Weird things are getting ever weirder as the US financial system cracks and crumbles - and we're not just talking about plans to give the economy-wrecking Federal Reserve even more sweeping powers, even as the gravy flows and flows through its emergency lending spigot. There's this: Wall Street's big guns are now booking gains on the declining value of their own debt!

http://www.atimes.com/atimes/Global_Economy/JD11Dj01.html

Good Morning.

Here are your Cara 100 Ratings Changes:

Upgrade:

INTC - to Buy @ Banc of America Securities

Downgrade:

PTR - to Sell @ Citigroup

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

Enjoy your day.

NYT: Administration soft on corporate crime

Taking the justice out of the Justice Department.

Consequences on the ongoing mortgage lender fraud cases?

http://tinyurl.com/4ak48z

Fransix: Thanks for the link to Border Gold yesterday.
My wife's birthday is approaching so I bought her a
10 oz silver bar. Shipping to Ontario though is steep at 40 bucks a pop. This idea kills two birds with one stone....She gets a nice "Gift" and we get to keep some silver bullion on hand!

jk484,
That's exactly how LEH reported profit last quarter and not a loss.

It seems wrong to make money betting on your company failing.

Rob.

rob- it's as wrong as betting your team loses the game...

I know. It definitely seems like it would give you an incentive to lose.

It just shows how crazy these financial institutions are trying to squeeze profits out of anything no matter what the ramifications.

For example, does it make us feel comfortable owning their equity or cheering for their team if you know they're betting they will go down?

Any other year I would be shocked but I think I'm getting desensitized to how low the players will go.

Rob.

Gold could rally strongly and post fresh highs later this year and into 2009. But in the longer term it is likely to fall quite rapidly to an equilibrium level around $600/oz, according to Philip Klapwijk, Chairman of the precious metals research consultancy GFMS, who launched the Gold Survey 2008 report at an impressive presentation in London today.

http://www.resourceinvestor.com/pebble.asp?relid=41816

rob- it's worse than that, right...bill's comment a couple of days ago about brokerages repurchasing their own shares at the high (allowing family and friends to unload) + positioning themselves to benefit from the subsequent downside move-> playing both ends...

why bear markets go lower and last longer than everyone thinks:

tactics like the current one's employed by various banks via voodoo accounting practices,
shuffling of assests into "tiers", releasing
carefully worded statments about thier "solid" balance sheets and healthy "capitalization".

ive looked them up in the dictionary and have no clue what constitues a "solid" balance sheet. is this why we pay advisors so richly? when i was in highschool id talk about the girls with "solid" bodies, and realy hype house parties were "solid" jams, my favourite record had 15 tracks on it, and 10 of them were "solid" tunes.

and now we're told by men in fine woolen suits that their balance sheets are "solid"? should i chest-thump them after we share a cigarette along the butt-wall before math class?

i looked up "well capitalized" too and it actually made sense from a fiscal point of view. and certainly i never refered to girls or my mother's cooking as "well capitalized". yet within this sound definition, i wondered why banks kept saying it. why was being well capitalized so fantastic? who needs sound capitalization if all is well?

and why wont banks load money to eachother if their balance sheets are "solid" and they are so fantastically capitalized? really its sheer madness that black swan events are even being discussed, if one just happened 6 months ago, what are the odds another could happen in 2008?

i would give up the prospect of double digit returns YOY just to hear a CEO of a major financial institution give this speech in after the credit crisis:

"we believed a new paradigm of wealth was being created in which we earned double digit returns on triple A rated bond-like creatures only MIT trained mathematicians understood.

for years we enjoyed the upside but seemingly none of the risk, we were blue-chip financial institutions, the vangaurd of wealth creation in America, and our stocks were rising over %15-%20 per year while still holding "conservative blue-chip" status.

it was the very definition of a financial WIN-WIN.

surprisingly our clients enjoyed the returns and trusted us to keep risk parameters in check. in a sense we began consuming our own BS when we spoke of safe returns, of "risk-adjusted" parameters, and sound money management.

when the BS hit the fan we fired our "risk" analysts because they failed to do their job, in their place we hired the finest PR and communication consultants our clients money could by who could begin the delicate process of applying lipstick to the pig we put on the market's stage.

for a while they made the pig dance, stocks resumed their upward rise, and our PR people seemed to turn a bad situation around, convincing the masses the worst was over. we lost upwards of %30-50 of our share price and the financial media still said our company was a buy. the lower we went we didnt become bad companies, we became "cheap" stocks, bargains, and firms that got caught in the downdraft of the credit crisis. it was as if the credit-crisis was this external event that was hurting our share price, and we were passive victums as opposed to complicit passengers.

it was 2nd most popular definition of a financial WIN-WIN.

we rehired our old risk-analysts to find out the odds of 2 WIN-WIN's happening to big banks in the same 12 month time-frame. they said the odds were so improbable, their mathematical models required 4 dimensional fractal combinatorics to express the exponential.

we sat back in our high-backed leather chairs sipping the most delicate of ancient Merlots, the saltiest of caviar's while cloaking our theirvery in the softest of cashmere cloth.

the ship may be sinking but the passengers were certainly not rushing for the life rafts. if anything they were content with the first-mate's explanation that the ship was on a "well-charted" path.

perhaps the titanic would have been less dramatic of a movie if the crew spent more time assuring people of the safety of the ship rather than trying to save it, for fear of causing wide-spread panic."

the next bubble: script writting ETF's by former bank employee's.

dr. cosa MD
if banks get to say their balance sheet is soild,
i get to call myself a doctor.

