Good morning.

Here are your Cara 100 Ratings Changes:

Upgrades:

GG - to Outperform @ BMO
GS - to Market Perform @ Punk, Ziegel & Co.
LEH - to Buy @ Punk, Ziegel & Co.
SLW - to Buy @ UBS

Downgrade:

YHOO - to Hold @ Soleil

_________________________________________________

Congratulations, Giants fans

Good morning all. More bad news for the economy from the Challenger Job-cut report: "Challenger's January layoff count totaled 74,986, well above December's 44,416 and consistent with Friday's dismal employment report. The financial sector accounted for 20 percent of the layoffs."

Aside from our upgrades/downgrades, I want to direct your attention to the downgrade list.

Count the banks. Lots of bank downgrades.
Also the Credit Card Co's. Take note.

Congratulations Giants fans.
The perfectionist in me is slightly wounded, but I enjoyed the spectacle.

Re 30 year bond:
I've been thinking the low in yields may already be in place, in that the trading on 23 Jan looks like an island reversal. Time will tell. Anyone know of an ETF thats a nice trade on this?

I read an article at Seeking Alpha that suggested shorting the long bond (as I recall paired with going long the short end).

Also one suggesting GLD holders short Barrick as it will go down faster than bullion in the expected pullback. Interesting ideas.

Bill,
The Service sector employs more than 82% of our
Labor Force. I expect this sector to deteriorate faster than Manufacturing.
The implications are not good.
See "Employment:Goods-Producing vs Services"

FXP @ 85...

Just did a ranking of a the strongest China stocks. Their market rally +8% last night
http://wallastoninvestments.com/how-to-invest-in-china-with-etfs

And of course John Murphy released his chart of the week
http://wallastoninvestments.com/john-murphy-carl-swenlin-and-arthur-hill-talk-about-the-bearbull-market

SKF- out at 96...

heavily long skf, dug, smn.

Some good T/A from "Oscar" this morning.

"Don't fall in love with the upside."

http://tinyurl.com/39yz39

QID- out at 48.15...basically cutting exposure this morning...

GFI- anyone buying?

i bet we move back to dow 12000 soon.

What's happening out there?

The 10 year bond is still going opposite of the stock market. Stocks down today yield up--just like Thursday and Friday when stocks were up and yields down???? What's up????

Also, 1 month and 3 month LIBOR are above the FED funds target rate at 3.18 and 3.14. What does that mean?? The FED will raise rates soon or at least hold them stable?? Banks just won't lend to each other under the inflation rate????
What's up??

We need answers from Bill or someone else well-versed in bonds and LIBOR.

Rob.

Good morning

Long lurking & learning.

Re short selling bonds… the Seeking Alpha article is:

http://tinyurl.com/25556k

I thought this idea significant and added it to my files. Happy to be in august company.

23OKie

JIM - Oscar is a hoot. In terms of decibels, he's a "cramer's cramer" ...

Do you know if he's had Cramer's success in the markets? I'd doubt it, somehow ...

Why ever would you buy bonds?

" . . the specter of inflation is looming ever nearer. Sharp reductions in interest rates and insertions of liquidity into the system, as have been undertaken by all the world's major central banks outside Japan, have increased the supply of money chasing goods, at a time when commodity markets are already stretched. Hence, not only is the dollar likely to decline owing to the extra liquidity, but commodity prices are likely to rise further in terms of all major currencies. "

"If inflation accelerates rapidly during 2008, bond prices must fall. A 3.6% return is wholly unacceptable in a currency suffering from 10% inflation; returns of 2% in yen, 4% in euros, 4.5% in sterling or even 13% in Brazilian real will appear more attractive to the savvy international trader. Consequently, at least in the short term, accelerating inflation will bring declining bond prices and rising long-term bond yields, even though the Fed, the Administration and Wall Street will be using every endeavor to prevent such an unpleasant outcome, since it will wreck their strategy for saving the housing market."

http://www.atimes.com/atimes/Global_Economy/JA30Dj07.html

FL, very good questions. I always wondered why would a bank lend at below inflation rates at all. Unfortunately the FED raising rates does not appear to be in the cards in the short term.

Re. Oscar: 2nd time I watched him. I like the chat explanations, except he seems to have gotten in wrong today, so far at least. But, if you don't like these markets, just wait 10 minutes.

GFI:
Already in. Waiting for the low. otherwise I'm good. Been lightening the PM load to store dry powder.

Also offing some bonds.....

The Clinton budget of '93.

"President Clinton today sent Congress a $1.52 trillion budget full of new details showing how he wants to reduce the Government's deficit while spending more money on public works, education and retraining jobless workers. "

http://tinyurl.com/ynkwuy

Maybe Bush is just keeping up with inflation...

"What cost $1.52 in 1993 would cost $2.22 in 2007. " according to one inflation calculator... but my guess is inflation is way higher than this... probably not $3.10 high though. Unless you believe that the prices of things have doubled in the last 15 years... hmm...

"When we began the task in June, 1921, of reconstructing our public finances, it looked almost impossible of accomplishment. The entire Government structure was permeated with extravagance. The expenditures for that fiscal year, exclusive of debt reduction, were about $5,000,000,000. The interest charge alone was more than $1,000,000,000, and our outstanding indebtedness was nearly $24,000,000,000. The business of the country was prostrate. Its different branches of agriculture, commerce, banking, manufacturing, and transportation were suffering from severe depression. Employment was difficult to secure. Wages were declining. Five million people were out of work. The price of securities, even of Government bonds, was very low. It was difficult to find any market for commodities. Confidence in our entire economic structure had been shaken. Progress had stopped."

http://tinyurl.com/2y8ry4

The more things change...

So if the US is a corporation with 301 million employees (not including part time, contractors, and outside parties not in the census)...

"One of the first essentials in the work of making the Federal Government a real business organization was the welding of the various departments and independent establishments into a harmonious, efficient concern."

