% -1.39% 37.51% 37.28% 37.74% 44.13%

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

IFN 59.58 1.83 3.17% 8.68% -5.95% 15.24% 31.41% 37.44% 42.30% 20.19%

EWZ 84.18 2.83 3.48% 1.10% 1.30% 11.33% 80.26% 64.16% 45.64% 94.55%

EWJ 13.49 -0.06 -0.44% 0.67% -4.66% -2.88% -5.00% -1.53% -6.38% -0.30%

QQQQ 50.28 0.46 0.92% 0.56% -7.61% -4.12% 16.28% 10.63% 8.01% 13.45%

SPY 145.79 0.25 0.17% 0.45% -3.61% -2.59% 3.13% 2.60% -3.83% 3.85%

IEV 118.60 0.90 0.76% -0.25% -3.11% -0.42% 12.31% 11.40% 2.24% 15.39%

TRF 68.50 1.09 1.62% -0.91% -5.95% -1.23% -22.64% 19.36% 1.63% -8.67%

EWU 25.20 0.14 0.56% -1.22% -6.08% -2.63% 7.01% 9.80% -0.12% 8.48%

FXI 178.37 -4.13 -2.26% -1.99% -14.35% -10.50% 53.24% 48.96% 53.13% 92.00%

EWC 32.33 0.43 1.35% -5.58% -9.97% -3.67% 30.89% 17.48% 10.99% 29.22%

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

WMT 46.34 0.14 0.30% 8.02% 4.87% 3.02% -2.54% 6.53% -1.78% -3.28%

HPQ 50.75 1.85 3.78% 4.88% -3.15% -1.26% 21.94% 10.21% 12.25% 26.37%

IBM 104.79 1.19 1.15% 4.53% -8.55% -6.67% 7.73% -4.47% -1.02% 12.11%

MRK 58.38 0.46 0.79% 4.44% 4.18% 9.92% 32.62% 18.03% 10.80% 30.75%

JNJ 67.75 0.87 1.30% 3.97% 4.58% 5.48% 2.03% 9.93% 7.45% 1.83%

PG 73.19 1.36 1.89% 3.93% 5.23% 3.38% 13.40% 14.31% 15.59% 15.22%

AXP 58.67 0.43 0.74% 3.86% 0.43% 2.73% -2.80% 0.86% -8.30% -1.51%

HD 29.07 0.09 0.31% 3.64% -4.38% -5.49% -29.22% -10.33% -24.24% -23.12%

KO 62.62 0.67 1.08% 2.94% 3.49% 6.57% 28.90% 17.31% 18.73% 32.84%

C 34.00 -0.58 -1.68% 2.72% -9.89% -19.74% -38.46% -28.50% -38.08% -32.89%

MMM 81.57 1.92 2.41% 2.59% -3.91% -5.83% 4.23% -4.48% -5.16% 1.59%

PFE 23.39 0.10 0.43% 2.45% -1.18% -2.83% -11.03% 0.00% -14.39% -12.59%

VZ 43.69 0.65 1.51% 2.15% -1.55% -1.31% 15.52% 8.60% 2.22% 21.56%

JPM 43.09 -0.44 -1.01% 1.84% -0.14% -4.29% -10.36% -5.23% -18.67% -9.95%

INTC 25.51 -0.02 -0.08% 1.43% -4.81% -3.00% 25.36% 10.43% 15.01% 14.24%

UTX 74.30 0.35 0.47% 1.07% -1.78% -2.24% 18.29% 4.53% 8.50% 11.29%

MSFT 34.09 0.33 0.98% 1.07% -8.01% 12.99% 14.17% 22.58% 9.72% 15.68%

T 39.55 0.18 0.46% 0.89% -2.15% -4.40% 13.16% 4.30% -3.86% 22.07%

GE 38.65 0.34 0.89% 0.70% -4.17% -3.47% 1.79% 3.90% 4.94% 7.48%

MO 73.18 0.91 1.26% 0.65% 1.48% 3.80% 12.72% 10.28% 4.56% 16.68%

MCD 58.13 0.95 1.66% -0.31% -1.51% 3.03% 32.51% 20.93% 11.85% 39.50%

DIS 32.53 0.13 0.40% -0.64% -4.10% -3.79% -4.88% -0.15% -9.66% -1.60%

AIG 56.44 -0.51 -0.90% -1.09% -4.53% -10.80% -21.77% -11.74% -22.11% -22.00%

CAT 69.44 -0.29 -0.42% -1.38% -7.12% -5.61% 13.54% -4.88% -8.57% 13.15%

XOM 85.10 0.61 0.72% -2.01% -3.22% -7.64% 14.83% 5.49% 4.48% 17.10%

AA 36.31 -0.02 -0.06% -2.10% -5.84% -3.02% 23.80% 13.75% -6.99% 28.26%

DD 45.31 -0.06 -0.13% -3.16% -5.53% -3.33% -7.61% -5.47% -12.02% -4.87%

HON 55.88 -1.28 -2.24% -3.25% -5.85% -4.18% 23.90% 3.25% -3.89% 28.99%

BA 89.99 -1.35 -1.48% -4.48% -7.95% -4.16% 0.92% -2.97% -5.61% 1.44%

GM 29.27 -0.87 -2.89% -6.43% -20.87% -22.15% -0.61% -4.87% -7.78% -17.62%

Posted by Posted by Bill Cara on November 17, 2007 10:08:38 AM | Category: Saturday Report

Discourse

Go Bill!
Critical mass doesn't yet exist, but the masses are getting awakened and ruffled laying the groundwork for a movement.
Jake

Posted by: Jaketh at November 17, 2007 11:08 AM [link]

Bill,
Well said! Although it was obvious the sub-prime loans were high risk to say the least, they were allowed to proliferate and invade the "safe" ABCP market. It is truly mind boggling to see how it was allowed grow to such an extent. There is no doubt in my mind it is a criminal act. The question in my mind is: was it simply a financial ponzi scheme propagated by greed running through a variety of financial institutions? Or could it be part of a greater political strategy on the part of the U.S. administration?
A “ponzi” scheme perpetrated on major financial institutions? How is this possible in a developed economy such as the U.S.? I suppose, “There is a sucker born everyday” but on this magnitude? On Nov 15 you wrote about the Canadian lawyer who tried to write off his “investment” of $340,000 in a Nigerian scam. Okay, I can get my head around that one, but this sub-prime fiasco is humungous as in HB&B.
I found the article below very enlightening and troubling.
http://www.mlm-beobachter.de/mlm/ponzischemes_org.htm

Posted by: yaba at November 17, 2007 11:11 AM [link]

"Jason" sent this item: "In Ron Paul Coins, Federal Agents Don't Trust". Dirty politics by slimy people. What else is there to say.

http://washingtonpost.com/wp-srv/WPlate/fpImages/fp_front.jpg

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

Rep. Ron Paul, candidate and currency.

As if Ron Paul's supporters needed any more motivation to storm the battlements and wreak havoc on the Republican presidential primary, now comes this: the feds are trying to take away their money.

Federal agents on Wednesday raided the Evansville, Indiana headquarters of the National Organization for the Repeal of the Federal Reserve and Internal Revenue Codes (NORFED), an organization of "sound money" advocates that for the past decade has been selling what it calls Liberty Dollars, a private currency it says is backed by silver and gold stored in Idaho, with a total of more than $20 million in circulation, according to the group.

NORFED officials said yesterday that the raid occurred just as they were preparing to mail out the first batch of about 60,000 "Ron Paul Dollars," copper coins sold for $1 and decorated with the craggy visage of Paul, the libertarian Texas congressman, Iraq war opponent and sound-money advocate who has sparked a surprisingly vigorous insurgent campaign for the GOP nomination. The group says that it in recent months it already shipped out about 10,000 in silver Ron Paul dollars that sold for $20.

Bernard von NotHaus, NORFED's founder and executive director, said in an interview from his home in Miami Friday night that his employees in Evansville had received the copper dollars late last week and managed to mail out only about 3,500 of them so far. After a six-hour raid, he said, the agents left with the rest of the coins, which weighed about two tons total, as well as smaller amounts of silver Ron Paul dollars, gold Ron Paul dollars that sell for $1,000 and platinum Ron Paul dollars that sell for $2,000. There was a separate raid, NotHaus said, of Sunshine Mint in Coer D'Alene, Idaho, a company that prints the organization's coins, where von NotHaus said agents seized the huge pallets of silver and gold worth more than $1 million that the organization says back the paper certificates issued to its customers.

"They took everything, all of the computers, everything but the desks and chairs," said von NotHaus, who says he served 25 years as the mintmaster for the Royal Hawaiian Mint. "The federal government really is afraid."

