Good morning

Almost exactly a year after the advent of the credit debacle, the term “credit crunch” squeezed into Britain's Chambers dictionary, defined as “a sudden and drastic reduction in the availability of credit”. Fittingly, the past week witnessed market participants focusing anew on deteriorating global growth prospects, arguing that slower growth could reduce inflation pressures.

The notion that the US was further along the slowdown process than foreign economies, and an expectation that interest rate differentials could narrow in favor of the US dollar, resulted in continued strength in the greenback, further weakness in commodities, lower bond yields and mixed stock markets.

Investors should brace themselves for a lengthy convalescence period, where a shift in central bank policy to targeting GDP growth rather than inflation is part of the patient’s eventual recuperation. However, in the short term I still give the nascent stock market rallies the benefit of the doubt provided the mid-July lows are sustained.

Read all about this in my weekly “Words from the Wise” review: http://tinyurl.com/5av3gl

That's the way it looks from Cape Town.

"Gold is such a small component of the capital market; we ought to give it less attention. There is so much more going on and it’s all great stuff. Let’s see."

Hear, hear!

I just sent my son back to school in New Orleans. So, Bill, I have a vested interest in wishing for a mild storm season. Take care of yourself.

number2son

Private [school] I hope.

Started out in the Big Easy with Shell Oil in 76. Lived in Metaire/Kenner/then did the Cause Way haul from Mandeville each day.

Really miss lunch at Café Maspero or the Rib Room
[Royal Orleans Hotel].

[Bill Cara note:

My favorite place was Coop's. Great value.]

Good morning.

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

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

Have a great day.

QT ... he's starting his second year at Tulane.

Pimco's El-Erian Says Raising Bank Capital Is Harder

``We are in the process of a major adjustment of the banking system which is made harder because you don't have the capital to lubricate it,''

The month-long rally in the dollar is a ``cyclical retracement'' and its decline will eventually resume with Asian currencies carrying ``the burden of appreciation,''

http://tinyurl.com/5hebrc

The Bedrock Case for the Return of the Gold Bull

http://tinyurl.com/5vbhca

Back to the Future: Google Fares Better Than Apple

Let's start with the obvious: Google makes more money than Apple does. It had earnings of $10 billion over the past 12 months, compared to $8 billion for Apple. And while both companies' earnings are growing fast, Google's are growing faster.

http://tinyurl.com/5holqp

How Anti-Intellectualism Is Destroying America

Sad but true: Intelligence is a political liability in the US. Author of The Age of American Unreason Susan Jacoby explains why.

http://tinyurl.com/6848ws

Dear Caraistas,

several weeks ago the blog started to discuss the potential stocks to buy once we hit the cycle bottom. Today I want to draw your attention to Hyflux. I like the sector and the region. Management so far has pretty good track record. I would call it a mid-cap. Make your own due dilligence. Here is the link to the website: http://hyflux.com

Here is some marketing talk from their website to get a quick overview:

Hyflux Ltd began in 1989 as Hydrochem (S) Pte Ltd, a trading company selling water treatment systems in Singapore, Malaysia and Indonesia and later, China. A little more than a decade later, Hyflux Ltd became the first water treatment company to be listed on the Singapore Stock Exchange in January 2001.

Today, Hyflux has a market capitalisation exceeding S$1 billion and has grown beyond just a water treatment company. It is recognised as Asia’s leading environmental company with operations and projects namely in Singapore, China, the Middle East & North Africa and India.

Specialising in membrane technologies, Hyflux is an integrated solutions provider offering services that include design development, pilot testing, systems integration, and engineering, procurement and construction. It is also engaged in the commissioning, operation and maintenance of a wide range of water and liquid treatment systems on a turnkey or Design-Build-Own-Operate (DBOO) arrangement.

Backed by its membrane and materials research centre in Singapore, the largest in Asia outside of Japan, Hyflux ensures that development of cutting-edge membrane technologies is the key driver to spearhead sustainable company growth.

Through in-house research or in collaboration with reputable institutions worldwide, Hyflux leverages on its technologies to develop a comprehensive range of membrane products (polymeric, stainless steel and ceramic) and membrane systems, to provide an environmentally-friendly solution to a wide range of applications in water treatment and industrial manufacturing processing.

With the use of its proprietary membranes, Hyflux has also moved into the field of clean energy in environmental applications such as the recycling of spent oils and solvents, as well as in the production of bio-based materials such as lactic acid and biodegradable plastics.

Hyflux’s outstanding performance has been widely recognised. In 2006, Hyflux was awarded Water Company of the Year at the Global Water Awards, by the Global Water Intelligence, United Kingdom. Hyflux was twice listed as Forbes Asia’s Best Under a Billion Company in 2005 and 2006.

Moving ahead, Hyflux key growth lies in the development of cutting-edge technologies and strong operational and financial capabilities. Focusing on these strategies and continuous emphasis on research and technology development and acquisition, Hyflux is poised to extend its reach to the growing markets in China, India, the Middle East & North Africa and Asia Pacific.

AES,

Mate, can you take your spam elsewhere. Bill, bounce this clown!

Rafish,

if you have something constructive to add you are welcome. I mean it seriously. The community has been exchanging ideas over the past couple of weeks. This is just another idea from a sector that has significant growth potential in the future.

Came accross some interesting charts this weekend:

Rising wedge on SP500:

http://tinyurl.com/risingwedgesp500

Diamonds:USD index:

http://tinyurl.com/DIAUSD

AES

Mate, I am serious. Don't P*** down my back & tell me it's raining. I have hundreds of news items & companies such as your post coming over the wire a day. Please!!

JIM,

I'm trading the S&P at the moment. What's your take on it?

Rafish,

i did not know that you are treating Bill's blog as your personal email inbox. Anyway if the rest of the community treats it as spam then this is fine with me. I am not entertaining any newsletters I am just a retail trader trying to add little value to the community. I felt that the focus on gold and miners is too strong. I wanted to kick of a discussion regarding future sectors that profit from the future challenges of our society. Water treatment is definitley one. The community had this discussion already some months ago and some interesting companies were mentioned without anyone accusing the other of spaming. I just wanted to add another name to the list. Do your own due dilligence.

