Funny numbers are no joke

There's something funny happening to the money that the US Federal Reserve actually has under its direct control. It is not just that a bigger and bigger chunk of this is going overseas. One set of figures has the country's monetary base rising steadily over the years, which at least is positive. Other data show it actually falling. That's a reason to press the panic button.

http://www.atimes.com/atimes/Global_Economy/JE03Dj01.html

Take note of the section:"The Tale Of Two Charts"

http://jessescrossroadscafe.blogspot.com/

i don't recall the number at which bill signaled the all clear wrt POG.

[Bill Cara note: I didn't give any "all clear". What I stated early this morning was "(The Fed emergency action this morning) should give a bump-for-the-day to gold though, despite the head-fake a couple minutes ago. Fed pumping usually does that. After the lift, will be more drop. I believe the short-term $USD trend is going higher for a bit longer, maybe even a few months.]

Positive payroll news... -20K instead of -78K. my reasoning sprouted wings and flew out the window!

[Bill Cara note: What is so positive about the -20,000 number? Replacing high-priced construction and factory value-creating jobs with part-time and low-priced service sector jobs is not a step forward.

The bump today in equities is coming from Frd intervention by adding mega-billions in liquidity to banks to help them handle the ARMs roll-overs in an effort to slow the crisis-level increases in foreclosures.

How anybody can think there is anything positive happening in the economy, and not understand that this is about financial engineering to be paid by your children and theirs, is simply mind-boggling.

Should give a bump-for-the-day to gold though, despite the head-fake a couple minutes ago. Fed pumping usually does that.]

Good morning.

One small change to the Cara 100 Ratings:

XOM - Target Price Raised from $92 to $101 @ Lehman Bros.

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

Have a great weekend, everyone.

QID- added at 39.09...

SKF at 90.70...

craig- yield on the 10-year up almost 3% ;)

remember- this is pre-mkt...a lot of panic covering...i think it reverses...

if i had any longs left, i would be selling without second thoughts...

I'm watching...LOL! Not yet getting into the ultras though...

I think we have a bit to go....hard to bet against the charts, employment Disneyland and the manipulative Fed.

Do you get the idea the Fed was expecting lousy employment? Apparently didn't get the report from Mortimer Duke.

craig- fair enough...i brought up doug kass last night, and mentioned i like his calls but took his "all-in" wednesday on the short side on with a grain of salt...but he will eventually be right...

zap the second "on" in the sentence above...

just don't forget to get in...as uncomfortable as it may feel to go short right now, i can assure you it was even more uncomfortable to go long 3 weeks ago...what did Vad say? you can judge profit potential by the amount of discomfort you have in the trade...

The Fed is killing the bears

"Fed announces new moves Friday with European banks to battle ongoing credit crisis"

-The Fed said it was boosting the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April.

-In March, the Fed used powers it obtained during the Great Depression to begin making loans to investment banks. Previously, the Fed only made direct lends to commercial banks.

http://tinyurl.com/62qpsp

2nd

Hope you're right. Right about now I need a good plunge downward.

Regarding the employment report, here's cloud behind the silver lining:

"Service industries, which include banks, insurance companies, restaurants and retailers, added 90,000 workers last month, the most this year, after an increase of 7,000 in March, today's report showed. The advance was led by business and professional services, along with education and health jobs."

http://www.bloomberg.com/apps/news?pid=20601087&sid=aatZA4Jbx9rA&refer=home

always hard to visualize the destination from the starting point...it was murky looking for 13000 in april, and just as murky trying to see 11800 now...if the 'market is us,' need to remember our job is to game the 90% following the trend and try to play against them...(actually, Vad has it right- our job as a trader is to make money, not to be right)...

At the serious risk of dislocating my shoulder by all the patting myself on the back... my NQ 2000 target hit.

As headlines turn more and more bullish, smackdown nears. I have no timing for it though at this point, gotta wait for general sentiment to turn all pinky-rosy.

to put it another way, do the traders buying the Dow this morning at 13120 have it right-> wouldn't you rather be the guy who bought the Dow when they offered it to you at 12200, and be selling it back to them this morning at 13120? ergo, i'm not going to buy it at 13120...i'm going to borrow a double-load and sell it...

Ah- I see the head trader has arrived...what's your take, Vad?

Why not do this:
take position in SKF and hedge it on and off with UYG?

g52- i see major advantages to switching from RRPIX to TBT: a) 2x leverage, and b) it trades intraday- how many times have you watched TLT make a major move pre-market, but been unable to capitalize on it due to the EOD trading with RRPIX?

QT- i see FXP has hit the fifties...might consider selling puts against your position right here...

Alrighty then.... sell Disneyland, buy fear.

CAF out
ROM out
SMH out
QID in @ 38.84
SKF 90.35

2nd
I saw that. Thanks for the advuce but I never did ventured into the world of options.

Allen: How are you holding up?

2nd
I will wait untill 11.00 to buy any short
last many days it is 11.00 a.m that move happens

craig- nicely done...btw, no change in my plans...will be taking a 'trading holiday' after market open today to spend time with the family...plan to be back with next friday's open...will probably cash out of everything with the exception of longer-term positions in ESLR/DXKSX-> may be changing over to TBT by Monday/maybe even QID and SKF...(think Rob had the right idea earlier this year- can't be with the family and watching prices at the same time LOL)...

vinod- i won't be around at 11am...good luck whatever you decide to do...

Two words...vibrating blackberry.....LOL!

Enjoy your May Day holidays!

2nd... my take at this moment is, get out of longs, no short yet. To me, this move is euphoric enough to liquidate long position and not euphoric enough to establish short. If I miss the beginning of selloff, so be it - I prefer to see clear formation shaping up rather than pick tops (or bottoms for that matter).

Vadym Graifer

i HAVE SAME FEELING
NO SHORT YET

craig- LOL, let's see what happens when i relay that idea to the wife and kids...

