Why can't they get it right on the short-selling issue? Ban illegal naked-short selling on ALL stocks but leave covered short-selling alone. It almost seems like the legislators who are rubber stamping these measures don't know the difference.

Bill,

It was good to be able to read your mini essay yesterday on the difference between law and philosophy. Any hostility I have right now is born of frustration with governing and not with any views expressed here. Today you summed up all that very well.

I bought my first stock in 1969. Currently because I chose to obey the law I am having a struggle with the IRS. Had I ignored my mistake I would have gained several thousand dollars.

Now I see our government ignoring both our laws and basic ethical standards. I am saddened, angered and embarrassed by our national behavior. Those responsible have diminished generations of people who have served in so many ways to try to make this a better world. The Marshall Plan, Radio Free Europe, various emergency aid missions have been replaced by selfishness and greed which has polluted the international marketplace and is now receiving an official blessing from on high.

(I won't go into what I have in mind for Paulson&Co. Hint: He would prefer Waterboarding.)

I am frustrated and disgusted by media reporting with their daily pandering to CEOs, government officials and politicians while pretending to offer valid advice to the uninformed or naive. I want someone to simply ask those who were charged with the responsibility of guarding the markets and taxpayers — "Can you please justify for us, what you did to earn your $millions these past several years?"

Your blog is a bastion of reason and information, unique among all others available to the general public.

Thanks again.

"Capital must protect itself in every possible manner by combination and legislation. Debts must be collected, bonds and mortgages must be foreclosed as rapidly as possible. When, through a process of law, the common people lose their homes they will become more docile and more easily governed through the influence of the strong arm of government, applied by a central power of wealth under control of leading financiers. This truth is well known among our principal men now engaged in forming an imperialism of Capital to govern the world. By dividing the voters through the political party system, we can get them to expend their energies in fighting over questions of no importance. Thus by discreet action we can secure for ourselves what has been so well planned and so successfully accomplished."- USA Banker's Magazine, August 25 1924

Exhuberance overnight in all the markets but Russia surely tops the list - up > 25%. Wow.

Cara 100 Update:

Downgrades:

CTSH - to Market Perform @ Wachovia
INFY - to Market Perform @ Wachovia

New Coverage:

COST - Market Perform @ BMO

Have to be "veyy, veyy quiet", Elmer Fudd. I'm waiting for DJIA to hit something like 11,650, then open positions in TWM/SKF.

Nuthin is ever as good as it seems nor as bad.

keep in mind the big boys have to kill off today's option holders.

Bill, maybe this was the WSJ article in question.

"The Securities and Exchange Commission prepared an aggressive assault against short-sellers, saying it would temporarily prevent investors from making bets on stock declines in an attempt to stem some of the worst stock-market slides in years, according to people briefed on the proposal.

The SEC was convening a late-night commission meeting to consider several items, some of which could be announced as early as today, a person familiar with the matter said. It's unclear whether the halt will be limited to a certain number of financial stocks or how long it would last"

http://tinyurl.com/shortsales

Where's GE on the list of 799? Oh yeah, they aren't a financial company. :)

How longs this next rally going to last... isn't this just like the SEC dumped 300 tons of cocaine into the water supply around wall st?

Pre-market FXI is $38.20

Doesn't look like a rate cut today, does it?

From the SEC:

"IT IS ORDERED that, pursuant to our Section 12(k)(2) powers, all persons are prohibited from short selling3 any publicly traded securities of any Included Financial Firm."

http://sec.gov/rules/other/2008/34-58592.pdf

The SEC has put in this order to begin Sept. 19
at 11:59 PM and end Oct 2 at 11:59 PM. Does that mean we rally for the next two weeks?

skf down 20% premarket

I'm expecting Borat to pop out any minutes.. and say - Verrrrrryyyy Niccccccce! Wellcome... the USASTAN!!!

For some forseen reason... (Kick me to the curb for thinking so) that this was going to happen.

I picked up some UYG yesterday.. But held on to my SDS and QID!!!

Any thoughts!! Pre market is up 27% on UYG.. but much lower on the others. Will this be a one day jerk move??

I pray for my fellow Brothers and Sisters here who are in SKF!! Us Comrades will pray for you. Let us know what you lost.. and collectively.. we'll pass the ox car to share our grain the mutton with you.

"keep in mind the big boys have to kill off today's option holders."

If it's truly a question of "national security", I'm sure the big boys could ramp the markets into the close and take a hit on call options (accept later accept some small compensation from the Fed/Treasury for their troubles).

