Bill,
You Saturday comments and the WIR were both the best ever this weekend. Too bad you aren't American, you could run for President. We have a dire need for leadership that isn't already sold-out by the time they get to the White House.

Thanks for everything.

Rob.

Thanks Bill, we need more people discussing and showing the "men behind the curtain" i.e. Slizzards of Oz

maromatics:

Re: your educational post of 4.5.08/8:10AM (Bill’s 4.4.08 Community Chat Discourse entry) set the scene for Sunday morning coffee and viewing pleasure with my better half, providing greater depth of understanding and origins of the ‘Fed’ along with the havoc it has caused over the years.

During the 45 minute video I could see the frown of the past that would be created on my sweetheart’s face when I tried to explain what Hank & Ben were doing, turn to alarm and then acceptance of why physical GOLD & SILVER were filling up boxes around the house.

There’s more to J.P. Morgan’s ‘helpful’ hand in the latest bailout than I realized.

Thank you for your many contributions here on Bill’s blog; I try to read all of your posts.

Got Gold Report - Gold, Silver ‘Bubbles’ Pricked? Rubbish

http://www.resourceinvestor.com/pebble.asp?relid=41689

He needs a leash!
http://editorialcartoonists.com/cartoons/ZygliA/2008/ZygliA20080405_low.jpg

Good morning (en route from Cape Town to La Jolla)

A sense of relative calm descended upon financial markets over the past week. Although fears about the outlook for the US economy persisted, a perception crept into markets that much of the bad news related to the credit crisis was now out in the open, with the result that the equity bulls had reason to feel rather pleased with their performance by the close of the week.

Read all about this in my weekly blog post, highlighting some thought-provoking quotes from market commentators during the past week, and briefly reviewing the week’s market action.

The link to the “Words from the Wise” is: http://tinyurl.com/5rfumt

Enjoy the read.

Maromatics:
I echo C.Note's appreciation.
I too watched that video last night - very worthwhile - and an emphatic follow up to Bill's WIR and sat morning comments, for
which i thank you, Bill.

Bill, this is unrelated to this post, but I didn't know where else to put it. I want badly to own your Lessons book, but I just can't stomach the $20 shipping. Any hopes of getting it from Amazon shortly? (Yes, I should have taken advantage of the pre-pub discount).

i believe they will adjust the $20 shipping to $10 once you complete the order...if they don't, why not assimilate the amount into the cost of the book, which is well worth the purchase price, right...

targeting SMN/FXP for possible additions...

vinod- your ESLR may well double earlier than you thought...

Bill,
I posted a chart of employment in Services ex Health & Education and it shows a rapid decline typically associated with recessions.
See "The Precipice"

prieur- Cape Town, Manhattan, La Jolla-> seems like you're always on your way to a nice destination...i envy your schedule ;)

Re: Discussion of the Gold basis

I managed to dig up the following article, dated March 10, which comes to the following conclusion, with a lengthy discussion of the gold basis:

"These holders can use sales of gold to make it look as if money is worth more than everyone is guessing by releasing waves of gold such was we saw last spring and will see very soon. If 300 tons of gold hits the markets, it soaks up a lot of loot. BUT NOT IF THE SAME BANKS ARE ALSO OFFERING INFINITE LOANS WELL BELOW THE RATE OF INFLATION!

This is why I suspect, even if 2,000 tons of gold hits the markets this next year, it will only cause more people to take on more loans to buy this 'cheaper' gold and within a year, the inflation of the value of gold will redouble. This is why the only cure is to restrict the flow of money. In other words, to deliberately make for a depression."

http://www.commodityonline.com/news/topstory/newsdetails.php?id=6195

Lease rates are still in the negative, indicating a serious dishoarding of bullion and sterling.

F6

Bill, I received your book this weekend - totally excellent - much more information and many insights I had not expected although I read your blog daily.
Thank you for your contributions to my knowledge and our community.

Ah....there's the BOS! Adding to FXP....now that's huevos! I'm thinking I should have taken my profits on Friday.....but it is what it is....
now underwater....so adding is the other option.
Same for SKF but smaller position.
WM isn't helping me.

I did add to ESLR last week though, so treading water today overall. ESLR had a write up in the Boston Globe, adding to work force, more growth, etc.

craig- correct->i've got huevos on my face for scaling in to FXP too early ;)...as for ESLR, we got the Boston Globe report from vinod 10 days early...

vinod, 2nd

Heavy (by Eslr standards) call action at Apr 12.50 strike price on ESLR.

calls may be the way to play ESLR...

2nd

I am going to try my luck on SONS and TER
I wish I did not sold ESLR I have then in my IRA
also i have LDK and SIGM I do not know should I hold on or not. LDK i got at 20.79

My problem is i always sell one that is going up and keep one that is going down

gold spiking while USD back above 72.....

adding SMN at 32.63, FXP at 75.25...

vinod

re TER (still holding in IRA) wait for the price to come to you. Daily RSI 7 around 78 right now, weekly around 79.

vinod- i know what you mean, man...very strong tendency for most of us to buy what's going down and sell what't going up-> that is (ultimately) the whole point, after all ;)...i try to correct for that tendency by buying into extreme negativity/weakness as best i can..

SPX is flirting with resistance at 1380. If it breaks through, we go higher. A good place to try SDS with a tight stop.

