Bill Cara: Saturday’s Report & Discourse, 12/08/2007 10:45 AM ET

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December 8, 2007

Saturday’s Report & Discourse, 12/08/2007 10:45 AM ET

The “Corner Stone” of our Community says that this info table from the report of the US Comptroller of the Currency, Administrator of National Banks in Washington, is a frightening experience. I tend to agree, but I also have to admit that I don’t fully understand it. What I do understand is the whole premise of the house of cards of HB&B is that “bilateral netting” works as long as the credit ring remains unbroken. But it happens to be breaking up. What then?

I will simplify my concern here. The last time I looked, JP Morgan Chase (JPM) et al were not good for $80 trillion, which is its total derivatives contract obligation. And I suspect Citigroup (C), having to reach out to Abu Dhabi last week for an emergency handout of $7.5 billion isn’t good for $35 trillion. I don’t think anybody should be holding their breath for Bank of America (BAC), which also has to be bailed out of its SIV crisis, to stand behind its $30 trillion.

Admittedly, these are the Big Three. But the bottom line is that the global financial system is hanging on a thread. That thread by the way is now called the MLEC --Master Liquidity Enhancement Conduit. And, BlackRock is the anointed savior.

The BlackRock founder, according to wiki, was the person who initiated these mortgage-backed securities. Goldman Sachs (Paulson)/Merrill Lynch (BlackRock/Goldman) is clearly in the middle of this. Seems to me to be 12 people sitting around a boardroom table scheming ways to get themselves out of bankruptcy and us to pay for it.

If you are wondering which financial companies are involved in the $100 billion SIV SuperFund they can't sell, and the reason for the new MLEC, the Bloomberg article states:

Citigroup (C.N: Quote, Profile, Research), which created special investment vehicles (SIVs) in the 1980s, Bank of America (BAC.N: Quote, Profile, Research) and J.P. Morgan Chase (JPM.N: Quote, Profile, Research) are heading the large-scale effort that is supposed to help SIVs sell hard-to-value paper without further unnerving jittery credit markets. As manager of the fund, BlackRock will be in charge of deciding what to do with the assets sold into the portfolio.

Unfortunately, the Bush/Paulson Mortgage Relief (HOPE) Plan is their scheme to get us to pay for it.

Oh, my head spins. Hows yours?

Counter-party risk, btw, is the new word for the water cooler. Let's all try to understand what it means.

(Note: I added some info here as I felt it to be important to an understanding of the big picture. History is being made.)