I have been following Hyflux for more than two years I have no position in it. It is listed in Singapore and issues quartely filings. It has been covered by names like JPM, Morgan Stanley, Credit Suisse, UBS. We all know how to assess the judgement of analysts but I am mentioning the analysts only to show that this is not a pink sheet spam stock. Hope this caltifies things.

should read "clarifies"

Probably most folks here have read this already, but in the story Bernanke Tries to Define What Institutions Fed Can Let Fail, I'm curious what will be the final outcome of all this. I might be wrong, but given the interrelationship between the media and the powerful, I would think trial balloons are being floated in this article.

http://tinyurl.com/67ah3b

Re: Hyflux info via AES
This is where I would welcome a separate section on the site. I've not been in favor in the past of breaking up the comments into sections (gold/politics/oil) as I prefer being able to decide what I want to read. That's why there is a scroll wheel on my mouse! BUT, this is an area I see a definite advantage.

Many moons ago Bill started promoting the idea of looking for micro-caps and stocks that could lead the next up-wave. I believe there are stocks that could buck the trend if we take a whoosh down and be ready to take off. We have a huge number of Caraistas from all regions of the world with different expertise in a variety of fields. I would welcome reading everyone's picks that they feel fit the category. It would probably be best if there was someone in charge of content so if it looked like a poster was repeatedly hyping the same penny stock, or a stock with dubious character, action could be taken.

At least it would give us something to discuss other than whether the price of gold/miners was going to go up or down! Leave all the other comments on the main "Community Chat", but make it so posters like AES and any of the rest of us with companies we think are future winners, could post them without being labelled "spammers". If it is deemed to be spam, then punt the poster and his information.

There is a huge world out there outside the mining community. The timing is probably too early to start investing heavily in this area, but I would be thrilled to discuss something different for a change.

Rafish, re S&P 500

go to this link: http://www.momentum-trader.com/

most folks who have been on this board for while wiew with suscpicion a new member who's first handful of posts is about offering cut and paste marketing info on a particular stock.

your post contained nothing objective whatsoever on the stock, just info from their cleverly written sales team.

u can see why some people may be suspect of your motives, even if you had the best of intentions.

Dr. Cosa,

point taken. Will be more carfeul next time. Although I had labelled it as marketing talk....

Thanks jk

I think AES is quite genuine - he/she includes this early in his post:
"Here is some marketing talk from their website to get a quick overview"
- that's quite explicit to me. I also picked up on Hyflux elsewhere, and think it is in a market with a big future - much of its business is in China, cleaning up their water pollution (if my memory serves me well - sometimes not a sure thing).
I have no position.

Cara100 now with 20-minute delayed charts of each GIC sector: http://nexalogic.com/cara100.html

MaxPain report: Last week started with DIA and SPY significantly off their Max Pain values, 3.3% and 2.1% respectively. At the end of the week, these figures were down to -0.4% and 0.9%. While this was somewhat remarkable, note also that both stock prices and max pain values fluctuated. DIA went from $117.80 to $115.40 on Wednesday to $116.43 o Friday. DIA's max pain went from 114 to 115 on Tuesday, jumping 2 points to 117 on Friday. While the stock prices moved closer to MP, MP also moved closer to the prices on the expiration day. The situation with SPY was similar. Stock price went from 130.71 to 130.57 to 130.17. Its max pain was steady at 128 all week, moving one point to 129 on Friday. As mentioned, one month no proof makes, but there are clearly forces at work here to bring prices and/or MPs in line.

http://nexalogic.com/maxpain.html will attempt to track the values for September as well.

I also made calculations to try figure out who made money with those August options. For SPY, and an average premium charged of $2, the options writers made profits of $480M. The options buyers made profits somewhere around $120M. These figure do not include options closed ahead of expiration, for either side.

Natural gas: I am still leaning on the short side for the near term (weeks), but I am no expert. I am thinking that the winter will not be that good for NG, barring the usual external events (oil, Fays/Hugo/Vladimir's). Keeping an eye on NG.

Finally, if you did not read the WIR yesterday, it contains tremendous information in Bill's comments.

"I wanted to kick off a discussion regarding future sectors that profit from the future challenges of our society."

My apologies in advance, but this will likely be the gold sector, which is why it gets so much focus. If any gold cartel members folds, or taxes or prohibitions to own and trade physical gold are lifted out of necessity, then the growth here will be unbelievable. But there is no logic to this market. Its all mania, 24 hours a day for and against.

A great short term trade was in the airline stocks. I also pointed out a blog which called a rally in bank stocks in the near term, prior to the rally. This outlook was sharply criticized here.

There are such great imbalances in the forex that there are simply huge opportunities there. But you have to get your trade spot-on, as we witnessed with the 10% dollar rally. I think the next move will be a decline of the € against the ¥, while not changing their relationship to the $. The better you are at the macro to the micro, the better you are at forex. But so many states in the G7 are tottering on the brink, that forex can easily be your waterloo.

Another sector which caught my eye lately are companies that are brokerages and conduct trade via the internet, with a far greater dissemination and access to global markets than say, HB&B. The publicly traded internet brokerages are being absolutely crushed in the banking sector recession. But there are restrictions in the U.S. to contracts for difference and futures trades which don't exist elsewhere because of the monopoly of the commercial banks there, so this is a sector to ponder.

My 2 cents - people should be allowed to post information about investment ideas, so long as they don't become too noisy about it. A judgment call, to be sure. But what is the harm if they are civil and aren't hyping?

I first thought AES was providing too much information, but then on second thought I realized I wasn't obliged to read the whole thing. FWIW, water is one of the big investment ideas that still hasn't taken off. I know from experience having watched my water ETF position languish in a state of catatonia for months before moving on.

And another FWIW, I'd rather people post too much info than too little. I can decide for myself if it's too much.

And btw, and with no offensive meant to those who post here about this topic regularly, there are many of us I'm sure (I'm one) who would like to discuss something other than precious metals. But that doesn't mean people shouldn't continue to post about it. They can. And we can choose to read and focus on those comments that we think are current and relevant.

