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June 7, 2008
Bill Cara's Community Chat, Sat., June 7, 2008, 7:17am ET
Now and then a book or article is sent to me that I find hits the mark for information I think would be useful to this community. One of those was “Full of Bull”.
Dear Mr Cara,Thank you very much for highlighting, in your May 30 commentary, Stephen McClellan's new book entitled "Full of Bull - Do what Wall Street Does, Not what it Says, To make money in the Market".
On the basis of your article I recently purchased and read this book as I am always on the look out for these kinds of interesting and hopefully useful texts.
This is a truly excellent book containing very thorough exposes of the workings of many significant facets of Wall Street. It contains important relevant information for anyone buying and selling equities or equity based derivatives. Of course the practices he discusses are conducted in many western financial markets. They are not confined to North America.
Having worked for 30 years in a major global corporation I have seen first hand some of the activities discussed in this book.
For those wishing to expand their financial education this quite inexpensive text is a "must read". Thousands of dollars of useful info for a few dollars, even if at times some will say - "well - I already knew that was going on".
Needless to say, now that I have read it, I would highly recommend this text to your community. Of course the vested interests in the financial markets would rather you didn't read it.
(I am not acquainted with Mr McClellan or his publishers. Nor have I read any of his earlier books or other texts from his publisher).
Thank you for continuing your magnificent 10 STAR web site. You are an exceptionally generous person.
Regards
James
Let’s read what Business Week has to say.
Business Week,
Investing April 22, 2008,
Is Wall Street 'Full of Bull'?
A well-respected analyst for 32 years, Stephen McClellan describes how analysts' advice is biased and misleading for individual investors
by Ben Steverman
Stephen McClellan is biting the hand that fed him for 32 years.
A top-ranked analyst at Salomon Brothers and Merrill Lynch (MER), McClellan was one of the first to cover the booming computer industry. In addition to being well-respected, he was one of the longest-serving equity analysts on Wall Street, with a career stretching from 1971 to 2003.
Now, the retired 65-year-old number cruncher is saying what he really thinks about Wall Street. In his new book, Full of Bull: Do What Wall Street Does, Not What It Says, to Make Money in the Market (FT Press, 2007, $22.99), McClellan, admits that price targets are "fiction," and buy/sell/hold ratings aren't taken seriously by professional investors. Analysts spend perhaps only 20% of their time on research and the rest on marketing and other tasks, he says. They create sophisticated computer programs to track a company's earnings, revenue, and cash flow in close detail. But the results are "not accurate at all," he says. In fact, analysts often miss big trends and have a terrible record as stockpickers.
Stiff Penalties
Research isn't written for retail investors, but for institutions. Those institutions, including mutual funds and hedge funds, have far too much influence over an analyst's research, McClellan says. Companies and executives are also too good at manipulating analysts.
Even more blatant biases were exposed as part of the 2002-03 investigation by the New York State Attorney General and securities regulators, which led to the Global Settlement of Conflicts of Interest Between Research & Investment Banking that required 10 of the nation's top investment banks to pay $1.4 billion in penalties and restitution to harmed investors, including money for investor education and independent research.
The research settlement may have pushed apart investment banking and research, but it left in place lots of other conflicts of interests, McClellan says. Plus, the settlement's money for research—money that is slated to run out in 2009—hasn't improved its usefulness for investors. By giving research away, Wall Street has diluted its quality, he argues.
Exposing the Code
McClellan says that when he retired, he began to realize how naive individual investors "take Wall Street literally." When analysts rate a stock as a buy and expect it to rise 20% in the next six months, many individual investors actually believe them.
"All of us insiders know the code," McClellan said in an interview with BusinessWeek. "But all the outsiders don't."
The book is designed to "expose the puzzling, deceptive, conflicted behavior of Wall Street that so disadvantages individual investors," he writes. It's not that Wall Street intentionally tries to cheat and deceive individual investors, he says. Rather, investors are at a disadvantage because so many other interests—those of companies, institutional investors, and the brokerage houses themselves—come before their own.
Paid Salesmen
"Wall Street is not suited to be an investment manager, financial adviser, or stock selector," he writes. "In fact, these services that it purports to offer are a conflict of interest with [its] bedrock brokerage and banking functions."
Suppose your stock broker recommends defense industry stocks. First, realize that your broker is not an expert financial adviser but a salesman paid to sell you a product, McClellan says. Second, understand that the broker is probably basing that recommendation on a stale analyst note and its advice is probably already reflected in the price of stocks.
Third, there are a lot of biases included in this recommendation. Analysts rarely look past the next six months, for example, which is a bad approach for individual investors trying to build wealth over the long term. Analysts are also biased toward large companies. Institutional investors like big, heavily traded names even if, McClellan writes, "individuals can benefit by making an astute, early investment in smaller companies not already picked over by Wall Street."
Cherry-Picking
McClellan has proposals for how he would reform research on Wall Street. He would make analysts far more independent, so they're not "embedded in the bowels of a brokerage firm," with all the inherent conflicts of interest.
But McClellan's book's main purpose isn't to shame Wall Street into changing its ways. Rather, he says he wants to help individual investors profit despite their disadvantages. Research can be valuable because it gives investors lots of detail on companies and their industries. Absorb that information, McClellan says, but disregard analysts' conclusions and recommendations.
"The individual has advantages," McClellan says, especially the ability to see "the big picture trends." By contrast, he writes, analysts "may be good at evaluating the trees, but they fail to have enough vision to see the forest."
Size Up the Boss
McClellan says he has become a better investor since he retired from Wall Street. In his book, he offers investment advice based on his three decades as an analyst. For example, investors should closely evaluate a company's CEO before they invest, he says. He describes various types of executives he has met, from the "visionary leader" to "techy geeks who know their stuff" to "promotional hypesters without substance."
Since writing Full of Bull last year, McClellan says he's disturbed by the wave of trouble heading toward the U.S. economy. It's not just the credit crisis and the housing slowdown that worries him, but also the weak dollar, the government deficit, the decline in corporate earnings, the inflation, and a troubling Federal Reserve response to it all.
McClellan warns that stock market slumps often last two or three years. "This could be one of the biggest bear markets we've had in 30 or 40 years," he says. "Be cautious and careful."
Still, McClellan says, Wall Street remains "eternally bullish," predicting the economy and stock market could bounce back in the second half of the year. That's because analysts don't want to scare investors away from trading and building portfolios, no matter how frightening the news might be.
[Steverman is a reporter for BusinessWeek's Investing channel]
There is a lot to grasp here, but, really, is it anything different from what I have been writing in this blog for the past 50 months?
It’s only when industry people like Stephen McClellan, or Michael Panzner and myself who have broken the suffocating grasp of the financial services industry network are you likely to hear it like it is, not some Hollywood fiction from Wall Street.
Conflict of interest by an industry that has been bestowed self regulatory organization powers is at the heart of every serious problem in the capital market. But our capital—yours and mine—are at risk, while theirs, with the right to print money, is only destroyed out of sheer stupidity and arrogance. In the end, we also have to pay for their mistakes.
Where’s the social equity in that?
Posted by Posted by Bill Cara on June 7, 2008 07:17:08 AM | Category: Community Chat
Discourse
ALOHA !!
Thanks for your comments Bill! Of course there is no social equity in any of this!
Here we have a time in human history when there seems to be the most wide spread orchestrated fraud of all time!
The Middle and Upper class America has been roped and corralled into two main investment vehicles.
1) Stock market
2) Real estate
Item number one is where your future retirement income resides, since everyone knows Social Security and Medicare benefits are already too low to support retirement exclusively.
Item number two is where you dwell and where you expect to also derive future retirement income.
So we have more than half the population of the USA with their future tied up in either item number one or two or both. The rest of the US population is either too poor to afford either item one or two or they are too old or young to care!
Now bring in the "store of value" that both items one and two are based on ... FIAT. Not just any "fiat" but the US Peso fiat, where debt and fraud are at all time human history highs! We have a global currency of DEBT and FIAT and it is unprecedented in all the human history of money! Even the Roman Empire was built on GOLD! Now Empires are built on "promises" of governments and their "good faith and credit"! Look at the counterparty risk we now have for items one and two ... the counterparty is FIAT! FIAT is an IOU ...
