Good morning.

There are NO Cara 100 Ratings Changes to report at this time.

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

Have a great day.

[Bill Cara note: With spot precious metals prices under attack this morning -- gold down to a low so far of 857 -- I have to think that maybe there will be some analyst downgrades forthcoming in the major goldminer group.]

A new high, or low, of manipulation was hit today in the overnight futures. The USD/JPY and the USD/CHF had fantastic jumps, with another shakeout spike coming in at 8:30. The one week and the two day graphs of both pairs might are almost identical. Except that the EUR/CHF is confirming the carry trade, way down, while the EUR/JPY is not, flat. Who and why would buy the USD a day after a big uptick in the current account deficit. And why are the AUD and NZD flat, the high interest currencies that actually make sense as carry trades. The talk of the strong dollar was denied by the market yesterday, with the dollar falling. All this action came in overnight. Why use the carry trade for the the USD/JPY and not the EUR/JPY? OF course the US futures markets got a huge bounce from this mmanipulation overnight and today the economic reports will be distorted by the Bimbo TV crowd. The huge downwave rolling from the US into Asia and then into Europe was stopped in Europe. How often does this happen? Never. The wave that starts here has always stopped here or continued. It appears that the Swiis bank is now co=operating with the manipulators at the Fed. A new low in financial integrity and more lies for traders to fight. My answer is to get out of the way of my short positions in the US market this morning, if there is sustained buying, and reshort the CHF and JPY when the lie runs out of gas in the volume this morning. Overall, less and less reason to stay in the market. Perhaps the physical gold guys are onto something.

it's the mirror image of yesterday's open..

Looking @ YHOO & ETFC at the open....
Will sell both by the close today....

DGP on the watchlist...

[Bill Cara note: European bourses are taking big hits in the past couple minutes... LEH just fired CFO and COO... trouble in this "solid" bank? (LOL)]

(off topic) made the mistake of watching "Nanking" last night...inspired by Iris Chang's "The Rape of Nanking," which catapaulted her to best-selling author status in 1997. This beautiful and talented writer later committed suicide in 2004 while researching the Death March of Bataan. After watching the film, I can imagine how immersing yourself in those kinds of events could push you over the edge. If you find yourself feeling too good and need to sober up fast, this documentary is guaranteed to do it...I would highly recommend the DVD, however...

[Bill Cara note: Traders who suffer from what I call Credulity Syndrome would be well served to follow your advice. We can only enjoy the beauty of life when we understand its ugliness. Traders can only build portfolio wealth when they understand and can manage risk.]

On a different tack ,today is the day we find out if the Irish voters in the Lisbon treaty referendum will save us in the UK. The other 26 nations in the EU have not allowed there citizens to vote on the Treaty. Gordon Brown reneged on his promise to give us here in the UK a vote, in a referendum on the issue . If the Irish vote yes to the treaty then it will be welcome to the EUSSR run by unelected Brussels Bureaucrats.

There has to be a very serious global bond rout if the Euro area yield curve looks like this:

http://www.ecb.int/stats/money/yc/html/index.en.html

Bill, if a tragic sense of life is what I needed to make money trading.. ah well. I have some to spare for anyone that needs it.

John, how popular is Gordon Brown now?

The manipulation becomes clear. Lehman is dying, firing their management. The market should be down 120 right now, instead of up.

But c'mon, firing executives means you are getting rid of the problems! Onward & upward! "Combined with a bold curiosity for the adventure ahead!"

Morgan Stanley has upgraded financials and downgraded energy today. Does any believe these people anymore?

Oh, and UBS, home to one of the most disastrously wrong home builder analysts, Margaret Whelan, this morning upgraded dying home builder Ryland Group (RYL).

Bagholders delight.

Chickenpookie, New Labour popularity under Gordon Brown is now the lowest according to a recent poll since 1943.I think that gives you an idea of his standing.

should have taken the LEH trade...it was foreseeable the gap down would be bought...

adding to CAF-> (one of the few times i've been tempted to add on strength)...

Dave- did you pick up FXI at eod yesterday?