THE CONSERVATIVE NANNY STATE

How the Wealthy Use the Government
to Stay Rich and Get Richer

http://www.conservativenannystate.org/cnswebbook.pdf

It is crazy how far outside the boundaries of right and wrong we let these people operate with impunity.

And how about their current shell game of "you better support us with the People's money and better not let any of us fail or else.

And at the same time loans for you and I are either cut off or given at exorbitantly high rates.

It all makes me so happy to be almost debt free with no need for any more debt ever if I don't want to take it.

The Bahamas is looking better and better. I just need to keep focused so I can make enough money to get there.

Rob.

There is a widespread belief that the US Government has limitless resources. That it can rescue Wall Street, the housing market, the soft patches in the economy like distressed farmers and fishermen, and fight two wars which require consuming vast amounts of fuel as though a barrel of oil was still under $20. That belief is only justified as long as the US taxapayer is not burdened by having to pay for all of it. Thus far she/he hasn't been asked to pay because so many people want to buy US treasuries that they have driven interest rates down into the basement.

That phenomenon could change abruptly as the econonies and domestic conditions of virtually all nations worsen and pressure builds in foreign lands for the repatriation of money to alleviate hardship.

Senate housing bill wins key vote

http://tinyurl.com/5ny8vs

Folks, if the tax carryback provisions are passed into law, it is going to deplete the U.S. treasury like nothing you've seen before. Not to mention it reward the villians primarily responsible for the housing crisis.

From the article:

"This loss carry-back is simply a gift" to home builders and other companies, said Sen. Judd Gregg, a New Hampshire Republican, in Senate floor debate.

Here's another article about the bill:

http://www.builderonline.com/business/on-the-fence.aspx

"While Howard [NAHB lobbyist] points out correctly that the tax breaks apply to any business, not just builders, that may not be a political advantage; this relatively recent addition to the housing rescue bill is already raising eyebrows. 'It's a boon to every company that is losing money now but made huge profits in the preceding four years. And that could include any number of banks, investment banks, mortgage bankers, and hedge funds,' Washington Post Steven Pearlstein wrote in his April 4 column."

re bold bullion
Scotia bank became a fairly big player in the bullion when they bought Mocatta in 1997. While I have not purchased from them, I've done some homework planning it when next correction comes.
1. You can order bullion from the local Scotia branchs. Mine discouraged me given high unspecified delivery/administration costs.
2. If you live reasonable close, as I do, to Toronto, you can pick it up over the counter.
Address 44 King St W near King and Bay. Call the bullion desk (yes live person) at 416-866-4900 for an approx value of your intended purchase. They require a bank draft or certified cheque payable to yourself, and 2 photo ID's. Given price volatiliy, be prepared for increases in quoted purchase price when you arrrive (cash or excess cheque value).

When asked about Au/Ag bullion avilability, they indicated no problem for any weight. Didn't ask about coin availability. Check there website for offerings.

Website is scotiabank.com (sorry couldn't get hyperlink to copy)

FWIW
Mullie

Added back a bit of the FXP this morning @ 81.89 that I shed at the end of yesterday.

SNDK just had a big reversal. Don't see any news either.

Rob.

sundance-> i'm going to join you on FXP here...

glad to see DUG/SMN finally catching bids...

And the oil price is only down one cent. It must be that the oil/gas stocks are getting tired. They've been rallying for at least a year now.

Rob.

jk484,

Thanks for the link to "The Conservative Nanny State". The Introduction provides a clear overview of its central thesis that social equity is not being served by by current biases and misconstructions regarding so-called "free markets".

"""
Political debates in the United States are routinely framed as a battle
between conservatives who favor market outcomes, whatever they may be,
against liberals who prefer government intervention to ensure that families have
decent standards-of-living. This description of the two poles is inaccurate; both
conservatives and liberals want government intervention. The difference
between them is the goal of government intervention, and the fact that
conservatives are smart enough to conceal their dependence on the
government.
Conservatives want to use the government to distribute income upward to
higher paid workers, business owners, and investors. They support the
establishment of rules and structures that have this effect. First and foremost,
conservatives support nanny state policies that have the effect of increasing the
supply of less-skilled workers (thereby lowering their wages), while at the same
time restricting the supply of more highly educated professional employees
(thereby raising their wages).
"""

A Tulip Parody
(apologies to Kaimu and any other “real” producers)

There are now in excess of 1 trillion (some say as much as 45 trillion) of the "new, genetically modified tulips" that have been sold worldwide. These new "tulips" have the implied promise that the holder of the tulip will be able to sell it onto someone else at a profit. These new tulips are also guaranteed to stay fresh longer due to their "patented" genetic engineering.

Unfortunately, the major "tulip" producers decided to create other genetically modified tulips (Opt-A’s, etc.) so that less sophisticated buyers could participate in this new and exciting trend. The holders of these “newer tulips” are finding that they turn out to be Skunk Cabbage and do not have the same redeeming features. This is affecting the credibility of the tulip producers. Even sophisticated holders of the original tulips are now finding it not only difficult to sell-on their tulips but also finding that the "freshness" is turning sour just like the skunk cabbage!

From Wikipedia.org:

“The plant is called Skunk Cabbage because of the malodorous, distinctive "skunky" odor that it emits. This odor will permeate the area where the plant grows, and can be detected even in old, dried specimens. The foul odor attracts its pollinators: scavenging flies and beetles.