That said, I still haven't pulled the trigger... ;)

C. note,
Joey.

Thank you.

Have a good week.

Cheers!

It sure hasn't felt like a bear market on the TSX, lately. I'm running out of u shares to take profit on (UUU, especially)! Is anyone else here itching to reload on HED, or just me?

the market's going to be in a good mood until it decides to change its mind...

Well Uncle Ben is having a tough time moderating Inflation, with Oil and corn near all-time highs, gold Spiking and the dollar still near an all-time low.

I guess as long as he can save the banks that's all that matters in his book. There doesn't seem to be all that much excitement out there for private equity saving WM. They probably had to pay a huge interest rate like Thornberg that will make it impossible for them to make money and pay back the debt.

Rob.

Mr. Obvious 'I want badly to own your Lessons book, but I just can't stomach the $20 shipping.' I was in the same boat but apparently the $20 is a default number that the book shipper cannot change so they do as 2nd-ave indicated and refund you $10 shipping.
Received my copy last week via Fed Ex and it cost $10 to ship.

Pulled the trigger on SDS...

Here is some interesting testimony from the transcripts of the April 3, 2008 Senate hearing regarding the Fed, JP Morgan, Bear Stearns, and the “imminent collapse” of the global financial system. (Bold caps mine)

BERNANKE: The company's failure could also have cast doubt on the financial positions of some of Bear Stearns' thousands of counterparties and perhaps of companies with similar businesses.
Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. ………………………………

QUESTION: Mr. Dimon, for some time, JPMorgan Chase has acted as the clearinghouse for Bear Stearns. I believe that JPMorgan Chase also has extensive OTC derivative contracts with Bear Stearns.
What was the extent, sir, of JPMorgan Chase's interconnectedness to Bear Stearns, prior to Bear's announcement of their intention to file for bankruptcy?
And what would have been the impact on your company's balance sheet if Bear Stearns had been liquidated?
Were these considerations that went through your mind?
Because you were connected. You were the banker, basically, the commercial banker, for an investment bank.
DIMON: Senator, yes. We were one of their bankers, and one of their main clearinghouses. So we had, obviously, extensive relationships and exposures. But the answer to the question, our direct exposure, on that day, was approximately ZERO. So, if you said -- and where we did have exposure, it was fully and totally collateralized.
Our real exposure would have been if Bear Stearns went bankrupt, the impacts it would have on the financial system, we probably would have lost money, but we still would have been in FINE SHAPE. …………………………………

SHELBY: Mr. Dimon, you're the CEO of one of our largest banks. Do you believe that most of our bigger banks are well capitalized and have enough liquidity today or do you not know?
Speak of your own bank first. I know you know where you are.
DIMON: Yes, we've always believed in being extremely well capitalized, CONSERVATIVE ACCOUNTING, strong loss reserves, and being prepared for what we call bad weather, which happens when you don't really expect it.
And I really can't speak about all the other financial institutions in the country. ………………………………………………..

MENENDEZ: Thank you, Mr. Chairman.
Thank you, gentleman. Let me ask you, Mr. Dimon, with reference to the securities that are backing this transaction that the Fed has done, my understanding is that they are largely mortgage-based securities and related hedge investments.
Is that a fair statement?
DIMON: Yes, Senator.
MENENDEZ: Do you know what the VALUATION of those assets are?
DIMON: The VALUATION at which the Fed has taken them into their books is at the same VALUATION that Bear Stearns had it marked on March 14th, and it's the same VALUATION that JPMorgan has taken the other $300 billion at as of March 14th.
MENENDEZ: And what is that?
DIMON: That's the Bear Stearns that -- whatever is on their books for.
MENENDEZ: But in reality, that's not the VALUATION of them, are they? Is that the real VALUE of it in the marketplace at this moment?
DIMON: Well, I think, Senator, I think you can have a big debate on what the VALUE is, but I think that they -- that Bear Stearns, I believe Black Rock's also looked at it, you know, believe those VALUES are approximately appropriate.
MENENDEZ: Why do you think that there was this first panel testified -- I assume you agree with them that there was a crisis of confidence and a set of rumors -- why do you think an institution like yours with such reputation, such standing, could simply fall on a series of rumors, if it isn't a question of VALUATION at the end of the day?
SCHWARTZ: I think that, as I said in the earlier testimony, or opening statement rather, I think that it's well established in financial history that institutions that lend money against assets, if people are concerned that there is a liquidity crisis or if there are rumors that there money is not going to be there after everybody else withdraws their money, there's a rush to the exit. It's my mind that that's what happened this week.
MENENDEZ: Well, let me ask you, do you really know what the VALUE is of the securities that you have?
SCHWARTZ: I think that when you ask do we know the VALUE of the securities, I think that when you get into, I think, Chairman Bernanke testified that if you look at securities that become highly, highly illiquid, if you have to sell them overnight, then you will have a much, much lower VALUE than if you look at what is a required return and how you VALUE that return over a reasonable period of time.
So do I think there are some assets on our balance sheet that may turn out to be worth less than what we're carrying them for? Yes.
We have some significant hedges against a number of those assets that would tend to move in the other direction where we're short.
I also think there's a number of assets on our balance sheet that could be worth a lot more than what they're carried at. One example of that was highlighted in the transaction with JPMorgan where they asked for an agreement to be able to buy our headquarters building for $1 billion. It's not carried on our books at anywhere near that.
MENENDEZ: Well, the problem is, is that Chairman Bernanke also testified in response to my questions that he can't tell us what the liability of the American taxpayer is here. So if your VALUATIONS are equal to or greater then we have not problem. If your VALUATIONS are less than, we have a problem, even over the long term.
And I think that I've seen some statements and some reports that going back in time say that when we had analysts during this home mortgage crisis situation, there were analysts -- and I think -- I don't know, Mr. Dimon, if your institution was one of them -- who said we can't really tell you the totality of the challenge that we might have. So I don't particularly think that you all know what the VALUE of the instruments that you have really is. And that's part of our challenge here.
Mr. Dimon, is it wrong to have said that you would not have, on behalf of our institution, entered into this agreement without the Fed's position?
DIMON: Senator, that's correct.

