Merry Christmas and Happy Holidays to all.

There are NO Cara 100 ratings changes to report at this time.

A joyous holiday season to my extended family here at billcara.com.

May Santa be good to all of you.

low (expected) volume this week makes it easier for prices to get pushed around, so i expect a good trading week...the flat open is a good set-up->lulls you into inattention and keeps you guessing...

(isaiah- reminder->market closes 1pm EDT today)...

I'm paying attention 2nd!

I'm looking at extremes on the open to possibly add to ultra positions.

Note interesting action on FXP this premkt. Not that this can't change but it usually opens much stronger when Asia is in the green.

pricing of foreign ETFs still unclear->mix of what has happened + what may happen (assuming real-time changes in the underlying derivatives) seems to be what the moves are based on=you're trading broad swaths, not fine lines...

Good morning (as we get ready for Christmas Eve).

The next few days could see interesting market movements. It has been observed by Stock Trader's Almanac that “beginning just before or right after the market’s Christmas closing, we normally experience a brief, yet respectable, rally from the last five trading days of the year through the first two of the New Year.” The S&P 500 Index has averaged a 1.5% increase during this seven-day period since 1969 and it is referred to as the “Santa Claus Rally”. However, it is also pointed out by Stock Trader's Almanac that “when this reliable seasonality has failed to materialize, it has often been a harbinger of a sizable correction or a bear market in the coming year.” Hence the saying: “If Santa Claus should fail to call; bears may come to Broad & Wall.”

So much for "pop” analysis. I have just published my regular weekly article highlighting some memorable / thought-provoking quotes from market commentators during the past week, and briefly reviewing the week’s market action on the basis of economic statistics and a performance chart. The link to "Words from the Wise" is: http://tinyurl.com/22s6h6

Bill and friends, here’s wishing you a great festive season full of fun, laughter and joy, and a wonderful 2008.

XLF has a long chart and wallstreet will want financials to move higher on the last shopping day of the holliday season. Retailers should be looking up as well.

Good morning 2ndave,
Bill is sticking to his guidance on gold taking a pretty good decline. MY sense is that the trigger is the perception of no more cuts by the fed, and possible tightening due to inflation. China is gradually going to strengthen their currency. Perhaps that will weaken ours even further?

craig- FXI->fido is showing it's UP 0.95 (0.54%) to 176.90, although it closed friday at 178.04...not sure what this means...

2nd

Closing time noted.... thanks!

FXP- another 20% at 70 and change...

NOT.V- adding at 3.78...

Young fellers, still mixing their gold with base metals:

http://broadband.bnn.ca/bnn/?id=2238&vid=25223

In Greece, no less.

%^)

Aaach, Ben Stein is at it again on Yahoo Finance saying "the media and the short-sellers on Wall Street are trying to scare us into having a recession" and that everything is just fine.

Gems like "the cost of oil is less than 3 percent of the average family's budget" therefore it's price rise is not a problem. What in heck is he counting? What about everything else we do or buy that requires energy input? What about food, packaging, transportation, electricity... I could go on.

And other things like housing is such a small part of the economy, it's fall won't matter much. Uh huh.

So you bad short-sellers stop trying to scare us, okay, Craig, Isaiah, 2nd, et al.

Have a good holiday :-)

Why is UNG tanking today? Anyone have any ideas?

Ben Stein should stick to doing boring monologues. As if him giving bad financial advise wasn't bad enough, he's also involved in a creationist movie(Expelled) whining about the recent court case in Dover Pa.

The man is clearly not the sharpest knife in the drawer.

UNG - warm weather ahead forecasted

Oh, and in case I haven't said it already, Merry Christmas(eve)!

ksobo2000

Make sense...thanks!

UNG fund is half-cash... seems like a not-so-great investment. Why not just invest in Berkshire?

Wavesmash

Can I get you to post the link where you found UNG is half in cash? From what I had found it was....
"The Fund seeks to invest primarily in futures contracts for natural gas, crude oil, heating oil, gasoline, and other petroleum-based fuels that are traded on the New York Mercantile Exchange, ICE Futures or other U.S. and foreign exchanges"

you're welcome Isaiah. I use Bloomberg (http://www.bloomberg.com/energy) for basic info on energy.

Stein may be boring but Hoye isn't:

"1125 A.D. In this year before Christmas King Henry sent from Normandy to England and gave instructions that all moneyers ... be deprived of their members ... Bishop Roger of Salisbury commanded them all to assemble at Winchester by Christmas. When they came hither they were then taken one by one, and each deprived of the right hand and the testicles below. All this was done in twelve days between Christmas and Epiphany, and was entirely justified because they had ruined the whole country by the magnitude of their fraud which they paid for in full." - The Laud Chronicle (E)

http://www.safehaven.com/article-9096.htm

Sure!

http://www.unitedstatesnaturalgasfund.com/ung_holdings.asp

I could be misreading this though... but if there's 1% in fees then wouldn't you be paying a 2% MER on the fund if it's 50% cash?

"Leverage
While USNG’s historical ratio of variation margin to total assets has generally ranged from 5% to 10%, the General Partner endeavors to have the value of USNG’s Treasuries, cash and cash equivalents, whether 45 held by USNG or posted as margin or collateral, at all times approximate the aggregate face value of USNG’s obligations under its Futures Contracts and Other Natural Gas-Related Investments."