AES - All the verbage didn't cut to the immediate chase. I'd like to see some reasoning as to why Hyflux is poised to outperform. I don't think Zimbabwean's are going to be able to purchase a water filtration system for each of their tents, considering they are already starving...

re Hyflux- clean water, clean air, clean walkways...these will become priority issues in the next twenty years, IMO...that singapore is able to legislate 'undesirable activity' within its borders is to a large extent due to its population density...when you have that many people crowded into a small area, what your neighbors do becomes that much more important...

even in SF, i won't ride the Muni, i watch where i walk, and i certainly don't bring my kids into the city to play in its parks...spitting on the sidewalk is one of the milder forms of disrespect the large homeless and mentally unstable population show its citizens...used needles, used condoms, parks and streets used as latrines and dumping grounds...there's much to be said for singapore's approach...SF needs to get it together-> on weekends i stay home in the 'burbs or drive to cleaner cities for recreation...

This poem written by Robert Frost many years ago might apply to some of todays gold bugs.

In Neglect

They leave us so to the way we took,
As two in whom them were proved mistaken,
That we sit sometimes in the wayside nook,
With michievous, vagrant, seraphic look,
And try if we cannot feel forsaken.

Goodmorning from beautiful North Puget Sound.
Please do not break this site.
Allow flamers and newbies to post here amoung the savvy. With a sharp eye on them-or a thousand pairs of eyes,of course. If its flame of pump and dump, it will fairly quickly be recognized. or in time AES will be recognized as a blog tag of value. I have put it on my watchlist as I like the sector(s)
peace

I also believe there will be opportunity in the water supply arena. I heard this is a part of Pickens' plan that hasn't been made public. I have someone doing a physical check for me.

getting ready to give up on VLO...

I understand this blog as being a "mania to the downside" on gold. That's the attitude here. No different than "Fast Money" on FETV. No better than a crowded lounge in a unionized workplace.

Well, being a gold bug for a couple of years now, I can say its the volatility in the sector which will intimidate the sane.

But there is simply NO criticism to level at a gold sector play that does not equally apply to real estate, foreign markets like the Bovespa, or oil, or natural gas, or uranium.

Is "gold" over? Not a chance.

F6

2nd - The passenger seats on the MUNI are sticky because someone's not doing their job. There's a big part of the problem... Folks are too interested in someone else's job to concentrate on their own duties...

Agree F6

Buy your straw hats in winter.

"But there is simply NO criticism to level at a gold sector play that does not equally apply to real estate, foreign markets like the Bovespa, or oil, or natural gas, or uranium."

The difference that I have observed is that only precious metals are touted as having the capability of going to the moon when the rest of the economy tanks.

teamonfuego

Why not wait till Wednesday when the EIA Petroleum Status Report comes out.

Yesterday's WIR...

"..... Recall too that last week’s oil inventory numbers were probably estimated far too low so that if they are on the high side this Wednesday, watch for the $WTIC to drop below the 200d MA during Wednesday.

$WTIC has dropped from $145 just five weeks ago to under $114. Next week’s close could be under $110. The indicator there may have been Friday’s drop in XLE (-1.95% on Friday).

This week, the Energy sector ETF (XLE) lost -0.45% to close at 70.87. Next week, there could be prices in the 60’s"

Wednesday is my date either way to dump TSO.

Re: COT

Bellicose. Interesting choice of adjective.

Players in the forex market are trying to anticipate and exploit moves by the Fed, ECB, and Japan. In doing so, they take positions in that market, which are then disclosed via the COT data. Knowing how large players are altering their stance over time, could have utility.

The COT Commercials data is supposed to represent the smart money/insiders. But when looking at the historical record, their performance with respect to gold appears less than convincing. Of note is the apparent lack of influence that was seen during a recent (but not the most recent) historic high in open interest, which coincided with a historic net short position by the Commercials. This occured around mid-October 2005 and was supposed to be a sell signal. However, this was not a good time to sell (20/20 hindsight, of course)!

Whilst the net short position has gone on to hit new highs, the recent peak in open interest did not. And yet now, the sell signal would appear to have had greater value. Should one give more weight to the short position peak (over the open interest)?, or is the COT Commercials data, when used in the above manner, of rather unreliable predictive value?

"I think the next move will be a decline of the € against the ¥, while not changing their relationship to the $."

Is that because you expect the ECB to lower interest rates in Europe, whilst rates rise (after many years of not doing so) in Japan? Is that the catalyst?

F6 - If you're referring to Bill's morning comments, I think he's just making the point that the gold market is just one facet of trading, and should be given equal attention. This confirms for me that he doesn't have an expectation of a repeat of the 70's fantastic volatilities. A trader can experience 4x returns in many other areas of the worlds markets.

QT - thanks for the info...that is what i needed, a REAL reason to see other than worrying about losing money :)

chickenpookie,

sorry for not providing more details. I have not the knowledge to make a proper financial due dilligence but I will try to put some ratios together.

So currently it is more the storyline that I like about this company.

1) Revenue growth from 45 Sing $ in 02 to 192 Sing. $ in 07

2) Last two years was a consolidation phase. You can see it in the bottom line and top line.

3) Last two years focused on developing new business areas. Firstly they started to acquire more build and operate projects in the water business. They are looking for a more constant revenue stream. Secondly they have developed technologies to recycle used oil. They have started a joint venture in Saudi Arabia.

4) Regional diversification focussing on oil rich and waterless arab countries and especially China and not Zimbabwe and Central Africa.

5) Entered into a joint venture with Mammon Group, a Berkshire Hathaway company. Entered also a cooperation with BP.

Back from vacation, hope everyone stays safe in the August markets.

I see USO/UAUA relation still works for active traders.

vacation - going to the beautiful BANFF, Canada
need to pack, get my cameras charged
will be back next week with at least 5000 pics.

successful trading to all

Good morning - Seeing some "dis"course about water treatment - thought I would add my two cents. Picked up TTEK earlier this year - seems to have some legs. Some may wish to track it for decent RSI down the road.