Looking over the cliff...

"Largely because of such work as this, less than two years from the time when the lowest point was reached, the country was very generally restored to normal conditions. From that time on there has been an upward swing, broken only by short static periods or slight temporary recessions. The closing months of 1928 and the opening weeks of 1929 have seen American industry and commerce at the highest point ever attained in time of peace. "

Anyone know what happened in 1929? Calvin seemed to be a fortune-teller.

"The margin between prosperity and depression is always very small."

Jock,

Only one or two misses in the last forty trades (if you follow his exact trading signals on the futures). I usually watch the weekend webinars for market direction.
Good example on "a fundamental market change" warning on 12-15-2007:

http://tinyurl.com/2wc2de

He certainly is a hoot!

The latest mindless distraction...

"The budget is going to congress over the internet". (internets?) LOL!

Is anyone so stupid as to be distracted from our financial disaster by submitting the budget on a laptop "to save paper"?

Tell me I'm hallucinating.

at 4%, it takes about 20 years for an investment to double...given an inflation rate of 4%, something priced at 1.52 in 1993 would set you back 2.53 in 2007...so it sounds like we've averaged slightly below 4%...until now...

Hi Bill!

Re. dropping bonds and going long gold: indeed, it will be a "once in a lifetime trade".

Over the weekend I have spent quite some time doing some serious TA on gold using the GLD prices and here is the skinny:

1. There is absolutely no question that the gold bull is alive and well, by all technical accounts.

2. The fibonacci retracement for the last upswing can be calculated in 2 ways:

A) If you choose to calculate the retracement by using the low of Jan. 22nd, then a 61,8% retracement is already in (today´s prices), and a conter upswing is expected later today or tomorrow. If this is your choice, then you may decide to start adding at today's prices, which would be around 896 / 900 Spot. If 896 breaks to the downside, this hypothesis is of course void.

It is also interesting to notice that today GLD closed the gap it had left open on Jan. 8th.

B) If you prefir to calculate the retracement by using the low of November 19th, then you may look for a fall in prices untill the 38,2% fibonacci is reached @ GLD 86.30 give or take a few cents.

Please notice that I have looked back to all the retracements in gold since 2006, and have noticed that rarely has gold retraced over 38,2% of a large swing like the one between November 19th and Jan. 30th.

If this is to happen, then in reality gold is headed for a retest of the multi-year high at 850 spot, which is expected to hold. However, this level was already tested successfuly an incredible 5 times from the upside, and held, which makes me believe that there is no technical need to retest it again.

3. Looking at the several gold retracement / consolidation periods since 2006, I realise that generally most of the retracement is completed around the 9th trading day after the top, which would be the end of this week, and the takes about another week to resume the direction of the trend, which is up.

4. Fan lines: if you use this as a TA tool, you may notice too that if you count the total upswing movement from the low of August 18th, then a medium term technical support is also present around 88.20 GLD, which is another indicator that the low may already be in @ around 896 spot (today).

5. Morphology of trading: the retracement going on in gold this time is unusual. In the minor timeframe charts (1 and 5 minute charts), hudge vertical drops are apparent. Once these stop, immediately the price line starts drawing a succession of higher highs and higher lows.

This is an extremely bullish signal. It means that some institution is selling hudge quantities and that once these orders are processed immediately the market resumes its up trend, without even taking a breather. As soon as these orders stop coming, the market will rally sharply.

But, for those who think that these vertical falling lines (large sell orders) are the doing of central banks, I think that such is not the case this time. Actualy, this time I notice that these large sell orders are coincident in time with similar lines in equities, which means that liquidation of a large portfolio is going on.

If this was a tipical suppression of price by central banks, we would have gold prices falling and equities prices rising, which is not the case.

So, I call this a portfolio liquidation. Nobody knows when it will end, but the minor timeframes charts are telling me that as soon as these large orders stop impacting the market vertically, the price of gold will instantly resume its uptrend.

The strength of the gold bull at this time is tremendous.

Hope these comments are useful.

Cheers,

When was the last time you bought ice-cream at a supermarket? Pretty much all ice-cream vendors have reduced their size from 2L to 1.65L in Canada, but kept the same price. This is not just Nestle, it's most brands. Most likely this is to cope with the rising cost of milk and inflation.

More packaging, less product. So, who makes ice-cream packaging? There is someone who might be doing well in the future.

China:

Boeing predicts that between 2007 and 2026, China will purchase 3,400 new aircraft worth US$340 billion.

Links with Boeing and Airbus have helped leaders of China's aviation industry recognize key tricks of the trade, from Six Sigma methodology to customer service. Amid continuing restructuring, an indigenous rival may be ready within 20 years to take on the Western giants.

http://www.atimes.com/atimes/China_Business/JB05Cb02.html

All packaging should be doing well as almost all products I buy are either up in price (seems to avg about 20% not joking) or in smaller packages with the same price.

I think the scale of the increases are forward looking in order to not have a constant (and alarming) rise in retail prices.

2nd_BOS - Rationale for cutting exposure?

Was short long bonds and covered this AM for a small gain. Will short TLT again, however getting shortable shares was not easy. I couldn't get any Muny shares to short.

Out of my COF puts for 30% gain in three days. Not done playing that disaster, but taking some profits.

I think we will have another great chance to short bonds. ~~ Does anyone know of ETFs to short them that one can use in an IRA? 2x inverse would be nice.~~

SKF just lifting off the lower Bollinger band, don't sell yet.

Looking for a retracement to ~ 13000 on the Dow after a sell off this week. I will then go more short and hunker down.

Picked up some of the new commodity ETF on Friday. In case you haven't found it yet it's GCC.

jk484 - china's appetite for aircraft ... WOW

I wonder what this would mean for ERJ, Embraer of Brazil, the world's 3rd largest aircraft manufacturer, which has a JV with China Aviation for smaller, regional jets - AND which has much more "headroom" in their market cap than Boeing or Airbus!

og- reference last night's post:

protect your gains, keep position sizes small, and adjust your trading to fit the environment...the fact that i ended up on the wrong side more times last week than in the previous four weeks tells me to scale back and wait for better conditions (ie, conditions where my trading style has an edge)...