"USNG and its general partner may have conflicts of interest, which may permit them to favor their own interests to your
detriment."

at least they're honest. :)

Recently the guys behind USO & USNG launched a 12 month futures oil fund.

http://finance.yahoo.com/q?s=USL

Seeking Alpha has some stuff on the fund.

http://seekingalpha.com/symbol/usl

How about contango? Could explain why futures are losing & present valuations are winning.

"A market that is pervaded by scarcity fears - crude oil comes to mind, no? - can invert such that nearby contracts are priced higher than later deliveries. In essence the front months are bid up because every one wants their oil now "

GMO continuing to new highs after a recent test of the 50 DMA.

Disclosure: Long GMO

Everyone getting their financial nukes ready...

"Saudi Arabia plans to establish a sovereign wealth fund that is expected to dwarf Abu Dhabi's $900bn (£454bn) and become the largest in the world."

http://tinyurl.com/363vd5

Wavesmash...

UNG
The 50% cash holdings you noted is correct for Dec 21 2007. My knowledge of futures is very limited, but since they deal in futures the amount of cash they have on hand would most likely fluctuate greatly. I was unable to find anything on the site that states they would have a certain percent of their holdings to be invested in futures at any given time.

Light volume (except for Merrill Lynch (MER) - wow!) and the markets trudge higher.

I'm watching the hourly charts on the SPX, RUT and NDX. Nice bearish divergences forming. But I've already tried to trade it once unsuccessfully. Better to wait for the oscillators to provide confirmation. That means a cross on the MACD signal and a break below the 80 on the RSI(14).

The rise in the home builder stocks is the most delicious if you are looking to re-enter short positions. Bill Miller throwing good money after bad notwithstanding, the housing market will only get worse in '08, and the balance sheets of ALL the home builders will be completely destroyed.

A collective "Thank You" to Bill Cara for the (almost daily) gift of his site that we all enjoy so much.

BILL, THANK YOU!

May you and the entire Cara family enjoy a wonderful, blessed Christmas and a happy, healthy, prosperous (in that order) New Year.

Bill and fellow Caraistas,

I could not express a "Holiday Greeting" any better than what GemmmaStar has just done at 12:59PM.

So I can only say "ditto"

Merry Christmas everyone!

2nd

[you got mail]

Circuit City went up the chimney just before close... and my bid for $4.65 didn't go through.
:(

Hopefully I'll catch something Wednesday.

I'm with GemmaStar... thanks Bill & everyone here for keeping us educated, informed, and aware, and Happy Holidays!

In the spirit of the holiday season, wanted to thank Bill for that great call on Western Goldfield in September.

g034,

Thank you for your illuminating commentary on the technicals of GLD. Keep it coming!

Gold does seem to be winding up for a move, one way or the other. GDX, while not yet out of the woods, may be negating the head and shoulders seen by some analysts, which would be rather bullish.

Some charts of gold, GDX and the U.S. dollar here:

http://tinyurl.com/2ktedf

Merry Christmas, Bill and all the others who give so generously of their knowledge and wisdom here!

I have a new confirming signal that the economy and the consumer are in the toilet.

I just came back from the liquor store, Christmas Eve afternoon, I parked in the lot?, the store was almost empty? and there was only one person in line at the checkout in front of me?.

Bizarre, for 30 years its always been a ZOO at this time, I wonder if New Years Eve will provide another confirmation that the consumer is toast, the ATM's have gone dry.

Bill and all, Merry Christmas / Happy New Year

The shell game by the central banks heightened this week with the ECB injecting about 500 billion while the Fed only dumped 20 billion. On the surface, one would ask...are things really that much worse in Europe? They are not...HB&B went to the European window because restrictions on debt quality are much lower than Fed requirements. HB&B found a lender for their questionable paper.

The ECB can't just yank 500Billion out of the market....the debt will be rolled or the thaw will freeze up again. SIF's (Sovereign Investment Funds) are liquidating dollars, exchanging them for assets/shares. Stealth liquidation. The Saudi's are coming online with their own SIF...which may dwarf all existing funds.

Follow the money...where will it flow? I'd guess gold may be on the purchase orders of many of these funds.

Jim Jubak/ MSN finance has a good video on the subject. FYI http://tinyurl.com/2bnz25

A good holiday to all.

Correction to previous post.

Sovereign Wealth Fund SWF

not Sovereign InvestmentFund SIF

Sovereign Wealth Funds (SWFs). These are funds that are set up partly to get rid of dollars, but also to buy up stocks and assets. This new source of spending has already exploded to the two trillion dollar level. The potential spending power arising from the various SWFs is absolutely mind-blowing. To give you an idea of the money involved in the various SWFs (and these figures are probably six months old), this is just a partial list --

The United Arab Emirates have a SWF of $875 billion.
Norway has $350 billion.
Kuwait has $213 billion.
Singapore has $208 billion.
China has $200 billion.
Australia has $40 billion.
Qatar has $40 billion.
Brunei has $30 billion.
Russia has $29 billion.
Korea has $20 billion.

Then in the December 22 Financial Times we read on a page one headline, "Saudis Plan Huge Sovereign Fund Body. Source Would Dwarf Abu Dhabi's $900 Billion."