Vad- thanks...i guess that helps me decide how much to park in cash...

vinod- well that does it then ;)

wfmi ~ getting close to $ 36.00

Added to FSLR short @ 271.3

I predict they will want one too.....(don't do it) LOL!

SKF- out at 91.28, QID- out at 39.50...may check in a few times...otherwise, see you guys next friday...good luck!

What a hoot, employment rate dips not because more people are out of work (they are) but because they are leaving the workforce.

And the MSM claims this is a good thing!

...sigh

Sentimentrader:
If we look at any time the S&P 500 gapped up +0.75% or more on the morning of a payroll report, then we see that it closed higher than the open 45% of the time by an average of +0.2% (each of the last five were losers). Like most extreme reactions to economic releases, this one tended to back off after the initial excitement. Holding for three days would have generated losses 64% of the time, averaging about -0.3%.

Have FUN 2nd! See you in a week.

QT, I'm just sitting tight with FXP. I will investigate how to sell puts as 2nd suggested. I've never sold puts, so don't know the mechanics.

At least my NOSOF.PK position is in the black again....I still haven't found out the reason for the sudden recovery. (I have a day job....)

2nd, thanks for the suggestion of TBT. I've been slowly accumulating RRPIX. I'll do some DD on TBT to make sure it isn't another FXP....

"The US Jobs Report will be spun like a magician levitating the dead. I think I’ll go back to bed."

Thanks Bill, I got a good guffaw out of that one. Keeps one healthy.

Allen

If FXP continues to act like it did in the past, then when the Dow drops it will go back up. In the past for some reason, it seem to be influence more by the US market than the China market. So I wait!

Shorted some more FSLR at $274 a bit ago - this level was prior support and I think we just saw a failed retest.

Due to the serious technical damage in the last two days- I don't expect longs to display much comfort holding through the weekend.

QT, that's what I'm thinking as well. But 2nd's idea of selling puts is interesting. I will investigate the put strategy this weekend.

Allen

You are entering the world of options.

Sharkie was right!

"Allen has balls of steel"

Posted by: shark_attack at April 29, 2008 4:47 PM

Good Luck!

That quote really stuck with you, huh?

I am kind of dismayed by this market and this economy. Was anyone here trading in the 90's? This seems like an absolutely daunting market to try to actually make money in. I haven't really, for weeks. And frankly, it's getting a little depressing. PAL got a pop this morning and is looking like it's coming round on the dailies, but I don't perceive a lot of interest in bidding stocks up now. And many of the obvious shorts have been shorted into the ground. So what's a shark to do?

One more thing...There are so many people doing so much short trading now that the number of viable opptys versus non-opptys is a dwindling ratio. Ok, I admit it...I'm depressed.

The FSLR chart shows the price to be at the lower edge of the price channel (or bollinger bands - take your pick) Also, this price area (270, +-4) was, in April, the site of about 2.5 weeks of pric congestion, after a huge, steep runup.

http://tinyurl.com/5oe9ee

That tells me a bunch of longs took nice profits, and those longs got off and new ones got on at 270, +-. Those people, while not happy they failed to get off at 300, may not be feeling enough pain to take the trade off now.

The shorts closing out for the weekend may offset those longs getting out before the weekend.

So, I'm wondering about the short entry in an oversold condition on fslr? It still may work, as I think this one has room to fall in the short term. Just thinking out loud. Hope you don't mind.

I'm sure wishing I could have sold tons and tons of those MSFT 27/28 puts....man, that was fish in a barrel.

Coming up on BubbleVision:

Larry Kudlow vs. Gary Schilling

Opening bout is Mike Tyson vs. Stephen Hawking :^)

hey, shark!
keep your head up, your nose in your charts and your powder dry!

shorts are being reloaded and new long trends (or what passes for them these days) are being established.

we're at some sort of pivot point here. follow the money. play with some new indicators. search the new high, low, crossover breakouts/breakdown, put/call lists, etc. lists to see how things are changing. read some trading blogs to see what other people are doing. (did you check out that RSI(2) ETF thing everyone was backtesting and trying last week?) work your brain, man.

just be careful until you get that clarity back and it starts to come easier. you know what I mean.

Larry Kudlow, would the real president please stand up!!!

Taking profits

V purchased Monday; Sold half V position this a.m. @ 86.14 (14.7%); sold May 90 calls yesterday on remaining and still holding that for now.

GOL may be early on this one--daily RSI 7 came down to 70 area so exited at 17.25 realizing "don't look gift horse in the mouth", 16.7% over 5 trading days.

QT, I didn't say I was going to sell puts. I said "I will investigate." Read.. Procrastinate and sit on the rest of my cash. One of the better investment strategies in this current market....For me, at any rate.

Mike,

Gotcha. Sometimes is comes down to this. You're looking at 2 or 3 stocks. You buy/sell one, and it's the wrong one, and the other 2 move right. That's what happened to me today.

PAL turned out real good today.

ALOHA !!

If you want a vision into the future then go to this link and see who really owns the major GOLD mines in the World and who will continue to own them!

Link: http://tinyurl.com/6x8vfk

To answer my own question about who is buying gold, the following central banks/banks have been buying:

China
Russia
India
S. Korea
Argentina
Turkey
OPEC

In other words everyone who is holding a crap load of US Pesos who wants to hedge the failure of the first known fiat-based World Reserve Currency. I also notice that our two largest military threats are at the top of that list as well! WOW, what a coincidence ... I even recall a couple years ago Putin doing a photo op with bars of gold in his hand! When was the last time a US President ever even mentioned gold much less do a gold photo op?

So once Russia and/or China own most of the World's above ground supply of gold ... what next? China already owns most of the above ground silver.