Hyflux:
Trades in the pinks in the US and is 3% of PIO, which is a very interesting ETF. I prefer PIO to PHO at this juncture. PHO seems ready to roll over, while PIO has pulled back and is shaping up nicely on a risk/reward basis.

My Google Finance search on Hyflux has also led me to SPG. These are a group of people I intend to watch very closely. The holdings of this firm seem a compelling mix and the principles a very smart mix of people.

I don't know if I'll buy Hyflux anytime soon, but the mention led me to learn a couple of new facts, so I'm good.

NOTE: PIO is currently in a 'squeeze'. BB inside the Keltner channel. Check it out:

http://stockcharts.com/h-sc/ui?s=PIO&p=D&yr=1&mn=0&dy=0&id=p67838130944

AES - So we're talking about municipal water treatment systems as opposed to home use units?

Wouldn't that be a breakthrough if such systems were capable of integrating into the process of refining petrochemicals? Refining crude oil requires some very robust technologies.

aes.. if interested, would like to share ecology/water efficiencies watchlist and maybe develop a list with some DD. email to (giordan at comcast dot net)

Photogray -

A warm gray and humid salute to a fellow sounder! I agree with giving newbies (including myself) a voice but it might be more work to keep the pump and dump schemes from popping up. It's like kids; give them an inch..(yadda yadda).

If someone new posted something about a company they were interested in, provided a good independently done summary level analysis with a link to the details then maybe I could get on board with that. I tend to think in order to post material like that you have to have earned it though time and effort. If you haven't been here that long then you need to put in more effort.

Lunch time break:

In Mr Cara's book at the start of Chapter 3, he writes:

"When it comes to money, I have a simple rule: trust no one but yourself..... Give no one - and I mean no one - the benefit of the doubt."

If only Michael Vick [The Dog Fight King"]had read his book. This article will shock you!
It is hard to believe that Mary Wong, David A. Talbot and the others could do what they did.

http://tinyurl.com/5zk6ne

The difference between PIO and PHO is that PIO is more globally oriented. I pulled up the 2 year chart on these ETFs to make sure my recollection of their price action wasn't off base. Sure enough, either one of these could be properly renamed ZZZ.

All kidding aside, this sector bears watching.

teamonfuego

Wednesday is our "Get Our Of Jail Free" card! :-)

Who knows.... they may even pay us a profit for our holdings.

When the market corrects this fall just in time for heating oil season, we can buy back cheaper. Hopefully oil will be at or near 85.

QT - a get out of jail free card with profits? that might be asking for too much.

as far as market falling, i still am of the belief that "they" will do whatever it takes to keep it up for the election season and then the fade will begin....

Chickenpookie,

the portfolio structure is still fluctuating a lot. 2Q 07 76% of the revenue was made up by industrial applications, 22% by municipals and 2% by others. In Q2 08 80% of the revenue was made up by municipals, 20% by industrials.

I do not know whether you can compare refining crude oil with recycling used oil. They are in the recycling business.

I have just checked their website again and it seems like the recycling business is picking up steam. They are building recycling plans on the Philippines and in Vietnam, also as Joint Ventures.

Haven't seen any comments on SKF lately, but the post about "recapitalization" and which "institutions the Fed can let fail" has me wondering what anyone thinks of the Fed covering all the big banks.

Where s the best place to monitor this?

Is UYG the best hedge?

Any thoughts?

I can think of no real authority for them to do this, but congress is apparently out to lunch regarding US investors.

"But there is no logic to this market. Its all mania, 24 hours a day for and against." - Fransix

Amen.

teamonfuego

Take a look at the link from

Posted by: JIM at August 18, 2008 9:40 AM

Rising wedge on SP500:

http://tinyurl.com/risingwedgesp500

~~~~~~~
[same formation applies to the INDU]

This is a bearish sign. What I have been reading lately sometime in the next few days it will complete and turn downward. Some believe this will be the start of the BIG plunge downward.

Good start to the week......Bill's book just arrived.

It took seven days from order to delivery from Amazon, with free shipping.

It appears that even this founding member of DENSA will be able to comprehend it.

I'll post my review at Amazon when finished.

re skf:

i was looking at the TA for SKF late last week and it looked like a perfect technical set up for a rise.

as of today the TA looks compelling:
RSI-7 49.7 and rising
Slo Sto upward crossover and rising
MACD crossover and starting to rise

Volume is the big question mark to see if this run has legs.

looking at GS closing in on new lows for the year, and Fannie Mae is taking a slient but deadly hit today as well. along w/ the rising wedge formation pointed out on the board earlier today im starting to wonder if a new panic low is in the cards.

my quesiton is will gold/oil move opposite to the next shake out, and will these be a replay of last august's dump and rise?

teamonfuego- re VLO, not sure i would get out right now...every stock chart has its own rhythm, and unless you think VLO is down for the count, why not move it to the back burner and wait... it's usually completely unpredictable when a stock takes off, and you are unlikely to be jumping back in at the right time...JMO...

speaking of predictions, exactly what or how much IS predictable in the market? in the ST, very little..anything that WAS predictable has been noted and no longer playable...in the LT, a lot is predictable in the way of mean reversion, seasonal patterns, and cycles-> but it means putting up with ST shake-outs and reversals...so trading is easier for those with longer time horizons in that you don't need to react to every twist and turn, but more difficult in that you need to not react to every twist and turn...

Strong support [for now at least] at 11500ish

Sold WGI bought Friday (just taking profits), and moved into GRZ (short term play on the possible changes in Venezuela, GRZ at 1PM at 4X average daily volume).

If we close decisively below 11500 this rally is over and would result in the next leg down.

Hope it can rally back before closing. Need this rally to continue at least until Wednesday's closing.

Hey Vadym,

How was the cruise?

2nd,

you make an interesting and very important point. It's a matter of confusing semantics sometimes, different people mean different things when say "prediction". To me, correct trading doesn't require prediction at all, in a sense of forecasting what the market is going to do. Correct trading is a matter of a)putting odds on one's side by using a valid trading system, then b)controlling risk to limit loss in case a trade doesn't work and c)monitoring the conditions to define the moment of taking profit in case a trade does work.

It requires somewhat "fatalistic" approach if you will - acceptance that market can do anything, and a trader's job is to be prepared and to have scenarios of his, trader's, reactions on any possible market behavior. Unlike mindset based on prediction, it allows to leave ego behind the door - since no prediction is involved, there is no emotional "investment" in your trade, thus no trigger for ego. In turn, absence of ego involvement leave a trader free to react on market events without emotional attachment to his position - exactly what we discussed a week or so ago in connection with excellent article from Economist stating that professional traders are able to beat this "endowment effect"

shark,

absolutely fantastic, thank you. Majestic place, Alaska is

Jim Jubak on VLO, if it hasn't been posted over the weekend:

"Valero Energy (VLO, news, msgs). It's tough to be a refiner these days. Because it costs so much to buy the oil you run through your refinery, profits are getting squeezed. But I think there's a bigger long-term danger looming on the horizon for refiners outside the major oil-exporting countries. Oil producers such as Saudi Arabia are moving downstream to capture more of the revenue as oil moves from underground to auto engines. They're building refineries of their own, right next to guaranteed supplies of oil from their national oil industries. The number of refineries being built now in the Middle East argues for falling margins in the refinery sector as a whole as competition heats up."

Re market up or down, just trying to look at the interrelationships Bill talks about. For example he said earlier in the month: "The stronger $USD is pressuring commodity prices. But the key is the US T-Bill yield here. If that drops, I suspect the Financials (and the broad market) will sell off again, and the precious metals to hold their ground as the $USD rally stalls (August 6)."

The T-Bill chart has been bearing that out up to this point, but I'm not enough of a chartist to make a prediction from here.

http://tinyurl.com/582gtq

WOOOOW

I guess the takeover rumors on SNDK where just that. Rumors. Down over 10.25% today. Ouch!

shark- CALM- no position, just pointing out the move..

D - FYI - Dominion Resources has applied to DOE seeking loan guarantee for new reactor at North Anna site. (no position, stock flat on news)

The VIX will test resistance in the next day or two if this behavior continues. If it breaks to the upside, I'll probably exit longs.

Added to DZZ, it seems like GLD might be sputtering?

Poor Geologix (GIX.V) can't find a friend...it almost punched below $1.00 today. Meanwhile, shorts in the consumer discretionaries are starting to working nicely . . . Of course the financials are behaving like the over-leveraged, no-account, off-balance sheet, flea-ridden scoundrels they are. The patients are sick from too much easy money on the way up, so more easy money can't help them on the way down. Only destroy more wealth with the US Government as a conduit.

CALM has been a very good pick of yours 2nd. How ya been? How was the weekend?

Into SKF at $125.35. I just can't believe these banks with so many writeoffs still ahead of them can sustain current prices. Everything that is being said and done is to slow down the velocity of the meltdown, but it's still a meltdown.

XOM - At a new 52wk low

EGLE - Dmn, missed EX-DIV.....

Dr. Cosa,
My only issue with SKF is the threat of spurious intervention by the FED. That can clock it, at least in the short term.

I guess the question is are they in a feckless enought position so that any move they make would be considered a positive for SKF.

Pookster:
I've heard and read on more than one occasion that Mr. Pickens has bought up water rights all over the Southwest

Damn! DBA has once again jumped over my buy stop limit order and ran away from me (so did SLW, but I already have SLW and so I am not so upset :) ). DBA did it for the second time in 4 days! Buying on weakness would have worked out great here, instead of waiting for a buy signal... Obviously, there is strength in DBA now, and so I just opened an initial position at $35.82. Let's see how far it takes me. Will double down at $34.

Re the gold stocks,I look at the xau and see it at the same level it reached in 1984 with 380 gold.

If it is the job of a trader to look for value? then I also look at the xoi having appreciated 10 fold since 1984 and the xau is about a double since the lows shown back then. The 20yr down trend in the ratio of xau:xoi has been broken recently, that seems important?

I think this sector merrits the amount of attention it gets by this group because of the value that has not been attributed to date? But I surely do not know as my pf will testify.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2984294&cmd=show[s148912478]&disp=P