Posted by: 2nd_ave [TypeKey Profile Page] at February 3, 2008 10:04 PM

the past week has not been a sentiment trader's market->so it makes sense (for me) to cut back...

U.TO had a modest gap up this morning and looks to be stabilizing for another move up. CCJ looks also to be stabilizing. I am expecting a modest rally for the U-majors going towards options expiry.

SLW looks like a screaming buy to me.

http://stockcharts.com/c-sc/sc?s=SLW:SLV&p=D&b=5&g=0&i=t65146295770&r=1666

(tiny URL won't work)

Bill,

Wondering when I'll be able to go to my local Chapters and pick up your book??

Thanks - Robert

Macro thanks for your analysis on gold. If one datum is evidence, I sold WGW this morning at the time you were writing your comments and I may have timed the bottom perfectly!
peace
gray

2nd - Thanks. I, too, found last week difficult, though still profitable on balance. Like you, I found myself trading from the wrong side much too often. Trying to rectify this week by taking directional cues from "bowties" made by the short-term averages I follow.

This is more a TA market. I gave up on sentiment at the rally. Fundamentally this is a disaster and I have that pump and dump feeling.
Get everyone all worried their missing the train, they all get onborad, HB&B gets off.
Fits with resistance at 12800-13000 and further downside......and the ultimate sentiment...greed.

BTW, also transferred all cash out of banks. Only maintaining enough for basic functions.

What is FDIC and what/who is it backed up by/with? It's all a house of cards built on sand.

Hello Bill and guys (I'm late, but the lunch was gooooood!)

The latest edition of Newsweek blares out: "Road to Recession". What does this tell us as a contrarian indicator as far as magazine covers go?

Read all about this in my regular weekly blog post, highlighting some thought-provoking news items and 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.

Here is the link to the "Words from the Wise": http://tinyurl.com/3yhswq

Enjoy the read - the first post on my new-look blog site! (Please let me have your comments on the new face.)

aurator: a few months back I read that an ETF inverse to bonds wasbeing started up. But now I can't find any reference to it on the internet. just the mutual fund ryjux & (I believe) rrpix

They suggested shorting VGM and CXE.

Seems as though most of the employees at the wifes place of employment (no name), have redirected their retirement investments/allocations to "CONSERVATIVE" with their company appointed Merrill Lynch accounts.
We had an in-depth discussion one night about how these banks didn't/don't/and never will care about the contributors to those retirement accounts as long as they had a confusing answer to give the contributor when they call and complain about their account losses. I.E. the markets are doing poorly, but just hang in their they will come back around.
Just like back in the late 70's and early 80's when all those Savings and Loan's were going under and people were loosing thousands of dollars on their retirement accounts. The consensus was...it'll be OK, the economy will turn around, and your accounts will grow again.
In a way, the banking institutions were correct, those accounts grew back over time, but many years passed, and people kept those monthly contributions pouring into those accounts for many more years before they had their retirements up to the amounts they had before those accounts were pillaged by the very institutions that are appointed to manage these retirement accounts.
Why don't these huge institutions that are in control of these retirement accounts educate the account holders when they call to question the drop in their account balances. All they need to say is you need to reallocate into our very conservative investment vehicle, rather them tell them that every thing will be OK.
Long story short, she moved her retirement to the safest (Merrill's safest) allocation she could the next day after we discussed it. I had already moved mine into the money market, my safest position, months earlier.
The following day her pie chart and bar graph came from Merrill, it had excellent coloring, the bar chart was centered properly, the pie chart had excellent saturation and a varying degree of color space. All in all very impressive presentation of colors.
Well, she flipped it over and started reading the negative numbers and instantly all the colorful pie charts and bar graphs started turning the same color as a terd. Merrill polished and polished, but just couldn't get the stink to go away.
Seems many people at her work changed to the lowest position Merrill has to offer, "Conservative?", now Merrill has 2 investment rep's scheduled to come and talk to the employees about their retirement accounts this week. No one knows why, or what they will say, but chances are ML is going to try and calm peoples emotions.
We were wonder last night just how often this goes on with these huge banks, or is this surprise meeting more coincidence then anything else?

QID- resistance on the upside?->taking another shot at QID @ 48.26...

2nd (and anyone else interested in this issue) re your Feb 3 about Greatest Generation: "perhaps heightened maturity comes with the kind of hardship/deprivation at a young age most of us never experienced"

Speaking to you from the pointy end of the Boomer Generation. My parents lived through the Great War (my father remembered, as a boy of 5 or 6 in London, England seeing Zeppelins dropping bombs on his neighbours). They lived through the Great Depression. They lived through the second world war. They were hardened by these experiences and, yes, they matured. The cost of that maturity was loss of inner peace and damaged health.

Let us never forget that the events that made the Greatest Generation great were the results of the greed, arrogance and deceit of people with power. Achieving "social equity" also requires freedom from fear.

GOOG- was it just 3 months ago when it bumped up against 750?

I posted yesterday about the performance of Ultra ETF's (QLD, SSO, etc.) not matching their benchmarks over time. I just checked the Prospectus for the Proshare Ultra ETFs and it specifically mentions this issue and states that the investment vehicles are not intended to match the 200% benchmarks outside of a ONE DAY timeframe. Caveat emptor.

Craig: "They suggested shorting VGM and CXE."

Tried all last week and there were no shortable shares thru Fidelity.

Evidently we aren't the only ones thinking about shorting bonds.

~~

Here is the setup: Dow bounces off 13321 for a 0.786 retracement. Then resumes crash.

Fed cuts to zero. No ammo, bolt locks open.
Dollar breaks toward 70 on the DXY.

