US Producer Prices more than doubled analyst estimates.

PPI Consensus: 0.3%
PPI Actual: 1.0%

PPI less food & energy consensus: 0.2%
PPI less food & energy actual: 0.4%

http://www.bloomberg.com/apps/news?pid=20601087&sid=auV7LPuUwbfQ&refer=home

Yes, that 1.0% change is month over month. That has got to send a chill down the bones of traders, of both equities and bonds.

not seeing much movement in TLT pre-market in response to those inflation numbers...

taking a shot at TWM pre-market->80.53...

Here's what bloomberg has to say about the premarket reaction to the surge in PPI :
" Feb. 26 (Bloomberg) -- U.S. stock-index futures retreated after wholesale prices rose more than expected in January, boosting concern that inflation may keep accelerating even as the economy slows.

Merck & Co., Citigroup Inc. and Alcoa Inc. helped lead declines in members of the Dow Jones Industrial Average. Home Depot Inc., the largest home-improvement retailer, tumbled after earnings trailed analysts' estimates amid the worst housing slump in a quarter century.

Standard & Poor's 500 Index futures expiring in March dropped 3.3 to 1,368.3 at 8:54 a.m. in New York. Dow futures lost 25 to 12,541. Nasdaq-100 Index futures slid 5.25 to 1,780.25. Shares in Asia and Europe gained. "

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTUhagKnkB20&refer=home

1% actual PPI means inflation running at 12.7% annually if this rate stays like that.

0.4% core PPI means 4.9%.

Still, my anecdotal evidence suggests inflation is running higher than that.

How can interest rates possibly be below inflation?

“Return No Incumbents!” has taken on a whole new meaning for me. Incredible just doesn’t say enough:

“Senate To Debate Bankruptcy Law Changes
Changes would help homeowners facing foreclosure

In an effort to throw an additional lifeline to consumers facing the threat of foreclosure, the U.S. Senate is set to consider changes to U.S. bankruptcy law,** giving judges wide authority to not only reduce interest rates, but actually reduce the amount of a homeowner's mortgage.** ...”

more at link:
http://tinyurl.com/25x3dg

This surely beats Rome; they only gave bread and games away to the masses.

if financials rallied yesterday on downgrades, it will be harder to 'ignore' inflation data (not that we didn't already know we had inflation)->higher rates are pretty much in the cards...

isaiah- DUG/SMN/QID should all gap up at the open...only reason i added TWM was to spike the punch bowl...

2nd, the financials rallied only because of the nonsense surrounding the monoline bailouts. And that b.s. can only pump hot air into the markets for so long.

But I do agree that today's inflation numbers will be difficult to ignore.

I want to share a good site I found recently that provides a daily "weather report" of action in the markets.

http://www.price-trend.com/

My own tech analysis shows the same thing on the S&P daily, closing yesterday right at the upper line of a symmetrical triangle. A nice place to put on a trade (should the markets not gap down too far) as you can put your stop right at yesterday's close.

If the market ignores today's data and goes higher, then you need to respect the tape.

But then again, don't discount yet another "breaking story" regarding Ambac to turn the tide.

So goes my "on the one hand, but then on the other hand" analysis this Tuesday morning.

IL- thanks for the weather report..

Alright, so this 1% M/M inflation number is scary, but what does it do? How will this lead to the ToG?

How will inflation lead to more pain for MBIA and Ambac? Will it be higher inflation->higher rates->more bond defaults-> loss of rating for monolines?

2nd

Nice punch... Hope it really packs a wallop like last Friday...
:^)

Anyone else noticing GOOG's downward plummet in premarket trading? Down to 463.50 as of my post.

Quent ... you got it. Yields are already moving higher.

And this does give pause to all those who believe the Fed can just lower rates ad infinitum in order to solve our many and growing economic problems.

Again, be cautious as the other shoe hasn't dropped with respect to Ambac.

BTW, how can anyone respect the ratings agencies after S&P's reaffirmation of MBIA yesterday?

isaiah- 'like last friday'- didn't you end up making five figures that day...good luck...

Some Lowered Target Prices to add to the mix:

GOOG - $690 to $590 @ BMO
SLW - $19 to $18 @ RBC

TWM- adding at 79.65...

2nd, Isaiah, other than twm are you trading pre-Consumer Confidence numbers?

What are you planning to trade once the numbers come out?

GRS:
After months of underperforming Gammon Gold up 50% in the past 5 days.
http://finance.yahoo.com/q/bc?s=GRS&t=5d

Anyone know of any news behind this move?.

taking a hit on SNDK...c/w/s taken it off pre-market...

TWM- adding another 20% at 79.09...

quent- honestly, i try to tune out the noise as much as possible...can't really be paying much attention to the market at my day job, right...just buy a little when they're selling, and sell when they're buying...(which is not to say i don't try to soak up as much data as i can, but once i do, i let my subconscious take over and run on auto-pilot)...

(btw, taking a hit on SNDK not to be interpreted as selling it...disappointed with missing the intra-day trading opportunity, but not worried about the position)...

CDO's, Subprime, now we hear about VIE's.

VIE's could produce between $30 billion to $80 billion in bank write downs.

narrow range for TLT so far...

sndk - analyst day yesterday.

bear stearns knocked $5 off target to $40 this morning.

"With regard to the current NAND market environment, SanDisk indicated that the price
weakness it started to see in late 4Q07 is continuing into 1Q08, but similar to last year, they
continue to expect supply-demand to improve as we progress through the year. SanDisk
implemented price cuts in February which they had not planned for when they provided their
guidance in January. As a result, we are lowering our 1Q08 revenue estimate from $825M to
$805M, below the mid-point of the guidance range of $775-$875M, our product gross margin
estimate from 24.5% to 23.0%, and our non-GAAP EPS from $0.28 to $0.24."

2nd
Shhhhhhhhhhh [get me in trouble]!

Quentusrex
Lately I have just been playing the drops in the market. During a big rally I will buy into the various ultra shorts and then sell during the sell offs.

have to be bipolar to trade SNDK...they either love it or they hate it, and it changes every day...;)

I've been saying/thinking the same thing for the past few months but I keep getting proven wrong. Every time I think the news has gotten so bad that people can't ignore the shape of the financials and will stop buying them and sell them, they rally.

I'm being more cautious now about jumping into my SKF trades and I am pretty much sitting back and waiting for it to come to me. I used to be on edge thinking, "ok, they HAVE to drop now, I better get back into SKF!". Now I am not obsessed with being positioned for The Big One(i.e. a huge market sell off). I know that ultimately the financials are pretty well screwed, so I'm content to let the lemmings run the prices up against all rationality and THEN step back into SKF.

NOT.V 5.54 +9.5%

Check out my charts of the market
http://www.WallastonInvestments.com

Zenob,

I think that the price of SKF is completely divorced from reality. Even though I'm in at a much lower cost basis, I almost bought more this morning and may still do so before the day is over.

IMHO, the global financial structure is toast........it's only a matter of time until SKF holders get their butter and jam.

Regards

GFI - Today's low of 10402ZAc on the JSE (S. Africa) exchange equates to about 13.70USD. Day high of 10800ZAc equates to about 14.22USD.

SNDK- watching the always interesting human psyche in action (reminds me of the always interesting street life in SF)->so the target has been lowered to 40...which holders are selling today at 25 and change? are they unable to wait while it makes its way to 40? does it matter if it hits the 40s or 50s? whatever the case, i wouldn't be selling on weakness...but that's why we have opportunities in the market...

Reading "Come into my trading room" is icing my veins....have good posture, well oxygenated, lying in wait....gotta bring it to me...
Keeping charted records for each trade with reasoning, entry/exit.
Focus....discipline.

SNDK: Have larger limit order @ 24.30 Added @ 100@ 24.63

"The day all pretentions of a "Strong Dollar" policy died..."

http://tinyurl.com/2866hx

JogyP:

You were asking about Gammon.

People will tell you about their improved cash flow etc.

But the real reason: I sold my holdings!

Zenob..YOU DA MAN...never let a bad trade turn into a worse investment...:)

SOTB is a master at reading the tape backward and telling everyone how stupid they are for missing the signs.

fazelli
""Anyone else noticing GOOG's downward plummet in premarket trading? Down to 463.50 as of my post.""

GOOG has been a run away freight train with internet advertising. Now that MSFT has announced they want number 2 YHOO, the market value of GOOG has hit the skids. MSFT has the cash to make YHOO/MSFT a competitor to the GOOG freight train.
This yhoo scenario could prove interesting this week or next.