One thing(among many) I cannot figure out is why the xgd.to:$gold ratio has gone down for 8 yrs nearly straight. Is the $cdw bull killing thew value there?

As for VLO, I agree with 2nd_ave that it doesn't make sense to give up on it now, after it fell 50% in 6 months. A possible strategy might be to quit temporarily, wait for the chart to turn around, and then jump back in again. But then, it doesn't look like a falling knife anymore. It looks like it has bottomed out in the low 30's and is waiting to go up into 40's as soon as enough people will give up on it. Oil is not going up now, and I don't see a reason for the gasoline demand to keep falling, given that the prices at the pump are going down now. The VLO puts I sold were "put" to me on Friday, and now I am a proud owner of VLO shares comprising 12% of my portfolio.

ps. Sorry re the 20yr downtrend being broken, that is on the linear chart not the one on the link with the post.

cutting losses quickly-

out of starter positions in TBT, HNU.to, and LEH (all picked up last friday), all at losses...

above actions result directly from recent advice by g034 and Vad...thank you both...

The one minute chart of SLV shows lots of program-buying just above and below 13.00 this afternoon.

Nemo,

I'm not here to knock on Boone Pickens, because I like a lot of what he's saying about energy independence and I respect his oil patch accomplishments.

But, as Bill often mentions, we're well served when we check our credulity at the door when we enter the markets. A hidden part of Pickens's wind-energy corridor plan is that he quietly arranged the State of Texas to provide pipeline rights underneath the windmill powerline "Rights of Way." In essence, he's getting the use and control of hundreds of miles of land, with the open agenda of providing power above and the sub-rosa agenda of providing water below. I think it's the equivalent of getting railroad rights of way in the mid-1800s. Not that big of a deal at the time, but Whoa Nelly when the technology and demand catches up ... Pickens will eventually make more selling water than he will his electricity.

[Bill Cara note:

I sincerely appreciate a Discourse entry like this. The fact is we'll never know what Boone Pickens is up to, but we have every right to consider the possibilities. That's not to say we have to be perpetual doubters. But we do have to push one another here to look at all the possibilities.]

2nd,

small loss is a small loss... nothing out of ordinary, just another day in the office. It's a big one that is unaceptable and is event. But then again, you know it very well - take my blabbing as "market-talk deprivation over vacation period", lol. On a serious note... dunno about LEH, but FNM/FRE from pure chart appearance look bottomless... did short play on FNM today (to my suprise it's available for shorting again). Don't want to carry short overnight lest I get caught into some engineered news/spike... but will watch for another play tomorrow

This is a tough market to take money out of.

I think of the market recently as being mostly pros trying to canoodle each other out of money. There's not a lot of "stupid" money being thrown into stocks, so it's been tough for longs, and even the shortist has to pick his spots carefully.

Who ever heard of a government bailout that kills the shareholders? What kind of bailout is that?

I just called the director of investor relations at WGW and confirmed my understanding of their cashflow situation. Below are the excerpts from their latest quarterly report.

“The term loan facility comprises multiple-draw loans maturing December 31, 2014, of which $87.3 million is available for the development of the Mesquite Mine. As at June 30, 2008 we had drawn approximately $86.3 million. Based on our current plans, we do not anticipate making further draws. Interest on each advance is charged at U.S. LIBOR plus 2.2% up to completion and at U.S. LIBOR plus 1.75% after completion.

In connection with the term loan facility which required us to sell certain quantities of gold forward, on June 7, 2007 we executed flat forward sales contracts for 429,000 ounces of gold (the "Hedging Contracts") at a price of $801 per ounce. The Hedging Contracts represent a commitment of 5,500 ounces for 78 months commencing July 2008, with the last commitment deliverable December 2014. We expect to produce on average between 160,000 and 170,000 ounces annually during the term of the Hedging Contracts, of which 66,000 annually will be covered by the Hedging Contracts, leaving approximately 100,000 ounces leveraged to the price of gold.”

The cash costs for WGW are about $500/oz, as was confirmed by the person I spoke with. If gold stays at $800/oz, then WGW will be making a profit of 160,000*(800-500) = $48 million per year. So they will be returning 56% annually on the initial investment of $86 million. Sounds like a good business model to me, even if gold averages at $800/oz. If gold averages at $1000/oz, then their annual profit will be 60,000*(800-500) + 100,000*(1000-500) = 68 million per year. They have about 136 million shares outstanding, giving them long-term earnings of $0.35 per share in the $800/oz POG scenario and $0.5 in the $1000/oz POG scenario. With a modest P/E ratio of 10, their stock should be worth between $3.5 and $5, which is the range that the analysts covering WGW are predicting within 1 year.

I just bought WGW at $1.62 for 5% of my portfolio. Will double down at $1.05.

Re: ¥ vs. €

The ¥ carry trade to continue to unwind, as the EU zone softens in the face of recession.

The JCB is unlikely to raise interest rates any time soon, though I keep looking for signs this will happen. But the one theme that has been at play for years is the unwinding of the carry trade.

A raise in interest rates will surely unwind the carry trade, but an unexpected rise in ¥ may also accomplish the same. The ¥ has been firming for many consecutive business cycles, but has dropped off since March vs. the dollar.

Contrast this with efforts in the EU to counter inflation with higher interest rates, which may have already played itself out.

The bond markets in either Japan or the EU are not reflective of any changes. In essence, an equilibrium in rates may point towards some welcome price stability in $US after the commodities blowout/volatility.

A major shift in value of the € against the ¥ will have profound effects on the carry trade, perhaps this is already occurring. I believe this will have a direct effect on the valuation of bullion, thus logically, the gold sector.

A good discussion on the ¥ is here:

http://www.safehaven.com/article-11018.htm

A very good price projection compared with the previous hard asset inflation is here:

http://www.nowandfutures.com/last_hard_asset_bull_comparisons.html

This is what I call my "big picture" viewpoint:

stockcharts.com

http://tinyurl.com/6j98wm

And, after all is said and done, a very good discussion on risk in mining juniors is here:

http://www.kitco.com/ind/GoldReport/aug132008.html

Note: Please don't buy into what I write as I sometimes don't believe it myself

:0

F6

[Bill Cara note:

F6, the point is that you do believe you are adding value here, and the rest of us sincerely appreciate that.]

cutting losses, part II- i was monitoring my emotional reaction to taking the losses today: (a) not easy, and (b) almost would have been easier taking a bigger hit later than a smaller hit today...the (human) mind can be a terrible judge unless you have your emotions in check...

i'm cutting vlo loose...

nemo - It's not widely known in the South West yet that Pickens has bought up the water rights...