Here's what I see ... The Nations that made "debt" the basis of their economy and exports are selling their gold to keep their heads above water. Case in point the UK. Most all of their gold was sold years ago at average prices below $300USD. In fact most of that selling was due to their current PM Gordon Brown. Once again failure is rewarded with a promotion! The Chinese and Russians actually have economies that are based on producing "real wealth" and not FED induced bubbles! They are gladly taking the Westerners gold and with good reason ... THEY PLAN FOR THE LONG TERM! Now there will be no need for a WW4(War On Terror is WW3)since the West will go the way of Russia in the 1980s and just bleed to death! Ultimately Russia learned a large military and huge Empire was a great way to go broke? The USA has yet to learn that lesson. These are monetary wars now. Reserve Currency works both ways ... its a double-edged sword. It's great for building huge supplies of money and assuming massive debt loads at the rest of the World's expense but when the rest of the World is done accepting US Pesos the sword slices the opposite direction, only worse, because there is no bottom ... There is no bottom ... Selling off our infrastructure is "the" bottom! Some of our infrastructure assets are already sold ...

So while our past enemies are taking the above ground gold supply the same banks we US Taxpayers are bailing out now(JP MORGAN)are taking the below ground gold supply! GFI is but one of many examples of "bank owned" below ground gold! The GLD and SLV ETFs are the banks above ground supply!

Just to show you how wide spread JP MORGAN is they bought 19mil shares recently of one of my lowly ASX juniors, Integra.

I believe the largest financial entities and the major controllers of fiat have all gotten together to divvy up the "real wealth" so as to leave the debt to the global masses. I believe the US FED and the ECB have an agreement with the buyers of their gold to keep their names a secret. Currently GATA is trying to get the US Treasury to audit the US gold reserves. The US government cannot sell gold without the prior approval of Congress(We The People's elected representatives). However, does "swapping and loaning" qualify as selling? Without an unbiased third party audit of the US gold reserves who knows what we have left?

Who will be left holding the DEBT bag(all the US Pesos) in the end? None other than the "usual fool" the US Taxpayer who keeps voting their demise into office every year! The two party aristocracy ...

There you have it ... my blueprint for the transfer of all our "real wealth" to banks and foreign governments. Welcome to "globalization"!

Get gold and get a farm! Two of the most "barbarous relics" you can imagine dating back to the Romans and about as "sexy a trade" as oatmeal!

Vote OBAMA for CHANGE? Vote MCCAIN for TRUTH?
Hey make way for the "Straight Talk Express"! Chooo ... Chooo !!!

Please-e-e-e ...

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

[Bill Cara note: When you in the US buy an ADR for your account, it shows up as a bank holding, probably Bank of New York. For the most part, these are Assets Under Administration just like your accounts with Merrill Lynch, Interactive Brokers, etc. Your point about conflict of interest though is well understood. These banks have too much knowledge of you, your account, your trading orders, your margin, and so on, and they use it in their interest to trade against you. That ought to be illegal. The rest of us call it insider trading.]

allen

Understand you are holding something like 2000 shares FXP. Selling puts is if you want to purchase additional shares at a lower price.

For example, If you sell May expiration puts at a certain strike price, say 55, for @ 1.25, you'll recieve $125 for each put which covers 100 shares; however if the price goes to the area of 53.75 by the expiration date (55 strike price minus 1.25 paid to you) you will have to purchase additional shares at the $55 price, although your actual cost basis would be 53.75 because you received the 1.25. If it's 40 by expiration, you will again have to purchase shares at the $55 price. If it stays above 55 area, you pocket the money you received for selling.

Each contract is 100 shares so 10 puts would be for 1000 shares--in that case you would have to pick up if it is "put" to you, another 1000 shares.

Not sure how big your portfolio is, but is that really what you would want to do?

"There will be lots of talk about Spain and Italy leaving the euro, but the weak cannot afford to leave,"
http://tinyurl.com/4ks6f7

MikeNYC - your comments on FSLR are much appreciated and I indeed jumped in a bit too early this morning on my reload.

My FSLR short trade is really a swing trade as opposed to day trade so my timeframe is longer than today - which is no excuse for not being patient in reloading.

Over the next month I think the downside potential is far greater than upside. After the reversal this week, I think we reached an inflection point. The shorts who have been trapped for the last month from the nasty move from $230 to $300 will provide the fuel for Smart Money to unload and distribute at high prices. I.E. a lot of the new buyers (short coverers?) will not be buying on valuation but on an "escape" mentality.

As for today - FSLR longs can't be too happy with the nice new gap created this morning.

And as for the market as a whole, feels like an exhaustion gap up on indices today as longs have no impetus to hold over the weekend. I am expecting red across the board by days end.

Seamus, thanks for the excellent explaination. How do you find out the price of a put on FXP? I'm not sure that I want to do. Would you do it if you were in my situation? My FXP position is just over 1/10th of my stock/cash portfolio.

allen

If you are content on holding the FXP but want to reduce risk - wouldn't you consider selling calls?

Here is the table of June FXP calls - you could consider selling some calls at out of the money strikes (ie 75,80). You would limit your upside prior to expiration but get paid for waiting and reduce margin due to the offsetting.

Strike Symbol Last Chg Bid Ask Vol Open Int
60.00 FXJFL.X 6.50 0.80 6.30 6.70 14 353
65.00 FXJFM.X 5.00 0.50 4.70 5.00 19 480
70.00 FXJFN.X 3.80 0.40 3.50 3.80 19 597
75.00 FXJFO.X 2.80 0.40 2.65 2.90 13 482
80.00 FXJFP.X 2.25 0.30 1.95 2.20 11 492
85.00 FXJFQ.X 1.80 0.00 1.50 1.65 120 528
90.00 FXJFR.X 1.45 0.00 1.10 1.35 33 499

Lunch crowd is back and looks like we might have a sell off of a sorts this afternoon. SKF has been gaining back ground all morning.

One issue with FXP options is that they are not very liquid. For example, look at the $90 FXJFR -- bid $1.10, ask $1.35!