I surmise that the US government cannot and will not allow the real estate and stock market to collapse and will print money at hereto unknown heights! Allowing items one and two to collapse would mean the end of the two party aristocracy regime of power! These people(politicians)did not spend a lifetime of power mongering and back stabbing and sweet talking to just throw it all away! This is what FIAT is based on ... human ego and greed!
What store of value has no such liabilities?
ALOHA !!
I might add that if you decide to sit it out in "cash"(fiat), especially US pesos, then you also lose in the end, because of the same people you keep electing and the US FED's agenda!!!
An interview with Stephen T McClellan from 16 Feb 08.About his book."Full of Bull"
Posted by: john uk ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 7, 2008 8:48 AM [link]
Genetically modified foods - One of my concerns: many Monsanto genetically modifieds are Roundup hardy, ie Roundup can be used directly on crops without harm. Problem: Sprayed roundup wafts into the the air, negatively affecting non-hardy downwind vegitation. When neighboring crops aren't Monsanto genetically modified, yield suffers tremendously, not to mention indigenous vegitation. Some say salts in roundup contaminate the soils for many years.
Posted by: Chickenpookie at
June 7, 2008 8:59 AM [link]
Kaimu
Any idea what Sinclair is talking about in this note he posted on his webite yesterday? TIA
A Note For Those Holding Gold In The Land Down Under
Author: Jim Sinclair
Dear Friends,
Those of you that hold gold bullion in the land Down Under should check up on it.
Respectfully yours,
Jim
Posted by: JesseSLC at
June 7, 2008 9:45 AM [link]
“Sometimes the more I read, the more I realize the the less I know, but as Bill says, it improves the filtering of information.” It greatly helps to read material coming from different areas of the world.
Posted by: SiO2 at June 7, 2008 7:10 AM [link]
Could not agree more with you Si02.
Over the years I have grown to think of Asia as the university you never graduate from; the more you learn, the more you realize what you don’t know.
Think the same may apply to global markets—we’re all "students" of the game.
Posted by: Seamus at
June 7, 2008 9:53 AM [link]
life is the university we never graduate from (and, depending on your beliefs, never meant to graduate from)...how much wiser would we be if life expectancy was 150-> probably more than twice as much...some learn faster than others, of course, and some are more willing to learn...that's one reason careful study of successful traders can pay off-> they're trying to save you an enormous amount of time by distilling what they've learned into a few hard and fast rules...on the other hand, some lessons are not going to 'stick' without learning them yourself...
Posted by: 2nd_ave at
June 7, 2008 10:05 AM [link]
Dear Bill,
The books sounds right on. It is pretty obvious that analyst upgrades presage distribution opportunities for insiders and savvy investors. It also seems clear that downgrades provide buying opportunities for same. What is less well understood are the forces at work in the past half century in the real estate business.
Firstly, ask yourself a question. Could the number one best investment any middle class family can possibly make (buying a house) really possibly fulfil that lofty expectation in defiance of gravity for too long?
Of course it can't. Beginning after WWII, land began to be "distributed" to use a stock term from farmets, big owners and savvy investors into the hands of the middle and then lower classes (more recently during subprime). Due to America's preeminent global position etc this distributional phase lasted for decades. What is of immediate interest is the part of the cycle that is now to come.
Due to the encroachment of technology on most people's ability to earn a living combined with global outsourcing trends and an ocean of illegal low wage labor, the American homeowner's (never before have so many owned so little home)ability to continue to pay the freight on his massive mortgage is, to say the least, questionable, not to mention the ability of future workers to pick up the cudgle at these over hyped housing prices. So what is to come?
This period of housing strife can't properly be termed a correction. It is far too massive, too widespread and too institutionalized to qualify for that description. We are witnessing nothing short of the end of the era of housing as an investment, and the beginning of a new accumulation cycle, an accumulation into the hands of the strong from those caught up in the descending spiraling vortex of the housing bust. The market, in addition to the structural woes mentioned above, will be starved of credit for a period sufficient to cause a mass-sollapse of housing prices, one far greater in it's scale than we've previously imagined possible. Property will be bought at auction and in backroom deals by the super-wealthy, who will bulldoze houses, unimprove residential properties en mass and take them off the tax rolls. There they will sit, for years, perhaps decades until a new distribution phase is ready to begin. And is it any surprise to us market mavens that the greatest number of people were induced to enter the market at the worst possible time imaginable?
Posted by: shark_attack at
June 7, 2008 10:05 AM [link]
shark- that's a pretty nice zoom lens you attached...i'll have to ponder that one...
Posted by: 2nd_ave at
June 7, 2008 10:19 AM [link]
Shark - IYO, is this a conspiracy or natural market cycle?
Posted by: Chickenpookie at
June 7, 2008 10:22 AM [link]
i just posted up Don Coxe's Basic points for May/June:
2nd - I can't express how much I appreciate your, and everyone's contributions who contribute to Bill's site. I get the strong feeling here of a desire to share a wealth of knowledge, experiences and feelings by numerous well-educated, affluent people. A very beneficial and positive environment IMO.
Posted by: Chickenpookie at
June 7, 2008 10:33 AM [link]
There was clearly an affordability issue in housing prior to the subprime era. Also, the macro trends conspiring against real wages were also in place. Where the trolly went off the rails was in the recent period when supposedly responsible banks, brokers and lenders....
conspired is the right word, to issue loans
en mass to the unqualified and to those in no position to pay. It was adaptive, to use a sociological term, to the powerful by aiding and abetting the final phase of distribution. I see this period in its historical perspective where it properly belongs, in an age of fixed elections and phony presidents, of conspiracies to steer a peaceful nation into war, of a cavelier attitude toward the constitution and to laws. In short, these recent years were a times when an "anything goes" attitude accompanied a concerted scheme to convert a constitutional democracy into a fascist dictatorship by decree.
Posted by: shark_attack at
June 7, 2008 10:36 AM [link]
re yesterday's threat from Israel of attack vs. Iran
It didn't come from JUST the Israeli Transport Minister! Today's FT informs that Shaul Mofaz also was born in Iran, served as Israeli Defense Minister, is now Deputy Prime Minister and is positioning himself for the succession struggle post-Olmert.
FT quotes him: "If Iran continues with its programme for developing nuclear weapons, we will attack it. The sanctions are ineffective ..."
Posted by: Jock at
June 7, 2008 10:48 AM [link]
cp-> those were exactly my sentiments when i discovered this blog in 2005...(not sure how many of us are affluent/feel affluent in what looks a lot like a return to the seventies-> i can tell already my oldest is disillusioned with what shark describes as the "anything goes" attitude, and is leaning instead towards child psychology-> i would say the male MSW was the defining degree of the seventies)...thank you...
Posted by: 2nd_ave at
June 7, 2008 10:54 AM [link]
"And is it any surprise to us market mavens that the greatest number of people were induced to enter the market at the worst possible time imaginable?" posted by shark
Can still clearly remember Greenspan encouraging borrowers to get into ARMs when interest rates and conventional loans were at their lowest. Why? How misguided and this is not Monday morning QBing. Just look at historical levels and how low could rates really go? Common sense would dictate otherwise.
Also remember FETV's Bill Griffeth(sp) encouraging all "now's the time to buy real estate" mantra at the peak during the summer of 2006 (if memory is correct). Kudos to Bill, who called him out and challenged him at the time on this blog, requesting a copy of the tape broadcast. Maybe it's on youtube, but I doubt CNBC would allow it; if not, it should be.
Posted by: Seamus at
June 7, 2008 10:55 AM [link]
Great comments on our agribusiness.... all accurate. I posted my reponse on yesterday's discourse. Glad to See Chickenpookie call BULL POOKIE on Roundup. Resistance to Roundup is the genetic modification they are talking about, not one that makes plants produce more. It's about production and labor, not output.
A search on Google for roundup will give anyone here more information than they can use.
I think of roundup as agribusiness's version of the Fed or the Microsoft version of software distribution VS Google. They want to make everyone totally dependent on their seed and the means to use them, regardless of the real costs in the future. Once they eliminate the heritage varieties by marketing hybrids, only those with seedwill be able to grow their own food. Hybrids = mules. They don't produce viable seeds, which is why they exhibit hybrid vigor. No seed production, just freaky food. Those flavorless pink tomatoes at the store? Yep, hybrids.