Note.....GOOG 52 week high is $747.24, as I post the price is $451.82, in a nut shell GOOG has lost $9,258,462,800 in Market Cap.
Thats a staggering amount for any company, even though most investors knew GOOG was over priced at $747.24. It's interesting to watch that's for sure!
My take is GOOG will keep going south unless MSFT backs out of the YHOO offer. If the MSFT/YHOO deal doesn't go thru, I'd buy all the GOOG equity you can afford. In the mean time yhoo is my choice for internet advertising investing pre deal.

Silver.

Not sure if I agree with 2nd stating not sell SNDK into weakness, I mean stops are used for a reason and that's to limit losses. Just because it hit a buy on the RSI doesn't give a stock an automatic green light to go positive, it's a tool not an absolute. There may be better prices to come or maybe there won't. Time horizon matters.

Just Bought DUG..bearish RSI divergence on 30 min RSI, butting up against trendline...

oops..thats the XLe hitting trendline and bearish divergence...out if XLE hits 78.

It's still fresh, but the IBM announcement of share buy backs boosted the DOW. But so far the boost wasn't enough to break through the 12600 resistance level.

JogyP:Re GRS
They have new mine management at Ocampo, ex Barrick, seem to be running it a lot better. Not sure that the ore is as good as originally expected, but they appear to be making it work.
Long GRS.

SNDK: 52 wk low is 24.29 buys should happen there and stops below if it breaks support at the 52 wk low. JMO/plan. Keeps odds in your favor.

geckojb- you may very well be right...

don't know if you listen to jazz...there was an interview with dizzy gillespie in the 50s, when musicians were discovering the 'tritone," (aka the flat 5), where the musicians had 'trained' their ears to the point where he claimed if a door hinge squeaked, he would immediately squawk out the associated flat 5...

my take on my own approach is that i'm either genetically programmed to make the contrarian trade, or i've trained myself to automatically buy on weakness and sell on strength...the opposite trades are difficult for me to undertake...;)

Those not genetically gifted may want to program their computers to do it for them when they aren't emotionally involved!

Awful economic news and the S&P is positive on the day as I write. Of course, that could change. But the point here is that the market wants to go higher.

I have a feeling, however, that when this thing breaks it's going to be fast and furious. In the meantime, a lot of naive retail longs are getting sucked in, and they're going to get slaughtered.

Bloomberg: The average fixed rate for a 30-year home loan rose more than half a percentage point during the past four weeks to 6.04 percent, according to Freddie Mac. The increase occurred after the Fed lowered its benchmark rate by 0.75 percent on Jan. 22 and cut the rate by a further half-point eight days later.

So much for interest rates cuts.

And the markets go up!

visa IPO set for mid March (16-19)...just got an email from fidelity...
I haven't decided whether to jump in...anyone else thinking about doing so?

Is anyone else getting tired of this?

From a story on Bloomberg:

"New York-based Ambac may get $3 billion in new capital with the help of Citigroup Inc. and Dresdner Bank AG as early as this week, the Wall Street Journal reported yesterday. MBIA raised money by selling common shares and warrants to private-equity firm Warburg Pincus LLC and issuing $1 billion of surplus notes."

We were told on Friday by CNBC that bankers were working on the deal over the weekend and that an announcement would happen no later than Tuesday.

Now, today, Bloomberg reports that it could happen as "early" as this week. What complete and total B.S.

EEMTrader, I see the bullish divergence on the DUG hourly, too. But I'm gonna wait until the MACD turns up before making a trade.

2nd Ave. I follow your trades and you have nice instinct. I think you would be killer with some TA backing up your instincts. EEMtraders rules and your instincts would be a nice match. You should get some setups from him :)

Nice set up AKS

Steels still hot.

Climbing that wall of worry over lots of negative news, some positive news. I'm surprised oil has remained high, and had half expected a decline there to really stoke a fire.

Added to SRS yesterday right before the close, I'm just below my basis. Getting a lot of practice snorkeling. A 500 point runup in the Dow in two trading days in the face of scary news, flag or no flag, I gotta at least try selling that.

Have any of the supposed bail out plans come to fruition yet?

All of you have played kick the can....right?

Even the AAA rating is kicking the can down the road....they are hoping rate cuts, AAA ratings of insurers, etc. will keep the cam rolling until the $165 billion bank rescue plan filters down through idiot consumers.

Meredith Whitney is trying to tell you something...

I want to know how the PPI numbers are possibly allowing DOW to be this far up today! ESPECIALLY with consumer confidence down to 75 from the expected 81, AND with the Redbook reading at 0.6 from 0.8!

somehow potentially bailing out Ambac is amazing news that nullifies all these other metrics. Meanwhile, the lovechild of the internet (GOOG) is down 7.5% as the DOW passes the +70 mark as I write!

The manipulation is blatant. Monolines AAA - as good as government debt? Does anyone actually believe that?

Combine that with the rumor late Friday and you have the signs of all out management of the markets. The Ambak deal is supposed to be done last week and the week before.

RIP free markets.

Lol

Terrible news all day long so of COURSE it's going to rally. I fear the day that we get multiple instances of good news at the same time. They'll be turning off the lights at the NYSE and chaining the doors when it happens. :-)

Exiting UWM, EEM ...dont know whether $SPX will tag 1380..not pressing it...

1. Anyone see Charlie Gasperino on FM backing off his bullish AMBAC call yesterday?

2. Anyone been to their online banker web site to see their begging for recapitalization?
I use two and have empty accts elsewhere.
They all have some inducement to recapitalize.
"Keep the change, interest for checking, a teaser rate for MM/CD's, etc.

Bank customers beware....

The next line/s of resistance for the DOW are between 12650 and 12800. over the last 1-2 months there are a few different levels between those two spots, but 12800 is the big one.

For me this is a very unusual rise on the indexes. It just doesn't feel right to me...If there is a bull-trap being set in DIA, IWM and SPY it would be right about now. If we go higher than this...well then I guess the market will remain irrational longer than I am willing to further participate.

Entering FXP

SDS: 50 DMA is support lately, will be starting a position there. (approx. $59.70)

Your logo looks very nice at the top of the sidebar. Looking forward to seeing the colors when done.

Fed's Kohn...recovery of financials likely to be extended process.....kick the can kids!

Craig - Nice and well-timed entry. I myself was early on TWM but think the turn has now happened.

.....or NOT!

I'm getting sick of the talking heads downplaying today's inflation.

Monetary inflation leads to price inflation - always. Look at soft commodity prices, you don't think that is going to affect food prices?

Also, when comparing 1970's inflation, no one ever mentions that inflation calculations have changed since then - lowering the rate of inflation. How about an apples to apples comparison?

Don't forget to watch bond yields. In the past, I have seen bond yields rise, while stocks rose as well. When yields got to a certain point, the selloff in stocks was quick. At what point will that occur?

g034, do you have a link? or a ticker for intraday info?

Sorry if this is a dumb question - thats why I dont post much lol, TLT is hardly moving and one would think rates would be much higher since inflation is so high based on todays reports. Is money flowing into TREASURIES as safe haven before rug is pulled? Movement in bond market seems divorced from reality.....?

SILVER!

SDS: took position at $59.80

MikeNYC,

Silver is on a tear! Any reason anybody can think of?

BTW, Dr. Elder would call the .05 "slippage" and some pro somewhere pocketed it.

I don't know why silver is vertical.

But the decoupling from gold is significant, also.

Silver....Inflation! Central banks don't hold silver as I think Fransix pointed out.

Like, at least a billion times.

:0

SBUX up 3% on this news....maybe should have closed all day for 10% spike.
"Starbucks is shutting its doors for three hours Tuesday night, the latest drastic step in a companywide bid to improve its sagging fortunes.

The shutdown is one of several big moves spearheaded by Chairman and Chief Executive Howard Schultz, who recently took back the reins of the company amid concerns that it was losing its edge and facing increased competition from the likes of McDonald's and Dunkin' Donuts."

SBUX: Closing to re-train to get back to the old basics from yesteryear. This is Howard at his best.

If you're a SBUX customer as long as I have been you know this is a good thing.

The coffee itself has no competitors but private small scale specialty roasters like Dedrich, Tully's, perhaps Green Mountain where the others get their coffee.

Dean's Beans - delicious, fair-trade coffee (important from the social equity point of view)

Q - I think you mean a link for bond yields.

Simply watch IEF or TLT. As I am sure you are aware, a selloff in those bond etfs mean correspond to a rise in interest rates. Hope that helps.