It will be by far the largest Sovereign Wealth Fund in the world.

2/3 of the China investment fund is slated for local chinese banks....

Merry Christmas Caraistas!

Merry Christmas where ever you are in whatever time zone.

Bill,
Thanks again for the $1200 usd I made on NOT last month in two days. I bought 2K more at 3.95 usd last week. The NOTguys over at agoracom.com really follow the stock and talk to Richard Nemis regularly. Richard seems to be on the side of the investor and keeps us informed as much as allowed.

here's a stocking stuffer:

TSX, CDNX scans for technical breakouts FREE ...

stockcharts.com/stockscans

Look for the TSX, and CDNX columns.

ENJOY - Happy Holidays, all!

Merry Christmas All!

stocking stuffer CORRECTION:

to get there painlessly, google for: cdnx stock scans

there are quite a few interesting studies daily! -

Phoenix Real Estate Brokerage Shuts: Associated Press Business ...PHOENIX (AP) - Gilbert-based Re/Max 2000, one of the Phoenix area's largest real estate brokerages, shut down its 13 offices this week, as the housing bust ...

Welcome to the future..
Merry Christmas

Jock and all

Re Scans

This link will give you the full Stockcharts scan list, it compiles all the Stockcharts predefined scans into one table. (Stockcharts runs all these scans each night)
http://stockcharts.com/def/servlet/SC.scan

I usually compile my own scans, but will sometimes use bits and pieces of predefined scans. Here's one of my standard pieces, "liquidity" which I always include at the beginning of my scans. I never want to own more than 5% of the daily average dollars traded, so I can get in and out if I have to. Also if I'm down in the 1% range then I can place actual stop loss orders and probably not get screwed.

For the advanced scan engine at Stockcharts.com, criteria 20 day SMA price times 20 SMA volume is greater than $500,000 The clause in the scan would be written as follows;

and [SMA(20,close) * SMA(20,volume) > 500000]

Just another Christmas tidbit

Bill

thanks for the comment on the SWF funds here's some more on keeping perspective...note many of these numbers are old so current figures are even higher... What comes after a trillion..
a quadrillion?

1,000,000,000,000: 1 Trillion dollars
1,000,000,000: 1 Billion dollars
1,000,000: 1 Million dollars

$400,000,000,000,000: Estimated total derivative exposure of all banks in the entire world. (20 x U.S. GDP) (up to $400 Trillion?)

$118,000,000,000,000: World Global Capital Markets (Stocks, Bonds, &?) Feb 2005 McKinsey Global Inst.

$75,000,000,000,000: U.S. Govt. unfunded liabilities; social security, etc.

$49,000,000,000,000: World bond market, Fall 2004 PWL Capital Inc.

$46,000,000,000,000: Total World Paper Money supply 2004; from M2 & GDP of EU, USA, Japan, & China (see SSR #56)

$45,153,000,000,000: U.S. Household wealth, as of first quarter, 2004. (Includes Real Estate, and investments)

$37,000,000,000,000: Total global equity market capitalization June 2001 UN.ORG

$21,700,000,000,000: Total global market capitalization of NYSE stocks, Dec '05 http://nyse.com

$21,000,000,000,000: U.S. bond market, Sept, '03: IAPF treas.gov

$12,605,000,000,000: U.S. GDP, 2005 (3Q) http://www.bea.doc.gov/bea/dn/home/gdp.htm

$10,261,000,000,000: M3 (money in U.S. banks) Jan '06 http://tinyurl.com/vra0

$8,249,000,000,000: US debt, 2-23-2006 http://www.publicdebt.treas.gov/opd/opdpenny.htm

$4,000,000,000,000: Total global market capitalization of Tokyo stocks, Dec '05 http://nyse.com

$3,600,000,000,000: Total global market capitalization of Nasdaq stocks, Dec '05 http://nyse.com

$3,000,000,000,000: Total global market capitalization of London stocks, Dec '05 http://nyse.com

$2,622,000,000,000: Total gold mined in all of history, 150,000 T (4.6 bil oz.) @ $570/oz. http://tinyurl.com/vrcc

$2,500,000,000,000: Total global market capitalization of Euronext stocks, Dec '05 http://nyse.com

$2,400,000,000,000: U.S. annual budget 2005

$1,200,000,000,000: Total global market capitalization of Deutsche Boerse stocks, Dec '05 http://nyse.com

$754,000,000,000: Total U.S. paper currency & coin in circulation, March 2005 http://www.fms.treas.gov/bulletin/index.html

$753,000,000,000: Annual U.S. current account deficit (trade deficit) for 2005, (annualized from 1 Q 2005).

$596,000,000,000: U.S. debt increase (true deficit) (Fiscal year '03-'04). http://www.publicdebt.treas.gov/opd/opdpenny.htm

$400,000,000,000: Total silver mined in all of history: 40 billion oz. @ $10/oz. http://snipurl.com/93j1

$376,000,000,000: Market Cap of Exxon Mobil (biggest U.S. Corp.) (8-05) http://finance.yahoo.com/q?s=XOM

$286,000,000,000: Debt of General Motors (biggest U.S. car company) Jan 2006

$149,000,000,000: US gold, 261 mil oz., @ $570/oz. http://tinyurl.com/vsr9

$110,000,000,000: all the world's gold stocks/equities (Sept. 25, 2005, Denver Gold Conference)

Crisis may make 1929 look a 'walk in the park'

http://tinyurl.com/2qzjq2

I am no economist, but this article from the Telegraph [UK] paints a bleak picture of the world financial system.