The Baltic Dry Index (BDI) dropped 963 points today.This makes a 1500 pt. drop in 10 days.
The BDI reflects shipping rates for dry bulk shipping for things stuff like iron ore and those kinds of commodities. Sometimes it is an early indicator of economic downturn because shipping rates drop with a drop in demand. At this point, I'm not sure what it means but a 963 point drop in one day is significant and something you may want to keep an eye on.

now above water on the refiners...

Unemployment up, imported cost of goods up, major brokerage house on the skids and the market reacts to higher consumer spending which is just a bigger deficit for the Trasury to fund. Today is the clearest proof that the markets have been taken over by non-economic entities. There is no way in the world that this is anything other than blatant manipulation of prices by the PPT.

Watermelon - I noticed yesterday that rail was coming to a screeching halt also.

Jumping back into FXP (1/2 position)

HSI was down 7 straight days, so it might run up another day. Maybe I can buy lower next week.

Fran6 - Glad to see your comment. Haven't seen you around for a few.

Too bad I didn't buy FXI yesterday. So, is today's rally to front-run the damage tomorrow from CPI or was yesterday a short-term bottom?

Any opinions?

Too bad I didn't realize I was trading with the crowd when I expected the FED to forestall any Bear-like events with LEH and others. Looks like the put holders won big on this one even though puts/calls were selling three to one.

The obvious trade was to short it as the put holders scored huge on Bear. So, will the obvious keep working? The next rumors that come up about Goldman or Merrill should that be a sign to load up on puts? Or the next time some broker raises their price target on Oil should that be a sign to load up on USO?

I find it very hard to figure out which side is the against the crowd trade lately.

Rob.

b0ss- your timing has been impeccable..

bigwad - I hope your selling YHOO in the black, cause I think it will come back.

Rob. short anything you feel like shorting. Short the dollar, short the eur/jpy. This is blatant manipulation.

Nice report from Capital Gold today - profitable junior making money from ore less than 1gm/ton in Mexico. Still has a chunk of forward sales to work off (to their bank, no less, surprise!!!) but they limited the damage to $35/oz by buying offsetting calls. I think these people are smart operators. Long CGLD

FL - I'm convinced we'll see many days like yesterday over the remainder of this year and the CPI won't be pretty. The spin doctors will continue setting up head fakes.

SurpLIEs!!!

continuing to add to dgp

I've been thinking a lot lately about daytrading in a particular style, fading big upmoves at key turnaround times. Watched like a stupid idiot as LEH zoomed up, but had no hesitancy going short near the high and covering in the low $23.40's. Will look for possible top (again).

Shark - I'm way too slow for that. I'm just buying dips and selling peaks. Can't deal with the inverse head-fakes.

I would be interested in the thoughs this board has on the following trade: Short Oil and go long Gold. The Gold - Oil ratio is near a 30 yr. low of 6.4 (it hit 6.15 in 09/05).

http://tinyurl.com/5nduxd

If I were to execute this trade without using futures, how would I do it. My thought; short USO and buy GLD. Any other thoughts? Thanks!!

dcr baby

If this is manipulation then use it to your advantage. It lets you short higher and with less risk as stocks rally back to breakdown points. The more volatility the better.

Thing is, and this is the last time I will say it, I'm gonna fade rallys from now on,,,but I may bo long DCR if oil keeps a droppin

IMO Might be a good time to short financials (me:no position). Buying gold now is a good option (me:Lots already).
Demand destruction is setting in on oil, so shorting might work if you stay on it like a hawk
(me:no position). Personally, I don't see oil going to $100 this year, but I also didn't see gold going back to $860...

My strategy: buy and sell quality stocks on dips and peaks.

2nd
Question: You mention the gold ETN "DGP" above which is by "invesco power shares" correct?
When I go to their web page I can only find "DGL". Can you steer me in the right direction here. I would like to read up on it.
Thanks.

QT- try this and see if gets you anywhere:

http://tinyurl.com/6bsv8x

ChicagoMark, it can be difficult in intermarket spreads (oil/gold in this instance) to get the proper ratios. Also the chart you reference is very long term in nature. If you are putting a trade on for a briefer period, it would be good to see the spread over a similar timeframe. I have no big opinion about the particular trade you speak of because I haven't properly analyzed it, but a lot depends on your style and your overall portfolio.