Tables

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

XLE 76.28 -0.37 -0.48% 3.92% 3.01% 0.57% 34.82% 8.57% 12.77% 26.42%

SMH 33.42 -0.12 -0.36% 3.40% 5.13% 1.12% -0.45% -11.61% -6.36% -2.79%

XLU 44.18 0.23 0.52% 3.39% 5.39% 4.54% 19.99% 13.22% 13.43% 19.79%

XLB 42.93 0.31 0.73% 2.75% 8.63% 1.25% 24.04% 10.73% 8.30% 21.07%

IYZ 30.03 0.14 0.47% 2.67% 5.37% -1.35% 1.25% -7.69% -10.52% 3.87%

XLI 40.30 0.30 0.75% 2.28% 5.58% 1.49% 14.39% 4.11% 5.89% 14.16%

XLP 29.46 0.31 1.06% 0.92% 3.22% 4.65% 12.10% 10.17% 7.91% 13.22%

XLF 31.25 -0.37 -1.17% 0.64% 6.76% 2.90% -15.36% -5.30% -15.06% -13.43%

IYH 73.12 -0.06 -0.08% 0.54% 4.23% 4.53% 10.02% 6.65% 4.01% 10.62%

XLY 34.75 0.14 0.40% 0.23% 3.58% 0.14% -9.79% -3.28% -10.74% -8.89%

Table 2: Senior oil & gas equities

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

PBR 106.71 0.03 0.03% 10.81% 5.88% -8.62% 114.15% 66.37% 100.17% 119.25%

SU 102.24 -0.17 -0.17% 6.77% -0.11% -8.16% 38.33% 12.38% 17.84% 28.77%

IMO 51.76 0.45 0.88% 5.57% -2.25% -10.65% 45.15% 15.43% 13.04% 34.41%

CVX 90.96 -0.42 -0.46% 3.63% 4.95% 2.00% 28.17% 3.78% 13.42% 24.06%

ECA 67.28 0.12 0.18% 3.11% -0.96% -8.10% 48.39% 14.01% 8.12% 27.64%

XOM 91.50 0.06 0.07% 2.62% 3.64% 2.33% 23.47% 6.71% 11.64% 20.86%

TOT 82.83 -0.86 -1.03% 2.36% 1.69% -1.28% 16.71% 10.00% 11.90% 15.47%

CEO 178.94 -10.75 -5.67% -3.05% 3.02% 0.16% 89.82% 46.52% 73.95% 100.72%

STO 30.21 -3.95 -11.56% -6.53% -6.56% -11.74% 17.59% -0.13% 10.82% 9.77%

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

PKX 169.57 -1.37 -0.80% 7.41% 10.48% 4.80% 113.48% 12.40% 41.06% 114.10%

GGB 29.91 0.52 1.77% 6.40% 11.27% 0.07% 82.16% 27.06% 33.29% 83.27%

RIO 36.50 -0.02 -0.05% 5.55% 12.10% -1.24% 26.65% -27.98% -15.41% 25.26%

NUE 61.98 0.74 1.21% 4.68% 16.44% 9.60% 13.72% 15.05% -4.35% -5.86%

TCK 38.93 1.28 3.40% 1.88% 2.88% -17.12% -43.78% -4.23% -6.82% -49.53%

BHP 77.00 -0.23 -0.30% 1.54% 5.74% 0.20% 98.10% 19.98% 40.61% 86.71%

AA 36.91 1.05 2.93% 1.48% 5.01% -1.99% 25.84% 5.85% -5.19% 19.80%

MT 73.93 1.12 1.54% 0.15% 3.47% -3.64% 81.20% 15.55% 22.40% 71.33%

RTP 468.00 4.53 0.98% 0.11% 7.33% 6.32% 129.30% 58.78% 69.33% 113.55%

TS 46.83 0.28 0.60% -0.74% 1.94% -1.89% -3.48% 3.65% 1.17% 2.16%

Table 4: Senior capital goods makers and transportation

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

ERJ 47.60 0.27 0.57% 9.22% 7.57% 1.62% 16.72% 7.33% 0.00% 14.84%

UTX 78.07 0.08 0.10% 4.41% 6.28% 4.51% 24.30% 5.80% 13.36% 20.59%

MMM 86.19 1.37 1.62% 3.52% 4.16% 4.06% 10.13% -3.07% 1.54% 8.33%

HON 58.51 0.28 0.48% 3.34% 7.02% -1.32% 29.73% 6.95% 3.74% 37.38%

CAT 74.20 -0.15 -0.20% 3.20% 8.12% 2.44% 21.32% 1.03% -4.02% 17.78%

FDX 100.22 1.73 1.76% 1.78% 7.07% -2.17% -8.70% -7.38% -6.69% -14.22%

BA 93.16 1.38 1.50% 0.67% 4.04% -3.24% 4.47% -1.77% -3.80% 3.50%

ABB 29.50 -0.02 -0.07% 0.41% 8.66% -4.16% 65.54% 27.26% 41.15% 74.14%

GE 37.23 -0.03 -0.08% -2.77% -1.17% -4.59% -1.95% -3.92% 1.28% 5.89%

Table 5: Senior consumer discretionary equities

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

JCP 47.92 3.08 6.87% 8.61% 16.03% -4.67% -38.61% -26.36% -38.40% -38.41%

WHR 85.78 0.12 0.14% 5.95% 10.14% 16.14% 1.32% -7.53% -20.31% -0.41%

TM 114.21 0.79 0.70% 1.57% 4.40% 4.79% -15.59% 0.80% -7.24% -6.12%

EBAY 33.73 -0.04 -0.12% 0.60% 5.60% 4.10% 11.80% -4.31% 10.19% 7.76%

BC 20.39 -0.16 -0.78% 0.00% 5.87% -4.85% -36.12% -12.19% -38.40% -37.34%

CCL 45.00 -0.26 -0.57% -0.27% 5.31% 0.47% -11.68% 0.63% -8.03% -5.02%

NKE 65.40 -0.01 -0.02% -0.38% 2.59% 3.32% 33.93% 19.56% 20.89% 33.55%

DIS 32.79 0.07 0.21% -1.09% 2.98% -2.50% -4.12% -2.38% -4.29% -3.95%

SBUX 22.62 -0.23 -1.01% -3.29% -1.95% -3.33% -35.83% -16.72% -17.57% -37.94%

Table 6: Senior consumer staples equities

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

WMT 49.02 -0.25 -0.51% 2.34% 7.19% 12.38% 3.09% 15.64% -1.49% 5.71%

KO 63.15 0.08 0.13% 1.69% 1.36% 2.73% 29.99% 15.68% 22.91% 29.62%

WAG 37.11 0.52 1.42% 1.42% -6.59% -4.92% -19.45% -15.95% -15.56% -14.18%

ABV 76.14 -0.62 -0.81% 1.41% 10.20% 0.51% 55.07% 15.82% 15.08% 60.13%

PG 74.12 -0.06 -0.08% 0.16% 1.73% 4.63% 14.84% 13.21% 18.93% 16.18%

BUD 52.79 0.09 0.17% 0.13% 5.18% 4.58% 7.25% 5.92% 0.88% 9.91%

WFMI 43.05 0.12 0.28% 0.09% 5.64% -6.23% -5.34% -0.19% 10.41% -11.26%

MO 77.60 -0.20 -0.26% 0.05% 6.35% 6.71% 19.53% 15.15% 11.57% 21.71%

PEP 77.00 -0.03 -0.04% -0.23% 1.97% 4.76% 22.77% 13.27% 16.05% 21.41%

DEO 86.91 -0.40 -0.46% -4.05% -2.70% -4.88% 9.28% 1.47% 5.01% 12.58%

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

AET 58.93 0.45 0.77% 5.46% 8.85% 7.89% 37.43% 17.30% 14.65% 38.07%

UNH 56.65 0.67 1.20% 3.00% 4.77% 12.65% 7.76% 15.17% 6.17% 14.47%

PFE 24.40 0.23 0.95% 2.69% 6.18% 5.58% -7.19% 0.62% -7.19% -1.85%

NVS 57.47 0.70 1.23% 1.68% 2.66% 9.11% -1.15% 7.62% 3.89% -0.97%

GSK 53.27 0.42 0.79% 1.12% 4.88% 4.66% -1.00% 0.38% 3.76% 1.37%

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

JNJ 67.68 -0.62 -0.91% -0.09% 1.20% 4.78% 1.93% 9.73% 9.16% 2.45%

BMY 29.23 0.15 0.52% -1.35% 4.10% 1.74% 10.80% 5.11% 0.21% 15.76%

AMGN 52.10 -3.05 -5.53% -5.70% -3.09% -7.01% -23.83% 2.36% -8.02% -24.61%

DNA 68.49 1.92 2.88% -10.18% -8.46% -9.10% -16.27% -13.40% -8.56% -17.42%

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

C 34.31 -0.04 -0.12% 3.03% 8.23% 4.29% -37.90% -24.56% -34.67% -32.34%

CS 61.90 0.25 0.41% 2.62% 8.27% 1.53% -11.71% -4.42% -14.38% -9.25%

MER 61.42 0.09 0.15% 2.47% 14.72% 14.18% -34.39% -16.07% -29.61% -31.40%

HBC 86.92 0.65 0.75% 1.66% 2.57% -3.41% -6.51% -2.36% -5.11% -4.27%

LEH 63.47 0.33 0.52% 1.34% 4.29% 13.12% -19.28% 19.87% -13.40% -16.38%

JPM 46.08 -0.13 -0.28% 1.01% 9.85% 8.14% -4.14% 5.88% -7.51% -1.18%

UBS 50.48 -0.12 -0.24% 0.00% 11.58% 7.24% -17.77% -3.09% -17.34% -16.62%

DB 131.57 -0.75 -0.57% -0.14% 5.81% 5.79% -2.79% 6.11% -7.51% 0.19%

MS 51.69 0.11 0.21% -1.95% 3.61% -3.71% -36.67% -17.30% -38.99% -33.88%

GS 217.89 -4.62 -2.08% -3.86% 0.65% 3.79% 8.55% 21.74% -0.98% 8.84%

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

CTSH 33.36 1.60 5.04% 7.27% 9.52% 5.67% -14.20% -6.11% -10.97% -16.89%

INTC 27.73 -0.25 -0.89% 6.33% 10.61% 6.94% 36.27% 8.87% 30.13% 34.35%

INFY 44.77 1.40 3.23% 6.22% 14.50% 5.64% -19.80% -6.18% -5.73% -18.12%

ADBE 44.37 -0.17 -0.38% 5.29% 5.87% -1.47% 11.15% 3.28% 3.86% 17.54%

ORCL 21.14 -0.28 -1.31% 4.76% 4.09% 3.88% 20.73% 4.86% 12.87% 21.08%

SNDK 38.65 -0.71 -1.80% 3.23% 7.03% -1.02% -7.36% -26.98% -9.95% -14.15%

ADSK 48.20 0.11 0.23% 2.36% 5.26% 1.77% 18.84% 6.76% 10.37% 15.48%

SAP 52.35 -0.18 -0.34% 2.21% 1.45% -0.11% -1.60% -5.44% 9.40% 1.63%

QCOM 40.12 -0.29 -0.72% -1.62% -1.01% 0.91% 7.10% 5.89% -2.19% 2.50%

CSCO 27.45 -0.34 -1.22% -2.03% -4.32% -7.36% -1.05% -12.91% 6.19% 2.12%

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 2.96 2.95 3.05 3.29

6 Month 3.12 3.14 3.23 3.58

2 Year 3.10 3.01 3.01 3.55

3 Year 3.09 2.98 2.96 3.52

5 Year 3.49 3.38 3.39 3.88

10 Year 4.10 4.01 3.94 4.31

30 Year 4.57 4.47 4.38 4.65

Municipal Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 3.11 3.13 3.19 3.32

2yr AAA 3.10 3.11 3.26 3.30

2yr A 3.38 3.38 3.38 3.32

5yr AAA 3.28 3.28 3.35 3.42

5yr AA 3.26 3.24 3.35 3.43

5yr A 3.39 3.39 3.46 3.53

10yr AAA 3.73 3.70 3.71 3.85

10yr AA 3.64 3.62 3.56 3.76

10yr A 3.96 3.92 3.93 4.08

20yr AAA 4.37 4.36 4.41 4.45

20yr AA 4.16 4.15 4.20 4.65

20yr A 4.74 4.74 4.83 4.46

Corporate Bonds
Maturity Yield Yesterday Last Week Last Month

2yr AA 4.26 4.20 4.22 4.53

2yr A 4.72 4.47 4.35 4.72

5yr AAA 4.60 4.49 4.53 4.77

5yr AA 4.83 4.75 4.70 5.11

5yr A 4.83 4.69 4.59 5.04

10yr AAA 5.22 5.16 5.03 5.34

10yr AA 5.45 5.43 5.32 5.80

10yr A 5.70 5.59 5.39 5.92

20yr AAA 5.52 5.44 5.65 5.10

20yr AA 5.78 5.68 5.75 6.07

20yr A 6.25 6.19 6.11 6.13

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

CFC 11.54 -0.56 -4.63% 6.65% 19.59% -14.33% -72.60% -36.63% -69.63% -71.88%

FRE 35.54 -1.56 -4.20% 1.34% 34.27% -18.90% -47.65% -40.08% -45.67% -48.12%

SHY 82.17 -0.09 -0.11% -0.40% -0.28% 0.56% 2.66% 1.19% 3.09% 2.37%

AGG 100.86 -0.84 -0.83% -1.12% -0.39% 0.41% 0.95% 0.66% 3.10% 0.13%

IEF 86.34 -0.58 -0.67% -1.42% -0.66% 1.17% 4.43% 1.71% 7.52% 3.20%

TIP 104.45 -0.54 -0.51% -2.11% -2.10% 0.01% 5.26% 2.17% 6.61% 3.50%

TLT 91.75 -1.04 -1.12% -2.79% -2.11% 1.31% 3.01% 1.61% 9.38% 0.94%

FNM 37.04 -1.70 -4.39% -3.59% 15.03% -25.62% -38.12% -40.75% -41.61% -37.86%

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

KGC 18.42 0.22 1.21% 6.17% -1.07% -3.21% 61.30% 41.26% 43.46% 46.54%

AUY 13.35 0.22 1.68% 3.81% -4.23% -5.99% 8.27% 13.33% 2.38% 1.99%

GG 33.53 0.13 0.39% 3.46% -3.26% -6.39% 22.64% 29.01% 41.00% 11.92%

MDG 36.63 0.40 1.10% 2.29% -3.71% -6.00% 39.33% 25.19% 45.94% 21.33%

AEM 48.89 -0.23 -0.47% 1.60% -6.38% -11.24% 25.62% -0.61% 37.06% 11.77%

NEM 50.03 -0.49 -0.97% 0.68% -3.95% -7.45% 13.19% 13.16% 25.58% 5.88%

BVN 55.17 -0.66 -1.18% -1.18% 0.71% -9.56% 99.82% 30.09% 66.43% 93.58%

ABX 39.79 -0.47 -1.17% -1.78% -7.68% -13.89% 33.39% 8.57% 41.25% 29.40%

GFI 15.62 -0.72 -4.41% -5.05% -11.35% -17.49% -14.78% -3.46% -2.31% -14.83%

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 65.45 -0.05 -0.08% 7.38% 18.46% 18.57% 44.35% 42.25% 60.77% 36.35%