Posted by: Craig at
June 7, 2008 12:20 PM [link]
Shark -
Agree with your comments. I feel like the American Dream was turned into a product to be marketed and sold to unsuspecting middle class: house in the suburbs (except has to be outer suburbs), nice car to get to work and back and second car, and invest in the stocks so you can retire. This is going to financially devastate millions while those who created the product can buy assets on the cheap, or setup the same scheme in the developing world where it will still work.
Posted by: moab at
June 7, 2008 12:27 PM [link]
Gotta agree with Shark and Moab. I don't think so much in terms of an ocean of illegal labor, as I was born and raised in California so a certain group of people isn't a surprise to me and I witness daily how they are necessary to some business like Ag.
I do think that the ocean of fiat cash has far more to do with the inability to earn a decent living/falling standard of living than any one group of individuals....with the possible exception of the group we call HB&B.
I also think the fiat problem will solve Shark's concerns about these folks. Once the US peso gives anough ground and the real Mexican peso rises in value, the supposed illegals will go where they can make the most real $$$.....places like Mexico.
I just want to treat them fairly while they're here, because I may need to move to Cenral/south America to survive in retirement. I don't want to be treated like some aliens are treated here, right?
Posted by: Craig at
June 7, 2008 12:45 PM [link]
ALOHA!!
AMERICAN DREAM = DEBT
DEBT is what the FIAT monetary system is based on. When in 1913 the bankers and politicians conspired to create the US FEDERAL RESERVE they were conspiring to create the fiat monetary system we know have. What they have done is to take away the masses ability to "STORE VALUE" and have substituted with the masses belief that "DEBT IS VALUE"! That is FIAT ... The only ANTI-FIAT cure is GOLD and SILVER monetary metals.
We have fallen for this scam on a global scale, just like the Monsanto scam! When you trade to gain maximum profits you are doing so in an effort to beat the rate of currency devaluation, but one important factor is left out of that strategy ... where do you store your wealth? Where do you store value? If you chose to keep it in fiat then you chose a depreciating asset that is quickly becoming valueless. You end up being only one step above default, because when the US Peso defaults so do all your profits!
This kind of stuff ends with civil unrest and worthless money, which is why I state my prediction ... "Many fortunes will be lost trading the market successfully" ... Like the Bible essentially says ... the root of all evil is money. I would say the root of all evil is "false money"!
The comments Shark makes were all made possible and are symptoms of the creation of a fiat monetary system ... period!
Actually, Kaimu, I believe the Bible states that it is "the love of money", rather than money itself, that is the root of all evil.
Posted by: johojo at
June 7, 2008 1:44 PM [link]
Think about this... If you're a landowner and the taxing authorities want that land, it's an easy task for them to seize your property. Look what happened with Arlington cemetary and Robert E Lee. This occurs continuously throughout the US.
Posted by: Chickenpookie at
June 7, 2008 2:00 PM [link]
I Timothy 6:10 For the love of money is a root of all kinds of evil.
Posted by: QT at
June 7, 2008 2:01 PM [link]
Mike Morgan is on the front lines of the REO market in Florida. He has posted some disturbing June 5 Comments on his site about the coming wave of bank failures:
Posted by: eventhorizon at
June 7, 2008 2:02 PM [link]
GM Seed - Think about what happens when pollen from your neighbor's GM crop crosses with your heirlooms? Is this likely to improve your crop seed? I think not!
If you were by some stroke of the imagination to have an improved seed, any patent rights would belong to the company who engineered the GM seed!
Posted by: Chickenpookie at
June 7, 2008 2:19 PM [link]
"I Timothy 6:10 For the love of money is a root of all kinds of evil."
when reading this as a teenager, it was easy to read it and think you understood the point, but only in a general way...after you grow up, it's reading about men and women who have hundreds of millions and need more that it helps you understand why those in power can't stop themselves from amassing wealth at the expense of their fellow man...not to mention the effect on their own consciences...is it a 'higher' sin than, say murder-> think about it...what percentage of murders/wars can you link to the love of money?
Posted by: 2nd_ave at
June 7, 2008 2:29 PM [link]
Gold and Silver are money. Money isn't the problem, it's whether it stores value, or loses value.
Debt by it's definition cannot be wealth or store value. As I said to Casey, money (the right kind) is a battery. You work however you do, sell your lifetime, ski9lls, talents, to earn a common source of exchange and store it like a battery for future use. If it isn't a Diehard or Energizer, but is instead an inverter for HB&B, we have a problem Houston!
Suzy Orman orders it best:
"People first, then money, then things."
If we use our love of money to foster and strengthen our love of people (and the earth they live on), that is social equity, it isn't a sin.
I would say the love of money (greed) simply for the sake of getting more, without social responsiblity, is a problem. We see the fruits of that folly daily.
I have a plan should I ever be availed of such a priviledge.
Posted by: Craig at
June 7, 2008 2:34 PM [link]
Colin Twiggs comes up with another good one-liner for his diary: Crude 1 Bulls 0
target 148/bbl...
Posted by: 2nd_ave at
June 7, 2008 2:35 PM [link]
2nd: It would be easier to count those not brought about by the lust for power/money/wealth.
Way less counting.....
Posted by: Craig at
June 7, 2008 2:37 PM [link]
The Mike Morgan comments reinforce my sense that there is a significant down leg coming in the stock market in the coming months. Thanks for the link - I had not read his work before.
Posted by: krharrellnw at
June 7, 2008 2:58 PM [link]
I could feel realestate volcano pressure rising, but didn't quite have my arms around the magnitude. I can't fathom where the various fallout opportunities will occur. Poor HB&BSOBS.
Posted by: Chickenpookie at
June 7, 2008 3:17 PM [link]
foreclosures of the rich and famous:
Posted by: 2nd_ave at
June 7, 2008 3:36 PM [link]
eventhorizon
"Mike Morgan.....has posted some disturbing June 5 Comments ....about the coming wave of bank failures:"
Disturbing? That is putting it mildly. WOOOOW!
If the other states follow the path of Florida
lookout.
Thanks for the link.
Posted by: QT at
June 7, 2008 5:02 PM [link]
just installed a new firewall...testing...
Posted by: shark_attack at
June 7, 2008 6:03 PM [link]
Shark: The firewall must be working, no profanity came through!
Posted by: Chickenpookie at
June 7, 2008 6:14 PM [link]
LOL-> are you saying shark is the first person to install a firewall to stop outgoing traffic...
Posted by: 2nd_ave at
June 7, 2008 6:27 PM [link]
Just think of it! Shark may have just invented the next blockbuster software idea!
Posted by: Chickenpookie at
June 7, 2008 6:29 PM [link]
no, it's the next blockbuster self-help idea-> the key here is the user has chosen to install it himself...so it's actually an anger-management tool for bloggers...;)
Posted by: 2nd_ave at
June 7, 2008 6:36 PM [link]
ALOHA !!
Mike Morgan quite ... "The banks will fail, just as they failed in 1929 . . . but worse because this time some of this leverage is as high as 40:1. Insurance? Where is that going to come from? There is no insurance that can cover the cost of the coming bank failure, unless we just print more money."
Interesting perspective from the front lines in Florida ...
He fails to understand that the major difference between 1929 and now is the "money"! Back then we still had gold and silver money ... now we do not! He calls it a "Depression" coming but what he describes is a a "monetary crisis"! The difference is money still had value in a 1929 Depression! Imagine 1929 coupled with worthless money Weimar Republic style ... that was a "monetary crisis"! He also fails to limit the monetary crisis to just the USA! When a global fiat reserve currency fails so do the other currencies ... Here is the Denny Crane analogy: If one cow in the herd tests postive for Mad Cow do you assume the rest of the herd is perfectly healthy?
I believe Mike Morgan has it correct with respect to the entitlement mentality of most Americans. When the Russian Ruble failed Russians were used to suffering already, even though they still felt the pain. Just like the Germans were already familiar with failure(WW1) prior to the 1923 Weimar Republic. What are Americans used to? American Idol, iPods, YouTube and spa tubs in their bathrooms!
