Miners Hecla and Rio Tinto in the news today:

http://biz.yahoo.com/bw/080212/20080212005742.html?.v=1

I'm long Hecla and I like this deal. The stock price has become decoupled entirely from the price of silver. Similar to many mining stocks.

I'm cautious, however, because this could be the markets telling us that the miners are not overvalued so much as the price of gold, silver and other precious metals (platinum!) are overpriced.

Buffet to the rescue! Looks like my ultra long XLF entry eod yesterday will be up today.

DaveB: Excellent Call !

DaveB, the XLF isn't ultra. UYG is, though. In any case, both should open very well thanks to this nonsense. Congrats just the same.

Good morning.

Nothing to report at this time regarding Cara 100 Ratings Changes.

Have a great day, everyone.

BC / Community - is there a website or service where i could plug in different ETFs ( say 50 ) and have the RSIs tracked / updated on an ongoing or real-time basis ? Any thoughts ? thanks, rk

Just in case you have not yet seen this: Here is "Wall Street meltdown" - the video.

Enjoy this hilarious clip: http://tinyurl.com/2wnrgn

Does anyone trade here on StreetSmartPro? I'm losing Velocity in a few weeks and in order to make SSP work I have to install a usoft OS on my Mac something I do NOT want to do. What other options are out there for a pure Mac platform?

GM just report it lost 38.7 billion.
Unbelievable.

Try this link for ETF RSI, I think it will work. http://tinyurl.com/2cffhu

Clear the table and enter the ETF's you are interested in. I don't know about limitations in the number you can track.

I_loser - you're correct the XLF isn't ultra but the fund I bought tracks XLF on an ultra basis.

We'll see what the day brings.

Dave

Notice the Buffett is not offering to take over the entire liability of the bond insurers.....just municipals.

It sounds like an offer to buy that liability while leaving the subprime liability with ambac, mibia, and fgic.

The financials may take off on this news, but it really isn't about them. It's about the insurers so this really isn't good news for the financials as they aren't bond insurers and their liability is on mortgages and related instruments which remains unchanged.

Colin Twiggs on gold: "Spot gold displays a bearish rising wedge pattern, but I would not place much reliance on this — unless the euro or crude showed similar bearish signs. While the formation has a fairly high failure rate, reversal below $900 would warn of a test of long-term support at $850."

Craig, I expected that we'd soon be hearing about a "bailout" of the bond insurers.

I didn't expect to hear this from WB today, but it will be helpful in beginning to put a floor under the financials.

I'm still believing that we'll be seeing a government led bailout for the non-muni stuff announced yet this week. These bond insurers simply cannot be allowed to be downgraded (fail) since the ramifications would be enormous and unacceptable. So, I believe, that we'll see a bailout.

Dave

The RSI app works for ETFs, albeit on an end of day basis (I think).

I made a spreadsheet to look at them as a "big picture" view, and enter the following string in Korvus' page:

XLF XHB XLY XLB SMH IYZ XLI XLU XLE XLP IYH GLD SLV TLT LQD RWR EWA EWH EWM EWS EWT EWY IFN EWJ EPP DIA IJJ IJS SPY MDY IWM RUT QQQQ EFA EZU EWD EWG EWK EWL EWN EWO EWP EWQ EWU ILF EEM EWC EWW EWZ

Then I copy/paste the values into the spreadsheet and have that day's RSI's populate another page that groups the ETF's by region, type, etc.

It is not perfect, but for me it gives me some ideas on where to start poking around.

Bill and others,
Thanks for the timely opinion(s) on CSCO a few days ago. Had been thinking similar (but far less well-informed) thoughts. It's now a small part of my long portfolio and seems quite comfy there.

Craig, Dave, others -

Yes, Warren Buffett is offering to take the only part of their business with any value, while leaving them with the dreck.

It's pretty funny to see him in action - that's a deal they take only if they are completely desperate.

This being OpEx week we will likely see some quick moves, especially in Financials, on little basis for cause other than some strong hand wants to make some money either up or down on their options before they expire. Then too, some traders say that Brokers for options will try to move the price to where the most options expire worthless. In any case, it is hard to play in a rigged game when you don’t know who the “patsy” and it is likely you.
+++++++++++++++++++++++++++

Just noticed that there is some strong “Inside Buying” going on for BJS (BJ Services Oil/Gas). The weekly price chart still shows the dance called “stair stepping down” but there is some strong support around $20 and RSI has just “left the building” but might come back. Anyone good at FA looking at BJS?

WPeyton....exactly. It isn't a real offer (it is to Warren) but we have to know he doesn't pay anything close to real value.

He and Wilbur Ross are not stupid. They aren't rescuing anything, they are investing in the best of the super-distressed liabilities.
Notice Ross didn't come through as hyped in the last couple weeks. They tried this pump already.

IOW, this is noise.

HNCadet

SSP system. For Mac I guess if you had the bootcamp function, it should work. Their tech support has been helpful and I'd call them directly if you have not. I asked about Mac a little less than a year ago and they said SSP would not work with it at that time. Since that time, Leopard is out and so is the bootcamp function.

FWIW, SSP works best on XP, sufficent, but not as well on Vista IMO.

leaning a little harder into QID/opening FXP...
trading's gettin' to be hard work LOL

HNCadet

Bootcamp is built in Leopard. Alternatives are "Parallels" or "VMWare" that both allow multiple virtual "OSs" running in separate windows.

Alternatively, Interactive Brokers and Think or Swim, both have java based applications as well as web based that work well with Macs.

Doug

I'm seeing EUR/USD gains to 1.459.
Details at http://www.dailyfx.com/

"The German ZEW Survey showed that investor confidence regarding future prospects improved as the index unexpectedly printed higher at minus 39.5, up from last month’s 15 year low of minus 43. The data suggests that the European economy may be more resilient than expected. However, the current situation survey dropped sharply to 33.7 from 50, as the ECB remains hawkish despite mounting downside risks to growth."

I would expect this to pressure $USD, yet gold has weakened slightly. Is the threat of IMF dishoarding acting as a counter-weight to a strong Euro ?

HNCadet Clarification.

"Their tech support" refers to Schwab.

Is anyone looking at DUG? I was trading it for awhile when it was in the 30's and missed the run-up, but if you believe Bill and others that the price of oil is going to $75 instead of $100 it seems worth a look. Anyone's thoughts would be appreciated. No position.

Colin Twiggs has opined that Dow "recovery above 12,400 would warn of a test of 12,800". Does that specifically mean just getting above 12,400 for a few ticks, or closing above 12,400?
Anyone?

My plan is to wait a day or two for this fairy tale news about all the coordinated bail-outs, I mean delay tactics to lose their rose hue and let us see reality again. Then I'm going hugely short with the Dump-truck.

Now that credit-default swaps are breaking down, it's a matter of time before it all comes crashing down. There's just not enough money in the system to save the derivative failures coming and Paulson knows he can't print more and still keep bonds attractive to foreign investors.

You can tell how screwed they are from the latest mortgage plan. It's clearly an act of desperation to stop people from "walking away". And it will never work.

I can't wait to see all the back-biting between financials as they go down hard. Pay down your debts and hoard your cash and gold because soon the banks will not be able to lend to anyone no matter how good their credit is.

Rob.

BC - that's great and i'm looking forward to it - that pegs me to a 'T' in so much as looking for a longer-term trade a few times per year - also sounds nice for me in that I could focus more on 'asset class' values, etc. Either way, great stuff, looking forward to it / them. Thanks, rk

Always an intersting site for a short list:
http://www.winninginvesting.com/Death_List.htm

just updated...

Selling into strength.
Added to QID, UYG for the ST bounce.

Ronbon: It's usually the closing level. With this volatility it seems anything can happen intraday.

Bill,
Definitely looking forward to seeing the results of all the hard work going on behind the scenes!

If my earlier post came across as short or curt, my apologies...plain text is the worst for conveying the flavor of a thought. I use Korvus' app several times weekly on the C100 list and the ETF's and other stocks of interest.

These interesting days, I am putting as much time as my wife...uh, er, life!, allow into my ongoing education of the market world we move through. While no where near the level of most discourse here I just try to share anything meager I can contribute!

As always, thank you and all here!