A few excerpts:

York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.
"The central banks are rapidly losing control.....They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds
--------
New York's Federal Reserve chief Tim Geithner echoed the words, warning of an "adverse self-reinforcing dynamic", banker-speak for a downward spiral.
---------
Quietly, insiders are perusing an obscure paper by Fed staffers David Small and Jim Clouse. It explores what can be done under the Federal Reserve Act when all else fails.

Section 13 (3) allows the Fed to take emergency action when banks become "unwilling or very reluctant to provide credit". A vote by five governors can - in "exigent circumstances" - authorise the bank to lend money to anybody, and take upon itself the credit risk. This clause has not been evoked since the Slump.
---------

"The kind of upheaval observed in the international money markets over the past few months has never been witnessed in history," says Thomas Jordan, a Swiss central bank governor.
--------

Also a lot of the comments posted below the article are interesting. Like this one:

Got Gold?

The bottom line is that the entire banking system is based on debt. Debt is money, money is debt. If you don't understand that, or you're in denial of that you don't understand monetary policy, macroeconomics or post-Keynesian banking: AND YOU NEED TO. This paper you call money is only valuable if the banks can create more debt. Once a critical mass of debt has been reached only two possible things can happen: A deflationary collapse (you don't ever want to experience that), or runaway inflation created at the central level in an effort to postpone the deflationary collapse. There is ONLY one class that gains value in such an environment: fixed supply commodities. Gold, silver, wheat, oil, etc. (And for those who think consumption goes down in a deflationary environment: LOL. You're cute).

Posted by See the Future on December 23, 2007 6:49 PM

In my opinion, which doesn't count for much, we have already seen the effects of a worldwide deflationary boom.

The "1929 bust" was the equivalent of the Nasdaq. Our deflationary boom has run its course, and typically at the end, to have a gold rush. Part of this will be a rush into hard cash as well, which people have been disparaging. The signs of this are unmistakeable.

And once again, I don't share the point of view of the "revenge of the apocalypse nerds."

A very hard opinion, I must admit.

F6

FranSix,

Please pardon my ignorance, but on several occasions you have mentioned the words "deflationary boom". Could you please elaborate on this? Everything I read indicates we are in an inflationary period and likely to experience stagflation over the next several years. Certainly there appear to be parallels with Japan during the 90's in that they have evidently suffered deflation (though their currency lost value with respect to the dollar, which normally occurs when a country experiences inflation, such as the banana republics in the past). I enjoy reading your comments, but have not been able to get a handle on "deflationary boom". Thanks for any help you can give.

No, we are definitely not in a period of inflation, however you might cut it. We are only familiar to inflation because it was experienced by so many during the '70's, and that the last deflation is nothing like the present day. I beg to differ.

Conditions are ulitmately deflationary, with the added worldwide boom in commodities and credit. I suppose its more of the hard money school than the fiat currency crowd.

We have ignored deflation, preferring the easy explanation of inflation and bang the drum and our chests on the inflationary bandwagon, seeking a consensus with our like minded imaginary "brethren" seeking retribution for imaginary slights from the Fed.

So just what is deflation?

Very good wikipedia page with enough historical examples and references to past deflations to convince:

http://en.wikipedia.org/wiki/Deflation

I would say that we were very fortunate not to be on a gold standard after the Nasdaq crash.

Seems that Santa climbed down 1.3 million chimneys this Christmas and found nobody home. I believe realty trac listed 1.3 foreclosed homes a while back, could be more by now. The point is....the news was released today that retail sales were up 19% over last years Christmas sales. Who makes up these numbers? And how can they make them up so fast? It's impossible that retail sales were up 19% over last Christmas. Fuel cost are up 26% over this time last year, food prices are starting to inch up with the price of corn @4.35 bu because of the ethanol surge going on. A bushel of wheat was trading for 10.095 just last week... a year ago wheat was 5.00 bu. My point is.....I find some of these unaudited numbers released to the news media very questionable anymore.
The transfer of wealth from the working class to the lazy rich isn't near as confusing if a person uses some free thinking and starts realizing most of these numbers they are feed by the news media can't even be check for accuracy anymore.
Happy Christmas season to everyone!

Think that 19% number is in reference to the FINAL weekend - more late shoppers than previous year. OVerall sales numbers as reported by WSJ thru christmas eve are:

From the day after Thanksgiving to midnight Monday, total retail sales, excluding automobiles, rose 3.6% over the previous year, according to MasterCard SpendingPulse, a unit of MasterCard Advisors. But factoring out spending on gasoline -- which soared thanks to a 27% average price increase since this time last year -- retail sales increased a lackluster 2.4%. Industry forecasts had predicted gains of 3.5% to as high as 4.5%.

ALOHA !!

F6 ... Your wikipedia based debate is limited in terms of comparisons. I argue in terms of "quality". If you defer to quality then there is no debate. Quality refers to "money" and "economy".

We could go on all day refering to various sources and definitions and debating who is right and wrong about future inflation or deflation scenarios. The very fact that we have to debate goes to "quality" and "fiat"!