There is monetary insurance available even though Mike Morgan fails to mention that. There is real estate that will appreciate in value during a monetary crisis even though Mike Morgan does not mention that. Just don't be holding any DEBT!
Best find some producing farmland and gold!
Precisely! Now all he needs are some investors, marketing team, etc. and he's on his way!!!
Posted by: Chickenpookie at
June 7, 2008 6:52 PM [link]
LOL-> OK...(i see kaimu's exclamation points are catching on)...!!
Posted by: 2nd_ave at
June 7, 2008 7:11 PM [link]
T Boone is about to win his dinner bet-> if CT is targeting 148, then >150 intra-day is almost assured; short positions getting squeezed (how close to being right is seamus in thinking anyone making comments about an attack is long oil) are going to bail at any price once it closes in on 150...
DCR? UCR is almost the better bet until oil hits 150-> at 39.14 and good odds of hitting 40...but the ultimate 'bet' is DCR once oil breaches 150 (if that occurs before june 25)-> the spike down should rival the last moments of the spike up, but last longer...
Posted by: 2nd_ave at
June 7, 2008 7:26 PM [link]
2nd
Jim Sinclair ups it to 170
"I have not been warning you about the developments in Pakistan for two years based on imagination. My sources are people who know and have yet to be wrong.....The end of Musharraf will compete in the annals of history with the disposition of the Shah of Iran.
This is not about the in-place nukes.
Crude is going to $170 and gold to $1200 this year with sound reasoning. Globalization now poses a problem for the Authoritarian central planners.
There is absolutely nothing the Authoritarian central planners can do to prevent $170 crude and $1200 gold because markets everywhere are licking their chops for US price controls and market interference.
Posted by: QT at
June 7, 2008 8:52 PM [link]
FXP holders
This should make it take off next week.
Bloomberg:"China Lifts Banks' Reserve Requirements Up to 17.5%"
- The current requirement is 16.5 percent.
- Today's move will drain about 422 billion yuan ($60 billion) from the financial system. Local-currency deposits stood at 42.2 trillion yuan at the end of April
Posted by: QT at
June 7, 2008 8:58 PM [link]
If Pakistan is the shoe that takes crude to $170 and possibly beyond, then when real trouble starts in Iran, 25% of world oil ceases to flow pushing crude to $300/bbl. Try filling an SUV with that!!!!!
Posted by: Chickenpookie at
June 7, 2008 9:23 PM [link]
2nd - How about USO?
Posted by: Chickenpookie at
June 7, 2008 9:31 PM [link]
eventhorizon -
Thanks for the Morgan links. Mish used to post his comments once a month or so. The guy seems to know his stuff and at the time was saying that the Wall St analysts didn't know what was happening because they never left their offices; Ivy Zellman worked out of her home in Ohio. The investors that came to Florida to see apparently changed their minds pronto.
Posted by: moab at
June 7, 2008 9:41 PM [link]
What happened to the daily spin from HB&B?
Posted by: Chickenpookie at
June 7, 2008 9:41 PM [link]
Economist:
.SMALL, weak and vulnerable: hardly an accurate description of America's central bank...
...Yet the Fed's standing is in a potentially parlous state, thanks to political brinkmanship by the Democrat-controlled Senate.
http://tinyurl.com/3hoshb
Morgan has several comments on his blog how the banks are playing with disaster by outsourcing the REO process to third party crooks, the same ones who were mortgage brokers before. They are selling properties well below market value, which pulls down the market value and then the banks don't want to lend on plunging prices.
The only bank he is seeing act responsibly, and offer mortgages on their REO properties, is Fifth Third.
Posted by: moab at
June 7, 2008 10:08 PM [link]
we got a Hindenburg Omen observation Friday, June 6th. What this means is we are now on the clock for a confirming observation. Should we get a second observation within the next 36 days, it means there is a much higher than normal probability that we will get a major stock market decline over the next 120 days, with a 25 percent shot at a full blown stock market crash. 120 days takes us into the dreaded September/October period.
Posted by: onlineaces at
June 7, 2008 10:56 PM [link]
CP- too much of a contrarian to buy into strength, although buying USO might be a good move for trend players...personally, i don't think oil has much further to go...think about it-> the media is full of stories with targets of 150, 170, 200...by next week it may well escalate to higher numbers-> these are signs of a top...try to recall the headlines when gold was 1000, GOOG was 750, mortgage lenders were still standing, when JAVA was still SUNW and its resilience during the initial sell-off in the NDQ caused Cramer to pound the table for bids...even if all these positions eventually go on to new highs, they will by nature reverse out of parabolic moves...
Posted by: 2nd_ave at
June 7, 2008 11:53 PM [link]
Like I told 2nd in an e-mail, when my barber and all his clients today (there were about five people in and out) bring up gas/oil then gold and food on their own accord, it's a sign of a top.
RE Dem brinksmanship with Fed appointments?....at the end of 12 years of Republican dominated Pres/Senate/House it's the Dems to blame for the Fed pickle and they will throw the precious balance off? Probably not.
How could we miss they have been jumping ship like bankers....oh wait.....:>)
Now who wouldn't want to remain a Fed governor after overseeing the greatest currency meltdown in history? Nobody ever wants to stick around for the fun part.
Posted by: Craig at
June 8, 2008 12:55 AM [link]
Market Slides Despite Bailout Ben's Cash Carpet Bombing
http://www.box.net/shared/static/vyfq68esko.xls
I've updated the Weekly Sector Report for the week ending 06.06.08. You can access it by clicking above. A reminder that I cannot see who downloads it, and it does have macros (macros that help me accumulate and paste the data efficiently) but nothing that allows me to infiltrate your computer and steel your identity!
FLASH NEWS - Fed Gov to move to the Bahamas (but note the date). snippit from futurefeedforward.com
"U.S. Federal Government to Move Offshore
February 3, 2047
NASSAU--In a bid to cut costs and enhance security the House of Representatives voted Tuesday to approve a Senate bill relocating both Congressional bodies to an unnamed offshore banking and tax haven. "The move is sure to result in immediate cost savings to the American people," notes Senator Janet Rent (D-Calif). "By moving to a tax haven we can cut payroll costs dramatically because we can reduce salaries without reducing take-home pay." ...."
---more at link below ;)
http://tinyurl.com/5owhou
Posted by: spot at
June 8, 2008 9:48 AM [link]
craig- (with all due respect to TA..) sentiment gauges have worked quite well lately...i'm taking your observations at the barbershop seriously...
would i open a short on USO based on that- no...but i would open one on DUG...
does anyone have a link to a well-written article on the predictive value of sentiment? batting average does not need to be 1.000 for it to work, right...calling market turns based on subjective evidence would be hard to document, i suppose (but wait...did someone not post a 'bull-trap alert' on this very blog at 245pm last thursday? LOL)...
UCR/DCR- something tells me if one is able to play this seesaw just right, even one red chip could earn a significant return...exactly 13 trading days before the play terminates, and high volatility in oil prices-> that sounds like the other recipe for nitroglycerin...;)
Posted by: 2nd_ave at
June 8, 2008 10:02 AM [link]
correction to above post- i would open a position (not a short) on DUG...
Posted by: 2nd_ave at
June 8, 2008 10:02 AM [link]
Presently anticipated inflation is because of low dollar/high commodity and high oil
Not because of wages pressure.
So, if oil and commodity bubble burst and dollar move higher than anticipated inflation
Will not materialize
So fed will keep interest rate where they are for a little while longer
And market may jump 400 to 500 point in a day. I think this can happen
This is just a view of an armature person
Posted by: vinod at
June 8, 2008 10:10 AM [link]
vinod- no, i think you're right...bernanke is not going to want to raise rates...have you noticed that in most professions, it's the guy who can 'talk' his way out of a situation that earns the most respect? a variation on the 'speak softly/big stick' strategy espoused by t roosevelt...(it's true in big screen Westerns, too-> winning a gunfight without touching a gun is the ultimate show of power)...JMHO...;)
Posted by: 2nd_ave at
June 8, 2008 10:27 AM [link]
2nd
when does so called summer rally happens?
Posted by: vinod at
June 8, 2008 10:31 AM [link]
it's usually sell in may and go away...but i'll let you know if i sense one coming ;) (still looking for a ramp up in shanghai into august...who knows, when we look at beijing's decision to raise reserve requirements in the rear view mirror, it may turn out to be the first step in a slick chess game)..