[I]t is among the first flowers to appear in spring. The skunk cabbage also produces heat. During the winter the heat it produces melts the snow around it so that it is able to survive.

While some consider the plant to be a weed, its roots are food for bears, who eat it after hibernating as a laxative or cathartic.”

Unfortunately, if we don't get those skunk cabbages and tulips into the compost, the bear is going to be unloading a lot of toxic diarrhea onto our "gardens". Doubly malodorous is the fact that the government will require to raise taxes even higher so that they can give subsidies to the tulip producers in an effort to enable them to re-brand themselves.

Might break-even on my DUG soon.

Doing great COF, LEH puts again today!

Still holding FXP at a loss again now.

I will just sit today out...

On the uranium watch - U.TO chart looking interesting for a reversal soon - UUU.to moving up nicely and CCJ just popped

Added again small bit FXP at 79.88. Adding very slowly.

Know it's not saying anything new but this market seems crazy to me. On the way in to work see WSJ article about inflation is back in a big way. Market's up, energy and gold down (after big energy runup of course). Lucy, I don't get it...'splain it to me. However, if I look at the trend, I don't think the market has really priced in inflation AND people, commonly referred to as consumers, battening down the hatches. Not really acting on that theme other than to stay out of the broad market, though.

What's up with the continuing saga of DCR? Were a lot of people actually caught in that mess?

WSJ.com

BREAKING NEWS:
McCain says oil prices too high to buy for Strategic Petroleum Reserve.

Is anyone tempted to buy DELL yet? Does anyone know the value line 3 year EPS prediction?

Regards

For the ESLR followers, an article here about recent option activity in the April series:

http://tinyurl.com/6gztp2

Bullish. Also, ESLR reports earnings on April 17th, so the obvious guess is that expectations are we get a good report. ESLR is building a construction plant in Massachusetts that, according to the last report, is slightly ahead of schedule to open in Jan. of '09.

Solar stocks also tend to rise with oil prices. Just my own observation, but it makes sense that money would go looking for energy alternatives as fears of high oil increase with the price per barrel.

I may add to my position in ESLR tomorrow.

taking another shot at QID...45.49...

bob -

With a tight stop, you may start building a position if you like their turnaround story/outlook. But a break below $18.50 only leaves the 2001-02 double bottom support in high $16/low $17 before peering into pretty deep abyss.

JML

Re: Gold

For those who can follow the futures intraday,
June gold came within 8 cents of the Fibonacci
23.6% retracement level at $943.68 early this
morning in European trading and is now testing
the short-term uptrend line from April 1 at
around $926.


FWIW.


Good luck and good trading!

U.to just broke out of its wedge

BTW, if anyone's interested in my take on all this foolishness here's the daily...

http://market-ticker.denninger.net/2008/04/retail-and-rates.html

Short version - retail rots with nearly all the gains in medical and gasoline - if you're not there, you are seeing huge declines. Gee, this is bullish?

The bottom line remains the fraudulent credit default swaps, none of which are any good, and the pervasive and intentional lack of reserves against what is toilet paper instead of "money good" assets.

ALOHA !!

That McCain statement is scary. Not because he is taking a "trader's" position with our strategic oil reserves but because he sees himself as already in the position to dictate strategy. Is it arrogance or just plain stupidity? Don't think for a minute I am just ragging on the Reps ... my disdain for the Dems is equal!

I tend to write-off these politicians as "idiots" and "stupid", but when I make those comments I am mainly talking about their actions or policy. If they were idiots they would not have gotten as far as they have, except for Bush Baby who has his Dad and the family wealth and influence propping him up! Most politicians in DC do not come from a DYNASTY like the Kennedy's or the Bush's. My point is that policy perceived as dumb to us may not be in context with the long term plans of those who hold the real power in the World. Perhaps the "real plan" is to destroy the US Peso and destroy the US economy and create global social disorder as a means to an end. It seems "control" is always the end for the these people. Problem is since none here seem to be "politico power insiders" we are just left with logistical guesses that can be manipulated. The first step to underestimate your opponent is to believe they are inferior and incapable. Being on a pedestal only means there is one way out for you!

Just looked at the intraday $Dollar. Can you say "Rocket"? Hmmm. G7 coming up. Maybe it's just gotta look good for a few days? Or, maybe there is all of a sudden good value in the "BenBuck" - nah.
http://tinyurl.com/5jucge

Added back some more FXP at appx 79. Reloaded a little more than half of what I shed at EOD yesterday so far.

Greenspan on the money?

http://ronsen.blogspot.com/2008/04/greenspanish-fly-fed-acumen-crisis.html

What I wonder is who has the money to buy all these semi-conductors? There must be some huge demand now since they've been upgraded.

I say, bring it on!! I have plenty of time and patience to wait until the irrational exuberance is over and then I'll pounce.

Learning that I don't have to trade every day or even have any open positions for a week or more is the most important lesson I've learned this year.

I'll give Bill the credit for constantly repeating "let the prices come to you"

Thanks, Rob.

Re: Gold prices/fibonnaci retracement

Ackerman says a close above $948.30.

http://rickackerman.com/commentary/2008/Gold_Still_NotbrOut_of_Woods.html

Hoye would say "a close above the previous six day's close." But has already placed the low on April 17, and the seasonal high at the end of May.(his article was previously quoted twice.)

Friday's close would be very essential.