I think that the real issue is VALUATION.
Thanks to a video being shown on Market Ticker,
http://market-ticker.denninger.net/2008/04/no-jobs-friday.html

Ron

smart money-> buying the dips, or selling the rallies?

Dimon says:

"Our real exposure would have been if Bear Stearns went bankrupt, the impacts it would have on the financial system, we probably would have lost money, but we still would have been in FINE SHAPE."

Whaaaaaaaaaaaat? I thought the system itself would have collapsed if the bailout didn't happen?

This is beyond belief!

Someone is lying their you-know-what off.

So did Bernanke or Dimon perjure himself before congress?

T-minus 15 min. before standard 11 am takedown in effect.

Hedge funds are reeling...

"The hedge fund industry is thought to have suffered its first net quarterly outflow in years as investors demanded billions of dollars back from the managers in which they had invested."

http://tinyurl.com/3q9zbt

vinod- the mental game i sometimes play is place myself into the opposite frame of mind-> if the market's in a bad mood, try placing yourself in a good mood, and vice versa...makes it easier to see how things may look a week or two down the road, as people (ie, the market) always change their minds...that way, you don't get caught as often in the trap of letting the market talk you out of something (how often have you heard someone say "i can't believe it was 'x' just 5 days ago, why didn't i jump in?"->it's because at the time it didn't seem like such a good idea, right...

2nd, that's some very sage advice. I suffer buyer and seller remorse all the time. And the key is to recognize it to better offset the impulse to act on emotion. Thanks!

2nd

Lost in last few trade
Got some back in LDK but I have only 50 share
After couple of month in this business, I found out that this is tough
It is a mind game and more to do with emotion than trading
By end of the day, I go to clean everything. What I made In March lost half in April
I have to seat back and regroup

Excellent article from Bob Hoye on Gold's correction:

http://www.321gold.com/editorials/hoye/hoye040708.html

kaimu, lessmore...thank you for your responses yesterday to my posting.

One of my biggest problems with day trading comes from playing that good times kinda music when I'm on a streak; it takes a lot to snap me out of it- especially after bragging to my wife over msn and receiving a bunch of positive reinforcement.

Late comment re fighting for one's sovereign rights: First step: Have no debt.

FingerLakes: Ron Paul isn't a bad leadership choice.

vinod- i clear the table to clear my mind quite often also...removes any bias you may have...taking a hit can be mentally taxing, but need not be-> i usually consider taking dents part of the game...if you're up, say, 18% for the year, and find yourself needing to take a 1-2% hit, that's fine...

As was presented here very late Saturday night:

RGLD has, this morning, made a powerful move upward from the large symmetric triangle, initiating the completion of this consolidation pattern.

Unless we get some bizarre huge reversal close downward that brings it back inside the formation, this pattern is breaking out and resolving exactly as expected.

Heavy resistance is kicking now at ~$31.90-32. If we complete the decisive move past that resistance, $35 does not seem out of the question.

suck em in long ... got my eye on 12,750 to get shorty ;)

Bralorne Mines BPM.V a name near and dear to oldtimers hearts, one of the largest gold mines in Western Canada during the boom

Now, for the first time, all the leases under one roof. There were some parts of the system they were never able to drill.

Now they can, read for yourself:

The width of the zone is averaging roughly 4.5 feet, with face samples ranging from 124.8 gm/t (4.01 oz/t) Au across 4 feet to 2.8 gm/t (0.09 oz/t) Au across 4.5 feet...however with the current gold price, money can be made milling 2 gram material.

This mine had average grades of 0.5oz/ton

I see Canaccord on the bid these days, is that because we're a week away from hitting the vein?

So the drilling started March 3rd, by March 16th they drilled 175ft

The NR says "we still have 350 feet to advance before intersecting DDH07-33 which gave 2.511 oz/t Au over 2 feet."
http://www.stockhouse.com/tools/?page=%2FFinancialTools%2Fsn%5Fnewsreleases%2Easp%3Fsymbol%3DV%2EBPM%26newsid%3D6807355

Seems we're due for news

Could it be that Paulson & Co will continue this melt up until the next President takes office?

It would take time to stop the BSC/Market bailout. And it takes time for all the Friends and Family to liquidate their stocks during this bailout before the floor falls out.

I just got 2 DUG july 25 calls for 9.90 Each. That's only a premium of .70 each. Either everyone thinks OIL is going up until July or it was a good deal.

Still hanging on in FXP but getting nervous since expiration is next week.

Rob.