Posted by: 2nd_ave at
June 8, 2008 10:41 AM [link]
2nd
I think Chinese government intention to pop up market before Olympic will not work
Like our fed they will fail
And I feel FXP is going to hit 85
Also will buy CAF to keep it for few days if it drops on Monday
Hope oil goes little higher on Monday so I can buy airline.
Will buy 3 airlines in case one of them goes under. Also looking at CCL an oil play
Will enter DUG again even though I have lost all my DUG trade
But will not give up until I hit them some day
Posted by: vinod at
June 8, 2008 10:58 AM [link]
OK- adding CCL to the watch list...
Posted by: 2nd_ave at
June 8, 2008 11:02 AM [link]
2nd
Barron has article about ethanol play and it look interesting to buy some stock mention on ethanol for speculative play
Posted by: vinod at
June 8, 2008 11:02 AM [link]
Gas hits national average of $4 for first time
Sunday June 8, 9:13 am ET
Gasoline prices hit national average of $4 for first time, expected to go higher
NEW YORK (AP) -- Drivers are paying an average of $4 for a gallon of gasoline for the first time. AAA and the Oil Price Information Service say the national average price for a gallon of regular gas rose to $4.005 overnight from $3.988. But consumers in many parts of the country have already been paying well above that price for some time.
vinod
"Will enter DUG again even though I have lost all my DUG trade But will not give up until I hit them some day"
I take it you have been in and out of DUG a few times in the past 30 days. Beware of the
"wash sale adjustment" which will effect your cost basis each time you re-enter.
Posted by: QT at
June 8, 2008 11:14 AM [link]
2nd - Forgive my lack of experience, what's the diff between UCR and USO? Both are oil up, aren't they?
Posted by: Chickenpookie at
June 8, 2008 11:14 AM [link]
2nd: I totally agree....that's why I wrote you about it. It is pure sentiment from an unknowing (naive) sample.
The other observation is of traffic vs gas price. Very low traffic at a time when it is usually quite heavy.
I noticed Gas at the local station was 4.27 reg/4.57 prem.
I brought up Ron's blog comment as a counterpoint take from Friday. That may change Monday as Bill hints with the Olmert statement. These statements have a way of being amended in time. If I was already long oil I would tighten stops and look for a short entry. I sure wouldn't chase here. DUG would be appropriate.
I had that feeling Friday. I sold my miners, SLV, QID, added to ROM and added to TBT around 70.50. The low for TBT is 68 although with very limited data and volume.
Posted by: Craig at
June 8, 2008 11:20 AM [link]
Just another squeeze on metal supplies...
"Western Australian miners, which supply the world with metals and iron ore, fear sharp falls in productivity and lay-offs after a gas-plant explosion robbed them of power, industry and local government officials said on Sunday.
"This is very serious," Reg Howard Smith, head of the state's Chamber of Minerals and Energy, said after crisis talks with some of the world's biggest resources firms, including BHP Billiton BHP..AX(BLT.L), Rio Tinto (RIO.AX)(RIO.L) and BP (BP.L).
"We're seeing some stand-downs of staff occurring and we're still deciding what needs to be done," Smith told Reuters.
Western Australia lost about a third of its energy supplies last week when an explosion crippled a gas-handling plant on the tiny island of Varanus, about 100 km (62 miles) off Australia's northwest coast. The Varanus plant, close to offshore gas fields, is operated by a unit of U.S.-based Apache Corp (APA.N)."
Posted by: fireworks at
June 8, 2008 11:34 AM [link]
cp- DCR/UCR is a relatively unique trading vehicle:
an early termination event was triggered april 16, and it will cease trading june 25...i think it was MikeNYC who described UCR/DCR as essentially an options play on oil price at this point, with a strike of 120...
Posted by: 2nd_ave at
June 8, 2008 11:38 AM [link]
cp- not to worry, though...you can get catch the next train ;)
"So an undaunted MacroMarkets will try to launch new versions of the Up and Down shares based on 2008's higher oil prices. In addition, the firm is developing a separate pair of securities tracking the cost of medical inflation.
The new generation of $100 Oil Up and $100 Oil Down shares also will be susceptible to a forced closing if oil hits $185 or more for three days, or dips below $15."
Posted by: 2nd_ave at
June 8, 2008 11:44 AM [link]
onlineaces--not to sound like a jerk or anything but I think you should have given attribution in your 10:56 post to Robert McHugh. Your post reads:
"we got a Hindenburg Omen observation Friday, June 6th. What this means is we are now on the clock for a confirming observation. Should we get a second observation within the next 36 days, it means there is a much higher than normal probability that we will get a major stock market decline over the next 120 days, with a 25 percent shot at a full blown stock market crash. 120 days takes us into the dreaded September/October period."
In an email update McHugh sent out, it reads:
"...we got a Hindenburg Omen observation Friday, June 6th. What this means is we are now on the clock for a confirming observation. Should we get a second observation within the next 36 days, it means there is a much higher than normal probability that we will get a major stock market decline over the next 120 days, with a 25 percent shot at a full blown stock market crash. 120 days takes us into the dreaded September/October period."
I'm just concerned that with it being so easy to cut and paste, credit is given (good or bad) where it is due.
Posted by: Denny at
June 8, 2008 11:51 AM [link]
craig/vinod/cp- enjoy your day...taking the scenic route to the big basin redwoods...back in time to catch the open in asia...
Posted by: 2nd_ave at
June 8, 2008 11:51 AM [link]
Correction: Added TBT at 70.80
Posted by: Craig at
June 8, 2008 11:53 AM [link]
China Lifts Banks' Reserve Requirements Up to 17.5% (Update1) http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asUcotsfSuRY
Link to article from QT's earlier post.
Posted by: Chickenpookie at
June 8, 2008 11:58 AM [link]
Enjoy 2nd. Nothing like giants to put it in perspective.
Posted by: Craig at
June 8, 2008 11:58 AM [link]
Ehud Olmert comments at the end of this past week.
In the WIR, Bill wrote: “Mr. Olmert, you take the prize this week for the second point. What bothers me is that I think these people are paid to say what they say, when they say it. If it could be proved, there would no longer be a capital market, so really I hope it’s not true. Maybe these people are just ignorant of capital markets? Do you think?”
The implication Mr. Olmert may have financial motivation to comment on aggression towards Iran nuclear facilities, may be discarded by some as hogwash. However, any intelligent individual is given pause when one considers repeated bribery allegations pending prosecutorial action involving Mr. Olmert . Below are two links of recent stories last month. You can google others. I recall another while he was in the U.S. on a diplomatic mission where he allegedly insisted an American deliver 10 k in cash to him in his hotel room.
At this point, legally just allegations, not yet proven. Is this a case of where’s there smoke, there’s . . . . . ?
[Bill Cara note: Seamus, actually I am embarrassed that I wrote that. I blog with something called free association thinking, and I rush through it as fast as I can type. Usually I don't even edit my work. Today, I had the pilot waiting to take me to Harbour Island, and he was saying, 5 minutes, 5 minutes...
In this case, however, I am aware of allegations against the Prime Minister, and possibly that set off something in my head. What I do think occurred here though is that in my mind at least -- based on 40 years experience--there has been a consistency of events like happened this week with respect to Iran and strange timing of commodity price spikes.
If I offended people, I will say I did it unawares.
Harbour Island was its usual spectacular. Beach time plus Lunch at Coral Sands, then beach time followed by snacks and pool time at Valentines. Checked out Mark Messier's place, but the kitchen was closed on Sunday. I would definitely return there. Nice people. Lovely spot. ]
Posted by: Seamus at
June 8, 2008 12:16 PM [link]
Craig
Gee, it's June and you wonder how much corn has been planted? More rain this weekend throughout the Midwest, rain of "biblical proportions" in may areas and some twisters to boot.
Heading out to take advantage of the weather before the next severe thunderstorms hits later this afternoon/early evening. Glad I don't live in the farm belt.
Posted by: Seamus at
June 8, 2008 12:24 PM [link]
2nd: Tks, I used to enjoy SC Mtn's when I was in San Jose.