2nd

Not sure if it is "Xie xie" or "Toa chie" but I'm sure you know what I mean! :-)

anyone short aapl on steve job illness rumors?

2nd - yes I got back into the FXI 2x long at eod yesterday. Doing well now - however, recall my original condition for holding onto the trade was that it needs to move up above 140 -- notice where it held today - 139.99....

So I'm waiting to see how we close today before deciding how long I stay with the trade.

Dave

This entire year the play has been to go short on Thursday since about 21 out of 24 Fridays have been down days. This is particularly true on up Thursdays.

A possible risk to this is if there is a sharp drop in the price of oil, which could cause the market to go up. Can the markets go up and oil go up? Unlikely.

My plan for tomorrow is to buy SDS calls hedged by some USO puts today.

Chickenpookie
Re: Short Financial's

My thoughts exactly! I think I had a quick back and forth with Finger Lakes a week or so back about there being a rush of "good news" about banks and a possible upswing. Maybe a great time to reload on some cheap puts.

Banks are dying. I'm preaching to the choir but have faith during these little moments. With Bill's CMRE commentary ,in addition to regulators forcing SIV's back onto the balance sheet, there is no feasible way (outside of a miracle sovereign fund bailout) for banks to stay afloat. Putting these securities back on the books is going to really dry up liquidity.

I'm actually starting to like these little upswings! Great time to reload on the cheap (though you have to stomach a swath of red in your portfolio for a day). Thanks HB&B!

Will see you after a week. Vacation time

2nd
Getting out of all position, most are in green, couple is red,
Doing good on oex 610 July call and out of it
Have a wonderful trading

long pal at 5

Have fun on vacation Vinod.

What do people think?

If CPI shows a "good" number tomorrow does the dollar strengthen or weaken? how about stocks?

What if CPI shows a "bad" number?

My guess is that the BS labor stastics will show a "good" CPI number which will lower the dollar and boost oil and the market will rally then fade into the close. Because everyone knows the only way Ben will raise rates is if he has to. And the dollar has been rising this whole time thinking he will raise soon.

If the CPI shows a bad number it will be easier for him to look like he really will raise rates and that will strengthen the dollar further, weakening commodities while the market rallies.

Rob.

2nd
What I am hearing is very controversial so I did not post it. Also do not understand currency market
But here it is

It been decided by us and European central bank to up the dollar and they all may be buying dollars and selling euro and yen
Inflation thing is temporary and they all will talk about it but will not raise the rate

Financial are in mess and it will create more problem by raising rate

So, some say no problem with inflation and everyone hope that time will solve problem with HB&B

While older trader will agree with BILL and do expect that we will go under 10000
In this regard they think Bill is conservative about this
Once a while their advise about OEX play help me a lot.
Decided to take week off, do not want to lose what I made.
I am close to my goal

vinod- well, if the ECB will be supporting the dollar, and that the 'inflation thing is temporary,' then oil is definitely on the way down...

Low volume bounce. Looks like it could come apart any minute if someone decides to sell in volume.

Todd Harrison's gut tells him Lehman will not survive the weekend with Goldman (!) being the only viable suitor.

...and refiners are on the way back up...

Allen

I picked up more FXP at noon @78.80.

Still holding?

Has anyone pondered the latest situation with the nonborrowed reserves at the Fed, which are now negative and THREE times bigger in magnitude than the total reserves? http://federalreserve.gov/releases/h3/Current/

Does anyone have a good understanding of what this means?

DavidV

huh, guyana goldfields has been one of my dogs for a while now, and had a bit of a moon shot an hour ago, up 7% on mildly higher volume...

curious to see if some news hits the wires post-rally as seems to be the norm.

[Bill Cara note: Actually you are referring I think to Guyana Gold (GYGC.PK) and not to Guyana Goldfields (GUYFF.PK and GUY.TO), which is one of my favorites in Guyana. I don't know anything about GYGC other than the name is not Guyana Goldfields.]

a little digging found this:

"Guyana Gold Corp. (OTC:GYGC) closed at $0.42 Wednesday, trading 337,383 shares.