Seamus, Doug:

Talked to Schwab several times, keep getting different answers from different people. I have Parallels, V 2.x but according to Schwab last nite you must still "LOAD" usoft OPS to get "it" to open their SSP. Confirmed this, in that in the loading of Parallels you must input your usoft OPS "key". Disappointing, Seems we Mac users are being left without support and the Mac purchase was to escape usoft hellish OPS issues. Has anyone here been able to use SSP w/o installing usft OPS????? maybe the new version(3.0) has usft preinstalled?

Ron Paul has an idea for a grand march on Washington in 3-4 months. I think that would give students the opportunity to participate during summer vacation.
http://tinyurl.com/39frgl at the end of 15 minute campaign update

A little more QID....

... escape usoft hellish OPS issues

Yeah, I use it fine on Windows XP. No problems whatsoever.

Net advancing issues is over 1500, evaluate your reward to risk in using ultra shorts in a market that gapped up and ran...without filling that gap...hope the stops kicked in.

I opened a small position in ZOLT this morning on the earnings smackdown. This one is highly speculative but it is down huge over the last couple weeks. I like it as a play on alternative energy/commodities. I bought some shares as well as a MAR 30 option. Anyone else been eyeing this one?

Okay, so I start a business and I approach your business and offer to take your best customers because you're not capable of servicing them. You tell me to stuff it. I then approach your best customers and offer them an opportunity to switch to my company because their current supplier is too risky and unreliable. That's what Warren Buffett is doing. This is not good news for MBIA, Ambac and their cousins.

Looks like Morgan is pumping gold this AM.
Call for it to be over $1000 this year.

Given the charts and ST dollar strength I think this is to allow them to unload at their price before a correction and reload opportunity.

Seamus: I want to take this opportunity to Thank you for CHSCP a while back. It's been very good to me so far. Capital gain and high dividend...all good.
I hope you are fully in the ferts....on a big run.

Nailed it Fred.

Not at all, Bill.

I find in this format of conversation it is better openly respond, and thus maybe to err on the side of courtesy and directness, than not :-)

To say you mean well is an understatement, I know I certainly mean well also, and if we both spend a little time ensuring each other that remains the case, then its time well spent. The world could use a bit more of that, IMHO!

HNCadet Sorry to hear that. Can't offer any more solutions. Godd luck looking at alternatives.

Craig, glad it's working for you . . . Fortune 500 company in the agriculture sweet spot . . .I've parked some money in CHSCP over the last year in lieu of a mm . . . have my personal limit of portfolio in it (10%) . . . (realize risk as it's not very liquid) ..look at it as a fixed income equity . . w/dividend, any cap gain a bonus . . anyone looking, please do your own due diligence.

On the other hand, looks like I may have sold PDA a little early, but no complaints as I'll take the move from a 39 handle to 46 where I sold yesterday.

Have to run out and won't be back till late afternoon . . . have a good one.

Just updated some ETF and market figures on my web site.

It is interesting to see that the GLD ETF is ratehr strong, while gold stocks are very weak in term of Money Flow.

http://www.willain.com/EV/index.html

Not all the figures at updated, because this is too much work, and it is just a free information web site.I plan next update at the end of the week, but will update everyday the ETF and GOLD sections.

Pascal

Hear, hear! Agreed Reenzo.

No worries Bill. I feel priviledged to be here.

I find parallels between Buffet's approach and Bill's in a sense. With Bill's RSI approach and 100 list he is holding his powder until others have to sell their best assets at firesale prices. Then he make them an offer with the risk/reward entirely in his favor. The patient are often rewarded.

This rally is going to have some legs, at least for a few days. Too many small investors were/are bearish and buying puts. The tell for a rally last week was the outperformance of the Nasdaq 10 stocks on Friday. Smart money was accumulating Beta before the rally. Once the small investors are rinsed and close their puts the market will resume the downtrend. Heavy resistance is between 1402 and 1440 on the S&P.

Seamus, exactly. Anyone interested should look at the LT chart and realize it is near the top of it's usual range. Luckily you highlighted it near it's usual low where I got in.

Thanks again.

... escape usoft hellish OPS issues

Yeah, I use it fine on Windows XP. No problems whatsoever.

Posted by: I_Loser

All my previous experience was with my small business applications and multiple users. Couldn't keep it from crashing and shutting down my business on a monthly basis. Perhaps on a single app w/o multiple users it is more stable for you. If so, consider yourself blessed.

Does anyone use a web-based trading system that does not have dropout issues? that appears to be the biggest issue with Schwab's Streetsmart basic platform.

The CNBC "reporters" are spinning the Warren Buffett news as meaning that a bottom has been put in the credit crunch.

These talking heads are:

a) pathetic pollyannas
b) corporate shills
c) bald-faced liars
d) all of the above

They can rally this market with all of their nefarious chicanery, but I remain firmly in the bear camp and will have the last laugh when the global financial empire is brought to its collective knees.

All IMHO.

"and castles made of sand, fall in the sea......eventually" -- James Marshall Hendrix

Also banked a small position in ZOLT on the smack down. Good long term hold for alt energy. Certainly met the low RSI criteria, but hasn't risen past 30 of course.

I think the 70/30 RSI does no strictly apply in a bear market. I think that is for a neutral market and should be offset + or - depending on whether it's a bull or a bear.

~

COF is up again setting me up for another round of puts. Can I retire on COF alone? Bought calls on RZ yesterday at 10 and have nice green.

Good tell today watching Yen and gold.
Franc is holding.

We may rally to 12800 but I will be selling and adding shorts into it.

2nd, added FXP with a 92 handle.
Thinking of building positions into Friday's options expiry, waiting for Monday. Have to keep track of where Ben and Hank are though....

Beside that, we have bond insurers with further losses to announce mid month.

Uh oh...more dial a hope coming on TV. A new one, "project lifeline".

Paulson is on the air again, "saving homeowners" with "hope now". In reality all this does is imprison people in homes destined to drop 25% or more over the coming years. The longer they wait, the less chance of selling at any reasonable price they will have. They need to make a short sale or walk away now, IMHO.

EW pattern is DOW retrace back to near 20 week MA, and then a huge reversal. Fib retracements are: 0.786= 13,321 0.618= 12,960. After the reversal it's a ride down 20% well below 10K. Fasten seat belts.

BullHunter,
I agree totally and pick D!!

There is no way the financials can dig themselves out of this one. There's not enough money anywhere to stop the derivatives from crashing.

Rob.

Two quick notes. First, if anyone sees distorted charts on the daily report, that's my mistake. Force a browser refresh (usually Ctrl-F5 on PCs) to see the correct charts. Second, if anyone needs to talk to the guy running the Skype server, we've set up an email alias for him at sio2 (at) billcara.com.

Oh, and since someone mentioned it, yes my RSI page uses end-of-day values. And the limit on the number of tickers is however many you can fit into the text box (it looks like it's currently set to 1200 characters...so 300 3-letter tickers, separated by spaces). I limit it partially to save my server from being overloaded by someone asking for, say, the Russell 2000, and partially because I put the tickers in the URL in case you want to bookmark it, and IE chokes at much longer than that.

Just got an email from PDAC.
They have a "Virtual PDAC"
It requires registration on line.
Here is the link.

http://www.virtual-exhibition.com/home.html?name=vpdac

David Dremin on Bloomberg is asking what the payoff will be for the "project lifeline" lenders to renegotiate all those defaulting mortgages. What will they get from us via Hank and Ben? Besides the bulk of that $150 billion of borrowed Chinese cash....

Boy do we sound like a cheerful bunch, eh? LOL!

Of course WB wants to buy the muni side of the business, with low defaults, it's a great business.

Those execs who facilitated the mountain of derivatives that could bring down the financial system should be on the CNBC show "American Greed" - don't hold your breadth on ever seeing that show.

Craig: Dealing with reality is not always fun. It was quite a party on the ride up.

Maybe collecting my PM bars at the post office will brighten the day.

Be careful out there. I'm holding the SKF and SRS anyway, as I've learned my lesson before. The 3 day settlement BS for IRAs really wreaks havoc using these instruments.

one more on ETFs, please...can anyone point me in the direction of a site or list of ETFs listed or ranked by daily volume ? please, thanks, rk

More daily humor:

"IndyMac Bancorp (IMB:IndyMac Bancorp Inc

Last: 8.43+0.83 +10.86% !!!

11:42am 02/12/2008

IMB 8.43, +0.83, +10.9%) on Tuesday reported its first annual loss in its 23-year history, leading the company to suspend its dividend on common shares as it attempts to ride out the mortgage crunch. The holding company for IndyMac Bank, one of the nation's largest thrifts and mortgage originators, said it swung to a fourth-quarter net loss of $509.1 million, or $6.43 a share."

rjk9

Try the Yahoo ETF page, see the left hand menu, by volume, by size etc.

http://finance.yahoo.com/etf

Aurator: Yeah, but look at the daily trend in XLF now.....that SKF is looking alright to me.