Bonds begin a huge fall. Gold thru 1100 on the way to 1500+.

Financials collapse, housing stocks collapse.

Overseas markets drop in sympathy.

Trannies break 4000 confirming a H&S breakdown with target below 2500.

M3 increase approaches infinity.

And then the other shoe drops.... hehe

http://tinyurl.com/2f4ehn

QID- off at 48.51...

norton850- although i would never wish "loss of inner peace and damaged health" on anyone (and who wants the ravages of war), the 'silver lining,' if you will, of difficult experiences is (usually) heightened empathy, humility and nobility...character (at the upper limits) really is forged in fire, and some achievements in life occur only in response to pain and suffering...sometimes (even greater) inner peace follows...

2nd.

helloo,

So, am thinking we close in the RED and if so I'll buy FXP at close or AH.

Have an opinion on it????

TIA

Maromatics gets the $gold star so far today.

Want to share a resfreshing experience. Jeff Stuart from Valgold (VAL) called me to discuss any questions which I might have regarding the company because they haven't released any news in a while. I am a shareholder but, I had not contacted the company. This might not seem like a big deal to many of you. To me it's huge and it increases my regard for the company big time.

GOOG drops below 500...

2nd Excellent post...I'm relieved to hear more from my new friends than chart hopping TA. Us privileged boome
rs have dropped the ball...so far. charlie

'Ideal" Short scenario worth watching for:

$SPX @ 1386, 1405, 1420 ish
$vix closes at 10% below 10 day SMA

Short the weakest stocks that are below thier 50/200 dma, not the ones above it.

QID- back in at 48.27...

Scaled into JNJ Friday @ 63.30; not impressed with volume, but liked the daily RSI move thru 30 the night before at the close. Not looking at it as a day trade, but will monitor.

Have to run out for awhile . . . back later.

mg-> i think FXP would be a good bet, even more so if we close in the red...but keep in mind my recent batting average has not been good ;)

BUD's inflation impacts from last Thursday's call... and packaging is their largest component.

"We’re seeing big increases in barley, really based upon that’s just what crop prices are. In barley is, we have barley and then you have conversion of barley into malt and there malt is just over 8% of our costs of sales, it’s the biggest part of brewing materials but about half of its barely and half of its conversion cost....Rice is also up significantly, that’s a world market situation. We use a little bit of corn and that’s way up and you’re well aware of that. The majority of our cost in agricultural materials are covered by contracts.

We do have some hedge positions but we do have a little bit of remaining exposure based on summer crop prices. But that is the key driver in our cost for this year 2008. Our packaging materials, our largest component, we have a little inflation but not significant inflation there. Energy, natural gas, fuel, oil, electricity, diesel fuel represent about 4% of our cost. And we’ve got continuing pressures there although energy costs in particular natural gas has been high for a number of years so the year over year impact is not huge.

And another factor is that because of the ongoing high energy cost we have a lot of projects in our breweries to reduce energy usage and energy cost and these are helpful in mitigating our cost pressures. So that’s what’s driving our costs of goods sold per barrel of the three to three and a half percent and again it’s primarily brewing materials and you’re seeing this throughout the industry and impacting others in food and beverage as well. In Canada, the industry was up just under 1%, nine-tenths of 1% for the year. We were up high single digits, so I mean we are significantly gaining share both for our Budweiser and Bud light. "

They've increased field sales staff by 30% last year. They're getting eaten in the UK, but growing in Canada and maintaining US.

http://tinyurl.com/2uewzb

We won't be adding any antifreeze to the wine up here soon - would increase the price too much... I picked up some washer fluid yesterday for $4.50... it's expected to go up past $6.

http://tinyurl.com/3e4nuy

According to the gas station attendant, it went up a buck in the last week, and people are starting to complain about prices for things other than the price of gas...

On the price of tea in china...

http://tinyurl.com/35pel7

Photogray,
Craig,

Thank you for your kind words.

Cheers,

Natural gas took a big swing up today, UNG back at 39.

SiO2

Broke out of the down trend. Looking for some follow through. Go gas!

JohnGeorge /SiO2: Nice call on nat gas..look at SWN..noice. Gotta have gas before fancy clothes..:)

Has anyone found a nice yield on a PM fund?

I came across FGX.TO, 5.5% yield, and it is at a decent 10% discount to NAV (Jan 31 diluted NAV $10.07, last trade $9)

The fund holds some majors and writes options for income

Agnico Eagle Mines Limited Anglogold Ashanti Ltd.
Barrick Gold Corporation Goldcorp
Gold Fields Limited Harmony Gold Mining Company Limited
Kinross Gold Corporation Newmont Mining Corporation
Yamana Gold Inc. Lihir Gold Limited

http://www.faircourtassetmgt.com/FGX_feat.htm

I thought this is interesting as the yield is much more than the yield on the majors,

Also the Black Scholes on the warrants (FGX.WT, strike $10 31 may 2010, is is about $3.4. I like the fact the strike is at the NAV. The ask on the warrants is $1.74, so half the Black Scholes value. It is a thin trader but in the uranium bull warrants like on Denison went from a discount to Black Scholes to a premium, plus if you assume the effect where the discount to NAV on the units disappears and turns to a premium, as what I believe happened to Pinetree last year, you could see $10 NAV, $11 share price, $4.50-$5.00 warrants. Maybe $2.50 warrants bought now would do well, plus the upside on the shares?

Anyway, if you're a gold bull 2 years of time value at half price could be a steal...

Thoughts?

JohnGeorge /SiO2: Nice call on nat gas..look at SWN..noice. Gotta have gas before fancy clothes..:)

Moab,

COF - bought Thursday MAR 50 puts @ $2.65,

Sold today for $3.70 (40% gain)

Thanks Moab - Good Luck on your short - you got me in!

Still holding on to all other shorts...

b0ss -

We got lucky with the UBS downgrade to sell on COF but I certainly thought the setup was pretty good.