Fortunately if you sell out-of-the-money calls, time is on your side :)

allen IMO, I would NOT do it if I were you.

I have a general rule not to have any position take up more than 10% of the portfolio. Many here and elsewhere use an 8% figure. I sure wouldn't double down in a losing position which already is 10% of the portfolio.

First, your broker will have to approve you for option trading and this is usually just filling out a form. If you are experienced they'll let you trade all kinds of options. If not, they may, no, SHOULD only let you trade some simple option strategies.

Not sure who your broker is, but usually at the trading window, (FXP for example) there will be a tab for options. You can click on that and it will show option prices for a stock within certain monthly expirations.

BTW, you can buy puts to protect your downside in a stock. It is the opposite side of the trade discussed in the prior post. For example, say FXP is at 59 and you purchase (not sell) puts at 1.25. If the price falls to around 53.75 or below (even 40) you have the "right" to sell your shares covered by puts for $55. The price of the puts increases as the price drops and thus you could also close out your position by selling these puts let's say for $3.75. However, there's a time decay factor involved also.

My advice, please do some research; there's a lot out there. Bill has some great explanation on this website (use search feature) and also in his book (highly recommended).

I'd also recommend you paper trade (pretend) you made a trade and track it as time goes on. Again, options have a time decay factor which can be a surprise killer to newbies to the field.

[Bill Cara note: Seamus, I haven't heard too much chat about the book ("Lessons"). Did you think it's too much? I hope not. What I tried to do was give a grounding in the basics of investing/trading with interesting stories thread throughout.]

Billy,
Good luck. I think you are on the right track.

I wouldn't do it if I didn't *fully* understand how it worked. Better to sit and wait for FXP to come to you. Sitting is extra difficult and is highly underrated. Waiting should earn higher scores....

RE: FXP

Was not trying to encourage anyone to jump into anything they don't understand - so I apologize if it came of that way.

IMO - you would be best to sit tight right now as the weak hands are being taken out today - looks to me that Chinese indexes need to retest some support next week. Now is NOT a good time to capitulate IMO.

If it makes you feel any better - I am also underwater on FXP but added a small bit at $60.10 today. My basis now at $72 - ouch.

As for Craig comment above

DITTO

He is right on the $$$. Give it time.

Vadym & 2nd:

Not sure if you follow Mish's blog. He agrees with you guys on your short-term market outlook.

http://globaleconomicanalysis.blogspot.com/2008/05/sitka-update-reducing-market-exposure.html

"Whatever is left of this rally, someone else can have it."

BillySundance

We should start an "FXP Under Water Club". Seems like a lot of us got burned that day if fell
8 pts over night.

I am sitting tight. I might start adding too.

VIX climbing back above 19 after hitting 17.97. Still showing pretty calm area for markets.

QT....I'd prefer to start an "above water" club next month ;-)

Thanks for all the great advice everyone. I'll ponder the options strategy over the weekend. I'm comfortable holding for now. I can just see that that big Black Swan sailing into the harbor...

On March 10th the S&P closed at 1273.37 and as of May 1st it closed at 1409.34. That is approximately 136 point rise or a 10.7% increase. My question that I have for anyone to help me out with is, what would normally be the pull-back percentage? 50%, 68% or what?

Thanks...

Scaling in this week on

SLW
GFI
UXG

and half an hour ago

FXP

I blinked and it dropped another 1%.

Staying away this time from buying puts and shorts, no matter how juicy AMZN looks.

Bill,

I been discussing "Lessons" with traders on Skype. With everything you are juggling, I thought it might be better not to bother you with questions at this time, though I'd be more than happy to start asking and discussing "Lessons" here.

Thank you for saving me (us) from the gold sector on Wednesday, would've been stopped out yesterday. And again was going to buy today until I saw your note.

Anyone cut a fat hog on FEED today? (Agfeed - China hog premix and hog producer) Up 18% today.

Bill

"Lessons" No, it's not too much to understand IMO. I've found it helpful. Especially found it important as it reinforced "lessons" that one sometimes can forget (overlook) due to the emotional nature of the moment.

Good to stay grounded and patient.

Stonecrest

S&P 1419.26 marks 50% retrace on closing basis for the Oct '07 high to Mar low range . Intraday comes to 1416.54 . There is also a strong support/resistance horizontal @ 1406-7 . The next higher Fibonacci retracement is 61.8% . That coincides with intraday 1454.19 and eod 1453.69 . These are the #'s we all be looking at , and there are others .

ALOHA !!

[Bill Cara note: When you in the US buy an ADR for your account, it shows up as a bank holding, probably Bank of New York. For the most part, these are Assets Under Administration just like your accounts with Merrill Lynch, Interactive Brokers, etc.]

Yes, that is true about ADRs and Bank Of New York acccounts for some 65% of all US ADRs. I personally quit using ADRs years ago, but I still own some. Yet who owns your shares even if they are supposedly under "management"? People in Australia got a glimpse of that with Opes Prime and the shareholders of BSC got a glimpse of that a month or so ago. The word "management" used to imply safety but now it is synonymous with the word "RISK"! Unless your portfolio is in an institution that does not participate in share lending schemes or unless you actully hold stock certificates you shares can be traded around and swapped and lended and played up and down and all over the place. In essence you really don't know where your money is! Like you say Bill ... these banks use OPM to trade against you, but even if they do not trade against you directly they do so indirectly by collecting fees for loaning your shares out to others who do. Obviously Wall Street works on the rule that "possession is 9/10ths of the law" no matter who actually paid for the asset ... If a bank or ETF loans out shares I purchased with my hard-earned US Pesos why is it I do not get to at least, share in the fees collected for loaning them? The brokerages and banks answer? It's called "margin" even if you don't have any! With ETFs its buried in the small print in that you have no choice what happens to your ETF shares. As a matter of fact they have every right to go out and buy up to 15% of the ETFs value in "illiquid securities" ... Illiquid means there may be no market! Don't have your portfolio end up in a failed bank or brokerages "general assets" otherwise the creditor/s get to sell off you shares to recoup their losses. So you're a US Taxpayer? Welcome to the end of the bankruptcy line and thank you for bailing us banks out at the same time! I just described a BSC shareholder!! Imagine ... you're handed a 95% loss on your shares and then the FED gets the US Treasury to take your tax money away from you to bailout BSC management and JP MORGAN the same two entities that handed you your 95% loss in the first place! Man, that's BOTH barrels! I would not be surprised to see some very angry BSC ex-employees and retirees out on the pistol range practicing RAMBO moves!