EWZ 85.67 0.17 0.20% 6.15% 10.63% -0.56% 83.45% 40.35% 52.41% 87.63%

TRF 71.60 -0.01 -0.01% 3.92% 7.99% 2.30% -19.14% 18.54% 13.18% -8.51%

QQQQ 52.33 0.01 0.02% 1.99% 5.00% 1.16% 21.02% 8.50% 12.93% 19.75%

SPY 150.91 -0.03 -0.02% 1.52% 4.70% 2.55% 6.75% 3.26% 1.21% 6.91%

EWU 25.97 0.17 0.66% 1.37% 3.84% -0.69% 10.28% 5.70% 5.35% 8.93%

EWJ 14.25 -0.13 -0.90% 1.35% 4.47% 4.93% 0.35% 4.47% -2.33% 1.06%

FXI 189.40 -8.09 -4.10% 1.01% 9.93% 2.69% 62.71% 29.04% 68.19% 95.82%

IEV 121.24 -0.31 -0.26% 0.69% 2.59% -0.38% 14.81% 8.64% 7.16% 15.80%

EWC 31.21 -0.80 -2.50% -6.16% -12.21% -7.72% 26.36% 8.41% 4.70% 22.68%

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

INTC 27.73 -0.25 -0.89% 6.33% 10.61% 6.94% 36.27% 8.87% 30.13% 34.35%

AIG 61.45 0.10 0.16% 5.71% 15.88% 9.73% -14.83% -3.30% -13.91% -12.55%

VZ 45.30 0.88 1.98% 4.84% 6.24% 6.01% 19.78% 9.58% 6.36% 29.80%

UTX 78.07 0.08 0.10% 4.41% 6.28% 4.51% 24.30% 5.80% 13.36% 20.59%

MMM 86.19 1.37 1.62% 3.52% 4.16% 4.06% 10.13% -3.07% 1.54% 8.33%

IBM 108.86 -0.84 -0.77% 3.50% 4.62% 2.59% 11.92% -5.79% 6.94% 15.53%

HON 58.51 0.28 0.48% 3.34% 7.02% -1.32% 29.73% 6.95% 3.74% 37.38%

HD 29.49 0.00 0.00% 3.26% 1.87% 1.38% -28.20% -13.80% -21.69% -24.25%

CAT 74.20 -0.15 -0.20% 3.20% 8.12% 2.44% 21.32% 1.03% -4.02% 17.78%

C 34.31 -0.04 -0.12% 3.03% 8.23% 4.29% -37.90% -24.56% -34.67% -32.34%

MCD 60.16 -0.12 -0.20% 2.89% 4.23% 1.33% 37.13% 22.18% 19.82% 39.00%

MSFT 34.53 -0.02 -0.06% 2.77% 1.23% -0.60% 15.64% 21.41% 16.58% 19.61%

PFE 24.40 0.23 0.95% 2.69% 6.18% 5.58% -7.19% 0.62% -7.19% -1.85%

XOM 91.50 0.06 0.07% 2.62% 3.64% 2.33% 23.47% 6.71% 11.64% 20.86%

WMT 49.02 -0.25 -0.51% 2.34% 7.19% 12.38% 3.09% 15.64% -1.49% 5.71%

DD 47.19 -0.06 -0.13% 2.25% 5.59% -0.74% -3.77% -0.65% -6.31% 0.30%

MRK 60.67 1.17 1.97% 2.21% 5.22% 10.77% 37.82% 22.39% 20.52% 38.04%

KO 63.15 0.08 0.13% 1.69% 1.36% 2.73% 29.99% 15.68% 22.91% 29.62%

AA 36.91 1.05 2.93% 1.48% 5.01% -1.99% 25.84% 5.85% -5.19% 19.80%

HPQ 51.84 -0.37 -0.71% 1.33% 5.43% 3.80% 24.56% 6.12% 14.16% 30.06%

JPM 46.08 -0.13 -0.28% 1.01% 9.85% 8.14% -4.14% 5.88% -7.51% -1.18%

T 38.47 -0.35 -0.90% 0.68% 2.23% -2.21% 10.07% -0.67% -2.66% 11.09%

BA 93.16 1.38 1.50% 0.67% 4.04% -3.24% 4.47% -1.77% -3.80% 3.50%

PG 74.12 -0.06 -0.08% 0.16% 1.73% 4.63% 14.84% 13.21% 18.93% 16.18%

MO 77.60 -0.20 -0.26% 0.05% 6.35% 6.71% 19.53% 15.15% 11.57% 21.71%

JNJ 67.68 -0.62 -0.91% -0.09% 1.20% 4.78% 1.93% 9.73% 9.16% 2.45%

DIS 32.79 0.07 0.21% -1.09% 2.98% -2.50% -4.12% -2.38% -4.29% -3.95%

GE 37.23 -0.03 -0.08% -2.77% -1.17% -4.59% -1.95% -3.92% 1.28% 5.89%

AXP 56.96 -2.57 -4.32% -3.42% 2.39% 1.53% -5.63% -1.37% -9.21% -3.74%

GM 28.62 0.01 0.03% -4.06% 5.38% -13.67% -2.82% -3.15% -3.57% -1.48%

The Dow 30 Company report from Value Line

McDonalds [GICS 30, Dow 30]

(MCD: Value Line Report Dec. 7: next one is due Mar. 7)
(MCD: Yahoo Finance file)

(MCD: StockChart chart)

(MCD: Billcara2 chart)

(MCD: ADVFN Financial Data)

This week’s report is on McDonald’s Corp (MCD), a company that transformed itself in recent years from being mostly owner-operated to presently where it is 60 pct franchisee-operated. As a consequence of that capital re-organization decision, the Company moved from an ongoing deficit working capital position to being a cash cow, with a much higher percentage of profits being distributed as dividends.

As I see it, the McDonald’s Board learned how to gain the advantages of Canada’s business royalty trust model. They simply gave up the real estate play in order to focus on cash flow so they could pay out more to shareholders. That’s something I wrote about three years ago, which long-term Community members may recall from my TraderWizard days.

How successful was that decision by McDonald’s? Would you believe that MCD is the #1 price performer over the past 52 weeks in the Dow 30, and I believe the same over the course of the 2002-2007 Bull market. Moreover, its Dow 30 leading Total Return has been enhanced by an incredible compound annual growth rate for dividends of +28.0 pct over the past five years, which is expected to continue at a +24.5 pct annual rate for the next five years.

This Company ought to have been in the Cara 100 from the get-go. The financial strength is rated A++ by Value Line, which also tags it #1 for Capital Safety (since July 1990 !!). The operating profit margins are high and growing, and the Return on Equity is now bordering on the exceptional (22.5 pct for 2007, which VL projects to grow to 25.0 pct in 2008).

The Average Annual Dividend Yield for the next 5 years is forecast by VL at +4.1 pct, which is considerably higher than the 5-year US Treasury is paying today (under 3.8 pct) and probably just as safe (LOL). Moreover, we all know the US Govt is not going to be earning a 25 pct ROE any time in our lifetime! So, over the next 5 years, USD is not ever going to match the performance of MCD.

The downside (isn’t there always one!) is that Value Line analyst Matthew Spencer projects a 5-year Annual Total Return of between +5 pct and +10 pct, which when you factor out the projected growth in dividends doesn’t leave much room for stock appreciation. Ah, there is always a fly in the ointment.

And then along came Bill… to tell you not to buy MCD today. The dividend yield is just +2.6 pct and you want to buy the stock when the yield is over +4 pct. And if Value Line projects +4.1 pct as the average over the next five years, you probably want to buy it when the yield is maybe +4.5 pct or higher.

Can that happen? Well, the increase in the MCD dividend from 2006 to 2007, and from 2005 to 2006, was +50 pct. The projected increase for 2008 is +33.3 pct from $1.50 to $2.00, which on projected earnings/share of $3.15 and cash flow/sh of $4.45 is reasonable.

So if the dividend is $2, you need to buy at a price of $44.44 to get a yield of +4.5 pct. A purchase price of $40 would give you a +5 pct yield. Friday’s closing stock price is $60.16, so this might be possible in a Bear market.

By going to the stock chart you will see that 45 was the upper level resistance from December through into mid April, so I believe that will be the support on the downside. Ergo: write the 45 puts to your heart’s content if you are satisfied with (i) an annual dividend yield of +4.5 pct that will grow cash on cash ie, using your cost basis of below 45 (which will be the 45 strike price where the stock would be put to you less the option premium income) plus the dividend that will probably grow at a rate of +24.5 pct if the VL projection is accurate.

Also, at a price of $60.16 today, the P/E of MCD is about 21.3, but VL projects the 5-year average annual PE to be in the vicinity of 17. On that score alone, a more reasonable price for MCD would be roughly 17/21.3 x 60 = 48. But, in a Bear market, the PE will be lower than in a Bull market, or even a sidetracking one. So the 45 is a reasonable target.

I’ll give you another reason why I wouldn’t buy MCD until much lower levels are hit. The RSI-7 for the Monthly and Weekly price series is presently 82.6 and 76.3 respectively. In McDonald’s-speak, that’s like oversize, and when it comes to purchase price, I happen to like undersize.

Less is more, if you catch the drift. If you don’t, then I will tell you that for long-term (strategic) purchases, I am looking to Buy in an Accumulation Zone where the Monthly and Weekly RSI-7 is below 30. The chart shows that the last time that happened was in the 1Q03, when RSI-7 hit below 15, and the price dropped to about 12-13. How good would a 13 basis for MCD look in your portfolio today !!

And if you are just thinking that the price appreciation over 4.5 years from 13 to 60 would be terrific, then think twice. I just explained cash on cash returns that has to become core strategic thinking. The dividends on that $13 investment have returned $4.12 in 5 years, which just happens to be an average dividend of +6.34 pct. Put that in your 5-year Treasury Note and smoke it.

And when the $2.00 is paid out in 2008, your dividend to basis is +15.4 pct. I ask, seriously (but not to rub it in), how many people are making those kind of returns on real estate? That is, not just the dividend return but the price appreciation as well -- the whole Total Return package.

Just think, did you ever once realize when at the drive-through window or inside at the counter you ought to have been buying the stock, instead of the food, for your kids?

That's a wrap.

Now I'm off to the dentist.

Have a good one. A good day that is.

Posted by Posted by Bill Cara on December 8, 2007 10:45:14 AM | Category: Saturday Report

Discourse

I picked up July 230 puts on Blackrock yesterday. I am learning to give these things some time. For IYR and BX, I am out to January 2009. The Blackrock only go out to July, anyway.

Posted by: northvan at December 8, 2007 11:25 AM [link]

It's all good, right? Or maybe just frightening. Does anyone 'believe' the numbers, jobs, inflation?

The charts have their say.

http://ronsen.blogspot.com/2007/12/saturday-morning-coffee-chart-reality.html

Posted by: Ron at December 8, 2007 11:35 AM [link]

"BlackRock Inc was appointed on Friday by the three biggest U.S. banks as lead manager of a super fund that will buy assets from failing investment vehicles as a way to ease the turmoil in credit markets."

(1) Creating a super fund managed from a "central" location->that strikes me as a good first step.

(2) Using those funds to buy assets from failing investment vehicles. Well, I would of course hire someone to examine each "vehicle" under a harsh light and determine FMV under different scenarios. If I'm going to buy any (and who's putting up the funds- the same banks that own these vehicles?), would need to be assured that I'm not buying someone else's problem.

(3) Vehicles that need to marked down should be marked down. Totally worthless paper should be written off.

(4) Going back to the question of the source(s) of the super fund: does this mean the process of valuing the junk yard has become too complicated and banks are pooling resources to have a hired gun clean it up- not a bad idea, really; companies outsource problems all the time.

(5) End result will not change much->the advantage of hiring Black Rock will (hopefully) be the credibility an "appointed" manager brings to the table when handing out the bad news (it's easier having an "expert" tell the wife the bad news, right), but bad decisions are going to be marked down or written off.

(6) So there should in fact be a "calming effect" on the credit markets. We've all had the same experience when we finally hire someone to clean up situations that have gotten out of hand.

Posted by: 2nd_ave at December 8, 2007 12:54 PM [link]

RE: UXG

No one has replied to my question a few days ago about the quality of the UXG drill results announced in April.

Kaimu, since you said emphatically that UXG has never had any good drill results, can you please tell me (and others, who I think would be very interested) why the April drill results (when UXG jumped 50% in one day) were actually not any good? What do you think was so misleading in that announcement so as to make the stock jump 50% after it instead of declining by 50%?

Thanks!

Posted by: David at December 8, 2007 1:15 PM [link]

David, I don't recall kaimu saying the UXG drill results were BAD, just not great, or not as good as hoped for. Also, I don't think there was anything "misleading" in the UXG news release.

However, please have at it. If anybody thinks otherwise, let's hear of it. I, for one, don't hold back when being critical, and I hope nobody here does either. We need to be independent and objective irrespective of having friends and family in these companies. We march to our own drummer. One hundred thousand sets of eyes will always see more than one, particularly when the "one" of us may be wearing rose-colored glasses.

Posted by: Bill Cara at December 8, 2007 3:47 PM [link]

With Gazillions of dollars in derivatives and the major banks you mentioned already in trouble,
what's going to happens when the economy slows further.
Despite good numbers coming out in the November report, Employment is heading south, as measured by both surveys and the two major sectors:Services(84% of Employment) and Goods producing(16% of Employment)

Posted by: Will Rahal at December 8, 2007 3:52 PM [link]

everyone may know this but, Delta Financial (Monish Pabrai, big holder) has filed for bankrupty. greetings from snowy Iowa

Posted by: woolybear1 at December 8, 2007 3:52 PM [link]

Good Read.