The Indianapolis branch of the FBI declined to comment on the raid and referred calls to the U.S. Attorney's office for Western North Carolina in Charlotte. That office's spokeswoman, Suellen Pierce, also declined to comment. But bloggers at the libertarian Reason Foundation posted on-line a 35-page copy affidavit for a search warrant filed last week with the Western District in Asheville laying out the government's case against NORFED. Pierce said that the search warrant in the case had been accidentally made public by a court clerk and has since been sealed, under court rules.

In the affidavit, an FBI special agent states that he is investigating NORFED for federal violations including "uttering coins of gold, silver, or other metal," "making or possessing likeness of coins," mail fraud, wire fraud, money laundering and conspiracy. "The goal of NORFED is to undermine the United States government's financial systems by the issuance of a non-governmental competing currency for the purpose of repealing the Federal Reserve and Internal Revenue Code," he states.

The agent states that the investigation started two years ago. And the U.S. Mint a year ago issued a warning against using the Liberty Dollar, prompting a lawsuit by NORFED. But that has not kept Liberty Dollar fans from speculating on-line that the raid was prompted by Paul's strong campaign -- which recently raised more than $4 million in a single day -- or by the precipitous recent decline in the value of the dollar.

A Paul campaign spokeswoman, Kerri Price, said yesterday that while Paul also supports abolishing the Federal Reserve, the campaign "does not have any affiliation with Liberty Dollars at all." von NotHaus confirmed this, saying that he knows Paul because they "move in the same circles" but that he had expressly not talked with Paul about his plans for the special coins so as not to violate federal election rules.

But the coins have been another rallying point for Paul's supporters, who have asked Paul to pose for photographs with the coins on the campaign trail. Jim Forsythe, a Paul organizer in New Hampshire who ordered 150 of the copper Ron Paul dollars, said yesterday that the seizure of the coins would likely fuel more support for Paul, who scores close to double-digits in some New Hampshire polls. "People are pretty upset about this," he said. "The dollar is going down the tubes and this is something that can protect the value of their money and the Federal Reserve is threatened by that. It'll definitely fire people up."

Von NotHaus, meanwhile, is urging Liberty Dollar supporters to express their outrage by donating to Paul, saying on the group's Web site that "in light of this assault on our financial freedom, it is clear that we need Ron Paul to lead this country more than ever." He said that all of his bank accounts have been frozen and that he expects that a federal indictment will soon be in the offing, saying that "once the federal government starts an investigation like this and takes it to a grand jury, they can indict a ham sandwich." Should he be charged, he said, "I'll turn it into my golden opportunity to validate the Liberty Dollar as a legal lawful currency and save the country from a monetary collapse."

What he's most concerned about for now, though, is the thought of all his customers waiting for their Ron Paul dollars. "People aren't going to get their orders, and they aren't going to get them for a while," he said.

That is good news, of course, for those already holding the coins. On eBay, the silver Ron Paul dollars that were purchased for $20 were selling for more than $170 last night.

Posted by: Bill Cara at November 17, 2007 11:13 AM [link]

And so it begins, the US Federal Reserve declares War to squash private ownership and trade of physical gold, silver, and platinum:

http://tinyurl.com/3atof8

The fact that the warrants were issued by a Magistrate in Asheville, NC only begins the appearance of legal abuses, "noted that the FBI specifically was ordered to confiscate "American Liberty Dollar and/or Hawaii Dala currency and/or precious metals of gold, silver, copper, platinum or other substance and United States currency" because it is "involved in, or traceable to, money laundering … or mail fraud."

As broad as that warrant is, any one of us could fear our homes and/or businesses being raided because we hold savings in non-US Treasury backed precious metals and/or coinage. Liberty Dollar has its own response posted and nobody can argue with the degree of indignation shown:

http://tinyurl.com/2dt6kj

Don't know how many of you have taken Bill's advice about investing and holding the physical metals but this incident should be the alarm which causes all to sit back and reflect on the entire situation unfolding before us. I've been debating this election to become an ex-pat for more political reasons than economic but this action has me re-considering not only my reasoning but my timetable!

Posted by: redclaydawg at November 17, 2007 11:24 AM [link]

Just what we need! "an organization of "sound money" advocates that for the past decade has been selling what it calls Liberty Dollars, a private currency it says is backed by silver and gold stored in Idaho, with a total of more than $20 million in circulation, according to the group." Ah, yes, Idaho....which, along with Utah, might well be dubbed "Wing-nut Central". Shades of Ruby Ridge and Waco!

Break out the tinfoil hats! As if the idea of a "competitive currency" weren't enough, they have an "Idaho connection"! Can't help but wonder if they are connected to Sen. Larry Craig?

The U.S. has a full plate of problems...probably more than it can ever solve; and, while the utter simplicity of Ron Paul's "solutions" has the appeal of a return to simpler times, when they are applied to real-world, twenty-first century conundrums they are a likely "final nail in the coffin".

A classic case of "meaning well, but.....".

Posted by: ronbon at November 17, 2007 11:35 AM [link]

ronbon,

I need to know more. I didn't know that Ron Paul was involved in a competitive currency.

His arguments, however, are sound. As I see it, anyway.

Posted by: Bill Cara at November 17, 2007 12:17 PM [link]

moneygenie- thank you for the link...

my take- "reverse scale trading" is one attempt to take the mystery out of trading, and it's certainly an effective strategy; even jesse livermore had much to say about cutting losing positions/adding to winning positions...

however, it's only one strategy, and why not learn to use all the weapons at your disposal...also skeptcial of any [armchair?...or maybe he's actually been practicing what he preaches for many years and now lives and skis in the mountains with his kids ;)] strategy that tries to distill the difficult *art* of trading into one approach...

re your own positions in the ultra-shorts or UNG, note that Mr. Glett prefaces his chapter on reverse scale trading with this caveat: "Scale trading can be a viable strategy when applied to commodity futures, mostly because commodities have inherent value meaning that they cannot decline to zero value." If you substitute "ETFs" (which were not yet available when he wrote the treatise in 1995) for "comodity futures or commodities," i would say averaging down on QID or UNG, for example remains a viable approach.

also keep in mind that msot of us (and craig in particular), have rules in place that automatically limit the kinds of losses Glett brings up with scale trading...and it would be difficult not to engage in scale trading if using intra-day time horizons...

finally, want to emphasize that day-trading is NOT my preferred trading approach...as mentioned above, there is an entire arsenal of strategies, and i use whatever works in the prevailing environment...no doubt the day will come when it makes sense to hold the ultra-shorts all the way down...and later to ride the tide back in on the long side...

speaking of the QID- note that daily RSI-7s for the Naz big 10 are now mostly back in the 40s again: http://tinyurl.com/3yvzkg ->
still leaning towards a sharp sell-off sometime soon, and those numbers should help it along...JMHO...

Posted by: 2nd_ave at November 17, 2007 12:35 PM [link]

How is this any different than an Idaho coin dealer selling maples? A competitive currency within Idaho and a real one few miles North of Idaho.

If we think this through then what they are doing is harmless to the people but isn't good publicity for the printer and helicopter co's and their Goldman Sachs lobbyists.

Think about it Ronbon.

If we don't limit the USD by linking it to something truly rare, then we cut these people loose to take our wealth at will.

Have you calculated how much Ben Bernanke has cost you in real wealth (or your neighbors) in the last two cuts? Just multiply your net worth by the drop in pennies in the dollar. A penny represents 1 cent...one percent. The first cut of 50 basis pts was three percent of your net worth and purchasing power.

I'll bet you freak over tax hikes, yet you accept a 3% tax announced by Ben Bernanke, an unelected government official without a fight?

I think this should prompt you to re-examine your position. The world is full of competing currencies. This one is no different than any other, except it reveals a giant theft of American citizens wealth by the U.S. Government.

THAT is the problem.

What's next? Are they going to raid every bank andcoin shop to eliminate all competing currencies? Are we now the American Socialist Republic?

Posted by: Craig at November 17, 2007 12:36 PM [link]

If ronbon would take the trouble to check the validity of his claims he would find that both the founder of the Liberty Dollar, Bernard von NotHaus, and the Ron Paul campaign assert that there is no affiliation between the two.

Ron Paul is NOT INVOLVED in a competing currency--just competing ideas!