[Bill Cara note: kaimu, agreed. You know we -- you and I -- will be writing a White Paper on this some day, hopefully soon. I heard the very plugged-in Rick Santelli of CNBC saying much the same a couple hours ago. He said that 98% of American's have almost zero understanding of what's happening when the Fed takes actions like they did again today. I'd like to think more than 2% of Congress understood the seriousness of this situation so they could step in and seize control before Paulson and Bernanke's crew do much more damage. I have to ask, just who is regulating the regulators if it's not the elected representatives?]

So, it's looking like I was a couple of days early buying puts on the DIA. I usually am early or late. That's why I bought September Expiration.

My earlier positions are the June puts on NEM and July calls on DUG. I'm counting on Ben to keep his promise and raise the dollar, thereby dropping Oil and Gold. My target is a dollar of 80. That's probably fantasyland but it would provide a great buying opportunity in Gold if it happened.

2ND,
Have a great vacation. You deserve it. I missed the market all day yesterday and just got here an hour ago today. We were out having fun as usual. Talk to you soon.

Rob.

How about that new math as well? When I went to school 1+1=2. Apparently now that's not the case when we can lose 20K jobs in one month and have the unemployment rate magically go down.

I'm starting to remember the bubble days of '99 when a company just had to fog a mirror to get bid up to $100 and then bought out.

Look at all the lies we're expected to believe now and just keep cheering:

The recession "that noone admits to" will be over by the 3rd quarter.

Most things have doubled in price but the CPI is up 5%.

We're for a strong Dollar.

The banks are a good buy even though I defy anyone to figure out their P/E ratio.

Rob.

RE: Selling puts on FXP.

Allen, QT: instead of waiting to paper trade options, I'll share an experience of my own. As you can check on this blog a couple of weeks ago, when FXP first dropped below 80, I bought 200 shares and figured that since FXP has just dropped from 110, $78 was a killer price, and so I sold May FXP puts covering 200 more shares with a strike price of $75 for $7.8 each. I figured that if FXP drops down further, the shares will be put to me at $75, but since I got $7.8 upfront for each share, my effective purchase price will be $67.2, which seemed like a double killer price at the moment. You know what happened since then...

Similarly, in December, when UXG had a spike drop down to $2.77, I sold June UXG puts with a strike price $2.5 for $0.75 per share, thinking that the chance that UXG goes down to $1.75 (which will be my effective purchase price if UXG is put to me) was almost 0. Now it doesn't seem like it any longer.

My take on selling options is that it works only for those whose trading style is to buy on weakness in small quantities and wait however long it takes to make profit. In this case, instead of buying UXG at $2.77 or FXP at $78, I have exposed myself to the possibility of purchasing UXG at $1.75 and FXP at $67.2, which is a much better deal. But if you are a nimble trader and know how to take losses, then this strategy is probably not for you, as you would do better purchasing the stock and then selling it if it drops a little below your purchase price.

DavidV

Dollar and commodities
The Goldman analysts argue the latter because oil exporters import more from Europe than America and hold less of their oil revenues in dollars. A second factor lies with central banks. Because the Fed focuses on “core” inflation (which excludes food and fuel), whereas the ECB targets overall inflation, America’s central bank runs a looser policy in response to higher oil prices, thus pushing the dollar down.

I will join the underwater FXP club. Bought some FXP shares a few months ago around 87. I have been selling OTM calls each month to lower my basis to about 64. Usually 10-15 dollars OTM call will give a 3%-5% premium for the 30 day time frame if you sell them right after the current months expiration.

One thing about OTM calls is you do reduce the basis but of course you limit the upside. But if the stock does take off, you can always buy back the ITM call and sell a new one OTM.

Example: I sold a $110 OTM call for $9 when FXP was around $95. When FXP mad a run up to $108, I bought back my $110 call for $12 and sold a new $130 OTM for $7 that ended up expiring. So in the end, I lowered my basis of my stock by $13.

I am not an expert at this but my goal was to keep my FXP for any big meltdown. I have been selling calls to generate a cash flow. If it goes above the strike price, I have the option of selling for a profit or buying back my call and selling a new OTM call.

So is the weaker dollar driving oil prices up or are high oil prices driving the dollar down?

I also tried selling covered calls (selling call options on the shares you already own), and I am not sure what to make of the result. I bought 600 shares of SLW a few weeks ago when it dropped to 15.50, and then when it rose to about $16.70, I sold call options covering these 600 shares (6 options contracts) with a strike price of $17.50 for $0.9 per share, figuring that if it gets taken away from me, then my sales price will be $17.50+0.9, which is a nice trading gain relative to the purchase price of $15.50. On Tuesday, I bought back SLW calls at $0.05 per share, figuring that SLW had a local bottom and will rise again. So I basically pocketed $500 from these options, but in retrospect it would have been better to sell my 600 shares of SLW at $16.70 (making about $750) and then buy them back at $12.75.

When deciding whether or not to sell calls or puts, I think you should evaluate the possibilities relative to what you would have, honestly, done otherwise. If I sold my SLW at $16.70, would I wait for it to drop down to $12.70? Probably not. I would have probably bought it again at $15+. So now the action of selling covered calls on SLW does not seem so bad any longer. :)

DavidV

RE: How about that new math as well? When I went to school 1+1=2. Apparently now that's not the case when we can lose 20K jobs in one month and have the unemployment rate magically go down.