What the USA has now is a reserve currency fixed on "debt based" fiat money. If you agree with that then in the hands of "humans" with large egos(bankers and politicians)then we are bound for inflationary "solutions" rather than "deflationary" solutions. As long as I have been alive there has been no shrinkage in the money supply or the rise in prices for goods and services. Has that been your experince? If so, then why would anyone argue that the FED's "solutions" to our financial and economic policies would be different?

These are modern times ... 1930 was another lifetime and another era. I can spell out the differences but I think you know them.

The main factor in all this that has never changed since time began is the few who want to control the many and the human conditions of ego and greed. The so called "primitive ancestors" our Founding Fathers, knew this and decided that the human condition equation would best be checked with a gold standard(barborous relic). Only in 1913 did weak politicians and greedy bankers reverse that and then finally in 1971 abandoned the gold standard entirely. Now our politicians are "fiat banker based" because our money is!

We are now in the grips of "free floating weighted fractional reserved debt based" global currencies and governments. All evils to varying degrees! To me that is the worst possible "choice" any one could imagine! That is where my "quality" argument comes in! There is no quality!

I do agree with this Wikipedia article and it points to quality once again and why I am where I am and am doing what I do ...

READ ON:
DEBT BASED MONETARY SYSTEMS
Some believe that "if unchecked, the economic and political chaos that comes from currency destruction inevitably leads to tyranny".[14]

Some economists (particularly the Austrian School) and political commentators (particularly Libertarian thinkers such as Murray Rothbard) believe that a debt-based monetary system amounts to a subtle form of monetary "fraud" in that it creates real money (and therefore real wealth) "out of nothing" through the use of fractional reserve banking techniques.[15]

Some monetary reformers (such as Michael Rowbotham and Ellen Hodgson Brown) also argue that this system of money supply is perverse and inherently "anti-democratic", and inevitably creates an inflationary exponential growth bias in the economy which causes gross over-consumption and is unnecessary, environmentally damaging and unstable. They argue that the already indebted are forced to induce new consumers to spend and go into debt so that existing loans can be repaid with this new debt-created money. If this is not achieved, the result is foreclosure for those businesses that do not successfully induce new consumers to go into debt for their benefit - and, more broadly, insolvency in the banking system and economic collapse due to the sudden contraction in the growth of the money supply.[16] [17]

Mark Anielski as well as some political thinkers such as Michael Rowbotham and some economists (such as the Keynesian monetary economist Hyman Minsky) argue that this system of money supply has all the essential characteristics of a pyramid scheme, where the newly indebted, who have have control at the top, find themselves compelled to induce others into debt to enable them to pay off their own debts.[18]

It is therefore argued by a number of monetary reformers that fractional reserve banking and the associated exponential growth of debt money in the economy "forces" the economy towards indebted consumerism.[19]

Michael Rowbotham argues that a major negative side-effect of the debt-based monetary system is its effect on agriculture. As Michael Rowbotham claims, residential development produces one of the greatest continuous injections of debt money into the economy. Therefore, significant super-normal profits can be generated by re-zoning agricultural land and replacing it with low-density housing.[20]

If for any reason the monetary system broke down, urban populations (nominally "rich" but poor in terms of direct access to food supply) could find food increasingly expensive, ultimately resulting in food security becoming a major public policy issue.[21] [22]END

The USA once exported wheat during the 1960s and 1970s. Now we import food and export debt and fraud. Yet more "quality" issues ...

There you go ... the less people that farm the less the food supply and you know what happens to food prices when supply is low! No ... the bankers cannot print food any easier than they can print gold! If food will someday be "wealth", which I believe it will, as well as clean air and water, then living where I live will make me one of the wealthiest men in the World and I don't care what currency you want to measure that in!

I am of the opinion that owning gold and "year round" food producing land is "real wealth"! Holding a $6mil home in Malibu secures you just that! You still can't feed yourself ... Last I looked an expensive home in Malibu is not a basic human need ... By the way ... that Malibu home is only expensive as long as you can find another foolish idiot to buy it for more than you paid for it!

We have all been conned into believing in a false Money God ...