False Breaks Warn Of A Market Top
By Colin Twiggs
December 8, 2:00 a.m. ET (6:00 p.m. AET)

http://tinyurl.com/7fw5r

Posted by: moneygenie at December 8, 2007 3:56 PM [link]

Hello All
I found John Mauldins news letter this week particurly informitive as to the nature and cause of the credit markets problems. It explained these "financial abbominations" (My phraseing LOL) in a way that my simple mind could comprehend.

Thoughts From the Frontline
http://frontlinethoughts.com/index.asp

Posted by: Lazarus at December 8, 2007 4:42 PM [link]

Bill:
Re: McD
a wonderful lesson...
Thank you, teacher.

regards

Posted by: joey at December 8, 2007 5:00 PM [link]

I have wondered what the nature of derivatives exposure was in issues like QID, SDS, DXD etc. Perhaps it would be safer to short QLD instead of purchasing a long position in QID....???

Posted by: Oxbird at December 8, 2007 5:21 PM [link]

BX is Blackstone... different than Blackrock.

Just confirming that is what you meant northvan?

Isn't counter-party risk the idea that you're selling off all odds against you (the bank) to another party (your customer), thereby making you more secure?

Isn't this sort of like standard insurance? Chances are you'll claim less than the amount of the initial premiums over your lifetime, however there could be a slight chance that the entire "notional value" of the policy could be distributed. This would be offset by writing a larger insurance policy against a different institution....

Seems like a good deal for the bank.... unless.

"Risk transfer through derivatives is effective only if the parties to whom risk is transferred can perform their contractual obligations. "

http://tinyurl.com/2vbez9

You can break his arm but you can't put him out of a job....

Greenspan's speech is a good overview of why the banks aren't exposed to the total notional values of their credit spreads, just the spread differences (or liquidity disasters).

But that might still add up to a buncha billion dollars. Probably not a million billion though.

"Not surprisingly, an analysis of risks based solely on notional amounts turns out to be misleading. The interviews that Federal Reserve staff members conducted last year indicate that dealers run fairly well-balanced books in terms of sensitivities to changes in interest rates and especially to changes in interest rate volatility. The options that dealers sell tend to have terms that create less sensitivity to changes in interest rate volatility than the options that they buy. Thus, in order to limit the overall sensitivity of their options portfolios to changes in interest rate volatility, dealers must sell a larger notional value of options than they buy. "

The only way they would lose big if the markets become illiquid.... hmmm....

"Critical to any evaluation of the CDO markets is an understanding that, per dollar of notional value, the risk (and risk transfer) associated with various CDO tranches varies enormously. The risk per dollar of notional amount of the "first loss," or equity, tranche can be thirty or forty times the risk per dollar of the senior tranche, which would be required to absorb losses only after the protection provided by the equity tranche and other more-junior tranches had been exhausted. "

??? I wish I had my Fed decoder ring on right now.

Posted by: wavesmash at December 8, 2007 6:59 PM [link]

"The study did note that understanding the credit risk profile of CDO tranches poses challenges to even the most-sophisticated market participants"

Sounds kind of like a meteorologist predicting where a drop of rain is going to fall in a thunderstorm?

"In general, the valuation of CDO tranches is model dependent, and market participants need to carefully evaluate the models that they use and the model parameter assumptions that they make, notably the assumptions regarding default correlations."

Posted by: wavesmash at December 8, 2007 7:06 PM [link]

China Directs Banks to Raise Reserves - NY Times
By DAVID BARRBOZA
Published: December 8, 2007

http://tinyurl.com/yo3ona

"The Central Bank said that it had ordered banks to increase their reserve ratios by a full percentage point, to 14.5 percent, in an effort to tighten the supply of money available for loans. It was the largest single reserve ratio move in four years."

Posted by: BillySundance at December 8, 2007 7:10 PM [link]

shorting QLD in place of buying QID may in fact be safer...worth finding out if it's possible...

for a lot of people on this board the main advantage of the ultrashorts is simply that shorting is disallowed in their retirement accounts.

Posted by: 2nd_ave at December 8, 2007 7:13 PM [link]

ALOHA !!

David ... After you review numerous assays you start to tell what is fantastic and what is good and what is not so good! It depends on the deposit types and how many holes are in the ground and what each drill hole is confirming. Really UXG is just getting started and so far the assays are good in that they confirm further drilling is required. They are not fantastic enough for a stock price above the $5 mark! My assay comments have been in context to the UXG share price.

APRIL REPORT
Out of 47 holes ten(22% 1 out of 5)had no significant gold to report and only one had high grade gold over 1.5 meters(small width). The rest confirmed gold mineralization in low to average grades with mostly small widths. Not exactly an automatic mine!

Even Rob agrees, here is a quote he made on the June assays in the October drill report for Tonkin ...

“Since our last exploration release on June 12, 2007, assay results from 44 holes totaling 35,964 feet of drilling have been received. We haven’t hit any home runs yet, out we are on base and it is early in the game. We have advanced our understanding of the geology and confirmed that we have encountered wide sections
of the right rock types to host a Carlin style gold deposit. In addition, we are fortunate
to have a large land holding in a prospective area and a healthy treasury to fund our objective of exploring aggressively for the next Cortez Hills discovery. I must emphasize that exploration is the research and development of the mining industry, and it is typically a frustratingly slow and expensive process with low odds of success. The results in this press release are positive and encouraging, but not
thrilling,” said Rob McEwen, Chairman and CEO.

You know the healthy treasury he talks about is mainly HIM and his ROB POWER! Without that this company would still be worth $0.35USD where it was when Rob first took over when it was USGL! Its only worth more now because he consolidated five companies(larger land package)and he is the CEO.

Posted by: kaimu at December 8, 2007 7:14 PM [link]

Nowandfutures has an interesting article on Counterparty risk & CRMPG, the real "Plunge Protection Team"

http://www.nowandfutures.com/false_data.html

"When our house is on fire, the first thing we should do is to put out the fire, rather than thinking about installing a fire alarm for future prevention. Thus, priority should be accorded to helping the markets back to normal as early as possible. The efforts undertaken by our central bank colleagues in major markets to this end, including their large-scale injections of liquidity, have been encouraging. "

Japan's FSA chairman in a speech on Thursday.

http://tinyurl.com/35rpfa

Interesting analogy to housing market...

Posted by: wavesmash at December 8, 2007 7:21 PM [link]

Red sky in the morning in China?

Posted by: wavesmash at December 8, 2007 7:22 PM [link]

Hi Bill,
I just returned from a trip to the Heartland - Branson, Missouri - where I think real estate prices are probably setting the benchmark for what is to come nationally with respect to retirement/recreational properties. The Ozarks are far from being an economic powerhouse region but are ranked high for retirement developments, recreation, tourism and entertainment venues. A sizeable, quality-built 3 bedroom ranch with 2-3 car garage in a fully developed area ( large lot with buried utilities, view of Table Rock Lake, mountains etc) can be had for under 300K. Taxes are low, crime is low ( never saw a squad car ), and transportation networks are excellent. Also, hospitals are state-of-the-art. And this area HAS WATER! ( i.e. abundant water you can drink and bathe in ). I take pity on the herds of buyers that decided on FLA & CAL in the past decade as many now are in dire straights due to the bubble's burst.

Posted by: TerryC at December 8, 2007 7:46 PM [link]

just remember is you short qld, or anything for that matter, that you must pay the dividend if you hold it on the ex-div date...

Posted by: TimG at December 8, 2007 8:17 PM [link]

UXG:
Kaimu's analysis of the UXG drill results and UXG's stock price tells me to lighten up on my holdings.

But..
"The Tonkin and Gold Bar properties are located in the heart of the prolific Cortez Trend. The properties encompasses 170 square miles and are situated immediately south of Barrick Gold and Rio Tinto’s Cortez Joint Venture Area, which has past production, current reserves and mineralized material of 33 million ounces of gold."
http://www.usgold.com/tonkin/

While UXG has not hit any home runs yet, the odds are good that they will hit a homerun based on the location of Tomkin, So I am still planning to hold for $5+.

"I knew what to do..... Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them so as to anticipate probabilities."
--Jesse Livermore

Posted by: JogyP at December 8, 2007 8:24 PM [link]

jock et al

Bill so kindly indicated the soon to be additional cara 100 lists....but I misplaced the post of not too long ago and the search function did not help me here. Anyone recall this post and about when they might come down the pipe. tia

Posted by: jasper at December 8, 2007 8:43 PM [link]

Here is a link to a 12/7 Citigroup research report to buy MU...
https://www.citigroupgeo.com/pdf/SNA12710.pdf

Posted by: TimG at December 8, 2007 9:21 PM [link]

latour,

Another reading assignment, there will be a quiz at a time of my choosing. LOL
So much to learn, so little time. Reading is so FASKINATING !!!
I love spending my time this way.

Enjoy, keep an open mind and think, just think.

Money, Power and Modern Art By Henry C K Liu

PART 1: Ruthless empire builders

When the Museum of Modern Art reopened in New York last month with a new US$850 million building, it was the latest manifestation of the legacy of Abby Aldrich Rockefeller. Born and then married into the families who shaped the US economic and business environment for decades, she struck her own path, unlike those close to her who controlled the very nature of money.

PART 2: A monetary coup d'etat

The nature of money has been a controversial issue since the founding of the United States. After the country's first national bank was modeled after the Bank of England came the rise of the robber barons, the opening up of the western US, invention of the Civil War-inspired greenback, and then the year 1913 and the birth of the Federal Reserve.

http://tinyurl.com/5c9jo

Posted by: moneygenie at December 8, 2007 9:39 PM [link]

A few Morning Star Analyst Notes on Cara 100 stocks...

TM http://quicktake.morningstar.com/err/abde/tm.pdf 11/20/07
WMT http://quicktake.morningstar.com/err/abde/wmt.pdf 11/28/07
UBS http://quicktake.morningstar.com/err/abde/ubs.pdf 11/01/07
KO http://quicktake.morningstar.com/err/abde/ko.pdf 10/17/07
DELL http://quicktake.morningstar.com/err/abde/dell.pdf 03/02/07
WFMI http://quicktake.morningstar.com/err/abde/wfmi.pdf 11/21/07

Posted by: TimG at December 8, 2007 9:58 PM [link]

Comments on Credit
Financial Restraint Clears Policy Path

- A significant tightening in financial conditions coupled with greater than expected near-term economic softness argues for a half-point rate cut next week.

- At a minimum, Fed officials are likely to
acknowledge that downside risks now dominate, thereby encouraging expectations for continued accommodation in the new year.