There'll be some real hell raised over this, I'm sure!!! The aquifer is big, but not that big. Get a rope!!!

BTW - They've been drilling holes everywhere, looking for oil. I'm told temporary pipes are strewn all over the place in W. Texas.

rnd,

interesting obervation on how it feels. My guess: it feels easier to take bigger hit because it's kind of act of resignation in a face of overwhelming power rendering you helpless (here and further when I say "you" I don't mean YOU personally, just a figure of speech). It's a kind of "Nothing I can do" attitude, which is freeing one of responsibility. Taking small loss though is an act of taking self-responsibility, taking things in your own hands - and it can be very uncomfortable; no one to blame for an error anymore, no omnipotent powers that be that robbed you of deserved profits. It's all you, your decisions, full and undivided responsibility for an outcome.

It does feel uncomfortable at first. It, however, becomes a source of enormous empowerment further down the road, gives you a pride of being in control and creates new kind of comfort - comfort of controlling your enviroment and action and, ultimately, managing your destiny.

rnd in above should read as 2nd...

Emotions - Humans have a natural tendency to make decisions based on fear.

So, when you sell off that beaten down stock, is that because of fear? Or when someone chases a stock based on a rising chart, is that fear?

There are too many variables in trading stock not to allow fear to become a part of the decision making process.... All you can do is attempt to suppress it.

[Bill Cara note:

Fear and greed. Yes, I agree.]

TGP - Does anyone here recall if Bill's TGP review included GLNG? It looks as if these are in competition in regard to the Bahamas.

[Bill Cara note:

I will have to look into GLNG. Comments anybody?]

Hi All,
Just checking in from sunny So. Cal......

On water tretment, this area is chock full of competition, both foreign and domestic, one of ther largest being GE, both in terms of membrane technology (by which they tend to mean reverse osmosis)and ion exchange (like softeners), carbon and ceramics, which are also very competitive. There may be a couple of other ways to play water including pipe, valves, pumps and water resources themselves.

It is already possible to turn the most polluted water into laboratory grade pure water. This isn't necessarily a new premise.

One place I would be interested in would be Dean Kamen's purification technology which is a paradigm changer. http://tinyurl.com/6j9meg

One thing we will need to look for is how many players are in the market and if one technology will have a suitable moat/lead over others.

Back to your regularly scheduled posts....

Bill
I am currently reading your marvellous book. I can see that learning to invest is a lifelong process. One question: as a Canadian investor I often read the advice that Canada is only 3% of the world market therefore one needs to invest in foreign markets. It seems to me though that too often investment advisors ignore the foreign exchange risk. My maxim has always been that I should invest where I am going to spend my income. Am I wrong?
Also I like Exxon but don't you think that Obama poses a huge risk to the US oils - better to invest in Canada?

[Bill Cara note:

Thank you for commenting on the book. I hope you enjoy it.

I think a global audience might invest 3% in Canada, but a wise audince will see that almost 10% of the Cara 100 are Canadian headquartered companies. Companies like Barrick and Goldcorp, Silver Wheaton, etc, are invested all over the world, and we have the benefit of their dual listings in the US. You will also see a greater emphasis in the Cara 100 on the Brazilian headquartered companies, and a partial reason for that is they are dually listed in the US. US and Cdn listings must comply to accounting and filing standards, which are top notch. Disclosure is greater. Hence I am interested.

In terms of Obama and Exxon, I think that might be another myth. But we'll see. As for the Western Cdn oils, yes, I am in full agreement. If there is a single basis for strong US-Canada relations, surely it can be in oil. I strongly support investment in the Western Canada oil sands.]

The 16 primary dealers are among the nearly 60 firms listed but they dominate the universe having experienced $280 billion or (56%) of the total losses reported to date. Second, these primary dealers have raised about $184 billion in new capital, but they are still are nearly $100 billion short of covering even their reported losses, which is seriously impacting their ability to deleverage as financial markets are now demanding. Third, only two of the primary dealers have actually successfully replenished their capital, while the remainder has suffered in some cases significant capital impairment.
http://tinyurl.com/5qkcad

[Bill Cara note:

In an unrelated matter, but important with respect to the viability of HB&B in Canada, the ABCP ruling of the Cdn Appeals Court is out:

http://tinyurl.com/6cxxzz ]

Weak bounce for $SILVER. I have heard many times a collapse in silver can signal a CREDIT CONTRACTION.
From $20 to $13 is a huge move.
Are the rumors of Silver shortages/reserves...just rumors? I get conflicting data.
I think its a great investment long term, both industrial and monetary components

I pointed out in this morning's post that there are two schools of thought as to what's next (school 1: July 15 was the low; school 2: we're about to enter a gigantic wave 3 that plunges us into much lower levels). Today's action helps the second postulate to some degree. And Tuesday morning's important economic reports will provide some more direction. But hear this: until we break below 1261 on the S&P 500, we're just flap-jawwing.

I was interested to see FXP had a strong up day. I haven't had a position in China for a while, it looks like the post-Olympic bear market might be shaping up. Do you remember what I was writing back when the Shanghai index was above 6,000? I was talking about how the new, naive middle class was going to get their heads handed to them. Well, that's what happened. But I think there could be lots more heads to come
TIM KNIGHT

It has been said that wave three will take DOW to around 10000
So, is it good idea to get in to DXD Ultra short for the Dow?

Vad- reference your 509pm post: very well said...i don't usually like to refer to losses as 'tuition,' preferring instead to call a spade a spade, but i am having no problem putting today's losses in that category-> they were taken totally at my direction, which (as you point out) feels completely different...thanks again...

Vad, a question to your personal loss limiting - do you enter stop orders as soon as you take a position, or do you use mental stops? TIA

vinod- it's getting late in the game, so maybe you're right...everything we expected to sell off has sold off-> lenders, real estate, homebuilders, technology, banks, brokerages, healthcare, retail, airlines, commodities, metals...it's possible the blue chips have further to fall at this point?

[Bill Cara note:

Another topic altogether. I have just watched Canadian Idol from NFLD. the rest of Canada should tune in later this evening to what I believe was the best ever of any Idol show I have watched in all the years -- US or Canada. Next week, my wife and I will be in the audience live. I'll get home in time to blog. Ann Murray will be the guest. Ought to be terrific. Man, we cannot let life pass us by. We are not here that long to miss a moment.]

2nd
Studying all post here. And trying to learn from it
Lots of member has enourmouse amount of market knowledge

Will wait befor I put 100% for seasonally strong period (November-january)

stormy monday

(off-topic also)