Company News- June 12, 2008: Guyana Gold Corp. Receives Proposal for Joint Venture to Develop Port Kaituma Gold Project

Guyana Gold Corp. (OTC:GYGC-News) is pleased to have reported earlier today that it has received a joint venture proposal to develop the Port Kaituma Gold Project. The proposal would expand the company's land position and increase the scale of the Port Kaituma project. Guyana Gold Corp. had received a number of joint processing proposals and has now expanded those proposals to include ownership in the Port Kaituma project. Guyana Gold Corp.'s plans are to build a modern processing facility at Port Kaituma with far greater recovery rates of gold. The new joint ownership presents an excellent opportunity for Guyana Gold Corp. to increase revenue, expand mine life and accelerate the capital recovery costs of modernizing the Port Kaituma mine.... "

http://tinyurl.com/6rhlsh

Crude is almost back to even while the dollar is holding up. Gold has come back a long way too. It seems like everyone expects the dollar to crash tomorrow and commodities to rise after the CPI report.

Rob.

I suppose what we're saying is if dollar is propped up this will bring crude down, then inflation will be kept under control and prime rate won't have to be increased. This will keep market up and increase chances for HB&B recovery plan. Is HB&B recovery plan the fly in the ointment?

I can now envision the CPI spin: "Prices are up, however less than anticipated and only temporarily".

Vinod, nice 12.55 post. Thanks.

QT, sold 50% yesterday, am holding remainder until a major move in FXP occurs. If it drops back into the 60s, I may increase my position by 500 or so shares.

Also hold GXEXF.PK, NOT.V, TBT and RRPIX, plus cash (and farm land...).

Don't have much appetite for trading right now given the unpredictable volitility.

Thanks for the post Vinod. Have a good vacation.

Growing concern over inflation in the U.S. led fixed and adjustable rate mortgages strongly upward this week, according to data released Thursday morning by Freddie Mac . The average rate on a 30-year fixed rate mortgage rose 23 basis points to 6.32 percent, with an average 0.7 point, for the week ended June 12; last year, 30-year FRMs averaged 6.74 percent, Freddie said.

Spin? $50 bln economic boost yields 80 point market increase.

QID holders should be encouraged, as the price is basically flat in an up market.

FXP-> mentioned last week i had a colleague riding in that boat...fwiw, he's bailing now at around 80...

In case some of you missed it. Mr Cara posted this response to my 4:03 post yesterday.

"[Bill Cara note: Dow=12200 was given up by the Bulls who are now in retreat to 11700.]

Posted by: QT at June 11, 2008 4:03 PM"

Looks like the Bulls are struggling again today.

2nd he did well for himself - nice exit IMO. I'm going ot have to wait and see what the close today on FXI looks like to determine if I hold my 2X position. FXI does appear to be relatively stronger today than the major US indices...

Dave

SMN has also held up well today despite the upward market move and a relatively good day for MON which makes up a large part of the index that SMN is 2X shorting. Looks like an upwards sloping wedge formed over the last 3-days and that a breakout could be coming soon - watching action at the close - bought SMN July 30 Call @ 1.55

They're Red Bulls

What's up with GE & the SPY?

4M shares in GE last hour.

airlines going into a nosedive...

QT - I saw Bill's comment re DOW 12,200 yesterday, so I looked at the DOW chart again. I couldn't really see the reason for 12,200 being a critical point.

Bill or others - could you help me understand the DOW 12,200 reasoning? TIA

Dave

2nd "airlines going into a nosedive" - not a nice mental picture for those of us that fly a lot...

Dave

feels like capitulation in UAUA/DAL/NWA-> preparing to go to 40% allocation in UAUA, open positions in DAL/NWA...

DavidB

Others like Colin Twiggs has note 12,200 as support as in his diary post today.

"The Dow broke through short-term support at 12200 and is headed for a test of primary support at 11750. Twiggs Money Flow fell below -0.05 warning of abnormal selling pressure. Failure of support would offer a target of 11000."

Cardinal rule of flying: The number of landings must equal the number of take-offs.

Glenn Tilton not having a good day:

http://tinyurl.com/43nxvn

"It was a raucous gathering Thursday in Woodland Hills, Calif., as airline workers shouted questions at UAL Corp. Chairman and CEO Glenn Tilton. Boos and hisses erupted when it was announced all the current directors were re-elected."

you need to specify 'safe' landings...