I see Bloomberg reporting Paulson saying the subprime mess is just underway. He didn't say THAT on TV while announcing how citizens could participate in "Project Lifeline to the Banks".

Why didn't he tell all those people that he is trying to keep them from sending their keys to the bank while knowledgable of the fact they will lose 25 - 30% of their principal by staying? What a public servant he is.

Is he Treasury Secretary or schill for the banks?
Nevermind, redundant and obvious question.

surprised no one is mentioned golds free fall the past few hours...

closing in on $900....

Gold, London closes and NY starts those spikes again. Kitco showing $905 now.

Back in early Nov I posted a note about my favorite jr. GWQ.V. I have been accumulating over the past 3+ months and news last week on the last drill results are very positive. We(inv grp) believe that reserves are now doubled and all drill locations are still open-ended! This does have the capability of being one of the largest Cu mines in BC. I have mentioned it to Jock, still hope to go to PDAC. My biggest interest is that the ownership(over 20yrs) is looking to sell it, so holding until producing is not an issue. Still, DYODD please.

Hi,

Some traders I am talking with are adding short gold positions invoking the IMF sale and other minor reasons.

Again, my gut feeling tells me that the conditions may be brewing for a serious short squeeze, but I may be wrong.

rjk9,
Morningstar.com has a comprehensive ETF section which provides volumes, portfolio holdings etcetera.

Too busy selling to comment on the POG. Using the rally to raise cash. Luckily bailed on PAL and SWC this AM before the headwind.

As the price falls I will be looking to buy more bullion bars.

Re: Gold

Gold basis has spread to ~$8.

This should be the week where bullion clearly underperforms, though all eyes should be on the silver price outcome in the next couple of weeks.

The seasonality of Gold is into a moderate correction, while silver should advance strongly percentage - wise against gold.

"All my previous experience was with my small business applications and multiple users. Couldn't keep it from crashing and shutting down my business on a monthly basis."

don't blame bad software on the O.S.

CCJ not on "buy" RSI signal list, due to monthly/weekly not under 30, but they were close.

RSI 7 crosses over 30 AND over the RSI M/W lines AND the downtrend line on daily chart.

Nice move today on above.

Re: gold, if you read my note on the RSI divergence yesterday, then todays decline should not be of surprise, now waiting to see if it breaks the neckline.

There go the bond insurers...

ABK: Last [Tick] 8.957[ - ]
Change -1.523
% Change -14.53%

MBI: Last [Tick] 11.867[ - ]
Change -1.713
% Change -12.61%

What will be even more curious is the decline of the $USD along with Gold into the end of March.

If you are into junior PM's take a close look at the filings at SEDAR.com, or insider fillings for any sign that institutional investment has increased in the last quarter.

UBS Nifty Fifty posted in pdf on this page.
http://tinyurl.com/2yvyae

Aurator--stop talking dirty!

I meant to mention earlier....
Asked about further write downs the Credit Suisse CEO showed he is a master of double speak, obviscation and avoidance. Really good at it.

He had an answer for something....just not the direct question....we feel pretty good...we feel confident...we don't speak in terms that can be held responsible for....

'I think what we attempted to do was to be extremely transparent"..."we are going to continue to manage"...blah, blah, blah.

Whether stops were taken out deliberately or not, its of little consequence, because the resulting actions of traders on the gold price are no different than if they acted unconsciously and without thought.(I'm not trying to be insulting or anything.)

I believe we reached the seasonal peak @$942.20 a couple of weeks ago, and will be looking at an interim correction based on seasonality. I figure we'll see gold prices eventually hit the 13-week EMA.

However, silver activity suggests that the silver price will advance percentage wise against gold into a seasonally strong period. So if gold corrects, and silver remains range bound, or rises, then the Silver/Gold ratio will rise. This is an important sign that speculative cash is being played in the PM sector, and junior PM's will benefit. That's my theory.

Northforker: No idea what you mean.

Gone for the day to do more Khrysos management.

So the "lifeline" freezes foreclosures for 30 days....enough time for AMBAC/MBIA/FGIC to go hat in hand to SWF's...or to kick the can down the road another 30 days before the other shoe drops. Maybe a government bail out or big Fed cut in March to blur the landscape?

I actually thought that was Single White Females for about 5 seconds until I realized it was Sovereign Wealth Funds.

Craig,
"Credit Suisse CEO showed he is a master of double speak, obviscation and avoidance. Really good at it...."
Reminds me of an old spoof David Fry did on Nixon during the Watergate years. He had Nixon announcing to the American people....
"Let me be perfectly clear about this right now: I accept all of the responsibility...but none of the blame. You see, my dear friends, that people who are to blame go to jail, but people who are responsible, do not."

Fatty - you need a love life!

Over past years, gold sell offs look like an elephant came into the room. Dramatic and with no regard for getting best price, simply trying to scare longs with a violent selloff. Where it goes from here is unknown, but keep in mind what type of player acts like an elephant.

Haha, I'm married now. I think my reaction was just reflective of old, uh... habits.

The culprit was likely the same reptilian portion of my brain stem that whispers for me to buy on strength & sell when the crap is hitting the fan.

Aurator: you said "There go the bond insurers.."

I said: "Stop talking dirty."
trying to make a joke. sorry if I was obtuse or offended.

Fatty - Too bad your wife isn't a trading coach, you'd have all the bases covered ;-)

I don't get all the Buffett talk...nothing new there at all, IMO.

go34, the shameless nature of pumping.....
They did it two weeks ago with Wilbur Ross too.

It was good for that little countertrend rally too. It would be more forthright to just stick a gun in my ribs in a dark alley.

craig - lol...really.

Buffet is proposing to be the 2nd insurer of the muni bonds and for the privilege of doing that, he will demand collect 1.5X the original premium paid to the insurers (!)

All this to allow the insurers to get rid of their only good assets. What a deal.

Can someone tell me again why the market is going up? Maybe it's just to stimulate the Chinese after one full week off.

Added to SDS March calls today. I am short gold, oil, natural gas, and SPY. Taking a beating on the SPY shorts - today.

One thing is for certain regarding sell-offs in the precious metals sector is that central banks have no silver to dump.

I also wonder why noboby suggests that the industrial sector must be dumping silver or gold from time to time, possibly the larger miners. But then again, multiple leases on the same bullion bars through the bullion banks get dumped on the market. None of these methods have managed to fix the price for any length of time.

The only entities that are accumulating silver are ETFs, and possibly China's central bank has accumulated silver somewhere in their system.

It would certainly be interesting if my wife was my trading coach. She's got enough "discipline" for the both of us. (Cue bullwhip sounds)

If the market starts to roll over & give up much of the gains btwn 3-4 PM, (close below 12,400) then I'll go short. Else, I'm inclined to hold my longs overnight.

Or if I'm lucky, I could convince my new "trading coach" to do that...

I'm reading that wheat nearly had a limit down day today and down large since yesterday. Looks like that party is over for the short term.

SIO2 : Check out the COT data..and check where the maximum pain is for spy holders...puts and calls...you have answered your own question...

Craig I too noticed the Credit Suisse CEO dodging the question. My initial reaction was, wow this dude has one heck of a political career ahead of him.

He was obviously prepared for the question.

Let's assume that Buffet some how does purchase the muni part of the monolines' business, and the monolines go out of business.

Woulden't you think a financial crises would occur due to all the CDO insurance the monolines wrote?

Back long UNG @ $41.23. GLD is under $90 and may portend more selling in PM's. I am looking to go short GDX after reviewing todays action.

Aussie market for the last 100 years Interesting view. Any one have similar charts for s&p, dow ndx
http://www.asx.com.au/investor/pdf/share_price_movements.pdf

Thanks EEMTrader. Can you explain which data you look at? I looked mainly at the Chicago options futures data, positions as of Feb 5:

Non commercial: far more shorts than longs:
5,378 vs 23,610

Commercial: more longs than shorts:
40,500 vs 22,213

Total is very similar:

48,497 vs 48,442

With, regards to options only, last month at expiration most QQQQ open contracts were in puts, and the majority of QQQQ puts expired in the money. Max pain in this regards did not hold.