Question to all stock market veterans, given the Fed intervention/bailout, will the great bust anticipated actually be prevented or at least contained? Like what the government achieved in 1980s... If this might be true, what is the best position to play... Please enlight me ;-)

Bill,

Thank you. I'm pretty clear on what my choice is, but I'm not clear what to do next? I've never written to a congressperson, or taken any political action. Would you be willing to create a basic letter, that I could personalize?

Sincerely,
Eileen

Folks, please understand what is going on here.

Bernanke and HB&B are attempting to engineer a bond market collapse. This will result in a deflationary credit collapse and another depression.

You will lose your house and everything else, as you will not be able to service debt. Only those without debt will survive economically.

Go listen to his exchange with Kennedy. It is clear what he is doing - he is attempting to provoke Kennedy into doing what he wants to do, which is to take the entire $10 trillion in come deflation onto the public debt.

Bernanke "lit the fuse" with the Bear Stearns "backstop" which was illegal, but he knew that would ignite calls from constitutents for "their fair share", and it did.

At the same time he is draining the monetary supply by selling off his Ts.

If Congress does what I expect (and he expects) they will then HB&B wins as the bond market will collapse immediately. This will cause credit to become "unobtanium" at any reasonable cost, with the concurrent economic collapse.

None of this is an accident. It is in fact exactly what happened in the 1930s.

We have very little time to stop it by raising unholy Hell with Congress. If we fail, then that is what will come.

Not might come - WILL come.

You've been warned.

Come look at the bottom line here http://market-ticker.denninger.net/2008/04/who-are-they-trying-to-fool.html

Bill, you need to get on this if you want to try to stop it. This will not remain local to the US - it will be a GLOBAL incident.

Mish's post on the failure of Australian broker Opes Prime is a must read for anyone trying to figure out why kaimu and others keep going on about counter-party risk.

One day people 'had' shares. The next day, they have nothing.

http://tinyurl.com/6hlawa

relentless...

Leander,

I'm also a U3O8 believer. I've been reloading DML over the past 2 weeks so my ACB is under $7. Recent reading suggests, however, that there may be much more money in building reactors than running them or supplying the commodity. In the short term, the commodity may be the best play, especially if the price of U3O8 has bottomed out, as many believe.

A conclusion I made based on John Mauldin’s commentary this weekend “More Thoughts on the Continuing Crisis” (available at http://www.investorsinsight.com/) is that a strong rally in ABX indices over the past two weeks does not mean that the banking sector is “out of the woods.” It simply reflects the fact that the crappy assets the banks are holding can now be valued at whatever price banks like to use (because of the SEC rule John Mauldin has quoted). That is, the banks do not need to hurry to get rid of their crappy assets and hence their value (as reflected by the ABX indices) rose dramatically relative to the previous assumption that all these assets will be written off at pennies on the dollar. HOWEVER, the return to the non-transparent valuation of these assets does not make them any more profitable for the banks to hold. So in the long term the bank profits WILL keep falling, and the fact that the real balance sheets of the banks have once again became concealed from us should not allow XLF to keep rising in the future. It will at best oscillate for a long time, and the current level of XLF is unlikely to be the lowest point looking into the future, as the strong rally over the past two weeks has included some overreaction to the new valuation rule. Any comments?

And IF the current level of XLF is the lowest point heading into the future, then forced selling of assets will stop soon, more money will appear in the system, and some of it will finally start flowing back into the junior mining and exploration sector. :)

DavidV

David, assuming their worthless investments are indeed not valued to market, why would the profits of the banks keep falling? They can borrow at very, very low rates and lend at much higher rates now. This could generate a healthy profit.

Re. Mauldin's letter, he mentions the 80s and the collapse of the Latin American loans (countries defaulting and banks having to write-off the loans). The banks faced similar issues at the time, to be also bailed out in a similar manner, i.e,, by given them time to recover. The banks did fine after this.

Question for all: why would this not happen again?

In NYC, the govt was trying to obtain 350M from fed govt funding. the twist is that the money would only be extended if NY approved a $8 fee for congestion taxation.

the plan is to charge drivers $8 to enter Manhattan below 60th Street on weekdays, in addition to any tolls!

It doesn't look like the new tax will be approved but its just another attempt to keep the working class pinned down.

Sio2....

There is not a real connection anymore between the real estate and the loans. The derivatives that were created through the loans are really unregulated "bets".

Its like sports betting. There are the teams and the final score. But, in between there are a lot other bets that can be placed....like how many strikeouts, the number of pitches in the third inning, the number of doubles. The total of all these bets exceeds by an astronomical amount the amount you might bet on the final score. If you make these bets with a bookie he enters them in "his" book and hedges to get the vig or spread. Derivatives are unregulated. There is no book. Try to get information on any tranche in any CMO. Its not like the price of WMT. No one even really knows how many "bets" have been made. It is estimated that the total is 45 trillion. 45 trillion in "bets" using bank assets....unregulated. When you get you mind around how big 45 trillion is let us know.

Hi,

Re Denninger's comments: the Trade of a Generation seems to be forming.

Cheers,

Re: Bank failures

The brokerages that failed so far had massive net redemptions due to loss of confidence that they could not pay from out of their reserves. This is due to the fact that major commercial banks in the U.S. are borrowing their reserves, instead of using depositor's money and assets to lend.

Bear Stearns may have had the plug pulled on them at their weakest point, though, not necessarily due to a run on the bank. Likely they were overly exposed to Credit Derivative Swaps against themselves.