The number of landings must equal the number of take-offs.

That's a fact - they are always equal. It's the quality of the landings that I care about...

Dave

adding to UAUA at 6.25...

Biting more yahoo...

A personal note to the airlines posts. We are going to Peru the end of the month and received the following email last night:
"dEAR bOB:
Aerocondor Peru has announced the temporary suspending of the Domestics Flights due the increase of the petroleum.
This situation require to cancel all the reservations was made and refund of your money .

For that reason I will sent to you YOUR CHECK:"

I started making reservations on other airlines last night at 1:00 a.m. and hope there are planes that are going to take off (as well as land) when we get there.

Today seems to indicate that there is no demand for stocks.

GE - a bellwhether - is under the 30 support level which goes back to 2004. Thanks for pointing out the action in GE.

Collapse into the close?

DB downgrades CMG.

A day late, as I outlined the technical and fundamental case for the short side two nights and 6% of market cap ago. 6%, so far, that is.

It won't be long before they re-revise their opinion, as their $90 price target is already toast.

"My kingdom for a tomato!"

I'm banking on another gap up tomorrow in GE with a fade into the weekend... anyone want to bet on that one?

Correction: DB maintains HOLD for CMG and lowers the price 'target' from 105 to 90.

Why you'd 'hold' something with a lower price target is pretty much beyond me. I guess that's why I'm not working on Wall Street. And why I'm 'holding' my working CMG puts.

V Sold and took profits on V after today’s move up. Prefer swing trading, but we’re in a different climate.

Thinking of Bill’s “Lessons”, the series of waves, tide rising and ebbing. The tide is ebbing overall. As Si02 has mentioned, Fridays have been down way more than up.

Re: Inflation

Bonds dropping may not be signalling inflation. For that we require many 100's of points of interest rate increases.

A bond rout may be signalling the cash deficit in the system.

A bond rout occurred just prior to previous the previous housing market peak, so I presume that the bond rout here is signalling that last runup.

Since the majority of bets on markets are short sales, its likely to see a short squeeze in markets like the Bovespa, Oil, and other extremely overbought markets.

2nd cardinal rule: If sufficient quantity (good quality) fuel is not in your tank, your T/O to landing ratio may become less than unity.

I just bought a good chunk of GLD. It is down to the 870's area from where it launched up a couple of times already. More importantly, if CPI comes too high tomorrow, gold should rocket because of inlation fears. If CPI comes in too low, then dollar will fall as this would increase the chance that the Fed will make another rate cut. What do others think about buying GLD now for tomorrow?

DavidV

Sorry, I ment optimum. (Unity is optimum)

Panic buying of Lehman at the close on heavy volume.

David - I say Gold is, well.... Golden!!! Be prepared though, it may drop lower. Just hope you can afford to keep it as long as necessary.

Is there an airline specific ETF/CEF/mutual fund ? I feel a capitulation in airlines but worried to bet on specific ones.

My view on airlines is that once they cut 50% of the passenger traffic or even more they could ramp up the price for the rest of the 50% and possibly return to profitability in this half-dormant state until better economic times.

My belief is this market has helped to expose weaker companies and provided opportunities to purchase good quality.

The dollar just made another higher high today after another higher low yesterday. If this trend continues I would expect all commodities to go down.

Rob.

rob- every time we expect something the opposite occurs, which after a while conditions us to expect the opposite...after our reflexes are retrained, it reverts back to the original scenario...

Occam - re: airlines

I looked at United, Continental, USAir, American
they all appear to have high levels of debt (as a ratio to equity), obviously problems with the fundamental business model, and are confronting ever-increasing fuel.

So I'd say they all stink.

However, I hear that most of the big airlines hedge their fuel costs. Does anyone know what a typical fuel hedging structure is? Can you describe it to me?

I agree that if they can cut out the non-business traveler (cheap fares) and start focusing on the business traveler (higher fares) then they may be able to become viable businesses, until then, they are of no real interest to me for anything other than a quick oversold bounce trade.

Dave

Heres a link to:-
BANKS HOARD OIL IN STORAGE TANKS.

http://tinyurl.com/5xqtj5

Dominant commodity traders such as Morgan Stanley and Goldman Sachs Group Inc. long have had strategies to own or lease fuel-storage terminals, oil tankers and power plants to give them more flexibility to hold onto inventory or sell it at opportune moments.