I know you are probably referring to some other data, trying to educate myself.

Thanks!

Constructing a firm stool (no jokes please):

IMO, you need to follow both fundamentals and technicals for profitable trading. Boy am I smart ;-) . That makes up two legs of the stool.

But a two legged stool places your rump on the floor quickly, so you need a third leg. My third leg is intermarket relationships between stocks, interest rates, oil, gold, etc. I believe this is Bill's "cause and effect paradigm".

How about a fourth leg? There are a few candidates (please feel free to add them), but a good one is CNBC.

That's what I said; CNBC. Most days it's worthless, but some days you can clearly hear the noise that is leading many traders to make bad decisions based on emotions. See CSCO post earnings - "oh no, bad earnings, better put in a sell on open market order", OR how about all the talking heads that they trot out when a commodity is making new highs with their predictions of $200 oil or $1000 gold - makes people buy at top or sell at bottom. I know it can be annoying to have it on all day, but you can use it to your advantage as you learn how the market "plays" the mom and pop. Bill talks about this all the time, and I think that traders that don't have it on are missing out.

Very good g034. Some days it feels like HB&B or other crooks are the one who put the screws and nails in the stool, so it falls apart when you least expect it.

go34, that's probably good advice. I just get so disgusted at the level of the discourse. Is everyone in their audience a slightly deaf, hyperactive third grader?

Re: Overnight trade in PM's.

If you look at it carefully, the overnight trade is where the action in PM's are. Both Platinum and Silver reached record highs last night, so obviously they will sell off during the trading day in North America.

Its the reverse of the South African paradigm of two lions waiting for a gazelle to run into a tree, which they merely have to pick up once it happens. South African trader make a living with this kind of advantage, but the tables appear turned. Its now the North American trader that sells during the day to reap the overnight harvest.

Gold has declined off its peak two weeks ago, which was set in overnight trade, but Platinum and Silver have continued onwards.

"General Motors offered lucrative buyouts Tuesday to 74,000 employees - its entire U.S. hourly workforce."
http://tinyurl.com/2u8z4t

craig- tough day, man...finally back to even on the ultrashorts and trying to decide whether to walk away or press the trade(s) on QID/FXP...

SIO2: was watching non reportable correlation with $SPX...as far as options its still early..I use it as a tool..not an options trader. A stong gap that doesnt fill...is a bullish sign..then again this week is kinda funky anyways..

Fransix,

'Its now the North American trader that sells during the day to reap the overnight harvest.'

If I couple that statement with the fact that today the $US has weakened against EUR, the major component of $USD, thereby indicating gold's spike down is NOT the result of $US strength, then I conclude that gold market is subject to short-term market manipulation. Who has the power to dump enough to cause a 1% drop from $920 to $905 in a few minutes in order to reap the overnight harvest?

Might the sudden drop in gold be due to forced liquidation of hard assets to cover margin calls -- re ABK and MBI down by 13% ?

Huge drop (90%) in Indian gold imports versus last January:

http://tinyurl.com/2b7le4

QID- taking some off at 50.92...
RXP- ditto @ 95.70...

Dang..what spooked the QQQQs?

Tech heavy NASDAQ loves the color red.
S&P will follow...
Today has to be the end for a positive consumer sentiment with all the negative news. Bring on the bear.

What spooked everything on my screen?/ Red arrows all around - what's up?

EEMtrader I don't know but it spooked the XLF also! - LOL. That's a spec trade - I'll continue to hold the XLF ultra for a couple more days since I do expect that we get a real government-based bailout announcement this week.

DaveB: Think Halloween is here early..!! Qs dont even have $financial exposure...think it spooked all sectors...even the XLE...think you may have something there about a government bailout...they cant be allowed to fail...major catasrophe...what will I do without my bank?

FattyArbuckle, I have gone hat in hand to many SWFs. There usually seems to be a problem with the rate of interest. I guess my yields aren't adequate.

BTW,

CMG down another $4.20 today. Carnitas for everyone, on me!

Yes EEMtrader - it's easy for people to speculate about financial holocaust, etc., but quote another thing to live in that environment. Too many entities of real wealth and power are extremely well incented to keep these institutions afloat until some risk transfer/mitigation can be put into place.

EEM, that's a little extreme - have you heard something re: "major catastrophe" occurring today?

Must be a sell program kicking off... France just opened up... maybe it's another rogue trader. lol.

2nd, if it's green and up enough I'm a seller.
I thought you had a lower basis on QID as I was right behind you.
I already sold QID/FXP for gains.
Also traded the SKF on the downside of XLF.
Sold at 111.95
Nibbled a few shares of SNDK at 25.88.
Shorted GDX this am and got flushed out, wish I had held.

No clue how Asia will go....suspect up after a holiday, but it depends on how we close.

craig- whoosh->finally caught a decent trade->QID/FXP off at 51.75/97.83...

writersblock...no...heard nothing...some institutions are just too intertwined within the system to fail...without our best and brightest trying to save it. no one benefits.

thats a separate discussion from crooks that rip the system off and worthy of an FBI investigation..and porsecution.

No I heard nothing, not packing my potatoes and canned tuna and heading for the hills with some old magazines.:)

NYSE breadth 2:1 positive and Nasdaq breath 2:1 negative? Very strange.

AMAT (Cara 100) reporting after the bell today. SHould be interesting - (Bad).

this is going to leave some ugly daily candlesticks...no overgnight holds for me...

Whew! Thanks, EEM. I was already loading up my donkey :-)

writersblok & EEM - the core issue that I think of relative to this bond insurance problem is counter-party risk. Google it - the more deeply one understands that issue, the more you can see the "major catastrophe" that would exist.

EEM - agree on the sticks (inverted hammers) but I've gotta hold that XLF thing now that I opened my mouth (keyboard).

DaveB: Look at the last minute buying...!! Think I got snookered..

Re: Margin Calls On Financials Affecting Gold

I have no way of knowing whether hedge funds run long financials/short gold trades, but I feel its unlikely.

But I do feel that if there were a sell off in the precious metals sector, that this would require net settlements in $US, creating a demand.

Its very difficult to prove that conscious price fixing in the precious metals sector has had any effect except unintended higher prices.

We have seen time and again 2% deviations in the spot price of bullion at ~11 o'clock in the morning, but notice also the London markets have awfully regular sell offs as well. Sell offs in the London market usually means some Central Bank in Europe selling their gold in open market operations. I do believe this is directly ties to saving face and perhaps the careers of central bank economists in Europe.

There are probably massive overhangs of gold based derivatives and swaps with no possible settlement, so any operator with this kind of liability moving onto their balance sheet will likely attempt to unwind those obligations. But I haven't seen a cogent write up or explanation of how that works.

Certainly an options contract of sufficient size which is barely in the money would cause a sell off. The commodities markets have long been in the very tightest grip of seasonality & mania in the last few years.

As the price of gold rises, then it causes agreements on international settlements to fall apart as well, though I have not read much about it to date. But we see the chronic resorting to jawboning in the markets whether the IMF will sell or whether the gold trade in India affects the price.

So there are many uncontrolled factors with arbitrary contractual & seasonal limits that no single trader from their standpoint can determine through their own will. They are not all seeing and all powerful, they are men with skills no better than you or me.

It all appears like manipulation, but if you look at it from the perspective that the players are unconscious in determining the price outcome, it clarifies why the gold price seems to be timed on a Swiss watch,(from the perspective of momentum) and that looking a few weeks and months out, you can determine its course of action.

EEM - it appears a quick surge in the last 1-2 mins. This is a messy market - you're probably better off in cash overnight!

EEMTrader...maybe not. I bet they unload those positions AH as they get pumped at the close and afterward quite a bit.

The problem is, sometimes tire chasers catch the tire. Ouch.

AMAT up ~4% after hours. So far a/h traders liking something.

2nd, glad you made it!
I gained a lot in ultras today but jr's down some, so mildly up overall.

The added visibility of BRK hasn't hurt me.
Seems to be reminding folks of WB's gift of finding extremely distressed buys.

hello everyone,

Please click this link and give me your opinion of the product if you are aware of it??

Thanks much.

http://tinyurl.com/35yyrm

MikeNYC, good one! It's tough when the SWFs get all Moody and downgrade you from AAA.

Got out of the longs & picked up some QID @ 50.3 before the runup but didn't unload. Everything's real fishy.