Bankers Gone Bonkers

"Few Americans are aware that for at least 16 years big business and banks have been secretly taking out millions of life insurance policies on their rank and file workers and naming the corporation the beneficiary of the death benefit without the knowledge of the worker. "

"In 2003, the General Accountability Office (GAO) released a study with the startling findings that companies were taking out multiple policies on the same individual and that 3,209 banks and thrifts had current cash values in these policies totaling $56.3 Billion."

http://www.counterpunch.org/martens02022008.html

Fred;

I've met Jeff Stuart, Valgold's Investor Relations Manager, and he strikes me as a good guy. For a non-geologist, he has made himself quite knowledgeable about the company's activities and prospects, and speaks intelligently about them. His job is to develop and maintain investor interest in the company. That he does a good job of that is a credit to the company. I try to appreciate that he is forthcoming with information, (better than those companies that are not), but keep in mind his motivations. Perhaps what I'm saying is that the available information gives an opportunity to evaluate the company, whereas we should probably avoid company's that are more secretive, because we lack information on which to base an opinion.

U.TO poking above $10. Excellent 2-day move so far!

I met Jeff last year at PDAC with Bill. Agree with manx's views, and I felt that he was very forthcoming about the industry and the company, and he had some good insights on Venezuela & Guyana.

As a good promoter, I would call shareholders out of the blue, especially on such an illiquid stock.

As of mid-Nov

"The company is about three-quarters of the way through a C$ 3.5 million equity financing, the bulk of which has already been sold to institutional brokers and investors, according to Stuart. "

http://tinyurl.com/2lmqaq

A lot has changed since then.

Val.v has been under a buck since 1998..

Completely speculative from what I can see, but I trust Bill's judgement on this as being one worth watching... especially if a major decides to exercise some options.

A bit more background...

http://tinyurl.com/3xhodz

It will be interesting to see if Chavez eats a bit too much cocao for breakfast and passes out permits to everyone...

Anyone plan on holding QID or SDS overnight?

manx928,
Thanks. I get that Jeff Stuart works for the company and that he has a job to do. Still, the customer service (regardless of motivation) was unique in my experience with juniors. I'm comfortable holding my VAL shares and waiting for the N43-101 to be released.

Bush Rebuffed Tensions growing in MidEast

What was GW peddling during his recent MidEast trip? Was it a greenlight to attack Iran for rejecting the dollar as payment for oil? Additionally, both he and the Energy Secretary begged for more production from the House of Saud. At the recent OPEC meeting, the demands for more oil were refused. It was reported that Turkey had rejected an American demand that called for severing banking ties with Iran, their access to the global banking system. Concern about the value of the trillions of USD holdings growing stronger day by day. It has been mentioned that Saudia Arabia told the US to back off Iran or face a decoupling of the dollar from the oil trade. MidEast currencies pegged to the dollar are generating high inflation within participating countries in addition to loss of value on existing dollar investments. Another crisis brewing?

Late last week, four major MidEast undersea communications cables in different locations were cut, disrupting communications throughout the MidEast. MidEast banking centers were cut off from SWIFT, the global electronic banking transfer system. Was this occurence just a coincidence or was it something else? a message?
a dry run as a pretext to war? We wait and watch.

isaiah- planning to hold partial positions in QID/FXP overnight...

Bill,

Thanks for the great advice:Re Recycling

I knew there was a reason I preferred cans over bottles....

Now, If I can just remember what I did with all the empties..:^)

FXP... I am holding everything...underwater a bit....

% wise what do you recommend holding over night on QID & SDS?

QID/FXP holding a little.

2nd
that last post was for you

2nd & Craig

thanks !

64v4- i have 35-40% of my normal exposure...

2nd

Thanks.... that was helpful...Appreciate it.

can they take the DJIA down below 12,600?

2nd & Craig...

I'm still holding 100%...this will probably prove to be piggish on my part. But I am expecting more people trying to get their money back tomorrow in tech and thus more sell off. The last 2 mins my holdings are way up. Will hold everything. I will probably eat those words... What the heck...only paper...

Astral - mid-east cable cuts ....

you wrote, "Late last week, four major MidEast undersea communications cables in different locations were cut, disrupting communications throughout the MidEast. MidEast banking centers were cut off from SWIFT, the global electronic banking transfer system. Was this occurence just a coincidence or was it something else? a message?"

Very interesting point. Middle eastern countries have long been suspicious of US/Israel re cable cuts.

Way back in 1982, I was on the US delegation to the Plenipotentiary Conference of the International Telecommunication Union (the UN telecomms standards body)

At that time, the middle eastern countries made a huge issue out of Israeli cable cuts (to Lebanon, I believe) during previous Mideast conflicts. They wanted language outlawing such actions, but of course the US, UK, and Israel resisted (I believe I remember correctly that all 3 stood togehter

4 cuts in one week in different locations wouldn't likely happen by coincidence. Somebody is likely sending a message to somebody !

I believe that in pre-fiber optic days, cable breaks from natural causes were much more common than today.

I'm holding my DIA puts into tomorrow and almost bought some XHB puts but will wait for XHB to have an up-day.

Also still holding NEM puts as well.

Rob.

Jock,
re: Middle East Cable Cuts
Only a matter of time that we start to hear the conspiracy theories. Darn right the probability must be extreme for this to happen, unless there's some engineering flaw that surfaces from time to time to flummox the best and brightest.

For what it's worth, here's the latest out of the maritime world:

http://tinyurl.com/2mebsu

stu

let's try DJIA below 12,600 after hours ;)

fingerlakes,
regarding yields and stock prices(sorry for the belated response, I just read some of the posts)if I remember correctly, one of my economics professors put this way:"when the yieds will rise the stocks will fall." Like a teeter totter. No? What did I miss?Gest regards,
Gus.