Posted by: johojo at November 17, 2007 12:50 PM [link]

Why HB&B deserves "the last laugh"

Funny, and likely TRUE!

http://www.youtube.com/watch?v=SJ_qK4g6ntM

Posted by: Jock at November 17, 2007 1:09 PM [link]

"The U.S. has a full plate of problems...probably more than it can ever solve."

i would give the benefit of the doubt to the american people...most are down-to-earth people who overcome even more difficult problems in their lives on a daily basis, and would readily embrace a president and congress able to sit down and work out solutions...change is always gradual (eg, it's time and not technology that heals all wounds)...when my dad was teaching at michigan, became acquainted with professor wilbur cohen, who helped draft the social security act- a truly compassionate, intelligent and selfless gentleman...we need to be electing "real people" like he was to be representing us...i understand that smoke and mirrors is part of politics, but that is only because we "accept" the scenario...if "the market is us," that's many times more the truth for our government...

Posted by: 2nd_ave at November 17, 2007 1:21 PM [link]

I just visited the Liberty Dollar site. My initial perception is that it is just a tacky mail order marketing company with a profit motive. Ron Paul receives no royalties from the company so I wonder why he didn't sue them for printing his likeness on their coins?

Posted by: Fred at November 17, 2007 1:31 PM [link]

Good post above 2nd ave. I see your thought process now.

Posted by: geckojb at November 17, 2007 1:58 PM [link]

jock- thanks for the link...best laugh i've had in awhile...

Posted by: 2nd_ave at November 17, 2007 2:05 PM [link]

Bill /Posters

Alexander Elder and other well known traders/writers books are available for a 90 day free trial.Found this site last night and am now reading "Entries and Exits ",for free.There is something here for everybody.My second best find on the net!!!!

http://tinyurl.com/2vr8lw

You may need a file handler(stuff)(I did )
http://tinyurl.com/nk75

For people who have something share /pay(there is no shortage of talent on this blog )check out this rapidshare site.They are hosting "Entries and Exits".
http://tinyurl.com/bcxev

Posted by: Trading My Chips at November 17, 2007 2:12 PM [link]

Bill,

I know Ron Paul thinks we should go back to a "metals standard" for currency. Instead of gold, just tie the currency to a basket of precious metals.
He mentions this in a video about the history of money on google video.
http://tinyurl.com/2mcgne

Posted by: chas at November 17, 2007 2:18 PM [link]

Fred - Liberty Dollar Site

Hard to imagine Ron Paul suing a business which is inline with his basic philosophy. That might alienate a lot of his base ...

Posted by: Jock at November 17, 2007 2:53 PM [link]

ronsen.blogspot.com/2007/11/saturday-brunch-dok-from-doc.html

http://www.youtube.com/watch?v=dib2-HBsF08 (even if you don't read me, check out 'Network')

Yes, I am told that I am too negative, too.

Amen to Bill.

Posted by: Ron at November 17, 2007 2:58 PM [link]

I believe Bill mentioned this also in the past - referencing the currency to a basket of commodities.

As far as Ron Paul goes I do not agree with everything he says and do not think he will be elected but I want him to be heard and thus donating to his campaign.

I have always been sympathetic to libertarians but do not fully agree with laissez-faire economy view that most of them share. I strongly believe that some form of regulation of economic entities must exist for the benefit of both fairness and progress.

For those familiar with game theory there is a state of Nash equilibrium that a set of players in a game reach, pursuing their own optimal winning strategy and neither player can further improve it's gains by changing his strategy alone. It has been proven that this equilibrium may be far away from a global optimum achieved if all entities alter their strategy cooperatively. This makes me believe that some form of top-level coordination is needed be it among economical entities in one country or world countries.

Partly because of that I am also supporting Obama campaign. Wish there was a possibility for Ron and Obama to be on the same ticket for 08 election.

Posted by: occam_razor at November 17, 2007 2:59 PM [link]

Looks like GS is taking control early of the BoC.

From the Globe And Mail http://tinyurl.com/create.php

"The Bank of Canada will adjust its monetary policy in the coming months to reflect the growing risk of a global economic slowdown, central bank Governor David Dodge said Saturday.
His comments underscored the growing belief among economists that the Bank of Canada will move to reduce interest rates in the coming months as it copes with a sharply higher loonie and slowing growth in the United States."

"The bank governor and Finance Minister Jim Flaherty said they took the opportunity at the meeting to urge China to increase the value of its currency and expand domestic consumption in order to help global market adjust to the declining U.S. dollar and weaker growth in the United States."

I was not aware Canada had an imported inflation problem for him to be interfering with China. Who is he really trying to help?

"“And it's quite clear that global financial turbulence that we were experiencing then is now going to be more prolonged and the volatility is likely to be higher for longer than we anticipated when we met at the IMF last month.”"

Wow, they just realized this!

I thought we would be doomed when the new GS guy takes control next year, it seems this control will start early.

Posted by: SiO2 at November 17, 2007 3:14 PM [link]

Great lecture, Bill. I always look forward to reading your voice of sanity. I can't believe all the troubles at NORFED. I can see why the government is intimidated though, seeing as their currency is fake and they won't even report M3 anymore or tell us the truth about inflation. Their house of cards is falling apart and they'll get vicious defending it. What next? Will it be illegal to barter? That article makes me want to devote more of my money to buying bullion and storing it in my personal safe or in the ground on my property. And I'm definitely voting for Ron Paul. And all of my friends are too!! Have a great weekend.

Rob.

Posted by: Finger Lakes at November 17, 2007 3:21 PM [link]

Jock,
I only have this first impression and a gut feel. I'm suggesting that Liberty Dollar isn't inline with any philosophy other than to make money selling coins. They would put Alfred E. Neumann on a coin if it were saleable. I might be completely off-base.

Posted by: Fred at November 17, 2007 3:30 PM [link]

Another question I have is this:

Does anyone think that SIV's or CDO's will be viable investment vehicles once the foreclosure and default rates return to normal? Or will the people who bought them be so burned and upset that they lose trust in any investment that isn't 100% transparent.

This question has big implications for the financial system. HB&B is counting on us someday wanting these things as investments again. That's why they sit there and say: sure, I'm holding twice our equity in these CDO's but they're worth 75 cents on the dollar and will soon go back to 97 cents on the dollar.

That's why they think this Superfund will save them because that fund will hold these level three assets for a year or more until we buy them again.

That's why it's such an important question for us to figure out. If these are going to be viable investments again then these banks are fine and will be trading much higher come 2009 or 2010, so calls in that range look good.

On the other hand, if these investments will never be good again then many of these banks will go bankrupt or lose most of their value and their stocks will crater like we can't even imagine.

Being on the right side of that trade could be phenomenal and so please answer my question.

Thanks, Rob.

Posted by: Finger Lakes at November 17, 2007 3:31 PM [link]

occam-razor,

Paul & Obama on the same ticket? As unlikely as that may seem it actually is conceivable if the Unity08 "alternative choice" movement has its way. The avowed aim of Unity08 is for a grass-roots effort to forge a ticket from announced candidates of both major parties that will address real problems instead of the usual campaign-shadow issues. You can find out more and even help to draft both Paul and Obama at http://www.unity08.org/

Posted by: johojo at November 17, 2007 3:33 PM [link]

Fred -

I think the "Alfred E. Newmann" Gold coin is a GREAT idea! Would it be produced by the "MAD mint"? Would it have a little less than an ounce, in honor of that "air-gap" between Alfred's teeth?

Let's just not call it currency, so as not to provoke the humorless Feds!

How about putting Alfred on one side, and Alan Greenspan on the other? Birds of a feather? Certainly preferable to that pompous Eagle!

Posted by: Jock at November 17, 2007 3:55 PM [link]

I thought making a competive currency was legal as long as you dont try to counterfeit US money or confuse people that it is US currency?

It's just barter, pure and simple.

There are stores in the southwest US taking mexican pesos. That's not much different.

And how different are Liberty notes than, say, a check or other paper passed as money?

One of their big mistakes was calling it a 'dollar' and putting 'trust in god' on the coins. Even though the word 'dollar' was in use before the US adopted it, it has come to have pretty specific meaning. It's been pointed out time and time again, that was asking for trouble.

And their IS confusion. Recall that recently that some store owner called the cops about someone trying to use 'counterfeit' money. Some idiot tried to convince a store owner to take the money without properly doing whatever it is they do to get them into the Liberty Dollar "network." The shop owner was rightfully confused and rightfully notified the authorities.

Yes, what they were doing was probably legal on thin technical grounds. But when it comes to challenging the US on something as sensitive as money, that's not enough.

I always say "Don't go poking the bear with a stick and then act surprised when he tears your arm off."

Posted by: MikeNYC at November 17, 2007 4:02 PM [link]

telenetworxx:

You wrote on Friday, "my tendency is to jump in and learn on the fly...expensive lessons..."

I tried this approach in the late 90's and am still playing catch-up.

My advice is for you to step back and really find out who and what you are playing with or they will eat you up.