Glad I was away today (on the sidelines)

Block trades after hrs on JNJ

644,600 sh at 62.97 16:01
1,000,000 sh at 62.97 16:16

http://tickersense.typepad.com/ticker_sense/

check out their Blogger Sentiment Poll ending last week - extremely "bullish" with very few "bears". Looking back at the history of this poll (only 2 yrs) it's been a good contrarian indicator at extremes. Market action seems to lag poll extremes by a week or so.

Discourse by Antal Fekete

"If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe that the banking institutions having the issuing power of money are more dangerous to liberty than standing armies."
Thomas Jefferson

"The large-scale dismantling of the producing sector in America during the past twenty-five years is a direct consequence of the regime of falling interest rates. Production stopped as a result of the financial sector siphoning off capital from the producing sector. Industrial jobs were exported as there was no capital left to support them at home. This shocking truth was never investigated by mainstream economists, sycophants of Keynes. They did not want to expose the gravest error of their idol in confusing a low interest-rate structure with a falling one. Keynesianism is the gigolo of science (Ayn Rand)."

complete text http://tinyurl.com/39rvxl

CanadianSailor and other PDAC attendees -

I am indeed from Missouri - the "show me" state - and Bill did show me and others at PDAC '07 the dynamics of the mining and mining finance business .

At its core is a small group of very impressive and approachable men such as Mr. Platinum. My time at PDAC with Bill was an education - and this year I'm going for my "masters" ....

re jr's

I think that parabolic spike in abx including volume, from the average poorly informed new gold investor will be looking for a home soon,if not this week.The abx chart has always been the one I follow for point of recogition by the public. The trickle down theory at it's best perhaps.Looking at the abx:xau 8yr chart compared to the cdnx this appears to be what happens. I am positioned in my horses and jockeys that I have looked at for the past 7 yrs if so. Sucker that I am I can't imagine the downside to be unbearable in my jrs. fwiw..

Bill,
Bloomberg has definitely succumbed some to the CNBC/FOX model. It was much different before FOX financial came in and hired away some of the CNBC folks and CNBC hired away some of the Bloomberg people. Bloomberg does have a deep bench though and it looks as if the replacements are pretty high quality. It would be nice if they returned to the old model as it truly set's them apart from the competition.

Fox ended up as I thought....they got the good looking ones from CNBC and Bloomberg but hold the quality reporting down better than CNBC. So it's nothing more than Playboy entertainment TV with light financial talk. Poor Liz Clayman. They probably pay more than CNBC but it won't do a thing for her credibility or career. Not to mention pairing her with some of the already existent FOX knot heads who I would turn off reporting the weather. Bloomberg had a couple decent analysts hired away by CNBC that are now employed as their usual high volume pumpers.

Sad really. I don't get BNN but wish I could.
I've seen it when in Canada and it was very good.

One thing I have noticed. While driving to the airport on Friday I tried to find a financial radio station to hear what was happening in the markets. Went through the entire FM spectrum...nothing. All of AM with ONE radio station with a couple CFP's talking S corps. No stock market reporting anywhere. Nothing.

How much more disconnected can Americans get from the markets that influence their lives?
They can hear all the talk radio and schmooze they want, but not a thing about economics or money. Like anything else you get out of it what you put into it.

speaking of divergences -

AEM price (rising)

divergent to

RSI's (weakening)

formation could be bearish also...

something to watch...

Aurizon - a "senior" junior ...

I had the chance to meet with David Hall, CEO of Aurizon, whose Casa Berardi mine went into commercial production in May, 2007. Aurizon aims to become a mid-tier producer with 200K oz. annual production from mining-friendly jurisdictions -- and seems to be getting there in a methodical and disciplined way.

A CPA, involved with Aurizon since inception, Mr. Hall became CEO in 1992. In 1998, he acquired Berardi, which had produced 60-80K oz. annually in the '90s. Aurizon has proven 1.2M oz of reserves at Berardi, and produced 48K oz. in Q3,07. Cash cost was $282, all in costs est. at $600. Mr. Hall also spoke with detail and fluency about the drill program. Exploration budget for 2008 is expected to total $17M.

Financing is through a $75M loan facility obtained in 2/06. "Joey" took a look and found that Aurizon protected its downside buying puts to deliver 287K oz. at $500/oz. by 9/10, while selling calls between $813 and 908. This, in effect, caps price on under 2 years' production. In Q3, the company was profitable and cashflow positive.

They have 630,000 oz. measured &indicated at the Johanna property (near enough to Berardi to use the same mill) and are at early exploration stage (for gold, uranium and rare earths) at Kipawa. All are in in N. Quebec.

If 3M oz. are ultimately proven out, NPV over a mine life of 15 years might represent 2 to 3 times current stock price (assuming today's gold price initially, and lower prices later.) With a sustained higher gold price the gain could, of course, greater.

While senior producers have soared and junior explorers have tanked since Aurizon began commercial production in May, 07, their own stock has been stuck in a trading range between C$3.25 and C$4.50. Mr. Hall couldn't explain why, but did mention that Aurizon has already rebuffed one hostile offer (from Northgate Minerals in '06).

While we'll do more analysis in the current Junior Gold Explorers Project, I thought Aurizon's story warranted early mention. While some juniors aim to find and sell a 10M oz. orebody in Venezuela, another works methodically towards harvesting 3M oz. in mining-friendly Quebec. Rather different risk profiles!

disclosure: no position in Aurizon, nor financial ties of any type.

craig- my basis on QID was actually quite a bit higher than yours, as i ended up holding yesterday's opening buy overnight, then averaged down today..

the past 5 trading days (for me) has felt less like surfing and more like dodging bullets...

going to head oldgoat off at the pass and post this jesse livermore quote before he does (stripped it right off the 2/9 colin twiggs site LOL) :

"Don't take action with a trade until the market itself confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don't be an impatient trader......

Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes."

This has profound implications for gold:

http://tinyurl.com/2bg65j

Tuesday, February 12, 2008
The Most Important Ticker You Will Read This Year
From Genesis’ site.

Hi,

Link to an insigtful report re gold.

http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

This is a must read for those who look at the inflation and or deflation debate. I am in the deflation camp. This is one that deserves a read since it does impact how one invests. The article also has a PDF file that links the fed report. I have read this type of situation on MISHES site also. Greater minds dwell here than mine and would love any feedback on this -also you owe it to yourselves to ponder.

http://tinyurl.com/2bg65j

wow posted at almost the same site lol sorry for double post from caution - syncronistic to say the least

B. Biggs - the market is ``at or very close to an important bottom'' and may be led higher by banks and brokerages when a rally occurs. Some financial companies may advance 20 percent to 25 percent over periods of two to three weeks ...

BNN: Thank You for the info Bill.

2nd: Sorry to hear that, glad yo got out with skin! I bought in today after you did and then added when it was near the intraday bottom (some luck there) so I see how that all worked.

I tend to watch my charts and buy in when there is a clear trend, either longer term or intraday for day trades. Like the financials today, up, down in inverse V, then the gain at the end of the day. I rode the V up and down and left the end to itself as it didn't develop enough to chance. I used to live Jesse's nightmare and it cost me dearly thinking I could lead or outsmart the market. That is my biggest discipline issue these days....waiting as I posted this AM, to see what UYG would do at the open and waiting until it got going one way or the other. Unless there is such a monster deal that the current trend is not so relevant. Even then, if it turns against me I'm out without a thought. I cut losses before they get larger, even if it doesn't seem like much at the time. The brokers make out but it is asmall price compared to my past mistakes.

Better luck to us tomorrow.

Why I'm Backing Obama
By Susan Eisenhower
Saturday, February 2, 2008; A15

Forty-seven years ago, my grandfather Dwight D. Eisenhower bid farewell to a nation he had served for more than five decades. In his televised address, Ike famously coined the term "military-industrial complex," and he offered advice that is still relevant today. "As we peer into society's future," he said, we "must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow."

Today we are engaged in a debate about these very issues. Deep in America's heart, I believe, is the nagging fear that our best years as a nation may be over. We are disliked overseas and feel insecure at home. We watch as our federal budget hemorrhages red ink and our civil liberties are eroded. Crises in energy, health care and education threaten our way of life and our ability to compete internationally. There are also the issues of a costly, unpopular war; a long-neglected infrastructure; and an aging and increasingly needy population.

I am not alone in worrying that my generation will fail to do what my grandfather's did so well: Leave America a better, stronger place than the one it found.