2nd,
Do you think that means the crowd expects the dollar to go higher and commodities to crumble?

I know we can't really rely on technical indicators for stocks these days but what about for currencies?

Are these higher lows and higher highs a massive head-fake?

Rob.

Anyone follow Raytec Metals (ray.v)
They have a partnership with Triex minerals in the Athabasca Basin for uranium. 10 claims in the Key lake area covering 19,000 hectares.

100% ownership of El Sol Historic Iron Ore Project, located in the Red Lake Mining District of Ontario, Canada.Drilled in 1958 they had a historic resource of 312,000,000 tons grading 32.4% iron to a depth of 300 meters.

Also acquired potash claims beside BHP-ANGLO JV a 100% interest in Exploration Permit Application KP441, located in Saskatchewan. NI43-101 results 148.02 million metric tonnes ("MMT") grading 23.44% K2O and an additional Inferred resource of 229.16 MMT grading 20.40% K2O.
Stock currently under 2 bucks.
Just thought it may be of interest to someone here.

Rob, I would say that your very useful observation of higher highs and higher lows for the dollar would hold more predictive power if there were no CPI report tomorrow. However, that report can have a major effect on the dollar/gold trade, and so it should be analyzed independently.

As for the dollar moving up, that does not necessarily mean that commodities should crumble. Since the dollar is moving up because of inflation fears, the commodities can start to zoom up instead. Several people including Bill mentioned that gold often has its strongest moves up AFTER the dollar made its lows.

DavidV

Rob- I wouldn't over-think it...I always try to use common sense, as a) every complicated process you come across in life can usually be explained easily by someone who really understands it, and b) vested interests try to over-complicate things for their own protection...

what makes sense to you? and how do you keep from being over-exposed if you're wrong?

mean reversion goes a long way towards predicting price movements (as long as you're talking about sectors or markets)...bill mentioned earlier that it's easy to underestimate how far the pendulum swings, but that it will reverse direction is a pretty safe bet...some traders (like me) like scaling in on weakness, as the pendulum slows- whereas momentum players scale in as it picks up speed...

you also need to pick your time frame(s), and there's no conflict in having multiple time frames...i think the dollar will go higher ST, lower again mid-term, and then higher again LT- without necessarily fencing my opinions in with exact lengths of time (more or less the reverse with oil)...i may buy on near-term weakness, make partial sales on same-day strength + maintain a core position for a longer time frame...i may change my mind (frequently do- a mental act that is neither immoral nor illegal last time i checked, right)...

then there's the psychology of playing-> i like to maintain a state of mind that allows for discomfort (if you're not experiencing any, you've taken no risk- or maybe you're unaware of the risk), but within a larger framework of confidence (the zone, right)...once i sense myself moving out of that zone, i close/scramble positions until i get back to it...

hope this helps..

Re: Airlines

Or, they might chop traffic. Peak loads are like market indicators. Yield management only works until is doesn't. Everybody buys airlines tickets on credit, just like gas.

a haiku

:0

no one expects the airlines to run themselves into the ground to please the consumer...if oil prices stay high, then they need to charge (much) higher prices...this will in turn lower demand and/or increase revenue (depending on the elasticity of demand)...people will become accustomed to the higher cost of flying...if it lowers demand sufficiently, they save on fuel/personnel/capex/maintenance expenses (which may even help to lower the cost of fuel)...

people are not going to stop flying...the airline industry and its passengers will simply come to new terms dictated by the price of oil...these surcharges represent ST noise by an industry that's struggling day-to-day...in the LT, it will just cost more to fly, there may be fewer passengers, and we all get over it...

same comments apply to driving...people are not going to stop driving...gas prices and/or wages go up, and we reach a new equilibrium...

sustained high oil prices...media is on it, and of course plenty of well-researched/organized supporting arguments behind the talk...but didn't we have the same kinds of stories supporting home prices in 2005/06, the HASDAQ in 2000, and the Japanese market in 1990? if we remove the effect of the falling USD, exactly why is oil twice as high today as it was year ago?