BTW, Bills call on shorting bonds was timely and he isn't even running at 100% in this area. Wonder what e-bay bids on his crystal ball would look like :-)

"Where social activism, ecological responsibility and great coffee meet. All of us at Dean's Beans® are committed to an active expression of our beliefs in social justice and ecological responsibility."

http://www.deansbeans.com/
http://www.cooperativecoffees.com/members/member_pages/deans_beans.html

Quent - You could also follow a chart on 10-YEAR TREASURY NOTE (TNX)

The whole "it's not the 70's" yelp is so distractionary. Yes it's not the 70's runaway inflation but the fact of the matter is the economy is also not entering an extended period of declining inflation that helped fuel the stock market (amongst other reasons).

A sea change has occurred and even if inflation doesn't ramp up to circa 1970's it's still going higher which in itself is not bullish. That's the story not the Dennis Kneale inflation isn't Zimabawaean therefore things are great.

Its not the 70's because we have a runaway futures market, massive credit derivative obligations used as a cushion for reality and a deflationary housing market.

Anyone have rt quote for pnp.to?

I experienced the 70's...this is going to be worse as housing was rising then and citizens carried less debt.

Mish pointed out something on his blog: S&P downgraded Pfizer from AAA to AA1. It has more than twice its debt in cash. MBI has to borrow at 14%, its revenue is $3B, its cash less than $6B and its debt at more than $17B. Its bonds trade at junk levels. We are truly through the looking glass.

http://globaleconomicanalysis.blogspot.com/2008/02/mbia-maintains-highest-rating-pfizer.html

I am tempted to start buying call options on the VIX...hard to imagine that this goes below 20.00...and their are so many unknown variables that when they hit this thing should spike again...any thoughts guys?

Craig - PNP.TO quotes (delayed):
http://quote.yahoo.com/q?s=pnp.to
http://stocks.us.reuters.com/stocks/overview.asp?symbol=PNP.TO

Thanks OG, I have the yahoo link, was hoping for a real time quote from those with the CDN feeds.

PNP 4.68/4.70

This is the worst disconnect I've seen between market action and fundamentals in a long time. Like October '07 all over again.

PNP current price 4.69

Craig,
PNP now 4.66/4.67

DX=74.9

Very interesting GOOG is unloading big time...could it be that institutional traders are getting out before the big fall? Me thinks so....there is bad news in the pipeline that will tear down the markets...I have no timeline, but if I had to guess it would be in March, perhaps "Beware the ides of March" applies...be most careful folks if you are long. This market will take your money.

Just pay attention to the road signs....watch those offers at the banks. They scream "WE ARE DEAD BROKE".

Today bought:

DUG $36.30
SDS $59.80

Waiting on FXP to drop to lower 80s before buying.

Hopefully I can hold on to these for a few weeks in a down market.

Took a few nibbles at FXP and SKF with some low ball limit orders. Still betting I'm gonna get a better entry before I buy in any kind of quantity.

2nd Ave. I follow your trades and you have nice instinct. I think you would be killer with some TA backing up your instincts. EEMtraders rules and your instincts would be a nice match. You should get some setups from him :)

Posted by: geckojb at February 26, 2008 11:41 AM

geckojb- i'm waiting for EEM to set up liaisons with women we hardly know...;)

Per Bill's point, I have heard the rumor that HBB will try to hold the markets up until they unload Visa (mid March?). Right before Q2 earnings no less.

Did I hear that here?

good ol' days when the market followed GOOG down are over...

Moab, either here or from Bank Presidents on freeway exits with "spare change" signs.

2nd_Ave..

Be careful with those liaisons with women we hardly know...

I remember EEM saying they took most of his $$$...

You know...that may not be such a bad thing...You've worked so hard to make it just make sure it was worth it when you give it away...

I am sure EEM made sure it was worth it...

BG: They didnt take my money...I spent it on shoes ...pls dont spread rumors....I still have plenty of both...

I am gettin greedy now, but I am waiting for this bear market rally to play out...

Has been real strong and everyone and their mother seems to be trying to get short...

I will wait for that WASHOUT on the way up...Then I will be looking to get short...

This rally may have legs to NORTH of 13000..You know how those nervous shorts can react..We have seen that over the last few days...

I am giving this rally the benefit of the doubt and will wait till it tells me all is clear.

Oil and materials stocks seem to be the new playground for momentum players. Wish I hadn't bought DUG.

EEM..

Ha..Ha..Shoes..That's right we had that talk yesterday..

Well, you can't take it with you when you die...And I sure love pretty feet in expensive shoes..

Thoughts on Silver, my favorite metal: What I have seen and also read from different silver analysts is that silver makes its big move up, decoupling from gold, at the tail end of a bull phase. I don't know if that is now, but something to consider. I bailed out on 40% of my position at $17. Now I pray for the opportunity to get back in at that number.

DJIA- it was only about a year ago when the DJIA started pushing above 12,500, and the financials were still near their highs...now's it a year later, much of the bad news is out, and they're trying to take it back up again...they should just let the index take the hit to 10K and get on with it...but then i guess it wouldn't be any fun...

All the folks who bought TWM, are you still holding it?

The MBIA CEO won't sign the financial statements. Perhaps this is until he can assurances that he won't go to jail. He must be thinking Enron. I am sure he will get his assurances anyway.

BG: EEEWWWWW..you one of them toe types?

I keep the shoes...so I can rewrap them for someone else for xmas...same effeect different woman...same pair of shoes...better investment...

Blahniks and Jimmy Choos...never bought that stock SHOO though..

Dang... why do you assume men give women money...? They earn it too you know and have plenty of their own...but they love a man that can relate to shoes...

Better than shopping at Tiffanys..trust me...wives are infinitely more expensive..

SiO2- still holding TWM/DUG/SMN...position size(s) and sentiment keeping me long ultra-shorts right now...

Perhaps HB&B needs the market to be in good shape so that the VISA IPO is successful, then they can suck another $10B from mom & pop. The IPO will hardly succeed if the markets are crashing. But, $10B seems like just change here.

Holding SDS here...

Si02,

Where did you find that info about MBIA?

EEM..

No Not into the Toes...Although my Son has this new thing that he loves to look for Toe Jam...

My wife started that and the kid is now obsessive about clean toes...Oh well, guess it could be worst...

My son also likes to cook and clean..He is crazy about vacuum's...That is why I take him to Hooters at least once a week...We really like the Wings...I guess you could call him one of those metro sexuals, but he is only 2 1/2....

That he won't sign his statements was on Bloomberg yesterday (Bloomberg has been know to delete news though). The part about the jail hypothesis is mine.

BG: Women are going to love your son...one thing better than a man who buys shoes..a man who vaccums...

Bloomberg: Chief Executive Officer Jay Brown also said he has ``questions'' about the company's 2007 preliminary results released last month and hasn't yet signed off on the statements, according to a letter to shareholders today.

C'MON FXP..$89 pls....

MBIA investor relations says that they don't have to be signed until Friday. But he did state something about it in the letter to investors.

http://investor.mbia.com/phoenix.zhtml?c=88095&p=irol-newsArticle&ID=1112103

"Inflation its not going to matter." A CNBC talking head.

Really?

Si02: SDS support (50 DMA)held nicely today.
Made a decent entry mself and will be holding with stops.

I'm rooting for FXP as well, but I'd like that 91 + back.....:>)

I am glad the market is rallying now, as I am selling my long positions into strength, selling each bunch of shares with at least 3% profit. I did have to wait for several weeks for this rally to occur, and I was getting concerned the market would plunge, establish a new trading range below and I will have to wait for months for the share price to rise in order to sell with profit the shares I have been buying in Jan (e.g., CCJ). Now I am all ready for the market plunge, as I have been simultaneously increasing my short positions (SKF, SRS).

Incidentally, the ABX indices have been going down for a week now and are significantly lower than their support levels. Unlike other price series that are *following* XLF (e.g., CFC), the ABX indices portend the future of XLF, as the banks WILL have to make new writedowns as these indices decline.

Hello!

PoG may brekout overnight.

Next stop 960?

Maybe.

Yesterday I had my finger on the buy button but was too greedy and decided to wait for lower prices.

As it didn't happen, today I loaded the truck again, and am once more long.

Cheers!!

PS: Love my new MacBook Pro!

what was that huge gap up all about ?

Good Day to all from Miami*

Off topic:
Re: Power Outage Across State of Florida...

I got home from work early today, taking for granted the comforts of life.
Then the blackout hits.