GFMS' comments very essential to the discussion which was already quoted. They seem to have a pi-cycle sensitivity and have comments related to CPI-deflated Dow compared to the CPI-deflated Gold price. That analogy has fallen apart, because of the lengthy delay in the resumption of the bull after the correction in May 2006.

The £/¥ chart shows that perhaps the carry trade in the British Pound vs. Yen has peaked and is now unwinding, thus the delay:

http://tinyurl.com/6ecclv

FXP- adding another 25% here for a basis around 80...sundance, you've done well calling the highs/lows, what's your take?

another shot at ESLR->10.87...

FXP-> out at 79.63...just not seeing much in the way of direction right now...

2nd: What's your take on DUG @ $34?

Good to see I have company in ESLR, 2nd. I bought some @10.96 earlier. I wasn't expecting a fill today, but I put in an order before leaving for work.

I expect a very good earnings report next week.

And the option activity is also a good sign, as I noted earlier.

Anyone get the feeling they're trying to carry the market on the back of the 4 horseman again.

Rob.

Fannie Mae is getting killed today. It is a firecracker due to the huge short position.

2nd - It looks to me like FXP retraced a good deal today but still has held the general uptrend that began on Monday.

I like to keep tabs on the ^HSCE chart to get an idea of how the China markets may fare in the following session. The ^HSCE rocketed up in the afternoon session right to its 200 SMA on the 5-day chart. I think it will have to encounter some resistance there.

As more of a swing trader I am comfortable holding into tomorrow as I am currently averaging down my position.

In the short-term (weeks) a trip back to the mid 70s is not out of the question. There were many times I was kicking myself when this got up to $100+ for not making the obvious move to hold on to some FXP all the way. I am absolutely sure it will be there again - and we are much closer to extreme lows than highs.

MELI hot again with volume coming in.

ESLR at 10.84
FXP @ 79.83

Junior Potash play RAY.V up 26% today, mentioned earlier

sundance- thanks...back into FXP at the close...

DUG- take a look at the one year chart-> if you have a short to medium term horizon, worth a shot...fwiw, my own basis is currently about 35.85...

Two things.

First, wow. Take a look at any of the major indexes. over the past 7 trading days there has been almost no change. It's an almost perfect lateral movement.

Second, I've really started to notice a trailing off of content on the blog. I just remember seeing many people posting in depth information, but there seems to be a decline(not a lack of by any means) in the educational 'meat' recently. It could be just in my perception.

Are the main contributors working on projects other than the blog? IE the junior minors research? etc? or are people getting stand-off'ish in relation to the markets? Since nothing seems to do what it 'should' any more.

[Bill Cara note: I believe that the People can see that these markets are being controlled, so why bother discussing investing/trading insights when it doesn't much matter. I have opined on many occasions that the gnomes who are pulling the strings in the market today had better be careful that the People don't pull all their capital out. What has happened is that a split has developed between the bought-and-paid-for cheerleaders and the audience. The audience is wondering why prices are staying so high when there is so little to cheer about, and they are skeptical about the obvious cheerleading. The People are not negative -- they are simply waiting for a fundamental reason to expose capital to risk. Most trading today is being done by algorithmic programs using Other People's Money. The rest of us are watching, and waiting and keeping our thoughts to ourselves. I think you will find that as and when (i) volumes pick up and (ii) the trading action looks unrestrained, that the responses in the discourse here will build.]

2nd - I also have some DUG at the moment (also underwater). I don't have a particularly good take on the very short-term as the current goings on in the oil markets are straying from near-term fundamentals. The oil producers share prices have been benefitting nicely from all the gov't money being thrown in the fire lately - not all of which I foresaw (i.e. BSC bailout).

I've been looking for a good opportunity to hedge my position again by selling some DUG calls but the good opportunities have not been plentiful recently.

Thank goodness the Senate wants to use my tax dollars to bail out the homebuilders (sarcasm).

How many different industries are we going to try to bail out here before we get realistic with the probable outcomes?

I truly feel for those who are facing adjustable mortgages that are difficult to pay and people in the struggling transportation and homebuilding industries (to name a couple). But will all of these taxpayer subsidies really cushion the blow?

The more scenarios I run through my mind, it seems like bailing out BSC just created more fog in the distance instead of a washout that was really needed. But I know for sure who will not benefit - the MAJORITY of Americans (and global citizens) who have absolutely no money invested in global markets and who do not own real estate.

It sickens me that the ones who get the really raw end of the deal are also those most helpless to protect themselves. I truly fear how difficult it may become for low income families to keep food on the table.

These two statements are way too optimistic in my view. The FED simply doesn't have enough money to make either statement come true.

This has to be part of the Pump and Dump Bill talks about.

http://tinyurl.com/5bb6m9

"Earnings at companies in the index are expected to fall 11.3 percent in the first quarter and 3.5 percent in the second before rebounding to increase 13.9 percent and 54.5 percent in the year's final two quarters of 2008, according to analyst estimates compiled by Bloomberg."

"Financial stocks pared declines after Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the crisis that's forced almost $250 billion in credit losses and writedowns at the world's biggest finance companies may be approaching an end.

``We're closer to the end than the beginning,'' Blankfein said today at the company's annual meeting in New York. ``We're maybe at the end of the third quarter, or the beginning of the fourth."

I think we've just finished the first quarter. What do you all think?

Rob.

The index referred to is the S&P 500

Rob.