->That's the magic of the participation rate ...these people are not looking for jobs at this time...
:)

I think there's more involved with the oil price than the price of the dollar. Geopolitics, supply disruptions.

But I do think the weak dollar is the major factor keeping oil high right now. If the dollar did move to 80 somehow I'll bet that would make Oil around 80 per barrel as well. Unless there was a geopolitical event at that time.

Rob.

Bill, etal;

If foreign ADR's show up as a Bank holding, Asset under Administration, How are Pink Sheet stocks accounted for in my brokerage account?

Well their magic tricks, fantasy earnings, and cheerleading aren't getting any of my money. For now, debasing the dollar is the only way they'll get it from me.

My plan is that if the dollar does hit 80 or even 85 again, I'll diversify into Swiss Francs, Gold, and maybe Australian Dollars and just keep about 25% in US Pesos.

Rob.

DavidV,

Good example on SLW.

Funny, but I also own some SLW and UXG as my speculative plays. You do not happen to own any PWE?

Anyway, you faired much better then me with SLW because when SLW dipped to $15 after it hit $19, I bought some $17.50 calls for May thinking it was a short dip. I probably bought your calls. Anyway, I am not doing so well on that transaction.

Wash sale question:

My stops kicked into day on a SKF trade gone bad. If I rebuy that stock within a 30 day period will the loss be added to my new cost basis or do I lose the loss?

[I trade through Scottrade]

QT

If you are a U.S. taxpayer, you lose the loss if you repurchase within 30 days.

I think you could avoid a "wash sale" if you shorted the XLF.

As always, doydd.

QT,
I would check with a tax advisor but I'm almost positive you can't touch the stock again for 30 days unless you don't want to declare the loss.

On another point, if the economy is gangbusters again and the banks are ready to lead the charge again then why did the FED have to increase the amount of money it's swapping for garbage?

And why did Countrywide just get cut to junk?

I thought we were pulling out of this non-recession ready to take on more debt.

Did I miss something when I wasn't here yesterday or today?

Rob.

It makes the basis date and price of purchase go back to the date of the first purchase and you cannot take the original loss on your taxes *until you sell the new batch of shares*. It is not as bad as it sounds as long as you sell these new shares in the current tax year. I realize you are doing short term trades but, there is at least one potential positive in that it could make a short term investment into a long term one, should the original holding period be just below 12 months and the new purchase extends things to 12+ months.

This is my understanding from my reading and discussing with an account, but I am not an accountant so please DYODD.

Found this for those intersted in the handling of wash sales.

If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities. The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock on securities sold.

What this means in Plain English:

This means that if you close a trade at a loss, and then buy back the same, or "substantially" the same equity such as an option on that equity, you cannot take the loss at that time. According to the IRS, the loss now has to move forward, and has to be attached to the cost basis of the trade in which you bought back the same equity.

If that trade now ends in a loss, and you buy the same equity again, the loss gets moved forward again. This can keep happening indefinitely if you continue to keep trading the same equity again and again, and keep ending up with an accumulated loss, and do not stop trading this equity for at least 31 days.

http://www.armencomp.com/wash-sales.html

masstrader,
Could you clarify this for me.

"there is at least one potential positive in that it could make a short term investment into a long term one, should the original holding period be just below 12 months and the new purchase extends things to 12+ months."

I am puzzled by BoA announcement that they can not guarantee some countrywide debt. Does that mean bankruptcy laws do not exist any more for financial institutions or does it simply meant as warning to FED that unless the FED backs CFC debt (Bear Sterns style) the BoA will walk away from the deal ? Is there a legal framework on how they can aqcuire the company and default on it's debt without declaring bankruptcy ?

QT,

Yes. Here is an example: You make a purchase of shares on 1/1/2008 at $10/share. You sell all shares on 10/15/2008 at $5/share. You buy back the same # of shares 10 days later on 10/25/2008 at $4/ share. This is within 30 days so it is a wash sale. I think its as if you didn't sell for tax purposes. The basis price and date goes back to the original $5/share and 1/1/2008. If you now sell after 1/1/2009 (a year from original purchase date) at $20/share it is a long term capital gain of $10/share, instead of short-term. That is the potential positive (yet unlikely situation for short-term traders) in wash sales.

Even without this positive, as your own research found above, it is not such a bad thing. It just delays when you can claim the capitol loss until you sell again (as long as you don't repurchase within the next 30 days again.) It sounds a lot more scary than it is. First reaction is, here I lost all this money and then I am messed up on my taxes as well.

I'm still not a tax expert, so please verify what I am thinking elsewhere.

occam_razor
In January, Bank of America agreed to acquire Countrywide for $4 billion. Bondholders were counting on BAC to put its financial strength behind Countrywide, the largest U.S. mortgage lender. But today, BAC said in a regulatory filing that there was no guarantee that CFC's $97.2 billion in debt would be assumed. An S&P analyst said that it was their understanding that BAC would do so but the filing definitely raised doubts.

Credit default swaps soared on the news, according to the WSJ. Countrywide's five-year credit default swap (CDS) jumped to 250 basis points and was moving wider towards the end of the session. This signaled increased speculation that Countrywide would default on its bonds. Prior to Thursday's close, Countrywide's CDS were trading around 165 basis points. The new level represents an annual cost of $250,000 to protect $10 million of CFC's debt versus a previous figure of $165,000.

masstrader

Thanks for the clarification.

viso-
But is there any legal mechanism for BoA to acquire CFC assets but not the debt ?

I am a bit nervous about this given the calls of Bill and others, but my system has given me a buy sign on gold. I bought the HUI into the close at about 400. I am looking for a move to 450, but there is definitely some resistance at 430 that may slow or stop it.