AM radio brings news from the rest of the world. Reports of eight power plants offline and 4 million people without power in the national news are countered by Florida Power and Light spokespersons on air with 680,000 people without electricity.
No criminal acts, just a major nuclear power plant south of Miami is offline.

I fire up the Honda generator outside. What's the first electrical appliance I plug in?
A coffeemaker and the PC so I can catch up on the markets!
I do not care about the food in the fridge, like the wife does. At least not until 4 PM.

Consider it a training session for the hurricane season later in the year.

Taking nothing for granted...

Stu

Moab, thanks for the link to Mish with respect to S&P's rating of debt for Pfizer versus MBIA. It just goes to show that S&P has no methodology and just does whatever it wants to do.

It boggles the mind.

15:33 ABK - Private Equity Banks to infuse $3Bln. into Ambac's Books - Gasparino

Craig: My fortune teller with the plunging neckline sees $91 for FXP., porbably before the end of this week..no worries..at least you are not holding SKF..down $10 in 3 days..imagine a big shot that own 1000 shares of that !!

Thanks for the post on SDS Craig. Hit 50 MA just like you said.

EEM..

Are you speaking in the Third Person again?

BG: No..dont want to be kicked out of the site or have someone prying into where I am....just referring to people that buy 50 shares of skf has no conviction relative to a fool that buys 1000 shares of SKF..I must like money too much to try either..

Who wants to bet they drop more positive news on the monolines later this week and try to rally over 12800?

moon, re TLT. It does seem strange doesn't it? Interesting why so many would want a 4.34% yield. But then when you look at the gyrations of the stock market you know there has to be lot of flight to safety in there. I can only say, not for me thank you. I would like a return above inflation.

Zenob: dont say things like that..you may offend people who are dollar cost averaging the SKF and SRS...wouldnt surprise me if both happens...

This is frustrating!!

I started buying out of the money VIX call options and was getting filled when the VIX was at 22.05...then the VIX fell to 21.80 and I am no longer the low bid...and its actually trading 15 cents above the price I paid with the bid 10 cents above my price and the VIX fell 25 cents!

Therefore, people are paying a higher premium on volatility on the VIX options which measures volatility.

Does this make sense at all? Then again does a 1% PPI market rally make any sense either?

Haha, I'm down in SRS, but no offense taken here. Can't take this stuff personally. It's entirely possible we go up, and with more good news, over 12,800. At which point I would assume the market hysterics are very close to their end. Can't shake the fundamentals forever. Although we all know what Keynes said about rationality and solvency.

FattyArBuckle..sorry wasnt referring to you or had you in mind.admire you for being able to handle the volatility of those 2X ETFs .

I am a chicken@#$@# I prefer capitall efficiency and effectiveness over logic and common sense, especially now...just wasnt born smart...must be the fried chicken I ate and the powdered milk I was fed growing up.

Negative divergences starting to show up on the S&P (and probably elsewhere).

Computer problems kept me from taking a position in SDS into the close. Either the trading gods were working for me or against me.

We'll see tomorrow. But I have a hunch I'll be cursing those fickle gods.

Yikes...if you want 1000 shares of SFK best to wait until it gets down to the low-low 90's!

I have a whole new cut-throat attitude after just about 1/4 of Dr. Elder's book.

I'm good at dog think, but it's way safer to let the rabbit run into my mouth than chase.

Hence the SDS call at the 50dma. Now I can sleep.

EEMTRADER, I'm somewhere been your chicken and fool on SKF. I had sold calls against my position last week. Today I bought back my calls at a nice profit. My long shares, however, are sucking wind.

But then again, I closed those calls for good reason. ;)

Had my hand on the buy button for QID and I just sat there and let the minutes tick till close. I guess I agree that there will be more good news manufactured. ...that seems to be a product of financial entertainment tv. Fortunately was watching gold spike and got out of HGD with a small haircut.

Any comments on Noront? Other than pr on drill results have seen no info re the trading halt.

Thanks Canadiansailor for the link. I went there and read a couple of days worth of posts. Kinda fun to see/read bloggers doing the winners boogie
peace from North Puget Sound
This weekend is MUSSELFEST!
g

You had that powdered milk too?
My mom tried to mix it with real milk in an effort to get us to drink that crap. Blah!
One of the dumbest ideas ever...right in there with velveeta, miracle whip and Captain Morgan (fake cheese, fake mayonaise, fake rum). :>)

EEM, no need to apologize! I always appreciate your opinions & comments, & most importantly, experience. I was just throwing in my 2 cents.

I'd be much more of a chicken@#$%@# if I had a larger capitalization. At that point I'm sure close examination of efficiency is is critical, and I intend to enact a much stricter methodology eventually.

At my lowly larvae stage, and from what I've experienced, the name of the game is still capital concentration than preservation.

Ok, you know the market has gone totaly insane when you read crap like this:

Housing Stocks Surge As Home Prices Fall at Fastest Pace in 20 Years

http://biz.yahoo.com/ap/080226/homebuilders_sector_snap.html?.v=1

The reasoning here is that prices have fallen so far that it will lure in buyers.

What a complete load of crap!

Craig: I tried to gain entry to an AA meeting in Vegas after reading Elder's book...settled for my own community of AA women I hardly know...there is great truth in learning from them and the fruitless though intoxicating appeal of intermittent reward/feedback ...never liked losing money on one hand and gaining it back on the other, though its not an intellectual thing.

Did some serious self examination after that...hence the trading rules and being ruthless about cutting loses. and the AA women I hardly know.taught me ...only one way to lose money..ME .

All the need to be right, stubborness, banking on hope, market must be wrong not me, why trade if I cant be myself..blahblah. ...etc may work elsewhere...just not trading. Addiction to losing ocmes in many forms...:)with pretty shoes to match to fool the mind. :)

Oh man...lucky Gray!

Bistro mussles....yum. A little white wine, pear tomatoes, garlic and basil, a loaf or two of chewy French bread for dipping.....

Dang that's good!

Enjoy!

BTW, I grew up on Sanalac myself. I have nightmares still about that container my mother used to mix it. Yuck.

Craig, one day you're a self-proclaimed hayseed. The next, I read park ave tastes... Haha stop with the enigma already.

I_Loser:

Never listen to the press. They are not traders and they are only trying to rationalize prices movements that are mystifying to them. Homies are up because the chart held support.

EEMtrader: Exactly. Really illustrated ways I was doing myself in because I was pushing....

OG would quote Jesse about proper entries....:>)

Today I missed a few and accepted there will be other trades. No need to press, it will come to me.....why chase? It only cost me money.

Can't recommend the book anough and I'm just started.

I took a tiny little bite of SKF and FXP today but I'm still holding out on them forcing this rally up higher. If they get FXP down to the low 80s or SKF below 100, I'm backing up the truck. Hell, I might use margin and I NEVER use margin. lol

At some point, the RE price declines WILL bring in buyers, it's just a question of timing. The article authors suggest summer / fall 08:

The previous two residential RE boom / bust cycles took 3-4 years to go from peak to trough, (OFHEO data). Given the significantly worse data this time in terms of inventory, consumer health, possible monetary / banking issues, etc. I'd wager a little longer than that: 4-6 years, from the peak in fall '05 / spring '06.

Zenob: !! You cant resist the temptation of a lower price than you were used to ? DANG..remind me to never take you to a gentlemean's club !!

Here's to Bernanke having a rough nite so he can look more exhausted, unsure and overwhelmed by the financial problems he has to solve tommorow in front of congress...otherwise..more short squeeze is in the cards you think?

Or maybe a senator will call him Jesse and get him really riled up and the traders rolling on the floor.

Good afternoon Bill and Friends,

I haven't traded Crystallex in nearly a year, but I went long KRY today. It looks a lot like Anooraq (ANO) did a couple weeks ago (hello to our friends in the pineapple patch!)..I looks a lot like Gammon (GRS) did before I bought it at 6 bucks a week or 2 ago (and sold too soon). KRY shows signs of a trend-change and I put my hard stolen money on the line so you should too. All my best to 2nd ave ( I didn't impose this exile, my damn computer did) Leisa and Jogyp and of course my buddy Mike from NYC.

Advice for the week: Stop asking why.

LOL Fatty...I live on an island in a hayseed county.....ask Gray! He's in the high rent/Artistic district in the North Sound....Whidbey is choice. Mussels galore both locales.

I guess I'm a closet Renaissance man!
My wife likes that I cook, vacuum, appreciate fine wines. On the other hand she doesn't understand my lack of patience with politicians, bankers, fed officials and TV financial entertainment talking heads.