If those who jumped into the water and broke their neck had only taken the time to test the depth of the water before that first jump.

The market will still be here a few months from now for you to jump in...by then you may have at least some idea of the real depth of the water.

Posted by: golfer at November 17, 2007 4:05 PM [link]

As of Nov. 30th, for every 10,000 shares of Toronto-based Nirek that each shareholder owns, they will be offered a warrant. That warrant allows the investor to purchase a one-ounce gold bullion bar at an exercise price of $500.

http://www.nirekresources.com/Gold-bullion-bar.html

Nirek trades on the Frankfurt Exchange.

Posted by: SiO2 at November 17, 2007 5:11 PM [link]

Hi,

Many times in recent months I have decided to stay silent or to control my realistic views in order to avoid receiving unpleasent comments from "permabulls".

It reminds me of that story in which at some stage a child will scream "the king is naked!".

Like all here, I devote most of my living time to studying and trading in the market, and I strongly apreciate Bill's capability of promoting and maintaining a venue for real valuable exchange.

Cheers,

Posted by: maromatics at November 17, 2007 5:18 PM [link]

To put to rest the notion that the world is awash in credit market problems, which is the constant wailing of HB&B, here is a successful mortgage company that I was pointed to several years back. Had I listened, it would have been a multi-bagger.

http://homecapital.com

http://tinyurl.com/3bsezf

"Joey" would like to tell you about it, possibly.

Posted by: Bill Cara at November 17, 2007 5:19 PM [link]

>RON PAUL ON KUDLOW, CNBC RE: Competitive Currency:

http://www.youtube.com/watch?v=Mx2eWcBOE3o

>KUDLOW and LUSKIN analysis of Ron afterwards:

http://www.youtube.com/watch?v=Cilwld5fj48

Kudlow's foreign policy views are basically to continue this 'religious' war IMO

Posted by: stockershock at November 17, 2007 5:21 PM [link]

You remember Luskin, don't you? He's the guy who shouted to everybody from his perch on the Kudlow show a couple years ago that the gold price was going to collapse and the $USD would reign triumphant. I gagged.

Luskin's performance was so bad, I immediately called the guy a clown and put up a scorecard of the gold price for the next month or two on the right nav bar of this website, saying I would publicly apologize to him if he was correct, but that I would continue to call him a clown if the gold price rocketed instead of plunging.

Rocket, it did. Luskin is a clown. Why waste 60 seconds of your valuable time on those people?

Posted by: Bill Cara at November 17, 2007 5:31 PM [link]

Caraista's who are debating how to own gold may want to look at the Central Fund of Canada which holds 50% gold and 50% silver in a vault in Canada. The fund was incorporated in 1961 with headquarters in Calgary. It offers storage outside the US plus a convenient way to own bulky silver

Here's the latest fund data:

CENTRAL FUND OF CANADA LIMITED

Calgary, Alberta, Canada

04:48 PM
16-Nov-07

US$
CDN$

Net asset value per Class A share
$9.93
$9.66

Closing market price
16-Nov-07
$10.51
AMEX
$10.22
TSX

Premium/-Discount
5.9%
5.8%

Number of shares traded on exchanges
348,375
126,550

Trading Symbols on AMEX and TSX
CEF
CEF.A

Total Market Capitalization of all

125,134,532
Class A Shares Outstanding
U.S.$
1,315,163,931
CDN$
1,278,874,917

PORTFOLIO UPDATE

Ounces
US$
CDN$
%

Gold Bullion
805,169
$635,882,499
$618,650,083
51.2

Silver Bullion
40,252,756
581,652,326
565,889,548
46.8

Cash and Other Net Assets
25,139,156
24,457,885
2.0

Total Net Assets
$1,242,673,981
$1,208,997,516
100.0

VALUATION BASIS

London Gold Second Fixing
US$
789.75

London Silver Fixing

US$
14.4500

US$/CDN$ noon exchange rate
CDN$ 1.00 =
US$
1.0279

Posted by: astral25 at November 17, 2007 6:02 PM [link]

Golfer, Thanks for the advice. I've asked several questions here about reputable dealers and the differences in various coins to hopefully avoid making expensive mistakes. Almost immediately after
I made my first purchase the price of gold took off so rather than chase, I saved my money waiting for the pullback Bill predicted. I'm not so naive as to think I'll avoid all mistakes. I just hope to minimize them.

Posted by: telenetworxx at November 17, 2007 6:21 PM [link]

Fred/Jock.

Why would Ron Paul do anything about the coins,,,he's getting free publicity,,,lol.

Posted by: dabonenose at November 17, 2007 6:32 PM [link]

Posted on Sinclair, re Citibank capping amounts of electronic funds transfers out of bank accounts:

Limits on IIT Transfers
Type of Limit Standard Transfers Next Day Transfers

Incoming
Standard TransferS Next Day Transfers
Daily $100,000 $1,000
Monthly* $100,000 $2,500

Outgoing
Standard Transfers Next Day Transfers
Daily $2,000 $1,000
Monthly* $10,000 $2,500

"Next Day. Funds are credited to your account on the next Business Day, if I request the transfer by 3:00 p.m. ET on a Business Day. This type of request is subject to the following conditions:
(1) in order to request an INCOMING Next Day Transfer: (a) the available balance in my Eligible Citibank Account must be at least $500; and (b) I have successfully completed an incoming standard transfer from the same Verified Account in an amount of at least $500 at least 20 calendar days prior to requesting the Next Day Transfer.
(2) in order to request an OUTGOING Next Day Transfer, the available balance in my Eligible Citibank Account must exceed the amount of the requested transfer by at least $500.

(Sinclair:)
Without relying on the above account agreement, or the above institution, my read on this is to put in place a tool to prevent an electronic run on an institution such as the one which recently occurred in Great Britain. If you have $1,000,000 in such an account and such an agreement governs it, it would take you 100 months to withdraw the funds. "

http://www.jsmineset.com

https://web.da-us.citibank.com/tandcFiles/printable_cashedge.htm

Another item:
I posted a few days ago about Citibank being told by the IRS (as per a caller on a ROB tax show) that they could not hold IRA's under $1million any longer - I wondered aloud if anyone else had heard of that, and if that sounded like more news to be wary of?

Best wishes
AA

Posted by: aa at November 17, 2007 6:33 PM [link]

maromatics- if at any time you notice that "the king has no clothes," would appreciate you pointing that out...the nice thing about a blog is not only being able to read spontaneous comments, mistakes and all, but receiving them in real-time...

think your comments have been well-received- in fact, i added one of them to a list of "tells" i (consciously or subconsciously) incorporate and update as i scan each day's data...if i now see prices of gold/oil/USD/NDX lining up on the downside, gives me another edge in deciding to press the short side...;)

Posted by: 2nd_ave at November 17, 2007 6:40 PM [link]

Re: Luskin

Don't know much about him Bill...he does like Gold this year, maybe he is a bad timer too ;-)

Posted by: stockershock at November 17, 2007 6:44 PM [link]

FDIC gearing up:

http://tinyurl.com/2l3rw4

Office of Thrift Supervision gearing up:

http://tinyurl.com/2r88vd

Posted by: JIM at November 17, 2007 6:54 PM [link]

"Kudlow's foreign policy views are basically to continue this 'religious' war IMO"

Posted by: stockershock at November 17, 2007 5:21 PM

CAREFUL me love, when you think out loud like that. THEY will brand you Unpatriotic before the end of your thought.

Posted by: moneygenie at November 17, 2007 6:58 PM [link]

"In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China's economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China's size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China's economy will turn out to be 40 per cent smaller than previously stated."

http://tinyurl.com/2ptfq4

Posted by: JIM at November 17, 2007 7:15 PM [link]

astal25- "Caraistas-" has a nice ring to it...;)

Posted by: 2nd_ave at November 17, 2007 7:17 PM [link]

2nd ave,

Thank you for your comment, I feel honoured.

Hopefuly I will be able to create more value for all as time goes by: that would make me feel very well. I only wish I had access to communities like this when I started trading, and I feel I have the duty to contribute to others not making the same costly mistakes I have done when I started.

In this light, 2nd, please accept my congratulations for your courage in disclosing your short trades.

Actualy, I admit that at some stage I have held QID myself, but decided to drop it out of liquidity and counterpart risk concerns after reading the fine print on the product.

Thanks Kaimu for having alerted me on that.

At this point, as previously mentioned here, my has a bearish bias not only regarding price action, but especialy regarding counterpart risk.

Consequently, I am 95% in cash parked in a time deposit in a Bank I know personally very well which has books that make me feel secure, and that I know for sure has no investments in these challenged vehicles.