Another company which had their liquidity pulled was MF Global, but we haven't yet seen any evidence that they are going bankrupt. They are not exposed to credit derivatives in the same way, because they deal in retail CFDs and on-line futures and options contracts. CFDs are not traded in the states. CFDs were likely shut down in the last downturn, because margin requirements were increased.

Hedge fund collapses are occurring because of their wrong way bets due to widening credit spreads and net redemptions.

Much of the concern for bank failures is their exposure to credit derivatives and swaps, being unable to both at the same time keep reserves and provide liquidity to keep them solvent.

A great deal of exaggeration goes into how much these credit derivatives are actually worth in their notional value. Endless amounts of hot air is expended on the hugeness of their notional value, that this will bring the apocalypse. On the one hand 95% of these kinds of futures options are an invalid claim against any equity in any company during a bankruptcy. The money usually lost is the original cash put up for the contract. Investors have a right to this money and can successfully litigate for it.

There is a logical inconsistency that credit derivatives create the underlying economic conditions and thus god taketh away when they fail, since they are merely notional anyways and fequently of secondary lien type with no legal basis and more often than not fraudulent in nature.

So you can see why so much emphasis is placed in the press about how banks and brokerages exposed to losses because of credit derivatives simply can't pay back investors, when in matter of fact, they can.

The reason why these kinds of contracts exist, is that it permits a bank or brokerage sufficiently large with adequate reserves to completely dominate the futures market, and create them at whim.

red close?

XLB turning red...

Can someone post some technical analysis of the Dow index looking at the past 100 days in daily units? I'm not sure what to make of the 12750 ceiling that seems to be in place, along with the last 4 days worth of closes. We tested 12750 twice, the first time on the 1st of Feb, the second time on the 28th of Feb, and then over the past couple days... But over the past few days there is been side tracking between 12550-12750.

TNX up 2.6%...;)

starting to think about those ESLR calls...

I'm happy to say I just received my book. I was jealous hearing everyone report they were getting their books. Can't wait to curl up and read/study. Thanks Bill for all you do. You are the wizard.

SMN just turned green...

both SMN/DUG now green...;)

Received my book just a few minutes ago. Thanks Bill for the Cara 100 and thanks all you bloggers for the constructive insight.

Strong reversal in SMN on increasing volume. Might that have been the bottom?

One of my money market funds contains Bear Stearns investments, to be specific Master Notes @ 3.4% that came due on 3.31.08. I called my broker Fido on that date and asked what the status of the investment was and they could not or would not tell me.

I called and inquired about the issue again today and was told until it is a done deal they would not know. Further, it was indicated that if the deal goes thru with J.P. Morgan, it appears all is OK until the $30-billion runs out.

Further, I asked is Fido going to the ‘discount window’ and was told: “that’s a good question.”

It’s no longer “Got Gold?” Its: I got Gold and Silver and getting more every week.

based on the low number of posts i see today, guessing that watching trapped bulls jump ship is a welcome change of pace...

Not surprisingly, now it looks as if U.S. malls are now faltering...

"The vacancy rate at U.S. strip malls rose to the highest level since 1996 in the first quarter of 2008, while that for big malls reached levels unseen since 2002, research firm Reis said on Friday."

http://tinyurl.com/54k6wt

The whole "we don't know until its a done deal" means its time to litigate. Larger investors will surely engage in lawsuits to recoup their investments, but the smaller investor is being handed a coprophagic breakfast, simply because they might not have the means to sue.

If Bear Stears was allowed to go bankrupt, then all of the investors whose investments were tied into credit derivatives without their permission would be in a position to dictate their terms. And there are some very large, affluent investors who believed in the integrity of the brokerage seeking to get their money back. They'll probably get every penny.

SiO2:

I am not an expert on banks and so I might be totally off here. It seems to me that everyone knew two weeks ago that banks can borrow at a very low rates and lend at very high rates, so let's focust on what has changed since then. There was a concern that banks will have to take large losses SOON because many of the real estate loans they are holding will eventually default, but in the meantime, these loans will have to be marked to market, and so the losses will happen much sooner than that. Now the loans do not have to be marked to market, but it doesn't change the fact that the real estate loans will default. It simply postpones the time when banks will have to take losses, just like John Mauldin explained about banks starting to take losses a few years after the Latin America crisis. So now no one knows once again how big these losses are going to be, and in the absense of transparency and confidence in a "clear bright" future for the banks, I doubt the current level of XLF is the lowest level heading into the future. XLF might not collapse, but it won't rally into the sky either -- it will most likely oscillate for a long time now. UNLESS inflation gets out of control and FOMC will have to start raising interest rates -- that will bring XLF and XHB to their knees.

It is amazing, actually, how many negative feedbacks exist in the market, creating a strong tendency for the indices to oscillate around the same point. If stocks keep going higher, then bonds will keep falling, the yields will keep rising, and this by itself will pull financial stocks down, possibly by a lot, since people are very nervous now and once the happy mood changes for the gloomy mood, there will be an overshoot to the downside as well.

DavidV

Interesting action - breadth was very positive in the morning and very negative starting 1pm. And interesting that we broke the 1380 resistance and then immediately rolled over.