Think I'll stay away from Oil this time, as the direction vector isn't clearly defined in my mind.
Posted by: Chickenpookie at
June 8, 2008 12:24 PM [link]
Seamus: more anecdotal observations....
Having to replace the thermocouple on my heating stove so went to the local appliance repair to pick it up. Comments all around from the 4-5 employees about how cool and wet the weather has been.....(hence fixing the darned stove in June) and no tomatoes or corn unless summer runs into October! More food inflation to come...
I can't believe there won't be a push on wage inflation at this point. Ben's in a tough spot.
Posted by: Craig at
June 8, 2008 12:32 PM [link]
Craig
Here's a weather map of current conditions as of 12:19 p.m. EDT (don't know if it is updated automatically) Note definition of severe thunderstorms--58 mph or higher wind, 3/4 inch hail. That's the area marked in a burnt red.
Posted by: Seamus at
June 8, 2008 12:40 PM [link]
Any public figure making such inflamatory statements such as Olmerts, surely must realize the potential impact. I'd expect he and others would be jailed (or worse) for long periods of time if Bribery were exposed.
I shrudder to think this may be an attempt at assisting a Republican candidacy, while the fuse lit by Bin-Ladden still burns, in my mind.
Posted by: Chickenpookie at
June 8, 2008 12:51 PM [link]
Off Topic Heads Up To Space Buffs:
Discovery Channel tonight is running a 3 part series [Jun 8,15,22] titled "When We Left Earth"
- because of the unexpected terrain, they landed with only 17sec of fuel left.
Posted by: QT at
June 8, 2008 1:31 PM [link]
ALOHA !!
Both Israel and BinLaden will not let the US military leave the Middle East until the US government has defaulted and the US Peso ends up in the fiat garbage can of monetary history. That is how the US government will discharge all its obligations both internationally and domestically in a similar fashion as the collapse of the USSR in the 1980's! When the Ruble collapsed the Iron Curtain collapsed ... Napolean had it wrong ... "An Army travels on its money!"
What will Israel do about Pakistan, which I have been posting here for more than year is more dangerous than Iran? I find it interesting Israel does not even speak one bad word about Pakistan, which is Islamic nuke laden country already! Why didn't Israel bomb Pakistan back before it acquired nukes? Surely Israelis must have thought of the scenario where one Islamic nuke nation might sell or give another non-nuke Islamic state a nuclear device for defense purposes.
Look, no matter how you look at the Middle East predicament it is a predicament of our own doing! This is all part and parcel of the US Foreign Policy and US Energy Policy gone awry! Nobody cared about conservation or alternative energy or Middle East dependence back when oil was under $20USD! At this point I believe we Americans would have been better off just shuting down our military after Russia collapsed and just stay out of the Middle East. Now we have a $3tril War that will give us $300USD plus oil whether we stay in Iraq or leave!
Our Founding Fathers were right all along ... KEEP GOVERNMENT SMALL!
On posting I thought I added the URL: reference to the input textbox.
https://www.technicalindicatorindex.com
but I see that is not working for some reason. I will make an explicit reference to the author next time in the posting itself. Thanks.
Posted by: onlineaces at
June 8, 2008 2:17 PM [link]
REGARDING "SPOT" AND MOVING THE FEDERAL GOVERNMENT OFFSHORE IN 2047.
A point well-made Spot.
They won't ever announce exactly what they did, when they do it. But moving the substance and wealth of the federal government offshore is probably coming a lot sooner than 2047.
Dick Cheney dumped most of his US investments a few years ago. He's almost entirely invested outside the US now. Oh, the last time I looked, he was still holding a monumental fortune in Halliburton stock options. But then Halliburton is in the procss of moving itself offshore.
(Halliburton says it has "dual headquarters" in Houston and Dubai. The chairman and CEO both reside and work in Dubai.)
You might be surprised to discover just how many US corporate profit sharing and executive compensation plans are already domiciled offshore.
Posted by: REG CROWDER at
June 8, 2008 2:33 PM [link]
I'd like to read someone's argument on why Gold is set up to tumble. In Tim Wood's audio this week, Tony Cherniowski also stated he's looking for a tumble in Au.
I just don't see how that could happen other than a short term dump by a bank. Maybe I need to adjust my mental picture of the Gold situation.
When all currencies are fiat and all of them are expanding their supply of money and credit, Gold is the only real currency left. The end game seems clear, it's just how much time until the fiat currencies are worthless.
Posted by: Aurator at
June 8, 2008 3:09 PM [link]
BLoomberg:Banks Say Auction-Rate Investors Can't Have Money
``I can't do anything,'' said Biddar, who was so eager to unlock his money that he was willing to accept 11 percent less than what he paid for the securities. ``Bank of America got me into these securities that are supposed to be as safe as a money market, and now they won't get me out.''
Bank of America, UBS AG, Wachovia Corp. and at least four dozen other firms that sold $330 billion of securities with rates set through periodic bidding are thwarting attempts to create a secondary market that would allow investors to access their cash, according to investors. Dealers claim they are saving customers from needless losses on securities they marketed as similar to cash-like instruments."
Posted by: QT at
June 8, 2008 4:05 PM [link]
West Austrailia Nat Gas Shut Off
Apache declares force majeure
PERTH (Reuters) -
Western Australian miners, which supply the world with metals and iron ore, fear sharp falls in productivity and lay-offs after a gas-plant explosion robbed them of power, industry and local government officials said on Sunday.
"This is very serious," Reg Howard Smith, head of the state's Chamber of Minerals and Energy, said after crisis talks with some of the world's biggest resources firms, including BHP Billiton BHP..AX(BLT.L), Rio Tinto (RIO.AX)(RIO.L) and BP (BP.L).
"We're seeing some stand-downs of staff occurring and we're still deciding what needs to be done," Smith told Reuters.
Western Australia lost about a third of its energy supplies last week when an explosion crippled a gas-handling plant on the tiny island of Varanus, about 100 km (62 miles) off Australia's northwest coast. The Varanus plant, close to offshore gas fields, is operated by a unit of U.S.-based Apache Corp (APA.N).
Tim Wall, managing director of Apache's Australian unit, said on Sunday he was sticking with an earlier estimate of "months, not weeks" before damage to the plant and associated gas pipelines was repaired and operations could restart.
Western Australia's state government is trying to import more diesel from Asia to offset the drop in gas supplies, state premier Alan Carpenter said, noting that BP, which operates a diesel refinery in the state, was already at maximum production.
But getting diesel to remote, outback mines could take time.
"There is no wand to make this crisis disappear," Carpenter told reporters on Sunday. "It's one thing to get the diesel here on ships and another to where it's needed by truck."
Western Australia supplies about a third of the world's iron ore, 20 percent of the gold and tens of thousands of tonnes of copper, nickel, zinc, lead and other industrial staples.
Carpenter said stepped-up gas production from other gas suppliers would help but it could not eliminate the problem.
Smith of the Chamber of Minerals and Energy said large sectors of industry hurt by the shortage could expect little if any relief, even if more diesel arrived.
"There are large parts of our industry that are involved in processing, where there is no substitution for the gas they need," he said.
Nickel smelting and refining had been among the hardest hit, since those operations can only run on gas, Smith added.
BHP runs the Kalgoorlie nickel smelter in Western Australia, one of the world's largest, churning out 100,000 tonnes of the steel-alloying metal each year. A BHP refinery 800 km (500 miles) away, near Perth, refines a further 65,000 tonnes annually.
"This comes at a very critical time for the nickel miners, who are struggling to keep on top of demand," said Eagle Mining Research analyst Keith Goode.
"The impact on supply is still not clear."
BHP said late last week it was so far coping by conserving gas and finding other suppliers, though another nickel miner, Minara Resources Ltd (MRE.AX), which produces about 33,000 tonnes of nickel annually, said employees normally working on making nickel had switched to plant maintenance during the crisis.
Other industries also dependent on gas for production included ammonium nitrate for explosives, cyanide used in gold mining and other key parts of the mining process, Smith said.
"Those issues of how to keep up are going to take a long time to work through," Smith said.
Western Australia's biggest source of gas supply was cut off after two pipelines feeding offshore gas ruptured, causing an explosion at the Varanus island plant. Apache has since invoked a force majeure clause in its contracts.