Valgold -

I also remember Jeff Stuart. Yes, he is a former teacher, but was impressive telling VAL.V's story at PDAC '07. They have played the game well in VZ. Their largest individual shareholder is one of the Cisneros who own Venevision, the big media company which always stays on the right side of the VZ government. Cisneros'rep on VAL's board is a former Head of the VZ Mining chamber.

GRZ also seems to have played the game well, and are farther along than VAL.V. I'd almost expect GRZ progress before VAL (as a leading indicator?) but who knows? Both of them informally call KRY rather clueless in how "dance to the music" of VZ.

Still, from a strategic and IR point of view, I think VAL would be smarter to accelerate work in Guyana (half of their land is in Guayana) and become a 50/50 "Guyana shield" plan - rather than a company whose stock price depends largely on public perception of their progress in VZ licensing.

I suggested this to Jeff some months ago in a note as to why I wasn't going into their earlier private placement, but never heard back from him.

Pres. Chavez could issue some licenses next week, or he let them fester for another year. Chavez has his oil business to think about, his initiatives in the region (including the FARC), and new worries about lack of basic foodstuffs on supermarket shelves(deriving from price controls imposed on food). His popularity has fallen since the constitutional referendum he lost.

With those kinds of issues on his agenda, how important is granting a license for a new Canadian junior miner? We need to view things from the other side, IMO.

FWIW

Stu - mideast cable cuts

I couldn't open that article without registering.

Now, I am remembering. The reason cable BREAKS are less likely today than in 1982 is that digital signals over fiber optics transmit farther than analog signals over copper.

Therefore, with fiber optics, fewer repeaters are rquired to cover a given distance. And the repeaters are the points of failure. Fiber optics have fewer points of failure.

(Repeaters are also where small subs place listening equipment.)

Thanks Bill and all for the yield discussions today,I have been watching for the 30yr to roll over as well. Looking at the past eight yrs you will see that the hui impulsive rally's were for the most part during usb bear legs and a rising dollar has not hurt the gold stocks in these instances for the most part.

Here is an article I use for reference of the 70's, the 10th chart down shows gold stocks against the rising 10yr yield fwiw.

http://www.financialsense.com/editorials/barbera/2005/0414.html

Jock,

Sorry 'bout that. Here's the full article:

"Shipping in the clear


Ships did not damage undersea cables causing a communications blackout last week, Egypt says.

Dragging anchors had been cited for snapping internet cables in the Mediterranean, disrupting internet services in the region, but the Egyptian government says shipping is in the clear.

Footage from offshore video cameras shows that no maritime traffic was in the area when the cables were ruptured, the transport ministry says.

"The ministry's maritime transport committee reviewed footage covering the period of 12 hours before and 12 hours after the cables were cut and no ships sailed the area," a statement said.

Previous reports from India claimed the cables were cut by ships forced to anchor off Egypt’s Alexandria in bad weather. Internet and international telephone services in Egypt, Gulf Arab states and South Asia were disrupted. India suffered up to 60% outages.

A repair ship is expected to begin work to fix the two Mediterranean cables on Tuesday, reports suggest.

By Andy Pierce in London

published: 14:01 GMT, 04 February 2008 | last updated: 14:01 GMT, 04 February 2008"

########

GRgold,
Treasury yields actually do just the opposite.
Usually, when stocks go down treasury yields go down and treasury prices go up because of the demand of people rushing out of stocks and into bonds.

And, when stocks go up yields usually go up as well as the price of bonds come down because of less demand as people sell bonds to buy stocks.

But, Thursday and Friday yields were down and the market was up. So it appears that money is going into the stocks and into bonds at the same time.

And then today stocks were down and yields were up so today money was coming out of stocks and bonds.

I know in a few weeks we'll look back and recognize why the bonds and stocks weren't correlating normally these past three days but I'd like to figure it out sooner and possibly trade from that insight.

Rob.

I have March DIA 120 puts, so hoping we can do a whole lot better than 12,600 ..

Contrary Investor has an article at safehaven postulating that when Treasuries start to selloff it may get unruly as the herd of institutional investors find no one to sell to. They also question whether it is the last bubble:

http://www.safehaven.com/article-9370.htm

Here are some exerpts from John Hussman's (of Hussman Funds) weekly commentary posted on Mondays (http://www.hussmanfunds.com/wmc/wmc080203.htm):

"With regard to the stock market, I've often noted that I usually have no opinion about near-term market direction except in unusual instances where stocks are overbought in an unfavorable Market Climate, or oversold in a positive one. As it happens, that presently means that I have a fairly pointed expectation that the market is at risk for a fresh plunge, since the major indices are back to overbought conditions in a still-unfavorable Market Climate."

"Presently, the U.S. economy is running the deepest current account deficit in history, even as the Federal government has promised to run up another $150 billion in debt to run a “stimulus package.” At the same time, the carry between Chinese interest rates and U.S. Treasury yields has now turned negative, meaning that there is no longer a favorable interest rate differential to encourage Chinese investment in U.S. government debt. Moreover, the gradual appreciation of the yuan continues, meaning that the Chinese are also taking losses on their holdings of U.S. Treasuries due to dollar devaluation. The only remaining allure of Treasuries has been for capital gains due to investors' flight to safety, but with yields already compressed, it is increasingly risky to expect continued downward pressure on long-maturity interest rates. This places the U.S. in the difficult position of having to finance an enormous volume of capital needs from foreigners, particularly for Treasury debt, yet without being able to offer competitive yields or strong prospects for additional capital gains.

My impression is that the markets will respond to this difficulty with what MIT economist Rudiger Dornbusch referred to in 1976 as “exchange rate overshooting.” In the present context, that means a dollar crisis.

Specifically, if there is a weak prospect that foreign lenders will achieve a total return on U.S. Treasuries competitive with what they can earn in their own country, and every prospect that short-term interest rates in the U.S. will remain depressed or fall even further, the only way to attract capital is to immediately drive the value of the U.S. dollar to such a sharply depressed level that it will be expected to appreciate over time."