- Undue policy caution now would heighten risks of a pronounced slowdown more likely than aggressive action would rekindle inflation. See the Disclosure Appendix for the Analyst Certification and Other Disclosures.

https://www.citigroupgeo.com/pdf/duringerror.pdf

Posted by: TimG at December 8, 2007 10:34 PM [link]

ALOHA !!

JoyP ... I do not think UXG is worth $5+ unless they get some drill results that hint at a Cortez Hill deposit. As Rob is saying they are finding the "right rock", just not enough of it ...

I would not apply Jesse Livermore to geology and finding mines. I would apply what Rob McEwen himself says about finding an economically viable mine which is in the quote I posted ... Success in the junior exploration sector depends more on geology than stock trading principles. Though there is a place for RSI and charts and Jesse!

"I must emphasize that exploration is the research and development of the mining industry, and it is typically a frustratingly slow and expensive process with low odds of success." ---Rob McEwen

SLOW AND EXPENSIVE WITH LOW ODDS OF SUCCESS!
Wow ... that sums it up in a realistic manner ...

If you add in the POG price capping and manipulations then I'd say the markets can stay irrational a lot longer than you can stay solvent.

What I do in these circumstances is wait until there is a material discovery announced instead of jumping in and out and hoping you got in at the right time! Timing a major gold discovery is like timing a meteor hitting your house! I personally like the odds of timing a jump in the price of ECU SILVER-ECU.V?ECUXF.PK once the new 43-101s are announced around the middle of December. I think the odds are you will make money faster doing that instead of waiting for UXG to hit something major! With ECU SILVER I know the time frame is within two to three weeks not forever. Currently the ECU price is trading a lot less than UXG! Nothing is a 100% guarantee. If the POG and POS plummets at the same time ECU announces the new 43-101s then it could nullify the gain temporarily, but there will be a gain! In my past experience a positive 43-101 always adds value to the share price about 98% of the time!

That is what I would do if I still held UXG above $5+ right now. I do not hold any UXG since I sold my entire holdings of UXG at $6+. Last I looked ECU share price was at $2.17C and UXG was at $3.45C, which means you could get close to 1.6 shares of ECU for every UXG share. Then you would own shares of a company that is at production now with five high grade mines not zero!

Naturally any decisions to acquire ECU in exchange for UXG should be researched thoroughly on your own.

Posted by: kaimu at December 8, 2007 10:54 PM [link]

To: moneygenie
thanks again :-)

Posted by: latour at December 8, 2007 11:31 PM [link]

wavesmash,

Yes, I was referring to Blackrock (BLK), Blackstone (BX), and iShares Dow Jones US Real Estate (IYR).

Sorry to anyone that was confused.

Blackstone (BX) has high exposure to commercial real estate.

Posted by: northvan at December 9, 2007 12:48 AM [link]

ALOHA !!

Bill I see that "bilateral netting" is based on GPFV(gross positive fair value) and not GNFV(gross negative fair value). I therefore also see that the graph 5B could be inverted in the event that the "banks owe the counterparty"(GFNV)!! In that case "bilateral netting" would be a catastrophe.

I also find that Graph 8 showing future gold derivatives declines significantly in five years and precious metals derivatives decline to zero in five years. In this case the OCC separates "gold" from "precious metals". Are they trying to say gold is money? What do these guys know about gold and precious metals that we don't? Why are those derivatives evaporating away in five eyars? Is that a hint?

I love this one ... PFE!

PFE
Potential Future Exposure (PFE): An estimate of what the current credit exposure (CCE) could be over time, based upon a supervisory formula in the agencies’ risk-based capital rules. PFE is generally determined by multiplying the notional amount of the contract by a credit conversion factor that is based upon the underlying market factor (e.g., interest rates, commodity prices, equity prices, etc.) and the contract’s remaining maturity. However, the risk-based capital rules permit banks to adjust the formulaic PFE measure by the “net to gross ratio,” which proxies the risk-reduction benefits attributable to a valid bilateral netting contract. PFE data in this report uses the amounts upon which banks hold risk-based capital.

Okay ... here's the BLANK that cannot be filled in ... "based upon a supervisory formula in the agencies’ risk-based capital rules ..." It seems this is proprietary info to the bank only and not public knowledge. How can anyone assess risk under these conditions. It seems not even the banks know what another bank's risk is.

So according to what Greenspan told Ron Paul none of this "derivatives stuff" needed regulating. If it were regulated then it would have to be more transparent! Of course ... MY GOD ... who would want more transparency? So why is it we need a central bank again? I mean can't we go broke on our own without banks helping us?

Posted by: kaimu at December 9, 2007 1:24 AM [link]

ALOHA !!

By far the biggest derivative exposures are to "interest rate" types, especialy those with maturities within 12 months, but those within 1-5 years are also exceeedingly high. Graph 7 shows $39tril ... with a T ... maturing within one year. Then $34tril ... with a T ... maturing within 1-5 years. Total is $73tril ... with a GIANT "T"!!! That's just interest rate derivatives!

I am sure the FED is looking at this potential hidden $73tril crisis when they assess the risk of raising rates or keeping rates flat. This means the FED and the US Treasury's hands are tied and so is the boat anchor around the US Peso's neck. Now I see why there are no gold or precious metals derivatives out past five years! The US Peso won't exist in five years!

VIVA LA AMERO !!!

Posted by: kaimu at December 9, 2007 1:40 AM [link]

Jasper- I don't remember the post, but I think the junior miners list will be sometime after PDAC, which is March. We have a "raw" list, but until we develop criteria and judge the list against those criteria, it's not ready for prime time.

Posted by: Jock at December 9, 2007 2:08 AM [link]

Kaimu:

"Now I see why there are no gold or precious metals derivatives out past five years! The US Peso won't exist in five years!"

The USD may exist in five years but not in its present form.

Will the global economy have a different form of trading mechanism in the near future?

It seems to me that the signs are here. The creation of the EURO, the attempts by other regions to create common currencies, the use of a "basket of trade weighted dollars" seem to indicate to me that there is going to be a major change in the near future.

Maybe it will be a "Trade Currency" based on gold or a "basket of commodities" or some other form but I believe the change is not far off.

I would find it interesting to see the amount of change in the US$, CDN%,or any currency which has been caused by speculators. How can trade be facilitated if the "facilitator" can be maniplated? The Canadian dollar alone had a 10-12% (approx) decline against the USD in the past few WEEKS. How can companies adjust to that kind change in buying/selling power in such volatile conditions? They all can't have the expertise nor the where-with-all to use hedging techniques.

Something is in the wind. The USD will still exist but maybe not as the "world currency."

Posted by: golfer at December 9, 2007 7:07 AM [link]

China and its foreign reserves

http://tinyurl.com/3bmyfy

Posted by: golfer at December 9, 2007 8:05 AM [link]

Bill and/or others:

In your write-up on MacDonalds you say... "then I will tell you that for long-term (strategic) purchases, I am looking to Buy in an Accumulation Zone where the Monthly and Weekly RSI-7 is below 30...

Dealing with your "AZ, DZ, Buy alert, Sell Alert" method that I am trying to learn and apply, I was under the impression that one should wait for the BUY ALERT but you say "I am looking to Buy IN an Accumulation Zone where the Monthly and Weekly RSI-7 is BELOW 30...

I realize that there are other indicators and factors involved in determining the actual buy price one arrives at but using the AZ etc method only am I correct in assuming (using the Mac case as an example) that:

(1) its daily RSI will be in and out of the AZ and DZ any number of times before it enters the Weekly and Monthly AZ, and

(2) once its RSI is in the weekly AND monthly AZs you would then make your buys when the DAILY RSI gives a BUY ALERT?

I know that this isn't supposed to be Forest Science but sometimes I can't see the trees for the forest.

Posted by: golfer at December 9, 2007 9:21 AM [link]

Bill,
There are many paths to making money in the stock market. One is your method of buy low and sell higher using the RSI's. Investors Business Daily has a similar concept of buying quality companies with explosive sales and earnings then using cup with handle formations, to name one, with the concept that their picks tend to break new highs and go higher. They buy high and sell higher. It is confusing to say the least. I suppose that each side has empirical evidence to prove their point. But I can tell you that from my experience watching the IBD 100, you don't want to be on the top of the list. The number one position tends to be the shorts favorite. That "has" proved itself out to the detriment of the retail public.

Posted by: stktrader at December 9, 2007 10:11 AM [link]

stktrader,

In the early 1980's I watched a couple of very bright friends of mine use the IDB system as the cornerstone of their new Fund. What happened is that they blew up capital. Thank you, but I'll stick to my way.

Posted by: Bill Cara at December 9, 2007 10:24 AM [link]

golfer,

What frustrates me is that I have to dot every i and cross every t. I only wish I had the time, and that I didn't have to deal with dental freezing and penicillin and people trying to take down my computers with viruses...

"I am looking to Buy in an Accumulation Zone where the Monthly and Weekly RSI-7 is below 30..."

Yes that's where I am looking to be a buyer and yes, as you indicated, when there is a cross-over of the Daily RSI is where I am likely to pull the trigger.

And yes, before I pull the trigger, I look at ten other factors. I do all that because I know better.

I don't think this is Forest Science at all, but with more questions like that I really am thinking of leaving the community to you all. Its time for me to take a break and learn from you.

This week I was asked to spend 15 minutes of my time hunting down e-mail addresses for some of you who wanted to discuss things one to one. I am done with that stuff. This is what it is and i am working hard to make it better. There are now over 20 people helping me do it. I need to spend more time with them.

As I say, there is a time for everything, and now is the time I need to focus on other things and let the Community start discussing these types of questions.

I'm sure you understand.

Posted by: Bill Cara at December 9, 2007 10:34 AM [link]

Kaimu:
Your points on UXG/ECU is very compelling for a switch.
While I still beleive in the odds of UXG going over $5 wthin a month or two,(my average cost on UXG is around 4.2), I plan on switching 1/2 of my UXG for ECU.

Thank you for your excellent analysis.

Posted by: JogyP at December 9, 2007 11:25 AM [link]

ALOHA !!

golfer ... I am not saying there will be no US Peso. Every country has to have a currency. If we keep the US FRN as currency then maybe 100 of them will buy a Mexican Peso. Or we will "unify" and we will do a Euro and call it an Amero! It seems that is the direction Bush&Cheney and the two party aristocracy wants the USA to go. There is no oppostion from Democrats as this plan unfolds. Ross Perot warned about this back in the 1980s and now Ron Paul warns.