The remaining 5%, I am trading on a short term basis via options and warrants / turbo Warrants, mostly on the short side.

Via the leveraged nature of options / warrants and Turbo Warrants, I am thereby getting similar exposure to the market as I would have with my entire portfolio, with the advantage of not having to pay interest on a margin account, and especialy with the key difference of keeping a very low Value at Risk (VaR).

As for trading itself, I have mostly bought deep in the money puts with near maturities over major indices and have cashed in profits fast.

This is not perfect, but is a way to milk the cow for the time being...

Cheers from a cold European winter afternoon.

Posted by: maromatics at November 17, 2007 7:18 PM [link]

There are a lot of smart guys here. During the last 2 years i have learned more about stock market investing and inter-relationhips than i learned the 25 years prior. The dance and trading.

I have a question....

This week i am studying double inverse index funds....the ultra shorts.

How can they move 2x the index they represent? I have read "use derivatives and swaps to provide the leverage needed to achieve the necessary returns." .....but who figures this out and what does it really mean?

Also does anyone know about the distributions they have to make? When do they do it, how much it is and what are the qualifications to get it?

Posted by: gademsky at November 17, 2007 7:22 PM [link]

maromatics- thanks for bringing up the issue of VaR...i've thought about that quite a bit recently...every trading vehicle has its pluses and minuses->as the bear picture comes into focus, thinking about switching into options also...6 month expirations sounds about right...gaming the volatility for now, but keying in on a long overdue major correction->no crystal ball as usual, but if i were to bet on direction->think Bullhunter and basketguy will be wearing big smiles and maybe driving new cars within that time frame...

cheers from a sunny and warm sf bay area afternoon ;)

Posted by: 2nd_ave at November 17, 2007 7:36 PM [link]

Gademsky,

I think 2nd ave and Kaimu can help you better regarding the ultrashort ETFs, but for the time being I will try to give you a hand here.

Basicaly what the ultrashorts do is invest your money in a variety of derivatives products which, as a whole, aim to obtain a result which is equal to twice the inverse of the performance of the underlying assets.

Now, to do this, they do not need all the cash you happily pour into their hands.

So, what they do with the rest is invest in money market funds and other forms of so called "liquidity". The proceeds of these investments is then used to pay for the funds running costs and commissions, and the reamining ammount is distributed as a regular dividend.

Yes, it is true, these ETFs actualy will pay you a regular dividend.

This happens because they do not need all the cash that you are giving them ot obtain the outcome which you are buying...

Needless to say that under these current market circunstances, there is a real risk that part of those investments may suddenly become iliquid.

This means that the major risk of products such as QID, SDS, etc is the counterparty risk, which investors have absolutely no way of evaluatiing and / avoiding and protect against.

Notice that I am not talking about the volume of assets held by the fund: that is irrelevant to this point. What I am saying is that there is a real conunterparty risk not only related to the fund managing company, but more importantly related to the issuers of the derivatives products and managers money market funds where your money ends up going.

mind you that money market funds in general have been reported to hold toxic waste...

That is why the Ultrashorts are high risk trades on a market like this.

Cheers,

Posted by: maromatics at November 17, 2007 7:39 PM [link]

trading my chips
how do you access the trading books on thesite you posted? thanks

Posted by: mbernold at November 17, 2007 7:44 PM [link]

gademsky- kaimu's 10/26/07 post re QID:

ALOHA !!

QID ... 13% of assets are in the Nasdaq 100 and 87% assets are in cash and derivatives(swaps). I have to ask how much of their cash are in other derivatives linked to CDOs? Sounds very risky to me. I can see how they are paying a high dividend since its all tied to derivatives, but is that prudent in an era of instant meltdowns? There is no FDIC on ETFs, so the US Taxpayer will not step in. No taxpayer bailouts for GLD or SLV either should the underlying custodial banks become derivative insolvent.

This looks like another CAR ETF in disquise ...

Posted by: kaimu [TypeKey Profile Page] at October 26, 2007 12:55 PM

who are the counterparties? kaimu's 10/26/07 post:

ALOHA !!
Counterparty ... every contract requires one even a derivative! Ever wonder who is in charge of counterparty risk on all these trillion dollar derivatives floating around the globe?
COUNTERPARTY RISK MANAGEMENT GROUP(CRMG)
Members are almost evey HB&B. The leaders are:
GOLMAN SACHS
JP MORGAN
CITIGROUP
BEAR STERNS
LEHMAN
DEUTSCHE BANK
MERRILL LYNCH
Here are the WORKING GROUPS that are no doubt interfacing with all the major central banks to avert the latest disasters.
WORKING GROUPS
- RISK MANAGEMENT AND RISK RELATED DISCLOSURE AND PRACTICES ... headed by Goldman Sachs, BArclays, JP Morgan and Bear Sterns
- FINANCIAL INFRASTRUCTURE DOCUMENTATION POLICIES ... headed by Goldman Sachs, Lehman, Merrill Lynch, Deutsche Bank, Bond Market Assoc. and the ISDA(International Swap & Derivatives Assoc)
- COMPLEX FINANCIAL PRODUCTS RISK MANAGEMENT, RISK DISTRIBUTION & TRANSPARENCY ... headed by mainly JP Morgan and one slot out of ten is filled by Citigroup
- SALES OF COMPLEX FINANCIAL PRODUCTS TO RETAIL INVESTORS ... headed by Goldman Sachs, JP Morgan, Gitigroup & Merrill Lynch
- MAJOR LEGISLATIVE AND REGULATORY DEVELOPMENTS ... headed by HSBC & Merrill Lynch
- RISK MANAGEMENT CHALLENGES ... headed by General Motors Asset Management & TIAA-CREF
Link to CRMG: http://tinyurl.com/2ym9rh
I would be worried about General Motors managing anybody's risk ... although GM certainly has the experience with "challenges"!

Now if this isn't a case of the fox guarding the hen house I don't know what is!!! On the other hand it is also a short list for trillion dollar class action lawsuits and lynch mobs ... These banks possess the most exposure to failed derivatives going forward ...
Posted by: kaimu at September 10, 2007 6:36 PM

from a link to Roger Nussbaum provided by Bull Hunter:

Roger:
Can you please tell us how inverse ETFs work. I understand short selling of ETFs.
But how does inverse ETFs work?
IF I buy $ 1000 worth of SPY ETF, I can understand that the ETF provider will buy $ 1000 worth of underlying stocks.

When I buy 1000$ worth of an inverse ETF, say inverse ETF of spy, what does the ETF provider buy with the money?

Could you also please explain how double long and double Short ETFs work and how they are implemented by the ETF issuer.

Thanks for your time.

Yours,
Stranger.

Posted by Anonymous | 2:49 PM

Inverse ETFs; they are mostly invested in T-bills which is where the interest comes from. The funds use derivatives to create the effect of being short or double short. Given the leverage the funds need only a small fraction of the assets to create the short exposure.

Posted by Roger Nusbaum | 7:30 AM

Roger:
Thanks for your response on how inverse ETFs work.
Regards,
yours,
stranger

Posted by Anonymous | 4:02 PM

Hi Roger - This is an interesting thread as I've wondered about this myself. If ProShares (the company that's launched QID and DXD) is using options to manufacture the double-short effect, then wouldn't those options be experiencing enormous influxes of money and attention? Other ETFs just need to buy the underlying stocks they're comprised of, but the machinations necessary to invert these ETFs seems like they could actually "break".

Any thoughts? If the market crashed extremely fast or the market spiked, would the options markets actually be able to carry the burden?

Posted by Anonymous | 6:30 AM

Specifically they use futures contracts and the liquidity is very adequate from all I have ever read.

Posted by Roger Nusbaum | 8:08 AM

hope this helps...

Posted by: 2nd_ave at November 17, 2007 8:02 PM [link]

"but who figures this out and what does it really mean?"

gademsky- i have no idea ;) blind faith isn't just a band...

Posted by: 2nd_ave at November 17, 2007 8:08 PM [link]

gademsky,

We are are learning. I have my "Lessons". You have yours. Thank you.

/Bill

Posted by: Bill Cara at November 17, 2007 8:39 PM [link]

There are two metrics that the biggest financial services firms, aka HB&B, judge themselves by: AUA and AUM.

The AUA means Assets Under Administration, which are our assets we place in their custody.

The AUM means Assets Under Management, which are our assets we give them discretionary authority over.

In all cases, these are our assets, and they are licensed financial sales people.

My question is how do their assets compare to ours? Where are the AUO (Assets Under Ownership)? How much skin in the game does HB&B have, or is all mouth?