Given the magnitude of these issues and the cost of addressing them, our next president must be able to bring about a sense of national unity and change. As we no longer have the financial resources to address all these problems comprehensively and simultaneously, setting priorities will be essential. With hard work, much can be done.

The biggest barrier to rolling up our sleeves and preparing for a better future is our own apathy, fear or immobility. We have been living in a zero-sum political environment where all heads have been lowered to avert being lopped off by angry, noisy extremists. I am convinced that Barack Obama is the one presidential candidate today who can encourage ordinary Americans to stand straight again; he is a man who can salve our national wounds and both inspire and pursue genuine bipartisan cooperation. Just as important, Obama can assure the world and Americans that this great nation's impulses are still free, open, fair and broad-minded.

No measures to avert the serious, looming consequences can be taken without this sense of renewal. Uncommon political courage will be required. Yet this courage can be summoned only if something profoundly different transpires. Putting America first -- ahead of our own selfish interests -- must be our national priority if we are to retain our capacity to lead.

The last time the United States had an open election was 1952. My grandfather was pursued by both political parties and eventually became the Republican nominee. Despite being a charismatic war hero, he did not have an easy ride to the nomination. He went on to win the presidency -- with the indispensable help of a "Democrats for Eisenhower" movement. These crossover voters were attracted by his pledge to bring change to Washington and by the prospect that he would unify the nation.

It is in this great tradition of crossover voters that I support Barack Obama's candidacy for president. If the Democratic Party chooses Obama as its candidate, this lifelong Republican will work to get him elected and encourage him to seek strategic solutions to meet America's greatest challenges. To be successful, our president will need bipartisan help.

Given Obama's support among young people, I believe that he will be most invested in defending the interests of these rising generations and, therefore, the long-term interests of this nation as a whole. Without his leadership, our children and grandchildren are at risk of growing older in a marginalized country that is left to its anger and divisions. Such an outcome would be an unacceptable legacy for any great nation.

Susan Eisenhower, a business consultant, is the author of four books, most recently "Partners in Space: US-Russian Cooperation After the Cold War."

Why I'm Backing Obama
By FattyArbuckle
Tuesday, February 12, 2008;

Hillary voted for Iraq.

P.S. Gold coming back to $900 again...

Why I’m not buying Obama.

All the media shills of the world, and I mean the world, are shoveling him at me.
Someone must have vested interest.

Green Arrow,

Is Goldman sucks done going down now?

Goodnight all!

Nice to know there at least one or two families other than the Bush's and Clintons that have a chance at the white house. But I am still amazed in a country as great as we have, this is what we get to choose from. Surely there is someone from Goldman Sachs who is a better fit. ;)

Whoever gets that job will inherit the greatest economic catastrophy in 50 years.

~

And you SOMA chart guys... don't try to confuse me with facts. The Fed can't deflate or they will implode the housing market into a black hole rather than the the undulating neutron cloud it's destined for already. Buy Au.

Shanghi... current

Index Prev.Close Last High Low Change%
SSE 4599.70 4536 4548 4454 -1.39

http://www.sse.com.cn/sseportal/en_us/ps/home.shtml

Constructing a loose stool (sorry g034):

This article is down right scary.

The Rising Risk of a Systemic Financial Meltdown:

The Twelve Steps to Financial Disaster

by Nouriel Roubini

Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.
To understand the Fed actions one has to realize that there is now a rising probability of a "catastrophic" financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown.
That is the reason the Fed had thrown all caution to the wind -- after a year in which it was behind the curve and underplaying the economic and financial risks -- and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities.
To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario - however extreme -- has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.
Start first with the recession that is now enveloping the US economy. Let us assume -- as likely- - that this recession- - that already started in December 2007 -- will be worse than the mild ones - that lasted 8 months - that occurred in 1990-91 and 2001. The recession of 2008 will be more severe for several reasons: first, we have the biggest housing bust in US history with home prices likely to eventually fall 20% to 30%; second, because of a credit bubble that went beyond mortgages and because of reckless financial innovation and securitization the ongoing credit bust will lead to a severe credit crunch; third, US households - whose consumption is over 70% of GDP - have spent well beyond their means for years now piling up a massive amount of debt, both mortgage and otherwise; now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters. What will be the consequences of it?
Here are the twelve steps or stages of a scenario of systemic financial meltdown associated with this severe economic recession.
First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon. At this point it is clear that US home prices will fall between 20% and 30% from their bubbly peak; that would wipe out between $4 trillion and $6 trillion of household wealth. While the subprime meltdown is likely to cause about 2.2 million foreclosures, a 30% fall in home values would imply that over 10 million households would have negative equity in their homes and would have a big incentive to use "jingle mail" (i.e. default, put the home keys in an envelope and send it to their mortgage bank). Moreover, soon enough a few very large home builders will go bankrupt and join the dozens of other small ones that have already gone bankrupt thus leading to another free fall in home builders' stock prices that have irrationally rallied in the last few weeks in spite of a worsening housing recession.
Second, losses for the financial system from the subprime disaster are now estimated to be as high as $250 to $300 billion. But the financial losses will not be only in subprime mortgages and the related RMBS and CDOs. They are now spreading to near prime and prime mortgages as the same reckless lending practices in subprime (no down-payment, no verification of income, jobs and assets (i.e. NINJA or LIAR loans), interest rate only, negative amortization, teaser rates, etc.) were occurring across the entire spectrum of mortgages; about 60% of all mortgage origination since 2005 through 2007 had these reckless and toxic features. So this is a generalized mortgage crisis and meltdown, not just a subprime one. And losses among all sorts of mortgages will sharply increase as home prices fall sharply and the economy spins into a serious recession. Goldman Sachs now estimates total mortgage credit losses of about $400 billion; but the eventual figures could be much larger if home prices fall more than 20%. Also, the RMBS and CDO markets for securitization of mortgages -- already dead for subprime and frozen for other mortgages -- remain in a severe credit crunch, thus reducing further the ability of banks to originate mortgages. The mortgage credit crunch will become even more severe.
Also add to the woes and losses of the financial institutions the meltdown of hundreds of billions of off balance SIVs and conduits; this meltdown and the roll-off of the ABCP market has forced banks to bring back on balance sheet these toxic off balance sheet vehicles adding to the capital and liquidity crunch of the financial institutions and adding to their on-balance sheet losses. And because of securitization the securitized toxic waste has been spread from banks to capital markets and their investors in the US and abroad, thus increasing -- rather than reducing systemic risk -- and making the credit crunch global.
Third, the recession will lead -- as it is already doing -- to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans. There are dozens of millions of subprime credit cards and subprime auto loans in the US. And again defaults in these consumer debt categories will not be limited to subprime borrowers. So add these losses to the financial losses of banks and of other financial institutions (as also these debts were securitized in ABS products), thus leading to a more severe credit crunch. As the Fed loan officers survey suggest, the credit crunch is spreading throughout the mortgage market and from mortgages to consumer credit, and from large banks to smaller banks.
Fourth, while there is serious uncertainty about the losses that monolines will undertake on their insurance of RMBS, CDO and other toxic ABS products, it is now clear that such losses are much higher than the $10-15 billion rescue package that regulators are trying to patch up. Some monolines are actually borderline insolvent and none of them deserves at this point a AAA rating regardless of how much realistic recapitalization is provided. Any business that required an AAA rating to stay in business is a business that does not deserve such a rating in the first place. The monolines should be downgraded as no private rescue package -- short of an unlikely public bailout -- is realistic or feasible given the deep losses of the monolines on their insurance of toxic ABS products.
Next, the downgrade of the monolines will lead to another $150 billion of writedowns on ABS portfolios for financial institutions that have already massive losses. It will also lead to additional losses on their portfolio of muni bonds. The downgrade of the monolines will also lead to large losses -- and potential runs -- on the money market funds that invested in some of these toxic products. The money market funds that are backed by banks or that bought liquidity protection from banks against the risk of a fall in the NAV may avoid a run but such a rescue will exacerbate the capital and liquidity problems of their underwriters. The monolines' downgrade will then also lead to another sharp drop in US equity markets that are already shaken by the risk of a severe recession and large losses in the financial system.
Fifth, the commercial real estate loan market will soon enter into a meltdown similar to the subprime one. Lending practices in commercial real estate were as reckless as those in residential real estate. The housing crisis will lead -- with a short lag -- to a bust in non-residential construction as no one will want to build offices, stores, shopping malls/centers in ghost towns. The CMBX index is already pricing a massive increase in credit spreads for non-residential mortgages/loans. And new origination of commercial real estate mortgages is already semi-frozen today; the commercial real estate mortgage market is already seizing up today.
Sixth, it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt. This, like in the case of Northern Rock, will lead to depositors' panic and concerns about deposit insurance. The Fed will have to reaffirm the implicit doctrine that some banks are too big to be allowed to fail. But these bank bankruptcies will lead to severe fiscal losses of bank bailout and effective nationalization of the affected institutions. Already Countrywide -- an institution that was more likely insolvent than illiquid -- has been bailed out with public money via a $55 billion loan from the FHLB system, a semi-public system of funding of mortgage lenders. Banks' bankruptcies will add to an already severe credit crunch.
Seventh, the banks' losses on their portfolio of leveraged loans are already large and growing. The ability of financial institutions to syndicate and securitize their leveraged loans -- a good chunk of which were issued to finance very risky and reckless LBOs -- is now at serious risk. And hundreds of billions of dollars of leveraged loans are now stuck on the balance sheet of financial institutions at values well below par (currently about 90 cents on the dollar but soon much lower). Add to this that many reckless LBOs (as senseless LBOs with debt to earnings ratio of seven or eight had become the norm during the go-go days of the credit bubble) have now been postponed, restructured or cancelled. And add to this problem the fact that some actual large LBOs will end up into bankruptcy as some of these corporations taken private are effectively bankrupt in a recession and given the repricing of risk; convenant-lite and PIK toggles may only postpone -- not avoid -- such bankruptcies and make them uglier when they do eventually occur. The leveraged loans mess is already leading to a freezing up of the CLO market and to growing losses for financial institutions.
Eighth, once a severe recession is underway a massive wave of corporate defaults will take place. In a typical year US corporate default rates are about 3.8% (average for 1971-2007); in 2006 and 2007 this figure was a puny 0.6%. And in a typical US recession such default rates surge above 10%. Also during such distressed periods the RGD -- or recovery given default -- rates are much lower, thus adding to the total losses from a default. Default rates were very low in the last two years because of a slosh of liquidity, easy credit conditions and very low spreads (with junk bond yields being only 260bps above Treasuries until mid June 2007). But now the repricing of risk has been massive: junk bond spreads close to 700bps, iTraxx and CDX indices pricing massive corporate default rates and the junk bond yield issuance market is now semi-frozen.
While on average the US and European corporations are in better shape -- in terms of profitability and debt burden -- than in 2001 there is a large fat tail of corporations with very low profitability and that have piled up a mass of junk bond debt that will soon come to refinancing at much higher spreads. Corporate default rates will surge during the 2008 recession and peak well above 10% based on recent studies. And once defaults are higher and credit spreads higher, massive losses will occur among the credit default swaps (CDS) that provided protection against corporate defaults. Estimates of the losses on a notional value of $50 trillion CDS against a bond base of $5 trillion are varied (from $20 billion to $250 billion with a number closer to the latter figure more likely). Losses on CDS do not represent only a transfer of wealth from those who sold protection to those who bought it. If losses are large some of the counterparties who sold protection -- possibly large institutions such as monolines, some hedge funds or a large broker dealer -- may go bankrupt leading to even greater systemic risk as those who bought protection may face counterparties who cannot pay.
Ninth, the "shadow banking system" (as defined by the PIMCO folks) or more precisely the "shadow financial system" (as it is composed by non-bank financial institutions) will soon get into serious trouble. This shadow financial system is composed of financial institutions that -- like banks -- borrow short and in liquid forms and lend or invest long in more illiquid assets. This system includes: SIVs, conduits, money market funds, monolines, investment banks, hedge funds and other non-bank financial institutions. All these institutions are subject to market risk, credit risk (given their risky investments) and especially liquidity/rollover risk as their short term liquid liabilities can be rolled off easily while their assets are more long term and illiquid. Unlike banks these non-bank financial institutions don't have direct or indirect access to the central bank's lender of last resort support as they are not depository institutions. Thus, in the case of financial distress and/or illiquidity they may go bankrupt because of both insolvency and/or lack of liquidity and inability to roll over or refinance their short term liabilities. Deepening problems in the economy and in the financial markets and poor risk managements will lead some of these institutions to go belly up: a few large hedge funds, a few money market funds, the entire SIV system and, possibly, one or two large and systemically important broker dealers. Dealing with the distress of this shadow financial system will be very problematic as this system -- stressed by credit and liquidity problems -- cannot be directly rescued by the central banks in the way that banks can.
Tenth, stock markets in the US and abroad will start pricing a severe US recession -- rather than a mild recession -- and a sharp global economic slowdown. The fall in stock markets -- after the late January 2008 rally fizzles out -- will resume as investors will soon realize that the economic downturn is more severe, that the monolines will not be rescued, that financial losses will mount, and that earnings will sharply drop in a recession not just among financial firms but also non financial ones. A few long equity hedge funds will go belly up in 2008 after the massive losses of many hedge funds in August, November and, again, January 2008. Large margin calls will be triggered for long equity investors and another round of massive equity shorting will take place. Long covering and margin calls will lead to a cascading fall in equity markets in the US and a transmission to global equity markets. US and global equity markets will enter into a persistent bear market as in a typical US recession the S&P500 falls by about 28%.
Eleventh, the worsening credit crunch that is affecting most credit markets and credit derivative markets will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets. Another round of credit crunch in interbank markets will ensue triggered by counterparty risk, lack of trust, liquidity premia and credit risk. A variety of interbank rates -- TED spreads, BOR-OIS spreads, BOT - Tbill spreads, interbank-policy rate spreads, swap spreads, VIX and other gauges of investors' risk aversion -- will massively widen again. Even the easing of the liquidity crunch after massive central banks' actions in December and January will reverse as credit concerns keep interbank spread wide in spite of further injections of liquidity by central banks.
Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market, actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit. The triggering event for the next round of this cascade is the downgrade of the monolines and the ensuing sharp drop in equity markets; both will trigger margin calls and further credit disintermediation.
Based on estimates by Goldman Sachs, $200 billion of losses in the financial system lead to a contraction of credit of $2 trillion given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks sovereign wealth funds -- about $80 billion so far -- will be unable to stop this credit disintermediation - (the move from off balance sheet to on balance sheet and moves of assets and liabilities from the shadow banking system to the formal banking system) and the ensuing contraction in credit as the mounting losses will dominate by a large margin any bank recapitalization from SWFs. A contagious and cascading spiral of credit disintermediation, credit contraction, sharp fall in asset prices and sharp widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses. Total losses in the financial system will add up to more than $1 trillion and the economic recession will become deeper, more protracted and severe.
A near global economic recession will ensue as the financial and credit losses and the credit crunch spread around the world. Panic, fire sales, cascading fall in asset prices will exacerbate the financial and real economic distress as a number of large and systemically important financial institutions go bankrupt. A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress. Monetary and fiscal easing will not be able to prevent a systemic financial meltdown as credit and insolvency problems trump illiquidity problems. The lack of trust in counterparties -- driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities -- will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch.
In this meltdown scenario, US and global financial markets will experience their most severe crisis in the last quarter of a century.
Can the Fed and other financial officials avoid this nightmare scenario that keeps them awake at night? The answer to this question -- to be detailed in a follow-up article -- is twofold: first, it is not easy to manage and control such a contagious financial crisis that is more severe and dangerous than any faced by the US in a quarter of a century; second, the extent and severity of this financial crisis will depend on whether the policy response -- monetary, fiscal, regulatory, financial and otherwise -- is coherent, timely and credible. I will argue -- in my next article -- that one should be pessimistic about the ability of policy and financial authorities to manage and contain a crisis of this magnitude; thus, one should be prepared for the worst, i.e. a systemic financial crisis.

maromatics -

Thank you for posting the link to
http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

There is very useful information in this report.
I'm trying to absorb it all at a slow pace....

May I ask how you found it?

And they weren't force feeding you McCain and Clinton? They didn't bring them on and kill them off and bring them back again? And there's no vested interests with the two war mongers?

You're joking, right?

Please explain how Clinton/McCain is a different "choice" (read non-choice) than Bush/Gore or Bush/Kerry? We were force fed those far more and that worked out so well, didn't it?

Here's the deal. It isn't politics, it's the dollar. The other two voted to go to war, rebuild Iraq while our country crumbles, and to kill the dollar with their insistance on supporting an unsupportable empire.