Re: DUG
I would be cautious shorting energy. Here is Mauldin's latest letter setting out Stratfor's views:

A Mystery in the Middle East
By George Friedman


The Arab-Israeli region of the Middle East is filled with rumors of war. That is about as unusual as the rising of the sun, so normally it would not be worth mentioning. But like the proverbial broken clock that is right twice a day, such rumors occasionally will be true. In this case, we don't know that they are true, and certainly it's not the rumors that are driving us. But other things — minor and readily explicable individually — have drawn our attention to the possibility that something is happening.

The first thing that drew our attention was a minor, routine matter. Back in February, the United States started purchasing oil for its Strategic Petroleum Reserve (SPR). The SPR is a reserve of crude oil stored in underground salt domes. Back in February, it stood at 96.2 percent of capacity, which is pretty full as far as we are concerned. But the U.S. Department of Energy decided to increase its capacity. This move came in spite of record-high oil prices and the fact that the purchase would not help matters. It also came despite potential political fallout, since during times like these there is generally pressure to release reserves. Part of the step could have been the bureaucracy cranking away, and part of it could have been the feeling that the step didn't make much difference. But part of it could have been based on real fears of a disruption in oil supplies. By itself, the move meant nothing. But it did cause us to become thoughtful.

Also in February, someone assassinated Imad Mughniyah, a leader of Hezbollah, in a car bomb explosion in Syria. It was assumed the Israelis had killed him, although there were some suspicions the Syrians might have had him killed for their own arcane reasons. In any case, Hezbollah publicly claimed the Israelis killed Mughniyah, and therefore it was expected the militant Shiite group would take revenge. In the past, Hezbollah responded not by attacking Israel but by attacking Jewish targets elsewhere, as in the Buenos Aires attacks of 1992 and 1994.

In March, the United States decided to dispatch the USS Cole, then under Sixth Fleet command, to Lebanese coastal waters. Washington later replaced it with two escorts from the Nassau (LHA-4) Expeditionary Strike Group (ESG), reportedly maintaining a minor naval presence in the area. (Most of the ESG, on a regularly scheduled deployment, is no more than a few days sail from the coast, as it remains in the Mediterranean Sea.) The reason given for the American naval presence was to serve as a warning to the Syrians not to involve themselves in Lebanese affairs. The exact mission of the naval presence off the Levantine coast — and the exact deterrent function it served — was not clear, but there they were. The Sixth Fleet has gone out of its way to park and maintain U.S. warships off the Lebanese coast.

Hezbollah leaders being killed by the Israelis and the presence of American ships off the shores of Mediterranean countries are not news in and of themselves. These things happen. The killing of Mughniyah is notable only to point out that as much as Israel might have wanted him dead, the Israelis knew this fight would escalate. But anyone would have known this. So all we know is that whoever killed Mughniyah wanted to trigger a conflict. The U.S. naval presence off the Levantine coast is notable in that Washington, rather busy with matters elsewhere, found the bandwidth to get involved here as well.

With the situation becoming tense, the Israelis announced in March that they would carry out an exercise in April called Turning Point 2. Once again, an Israeli military exercise is hardly interesting news. But the Syrians apparently got quite interested. After the announcement, the Syrians deployed three divisions — two armored, one mechanized — to the Lebanese-Syrian border in the Bekaa Valley, the western part of which is Hezbollah's stronghold. The Syrians didn't appear to be aggressive. Rather, they deployed these forces in a defensive posture, in a way walling off their part of the valley.

The Syrians are well aware that in the event of a conventional war with Israel, they would experience a short but exciting life, as they say. They thus are hardly going to attack Israel. The deployment therefore seemed intended to keep the Israelis on the Lebanese side of the border — on the apparent assumption the Israelis were going into the Bekaa Valley. Despite Israeli and Syrian denials of the Syrian troop buildup along the border, Stratfor sources maintain that the buildup in fact happened. Normally, Israel would be jumping at the chance to trumpet Syrian aggression in response to these troop movements, but, instead, the Israelis downplayed the buildup.

When the Israelis kicked off Turning Point 2, which we regard as a pretty interesting name, it turned out to be the largest exercise in Israeli history. It involved the entire country, and was designed to test civil defenses and the ability of the national command authority to continue to function in the event of an attack with unconventional weapons — chemical and nuclear, we would assume. This was a costly exercise. It also involved calling up reserves, some of them for the exercise, and, by some reports, others for deployment to the north against Syria. Israel does not call up reserves casually. Reserve call-ups are expensive and disrupt the civilian economy. These appear small, but in the environment of Turning Point 2, it would not be difficult to mobilize larger forces without being noticed.

The Syrians already were deeply concerned by the Israeli exercise. Eventually, the Lebanese government got worried, too, and started to evacuate some civilians from the South. Hezbollah, which still hadn't retaliated for the Mughniyah assassination, also claimed the Israelis were about to attack it, and reportedly went on alert and mobilized its forces. The Americans, who normally issue warnings and cautions to everyone, said nothing to try to calm the situation. They just sat offshore on their ships.

It is noteworthy that Israeli Defense Minister Ehud Barak canceled a scheduled visit to Germany this week. The cancellation came immediately after the reports of the Syrian military redeployment were released. Obviously, Barak needed to be in Israel for Turning Point 2, but then he had known about the exercise for at least a month. Why cancel at the last minute? While we are discussing diplomacy, we note that U.S. Vice President Dick Cheney visited Oman — a country with close relations with Iran — and then was followed by U.S. Secretary of Defense Robert Gates. By itself not interesting, but why the high-level interest in Oman at this point?