Craig - that's ok, they rarely deserve patience. Hope you get your mussels & white wine soon.

Does anybody see the VIX slamming down against the rising 200-day MA? Bearish, methinks.

I was just thinking. I would think it would be so very funny if the Visa IPO flopped because HB&B couldn't hold back the next wave of the bear.

Everything is telling me that the market should be falling right now. The fundamentals are crap, you can't turn on the tv without seeing more bad news, it's rallied hard for two days straight. It SHOULD drop like a lead balloon. So of course that means it will rally more. :-)

I could be wrong(and I often am) but I get the feeling this might be the Last Big Push before this turkey unwinds.

But bearing that in mind I still had to take a tiny bite just in case. lol

EEM...from CT's post today on gold.

"I was twenty when I made my first ten thousand, and I lost that. But I knew how and why – because I traded out of season all the time; because when I couldn’t play according to my system, which was based on study and experience, I went in and gambled. I hoped to win, instead of knowing that I ought to win on form."

~ Jesse Livermore in Edwin Lefevre's Reminiscences Of A Stock Operator

And the meat of the post:
"Spot gold is retracing to test the rising trendline, after encountering resistance at $950. Failure of the trendline would warn that the up-trend is slowing; respect would indicate another test of $950."

Good to hear from you Sharkie! I hope it respects $950 for you!

I second that...Good to hear from you Sharkie!
Craig,
I have stood in the rain to eat a bowl of fresh mussels cooked in wine and garlic. Some days living here must be like how the gods must live. We have this pub crawl to rate the best mussels in Coupeville, where all those Penn Cove mussels come from!
peace

Craig : Thank you for jesse's post and the lesson for some of us here is

DONT USE JANUARY'S STRATEGY to TRADE FEBRUARY's MARKET CONDITIONS....

regardless of how many internet clippings you post that justify your position...market is behaving different..till it changes....:)

I get the feeling that HB&B are reading the posts here...especially in the morning..dang how else do you explain a weak open that closed the gap ..and then some...and then never tested the opening price and took off....north...not posting trades anymore

FattyArBuckle...I see the $VIX and the GAP from DEc 31...time to go LONG if that $VIX gaps down .next support is about 20s....whaddup with DAT? a Wall of Worry, fianncial calamity, QUENTUSREX hoping for a busted V IPO, FIAT money is useles..grow potatotes, 100 banks going under.. but the $vix is down? Something's gotta break..

Colonel Jessup, I want the Truth..I deserve the TRUTH.

You cant handle the truth !!

Sounds like the bear conviction is waning...you know what that means.

FAtty ArBuckle...sorry left out the point about the $VIX..see that rising trendline below the 200 EMA...thats the next level I am watching to see if it bounces...that will be close to a 3 standard deviation move..Zenob could be right..the last hurrah may be today or tommorow..:)

Look who dragged his butt back in...

With a bag full of KRY, no less. You leave that junk out on the back step, you hear?

Good luck with that.

I just want to remind you that I've been mailing you about CCJ.TO for at least many weeks now. You coulda bought that and made some honest gains. Noooo...you hadda take another try at Hugo's casino. "Come one, come all, step right up and take a spin. House edge is merely %99.9. Step right up and take a spin on the 'Wheel of KRY!'"

Just one question, shark: Red? Or Black?

I hope today wasn't the last hurrah, I only nibbled, I didn't feast. lol

I honestly starting to think the Visa thing is going to be the "finish line". I think that may be HB&B's point of no return. In other words, brace it it up till then, make as much money as possible eating bears on the way up, then switch to eating beef.

Agreed ... sharkie we are all so over KRY by now.

But welcome back just the same.

From silverseek.com:

http://news.silverseek.com/GoldSeeker/1204061907.php

“April Gold finished up 8.4 at 948.9, 1.6 off the high and 12.9 up from the low.

March Silver closed up 0.635 at 18.72. This was 0.61 up from the low and 0.01 off the high.

After an initial downside failure April gold managed a rather impressive recovery move Tuesday. Certainly seeing a hotter than expected US PPI report provided the bull camp with part of its recovery capacity but another new low for the move in the US Dollar was probably an equally important element in the bounce. With oil and equity prices rising in tandem and the last of the US scheduled data for the day (the Richmond Fed Manufacturing survey) coming in slightly better than expected there were a number of developments that the bull camp might have been able to embrace. In fact, seeing sharp catch up gains in Chicago wheat prices, rising metals prices and a hot monthly inflation reading is a very strong list of bullish issues.

The silver market showed signs early in the session that it was capable of holding up even in the face of initial weakness in gold prices. However, with a sharply lower US Dollar and a mid day recovery pulse in copper prices, the silver market was potentially lifted by a host of outside market influences. In fact, seeing the US equity market manage another upside breakout on the charts, at the same time that oil prices rose to another new high would seem to put the precious metals markets back into a "perfect storm" mentality. On the other hand, one could suggest that the slowness of the US economy probably serves to keep the metals from having a true perfect storm.”- The Hightower Report,

Um, there should be an "am" between I and honestly. There goes my grammar along with my spelling...

Zenob: You are still a genius...anyone who can hold two opposing views of the market and still make money is a STUD in my books.....

go34....cave-pasture-cave-pasture-cave...pick-a-nik basket. About the time we all get ready to crawl in our caves they will pull the alfalfa and throw out berries. I'm waiting......

Notice we are back to approx. 12800 again or will be for a minute.

RE Visa IPO

Yes, HB&B must be desperate.... selling off one of the family jewels to raise capital.

Mastercard went from $43 to $195 in about 2 years. Will Visa mimic Mastercards performance?
Remember they don't own the debt...just process it. And I believe they have a 50% market share.

Anyone thinking about taking a piece of the action?

$USD has had lower highs and lower lows since late December according to stockcharts. 74.63 now with only the late November low 74.48 in the way.

craig,
What's powdered milk?
Thirty eight double d's for me please!

SteveC -

We also had new closing low for the dollar. wow. HYPERINFLATION here we come!

sharkie- i guess the time to buy KRY would be when everyone else has given up on it...good luck...

EEMtrader- i'm learning quite a bit watching your entries and exits, so hoping you don't stop posting trades entirely...when TA works, it's a beautiful thing...in regard to the other subject at hand, T&A can also be a beautiful thing when viewed from the right perspective...

THE STREET.COM

A Capitol Hill hearing planned for Thursday on executive compensation featuring current and ex-CEOs of Countrywide Financial(CFC - Cramer's Take - Stockpickr), Merrill Lynch(MER - Cramer's Take - Stockpickr) and Citigroup(C - Cramer's Take - Stockpickr) has been postponed a second time, TheStreet.com has learned.

The House Oversight Committee, chaired by U.S. Rep. Henry Waxman (D, Calif.), invited Countrywide chief Angelo Mozilo, along with former Citigroup CEO Chuck Prince and former Merrill Lynch CEO Stanley O'Neal, to testify on the subject of their lavish pay packages.

A spokesman for the committee confirmed that the hearing is postponed, but declined to say whether it has been rescheduled. Patricia McCoy, a corporate governance professor with the University of Connecticut who was scheduled as a witness in the hearing, said the hearing was postponed due to the death of Mozilo's mother, and she said the hearing was going to be rescheduled in two weeks.

Countrywide did not immediately respond to an inquiry from TheStreet.com.

The hearing was originally scheduled for Feb. 7, but was postponed due to scheduling conflicts.

The pay packages for all three executives are controversial, since they appear to be an outsized financial reward for failed leadership, with shareholders footing the bill.

Mozilo reportedly stood to collect $115 million after his firm agreed in January to a $4 billion sale to Bank of America (BAC - Cramer's Take - Stockpickr). After facing criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.

Meanwhile, Prince left Citigroup with approximately $68 million, while O'Neal collected about $161 million after he stepped down in October. Both Citigroup and Merrill Lynch reported billions of dollars in losses on risky investments in mortgage-backed securities.

The heads of each company's compensation committee were also scheduled to testify, including former Time Warner(TWX - Cramer's Take - Stockpickr) CEO and Citigroup director Dick Parsons, real estate developer and Countrywide director Harley Snyder and Chubb(CB - Cramer's Take - Stockpickr) CEO and Merrill director John Finnegan.

EEM/2nd - Might I suggest you consider moving your trade-specific commentary over the the skype platform? I and--according to Nex/SiO2--some others as well are somewhat more comfortable posting in that environment.

Silver hit 27-year high vs. $US today.