Short-Selling December 20, 2007, 5:00PM EST
Shorting for the 21st Century

Inverse funds allow investors to place bets on predictions of a drop in stocks
Trouble in the economy and turmoil in the markets in 2007 rocked a lot of investment portfolios. But many people took advantage of new tools that made it easier to hedge against losses—and profit from predictions of pain ahead.
Inverse funds, either in the form of mutual funds or exchange-traded funds (ETFs), allow investors to place bets that the pain will continue. The funds use financial engineering techniques to move in the opposite direction of a particular index. A 1% drop in a financial sector index, for example, translates into a 1% gain for an inverse financial fund. Some of these vehicles are built to double up, giving you a 2% gain for a 1% loss in the index. Among the outcomes inverse investors can bet on are more losses in the financial sector, a collapse in the supercharged Chinese stock market, and falling share prices in the U.S.
Inverse funds are a 21st century wrinkle on a very old practice—selling short. With short-selling, investors borrow a stock from their broker, sell it, and then (with luck) buy it back later at a lower price. That practice still flourishes, but it's a stock-by-stock transaction. With the inverse funds, investors can effectively short a whole basket of stocks. Unlike the setup with a traditional short sale, if you bet wrong, you can't lose more than your original investment.
There has been tremendous interest in such instruments, says Michael Sapir, CEO of ProShares, the leading inverse ETF manager with 35 funds betting against a host of indexes, sectors, and international markets. Since its inverse ETFs first appeared in June, 2006, investors have plowed $7.6 billion into the funds. Thanks to 2007's financial turmoil, ProShares' UltraShort Financials ETF (SKF) has been a big hit, attracting more than $1 billion in assets, racking up a 37% gain, in its first 11 months. UltraShort FTSE Xinhua China 25 (FXP), a fund that aims to gain 2% for every 1% drop in the index, attracted $305 million in the first two weeks after its November debut. The firm's total lineup of short funds contains $9 billion in assets. Its smaller ETF competitor, Rydex (RFS), has $1.6 billion in inverse funds.
Many individuals use inverse funds to hedge. Let's say you have an investment in China, which you see as a great long-term growth opportunity, but you're worried about a market drop in the coming months. You can invest a small part of your portfolio in the China inverse fund. Although not a perfect hedge, the fund will tend to move in the opposite direction from your regular Chinese investments and limit your losses if China's market crashes.
Used like this, inverse funds are a far better strategy than taking "the sledgehammer approach" of dumping stocks outright—especially when selling can trigger unwanted taxes, says Chris Guarino, a financial adviser at Smith Barney (C).
For investors interested in taking more risk for more potential return, inverse funds can also be used to put money behind a hunch. Think 2008 will be tough for U.S. stocks? Buy a fund that shorts the Standard & Poor's (MHP) 500-stock index. Think consumers will slow their spending in 2008? Buy an inverse retail-sector ETF.
Because most inverse bets will be for limited periods, they do tend to trigger higher, short-term capital-gains taxes. And the fees are high, a 0.95% expense ratio for most of ProShares' inverse ETFs, compared with 0.1% or lower for many long-only ETFs matched to broad indexes such as the S&P 500.
And keep in mind that when you put money into one of these inverse vehicles, you need to think about when to exit. These are not buy-and-hold investments. After all, over the long term, stocks tend to go up.
http://tinyurl.com/2wtzzq

kaimu
I always appreciate your views on the world as you see it. Just curious, do submit artiles to the magazine "Mother Earth News"? They would be appropriate
Mullie

Happy New Year Kaimu! You're in fine form this Boxing Day!

Bill, you look stunning in green.

Good morning. Hope you all had a great holiday.

There are NO Cara 100 Ratings Changes to report at this time.

Have a great and profitable day.

GLD: Closed at the upper border of triangle or slightly above on Tuesday, looks to be breaking out of upper border today.

NOT.V- is it trading today?

In looking at the money supply growth I am not sure how deflation can be argued ?

Wiki's definition of deflation is the opposite of inflation after all;
"Mainstream economists overwhelmingly agree that high rates of inflation are caused by high rates of growth of the money supply."

Note the charts here on money growth around the world;

http://www.financialsense.com/Market/cpuplava/2007/1219.html

2ND...

NOSOF..Showing Bid 0.001 Ask 100.00...

Quite a SPREAD.....

CANADIAN MARKETS CLOSED FOR BOXING DAY...

2nd,
Weird, it's not trading (mkts closed in Canada) but my IRA shows it higher than 3.98, maybe the pinksheets? (NOSOF).

BMD- this is either classic shake-out action, or it's heading for the p---hole...

I would think the majority of volume on BMD is Canadian and home enjoying the holiday.

So my guess is someone or someone's maybe taking advantage?

Are you seeing advantage or a falling knife?

2nd,
Put up a three month chart of BMD.

It was this low a couple spikes down in November, BUT, look at the trend.....not so good.

BMD: Note also rising volume.

BMD is purely spec, so not planning to add to my position...on the other hand, not selling either->if it goes down, planning to join those incredible insiders in the hole...

I hate that....

Re: Money supply growth

Yes, I have to agree money supply growth may be an indicator of inflation, but you need interest rates to follow and that has not occurred.

There has been a long-standing argument about ficticious capital and actual draining of the money supply over at the Fed (and the Japanese central bank)

The Wall Street Examiner has had a very long debate about this:

http://wallstreetexaminer.com/?cat=10

Then there is Gavekal theories about the velocity of money, which is yet another take on the whole scenario.

One could argue that money supply growth has not kept up with credit expansion, and thus the net money supply is trending lower. But since credit is contracting, that does not necessarily mean money supply is suddenly available. A lot is tied up in net settlements of contracting credit, making money scarce.

A lot of price advances are due to credit expansion, and we are about to see a real, substantive contraction in credit, and along with it oil prices, a rebalancing of currencies, and a drop in the markets.

Bill:

Longterm guidance in line re gold and pm but are you surprised about short term? Do you think that drop in dollar and return of pm and gold noise means that something significant going on? To my novice eyes it seems to be about perception and the tug a war we keep hearing about.. between what is the more important issue, inflation or growth. Growth is winning and there will be more cuts, while foreign currencies may actually see tightening??

On another note, at the family dinner table turns out I'm not the only one seeing in the mainstream news that sovereign wealth is buying our country. Personally, think that SW could be on the cover of time mag as much as Putin. Bailout is the immediate picture but how does this play longer term? Will a foreign delegation decide to be an active absentee owner, come knocking at the door, and lock everyone in their office until they show more productivity? Or, now more into futuristic thinking is this the beginning where corporations transcend political boundaries and move even further up in the food chain. A few alliances between corporations will more and more determine the political environment....same as now but more so.