Since the late March call from Japan to have the G-7 get together and plan a collective action by the member central banks to buy up all the troubled assets held by global financial institutions, this possibility has buoyed hopes of the market that the financial crisis will be dealt with successfully and the global economy can then move onward without the current chaos.

The meeting of the G-7 is April 11. If no agreement is reached on a global rescue plan, if there is discension within the group, it looks like a serious market response on the downside is possible. It will be interesting to see if the official response is made before the close or if they wait until after closing to make their report. My guess is that what ever they decide, it will have a strong impact on market psychology. A thousand point move up or down could be the result.

Perhaps a dual purchase of SKF and UYG this week
with tight sell stops would be one way to play the decision?

We wait and watch.

YAMANA GOLD yri------------anyone got some of this gols stock. will we see a spike soon russty.

hmm.... Interesting little drop here. Although I've become skeptical of any and all moves of the ticker...

SMN- taking profits on the shares purchased this morning...holding remainder...

s&p 38.2% retrace still proving to be resistance as price oscillators are extended to the upside...where's the oomph from volume in the latest rally?

Genesis,

RE: "Bernanke and HB&B are attempting to engineer a bond market collapse. This will result in a deflationary credit collapse and another depression."

I think your argument is sound and well made, but frankly, YOUR BLOG MAKES YOU SOUND LIKE A WIDE-EYED LUNATIC with all of the UPPER CASE!

Might I respectfully suggest that you continue to make your excellent points in a more conventional style of text? I suspect a lot of people stop reading what you have to say once they encounter bold, italicized, uppercase text scattered throughout your message....

Apologies to Bill for posting this response here on Bill's blog, but I don't see how to leave a comment on the marketticker site...

RIMM 5 points dump so far from the high, while most in its group are green or barely negative. This could be the beginning of scenario we discussed last week - unraveling starting with RIMM, spreading through techs etc

Jay,

I'm with you, don't know how to respond to his comment...

YHOO,
No matter how one looks at this stock, up is the only direction unless no deal is arrived at. Shouldn't this be a good buy point here for a swing trade?

"I'm with you, don't know how to respond to his comment..."

Genesis has a forum for discussions. Warning: it can get very uncivil and, for some unknown reason, he tolerates some certifiable lunatics.

But his message is clear and to the point and compelling. I hope everyone in the U.S. has called or written (or better, both) their representatives in congress to demand action.

You have to sign up to post on tickerforum. I think Genesis has this exasperated tone because he has been trying to rally his site's users to sign his petition and contact their Congressman and very few of them seem to want to do so. They would rather profit from the collapse than prevent it. Everyone is a speculator these days.

I picked up some COF sept 60 puts today and my DUG 25 calls are doing great so far and FXP is coming back. So far so good.

Didn't LEH raise money at 12% and C raise money for a similiar %?

Just because they're borrowing cheap from the FED doesn't mean they're using that money for trading. What if they're using it for daily operations?

Also, what happens when Ben makes them take back their garbage paper for his treasuries? These are still technically loans to the banks, except for the 29B they're covering on the Bear deal.

Someone is definitely trying to keep it in the green, buying the dips and selling resistance. Today looks very negative on the charts though, even if we end positive.

Rob.

...another failed attempt at upside, go figure

;)
ralph
http://successfulonlinetrading.com/blogs

Ben won't make them take the garbage paper back. It'll get renewed ad infinitum.

Once again, an ugly candlestick and low volume. I'm surprised the VIX has been staying below the 200 day, though. All we need is some surprise news w/r/t YHOO/MSFT or something else & we'll be back up to 12,800.

ALCOA PROFIT HALVED DUE TO HIGH ENERGY COSTS, WEAK DOLLAR

This will get interesting if companies start blaming the weak dollar as that is counterintuitive. It should be boosting international sales in dollars.

Consumer borrowing rose slightly less than expected, but credit card debt seems to be climbing at a healthy clip.

I wonder, if a bank is having problems with their capital ratios, doesn't increasing credit card debt make it even worse? I.e. won't CC companies have to eventually have to choose between stifling credit card debt growth or raising more capital?

I also bought back into COF puts today. The pessimist in me agrees with the idea that people are turning to CC's to maintain lifestyles in the absense of savings and home equity.

Anybody know if walking away from credit card debt is as 'easy' as walking away from an underwater mortgage? Seems you can give the bank the keys without filing for bankruptcy, but I suspect you can't do the same with credit card.

Any clarification would be appreciated :)

"consumer borrowing rose at an annual rate of 2.4 percent in February, just half of the 4.9 percent increase in January.

The slowdown reflected much weaker demand for auto loans and other type of non-revolving credit, which rose at a rate of 0.4 percent in February, much lower than the 3.6 percent growth rate in January. Credit card debt rose at a 5.9 percent rate."

http://tinyurl.com/3mv7xy

Also from that article:

"...total consumer credit to a record $2.539 trillion"

I remember when I first paid attention to these things a mere 2 or 3 years ago when we first crossed the $2t line. Hard to believe another half trillion was added in the meantime, and this not inlcuding mortgage or home equity loans!

Bill et al,

I am growing concerned about the counter-party risk that you guys and gals touched on a few days ago. I actually liquidated 90% of my ultra shorts this afternoon based on me being a Nervous Nelly, still holding some FXP though, maybe out soon.

Regardless, I was hoping to get some more discourse here about the risk in the ETF's and Currency ETF's. Feedback from this group has proven invaluable time and time again.