Back in 1980 when the POG soared to $850USD the US Dollar and then Fed Chairman Paul Volcker were at the "abyss"! In order to save the US Dollar Volcker racheted up interest rates in very short order. Soon the Fed Funds rates were up to 18% from 1980 to 1981 and the faith in the US Dollar was restored. Back then there was not a $73tril derivatives axe hanging over US Banks and the US Peso, just a $850USD gold price and the cost of the Vietnam War. Now we have an $800+ gold price plus $73tril derivatives exposure in just interest rate type derivatives, a collapsing real estate market, recession economy, the $2tril "War On Terror" and starting in 2008(in three weeks)retiring babyboomers en masse who will switch from depositing tax revenues to the US Treasury to withdrawing huge revenues. Without tax revenues our government will resort to printing! That will be the end as we know it monetarily speaking.

All any current and past two party(Dems & Reps)administrations have ever done is to constantly push our liabilities off into the future and to spend like drunken sailors on leave in Honolulu!! If the two party aristocracy stops spending then they lose their power. Its that simple. This is socialism where citizens and business rely on the government for their "security". Of course we all know here at Bill Cara that there is no security in socialism just like there is no security in democracy. I believe we Americans have had it so good for so long because of our reserve currency status. We could have had a government based on BOZO and we would have done well. All we and our money has going for it is the reserve currency status. Once that is gone we are just another PESO in a World crammed full of worthless PESOS! The FED cannot raise rates like Volcker did ... Wall Street greed and the FED and the two party aristocracy have seen to that! That leaves nothing but "spin" and gold in my playbook!

Our government has brainwashed us and the World to believe the US Dollar is as good as gold! Once "confidence" is gone it is gone! The US military cannot enforce any thing any more like it did after WW2. The genie is out of the bottle and the entire World is armed to the teeth with nukes and RPG-29s and the knowledge that the US Peso is on its last legs! Napolean once said "An Army travels on its stomach"! But what an Army really travels on is MONEY ... If you cannot get a loan then you cannot get an army! Look at Africa for proof of that concept!

Posted by: kaimu at December 9, 2007 11:55 AM [link]

Stktrader -

I suspect IBD's approach looked GREAT from 1995 through 1999 - when tech growth stocks were flying, but not so well since.

BTW, I have never found a (surviving) tech stock which grew anywhere near as fast as the hottest Canadian junior miners, not QCOM in 99, not TASR thereafter.

Aurelian went up 50 times in 4 months last year. And has plateaued relatively near the high. Not that it's easy to pick the winners in juniors either.

Posted by: Jock at December 9, 2007 11:58 AM [link]

craig/jogyp/golfer-

any opinion(s) on a (ST) long/short strategy (does it not seem at this juncture that the odds of day-to-day market direction are 50/50)->

long- a basket of the 5-6 cara 100 in the AZ
short- you could use stocks in the DZ, an ETF, or short candidates you have been eyeing

just a thought

Posted by: 2nd_ave at December 9, 2007 12:06 PM [link]

ALOHA !!

JoyP ... That is what I have done because I believe ECU has the opportunity for a share price increase within three weeks. That does not mean that there aren't other junior explorer choices to "elevator" on! I find it very hard to believe that ECU will not go up rather rapidly based on the two upcoming 43-101s they plan to report soon. Based on my experience a 43-101 report where deposit reserves rise over 100% moves share prices up quickly! I believe the ECU 43-101s(two) will be closer to a 200% increase in reserves. That would be an early Christmas present!

Posted by: kaimu at December 9, 2007 12:33 PM [link]

Bill:

I do understand...that is why I addressed my Q to

"Bill and/or others"

Thanks for your answer.

Posted by: golfer at December 9, 2007 1:21 PM [link]

2nd re ST strategy -
This is generally what I do now. I have a short position in XLY, RTH, IYT and a bit of TLT (for a different scenario) via LT put options (4-12month). My long position now is reduced to mostly core holdings in income enhanced global equity CEFs, canroys, some preferreds, some PM and U juniors miners (mostly with current production with the exception of KRI and UXG), some alternative energy (including nuclear).
My net position is very slightly short biased now and 50% is in cash equivalents (including PM bullion). I generally try to avoid intraday trading - I am bad at making real-time decisions.
With this double-sided position I trade on large swings - when I think market is overextended in either direction I re-balance short/long exposure accordingly. Now that I have reduced my long portfolio to core holdings I mostly do rebalancing by adjusting short exposure by trading puts. This worked reasonably well for me for the last year and prevented large portfolio swings. But it certainly does not guarantee good returns and I have to admit that last couple of weeks had been hard for me - I made few costly mistakes, there is simply too much external influence on the markets.

Posted by: occam_razor at December 9, 2007 1:29 PM [link]

2nd_ave:

I am on the same trail. Early this morning I went to Korvus's RSI tool and took the approach you are referring to. I have set up two "dummy portfolios" based on the Cara 100 Buy Alerts and Sell Alerts and will be monitoring them to see how it works out.

For now that's the long and short of it.

Posted by: golfer at December 9, 2007 1:50 PM [link]

Mom&Pop Stuff:

Buying Precious Metal, the physical, and specifically SILVER/AG

Yesterday, Saturday 12.8.07, the best buy I found, when one is limited to a fixed income, is the ‘clad’ Kennedy half dollar.

Here is my reasoning:

Friday 12.7 AG close=$14.34 or spot price.

Kennedy half’s minted during the years of 1965-thur-1970 contain .1479 troy ounces (Tz) of pure AG.

Actual Melt Value (MV) i.e. if you melt down the coin and separate all the silver (AG) from the rest of the other metals consisting of copper-nickel the AG would be worth $2.1207.

A $10.00 (face value) roll of Kennedy clads contain 2.9579Tz/AG.

On eBay yesterday, auctions of Kennedy clad were won @MV including shipping and handling fees (S&H). Meaning you could buy AG at spot price or pay $2.12 each for a Kennedy clad half dollar.

However, also yesterday, my local coin shop sold to me JFKclads for $1.57ea (cash, no tax) and the reason for this inexpensive price: they were taking up tooo much storage space, he had a bunch to sell, and it cost toooo much to ship them for the small margin he would make. So, I backed up my Ford-150 and purchase AG 25% below spot.

I now own one of the most recognizable coins in the world, in a small denomination one could easily conduct business with to buy some bread, milk and say a couple of gallons of gas with and not have to haggle over the right change if you only possessed a one ounce coin of gold (AU).

Posted by: C.Note at December 9, 2007 1:55 PM [link]

Kaimu,
ECU seems like a good trade. I am going to buy 1K tomorrow. The ticker for USA traders is ECUFX. The market makers have shaken the tree lately and 2.15 usd plus or minus seems like a good price.

Posted by: stktrader at December 9, 2007 2:01 PM [link]

occam_razor/golfer- thanks for your responses

traded my FXP for more QID friday, so short positions now limited to QID/SKF/DXD...(last four weeks the ultra-shorts initially took the entire port up 7%->which then rapidly receded to just over 1% as of friday)...

long positions in UNG/BMD/UXG/and some MU picked up at friday's close...

cash at 60%...

golfer- not a bad idea to monitor dummy ports before committing capital, no compelling reason to jump in right now...

Posted by: 2nd_ave at December 9, 2007 2:11 PM [link]

C.Note

Nicely done. And smart. That's a great deal - where is your local coin shop so I can score some of those?

Posted by: mojo at December 9, 2007 3:03 PM [link]

Fascinating video titled “The most important video you’ll ever see.”
It come in eight ( 9 minute segments), please take nine minutes and watch part one and you will now if your hooked to watch all segments like I did.

The subject is Dr. Albert A. Bartlett's lecture on "Arithmetic, Population, and Energy."

It is very thought provoking and stimulating.

http://tinyurl.com/26awdm

Enjoy

Posted by: Telestar3d at December 9, 2007 3:36 PM [link]

Will raucus CANADIANS replace BEARS as #1 in Stephen Colbert's THEATDOWN?

Ben Stein's moans of a flight with:

"six fantastically drunk, rowdy Canadian oil-field truckers in it. They were telling filthy jokes, throwing things, wrestling with one another. I asked them to stop and they did — until the flight attendant gave them more drinks. Then they were totally out of control. I spoke to them and they laughed at me. I asked the flight attendant to help. She said she was afraid of them."

Posted by: Jock at December 9, 2007 3:49 PM [link]

stktrader
There are many ways to skin a cat, and buying all time highs is definielty one of them, but I'm not sure the average investor has the discipline to play this game, I believe you have less winners but the ones that win can be huge. So provided you are true to your form you need to cut losses quickly and let winners run .
Never forget Bill's approach is based on quality companies, and then buying when they are weak. if they are not quality he dumps them from his list..this is a huge edge in my opinion.

Posted by: mikede at December 9, 2007 3:51 PM [link]

C.Note- if you haven't cleaned him out already, why not put a deposit on the remainder and finance the purchase via an eBay auction? congrats...very slick mom&pop arbitrage...

Posted by: 2nd_ave at December 9, 2007 4:11 PM [link]

Brazil - Petrobras announced another oil and gas find "of high potential" off Brazi's coast:

http://news.bbc.co.uk/2/hi/business/7133233.stm

Posted by: Jock at December 9, 2007 4:18 PM [link]

Interesting blog post on seeking alpha and correlation of interest rate cuts and lower equity markets.

I also agree most hb&b will be selling into any rate cut rise as well as shorting.

http://tinyurl.com/26xpaa

Posted by: NYUgrad at December 9, 2007 4:18 PM [link]

Si02,
Are you still testing Skype? I'm off work this week and will have the site up most of the time if you're still needing readers to help out.

Posted by: telenetworxx at December 9, 2007 4:19 PM [link]

Kathleen Pender of the SF Chronicle continues her xlnt coverage of the rate freeze:

http://tinyurl.com/2fchhm

Excerpts:

"What many find irksome is that the freeze seems to help those who gambled the most."

"Your FICO credit score must be less than 660 and less than 10 percent higher than it was when you took out the loan. That puts you in the bottom 30 percent of Americans based on your credit score."

"Also, your first mortgage alone must be for more than 97 percent of your home's value, meaning you put less than 3 percent down, or the value of your house has fallen significantly."

"A fascinating though somewhat technical piece on the blog Calculated Risk surmises that this "convoluted and counterintuitive plan" was designed to stay 'on the allowable side' of the contracts (called pooling and servicing agreements or PSAs) that govern how securitized loans are handled.

"Loan servicers - the companies that collect mortgage payments and work with borrowers on behalf of investors who own the loans - are given only so much leeway when it comes to modifying loans for struggling borrowers. If they step outside those bounds, they could be sued by investors. The loan pool could also lose some of its tax and accounting advantages.