For what it's worth, my personal feeling is HB&B are driving the price of crude. Some folks believe they are actually storing physical, I half believe that and I half believe they've bought up futures with their FED loans...

cp- short answer, i suppose, is because we're willing to pay that price...i may be thinking about it at 4.47/gal, but i'm still driving with little regard for mileage...at 9/gal, i'd be curtailing mileage...at 20/gal, it would be a change in lifestyle...

I don't think we have a bubble in oil. I think "peak oil" is, or soon will be, reality. I'm not really surprised to read of hedge funds/investment banks holding physical - it makes some sense in the peak oil context. But its not as nice as a shiny sock drawer, so the only purpose in holding it is to eventually sell it, which will tend to lower the price when it happens. I suppose this contributes to the contango which lasts until it doesn't and everyone holding physical rushes to sell, because storage of physical costs more than a sock drawer, as well as the opportunity cost of the capital.
I also think the adjustment will be longer and more painful than in the 70's - maybe no unavailability, just pricing people out of the market. Will have a big impact on the exurban real estate market too - already visible around Sacramento, probably worse in Southern Cal.

2nd,
Thanks for your response. It does help alot. I guess my main problem is that I've come to realize there's about 10 sets of rules stacked on top of each other with a deck shuffle(or a back-room deal) determining which rule matters the most today.

I was definitely in the zone a couple of weeks ago but am currently scrambling.

I did make the worst trade of the year at the close Friday, buying a few calls of LEH, thinking the contrarian trade was that there wasn't going to be another Bear until after the Election.

I should have cut my losses first thing Monday morning but didn't. It was a lapse of judgment and stupid hope killing me. I still have plenty of dry powder but just get really frustrated when I make stupid mistakes like that.

Thanks for your support.

Rob.

Dave,
I hear you. The dollar relationship to everything seems a little elastic these days, as people are starting to shun treasuries for oil or corn or wheat. The CPI sure will be interesting tomorrow. I'm thinking people expect a bad reading but we'll get a mild one from government massaging.

Rob.

Cyder - You very well may be right, though I would expect in that case we'd be investing in alternative infrastructure like mad, which I don't see happening yet.

DavidV - Good call on the rising dollar and commodities, that's exactly what I was thinking. Also, I believe the market has been re stabilizing from various disturbances ie HB&B failures. I expect this will continue until the housing market shows consistant signs of strength.

2nd,
And I also understand my need to not over-think the situation and rely on my instincts.

My instincts have been right a few times lately, I just haven't acted on them.

When China raised their bank reserve rates, I just knew their market would drop but I didn't put anything on it. and after they crashed I knew it was overdone but didn't put anything behind that either.

I also knew I should buy some DIA puts Tuesday when it hit 12300 to counteract my LEH calls but didn't.

I definitely have to rely more on these thoughts than overthinking the multiple levels of who's controlling what and which side of the news is winning today.

Go on what I see not what I think.

Rob.

cyderman- you've seen the housing 'bubble' come and go in sacramento...and we probably both know people who bought in that area near the peak...

if we had bought at the peak, what do you think would have gone through our heads when signing the loan docs-> we bid 50K more than the ask b/c our agent said we had no chance otherwise...our broker assured us it was OK to stretch a bit b/c the house would appreciate rapidly + we would be able to refinance at lower rates...by the time we closed, homes in the subdivision were already up another 5% so we felt fortunate to have decided early (heck, let's buy another one as soon as we can)...it's too easy to buy the argument when things are moving in its direction...there had be another voice saying man, let's think this over-> we're in over our heads, and i feel like we're pushed along at every step...

so now it's oil prices...are china and india going to be forking over $150/bbl indefinitely? i don't know, maybe, until they start pricing oil in euros or yuan...or until we finally write down the junk in the US and start backing the dollar...i suppose it's always hard to step aside in the midst of a heated argument to think about asking the right questions- airlines have been very reactive, as is necessary when trying to just survive-> who has time to think 5-10 years down the road when facing bankruptcy? i think CP is going down the right road-> if peak oil is the culprit, we'd stop arguing about nuclear power and + get on with it, right...maybe $150 oil is the ultimate bargaining chip here-> squeeze 'em until they give up...

you make a good point about exurban real estate-> high oil prices is just what the real estate market needs right now...

speaking of real estate: sacramento/central valley, san diego and las vegas all look like good bets right now...we're actually thinking of shifting our focus from the stock market back to real estate...