Craig, 2nd

Re BMD

Might just be today is the last day for US settlement in 2007, tax loss selling.

I've also followed this one for over a year, I like the concept and the possibilities, no position. Don't know about the fundamentals, but the chart has been great and then ugly. Might find some support here in the low 0.50's, which is basically back where it started the last big run in 2004. Also MA's are quite spread, stock oversold and could have a bounce like in Nov 07, but a lot of work ahead to start another uptrend.

I often use MA ribbons in TA analysis, scanning for MA compression areas often provides a nice watch list of stocks coiled and ready to move, one way or the other. The attached chart is for BMD, last 4 years, with my comments.
http://tinyurl.com/326hq7

Reminds me I should tune up that scan and run it now, might be quite a few stocks in compressed mode ready to move in the new year. Would be interesting to see how many look like set ups to the short or long side.

The interest rates follow in time. First there is a flooding of money supply to "save the economy" which drops rates, perhaps a one time tax cut or credit to juisce the system, then the expected inflation balloons, then they have to extract the liquidity to fight the inflation they printed up.

This all takes some time to play out.

Been there, done that, have the merit badge.

Re: Interest rates

Short term interest rates are declining. Thus, a steepening of the yield curve and a sudden widening of credit spreads between commercial lending and treasuries.

Thus, credit is no longer available at any price.

This is NOT the '70's.

Oh yes I know, it's now imbedded in my little CNBC watching pea brain...."it's different this time". Wish I had a dime for each time Kudlow has said that.

So far it has been different up until it's been exactly the same, but *more* so.

I'm thinking we will be looking at the 70's as the good ol' days. But then I'm an optimist.

Happy Holidays!

I am into ATVI. Guitar Hero and Call of Duty 4 anyone?!

Balance sheet looks good, technicals looks good, Vivendi investment looks good & the games are sold out at my mall.

Kaimu, FranSix,

I read the Wikipedia articles that F6 posted in response to my question and although I learned a little, I am still relatively confused about this issue (the idea of a deflationary boom). However, the article did serve to show how many schools of thought there are about these economic phenomena, which for me creates a sort of "erudite verbal haze". However, Kaimu mentioned the idea of a giant ponzi scheme, and this does at least resonate for me--the idea that with fiat currency in an inflationary environment, you always need more people to take on debt to keep the scheme going. I have always thought of the economy as run basically for the benefit of the rich who are always able to buy low and sell high in any environment and can sit tight when conditions are not favorable,--with an attendant need to stave off social unrest among the little people, of course. This fits in very nicely with Kaimu's ponzi scheme. What we have seen recently seems to be, as Bill has said, the greatest transfer of wealth in recent times. The rich have recognized that the ponzi scheme is over and have transfered to themselves all remaining assets of any value in a sort of final feeding frenzy. For example, they have indirectly milked the social security trust fund dry. This may sound like a conspiracy theory, but I think it is simply de facto way the economy works, whether by design or not. (Evolutionary biology could be applied here in place of standard economics.) The worst thing of all is the killing off of the inheritance tax, which means wealthy dynasties will inevitably control a larger and larger share of the wealth. Now we also learn that the markets are rigged, government intentionally misleads with its statistics, and any kind of external enforcement of still existing security laws is non-existent, thus preventing ordinary Joes like me from having a fair chance in the markets. In our country, laws are simply changed to make what was once illegal legal, eg laws against usury. But, as is always the case in our society, we must first and foremost blame ourselves individually for our failures--the system never needs fixing.

Another sign of pending market crash?

I read somewhere years ago, that Rocketfeller got out of the market shortly before the 1929 crash when his shoe shine boy was giving him stock tips.

Well today on Street.com they have an interview with Sara Underwood, Playboy's Playmate of the Year for 2007, about investing strategies. Poor girl just started for the first time 2 weeks ago.

[Bet you she ends doing better me ! LOL]

http://tinyurl.com/yqemyt

Didn't I tell you she shines my shoes?

Craig...

I hope she is shining something other than your shoes....:^)

Silver seems to be breaking out in the last few days. Took a small position in SSRI and SLW. Any thoughts?

Quasi- thanks for your input on BMD

Well thanks for the kind wishes BG, but something tells me my wife might have a problem with her shining the silver.

Franklin - the simple gold chart on the top of your link should be viewed by all here. Thanks for the link.

Craig - I know our gld triangle is for education purposes, but don't forget, when trading gld, you should look at the charts on $gold, which you may do already. Also, a higher probability confirmation occurs with 2-3 days or 2-3% trendline break. Gold has been trading lockstep with the S&P over the past few weeks, a false triangle breakout signal may be in place IF the broad stock market falters. The first week of January will be telling.

Happy Holidays!

Go Illini in the Rose Bowl!

Quasi:
"I often use MA ribbons in TA analysis, scanning for MA compression areas often provides a nice watch list of stocks coiled and ready to move, one way or the other."

If you can, look at a 10-15 yr chart of japan/ewj. Not sure what the tech pattern is called...looks like a shut alligator's mouth....volatility is compressing and ready to move lower or higher?