And I do not want to go back to the divisive BS between the same old players. I hear this from both sides. It is time to move on.

Interesting observation: The propane delivery guy was here today. When I asked how much it was a gallon he told me ($2.66) and then said, "You know it isn't that propane or gas is getting more expensive, it's the dollar is weaker and it makes propane more expensive. It's the war." "I hear it at all my deliveries".

My propane guy is pretty smart. So are all of his customers.

Craig,

In a previous post you stated "I tend to watch my charts and buy in when there is a clear trend, either longer term or intraday for day trades."

Would you mind sharing what charts you watch and your methodology to determine the trend?

Thanks for posting. I enjoy your insights.

Onlineaces,

Thanks for your kind words.

It was brougt to my attention by one of the financial advisors working wih me.

Cheers,

Naples: For intraday I use a 5 min/1 day chart with rsi/stoch/williams%r/macd. I tend to trade ETFs and equities with good liquidity so I can get in and out on a whim with no difficulty. To confirm overall market direction I use the indices charts in the same timeframe and indicators. I also look at the industry group or opposing index. For instance, if I'm trading financials etfs (lots of movement these days) I track the XLF/UYG, the SKF and the S&P or DJIA to confirm the overall trend. If the financials are going up I want the DJIA or S&P to look the same to confirm. Then it's a matter of patience to let the up or down trend develop and then go with it. I use the rsi/stoch and macd to see the trend develop and then W%R to determine the strength of the move since it's a 0 to 100 scale with 0 representing strong buying and 100 being strong selling. The up trend is tending to end or reverse usually when a low W%R starts to climb and the stoch/macd is rolling over at the same time it is happening on the broader chart (the index chart (DJIA/S&P) or vice-versa. I tend to buy when the W%R is well on it's way off of 50 and falling. 30-35 confirmed by the W%R and trend of the DJIA/S&P chart is a start. Not that it can't reverse, but there is less chance of a reversal when the W%R is falling (the number is falling, stoch is climbing, and macd has crossed and is pointing in the desired direction. I would set up a few charts and track these indicators to see how it works, esp. the W%R as it kinda works the opposite of how you might think, with zero at the top and 100 at the bottom.

Sometimes I will draw in a trendline but most of the time it's pretty easy to see on the above indicators.

For long term I use Bill's timeframes for RSI (M/W/D) and the same indicators with those timeframes. For LT trades I like to look at super longterm charts to see where it has been before and where support/resistance may be and to see how volatile past moves have been.

A good example of this is CSHCP that Seamus pointed out some time ago. I bought in with confidence at the time because the LT chart (over 5 years) showed it never fell below the mid 24's and rose to mid 26's and pretty much stayed in that range. Since it was in the $24.75 area and paid a high dividend that could support a move below 24 I knew the chances of falling below about 24.50 was slim as it had never done it before. However, I wouldn't buy it currently as it is now at 25.65 or so which is closer to the top of it's range.

I hope this helps you.

Good morning from the ice glazed Amish countryside.

Here are your Cara 100 Ratings Changes:

Upgrade:

HBC - to Buy @ UBS

Target Price Raised:

AMAT - $20 to $21 @ Caris & Co.
AMAT - $23 to $26 @ Citigroup

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

Other stocks of interest:

HL upgraded to Outperform @ BMO

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

Have a great day.

Why I'm Backing Obama
By Susan Eisenhower
Saturday, February 2, 2008; A15
………..
Why I'm Backing Obama
By FattyArbuckle
Tuesday, February 12, 2008;
Hillary voted for Iraq.

Craig,

The above is what I responded to.

Don’t think this blog is the place for my fair and balanced BS.

have a great day!!

John Hussman (of Hussman Funds) has reviewed on Monday what a bear market feels like, so as we don't forget and are prepared for a wide range of scenarios:

"The following are actual figures and headlines from the 1973-74 bear market. At the January 1973 market peak, earnings had hit a new high, and stock prices were selling at a P/E multiple of 20, which is extreme on the basis of record earnings. Over the next 2 years, corporate earnings grew by 56%, yet the market fell by half. The 73-74 bear market teaches that stock prices can decline from rich valuations even if earnings grow dramatically:

Suppose you own stock. You have decided to be a "long term investor." Stock prices rise to a new all-time high. You feel vindicated. The economy looks great. Although market breadth has deteriorated, your commitment is firm. "I can't afford to keep my life savings out of the stock market." “Buy-and-hold” is your motto.

Then, after a modest rise in interest rates, the market sells off -12.3% in just over 2 months time. Ouch. A correction. Buy on the dip. These things happen from time to time. You're a long term investor. Buy-and-hold is your motto.

Sure enough, prices recover. Somewhat. A 4.8% advance, but already, you think, you're on your way to new highs again. Then, you lose it all in a -10.2% decline. Two months later, you've given back your advance, and you're at a lower low. Alright, another correction. Maybe you buy on the dip. Bargain prices. Buy-and-hold is your motto.

And it's already paying off. A month later, you're up 7.8% from the low. But then a -9.1% selloff takes your portfolio even lower than the first two drops. The market is down -19% overall. You start to question the amount of risk you're taking, but how much lower can it go?

Thank goodness. 15.8% advance over the next few months! Should have bought more on the last decline. Earnings are still growing strongly. You decide not to wait. You buy more on the advance, confident that you'll be rewarded by new highs. Then the market plunges -20% over the following 4 weeks. You stare at your statement and feel sick. You've held on for a year and your reward is a new low in your portfolio. This really is a bear market.

Now some volatility. Up 12% over a few months. Then you lose it all a few months later in another decline. Then another 11% advance, followed by a -12% plunge to a new low. Seven times now, you've seen your portfolio collapse by more than -10%. With every recovery, a fresh disappointment. And the months march on. It's a year and a half since the peak. You've lost nearly 30% of your wealth. Price/earnings ratios look low, but they looked low before the last decline, too. But maybe it's the bottom. After all, the average bear market takes stocks down about 30%. Holding your calculator, you realize how that works. A -30% decline wipes out a 43% gain. Didn't really consider that at the top.

Stocks rebound a little over the next month. Just 6%. You're still clinging to the bottom. Then, the bottom drops out. Not just 10%, or 15%, but a real free-fall. Over the next 6 weeks your portfolio plunges by -27%. You're another -23% down from the previous low! Almost 2 years of nothing but losses! Major ones. You've lost almost half your retirement, now. Half your life savings! And the economy has turned bad. Everybody knows that stocks were overpriced at the top! It was so obvious! Greed. Valuations were so high. Everyone was so optimistic. Why didn't you see it at the time? You decide you can't afford the risk. Sell half. See if things recover, then get back in.

Well, prices do recover. More than 15%. But then you lose it all in another selloff! Another new low! The market has lost half its value! Nine major plunges. Nearly every one to a lower low, and getting worse. This market has no support. Where are the buyers going to come from in an economy like this? People are unemployed. They don't have the income to invest! And certainly not in the stock market. The financial headlines trumpet "The Real Recession is Yet to Come", and "The Coming Dividend Crisis." Some of the less diversified mutual funds are down as much as -80% from their highs! 80%! Every $100 has collapsed to $20. If it could happen to them, it could still happen to you. This is too risky. After all, you think, "I can't afford to keep my life savings in the stock market."

"Better safe than sorry" is your motto.

That's what a bear market feels like, but we all have a tendency to forget."

What lessons can we learn from this? So far, many of the traders on this blog have done well shorting this market. But we didn't have 15% rallies in DOW yet. I saw people scaling into SKF right after the surprise rate cut and being determined to ride out the rally that occurred after it. Would you still stick with your short position, seeing it gradually deteriorate for a month, losing 30-40% (for those who are playing ultra-shorts, that’s how much they can lose after a month-long market advance)? I think that it is critical to have a strategy in place for managing shorts, because if you don’t have one, then you will give up and close your shorts with a huge loss at the top of a large rebound rally in an ongoing bear market. And even though I would like to think that I will be smart enough to recognize that this is just a rebound rally in a bear market, in reality I may succumb to the feeling that the bear market is over (and close my shorts with a huge loss at the top), since bull markets start simply with investor’s optimism and do not need an economic justification for them. Bear market arguments are always more believable because they have logical justifications, while bull markets can start and keep going simply on wishful thinking. So if you decide to use the strategy of keeping shorts until the bear market will logically end, you will probably miss the end and keep them until the real bull market begins, and will be forced to close your shorts with HUGE losses. So what is the right strategy to use?