Posted by: Bill Cara at November 17, 2007 8:52 PM [link]

Reference NORFED: Usually a mail & wire fraud case connotes failure to render or misrepresentations with intent to defraud. Or in the vernacular, “a rip-off”. Notice money laundering is included among the statutes indicative of proceeds from a crime. No proof of that revealed yet, just an observation. (For those outside the U.S., the Secret Service has primary investigative jurisdiction in these types of cases)

It appears the promoter/operator has pushed the envelope with the government on some currency regulations and statutes. This is usually done when you want a confrontation with the government and have some political agenda. So it is not unexpected for him to adopt something like a Ron Paul theme. It attracts attention and provides a little cover and perhaps provides some support to the fringe. Ron Paul may have ideas about the Fed and our currency, but placing his caricature on a coin which appears may be promoted for a currency transaction substitute does not mean he endorses such conduct. Highly unlikely. It’s not him and that‘s what the Congressman’s campaign spokesperson stated. If the promoter/operator stuck to selling gold & silver, i.e.. commemorative coins, he wouldn’t be in this situation.

Not stating it’s the same, but the situation reminds me of a couple of past operations:

Northern Idaho & Michigan--A group a few years ago that printed checks on their own bank which used their own” currency.” They were anti-government and had started in their own minds their own nation. Too bad the victims didn’t make out so well as many suffered sizable losses. Operators promoted the anti-government rhetoric while they pulled the scam.

Lido Island, Newport Beach, Orange County, CA--A gold promoter in the mid to late 80’s who sold a few million gold bars that he retained for investors in his “vault.” The alleged “vault” was in So. Cal, not Idaho or Utah. When the feds served the search warrant, there was ONE gold bar in the “vault“. I think the coke spoon around his neck was the clue.
_________________________________________________________________________

Yes, Bill, I remember Luskin as well as your comments. Surprised he’s still around. Actually I’ve come to the conclusion not to waste my time reviewing anything with his name on it whether it’s you tube, an advisory letter or news article. Just not enough hours in the day and why waste it?
___________________________________________________________________________________

You don’t have to like someone to vote for them.

What we need is someone with good judgment, common sense, integrity and competency. Unfortunately, many Americans have an attention span of 30 seconds and sound bites rule the day in lieu of substance. Look at the issues and not how someone’s hair is parted, whether they’re bald, how shrill their voice is to you, what’s their religion, sex or skin color. The next president has some enormous challenges and if there was ever a time for a leader, this is it. Hopefully we’ll find one.
______________________________________________________________________________________

Some very light rain/sleet tonight, around 33 degrees, but the outdoor hot tub visit felt great after a few glasses of an Umbrian merlot.

Posted by: Seamus at November 17, 2007 10:05 PM [link]

The one thing I never got about Liberty Dollars:

Why would you spend them, in a casual sense?

If I had in one pocket a hunk of silver and in the other a wad of steadily eroding dollars, which would I give to the counterman to pay for my omelet?

I read a 'testimonial' on the Liberty Dollar site about a guy who felt great that he had paid for his breakfast with Liberty Dollars. I would just feel like I had ripped myself off.

Posted by: MikeNYC at November 17, 2007 11:31 PM [link]

Good thing they don't have Canadian Tire bucks in the states.... wouldn't want to lose that one.

The mint's been targeting the Liberty dollar since last year.

http://tinyurl.com/ehbk9

Be sure not to burn your dollars if they become worthless.. that's illegal too.

http://tinyurl.com/3b6jbj

What about Second Life Linden Dollars? Are they legal?

http://tinyurl.com/33jd2u

Daniel Carr is an artist who regularly submits designs to the mint. His web site sells 'unedited' coins from various states of his own design.

http://tinyurl.com/2kmkpc

He's also selling Amero pattern coins.
http://tinyurl.com/2tm9ox

His coins are professional and of great quality. I would recommend him if you're in to collecting. Just don't use them as currency...

Posted by: wavesmash at November 17, 2007 11:44 PM [link]

Hi,

Bill has nailed it (again): Assets under Ownership are rapidly declining for HB&B.

A LOT of it all is mouth.

So really this is all a HB&B solvency issue, no more no less.

Wonderful sunny sunday morning. Going for a walk on the beach, while hoping to read the WIR later today.

:-)

Cheers!

Posted by: maromatics at November 18, 2007 5:23 AM [link]

I received this letter today:

Hello Bill,

Do you know anything about FINRA? Is it a group we should support? I just stumbled upon them tonight. I have not read much about them yet. I see they have an investor complaint center where they seem to welcome tips to help enforce securities laws. I just do not know who they are.

http://finra.org/RegulatoryEnforcement/index.htm

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

My answer to "J" was:

FINRA is the new industry regulator in the US, like Market Regulation Services in Canada.

http://rs.ca

The stock exchanges and broker-dealer associations formerly contained a combined regulatory and trade association marketing mandate, which was an obvious conflict. Because they didn't want to get sued for conflicts of interest, they split out regulatory functions. So these independent organizations are the best places to take complaints.

I advise people who have a complaint to use a regulator-approved arbitrator, and never a court of law. The courts have little understanding of sophisticated capital markets, and too often the lawyers work the courts for as long as they feel the client has money. In the end, nobody wins except the lawyers. Arbitration, however, is a process using experts in the field of the complaint.

So, oversight of securities law and industry rules and regulation is now a function of regulators, and out of the hands of stock exchanges and trade associations.

The issue of investor advocacy is different. For example, investor advocates like me previously complained enough that there were material conflicts between regulation and trade practices the changes were finally made to set up organizations like FINRA. But there are many other conflicts that need addressing, like for example the material conflict in the definition of broker-dealer.

Is it a broker, which is an agent, or an advisor, which is a professional, or a dealer, which is a producer of product that is sold to the client? And, should the agent-advisor-salesperson also be allowed to have complete knowledge of a client's financial information plus a degree of control over his assets and at the same time use proprietary capital to trade against the client?

This practice is so completely improper and repugnant that investor advocates like me continue to call for new securities legislation. For obvious reasons, the industry lobby is dead set against it. They have no interest in a level playing field.

Industry actions speak louder than their words. If we don't speak up and eventually force change, the financial services industry will never act in the public's interest ahead of their own. They will continue to rely on these conflicts of interest to obtain their humungous profits, and pull out those humungous bonuses we read about every year-end.

Posted by: Bill Cara at November 18, 2007 6:09 AM [link]

I was contemplating here this morning about awaiting the next bear, but what if while we are waiting for it we actually never got out of the last one? Looking at a chart from 2000 sure looks like an argument for a secular bear. Could this be 1966-1982 redux?

Also, I noticed that the Nikkei is down substantially from March. Something that I have not heard talked about anywhere.

Posted by: geckojb at November 18, 2007 8:48 AM [link]

Re: CEF Central Fund of Canada

Are there any quirky tax implications for the taxable accounts of US Citizens?

Posted by: g034 at November 18, 2007 8:57 AM [link]

I am fearful for the USA due to the ignorance of the common citizen. Ignorance due to; the failure (IMO) of the education system, the polarization of the political system that makes a third political party impossible (ignorantly allowed to function by the citizen) and self absorption. I guess if I have my house, my car, my i-pod and MTV, why would I care to learn about the constitution, the men that wrote it and why?

When I travel outside the US, it amazes me how citizens of other countries (mostly Europeans) know much more about the US than the vast MAJORITY of our own citizens. The average American would be embarassed to be at a dinner table with average Europeans because the American wouldn't be able to answer any important questions. College Football National Championship playoff possibility or Lindsey Lohan arrests, would be easy, but questions on the US political process or, gosh forbid, global geopolitical issues would led to blank looks and a quick break to the "toilet" where more blank looks would occur. I guess the majority of Americans just don't give a shit...at least until the moment it hits the fan!

Posted by: g034 at November 18, 2007 9:20 AM [link]

Bill,

I have prepared a chart about the evolution of the Fed open market operations that I would like to share with the community.

Since I do not have a web server, how can I put the chart available to everyone?

I actualy think it is a revealing piece of information...

Thanks in advance for your help

Posted by: maromatics at November 18, 2007 9:21 AM [link]

Bill: Please refer to the link in the post prior to mine: http://tinyurl.com/3atof8

Ron Paul's ideas do have appeal, but they also have implications, and those are not always as simple as they appear on the surface. Check out this link: http://en.wikipedia.org/wiki/Ron_Paul

He supports "free trade"...but just what does that mean? Buying from foreign sweatshops; and what about regulating what comes into the country.

He wants to end the income tax. Just how do you support a government? Certainly not with Steve Forbes' "flat tax" or the like.

He would withdraw from NATO and the UN; but he favors "non-interventionist" foreign policy. Seems totally inconsistent.