OG- that's a great idea...i'll try it next time i'm trading from home...it's not going to work anywhere else...

reminder that friday will be end-of-month...if there is no sell-off wednesday/thursday, might consider backing off until friday to open/reopen shorts...

What is the skype platform
and How to read that platform?

Skype is an internet communications program. You can download Skype at www.skype.com. After you install Skype, you can access the Skype chat room that we are talking about. Go to nexalogic.googlepages.com/skype.html and select the chat room you want.

re: shorting the long bond

using TLT as my proxy, I am shorting the long bond using RRPIX, zero commission, you can trade as often as you like, but you trade it at the end of the day like a mutual fund, but since you can watch TLT move all day, you know where you are getting in and out. look at that RSI(14) divergence on the TLT, wow...

re David Walker- keep going back to his recent interviews and his resignation...he comes pretty close to what i thought of as an 'adult' growing up in the 60's...most other public figures (today) in his age range are more like kids, preoccupied with appearances and personal agendas...they need to take a good look in the mirror, realize they are not the persons they (publicly) claim to be, and start doing the jobs they were elected/appointed to do...

copy of slides from Walker's Princeton presentation in February:

http://tinyurl.com/yw2ucq

quick run-through says it all...

here's an interesting scenario- let's say the value of a dollar gets cut in 1/2 in a year (just for the sake of argument), due to a combination of inflation and the excessive printing of (fiat) US currency...

if you buy the DJIA at 12,500 and sell it a year later at 25,000, you're actually flat, right...

if you short the DJIA at 12,500 and close out your short a year later at 25,000, you're also flat...

however, if you short the DJIA and close out your short a year later at 18,750->you end up AHEAD...

unless i'm missing something, any acceleration in inflation or in the decline of the dollar immediately increases the value of a short position denominated in dollars...

steve c.

skype question. How do you save audio settings that don't have to be re-set with each new call? TIA

...all my way of saying if you opened positions today in QID and TWM at 50 and 80, and you close the positions at 45 and 72 in a year->if inflation/money supply drop the value of the USD by 12%, then basically you're still ahead by 2%...

Chinese Indexes are raging tonight

(February 27, 2008, 10:49:56 AM)
HSI 24,472.55 +757.80
CEI 13854.69 +527.85
Shanghai A 4551.060 +104.240

Jock,

Have you tried Tools, Options, General, Audio Settings, and changing the volume on Speakers?

The only audio changes I made from default were removing sounds when people enter/left the chat room or sent a chat. Those are under General, Sounds.

2nd ave,

I'm not sure I follow. Say I have $100, and say I buy a short ETF at $100 today. A year later with inflation at 12%, I sell for $90. Isn't my loss really $112 - $90 = $22?

I asked this earlier on this board but it still bugs me..... so will see if any thoughts on this subject. Treasuries should have tanked and yield spiked on the brutal inflation numbers.Running super hot - how in the hell can the yield be at
4.3 on the 20 year and 3.8 on the 10 year. Unless there is a flight to safety and or they expect inflation to drop like a rock tomorrow which is absurd

these numbers are HOT I cant figure the disconnect that is going on in the credit markets and the stock market. The credit market to me has always been the smart money. But, this does not compute...... someone have ideas WHY? thanks

Bloomberg notes:

"Prices paid to U.S. producers rose more than twice as much as forecast in January, pushed up by higher fuel, food and drug costs, signaling inflation may keep accelerating even as growth slows.

The 1 percent increase followed a 0.3 percent drop in December, the Labor Department said in Washington. The median forecast in a Bloomberg News survey of economists was for a 0.4 percent gain. Excluding food and energy, so-called core wholesale prices climbed 0.4 percent, the most in almost a year."

Here's the money quote from BLS:

"From January 2007 to January 2008, the index for finished goods moved up 7.4 percent. Over the same period, prices for finished energy goods climbed 22.6 percent, the index for finished consumer foods rose 8.3 percent, and prices for finished goods other than foods and energy advanced 2.3 percent. For the 12 months ended January 2008, the index for intermediate goods increased 8.8 percent, and prices for crude goods jumped 31.3 percent."

Looks like we might see a high 80 handle on FXP. Hang Seng up 3.32% so far.

Oh, and if I haven't already said it, I LOVE this desk alert software. Thanks Oldgoat! :-)

I should learn not to post while sleepy. High 70 handle, not 80. *sigh*

Steve C: re 2nd_ave's inflation example

I can't speak for 2nd's intent in his hypothetical, but here is how I interpreted it. He would short an equity index now, taking in cash in present dollars. Then he would cover (buy it back) a year later, paying for it with dollars that had been devalued by half.

This would only work if you preserved the purchasing power of the dollars you received today by re-investing them in something that retained its inflation-adjusted value over the year (a commodity investment for instance), and then sold it for twice as many devalued dollars next year. If you kept your dollars in your investment account as cash, they would be devalued, and the strategy wouldn't work.

I don't think this would work with an inverse ETF, because you are going long today (paying in today's dollars), rather than receiving cash from a short position.

Bill,

I could not find the video segment on the FDIC and banking system but here is the transcript from his web sight:

Now, the number of American homes facing foreclosure was up 57 percent in the last year. In Fort Myers, Florida, one out of every 86 homes is now in some stage of foreclosure process.

History shows us that when things turn bad in one corner of market, people flee to safety. To most people there`s no place safer for your cash than a good old-fashioned bank account. After all, it is FDIC insured, right? I`ve seen that sticker ever since I was a kid, but I don`t even know what that means. Where does that magic bailout money really come from?

A few months ago, I asked my "Fusion" magazine staff to look into those questions -- and we`ll get into what they found here in just a minute. But the "Real Story" is that the FDIC is simply not prepared to handle any kind of immediate crisis. And now they`re scrambling to play catch-up.

Earlier today, the FDIC released its list of problem banks and institutions that may not have enough capital to prevent a collapse. There are now 76 banks on that list. That`s up from 47 at the end of the 2006.

But should that number jump anywhere close to the -- I think it was 572 banks that made the list of the savings and loans crisis of the early 1990s -- the FDIC may not be ready to respond. Back then the FDIC had 15,000 employees. Now they have less of a third of that.

Back then, the government spent over $90 billion to bail out these failed banks. Right now, FDIC has just $52 billion in reserves.

Realizing that things could quickly worsen, the FDIC is now trying to "bulk up" for preparedness purposes by bringing back 25 veteran employees from the S&L crisis that had retired. But is that really enough?

And what happens if your local bank, or, god forbid, one of these big national banks fails?

Jaret Seiber is the Washington policy analyst for The Stanford Group.

Jaret, first of all, let me start with the FDIC. Seventy-six banks, up from 47. I don`t even know how the FDIC works. Is this -- do they take our tax money and do this?

How does this work?

JARET SEIBER, WASHINGTON POLICY ANALYST, STANFORD GROUP: Well, it`s a great question. Banks pay insurance premiums. And for a long time the FDIC fund was so overly-capitalized that banks didn`t have to pay anything. And that changed a couple of years ago, and banks have been paying in. And they have built up this reserve that the agency is supposed to tap in times of trouble.

BECK: OK. So -- but the FDIC was designed in during the Great Depression. It was not designed for the system that we have now. It wasn`t -- nobody -- there weren`t these gigantic banks. They were all local banks pretty much, right?

SEIBER: That`s true. But it was designed to prevent a run on banks from having depositors panic and run down and pull their money out, and thus cause a bank to fail and cause everyone to lose.

BECK: OK. All right.

Now, a hundred banks fail. The small ones that are, you know, your mom and pop banks, you say that`s not a bad thing?

SEIBER: Well, you know, bank failures happen during a credit cycle. And what happens is, some banks always get too aggressive. And they`re not able to cover their losses. And the agencies have very strict rules about when they have to step in. That`s one of the reasons why the FDIC is trying to get ready. You know, they know that we`re going through a typical credit cycle and they want to be prepared.

BECK: OK. So they`ve only got like $52 billion. What happens if -- and I know you don`t believe this could happen -- and if I hear this once, I`ve heard it a thousands times -- oh, things like Citigroup, that could never fail.

Really? It could never fail?

What about the huge bank because of the scandal in France? What about the bank in London? What was that, $299 billion that the government had to absorb?

What happens if, god forbid, one of these big banks in America fails?

SEIBER: Well, I mean, that`s what`s everyone always worries about. And regulators have been talking about that for more of a decade. The question really becomes, can we really ever allow a bank that is so large as some of our mega banks to go down? And the answer seems to be no, and they don`t...