Craig
Here's 2 articles which supports your call that gold is currently in a triangle formation.

http://tinyurl.com/2rbsl4

http://tinyurl.com/3byjwr

Closing my ultra long emerging markets position at eod today. I planned to hold through end of year, or until it printed a lower low and lower high, but this looks stretched to me now, and there will be another good position trade coming along soon...

Dave

NYUgrad, I finished call of Duty 4, it's wicket...

LOL, Bill. Elfing you is turning into a Christmas tradition!

All the best,

N2S

Happy Boxing day everyone. We just got everything cleaned up after having an 18 person Christmas party at our house. It was really fun, especially for the kids, but exhausting.

I haven't had time to watch the markets until the last half hour today. It seems like everything is drifting up, except the high beta momentum stocks. Most of them are on a tear.

MarcadoLibre MELI, the Latin Ebay that I mentioned last week was up 20% today to almost $73. I was waiting for a pullback to buy some shares but may not get it. I missed GOOG on the way up, waiting for it to pull back below $100. Even if I would have bought it at the $100, I would have had a 7X gain by now. MELI may not be as big as GOOG but it has aolt of potential. My current plan is to but if it hits $60 again.

I also plan on loading up on QID and SKF and also buying puts on QQQQ and DIA just before the excess money starts being drained off around Jan 10th or before that if the technicals start breaking down again.

Rob.

I'm looking for PM stocks that trade on US exchanges, preferably smaller stocks such as WGW. This is so I can trade them with lower commissions in my IRA as opposed Canadian stocks where the commissions are astronomical. Could anyone direct me to a list of these?
Any help would be appreciated.

I was doing more research into the juniors and starting plugging some of my contacts around the Ontario mining camps. I found something to keep an eye on:

Kodiak Gold is currently exploring close to the Hemlo camp and recently struck a 3.6 meter gold intersection of 10.46 ounces per tonne on the Golden Mile vein. Please read and digest that again - 10.46 OUNCES PER TONNE. Granted, this kind of depositional environment lends itself to a very sporatic nugget effect. That's 'veiny' gold for ya which the near-by Hemlo Mine exploited for it's mine life.

Sage Gold (sgx.v) is a small junior that plans to drill 22,000 metres of core next year on properties located next to Kodiak's exploration claim in the same camp (Geraldton Gold Camp). Keep an eye on this one as well.

Some more stuff I dug up on Sage:

Aerial magnetic surveys of the Jacobus property have indicated a hot zone on the SE corner, which is contiguous with the northern extension of a similar magnetic high on Kodiak’s Hercules property. Sage interprets the geophysical ’signature’ there (described as `a north-west trending low`, which will no doubt be familiar to those who understand the science of aerial electro magnetic surveying!) to be similar to the Golden Mile quartz vein system.

They plan to trench that NW low, plus a known quartz vein, in 2008 in addition to conducting detailed ground geophysics and geological mapping.

==========

I'm going to watch these in the coming months. I'll keep all here abreast of what I dig up.

Cheers and let's have a great 2008 together.

Rugger

aucorant,
fwiw...i've looked...wgw was just one of those gems that many of us were fortunate enough to get at a lower price...and, uxg

after that....good luck. suggestion, get a research pdf on a one and look at its peers

personally, much too hard to do DD worth its salt without having intimate background knowledge of this mining sector...which perhaps you do have

next suggestion...what I did...get top quality analysis with recommendations by a top analyst...i used rbc...but for juniors all canadian...fidelity does not make it expensive at all and i have an ira...trading is clumsy though, and I know that I'm not getting the best trades but I will get better at it...when it comes times to sell I've decided it's a must that it be into strength at market price...

perhaps others can help out

acourant,
I'm in the same boat as you - seeking US traded juniors for the speculative portion of my 401k.

Go to amex.com and find the equities > listed companies > Sector drop down list > metals mining.

Check out nasdaq.com and their listed companies > sector > gold.

Of course, there are plenty of producers, explorers and developers on the otcbb and pink sheets.
I've started a watch list, based on the companies mentioned by community members here.
It includes a lot of the AMEX listed miners.
A few others: PMI Gold PMVGF.pk Noront NOSOF.

Check out Pinetree Capital, PNPFF.pk that invests in juniors and the like.
Do not take these as recommendations. Please do your own DD.

Disclosure: Long NOSOF and GLD

NYUGrad: another choice in the gaming space, mentioned here last week by another poster, is GameStop (GME). Yeah, it's retail but prob one of the highest quality names in the retail space.

I just want to add that I closed out my SOLF trade today for a 42% gain in 3 trading days. It was my most profitable trade of the year. I set trailing stops along the way and it triggered early this morn. The stock closed below my stop at the close. I learned the art of trailing stops right here in this forum.

geckojb

I'm curious on your trailing stop, what % or $ amount did you set to trail by?

aucourant,
one small pm I'm long is capital gold, CGLD.OB, has an operational Au mine & mill in Mexico. Another I'm long is Gold Resources, GORO.OB, managed by Reid brothers who operated UXG before selling control to Rob McEwen. Another that I'm trying to buy at my price is Rochester Resources RCTFF.OB that has silver properties in Mexico. As always, please do your own DD - and I'd love to get feedback from others, especially if I'm wrong!!