The main reason I am a bit uneasy though, is that I still have a buy on DUG which I project up to 37-38 for this move. This is a problem as the HUI and DUG (inverse oil) has a correlation of -.67, basically telling us that gold and oil tend to move the same direction.

So there are a few possibilities.
1. Gold/Oil decouple for a while.
2. Whatever supply premium comes off oil for a while.
3. Something causes gold to spike, but not oil
4. At least one of the long DUG or HUI is wrong.

Interesting real world test of my system when I would not be able to see how this would work, but I'm following the system for now.

As always, tight stops on HUI. Do your own thinking.

Karl

In other words is BoA simply blackmailing FED to get the same treatment JPM got when they acquired BSC or I am missing something ?

Get ready for 3X ETFs!

Direxion has registered with the SEC new 3x bull and bear index ETFs
http://www.sec.gov/Archives/edgar/data/1424958/000089843208000403/an1a.htm

Article at --
http://tinyurl.com/5lvq4p

ulvy, I don't own any PWE. As for options, I read somewhere that 90% of people who buy options lose money, as people almost always underestimate the speed with which volatility premium can decline. It is possible to buy a call option on a stock, see that stock move up the next day and see your option go down in price (if the market decides that the volatility has decreased). So I figured I would only be in the business of selling options and let the other side take on the risk of the volatility premium reducing over time.

For example, in your SLW case, instead of buying calls on it, you could have sold puts on at $12.50, received some cash upfront and had a chance to buy SLW at a killer price if it gets put to you.

DavidV

occam_razor
No, you did not miss anything. That exactly what's going on here. The laws are here to protect the big corporations.
At least that's what I think.

David

Yes. option player do lose most of the time unless
you have inside information or you are good at it
even if you are good at it, out of 10 trade you may lose in atleast 4 trade.
trading option for six month and if you break even means you are doing good.

Davidv

My friend did 800000 of total trade in only OEX option in 2007 and at end of year he ws down 800

ALOHA !!

Bill ... It is amazing that everyone thinks they are "safe"! They are all protected by FDIC and SIPC ... HELLO ... read the fine print ... In case of fraud the FDIC and SIPC protection does not apply! Once the losses start rolling in I believe the FDIC and SIPC will classify future BSC failures as fraud and either not pay or settle for a dime on the dollar after lengthy litigation!

When I pulled out all my asstes from Morgan Stanley and Merrill Lynch last year the brokers were shocked to hear that I was leaving because I considered their companies too RISKY! My two broker's replied, "Even if we went bust it would not effect your portfolio. Your stocks are yours not ours!" I wonder if they still have their jobs?

GROUND REPORT
At the Hilo, Hawaii ALOHA AIRLINES CARGO warehouse located at the HILO INTERNATIONAL AIRPORT(Gilligan's Island size airport). Yes you read that right ALOHA AIRLINES went bankrupt but their CARGO biz did not! Now it seems all the union pilots that flew the passenger legs want the cargo pilots jobs because the passenger pilots have more senority! There is a big battle at the union going on over that!

UNIONS ... THEY WORK UNTIL THEY DON'T!

That tidbit aside, one of my customers was at ALOHA AIRLINES CARGO and an FBI agent was in there sending 18 boxes of "cargo"! He leaned over the counter and said softly he was an FBI agent! Then the clerk who was shocked and thought it was a joke, said in a loud voice where everyone could hear, "Is the FBI a known shipper?" Everyone in the office laughed! My customer asked him "How come you don't flash your ID like in the movies and yell FBI?" The FBI agent told him, "Yeah, I wish ... We used to get free shipping and us agents never had to deliver boxes either, but with all the major cutbacks to our budget due to the Iraq War ... well ... here I am ... the errand boy!!!"

YOUR TAX DOLLARS AT WORK !!!

IT ALL WORKS UNTIL IT DOESN'T ...

[Bill Cara note: kaimu, your passion as one of the Free Market Patriots is felt by all of us here!! ]

ALOHA !!

BOMBS OR BUTTER? What's more important? Decide now ... or you better start buying Lockheed and General Dynamics stocks!

READ ON:
Which Path to a Safer World?

11 Blankets for refugees $100 = 11 hand grenades

Enroll 2 children in Head Start $14,000 = 1 cluster bomb

2 home health aides for disabled elderly $40,000 = 1 Hellfire missile

Associate Degree training for 29 RNs $145,600 = 1 Bunker-buster guided bomb

Rent subsidies for 1,000 families $586,000 = 1,000 M-16 Rifles

Annual salary/benefits for 15 RNs $763,000 = 1 minute war on Iraq

Improve, repair, modernize 20 schools $46 million = 1 hour war on Iraq

WIC program nutrition for 200,000 families $130 million = 7 unmanned Predator drones

Eradicate polio worldwide $275 million = 3 tests of missile defense system

Best vaccinations for 10 million children worldwide $350 million = 6 Trident II missiles

Childcare for 68,000 needy children $413 million = Amphibious Warfare Landing Ship Program

7,000 units of affordable housing $494 million = 1 year military aid to Colombia

Prevent cuts to education programs (FY2003) $1.1 billion = 1 day of war on Iraq

Minimum support to save Amtrak train service $1.2 billion = 2 months U.S. war force in Afghanistan

Annual salary/benefits for 38,000 elementary teachers $2.1 billion = 1 Stealth bomber

Double federal funding for mass transit $12 billion = 1 year cost of war in Afghanistan (2001/2002)

Healthcare coverage for 7 million children $16 billion = 1 year nuclear weapons program

Save 11 million lives worldwide fighting infectious diseases $38 billion = 1 month U.S. current military spending www.warresisters.org/

Partial source list: Center for Defense Information (www.cdi.org); Federation of American Scientists (www.fas.org); Center for Budget and Policy Priorities (www.cbpp.org); National Priorities Project (www.natprior.org); World Policy Institute (www.worldpolicy.org/projects/arms), Children’s Defense Fund (www.childrensdefense.org); UNICEF (www.unicef.org); New York Times (11/12/01; 3/18/02; 10/13/02; 12/05/02); World Health Organization (www.who.int); National Center for Education Statistics (nces.ed.gov); Mennonite Central Committee (www.mcc.org/us/colombia/dollars.html)

ALOHA !!