(CROSSTALK)

BECK: Right, but what does that mean? I mean, first, you`re just passing the problem on.

Everybody says we couldn`t let Citibank -- it`s too big, we could never let them fail. Well, but you`ve got a system where our government has so much debt already, they would have to borrow all that money from someplace else and borrow it from China. How do we not fail by not letting a bank fail?

SEIBER: Well, again, it`s another great question, because, clearly, money does have to come from somewhere. But the Federal Reserve and the Treasury have the ability to pump money into the banking system.

And that`s what they look to do during a time of crisis. And the decision has to be made as to whether or not it`s better for the economy and better for taxpayers to keep an institution standing, even if the shareholders are wiped out. Remember, we`re talking about bailing out the shareholders.

BECK: I know.

SEIBER: We`re merely talking about preserving the institution to save the deposit.

BECK: OK. Jaret, thank you very much.

Bill and everyone else...thanks for the Visa opinion. I knew the IPO was to help "recapitalize" some banks, but I was just wondering if anyone thought the initial pop would be substantial enough to risk some capital.
From what I have read, it is much different than the MasterCard IPO, so I don't think I will try to put in for a lottery ticket. Besides, with Fido you have to wait 15 days before you can sell, or be penalized (3 strikes and no more IPOs for you!). In this market, I don't want to be forced to hold anything!

SteveC- good point...maybe my reasoning veered off course when making the leap from shorting an index to an ultra-short fund...or maybe it's off altogether? here's how i'm trying to talk myself through it:

if the Russell 2000 goes up by 10%, but the value of the USD declines by 12%, then buying and holding the Russell 2000 leaves you down 2%, right...ie, (leaving out transactions costs for now) if you sell short 100 shares of IWM @ 100 (for the sake of argument) today, your broker deposits $10,000 in your account...IWM increases to $11,000 in a year and you cover by shelling out $11,000...if the USD has declined by 12%, are you not covering the short using the equivalent of approximately $9700 in (2008) dollars?

the problem i'm having then is visualizing how an ultra-short of the Russell (TWM), would be priced under those circumstances...ie, would it simply decrease in value by 20%, or would it also take into account a 12% decline in the value of the USD?

Just got back from my son's basketball awards night to find that the dollar has made new lows and gold new highs.

I've been talking about stagflation since 2003/2003 - a little early but it is here now (Bill has been discussing this for months).

Regarding FDIC, I just suck it up and buy t-bills, what's the problem? I'll take the safety over any higher yielding money market in today's environment.

A personal note - my sons team started the year at 1-5. Wins were tough to come by. They didn't give up, learned from their mistakes, listened to the coach (me :-0 ), focused on defense and ended up finishing 2nd in the 8 team tournament. If third and fourth graders can learn from their mistakes, Caraistas can too!

Defense wins championships and is also key in todays markets.

Tax Evasion Liechtenstein -

German and UK authorities paid a former LGT Group Bank employee for information on bank customers' accounts. A US Gov't source told the Times that the US "had not paid upfront". (Did they buy the info on credit?)

The article further states that Australia, Canada, France, Italy, the Netherlands, New Zealand and Sweden are also looking into tax evasion by their citizens in Liechtenstein.

Isn't it illegal for confidential bank information to be disclosed by a former bank employee? Isn't it illegal for a government to pay for such information? Aren't western governments breaking laws in their search for lawbreakers?

Freedom57- you also make a good point...if i simply let the $11,000 sit in a bank earning minimal interest while it loses 12% in purchasing power, then the argument does not hold...

Zenob- if FXP hits the high seventies, i'll be buying...but i would be careful translating % moves overnight in the HSI or SSE into opening prices on FXP...i think the gains in Asia are primarily reactions to gains in the US, whereas opening prices in FXI/FXP will depend largely on opening prices in the US indexes...

Relates to FDIC ARTICLE / BECK TOPIC

FDIC: Bank reserves not keeping pace with delinquencies
Federally insured institutions see earnings plunge 83%
Tuesday, February 26, 2008

Inman News

Federally insured banks and savings institutions saw fourth-quarter earnings plummet 83 percent -- their lowest levels since 1991 -- and failed to boost loss reserves as fast as borrowers became delinquent on loans, the FDIC reported today.

Fourth-quarter net income fell to $5.8 billion at 8,500 banks and savings and loans insured by the Federal Deposit Insurance Corp., down from $35.2 billion a year ago. For the year, net income fell 27 percent, to $105.5 billion, as banks more than doubled loan loss provisions to $68.2 billion.

One of four insured institutions with assets of more than $10 billion reported a net loss for the fourth quarter, and the percentage that were unprofitable in 2007 -- 11.6 percent -- was the highest since 1991.

At the end of 2007, there were 76 FDIC-insured commercial banks and savings institutions on the "Problem List," with combined assets of $22.2 billion, up from 65 institutions with $18.5 billion at the end of the third quarter.

Weakness in the housing sector and the credit squeeze in financial markets brought to an end six consecutive years of record earnings, and made 2007 "a very challenging time for many institutions," FDIC Chairwoman Sheila Bair said in a statement accompanying the release of the FDIC's Quarterly Banking Profile. Bair said those problems will continue in 2008, but said "most institutions are so far successfully coping with the challenges they face."

Commenting on the report, American Bankers Association Chief Economist James Chessen said banks are "well-positioned" to handle the downturn, and continue to build capital and set aside reserves to cover potential losses. At year-end, the banking industry had $1.35 trillion in capital, an increase of $25 billion from the fourth quarter, Chessen said, and $8.4 trillion in deposits.

But the FDIC's survey suggests that banks aren't adding to reserves as fast as loans are going bad, and that more trouble lies ahead.

Loans 90 days or more overdue were up 32.5 percent in the last three months of the year -- the largest quarterly increase in the 24 years that FDIC's been collecting that statistic. The percentage of noncurrent loans at year-end was 1.39 percent, the highest level since the third quarter of 2002. The percentage of noncurrent residential mortgage loans rose to 2.06 percent, the highest level in 17 years of reporting data.

Net charge-offs rose to $16.2 billion in the fourth quarter, nearly double the $8.5 billion seen a year ago. The annualized net charge-off rate in the fourth quarter was 0.83 percent, the highest since the fourth quarter of 2002.

Net charge-offs were up year-over-year in all major loan categories except loans to the farm sector. Net charge-offs of residential mortgage loans increased by 144 percent, to $1.3 billion, while charge-offs of home equity lines of credit increased 378 percent, to $1 billion.

Although FDIC-insured banks and savings and loans posted their largest increase in loss reserves in 20 years, that growth did not keep pace with growth in noncurrent loans, the FDIC warned. The coverage ratio of reserves to noncurrent loans fell from $1.05 in reserves for each $1 of noncurrent loans to 93 cents by the end of the year.

"This is the first time since 1993 that the industry's noncurrent loans have exceeded its reserves," the report noted. At the end of 2007, one in three institutions had noncurrent loans that exceeded reserves, compared with less than one in four a year earlier.

Three FDIC-insured institutions failed in 2007 -- the most since 2004. The number of insured institutions declined from 8,559 to 8,533 during the quarter as 74 institutions were absorbed by mergers and only 50 were newly chartered.

something tells me the math in the above example needs cleaning up...is it more along the lines of $10,000 * (1.1) divided by (1.12)? maybe a finance major can weigh in...

Interesting article which shows the holdings of the Bill & Melinda Gates Foundation as of the end of 2007.

http://tinyurl.com/2uavl9

2nd, re inflation scenario, USD falls in half

As Freedom57 said, follow the money, I'll just put it in a different format.

Going long I agree you end up flat, DJIA 12500 to 25000, a year later that 25000 still buys the same amount of groceries.

Going short, puts 12500 in the bank account, a year later you need 25000 to cover, (same amount of groceries) but whats in the bank account = 12500, you will be 12500 short to cover. IE the banks do not adjust your balance dollars to adjust for inflation. You would have to invest that 12500 and make a gain equal to inflation just to break even.

I agree this is the whole problem, we need to find places to hide money / assets which will keep up with inflation at the least and if we are nimble we can find investments which will bring us out ahead. The problem is money in the bank is not inflation adjusted nor are loan principles inflation adjusted.

Example
"A" has 100K and buys an asset which he sells a year later for 200K, really same amount of groceries, 200k is FLAT.