The above point resonates with Bill's words this morning that either the yields rise (and bonds fall) or the dollar sinks (and thus gold rises). So buying gold and shorting bonds does seem like an exellent trade.

"What matters most is the long-term stream of cash that companies can actually deliver into the hands of shareholders, and whether that stream of cash would provide an acceptable long-term return if you paid the existing share prices. We're certainly willing to assume higher growth rates for well-managed companies with defensible product lines, which is why we don't simply define value as “low P/E” or “low price-to-book.” But at a market-wide level, valuations remain far too high to provide investors with tenable long-term returns.

The elevated values of home prices in recent years resulted from a combination of speculation on perpetually rising real estate values, coupled with reckless lending. The elevation of stock prices has had much to do with unusually wide profit margins resulting from a depressed share of GDP going to wages and salaries. The expansion in the U.S. current account deficit has resulted largely from profligate U.S. fiscal policy, which absorbed an excessive amount of domestic savings and left us dependent on foreign capital inflows to finance our domestic investment.

An economic downturn, even modest in terms of GDP contraction, will simply accelerate the inevitable reversal of these unsustainable trends. As I noted last year, the bulk of mortgage resets did not even begin until October, and are likely to continue well into 2009. At worst, the newly reset mortgages have only now gone delinquent, and it will still be several more months until we see a corresponding rise in foreclosures. At that point, we can expect a major acceleration in writeoffs of lower tranche mortgage debt. Financial companies can't write this off yet, because the losses have not yet emerged, and it is impossible yet to know which particular debts will fail. It is incorrect and unrealistic to believe that financial companies can simply “come clean” and put all of this behind them."

Putting all this together, I am sticking with my medium-sized SKF/SRS position as a hedge on my oversold PM miners (altough I did sell a small bunch of SKF today that I bought on Friday, just for money management, as 2nd_ave likes to say. :).

Following up on my previous post, I am also thinking that as bond yields rise, the financial stocks will suffer, and so a position in SKF/SRS might give a better return than a short position in, say, TLT. On the other hand, a long position in oversold gold/silver explorers, in oversold CCJ (which I have been buying on the way down and currently have a lot of) and in locally oversold SLW (which I recently bought at $15.8) might also provide a better return than GLD. Does this sound reasonable?

ALOHA !!

Bigwad ... I used to have Merrill Lynch and also Morgan Stanley. Every employee of these companies are programmed robots who will only recite whatever the company will allow. It wss only after I closed my account at Morgan Stanley back in 2002, that I became friends with my broker on a level outside the Morgan Stanley mortar n bricks. He admitted to me in 2007 that I was right to go into gold and silver and get out of the US stock market. Prior to that we had many a duel about the state of the economy, but whenever I switched to monetary issues, which is what gold investing is, he was lost. Brokers at Morgan Stanley are not trained in the TIC, M0, M1, M2, M3 or M3b. They cannot explain derivatives and are totally lost when I try to talk about the fine print on ETFs and GLD and SLV. It tells me they don't even read the prospectus of the products they recommend. Over three years ago I sent my broker at Merrill an e-mail listing the US banks with the biggest exposure to derivatives. All of those names on that list are now in trouble. At the time I first sent that e-mail they told me in a polite way, I was a conspiracy nut! None of them ever even entertained the idea of a US Dollar currency crisis either. All that has happened. I beat the "experts"!

What irks me most is that they tried to convince me they were right and I was wrong. I understand their interest since they survive on bonuses and dollars under management, but what they seemed to disregard is that ITS MY MONEY!!! Damn ... ITS MY MONEY!! They did not earn one single dime. That's what you are up against. Just because they have a shingle on the wall that says they are the "experts", a shingle from a university or internal diploma from BANK sponsored educational centers. Even that is a conflict of interest. In essence anything you say to them that is not on their agenda is either a stupid question or some "internet doom and gloom". It boils down to their agenda is more important than yours. They won't tell you that directly only after the fact. Remember these guys were screaming buy on Enron as the CEO bailed out! These guys touted dot.coms and Warren Buffet was crazy for missing out!! These same analysits that pushed dot.coms into the ozone layer are still employed by HB&B. These are your financial advisors ...

Agree over the long haul SLW and CCJ should do well. However I'm expecting another leg down and don't expect PM stocks to hold up well.

I'm down to mostly oil related shares and a few select in the PM sector. Raising cash that will reside in something other than USD, like FXF. The oils did well today, even DIG.

Should we see the Dow below 10K, you want plenty of dry powder for the beginning of the next major leg up. Dow possibly in a sideways wedge until breakout to 13K+. I have the DIA M127 calls. It could retrace to the 20 Day EMA.

kaimu,

I was a financial advisor for over twenty years.

I remember one regional meeting. Offices were referred to as milking stations. I the back of the hugh room were the meeting was held salaried employees would MOO in unison. MILK THOSE COWS......MOOO!

GFI got pumped (pimped?) by Fast Money.
Interesting what these guys can do to a stock they want to move.

craig- does that mean you're unloading into the 3% move AH?

Finger Lakes,

Since no one has responded to your question about yields yet, I'll try to make a guess about it. Lately, the market was focusing on the financial stocks (if banks begin a chain reaction of defaults on CDS's and other derivatives, a major deflation of assets will begin and the whole market will suffer). The financial stocks do well when yields fall (downward pressure on mortgage rates makes improves business for homebuilders and mortgage loan companies, which are the weakest link in the current financial system). Hence, it is reasonable for the market to rally as yields fall. Also, this suggests that the financial should fall sharply as yields start to rise, bringing the whole market down. Let's watch this correlation and see if it proves correct.

whatever,the only trade that makes sense is buying US stocks. God, I have made a fortune in the past two weeks.