A little research tells me that the main currency ETF counter-party guys for Rydex are JPM, one would expect some warning but I would hate to wake up one day and find out that JPM exploded overnight, trapping all the ETF holders with worthless paper. Also it appears that Proshares has an extensive list of US bank counter-parties but who are responsible for which Ultras, etc is cloudy at best. And we all are aware that these banks can fall apart with lightning speed, re BSC.

I think that something Bill said many moons ago (I've been lurking here daily for about 2 years now)about the proliferation of ETF's being good for Wall Street and not necessarily good for the common man (or woman)may be coming to fruition.

If Wall Street creates it, it cannot be good for very long!

thanks for any input / info / discourse in advance

Chris

[Bill Cara note: I will ask my friend Larry Berman about this issue. Maybe you could be more specific and I'll fwd him your query?

btw, did I miss something today? Did the UBS research dept really upgrade UBS from Neutral to Buy? That's on my screen, but surely must be a mistake.]

Chris,

The decision to move away from ETFs is in my opinion a wise one.

There are other ways to reach similar trading outcomes with lower risk.

Consider this: if you decide to expose a small portion of your portfolio, for instance 5% to a maximum of 10% to the market, you can allways buy call optios (or in your case put options since you were holding ultrashorts).

Options trading is much easier than you imagine once you get a hang of it, and is a great way to protect your capital.

The remaining 90% of your portfolio can be safely set aside away from your broker in some safer vehicle (for instance you can buy part of it in phisical gold).

By doing this you will be lowering your Value at Risk, but still getting the same portfolio performance you would get with all the investment you were putting in the utras.

Options are also prefirrable to futures because with options you have the right to buy or sell the asset at a certain strike price on maturity date, but unlike futures you do not have the legal obligation to do so. Therefore, if something goes wrong with your trade, you will only lose the money you have put into it, and simply walk away. This is a hudge difference from futures, in which you may lose all your margin and be further down in sometimes serious debt.

Consider options trading as a very efficient wat o reduce your VaR and still get you a cool exposure to the market.

Cheers!

vinod- ESLR-> wasn't expecting it to pull back that much at the close, so replaced my options plans with buying back in around 10.85...

craig- it has been a tough grind on the ultrahorts->the worst has been FXP, but i now have my basis down to 77 and change, which was my earlier 'target' for entry, so i'm not complaining...still underwater on DUG/QID, but today's intraday trading on SMN now puts me in the green ;)

http://www.hussman.net/wmc/wmc080407.htm

"More troublesome is the part of the portfolio described as “related hedges.” The question here is that the net value of a so-called “portfolio” might be $30 billion, but the gross or “notional” value of the portfolio can conceivably be a substantial multiple of that. If you own $100 billion in assets, but have $70 billion in offsetting liabilities against that, then sure, you've got a portfolio “worth” $30 billion, but as Long-Term Capital Management discovered, you could end up losing a whole lot more than $30 billion, depending on how well those assets and “hedges” offset."

Is this as bad as it sounds, that not only did the Fed take bad mortgages as collateral, but ppossibly untold notional values in derivatives that supposedly cancel each other out?

just posted an update redgarding Kazakhstan's decision to consider suspending wheat exports.

http://jglobal.blogspot.com

2nd

I am going to wait until next week to enter again
Also will buy call on ESLR, SIGM, and TER when price seems to be good to enter

Also looking for oex put for May expiration, has to pay the price but vix is low so premium will be reasonable. If it hits 640

Lost a lot in SRS, FXP and DUG

craig- this morning watching the futures climb i noticed (for the first time) i was completely at ease; aware of but not anxious about my (short) posture, and immediately/intently focused on buying opportunities...which is when i became acutely conscious of my trading rhythm-> two steps up, one step back...once you find it, it helps to embrace the part where you move one step back...may be unique to me, but i can sense that (personally) i may be unable to make the (subsequent) move up without the (initial) step back...maybe i should take up aikido to hone my trading skills (LOL)...

vinod- sorry to hear that, but i understand the reasons for your exit...nothing wrong with deciding to take a hit...

2nd
When people win at casino they will tell everyone that they won
When they lose they keep quite

I want to be honest and say such if I lost in trading
I am still up a lot from February 2008.
It is not losing that bother me but mistake I made is

We are not going to let those MBA from Harvard or Princeton beat us.
They play with someone else money and if they are so smart they would not be in this
Sub prime mess

vinod,
I'm curious what you see as a possible re-entry trigger for ESLR?

vinod- exactly what i'm trying to say-> you can't dance moving in only one direction...there is a give and take/yin and yang/whatever that gives you the rhythm you need to succeed when trading...anyone who claims to only win-> how can you possibly learn anything from someone like that?

MikeNYC

all solar are down today but few
I am looking for january 2009 in the money option for ESLR

a good (football or any other sport) coach is not going to start by teaching how to win...he's going to teach you how to overcome obstacles/setbacks, how to take a hit/come back from a loss, how to handle yourself/find motivation on bad days, right...once you learn that, you're unafraid to fail, which is what it takes to win...JMO...

ALOHA!!

For those of you who claim deflation will be dominate please look at the latest annual report on "Threat Assessment Of The Director Of National Intelligence" as issued by J McConnell presented to the "Senate Select Committee On Intelligence", dated Feb 5, 2008. When I start seeing "Threat Assesment" reports with only one page and not 47 I will believe in deflation!