He is "strongly pro-life"; in other words, he believes that the government can manage a woman's body better than they can raise taxes, conduct trade or conduct foreign policy.

I would need a thorough briefing before I could buy into that mish-mash. Sorry to be so long getting back to you, but just returned to my computer.

Happy Thanksgiving, Bill, to you and yours....and all the others here.

Posted by: ronbon at November 18, 2007 9:33 AM [link]

maromatics,

Re web hosting - there are many options to obtain web hosting for free. Try www.freeservers.com, for example. It will include adds, but it'll do the job of putting static material online just fine.

Posted by: Case at November 18, 2007 9:33 AM [link]

go34,

The lack of knowledge about issues and the rest of the world in the US might not be due to lack of interest but the lack of coverage in the media and in the classroom.
I once met a Texan on our travels through Canada and he was upset that geography had been removed from the state curriculum. A study later found that many students could not even name the states surrounding Texas. When traveling in the US, I have been astonished at how "local" the local news stations are.
When people lack good information over the long term - whether about world issues or financial knowledge - they become unable to think for themselves and their world gets very small. I am amazed at how much bigger my own world has become since starting to read this blog and others in my quest to learn.

Posted by: kiron at November 18, 2007 9:41 AM [link]

http://ronsen.blogspot.com/2007/11/must-reads.html

Some 'Must Read' sites and books...

Grantham's latest quarterly commentary is worth taking the time to register.

Posted by: Ron at November 18, 2007 10:16 AM [link]

NYTimes article explains how HBB was selling "liquidity puts" in order to be able to sell their CDOs and take the debt out of their balance sheets?

In essence they were selling the loans and presumably the risk associated with them (passing the buck). However, they were also selling the puts, or the right to the buyer to sell them back to HBB. The problem is, HBB took the debt out of their balance sheets and thus claimed huge profits. Doesn't this sound like an Enron-like scheme? Problem is... these things are now worthless.

If you never heard of "liquidity puts" you are in good (or bad?) company. Robert E. Rubin, chairman of Citigroup, had never heard of them until this summer.

NYTimes link: http://tinyurl.com/ytnuzw

Posted by: SiO2 at November 18, 2007 10:47 AM [link]

Something like 7% of Americans get a passport, and of those, 2% use it. We are culturally ignorant of the rest of the world, and because we are a melting pot of those cultures, we are ultimately ingorant of ourselves.

"Those who know the enemy and know themselves will not be endangered in a hundred engagements. Those who do not know the enemy but know themselves will sometimes be victorious, and sometimes meet with defeat. Those who know neither the enemy nor themselves will invariably be defeated in every engagement."

-Sun-Tzu

Posted by: Craig at November 18, 2007 11:00 AM [link]

FYI

How to Decipher Wall Street's Secret Code,

by Stephen McClellan
[author and former Wall Street analyst]

http://tinyurl.com/3ca49v

Moving on to personal investment policy, I suggest owning no more than five to ten different stocks. Too many spells trouble. A casual friend, who fancied himself an avid investor, once sat next to me at a black-tie dinner and boasted that he held 300 equities! After gagging on my salmon, I inquired whether he was a portfolio manager at the Magellan Fund (which, despite its enormous resources, probably doesn't hold anything close to that many positions). My argument against hyper-broad diversification is that an array of so-called alternative investments (examples could include precious metals, agricultural commodities, and emerging market stocks) customarily offers minimal protection during any broad downturn. Legendary fund manager Peter Lynch has elegantly defined stock over-ownership as "de-worse-ification." A survey by the Universities of Illinois and Michigan concurs, finding that investors holding a handful of names outperformed more diversified portfolios and that the performance of the latter portfolios slightly lagged the major market averages. The secret lies with knowledge, familiarity, and information: The fewer the companies, the greater the investor's comprehension of each one.

Counterintuitive though it may be, then, the bottom line is that Wall Street research, corporate promotion, and media hype do a huge disservice to the individual, do-it-yourself investor. So conduct your own analysis. Be your own judge. Preserve your capital. And, above all, don't let yourself be suckered by the Street.

Posted by: Isaiah64v4 at November 18, 2007 11:14 AM [link]

ronbon,

"He wants to end the income tax. Just how do you support a government? Certainly not with Steve Forbes' "flat tax" or the like."

His position is we have WAY too much government then we need.

"He would withdraw from NATO and the UN; but he favors "non-interventionist" foreign policy. Seems totally inconsistent."

How is this inconsistent? Logic would dictate that if you're an isolationalist, you would certainly make the case for removing the country from entangling foreign alliances such as NATO.

"He is "strongly pro-life"; in other words, he believes that the government can manage a woman's body better than they can raise taxes, conduct trade or conduct foreign policy."

A hot issue... for sure. Considering the man's profession, I think he is entitled to that view.

Posted by: Hoosier at November 18, 2007 11:30 AM [link]

American ignorance -

When I had a company in S. America, locals would comment on how ignorant our new (American) CEO was. There, after someone gets a minimum of bucks, the next thing the want is to become knowledgeable and cultured.

I had to explain that Dave showed well on Wall St, was a good salesman, had a big house, a big truck, a big TV, and felt he had arrived. He had NO NEED to understand their countries or cultures, or the wider world, for that matter ...

Posted by: Jock at November 18, 2007 11:48 AM [link]

Such a wealth of information here...

I know people that would pay thousands of dollars for the information that is provided here freely...Truly amazing

Like MIKENYC says "MY PRECIOUS"..That is how I feel about this site...

I wish the CARA IPO was available...

This website to me is like APPLE right before the launch of the Macintosh...

I will be happy to look back many years from now and say "I WAS LEARNING THERE IN THE BEGINNING"

Posted by: basketguy at November 18, 2007 11:59 AM [link]

2nd_ave..

You know way too much about me...Been looking to buy my wife a new car..

I am half way there...

April 2008..I think I will have what I need by then...(maybe a lot sooner, but I have to keep everything is perspective)

Posted by: basketguy at November 18, 2007 12:07 PM [link]

Re: American Ignorance

I think there are two sides of the coin on this issue. While it is embarrassing that Americans tend to know so little about the happenings in government and world politics, I can see the positive side to that believe it or not.

Places I've witnessed first hand in this country where there is a critical mass of people aware of local politics and the political machines, it is because government has become too involved in their lives. They care about politics because government is a way of life. In these places, we've lost the "The business of America is business." I would even argue that voter turnout is so much higher in Europe because every individual is going to the polls to vote for their stake in subsidies. If people don't care what's happening in government, can't that be considered a good sign that government doesn't rule their lives?

While I'm not saying that voter apathy and ignorance is a good thing, I am merely pointing out that there is a flip side to that coin. I am firmly in the camp that people need to wake up and fight back for their freedoms.

Posted by: Hoosier at November 18, 2007 12:10 PM [link]

Hoosier wrote: "If people don't care what's happening in government, can't that be be considered a good sign that government doesn't rule their lives?"

Just wait 'till they reinstitute the draft and they're kids are in the pipeline! That will change their opinion.

You get the government you vote for (or is elected without your input if you don't vote).

BTW, kudos to Bill and all for putting forward diverse opinions and viewpoints while maintaining civility.

Posted by: Seamus at November 18, 2007 12:41 PM [link]

Greetings from the Amish Country!

I just got back from grocery shopping and can't believe how much prices have increased since my last visit, two weeks ago.

It's not just the imported items either.....higher prices pretty much across the board.

Higher food & fuel prices, electricity rates climbing nationwide, US dollar in the toilet and ARMs resetting have doomed the American consumer, yet we are to believe there is no inflation?

Can massive job losses be far behind?

I believe what I see, and what I see is getting uglier by the day.

Battening down the hatches for the coming economic storm.

I hope I'm wrong.

Regards

Posted by: Bull Hunter at November 18, 2007 3:47 PM [link]

sunday sf chronicle reporting on what will surely be the first of many economic downturns in the bay area...fairfield is technically not in the bay area, being 1/2 way to sacramento, but would guess that stories like this one will be making its way down I-80 west straight into sf...common sense tells me if business on main street is starting to deteriorate, stock prices (which are leading indicators, right) in the consumer discretionary sector (XLY) will continue to fall, and i'll leave you to connect the dots to sectors which should not be far behind...

http://tinyurl.com/2wmkh8

Posted by: 2nd_ave at November 18, 2007 4:32 PM [link]

Hi,

Citibank limits ammount of IIT transfers:

https://web.da-us.citibank.com/tandcFiles/printable_cashedge.htm

Posted by: maromatics at November 18, 2007 5:00 PM [link]

Hi,

Citibank limits ammount of IIT transfers:

https://web.da-us.citibank.com/tandcFiles/printable_cashedge.htm

Posted by: maromatics at November 18, 2007 5:00 PM [link]

Bill
No truer words where spoken
From Bills WIR
"And, knowing that the custodian-agent-advisor-salesperson have complete knowledge of a client's financial information plus a degree of control over his assets, legislators will finally see the wisdom of never allowing HB&B to use proprietary capital to trade against the client.