every once in awhile the radio stations will play the 1971 allman brothers version of the t-bone walker classic...i'll never forget the first time i heard the fillmore east recording in 1974-> it was at the apartment of a meteorology graduate student from taiwan, no less (LOL)...also turned me on to van morrison's 'snow in san anselmo' LP, which i borrowed and played for the next two weeks...this guy went on to post-graduate work at MIT, married a beautiful harvard law graduate, and unfortunately i lost track of them after 1981...(vinod- it was in boston 1981 i was rudely awakened to how racist the neighborhoods around harvard can be-> went shopping for dinner one night with his girlfriend, and b/c she spoke with an accent, was slighted by a cashier who obviously had no clue how difficult it would be for a woman from taiwan to not only enter but excel at harvard law)...

They call it Stormy Monday
But Tuesday's just as bad.
They call it Stormy Monday
But Tuesday's just as bad.
Lord, and Wednesday's worse
And Thursday's all so sad.

The eagle flies on Friday,
Saturday I go out to play.
The eagle flies on Friday,
Saturday I go out to play.
Sunday I go to church,
Gonna kneel down and pray.

Cyderman,

I prefer mental stops but notice an importaant factor here: I am at my computer almost all the time during trading day and watch my stocks like a hawk. If I have to leave for a while, I will enter hard stop. The reason why I prefer mental is, there is a little discretion involved even in such "near-religious" for me matter as stops. Here are two important illustrations, both of which are "must to be considered" IMO.

1. My stop is at $20; stock drops into 20 where there are 100K shares are bieng bid. Do I want to take my stop at first 100 shares going at $20 or do I want to watch a few seconds/minutes to make sure that bid is getting hit and $20 is not going to hold? Obviously latter, right? Yet hard stop will take me out at first print and I have a high chance to be shaken out while solid bid keeps stock afloat and provides support for a bounce. By the way, that's why if I do set hard stop, I look at the bid on level 2 and if there is a strong support there I will "pad" my stop a bit - put it at 19.95 for instance, sacrificing a few more cents but making sure I get stopped out only if support is really broken.

2. It's important to consider HOW stock gets to this or that level. Again, my stop is $20, stock slides slowly to it and starts hitting it - I will get out. However if a stock dropped sharply into such support in one vertical gasp, then paused - there is a good chance for a bounce, aand I will try to take my stop on such bounce, minimizing the loss. Again, hard stop won't make this distinction.

If one can't monitor action real time, which is usually the case with longer term traders, risk is usually minimized by wider padding the stop and according decrease of position... but that's a bit different universe, matter of separate discussion.

gold is a leading indicator of inflation while the CPI is a lagging one. In the Olympic spirit, go with the gold
By RANDALL W. FORSYTH

2nd,

let me throw in one more angle to use. There is one key word that helps adjust mental state to taking stops easily. This word is FREEDOM. Try to get this feel of being free - free of losing position that drags you down, takes all your atention to manage. Free of negative emotions caused by it.ee to chose another stock that performs better. Free to redistribute your attention between sectors.

Remember Bill's mataphor abot "dancing between the markets" or something to that tune? Try to do such dance being chained to losing position... That freedom to act at your discretion not being slave to the market unfavorable to your position alone has enormous value.

"mataphor" is metaphor and not a matador... sheesh, my typing digs new hole just when I think it hit rock bottom

Vad- i know exactly what you mean...mentally marking all my positions to market at the end of each day gives me a similar 'freedom' from having to worry about 'basis' points and whether an individual trade was good or bad-> i just can't do it consistently..

i'm also a believer that verbal or written 'slips' are one way the subconscious communicates creative imagery and/or unexpected solutions-> so i would rather read 'matador' than 'metaphor..' well said, my friend...

"trash talk backfires at the beijing olympics"

http://tinyurl.com/6jznwk

love it...

SSEC breaches 2300...

RE: GLNG

One of Jon Fredrikeson's companies(ie;Deep Sea Supply/Seadrill/Frontline) extremely well run and investor centric. I've been in/out of GLNG several times this year. Builds ships, sells them under leasebacks then sets them into medium-long term leases, distributes excess cash back to shareholders. GLNG paid $1.00 in dividends past year.

Vad, thanks for your response. Very informative, as always

Bill, you are in NFLD?! You do certainly get around. I'll be back home to NS this September for vacation and to talk with the COO of Acadian Gold.

**General note to the community: If you want me to ask Acadian Mining anything, let me know. I'll be touring their operating Zn/Pb mine and reviewing their gold properties (and Bornite?!).**

I will be in Goderich this weekend to check out Sifto's salt mine and the town.

Cheers

Shannon

[Bill Cara note:

Shannon, you are making a terrific contribution to this community. We very much appreciate it.

As to NFLD, no, I haven't been there for many years--took a Winnebago from one end to the other as part of my 100-day Cross Canada Tour. Today, when I'm in Toronto, I just click on digital TV and pull in stations at more convenient times.

I will soon return to Nassau where I recently located the office just 1 block from the British Colonial Hilton in a famous Bahamian building, now a law chambers, called Condor House. Here is a photo taken yesterday and an artist's rendition from more than 25 years ago when my friend and associate acquired it:

Here are links to the images, resized to fit in a blog post:

http://billcara.com/assets/korvus/billoffice001sm.jpg (picture)

http://billcara.com/assets/korvus/billoffice007sm.jpg (painting)

You will note how well the building has been preserved.]

ALOHA !!

I am back from Honolulu and had a great time with Vegas pals. We snorkeled all over Kaa'a'va and the North Shore(no waves in Summer). My Vegas pals announced they will be moving out of Vegas within 18 months and move to Laguna Beach, California. Out of the frying pan ... into hummmmm??? Well, at least Laguna Beach has a nice beach ... or it did last time I was there back in 1994! They claim Vegas will be a ghost town and out of water by 2018. I heard there was a drought, but is it really going to be that bad? Maybe Boone Pickens needs to get some wind farms in Vegas?

CHANGE
What has changed? Not much since 1913, except to say the greed and ingenuity of leveraging greed has reached new highs in America as the intelligence level of the average US Voter has reached new lows!

Get some perspective on the past and watch this video link about centralizing government and banking and industry. Who pays? What has the US FED ever done for you? The same old ... same old ...

Link: http://tinyurl.com/8hbal

ASX
Don't forget to take advantage of the currency spreads between the AUD and USD and buy some cheap Aussie mining companies who are already nearing 52week lows. With a US Peso you get nearly a 15% bonus discount! There's always a silver lining if you look hard enough ...

Bill, my pleasure. Really.

Shannon, Try the fish and chips in Goderich....mmmmmmm, good. I have friends that live on the Maitland River, a beautiful farm. I found it fascinating, a salt mine under water......

Three "F-words" we should purge from the US vocabulary:

FNM, FRE, FED