Posted by: astral25 at
June 8, 2008 4:32 PM [link]
Gallup polls indicate that the GOP's popularity is highly correlated with the price of gold since 2000.
If one ignores the party's ratings around September 2001 during a period of broad unity in a time of crisis, the GOP's popularity has steadily declined from roughly 50% in 2000 when gold traded at $275, to 40% in early 2005 when gold traded near $425, and now to an astonishing 18% as gold trades around $850. Interestingly, Gallup statistics indicate that this decline accelerated after 2005 as gold's ascent accelerated, breaching a benign $425 level to what are now levels signaling inflation. Of course, the rise in oil, food and mostly all commodities - the living costs greatly affecting consumers - have risen in tandem with gold, as the classical Law of One Price would predict.
Aurator - I've been giving this subject a great deal of consideration too. As Bill said in his WIW, which you probably read:
"my belief is that the rush from equities into bonds will drive down yields one more time at least, which rallies the bond prices, and on any extreme trade where bonds hit a high price –even a lower high in a bond Bear—that is the time to sell the bonds. Simultaneously, I anticipate a stronger $USD, which would drive down $GOLD, presenting an opportunity for long-term oriented traders to buy."
Reminds me of a lesson in engineering where we learned about how intersymbol interference caused envelope delay distortion.
Anyway, I think the TOG requires staying one step ahead of the game, and works kinda like a slinky. Here's how I interpret:
1) Investors will flee from shaky equities market and enter bond market, driving up bond prices (sell bonds, before bond bubble pops, timing unknown).
2) As Bond prices rise from flight to safety, rates drop (well established).
3) As Bond rates decrease, the USD weakens (well established).
4) Collapse in oil bubble, USD strengthens. (Greater magnitude than #3?)
5) As the USD strengthens, USD/gold drops (well established, buy Gold while price is down).
6) USD Bubble normalizes (Pops?), Gold increases (Rockets?).
Not sure if this is exactly as Bill is describing, still working to assemble the puzzle.
Posted by: Chickenpookie at
June 8, 2008 5:56 PM [link]
Today was the first day I've heard Sinclair mention any notion of actually selling gold! Wonder what he means by fishing line. I'm only familiar with that big ball of monofiliment out in the garage. Finally, we get to put the black boxes to work!
"For the aggressive investor buy every dip in gold that on the charts appear as a fishing lin. Sell 1/3 on every Rhino horn up. So far from $248 it hasn't been too shabby an approach. You need no black boxes in gold. Let them work for you. NO margin please!"
Posted by: Chickenpookie at
June 8, 2008 6:38 PM [link]
Fiat currencies will never become totally worthless so long as there is a wildly uneven distribution of them across the social strata, and providing that the masses remain limited in their ability to acquire them.
Posted by: shark_attack at
June 8, 2008 6:40 PM [link]
ALOHA !!
Chickenpookie ... Sinclair has had that same strategy for years! It is not the first time he has ever said sell 1/3 on every Rhino horn ...
A monetary crisis would totally negate items 1-6! This is what nobody has plans for ... not in the mainstream media, not the US Congress, not 98% of blogs and not 99% or talk radio! I'd say 99.7% of Americans have no plans for anything other than their next day off!
The more Americans and their money are put into "lock down" mode by the US government the closer we will get to a monetary crisis! Watch the private jets ... When you see Cheney carrying his blow-up doll and shotgun headed for Dubai ... thats the SIGNAL!
As Richard Maybury has speculated at that point of a monetary crisis the US governemnt will announce two US Pesos. One for the masses and one for foreign trade and foreign banks backed by "We The People's" gold. The US citizens will get the worthless Peso while the elite get the one backed by gold(our gold)...
Shark, just how much fiat worthlessness are you personally willing to settle for? Just say "When"!
Plan for the worst and pray for the best!
GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...
Kaimu - Thanks for the positive feedback. As you pointed out just yesterday, it can be difficult to interpret the often vague expressions traded back and forth.
Posted by: Chickenpookie at
June 8, 2008 7:45 PM [link]
ALOHA !!
This was also on Jim Sinclair's website about PUTIN JR blaming the US for the global problems in finance and money! Sad to say but he is correct ...
Check out this part ...
"Failure by the biggest financial firms in the world to adequately take risk into account, coupled with the aggressive financial policies of the biggest economy in the world, have led not only to corporate losses," Medvedev told Russia's main annual event for international investors in St Petersburg.
"Most people on the planet have become poorer."
The Kremlin leader said investment by cash-rich Russian companies abroad, promotion of Moscow as a major financial centre and use of the ruble as a reserve currency were part of the answer."
WOW ... he wants the Ruble to be a reserve currency. I also posted last year saying that Russia and Putin want revenge against the USA and they were making way for their financial markets and their currency. Well, some currency has to take the place of the US Peso once we fail. I think PUTIN JR. is stating publicly that he believes the USA is headed for a monetary crisis or else why would he offer up the Russian Ruble as the new reserve currency? I wonder what China has to say about that? There's your first "red" flag direct from the leader of Russia! If any country knows what a monetary crisis looks like its Russia!
Believe me the rest of the World is not blind ...
ALOHA !!
"Most people on the planet have become poorer."
Obviously, PUTIN JR. knows how fiat currencies coupled with government corruption works!
Kaimu - I think I've got your strategy covered in #6, isn't a normalized USD truly in the eye of the beholder? If you believe the USD has or will have no value, then you must plan accordingly. For instance, I horded nothing in preparation for the turn of the millenium except for personal skill. Personal skill has served me well all my life. I can see economic struggle down the road now, but mostly relating to the HB&BSOBS attempting to wriggle their way out of their situation and into our pockets. IMO, they've been stealing from us for too long and I won't wish them a happy birthday or Merry Christmas until they come clean.
Posted by: Chickenpookie at
June 8, 2008 8:18 PM [link]
ALOHA !!
To view how the diminished lifestyle in the USA might look like, here is a farmer based in South Africa talking about infrastructure. As you read this and say in your mind ... "Oh, that's in South Africa not here!" Recall the bridge collapses last year and also note the antiquated power grid here in the USA and how we have not had a major refinery built in over 30 years. We have plenty of Humvees and bullets right now though! Bombs or bread? You can't have both ...
Wait until the Unions start to strike for higher wages. Most of our infrastructure is serviced by Union workers including mail and Police and Firemen. US government workers are all unionized and so are State and County and City workers. It's on the near term horizon ... along with the baby-boomers trying to retire!
READ ON:
SOUTH AFRICA IN THE PREMATURE LONG EMERGENCY
February 4, 2008
It began with a few potholes in the roads, the odd interruption to the water supply in the suburbs, a couple of days with strike action preventing the delivery of municipal services – no garbage collection, protest action disrupting the mining industry and picketing & toy toying at shopping malls…It continued over the next couple of years, largely with disregard for the disruptions, a little irritation to daily commercial and home life by the lack of service provision in food, gas, water and power.
In recent months, at the receivables end of the supply chain, there was a little aggravation at the delays, the lack of service, the shortage of a few consumer luxuries in the retail shops…, ‘but hey, what the hell, this is a great country, we cannot fault the lifestyle, the weather…’. For a couple of months, perhaps a year back or so, there seemed little or no reason to change our way of life, our lifestyles…a little further down the road and the disruptions become more frequent, we learn to cope, learn to accept the rising cost of living, gas supply shortages in the Winter of 2007, the intermittent water disruptions, the odd power outage and the potholes. Potholes may well be the singular measure of the calamity we are in or about to face.
We accept the transitions in South Africa, but it is all very well passing over these problems in the name of development, infrastructure development, greater housing plans and urbanization as a promised deliverable by the ANC government, together with the balancing of the wealth quotient. Access to finance and the shift of the material wealth are an indication of the success of the plans for economic growth in the New South Africa.(more)
Link: http://tinyurl.com/5atgkk
Your fiat monetary system at work ... making the World a little poorer ... a little more unsafe!
9:18 EST
All Asia markets open at this time are down...
Nikkei
NZSE 50
Straits Times
Seoul Composite
Taiwan Weighted
Bet you there will be blood in the streets tomorrow.