As I called it this morning, the entire affair is improper and repugnant."

And the complete idiocy of the geniuses that devised the variable rate mortgages and 125% mortgages etc. that have caused some of these problems. The creative mortgage is not the problem, the execution in the real world of the banks, mortgage brokers, realtors , purchasers and vendors to play on the up and up and not be self serving is the issue. I think Shakespeare must have written about human nature years ago but maybe no one was listening.

Posted by: mikede at November 18, 2007 7:06 PM [link]

mikede,

As you well know from this business, the people who wear more than one hat are the first people not to play on the up and up.

When it comes to handling other people's money, with so many hats to wear, the very notion of self regulation is ludicrous.

The thing is these people at HB&B know it. They discuss the conflicts openly, and talk about about chinese walls.

Having been there and done that, I can tell you from experience, what a load of horse manure.

Posted by: Bill Cara at November 18, 2007 7:57 PM [link]

This story appeared on October 24, 2007.

"Citigroup and other giant U.S. banks are not imperiled by subprime debt, despite the fact that they own tens of billions of dollars in debt linked to the deteriorating mortgage markets, former U.S. Treasury Secretary Robert Rubin said in Minneapolis on Wednesday."

http://www.startribune.com/535/v-print/story/1506487.html

Posted by: JIM at November 18, 2007 8:11 PM [link]

1,200 page 8K filed by MS. Wow, I guess this is rocket science!

http://www.footnoted.org/subprime-mess/a-fine-mess/

Posted by: Hoosier at November 18, 2007 8:51 PM [link]

Is anybody trading and bullish on the pharmaceutical ETFs (PPH)?

Posted by: AdamG at November 18, 2007 10:03 PM [link]

Is anybody trading and bullish on the pharmaceutical ETFs (PPH)?

Posted by: AdamG at November 18, 2007 10:03 PM [link]

The International Copper Study Group press release states:
"The apparent refined copper balance for the first eight months of 2007, including revisions to data previously presented, indicates a production deficit of about 260,000 t (a seasonally adjusted
deficit of 124,000 t). This compares with a production surplus of 38,000 t (but a seasonally adjusted surplus of about 240,000 t) for the same period in 2006.
World refined copper usage is estimated to have increased by 7.5% in the first 8 months of 2007 compared with usage in the same period in 2006. World usage growth was driven by China, where apparent usage grew by 38% as net imports of refined copper rose by 208% to about 990,000 t."

http://www.icsg.org/News/Press_Release/presrels_2007_11.pdf

Posted by: DoGood at November 18, 2007 10:08 PM [link]

"If you never heard of "liquidity puts" you are in good (or bad?) company. Robert E. Rubin, chairman of Citigroup, had never heard of them until this summer."

Kind of a way of expressing that much of the debt will have been transferred into Credit Derivative Swaps so the asset value can be maintained. Normally, Credit Derivative Swaps are like third party lien financing which allows CDO's to be written off as CDS's, which would also allow further lending.

CDS's are usually the brain child of company officers and not some outsider who necessarily has a bee in their bonnet about somebody else's assets.

CDS's usually represent liabilities in the order of 10X yearly cash flow.

They were the first thing thrown out during bankruptcy proceedings of the airlines, and the claimants were sometimes CFO's who managed to walk away with pennies on the dollar. But most of these types of derivatives do not even have any legislative foundation in corporate law. Its the reason why so many airlines went bankrupt after 9/11, when they took the opportunity to wipe obligations such as CD's and CDS's off their off balance sheet dealings.

Posted by: FranSix at November 18, 2007 11:53 PM [link]

Sounds wierd, off their off-balance sheet dealings.

But the activty would suggest that a last ditch effort is underway to prevent insolvency wherever these kinds of Credit Derivative Swaps spring up.

Posted by: FranSix at November 19, 2007 12:08 AM [link]

Just got back from the Wealth Expo in NY to see Greenspan & Trump (but mainly just to tour New York)

Both Greenspan & Trump had some ominous comments.

Some excerpts from the interview-style presentation can be found on my blog.

http://tinyurl.com/2klfud

Some examples... Michael Corbett & Alan Greenspan.

MC - With all of the stock market scandals, do we have policy changes to implement?
AG - We already have Sarbanes Oxley. Scandals and fraud, however, are human nature. Legislation will target individuals and individual situations, however there is no hope of keeping up with scandals or fraud.

MC - Is real estate one of the best investments?
AG - Over the long run, yes. There will be a testing period for real estate immediately ahead. It is difficult to get investment right now. In the short term, it is a bad investment. I am not sure how long this current market will last.

Trump's opinion is that we're in a recession. He thinks that could be a good thing for real estate investors, as it allows them to go in and offer money to the banks for discounted foreclosure mortgages.

"The best investments are outside of the United States."

"The banks are out of business - use Other Peoples Money (OPM) for real estate deals."

"Green buildings are too costly and technology is not there yet to implement properly."

"Banks are gone."

Posted by: wavesmash at November 19, 2007 12:39 AM [link]

Also notable in the last few weeks' time, which I haven't watched too closely, is the rally in long term bond prices, which suggests that there is support for market prices going into Q1.

In every bubble rally post tech stock crash, the bond prices kept things afloat, except for Nasdaq. As long as long term rates decline, this will ensure that the mania in various prices will continue. (my thesis)

If you look at this chart (its very huge) it would suggest that another bubble will follow, presumably in bullion should bond prices decline, as it did prior to Nasdaq:

http://www.flickr.com/photo_zoom.gne?id=2045550553&size=l

Sorry if WTIC is not included, I just felt it would make the chart unclear, though oil prices may be THE factor pushing inflation, and THE hedge against a declining dollar.

So I will look at it again. But the oil price is not yet at the peak of the mania, in a very clearly defined three stage bull market. I am assuming now that this will be the mover, rather than an emerging markets collapse.

Here is the weekly chart for gold from Commodity Traders website:

http://www.flickr.com/photo_zoom.gne?id=2041448256&size=o

Posted by: FranSix at November 19, 2007 12:51 AM [link]

Merle Hazard sings "In the Hamptons" while Arthur Laffer (yes, really) makes a guest appearance.

http://www.youtube.com/watch?v=B8PwqQ5guYk

Funny stuff. It's the follow-up to his earlier hit, "H-E-D-G-E"

"Merle Hazard is America’s first and only country music star to sing about mortgage-backed securities, derivatives, and leveraged buyouts."

http://www.merlehazard.com/Merle_Hazard/Home.html

Posted by: MikeNYC at November 19, 2007 4:01 AM [link]

Oil is back over 95. And we have our first snow in NYC.

And the people who run our government are just really, really high. Really high all the time. How else do you explain this?

From this morning's NYTimes.

"U.S. Hopes to Arm Pakistani Tribes Against Al Qaeda

WASHINGTON, Nov. 18 — A new and classified American military proposal outlines an intensified effort to enlist tribal leaders in the frontier areas of Pakistan in the fight against Al Qaeda and the Taliban, as part of a broader effort to bolster Pakistani forces against an expanding militancy, American military officials said."

I though the fontier tribes were hiding Bin laden and they were pro-Taliban? At least that WAS the story. Wasn't it?

Hey, George. Pass Condi the crack pipe.

Oh, yeah. How nice that some of our military officials leaked this classified operation. They must have gotten left out of the crack party. So they weren't high enough to see what a good plan this is. It's always the sober ones who are screaming as the drunks drive the car into the telephone pole.

Oil is back over 95...

And we have our first snow in NYC.

Posted by: MikeNYC at November 19, 2007 5:16 AM [link]

Bloomberg says Goldman downgrades C to SELL, not listed on Morningstar site this AM.

2nd,
Looking at UUP, adding to shorts on any strength.

Abby Joseph Cohen, Jason Trenert, Bianco all on Condi and GW's pipe, calling for S&P 1600 by year end. Geez, if the market climbs a wall of worry, does it fall off a cliff of idiocy?

Posted by: Craig at November 19, 2007 7:58 AM [link]

Craig

Are you still holding QID and DUG? And what's your take on SKF if the Financials rise this AM?

Posted by: Isaiah64v4 at November 19, 2007 8:20 AM [link]

November 17, 2007

Saturday’s Report & Discourse, 11/17/2007 10:08 AM ET

Discourse

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