"B" has 100k and buys a 100k assets but 100% finances the 100k cost, which he sells a year later for the same 200k, he also invests the 100k collateral inflation adjusted and breaks even in a year inflation adjusted at 200k. His balance sheet is slightly different, 200k asset sale, 200k in the invest account less the original 100K (plus 5% interest) he owes the finance co. = 300K (Not 200K). This works because the bank loaned out 100k today and got paid back their 100k later in wooden nickels.

Basically I see this as the scenario that the US gov is using to pay off some of the debt, they are paying off yesterdays $1 USD debt with todays $1 US wooden nickels, 1 for 1, as if they were the same thing, really they're NOT.

Our objective is to try and keep our assets ahead of inflation, if this hyperinflation scenario pans out.

Okay, you have me thinking....I hate that!

Say silver is $20 a ounce and you can buy 5 ounces now for $100.

And say annual inflation is 12%. That means that 5 oz of silver will cost $112 in a year.

At the same time you put $100 in any equity and a year later sell it for $100. The purchasing power of the $100 then is $88. But the silver is $112, so you lost $24 in purchasing power.

Please check my math....:>)

Craig

No, as I see it

Your silver investment kept up with inflation, net zero on purchasing power.

Your equity investment stayed flat in dollars, did not keep up with inflation, thus down inflation 12%, net down $12

total down is $12 not $24 in purchasing power.

Of course it getting late and I've been out and into a few bottles of wine.

Inflation

As I see it, it has not really hit the consumer yet. Most of what is on the shelves was bought on old contracts with yesterdays dollars. IE most big companies have contracts for fixed time frames, they don't buy on the spot market. When the supply contracts come due for renewal the prices will be higher, much higher in $USD (read wooden nickels).

It can work for you or against you, when I worked in the power and telecommunications cable business, if copper was rising that was great it meant all the cable in stock was going up in value, (from where we bought it), but if copper was dropping it meant that inventory was loosing value. Note everything in that business was fixed term contract price on labor and overhead, but spot price at shipment on the copper content.

Just a couple of more sleeps until the 13-week EMA crosses the 34 week EMA and the 89 week EMA on the silver/gold chart. We may already be crossing over right now.

Craig

Agree it get confusing and difficult to keep straight when we start talking about purchasing power, past - present and future.

Is that future purchasing power in future dollars, or future in todays dollars, or todays in future dollars.

Gotta use a spread sheet to keep it all straight and with the current inflation it makes a big difference.

This inflation and purchasing power confusion is what we get for fiat money. Kaimu where are you?

ALOHA !!

No central banks do not hold silver but they do hold paper silver and dodgy COMEX numbers to back it up ... oh and yeah ... SLV! If COMEX runs dry they'll just "borrow" from SLV ETF holdings. Warren did you hear that ... They're just borrowing? Go back to sleep!

I have already written about FDIC last year. When the tuff times hit they will start off-loading liabilities by claiming the derivatives fraud via their O'Darn(D'Oench)Doctorine!!! HA!!! By that time the derivatives class action lawsuits against the major US banks will be in full swing! The burden of repayment to deposit holders will fall on the broad shoulders of a combination of class action lawyers and the US Taxpayer! Thanks to the Saudis for coming to the rescue ... Or are they?

Now Greenspan is over in OPEC LAND telling the oil producers to unpeg their currencies to the US Dollar. If they obey Greenspan then the USA will be flooded with its own petrodollar IOUs! Jeez, the next thing you know Greenie will be telling everyone to buy GOLD!

READ ON:
Greenspan tells Gulf oil producers to dump the dollar

Dropping Gulf's Dollar Peg
Would Ease Inflation: Greenspan

By Souhail Karam and Stanley Carvalho
Reuters
Monday, February 25, 2008

JEDDAH, Saudi Arabia -- Former Federal Reserve Chairman Alan Greenspan said on Monday near-record Gulf Arab inflation would fall "significantly" were the oil producers to drop their dollar pegs, in contradiction to Saudi policy.

The pegs restrict the Gulf's ability to fight inflation by forcing them to shadow U.S. monetary policy at a time when the Fed is cutting rates to ward off recession and Gulf economies are surging on a near five-fold jump in oil prices since 2002.

Rifts are growing across the world's top oil-exporting region on how to tackle inflation, which hit a 27-year peak of 7 percent in Saudi Arabia in January and a 19-year peak of 9.3 percent in the United Arab Emirates in 2006, the most recent figure.

"In the short term free floating ... will not fully dissipate inflationary pressure, although it would significantly do so," Greenspan told an investment conference in Jeddah, Saudi Arabia's second-largest city.

Saudi and UAE central bank chiefs spoke in favor on Monday of retaining dollar pegs, while Qatar's prime minister advocated regional currency reform to avert possible unilateral revaluations designed to curb inflation.END

Bill / Jeff

I hope the next system gives us a grace period to edit our posts for spelling and grammar.

SteveC, Yes that is the whole problem, fiat money, NO fixed point of reference.

Now gotta get some sleep, getting very late here, back to the charts, data and y'-all in the morning.

Retail is a different animal than contracting which is competitively bid and which puts pressure on prices of current stock one way or another.

Retail customers don't generally get competitive bids on purchases where wire (or food) prices would be priced at current rates, not at the previous price.

Retail stores tend to raise prices at the rate of replacement. They don't wait to raise prices because it will hit their margins on replacement.

A good example is gasoline, where gas stations raise the price of gas in their storage tanks purchased at the previous lower price.

As to whether inflation has hit Americans yet, I have to say it has. My wife and I went to McDonalds the other day and bought the two combination meals we always do when we do Mickey D's. Those meals used to cost about $8. The other day we bought the same thing and it was over $12. $12 for McDonalds? Yeow.

A tank of gas last year cost $40, now it's over $80. They may appear to not notice, but I don't see how they can ignore it.

I buy a lot of dog food (Kirkland brand at Costco) and sometimes I get into conversations when people see that many bags of dog food on my cart and ask about how many dogs I have. I have been surprised at how many people understand what is happening to their purchasing power and why. The dog food I buy was $17, it's now $20 and other customers noticed it and some of the other prices that were higher as well.

ALOHA !!

POG = $958USD
POS = $19.11USD

Look at the rise of gold in foreign currencies compared to the rise of foreign currencies against the US Dollar. Gold is rising faster ...

The Chinese own silver ... It has been money in China for a thousand years. The Western banks are devoid of physical silver while China is loaded up! Just go to EBay and look at some of the antique Chinese silver bars up for sale. I do not recommend buying them on EBay since it would be a bit hard to trust a dealer so far away, but my point is made ... even on EBay!! If China had to back its fiat(soft)currency with ahrd currency I believe they would choose their old standard ... silver! Who holds the monetary cards in the modern industrial revolution of the BRICs? Balance of trade ...

2nd,

Thank you for the Princeton presentation slides: quite clear where the US wooden nickel is going.

Cheers!

ALOHA !!

Craig ... Holy Crap! $12 for two McD meals? When I was a kid it used to be $1.50 for two meals! Even that included milk shakes not watered down Cokes!!

We all have nobody to blame but ourselves. We have been voting ourselves a free ride for decades now. Does anyone really believe anything is really "free"? Your kids will get the bill except I doubt they will pay it this time! THEY CAN'T AFFORD IT!!! If ever we need a generation that JUST SAYS NO ... its now!!!

Keep voting the two Bubbas into office(Rep and Dem) ... You can't CHANGE a damn thing by voting Dem or Rep ...

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

19.42 spot? Wow.

On the one hand, that's insane!

On the other hand, that's more like it.

Silver at anything below 15/ounce was just dirt cheap. Now it's just a good deal.

It's all about the DX.

It's at multi-year lows and heading down.

Dive! Dive! Dive!

Hold on to your bullion, she's going down!

http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

Inflation and the McDonalds indicator: in 1967, when the Beatles and Sgt. Pepper's were on top, the McDonalds I frequented had a slogan of "Change back from a dollar" for a meal and drink combo.

In 1966 I worked for minimum wage of $1.20/hour. The current minimum wage is $8.25/hour. The Bank of Canada inflation calculator indicates the inflation-adjusted 2008 equivalent of $1.20 would be $7.85.
http://www.bankofcanada.ca/en/rates/inflation_calc.html

A similar calculator for US inflation can be accessed here:
http://www.bls.gov/cpi/

Keep in mind every government has a vested interest in understating the real rate of inflation of consumer goods and services.

Bill - Went poking around this morning and clicked on the Creative Commons license link. On the license page there was a notice down at the bottom that they have provided a new improved license to which they suggest you link henceforth. They also suggest you re-license your archival content under the new license as this does not happen automatically.