Posted by: QT at
June 8, 2008 9:22 PM [link]
OT - its a Sunday, and I suspect most of us aren't active in overseas markets, so I could use a little personal advice. I'm fast approaching my 65th birthday, and must decide on the best approach to handling those costs that Medicare won't cover. Does anyone have any experience or advice please - living in Northern California which of course affects the plans offered.
TIA
Posted by: cyderman at
June 8, 2008 9:27 PM [link]
June 9 (Bloomberg)
Goldman forecasts that two-year yields will fall to 1.9 percent by year-end, while Lehman expects 1.8 percent. The median estimate of 49 economists and strategists surveyed by Bloomberg is for 2.24 percent. In September 2001, when the fed funds rate was 3 percent both firms correctly foresaw that it would decline to at least 2 percent. The median forecast was 2.5 percent
does not look loke TBT is a good bet right now?
Posted by: vinod at
June 8, 2008 9:44 PM [link]
vinod- keep in mind that whereas short-term rates are set by the Fed, long-term rates are determined by the marketplace, and a lowering of short-term rates may or may not have an appreciable effect on the long bond, which is what you're shorting with TBT...
QT- i don't know what the correlation is between an overnight drop in Asia and a gap down in the US the following day, but i suspect it's not high...we've seen this movie many times, where steep drops in japan and china lead to..gap ups in the US! of course, pre-market intervention accounted for a couple of those. the drops you're seeing right now are probably reactions to the drop in US indexes last friday. not to say there will not be a gap down monday (holding QID/SMN myself), just pointing out there are no reliable indicators 12 hours before the open...in fact, one of the most bearish set-ups i know is a small gap up in the first 30 minutes that gets sold off hard...good luck tomorrow...
Posted by: 2nd_ave at
June 8, 2008 10:12 PM [link]
cyderman- does your employer offer post-retirement health-care benefits?
Posted by: 2nd_ave at
June 8, 2008 10:21 PM [link]
"Markets in Australia, China, Hong Kong and the Philippines were closed for a public holiday." btw
Posted by: 2nd_ave at
June 8, 2008 10:38 PM [link]
Georgetown University Health Policy Institute's consumer guide to health insurance for the state of California (summarizing rights and protections) can be downloaded (general information only, of course):
Posted by: 2nd_ave at
June 8, 2008 10:53 PM [link]
2nd,
No, been "retired" for a few years now. Currently just carry high deductible medical, so paying most of my bills directly. I'm trying to decide between a "traditional" medigap policy, a "medicare advantage" which is a sort of all-inclusive package, and a private insurance "fee for service" type. All complicated by Medicare part D, the drug coverage plan which itself is not mandatory, but gets more expensive the longer you defer joining. I'm going to a presentation on Tuesday on the AARP sponsored advantage program. Its at Marie Calendar's - whoopeee -but they're smart, its after lunch!
Posted by: cyderman at
June 8, 2008 11:01 PM [link]
2nd, thanks again, you type faster than me.
Posted by: cyderman at
June 8, 2008 11:03 PM [link]
Gold futures prices - anyone know of a website that keeps track of whether gold is in backwardation or contango. (Fransix, where are you???) I've been pondering the Don Coxe perspective about this indicating that stuff in the ground is worth more and so reflecting future real demand. But contango should be normal for gold, because of the cost of storage (though that should be reflected in a fairly consistent increment each month). So if we were to see a significant increase in the slope of the contango, we might be able to use that as an indicator for a change in prospects for the junior miners. Hope I don't have the terms backwards :-)
Posted by: cyderman at
June 8, 2008 11:27 PM [link]
You've all heard of the skirt length indicator for the direction of the stock market. I'm beginning to think there's a way to tell from hair styles too...
Posted by: Aurator at
June 8, 2008 11:54 PM [link]
"The impact on supply (nickel) is still not clear."
astral25 at June 8, 2008 4:32 PM
Anyone think PAAS and SSRI may rise due to energy troubles in W. Australia?
Brimelow:
...But Friday, of course, saw the bears massacred. Gold rose $23.50, blowing Gartman ignominiously out of its stop. And this was only the quiet part of a sweeping commodity rally, led by oil. As the Privateer pointed out: "The oil price rise on June 6 was its biggest one-day rise ever in simple dollar terms. In two days, it rose 13.3%. To put this in perspective, had gold risen by a similar percentage amount over June 5-6, it would have closed the week this week at $992 instead of $US 899." ...
Posted by: Aurator at
June 9, 2008 12:02 AM [link]
Photo: Hope so since I own both. We might see a buying opp for BHP if the outage is bad enough.
Posted by: Aurator at
June 9, 2008 12:04 AM [link]
Gold is back to $901.
Posted by: Aurator at
June 9, 2008 12:13 AM [link]
ALOHA !!
Going back to the Bush FY 2009 Budget there are three line items that essentially account for $1.1trilUSD in spending. There is the line item for the interest on the National Debt, near $450bil and there is the line item for DOD $585bilUSD and Homeland Security for $65bilUSD. Right off the bat before we bailout any Bear Stearns or CountryWide, before we spend a dime on Iraq or a dime on infrastructure or a dime on Medicare or Social Security benefits we are in the hole by $1.1trilUSD ... I believe that is why the GAO-US Comptroller General, Mr. D Walker quit! He did his best to stand on top of the Capital Rotunda and yell out a warning, even on 60 Minutes, but obviously the usual suspects were gleefully deaf and dumb for the record! The same deaf and dumb are now running for President ...
Now this ...
FED TO COUNTRYWIDE
"Why is it that the $2 billion investment by Bank of America in Countrywide was front page news in August while the company’s new $12 billion financing is buried on the business pages? Isn’t it funny, too, that Countrywide didn’t specify who is providing all that money, saying only that it comes from "new or existing credit lines." There was no comment, either, on the credit or interest terms—this for $12 billion! It makes me suspect that Countrywide’s new angel isn’t the B of A, but rather the B of B; the Bank of Bernanke."
Well, it looks like it was indeed the Bank of Bernanke that facilitated this little-reported deal. In the May 30 WSJ there is a profile of Fed New York Bank Governor Timothy Geithner. Of course, the article is highly laudatory of the Fed Governor but, as often happens in these pieces, it slips in some interesting details like this one, "In August, Mr. Geithner mediated a dispute between mortgage lender Countrywide Financial Corp. and Bank of New York Mellon that could have cut off Countrywide’s access to vital short-term credit."1 So now we know how Countrywide suddenly "found" its new capital.
FROM DAVOS
Not surprisingly, as the Fed started handing out money to the commercial banks, the, "Investment banks, which weren’t entitled to such loans…began asking Mr. Geithner to persuade Mr. Bernanke to open the discount window to them as well." So Governors Geithner, Bernanke, et al, broke Fed precedent and stretched the law to benefit their confreres on the Street.
The article also explicitly confirms the Fed’s priorities—putting financial stability ahead of fighting inflation. "Mr. Geithner flew to Davos, Switzerland for the annual World Economic Forum…In a closed-door session for central bankers and academics, Mr. Geithner forcefully defended it (rate cuts).
According to people who were in the room, he said that the Fed had to "buy a significant amount of insurance" against a "rising probability of a really bad macroeconomic outcome." He didn’t deny that steep rate cuts risked fueling inflation. "The choice," he said, "is between which mistake is easier to correct: underdoing it or overdoing it."
To Attendees, the message was clear: The Fed would do whatever it took to avert a financial meltdown. Inflation would be dealt with later."
Midas 6/6/08
ALOHA !!
If CountryWide can roll up to the FED's discount window I want to! I mean ... who's next ... the Bank Of China?
Good morning.
There are NO Cara 100 Ratings Changes to report at this time.
---------------------------------------------------
Have a great day.
Posted by: Bull Hunter at
June 9, 2008 8:03 AM [link]
Kaimu - Have you considered Countrywide, etc. may be getting their financing from China? I'm wondering...
Posted by: Chickenpookie at
June 9, 2008 8:05 AM [link]
Why wonder guys? WE are backed by debt, so whatever Ben allocates whereever is borrowed from China. American capitalists don't have any capital.
Posted by: Craig at
June 9, 2008 8:30 AM [link]
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Lying Eyes and the Financial Markets.
Have a good one.
Ron
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at
June 7, 2008 8:19 AM [link]