Hardly a word is ever spoken regarding the US Foreign Policy and the two War Fronts we are currently fighting with regard to its effect on the US Economy and more specifically, the US Peso and its ever growing supply and credit!

Read this 47 page report and after your are done it becomes obvious that the US government is actually engaged in policing the entire World and sees constant and unrelenting emininent threat from every corner of the globe. In this report it appears that the National Security Director feels as though the USA is surrounded by enemies from all angles and every continent on Earth. It is interesting that there is no mention in this report of an economic and monetary collapse threat due to unlimited US government spending on a failed Foreign Policy that got us into this state of constant fear.

Once again like the FED who created the current credit implosion and USDX collapse we get the FED policing a failed economy they created with new powers. Here we get an Intelligence Department who created fraudulent Foreign Policy now being asked to solve the very problems they created as well. It is amazing to me that failure is so richly rewarded in this country from every sector from Foreign Policy to the FED to the CEO salaries of BSC! All of these extremely high levels of "risk", never before seen in history, are now being placed squarely on the backs of the US Taxpayer. Now we get Foreign Policy failure on our backs as well! Welcome to the ever paranoid socialist state of the USSA!

Link: http://tinyurl.com/5jcrzf

If you take a look at http://www.Tickerforum.org you will find in there a forum called "User Presentations" which is explicitly for ONLY multimedia presentations of various sorts.

I have a few in there at the present time including this latest fun and games with the bond market and what I believe they are trying to pull.

BTW, you do have to sign up to leave comments (free of course); the "Ticker" area on The Forum is where they're left. I had too many problems with comments on the blog due to spammers and robots and was forced to disable that.

Marathon Asset Management starting to buy troubled loans:

http://tinyurl.com/6om57w

first time i've seen an indication of how much they might be worth: "32 cents on the dollar.."

excerpt:

"Marathon has set up a mortgage servicing company in Phoenix, Ariz. with 100 staff to buy and restructure home loans. The firm is calling regional banks, which are looking to sell troubled loans. Last week, Marathon bought a package of such loans for 32 cents on the dollar, Richards explained.
The real estate market probably has another two years to fall before all the inventory of unsold homes is sold. By the end of 2009, house prices may have fallen 15% to 25% from the peak at the end of 2005, he predicted.
The current downturn in the credit cycle will be worse than the previous decline in 2002. WorldCom and Enron collapsed during that period and the dot-com bust was at its peak, but banks were strong and the real estate market was doing well, Richards explained."

They're likely overpaying.

NYMEX to Change Margins for Crude Oil and Petroleum Swap Futures Contracts on NYMEX ClearPort®

http://tinyurl.com/6zx9q5

Sold those SNDK shares assigned to me at Mar expiration for a profit. When you have 11-12% gain in @ 3 weeks in this type of market, makes sense to take it.

vinod Have always learned more from my mistakes than from my successes.

I don't know why they think in 2009 house prices will rise again. The last housing recession that started in 1990 experienced six years of falling prices, and that did not follow a bubble.

VIP now selling Blackberry (RIMM) service
in Russia. MBT to offer in 30 days.

http://tinyurl.com/52987y

With any co-ordinated intervention coming from the G7 central bank meeting in Washington this week, would that imply inflationary measures going forward, or, would more deflationary forces be at work with regard to high (in US$ terms) worldwide oil, food etc. prices. There has got to be some serious brainstorming over this one, to find some sort of balance. I too must agree things will go hard one way or the other... Ta.

Re: Oil Futures

Don't know much about the oil futures game, but all of those margin limits raised on the NYMEX seem to do with Euro-related contracts.

I always take a peek at Oil Intel whenever energy related subjects come up

http://oilintel.com/newshome.cfm?news_id=5661&action=showstory

[Bill Cara note: I just hope that traders don't look at Peak Oil hype every time the futures prices get toppy. You don't need to be played by the market gnomes. If you happen to believe in Peak Oil, and I do btw, then you should pay attention to it more when the price of oil in the futures market is weak. If traders deny this statement, then they are not traders, but merely buyers of people's stories, which is not going to help portfolio performance.]

Greenspanish Lesson?

http://ronsen.blogspot.com/2008/04/how-greenspan-sees-greenspan-how-we-do.html

Good Morning.

Here are your Cara 100 Ratings Changes:

Downgrade:

GRMN - to Hold @ Soleil

Target Price Lowered:

DIS - $41 to $40 @ RBC

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

Have a great day and watch your wallets. :^)

Thank you Bill and Maromatics for your response to my concerns about ETF's. Bill, I like Larry Berman on BNN so please do ask him about the counterparty risk for etf's. I don't always catch him though so if you could give me a heads up when he responds, I would be in your debt.

Maro, I actually do trade options through another account but my question about the ultras may have mislead you as you are not aware I am in Canada. Regardless, your considerable knowledge of this trading environment and your response was a further reinforcement for me that the ETF game is best day-traded or left alone entirely. Which I guess leads me to want to beat a dead horse so here goes... is there any counterparty risk involved with options? I know this seems very "Chicken Little" of me, but the markets are making me nervous and I cannot buy physical gold in an RRSP in Canada, only CEF.b and some great juniors and seniors, ie G, SLW, etc.

thanks again

Chris