Rob- exactly...i always go back to first principles when it gets confusing...it's amazing how often something like 'buy on weakness, sell on strength' or 'there's no need to do anything right now' is all it takes to clear your head or help you navigate a chaotic stretch...

2nd, no doubt airlines will do what is necessary - but will they all survive? I expect that Southwest is probably part of the contango and hedged for $150 oil next summer. I'm currently long (and NOT flying high) JBLU, who I also expect to be well hedged and one of the survivors. But I think the market will shrink, as there's definitely price elasticity in the leisure market. Not the end of the world, nor a quantum change, but an unpleasant adjustment to the relative position of the US in the world.
I expect, perhaps post Olympics, that we'll see a significant rise in the Yuan as China decides they no longer need to import US inflation, so the price of oil for them will be less harmful than it is for us.
Comes down to the relative value of fiat to whoever supplies "stuff". As an aside, this would be a perfect opportunity to abort the abomination of the farm subsidies that just passed congress in an even worse form than ever.

2nd, interested in your reasoning for considering real estate. What's your time horizon? Use of leverage? I'm assuming you don't plan to live in any of those places (downtown San Diego might be an exception), so are you factoring economic prospects for your renters? If so, where do you see job growth?

Southwest Air has 70% of its expected fuel needs for 2008 hedged at $51 per barrel, and 55% for 2009 hedged at $55. Not bad, eh?

we're looking at S Cal for the simple reason that one child already is, and in all likelihood, a second as well will be, going to school in the area...buying a condo beats paying rent...

youngest brother recently moved back north of SD, where he was able to purchase a new home for half the year-earlier ask...but you're right, we would need be assured of a rental market, and i don't see that right now...we're well aware that our kids will have a difficult time transitioning to being first-time buyers, so we're always on the lookout for buying opportunities that may help in that regard...

mrmockingbird- any idea what the cost per bbl of hedging would be, and why (other than not being able to afford it) other airlines have not done the same?

Can anyone tell me what the closing price of $111.27 * 9,400,000 shares outstanding means for the price of oil?

http://www.unitedstatesoilfund.com/

Who thinks ETFs are to blame for the domino effect of price increases in the futures/spot markets? Where would we be today without a trillion dollars in outstanding oil futures contracts? $50/barrel maybe?

Still kicking myself for selling this one @ $48.90... tried to make the world a better place. :) We don't need no $80 fill-ups or $3 loaves of bread...

re oil hedges- actually, the question should be what the 'average' price to hedge per bbl 'was' (to be reasonable, the hedges must have been purchased a year or more earlier)...

Total Net Asset Value Ounces in the Trust(GLD) as at 06.12.08 UP 8 Tonnes

My gas tank holds 42 gallons, yet no OPEC thank you letters. Peak oil is the issue. Global warming is not.

Loaded up again on DIA puts when the market peaked, and also some IYT puts. Been working very well. I hope whomever is running this market up during an EW 3 of 3 of 3 down keeps it up, as the series of lower highs and lower lows is a put trader's dream.

In and out of LEH puts a couple times. Barely got out before the end of day run up. Chat on FOX was it's going to 15. I'll wait for another small run up to reload.

Bought some FTO a a refiner play. Bought a slug of the Merk Asian Currency fund MEAFX. Bought a 1/3 position in TBT. Probably going to try and roll thru HTE for the dividend.

Good trading!

Re: LUV

"Southwest Air has 70% of its expected fuel needs for 2008 hedged at $51 per barrel, and 55% for 2009 hedged at $55. Not bad, eh?"

Its called a subsidy.

Either that, or their off balance sheet credit dervatives in oil must be in the hundreds of billions.

Missing CSI - Colossus

Here's how a sharp observer of latin juniors (incakola) missed one (so did a dumber one - so did I!)

http://tinyurl.com/5uhc3h

Good morning.

Here are your Cara 100 Ratings Changes:

Upgrade:

YHOO - to Hold @ Soleil

Target Price Lowered:

NOK - from $40 to $34 @ Oppenheimer

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Have a great day and a better weekend.