Now let's swing back to September 2007, when the Israelis bombed something in Syria near the Turkish border. As we discussed at the time, for some reason the Israelis refused to say what they had attacked. It made no sense for them not to trumpet what they carefully leaked — namely, that they had attacked a nuclear facility. Proving that Syria had a secret nuclear program would have been a public relations coup for Israel. Nevertheless, no public charges were leveled. And the Syrians remained awfully calm about the bombing.

Rumors now are swirling that the Israelis are about to reveal publicly that they in fact bombed a nuclear reactor provided to Syria by North Korea. But this news isn't all that big. Also rumored is that the Israelis will claim Iranian complicity in building the reactor. And one Israeli TV station reported April 8 that Israel really had discovered Saddam Hussein's weapons of mass destruction, which it said had been smuggled to Syria.

Now why the Bush administration wouldn't have trumpeted news of the Syrian reactor worldwide in September 2007 is beyond us, but there obviously were some reasons — assuming the TV report is true, which we have no way of establishing. In fact, we have no idea why the Israelis are choosing this moment to rehash the bombing of this site. But whatever their reason, it certainly raises a critical question. If the Syrians are developing a nuclear capability, what are the Israelis planning to do about it?

No one of these things, by itself, is of very great interest. And taken together they do not provide the means for a clear forecast. Nevertheless, a series of rather ordinary events, taken together, can constitute something significant. Tensions in the Middle East are moving well beyond the normal point, and given everything that is happening, events are moving to a point where someone is likely to take military action. Whether Hezbollah will carry out a retaliatory strike or Israel a pre-emptive strike in Lebanon, or whether the Israelis' real target is Iran, tensions systematically have been ratcheted up to the point where we, in our simple way, are beginning to wonder whether something has to give.

All together, these events are fairly extraordinary. Ignoring all rhetoric — and the Israelis have gone out of their way to say that they are not looking for a fight — it would seem that each side, but particularly the Americans and Israelis, have gone out of their way to signal that they are expecting conflict. The Syrians have also signaled that they expect conflict, and Hezbollah always claims there is about to be conflict.

What is missing is this: who will fight whom, and why, and why now. The simple explanation is that Israel wants a second round with Hezbollah. But while that might be true, it doesn't explain everything else that has happened. Most important, it doesn't explain the simultaneous revelations about the bombing of Syria. It also doesn't explain the U.S. naval deployment. Is the United States about to get involved in a war with Hezbollah, a war that the Israelis should handle themselves? Are the Israelis going to topple Syrian President Bashar al Assad — and then wind up with a Sunni government, or worse, an Israeli occupation of Syria? None of that makes a lot of sense.

In truth, all of this may dissolve into nothing much. In intelligence analysis, however, sometimes a set of not-fully-coherent facts must be reported, and that is what we are doing now. There is no clear pattern; there is no obvious direction this is taking. Nevertheless, when we string together events from February until now, we see a persistently escalating pattern of behavior. In fact, what we can say most clearly is that there is escalation, without being able to say what is the clear direction of the escalation or the purpose.

We would like to wrap this up with a crystal clear explanation and forecast. But we can't. The motives of the various actors are opaque; and taken separately, the individual events all have quite innocent explanations. We are not prepared to say war is imminent, nor even what sort of war there would be. We are simply prepared to say that the course of events since February — and really since the September 2007 attack on Syria — have been startling, and they appear to be reaching some sort of hard-to-understand crescendo.

The bombing of Syria symbolizes our confusion. Why would Syria want a nuclear reactor and why put it on the border of Turkey, a country the Syrians aren't particularly friendly with? If the Syrians had a nuclear reactor, why would the Israelis be coy about it? Why would the Americans? Having said nothing for months apart from careful leaks, why are the Israelis going to speak publicly now? And if what they are going to say is simply that the North Koreans provided the equipment, what's the big deal? That was leaked months ago.

The events of September 2007 make no sense and have never made any sense. The events we have seen since February make no sense either. That is noteworthy, and we bring it to your attention. We are not saying that the events are meaningless. We are saying that we do not know their meaning. But we can't help but regard them as ominous.

[Bill Cara note: I read this myself, and believe that these events may be the key reason that commodity prices are lifting even though the $USD has firmed up. Would the People be surprised if the otherwise lame-duck US Administration might start a new conflict in their remaining months in power? I don't think so. Scary thought.]

Kaimu: you wrote: 'I tend to write-off these politicians as "idiots" and "stupid", but when I make those comments I am mainly talking about their actions or policy. If they were idiots they would not have gotten as far as they have...'

Very cogently stated. Now I have a way to reconcile my desire to say "stupid" even as I discern the keen Machiavellian intellect operating below the surface.

I know a guy who went to school with Jeb Bush at Andover. He described the Bush family as very secretive and very intelligent.

kaimu/purplejacket- well put...

i've come across many people in my life others have dismissed as 'stupid' or otherwise 'impaired,' only to see them turn the tables (sometimes in a big way) at a later time...those who carelessly judge the intellect, appearance, or ability of others reveal quite a bit about themselves, and nothing about those they judge...

disparage others at your own peril...

ALOHA !!

Quentusrex ... I have noticed that as well on other blogs I frequent. I believe and have said in the past at some point the maarkets will be so manipulated that the only traders will be HB&B trading with themselves! In a sense they already have that set up with derivatives and the dark pool platforms! HA!! Who here at this blog is busy buying a CDS or the new one CCDS? I for one have no "dark pools" ... Well you probably own derivatives if you own an ETF, but I am speaking of a "conscious" decision to own derivatives, like a "conscious" decision to own GoldCorp or options on RIMM!