"As it happens, the PSAs for these deals will nearly universally contain language that says loans can be modified only if they are in default, or default is imminent, or default is reasonably foreseeable. Therefore, what the plan does is simply provide a kind of standard definition of those categories for the vintages of loans in question," the report says."

"'It gives a sense that the government ought to be engaged in rescuing borrowers in this particular category. It also conveys the message that foreclosures are a bad thing or unhealthy. Foreclosures are a natural part of market discipline. If you take out the impact of foreclosures you have reduced the stick that stands behind the commitment to pay on the mortgage.'"

Posted by: 2nd_ave at December 9, 2007 5:14 PM [link]

NYUgrad
That's a great article. It goes right along with my theory as well. Look at what happened after the last two rate cuts. Aftert he first one the market shot up to new highs. But then after the second one we retested the August lows. Since then we've been grinding higher and after this one I would expect another test of the August lows before going to a new high. If it looks like I'm right Tuesday, I'll buy puts on SPY and DIA. We'll have to see what happens though.

First we get the entertainment Monday night for H&R Block's earnings call. That should be very interesting.

Rob.

Posted by: Finger Lakes at December 9, 2007 5:18 PM [link]

another take on the rate freeze (and the super fund) from sean olender of the SF Chronicle:

http://tinyurl.com/343tc2

"Excerpts:

"the 'freeze' is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with 'working families,' keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth."

"First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected."

"The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC."

"What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic - not five years from now."

"As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.

Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.

Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.

If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?

It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it."

olender is a san mateo attorney...so i think in general people 'get' what the bailout is all about...

Posted by: 2nd_ave at December 9, 2007 5:36 PM [link]

Rob,

they release earnings monday after close. but the conf call is tues morning at 8am.

Posted by: NYUgrad at December 9, 2007 5:42 PM [link]

NYUgrad,
So, unless the numbers are horrific, they might not start crashing until the Pre-market Tuesday. And since they're not a bank a rate cut won't help them widen their spread. The only way they won't drop big is if they can stuff their liabilities into the Super SIV or whatever they're calling it now. Otherwise, they have to be toast.

Rob.

Posted by: Finger Lakes at December 9, 2007 5:49 PM [link]

2nd,
If it is 50/50, and it seems that way to me, then I'm setting up for the fed with trades on both sides.

Big fed cut (50 basis pts or more) buy financials, either ETF or individual equities, home builders, GLD, GDX, AUY, SLW. Maybe a little WGW in preparation on Monday if it's the right price. Maybe ultralongs like QLD. All as trades as my real LT thesis is dire.

If it's 25 basis pts I'll wait a bit to see what happens as I think it could bounce then sell off and we would have the chance to short as we kick the can down the road again.

If no cut I'm looking to short and buy SKF/QID/DXD.

Only a 50 pt cut would have me pushing the buy button automatically.

I'm just using simple stops on my longs (INFY/MU/DOW/WGW).

For those debating IBD vs Cara RSI....I started out using IBD, made approx. 20% in 2005/2006, lost that and more down to 15% *below* basis. Found this blog and our fearless, dentally enflamed host early in 07.

From Feb 07 until now I'm back up about 10% above where I started *in addition* to physical gold and silver positions and my IRA up over 30%.

Bill Cara saved me, my money and my sanity.

Posted by: Craig at December 9, 2007 5:52 PM [link]

Telestar3d...

Great set of videos from Bartlett. Thanks for pointing them out.

Posted by: AlaBill at December 9, 2007 6:31 PM [link]

2nd_ave:
I am so confused by the market movement these days I don't know what to bet on.
I was able to escape the some of the financials last week with good gains(MER,FNM etc).

Part of me is looking for a santa clause rally for the rest of the year while the other part is looking for a selloff after the Fed rate decision tuesday.

Major holdings: C,BAC,INFY,OSK,SNDK,SNCR, UXG, KRY, GFI
Ultra shorts: DUG, DXD,QID

Planning to add FFIV, ECUFX and exit/reduce C, INFY this week.

Posted by: JogyP at December 9, 2007 7:11 PM [link]

Rob,

Just be careful. Breeden used to be the WCOM police and head of the SEC. I don't know his track record but he would be an ideal person to navigate and or sidestep the subprime issue momentarily with his connections.

And who really knows. maybe they have some positive news that could make the pps rise.

But HRB still owns that subprime. and Option One was a shady subprime lender who makes it hard for customers, even those who are current with payment. That is the core cavity that will split this tooth in half! (sorry for the dentist reference Bill)

Posted by: NYUgrad at December 9, 2007 7:52 PM [link]

Rob and others,

I wanted to also remind you that on Nov 12th, someone bought a a 28,000-lot transaction in the January 20 puts for HRB, which is 74% of open interest in one trade! That buyer knows something!
Link: text right under citi.
http://tinyurl.com/39xwbm

Jan $20 puts on yahoo:
http://tinyurl.com/3aoguq

Good luck tomorrow. I'll be on the road to a client meeting when they release numbers but will try to access the 10q on the blackberry.

Posted by: NYUgrad at December 9, 2007 8:05 PM [link]

I don't think i ever posted this but it was a letter from Ernst prior to his departure regarding Breeden and his opinion of Breeden's agenda.
http://tinyurl.com/2tw2qq

Here is meat of the letter dated July 31st, 2008:
"It is unfortunate that a dissident hedge fund, Breeden Partners, has chosen to launch a distracting proxy contest. Breeden Partners owns less than 2% of our shares and has been a shareholder for less than a year yet seeks to replace more than 25% of your Board with its own handpicked slate."

Posted by: NYUgrad at December 9, 2007 8:20 PM [link]

Telestar3d at December 9, 2007 3:36 PM

"The subject is Dr. Albert A. Bartlett's lecture on "Arithmetic, Population, and Energy."
It is very thought provoking and stimulating."
http://tinyurl.com/26awdm

thanks Telestar

Very interesting I second it as a recommendation to all, especially any one interested in energy and commodity investments. This one is from 2002, but he has been doing this speaking tour since back in the late 70's, the math hasn't changed he's just massaged the message a little.

I related with his attempts to correct misleading and outright lies from the gov and leading printed publications. I've done the same thing many times with press releases from Barrons and the Wall Street Journal, usually I don't even get a reply, about 20% of the time I receive a response that I was right and they're sorry, but I have NEVER seen a correction press release issued, the article just immediately disappears from the web. Ever wondered what happened to those market moving press releases where the link just on longer works after a few hours or days ??

Posted by: Quasi at December 9, 2007 8:48 PM [link]

NYUgrad

Just looking at those Dec $20 puts with all the vol we saw on Fri, but as yet I don't see any change in the open interest. I would have thought if the open interest had changed it would be on the books by now, or does it not show up till the open on Monday.

Anyway could be all that vol Fri was just people changing deck chairs, ie no new positions. Will be an interesting open on Tuesday.

Posted by: Quasi at December 9, 2007 9:19 PM [link]

Blackstone plans audacious bid for Rio Tinto
By David Litterick
Last Updated: 12:01am GMT 10/12/2007

Blackstone is planning an audacious break-up bid for miner Rio Tinto, The Daily Telegraph can reveal.
Blackstone believes Rio Tinto's key iron ore operations are worth at least $110bn

The US private equity giant is in the middle of putting together a consortium - believed to include a Chinese sovereign wealth fund - to mount the bid for Rio, currently the target of an unwelcome approach by rival mining giant BHP Billiton.

Blackstone is already believed to have appointed lawyers for the approach, and is in talks with bankers and public relations companies.

http://tinyurl.com/33q85w

Posted by: moneygenie at December 9, 2007 9:56 PM [link]

Re my laptop keying problem, I don't think it's phyical because it does exactly the same sequence of things every key I hit. The first one never registers until I hold it down for three seconds. the next one is two seconds, and the ones after that about 1.5 seconds.

Also, its not the driver because I went to an earlier driver and the same thing happens. Its also not the settings because I went through all that with the Best Buy guy on the phone after I had done all the trouble-shooting myself.

I'm just wondering if being too close to my Mac, the Windows OS got screwed (somehow). LOL. Although this problem started a couple days ago after I was transferring e-mails back and forth between the two machines. Maybe they exchanged machine fluids or something? Do you think?

The thing works great via remote access from a different computer (one that hasn't touched my Mac), so its not my app software.

Maybe you geeks will have an answer before I have to spend several hours tomorrow that I really don't have to spare.

Posted by: Bill Cara at December 9, 2007 10:12 PM [link]

Scale of shutdown in debt markets revealed
By Edmund Conway Economics Editor
Last Updated: 11:52pm GMT 09/12/2007

The full scale of the shutdown in debt markets around the world has been laid bare by figures showing that growth in corporate bond markets almost ground to a standstill in the late summer.

http://tinyurl.com/33g76a

Posted by: moneygenie at December 9, 2007 10:19 PM [link]

Ohio has been one of the worst hit with foreclosures. Their Attorney General Marc Dann has begun an offensive and is starting to uncover evidence that Wall St were not just accomplices, but the ring leaders.

http://tinyurl.com/yvgugf

Email and other evidence gathered in recent months is raising "disturbing" questions about the role of Wall Street.

"I've gone from saying, 'They must have known,' to it's possible the investment banks were directive of the mortgage companies who were directive of mortgage brokers," Dann told Reuters on Friday.

Posted by: NYUgrad at December 9, 2007 10:21 PM [link]

Re the keyboard issue: it occurred to me that my wireless Mac keyboard is right beside the laptop. Maybe that's the problem? Dueling keyboards... Do you think?

Posted by: Bill Cara at December 9, 2007 10:24 PM [link]

Bill,

Start> control panel> Printers and other hardware> Keyboard. There are some delay settings there.

If not then I would recommend googling "Keyboard delay ___(Insert your laptop model #).

PS, I am on my 2nd thinkpad and love it. Had dell and they crashed consistently and overheated often.

Posted by: NYUgrad at December 9, 2007 10:32 PM [link]

Bill,
if NYUgrad's suggestion doesn't help, perhaps you need to check for malware - run something like spybot (http://www.spybot.info/) to ensure you haven't acquired a keystroke logger along the way.

Posted by: cyderman at December 9, 2007 11:09 PM [link]

China's SNP invests $2B into Iran oilfields.

http://tinyurl.com/36ybuq

Doesn't look like anyone's listening to Paulson's demand to freeze assets of Iran.

Where's the China sovereign investment fund going?

"Vice Finance Minister Li Yong was quoted by state media as saying that only a third of the US$200 billion would be invested abroad, and it would avoid the aviation, oil and telecom sectors"

http://tinyurl.com/33gflj

So what's it investing in?