Lets go back in time to 2005. The DSB(Defense Science Board)conducted a study on the US military fuel consumption and how inefficiencies would lead to strategic compromises that could freeze US military operations in certain theatres, most particular in Iraq.

Well, the insurgents know this and that is why we used to see fuel convoys being blown up on TV every other day back in 2005! Now you don't see that so much because your tax dollars are being paid to Halliburton to fly fuel in on C-130 tankers instead of driving it through the insurgent gauntlet.

Remember back in 2005 oil was running at $50USD a barrel, less than half of what it is now and the US military is the largest single consumer of oil and resources in the entire World.

If only the Pentagon would have listened ...

Link: http://tinyurl.com/3lkhzy

Once again it ALL WORKS UNTIL IT DOESN'T!

Kaimu,

You are a light in the darkness--let it shine, let it shine!

viso -
There is fraud and then there is Fraud. What happened in JPM-BSC case is legally gray area (or better to say dark gray). It seems to me that what BoA is suggesting without FED financing the debt is plain black. I am not an expert in corporate bankruptcy law so I am trying to understand is there a "gray" way for BoA do that without FED backing the debt ?

Kaimu,
You rule Dude!!!

I'm writing in Ron Paul in November!!!

I think the main reason we have these troops everywhere is to hide our real unemployment rate.

For the first time, in this Afghanistan and Iraq war, we have much more reserve units serving that have left regular jobs to go over there.

Like the labor report stated today, people who aren't looking for work or who aren't here don't count as unemployed.

Rob.

Occam_razor,
I think BOA does want a FED guarantee like JPM got. After all, now that they have Countrywide, they originate 40% of all mortgages.

They want the sweet without the bitter just like JPM.

They have floated a strategy of placing Countrywide's debt in a separate corporation and letting that one declare bankruptcy but I doubt if they're confident of the legality of such a move and are really hoping for a FED bailout.

After all aren't we all hoping for Uncle Ben to keep the party going?

If he caves to BOA then I would expect a new high in the indexes very quickly and then a severe crash as the dollar drops below 60 on the repercussions of that kind of a backstop.

Rob.

Here is a good discussion, in lay terms, the problems facing the financial system as presented in an interview with National Public Radio in the US.

http://tinyurl.com/2tu3n8

Kaimu,

Bombs or Butter:

In 1963 the office of the presidency was taken by the military, never to be relenquished. then both houses of congress and lately the Supreme Court has fallen under the dominion of, principally, war profiteers and corporate privateers. Your list is a haunting and eloquent illustration of the truth of Orwell's prophetic masterpiece 1984, and I suggest that everyone re-read that book now in light of present circumstances.

One idea from '84: Perpetual war is the only way to squander the nations surplus without raising the general standard of living, for to allow the surplus to raise the general standard of living would mean lessening the disparity between the wealthy and the poor, thereby debasing the meaning of wealth, which is real only in relation to the poverty of others.

It's a dark day in America, my friends.

Will US Dollar and gold both increase at the same time
As European central banks follow the Fed and take worthless paper on their balance sheets, and people realize the banking problems in Europe and Japan are also very bad, wouldn't the Euro and Yen weaken dramatically relative to the Dollar? It's all relative among fiat currencies.

ALOHA !!

shark ... Yes, George Orwell was one of my heroes growing up and 1984 is a classic! His other works I have mentioned here before like DOWN AND OUT IN PARIS AND LONDON and SHOOTING AN ELEPHANT are also worthy reads. All about POVERTY and EMPIRE ... of course from a British perspective! There's NO WAY such things would ever happen in the USSA!

A question to those parents here who currently have kids in high school and college ... Are George Orwell's books used at all in the current public school education system?

It is interesting that the military industrial complex took over during a Democratic president's watch! Not surprising given the beginnings of the Vietnam War and the COMMUNIST Domino Theory and all the FEAR of the ongoing COLD WAR! COLD WAR over now "MISSION ACCOMPLISHED"!! Bring on the "WAR ON TERROR"! More perpetual WAR please!!!

When you vote the two party aristocracy(Rep and Dem) you vote for MORE WAR ... MORE MIDDLE CLASS DESTRUCTION and MORE POVERTY FOR ALL !!! Who cares about these ridiculous devisive labels that you hear all day long listening to the likes of LIMBAUGH or THE VIEW ... such terms as "right and left" ... "lib or conservative" ... "red or blue" ... Its all so very childish and unimportant. Neither party has our best interest at heart! The elitist goal is to DIVIDE THE US TAXPAYER AND CONQUER! They are winning that battle! What has been so CONSERVATIVE about the huge spending the REPS have been doing over the past eight years that the DEM controlled Congress has approved of? Checks and balance are out the window here!!

Remember the full inflationary effects of the Vietnam War were not acknowledged until after we left Saigon. Note what happened to the FED FUNDS RATE and the POG and POS in the late 1970's and early 1980's! The FED raised rates well above 18% as gold and silver skyrocketed at the same time. If you look at charts back then it all looks like a "race to secure monetary CONFIDENCE" and as the COMEX market makers kicked the bid out from under the gold price and silver spot markets that left the US PESO as the victor by default! Even the, then FED Chief Paul Volcker, admits we were "starring into the financial abyss ..." back in 1980. These days he says we "are" the abyss!

CHANGE? IT ALL CHANGES WHEN IT CHANGES ...

Like Rob, I will write in RON PAUL for President come Nov 2008!!! Back to the "Shire" I go!!

Kaimu, I've said it before and I'll say it again...

I love you passion.

Your earlier question: Animal Farm was a compulsory read in late 80's high school in Canada. Not sure about now.