Speaking of GFI, I just came across a company called OreZone Resources (OZN) who had a J.V. with GFI. In October they purchased GFI's interest in the Essakane project:

http://tinyurl.com/3dgc4r

The economics of the project sound impressive. Still need to do some research on the new share structure since the acquisition to see how much dilution may have occured. I also think that the political risk is lower than many other countries (VZ, etc.).

Anyone else follow this story?

David,
So what you're saying would correlate with my theory that they're buying/selling bonds and stocks at the same time instead of inversely like normal.
Our job is to figure out how to trade on that knowledge.
If bond yields are bottoming out and must go up from here that would mean stocks are going up or if bond yields have further to fall then so do stocks.
But they don't want yields to fall too far or else noone will show up for the weekly auctions our govt needs to function.

It seems as if they're in a difficult position currently.

Rob.

FL, my understanding from Bill's report is that he is still waiting for the trigger to sell bonds.

Great report Bill, as always.

Note that there are 21,800 Jan 09 90 puts open on TLT (20 year treasury bond), much higher than anything else in there. A significant number of puts are open for Jun 08 and March 08 as well.

Finger Lakes,

I am not sure that stocks will go up as bond yields go up. The financial stocks will come under pressure and may keep the whole market down. Commodities might fall as well, since higher yields will cause a stronger dollar (more foreigners will be interested in converting their currencies into USD in order to buy treasuries). So if yields start to go up, the only "safe" investment might be SKF. :)

What do others think about this scenario?

Khan Receives 3-Year License Renewal

http://tinyurl.com/3xutcy

jaketex,

Let's see what will happen to your fortune if you stay invested into stocks for the next two week. :)

If you have particular logical reasons for investing into some stocks, please share them.

regarding selling bonds short. It's a very compelling idea, but what is the risk that they stay range bound near where they are for the next decade the same way japanese bonds were/are?

Looking at the chart of 10 year JGB on this pimco article ( http://tinyurl.com/32sjtq ) shows bond yields hovering between roughly 1 and 3% for over a decade.

So the one risk is that one sells short to early when yields can plunge another 2%, the other risk being that they stay there for a very long time.

To be clear, i'm generally of the belief that dropping currency, inflation, etc, will cause an increasing interest rate cycle to unfold, just not sure how or when. Was japan just early to the yield compression party and so had to wait longer for the party to end? And the rest of the world joins it now for a quick melt-down then turnaround?

John Maudlin on "what a recession looks like:"

http://tinyurl.com/33pudy

excerpts-

"Recessions are generally accompanied by a slowdown in the growth of consumer spending, although the last recession of 2001-02 saw consumer spending continue to grow at a very healthy pace, making that recession one of the mildest (and strangest) recessions in history, not just in the U.S., but in the history or the world (to my knowledge).

Of course, we now know why consumer spending did not slow down in the last recession. Consumers leveraged their homes to continue their spending growth, as well as increased their credit card debt. However, in the current cyclical slowdown, it is going to be harder to use mortgage equity withdrawals to bolster consumer spending, as home values are dropping. The piggy bank of increasing home values is shrinking.

While long time readers have seen this chart on a few occasions, it bears review. Notice that mortgage equity withdrawals, or MEWs, accounted for 2-3% of the growth of overall GDP in 2001-6. Without MEWs we would have seen two solid years of recession (the red bars) rather than a few quarters, and a decidedly below trend economy. Such large MEWs were possible because of the bubble in housing prices and the availability of cheap and easy mortgages."

"There has never been a time where markets started out from high valuations that they did not eventually end up with lower valuations. These cycles lasted on average for 17 years, with the shortest being 13 years (so far).

And this is important. There has never been a time when valuations dropped to the mean and then went back up again without visiting a much lower valuation. Never. Not one time. Zip.

We are now back to the mean P/E ratio. Now maybe this time it is different. But those are dangerous words."

jaketex- friendly advice- (and assuming from the two week comment that you have a ST horizon)->a two week period of outsize gains trading in one direction would normally be a cue to take (at least partial) profits and/or trade the opposite direction...JMO...

2nd,
Sorry for the delay....away from the computer.

GFI: No, didn't sell AH. Looking to lower basis as much as possible, possibly add to position if it gets back to low-mid 13's again, otherwise I'm sticking with my current position.

Looks like those FXP/QID/SKF holdings might work tomorrow.

How oil burst the American bubble
By Michael T Klare

The economic bubble that lifted the stock market to dizzying heights was sustained as much by cheap oil as by cheap (often fraudulent) mortgages. Likewise, the collapse of the bubble was caused as much by costly (often imported) oil as by record defaults on those improvident mortgages. Oil, in fact, has played a critical, if little commented on, role in America's current economic enfeeblement - and it will continue to drain the economy of wealth and vigor for years to come.


http://tinyurl.com/3bhjqv

ALOHA !!

maggy ... Thanks for the info. I would not be surprised to hear MOO from the US Congress during pork bills ...

Floods in my region of the World. I am in Honolulu now but I expect to have a full plate of headaches waiting for me when I get off the jet in Hilo! I like water but sometimes excess is not good!

Tomorrow we are hoping in a car and going for a tour of the island (Oahu). I notice gas here is at $3.39USD per gallon. Gas in Australia was around $1.33AUD to $1.49AUD per litre, which is close to $6USD ... Here we Americans do not even know how good we have it with gas at $3 something!

In the 1970s gas was at $0.35USD per gallon. What has caused this price rise? If it isn't just the Fed and State excise taxes then it must be the oil companies and all the hedge funds and speculators and OPEC and Bin Laden and every other excuse in the World except US "monetary inflation"?

Hummmm ... the latest Bush FY2009 Budget is over $3trilUSD! What inflation? By the way ... that's what they will admit to! I can't wait to read the small print! I mean why waste taxpayer money putting out a budget? Just keep raising the ceiling ... There's always a shortfall in revenues so ... PRINT BABY PRINT !!! Cha ...