TAXING HB&B
It will be interesting to see what happens to the whole tax structure of investing once the Dems get a stranglehold on power! Under the Bush regime just how did the IRS tax laws deal with derivatives when the banks were raking in huge profits? Didn't Goldman Sachs make a fortune shorting all the CDO and ABCPs? What sort of tax loopholes must be in the offing to offset current losses against past gains? Can you be taxed on an instrument that never gets marked-to-market? How can you technically ever have a tax liability if you never trade? Is there tax law on notional value? Any CPAs out there know about that aspect of the derivatives meltdown?

QT: I posted a message for you on Skype in ref to your question.

Lessmore/MtnGtx: Thanks for the heads up and confirmation..

Here is a link that some of us may find useful about the wisdom and timing of buying DUG and SMN, its in the charts...

http://www.etfinvestmentoutlook.com/commentary.php?id=10453

DD blew out earnings..and GS upgraded SLB and HAL.
Here is more food for thought...courtesy of
wavespeak.com ..via Tim Knight, entreprenerur,founder of prohpet.net and slopeofhope.com ( bear blog ):

http://slopeofhope.com/2008/04/for_petes_sake.htm#disqus_thread

A disturbing item from wavespeak.com.........

The current upside pattern off March’s low has maintained its constructive nature, and upside potential remains very large. Our recent publications have been littered with charts that show a rare culmination of technical readings that have preceded major rallies in every single instance that they have occurred, at least as far back as our data goes. Such readings include the following:

· New all-time lows on the Bullish Percent Indexes, with readings anywhere near this low leading to a rally of at least 33% on the NDX in every single instance in the past.

· A test of all-time highs on the Put / Call Ratio, not only indicative of a larger rally as has occurred after such readings in the past, but also a reason to question the possibility that a major high occurred in October.

· The 4th lower reading on daily MACD, dating back to at least 1990 – previous low readings have given way to rallies of at least 25% on the SPX.

· The 4th lowest reading on weekly MACD, dating back to at least 1980 – previous low readings have given way to advances that have spanned at least 22% on the SPX. This period spans two major bear market declines.

· A positive divergence on Weekly Stochastics, the first positive divergence that has occurred on this long-term indicator since the Bear Market low was recorded in October 2002.

These readings don’t just have a “good” track record when forecasting big rallies in the past. As far back as our data goes, they have not once led to anything other than a big rally of at least 22%. Such a move from here would bring us right back to long-term highs

As always....trade well..be careful of buy sell calls from people you hardly know..

or words of wisdom such as not go long in downtrends...folow such advice at your own peril...market is what it is. with a down trendline break, for now, and still in a trading range.

Reread Bills post about staying out if we dont know what to do...worse thing is to guess, go by gut, get in early, guess wrong, lose money, and settle for a good lunch.

Ouch..@#$@#@ happens, then we bounce back..hopefully not to repeat ego based trading....

Received this in an email today. I have NOT verified it, so AFAIK its heresay/gossip.

'A moment I've been dreading. George brought his n'er-do-well son around this morning and asked me to find the kid a job. Not the political one who lives in Florida; the one who hangs around here all the time looking shiftless. This so-called kid is already almost 40 and has never had a real job. Maybe I'll call Kinsley over at The New Republic and see if they'll hire him as a contributing editor or something. That looks like easy work.'
From the REAGAN DIARIES------entry dated May 17, 1986

Judging others is always difficult. I generally tend too much the other way, according merit to people who turn out to less able than I thought. This also has a downside, especially if you need to rely on them in some way. Live and learn (I hope!)

[Bill Cara note: I received the same e-mail several days ago, followed by this one:

"Scruple obliges me to advise that that Reagan quote about George W. Bush in his diaries is apparently a hoax. I’ve been scolded about my send-out of this by a good friend who staunchly defends the virtues of our Republican president. To see the genesis of this hoax please go to: http://www.snopes.com/politics/satire/kinsley.asp

...Apologies to all."

If we aspire to be good traders, let me remind the Cara Community of the need for independence and objectivity. As somebody reminded me today, we are truth seekers here.]

cyderman...good post, especially the second paragraph. Pays to be a cynic and a pessimist as a trader , yet be flexible...hard one to condition but worth the effort..it pays well to be flexible with the market though.

re:people..until we know how they perform under stress and how they make decisions..a really tough call...especially for whatever reason we choose to depend on them.

I have yet to see a C player turn into an A player in business. In life, with friends...I hope we all turn out to be A players...but it takes work..:)

The first paragraph, ( I have heard other stories along the same vein ), well I made a mistake ...never again. I am sorry !! :)

If we really do have hyperinflation by central banks, then nominal values of everything would get a lift and cushion the fall of things like the stock market and real estate, while assets with no real increase still increase in nominal prices (commodities?) and assets with a real increase would skyrocket (gold). Hyperinflation would mean that the stock market and real estate would not stay very low for very long. The Weimar stock market zoomed up, but far less than other prices. It really does seem that those of us who missed the train on gold have no alternative except hoping for one last washout.

cyderman: I could believe it myself, but Snopes calls shenanigans:

http://www.snopes.com/politics/satire/kinsley.asp

oops, sorry Bill, I didn't see that you caught that ahead of me.