This isn’t surprising. Given the nature of the fund, Beijing wants to dial down the controversy – and it can always leave the dirty work to the likes of PetroChina and Sinopec.

"The remaining two-thirds will be invested domestically, Li said, focusing in particular on the banking sector. As has already been widely suggested, CIC will buy Central Huijin, the investment arm run by the People’s Bank of China (PBOC). "

"uijin has been responsible for recapitalizing China’s Big Four state banks in recent times. It used money from the forex reserves to write off the bad debts and, in return, took huge blocks of shares in the state lenders. These will now go to CIC. "

Speaking of wealth transfer...

"China will encourage its banks to look for more acquisition targets in overseas markets, a leading banking regulator said. Speaking at a conference in Hebei province, Wang Zhaoxing, assistant chairman of the China Banking Regulatory Commission, said the strategy would improve the global competitiveness of domestic banks. "

http://tinyurl.com/2ro6jv

"Three cheers for Chavez" from China.

http://tinyurl.com/2vaoax

Posted by: wavesmash at December 10, 2007 1:24 AM [link]

"China may become the world's largest gold producer in five years. Gold production rose 8 percent to 260 tonnes this year, up from 240.1 tonnes last year, according to the China Gold Association. The US, which is now the world's second-largest producer, is expected to have an output of 250 tonnes this year"

http://tinyurl.com/36ybuq

Posted by: wavesmash at December 10, 2007 1:27 AM [link]

Cyderman may be onto something Bill.
I know you have no time... but run a full virus scan and spyware.

One of the first virus' I ran across back in the 10 MB HD days was a keystroke virus.
Should be a routine find for McAfee or Norton.

Maybe the only way to transfer w/o detection was from Mac to PC! File to file may bypass detection software.

Posted by: Craig at December 10, 2007 2:07 AM [link]

ALOHA !!

I think the US Taxpayers should start their own "sovereign wealth fund"SWF! I mean according to Bush's own FY2008 Budget the US Taxpayer, meaning those employed and those retired, are contributing $1.6tril to the US government "kitty"! If we put in 5% after tax we could raise $800bil and buy PetroBras and have our own private oil supply based in the Bahamas(tax haven)! Then we could start buying up our own US politicians and the SEC and pretty soon we'd be running the USA! Then we could create "debt laden offshore shell companies" and sell them to Wall Street and laugh when they go belly up! Then we could put Wall Street out of business ... Its called fighting "fire with fire"!

YEAH-H-H !!!! What a coup !!!!

Posted by: kaimu at December 10, 2007 5:21 AM [link]

ALOHA !!

OPPPS ... typo ... too many zeros ... 5% of $1.6tril is $80bil not $800bil ... Still enough to buy our own oil supply and our own government and banks based in an offshore tax haven. If Haliburton can move offshore to avoid US taxes why not US Taxpayers? Then we could start our own currency backed partially by gold called the "Bozo" and all other people in the World would flock to the BOZO to preserve their wealth in a sea of floating fiat corpses ... BUY THE BOZO !!!

Posted by: kaimu at December 10, 2007 5:35 AM [link]

ALOHA !!

I am not kidding ... The US Taxpayer is perhaps the most abused, misinformed and bullied entity on the face of the Earth, yet the most wealthy entity on Earth. Why is it that firemen and electricians can start a union but somehow US Taxpayers can't? I have always thought that for many decades now and I have not come up with a good reason why we can't have our own union that lobbies for our needs and not everyone elses ... What a huge voting block that would be ... Remember that little box on the 1040 tax forms where you check $1 for an election fund? What about a union where you put in $2 every year with some 140mil taxpayers thats $280mil to start buying US politicians! Big corporations do it so why can't we? Quit voting for these idiots and lets just buy them! Its obvious they're all for sale!!! It'll be faster and cheaper in the long run! We could link up with other "global taxpayers" and our funding and voting block would be GIGANTIC!!! HA!!!

Our motto would be "WHATS ANOTHER 5%?"

Posted by: kaimu at December 10, 2007 5:54 AM [link]

ALOHA !!

Look the senior citizens of the USA have done it! Its called AARP!!!

TAXPAYERS UNITE !!

Posted by: kaimu at December 10, 2007 5:59 AM [link]

cyderman,

As soon as you mentioned this, a light went on. I think I ported over a keystroke logger virus via Kingston transfer from Mac to PC.

I installed AVG and spybot thinking that PC anti-virus may have been compromised. That cleaned up the problem. Today I will install a new copy of McAfee VirusScan and also rely on the Bahamas ISP firewall to stop these intrusions.

I'm now good to go. Relief spelled PC. Who woulda thunk it?

Posted by: Bill Cara at December 10, 2007 6:13 AM [link]

I'm left wondering why these humungous banks were using all their share capital to buy back billions of dollars in stock when now they are looking to Sovereign Investment Funds for new capital.

Along comes UBS to state that the Bank has taken a new $10 billion humungous loss after reporting until now they would be profitable. To compensate for their capital deficiency, they have turned to the Government of Singapore Investment Corp (11 billion francs) and an undisclosed Middle Eastern investor (2 billlion francs) for a total US$11 billion capital bail-out.

Does this give shareholders confidence in the people running these banks? Then, why permit them to pay themselves $38 billion in bonuses this year?

Several months ago, near the cycle top in the Financials, I asked why was Lehman Bros (and others) using all their shareholder capital to buy back stock. I even went so far as to suggest it was a strategic decision to pay the gnomes large on a pre-arranged contract to have them come back in at cheap prices later.

My point today is that these banks knew the crisis they were in, and were thumbing their noses at shareholders. So much for capitalism. Sounds more like totalitarianism as in he who holds management control makes the rules.

Truly, there must be an investigation into what's going down today. The question is, is there a humungous independent agency big enough? Govt agencies like the SEC and FBI seem to be bought-and-paid-for.

Posted by: Bill Cara at December 10, 2007 6:31 AM [link]

Here's a must read article by Sean Oleander in the SF Chronicle: http://tinyurl.com/2a5pr8
He speculates that the true purpose of the plan is to protect HBB from being sued to buy back the worthless mortgage securities due to fraud.

For a contrasting viewpoint, here's Mish Shedlock's response "Convoluted Mortgage Fraud Theories" (He calls the article "preposterous" and "complete nonsense": http://globaleconomicanalysis.blogspot.com/

Also, there's Calculated Risk's "Ten Things To Know about the Freeze" http://tinyurl.com/ynk57l

I found Mish's and calulated risk's writings helpful about understanding what's going on with this "Bailout," but it does seem like everyone in the press is trying to figure out exactly what does this plan mean, and what effect it will have.

Any comments about Oleander's article? The point I take away from these links is that this is a big, big mess we're in.

Posted by: yellowman98 at December 10, 2007 6:37 AM [link]

FYI:

CARDERO RESOURCE CORP (CDU on the TSE)

Insider BUY by CEO Hendrik Van Alphen on Dec. 4th:

Exercised 187,500 options at $2.00 on a day when it traded at $1.75 and the option date was Nov. 30th 2008...there has been no reported sales as of yet.

I haven't done any DD on it yet, therefore, I present it FWIW.

Posted by: golfer at December 10, 2007 7:45 AM [link]

Yay! I'm glad that one was solved.

Remember Bill, "MAC's don't get viruses"!!!!

They aren't affected, *they're carriers!* LOL!!!

Posted by: Craig at December 10, 2007 8:21 AM [link]

Let's get ready to rumble.

Here are your U/D's for the Cara 100:

Downgrade:

Sto - to Hold @ Deutsche Securities

Have a great and profitable day.

Posted by: Bull Hunter at December 10, 2007 8:28 AM [link]

Question:

If hedge funds are made up of "private money" and not HBB&B money and it appears that hedge funds will or are making large investments in strapped HBB&B will this lead to better corporate goverance from within or ???

Posted by: golfer at December 10, 2007 8:33 AM [link]

Aren't these pools private and sovereign funds?

I don't think we've seen hedge fund $ in there yet. They may not be as flush as previously thought and we're talking many many trillions.

Hedgies make billion dollar deals, trillions is on another scale.....so far.

Posted by: Craig at December 10, 2007 8:45 AM [link]

From Globe and Mail
short position in Us Gold as of Nov.30, change from Nov.15
Current 583,031 net decrease -954,980.
Somebody did some short covering

Posted by: mikede at December 10, 2007 8:46 AM [link]

brimelow: "Time left in 2007 for gold rally?
Commentary: Price movement may turn on seasonal demand in India"

http://tinyurl.com/2zsbzx

"Fed expected to lower rates despite raging inflation"

http://tinyurl.com/ywzemm

"An ice storm slickened roads and sidewalks, grounded hundreds of flights, and cut power to tens of thousands Sunday in a swath from the Southern Plains to the Great Lakes as even colder weather threatened.

The wintry weather was expected to continue through midweek, and ice storm warnings stretched from Texas to Pennsylvania."

UNG- pre-market NYMEX NG futures down 2.8%, of course...

treacherous cross-currents...for once, wish i was kayaking instead with jasper down south ;)

in vegas last week on business->apart from real estate, still subtle but cut-backs on the strip are noticeable for someone who visits every other year...partly the economy and partly inflation- one example->buffet at the bellagio now sets you back a few more bucks, with maybe 25% fewer options on the menu (no complaints, as the amount thrown away each day even now would be enough to feed the city's homeless)...

Posted by: 2nd_ave at December 10, 2007 8:58 AM [link]

Good luck with everything on your plate, Bill. You must have a lot of stamina. (As well as superhuman patience dealing with your computers.) Yep, looks like those Macs can be Typhoid Marys, I've gotten a few from my Windows friends--they just never executed on the Mac itself, but they certainly can be passed along. Stay well man, so you can provide the play-by-play on financial armageddon!

Posted by: Denny Phelps at December 10, 2007 9:02 AM [link]

Craig:

Aren't these pools private and sovereign funds?

Even better... Thus, in general terms. "will this lead to better corporate goverance from within or ???"

Posted by: golfer at December 10, 2007 9:05 AM [link]

Could be....probably likely if you put that much on the line you better have a large vote....OR, are they injecting cash to save *everyones* bacon and have no choice?

I've seen this with addicts. They keep kicking the can down the road, the problem gets bigger and bigger until they hit bottom, then they are forced to come clean cold turkey or die.

I suspect these HB&B addicts will exhibit a similar pattern.

They have all the symptoms.

Posted by: Craig at December 10, 2007 9:13 AM [link]

December 8, 2007

Saturday’s Report & Discourse, 12/08/2007 10:45 AM ET

Tables

The Dow 30 Company report from Value Line

Discourse

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