Wizards:

Bill, I must say that I’m enjoying your book and your writing style. It’s always fun to try to get into to someone’s head as to how they think about the markets.

P.S. The first thing I did after perusing the table of content’s was to turn to page 253. Patience, patience patience young/old Skywalker.

Again, thanks. T3D

Bil,
Sorry - I should have checked Snopes first. I tend not to believe most of the junk arriving in my inbox, but I guess sometimes its what fits my biases.

Bill,

Please consider this for your blog:

http://www.disqus.com/tour/

I think Disqus would be a great improvement to the blog here. It's so much easier to follow the comments section as they are threaded. You can reply to a specific comment to start a "side conversation" such as day trading FXP, or start a new thread topic completely.

Plus, discussions on the blog become more interactive and social and are characterized by avatar; icons that express one's personality.

Readers can rate comments to help make sure only good comments stay in the conversation. Rated comments contribute to a commenter's clout, or reputation.

Also, looking up historical postings by poster would be very easy. Sometimes, I'd like to look up all of kaimu's postings and I find it difficult to do so. With Disqus it would be easy, just hover over the poster's avatar and click on their clout points and you get a listing of all their postings.

Here are a few sites that use Disqus to get better idea:

www.slopeofhope.com
www.optionaddict.com

sorry, wrong link above...should be www.optionaddict.net

``We're closer to the end than the beginning,'' Its only hitting the ground that hurts says Wiley Coyote peace from North Puget Sound

Re: Weblog

onlineaces, this is a weblog. Obviously the comments following the daily and weekly postings overwhelm the initial post, but that is the format. A forum would be far less successful, as it is the previous step of evolution.

Re: Syria

The intrusion over Syrian airspace to bomb a military instillation by Israeli jets was not a nuclear reactor. It was a russian-made anti-aircraft unit of the same make that Iran makes use of.

Good Morning.....it's time to send a dog for our Bell Cow, GE.....I see she's made it outside the fence and is pulling the herd through the fence with her.....

Here we were waiting for a bank or financial to go kaput and lead us down....and it ends up being Bill's good ol' bell cow.

Good Morning.

Here are your Cara 100 Ratings Changes:

Downgrades:

GRMN - to Perform @ Oppenheimer
TOT - to Neutral @ JP Morgan

New Coverage:

SNDK - Neutral @ Broadpoint Capital

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

Have a great day and a better weekend.

Wow - Hang Seng up 2% last night and FXP still trading higher in U.S. pre-market. I can only guess it has to do with the fact that FXI is full of Chinese banks and insurers that are down on the GE news.

In other news my favorite airline FRNT filed for BK this morning but will continue flying and operations. They say one of their credit processors demanded they be able to retain more cash. I have held one of their Frontier credit cards - which used to be held by a private banking operation called Juniper - but a couple years back was bought by Barclays. I am just hoping I will be able to use my frequent flyer miles.

The 4th airline fails in a month and GE misses profit estimates.

Goldilocks all the way right??

The question I want answered is who are the companies and individuals that will be buying more tech equipment.

It seems to me that most company earnings are going down and will stay down for some time.

Rob.

Another question I have is why does anyone give analysts at Goldman, Lehman, Merrill Lynch, Citigroup, or MS, or JPM any credence anymore???

They've lied over and over about how bad the credit crisis would get. How can we trust them to report accurately about specific companies when we know they're telling us one thing and betting the opposite way??

Rob.

Have you read the daily report which includes IBM/HPQ Finger?

The answer? No one is buying tech equipment and it looks like GE confirms it.

Remember, we're all supposed to believe that the international economy is disconnected from the U.S......aside from Boeing is there a bigger international sales reliant company than GE?

Every once in a while Bloomberg issues a good joke on the ticker.....

"GE miss raises credibility issues....Goldman."

Isn't that the kettle calling the pot black?

You're right on Craig.

So, we're right to understand that the upgrade of Semiconductors yesterday was pump and dump.

I thought it was as the great news about Intel was that they'll buy back more stock and that's how they'll increase earnings.

I wasn't paying enough attention between 1999 and 2001 but I'm assuming these analysts were upgrading everything for the pump and dump back then as well.

Luckily, we're not fooled. Now we just have to hope they don't change the rules on us again like they did back in 03. Too many regular people were making money day-trading back then so they passed the patterned day-trader rules, limiting our trading ability unless we had over 25K at all times in the account.

I can see the next rule being something like: "traders have to follow the analysts calls or be barred from the market for 90 days."

Rob.

GE now downgraded to Neutral @ Credit Suisse.

I'm sure that all Caraistas join me in thanking them for the advance warning. :^)

Re: GE

A linear scale chart since 1981 of GE:

Yahoo.com

http://tinyurl.com/49xfem

Analyst on Bloomberg....
'We're expecting the market to trend slighty up to sideways OR a large down move....'

Just like astrology?

Bought a little GE @ about a 12% discount this AM. (32.66 basis) Wish it had made the 52 wk low a dollar lower.
It's one of three greens on my screen out of 12 total. Go figure....

Look at them bid up the financials. This is starting to get too easy. My bet is that they try and stabilize or even push up the financials until expiration, since so many April puts sold on all of them. So, when they peak out around Tuesday of next week, just before CPI is released, I'll pounce.

My thought is they'll get hammered the week of the 21st again. And if enough puts get sold they'll run them up into expiration again.

What do you think about that scenario?

Where is everyone anyway on vacation?? or on Skype??

Rob.