What it is costing so far:

-$200 billion for Fannie Mae [FNM 0.42 -0.061 (-12.68%) ] and Freddie Mac [FRE 0.26 --- UNCH (0) ]. The Treasury will inject up to $100 billion into each institution by purchasing preferred stock to shore up their capital as needed. The deal puts the two housing finance firms under government control.

- $300 billion for the Federal Housing Administration to refinance failing mortgage into new, reduced-principal loans with a federal guarantee, passed as part of a broad housing rescue bill.

- $4 billion in grants to local communities to help them buy and repair homes abandoned due to mortgage foreclosures.

- $85 billion loan for AIG [AIG 2.06 -1.69 (-45.07%) ], which would give the Federal government a 79.9 percent stake and avoid a bankruptcy filing for the embattled insurer. AIG management will be dismissed.

- At least $87 billion in repayments to JPMorgan Chase [JPM 38.12 -2.62 (-6.43%) ] for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers [LEH 0.11 -0.19 (-62.37%) ]. U.S. Treasury Secretary Henry Paulson said over the weekend he was adamant that public funds not be used to rescue the firm.

- $29 billion in financing for JPMorgan Chase's government-brokered buyout of Bear Stearns in March. The Fed agreed to take $30 billion in questionable Bear assets as collateral, making JPMorgan liable for the first $1 billion in losses, while agreeing to shoulder any further losses.

- At least $200 billion of currently outstanding loans to banks issued through the Fed's Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.

http://www.cnbc.com/id/26751385

This just out....Video.

Comrade Paulson practicing his speach for 10am (est)

http://www.youtube.com/watch?v=SEtk_WENKZA

HAH!! GLD is up this morning...everybody's not stupid.

From the order. Note the word "effecting"

In these unusual and extraordinary circumstances, we have concluded that, to prevent substantial disruption in the securities markets, temporarily prohibiting any person from effecting a short sale in the publicly traded securities of certain financial firms, which entities are identified in Appendix A (“Included Financial Firms”),

Does this mean that a person cannot buy SKF?

We knew they were going to do something....and being banker politicians what could we expect?

Bill told us to bet the jockey. Did anyone expect Hank wouldn't do whatever was needed to save his friend's bacon?

Here's hoping everyone was positioned for the rescue.

As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed below. The rates are effective at the close of business on Thursday, September 18th, 2008.

MARGIN RATE FOR GOLD FUTURES (GC), COMEX miNY GOLD (QO) AND COMEX ASIAN GOLD CONTRACTS (QS)
COMEX Division Margins on Gold Futures Contracts
Member: Clearing and Non-Clearing (Hedge Margin): New: $ 5,500 Old: $ 3,750

Non-Member Customer (Speculative Margin): New: $ 7,425 Old: $ 5,063

vinod- obviously, taking off the UYG pre-market at 24 and change...that's 28% overnight, man...

Well, now we know why SPY Calls have huge bid/asked prices.

WHO KNEW? we know...

opened one position in SKF at 91

Any thoughts on commodity and SMN?

BTW, had my ass handed to me on SKF, but only a 50 share entry......luckily I also straddled with a position in GS. Took the loss early this AM and the GS is making up for my error.

Down 600 on SKF, up 2000 on GS.
Also got into CAF, XOM, MSFT at or near the lows.

SKF in the low 90's -80's...will try a nice entry when it's time to sell GS and reverse the trade. That will likely be when they remove the short limitations as happened last time.

buy limit on DZZ 28.85

"GS 130 premarket? wow. guess I hit the eject button too soon."
Posted by: bsi87 at September 19, 2008 7:35 AM

bsi87- i read your posts yesterday...nice timing on entries and exits, and you back many of them up with technicals we can all learn from...

as for the Van Meerten guy, the disclaimer says it all:

"Disclaimer: My stock selections should not be taken as buy/sell recommendations for you. They are stocks that were selected by my stock screening process. I analyze each one before adding or subtracting them from my portfolio. Do not concentrate on the stocks I choose; learn how my selection process works."

;)

I lied...GLD is up GOLD is DOWN

I'm confused, SEC banning all short selling or just financial companies or what?

it's time to sell GS and buy SKF.

Folks? Did you vote for the elected members of congress who are embracing and applauding this farce? How about those candidates for the next election? What are you going to do about it?

Bill, your blog is a national treasure and should be required reading for everyone who chooses to risk capital in the market. Your comments and many of your predictions are incredibly good. You don't have to be correct 100% of the time because you guide us (your loyal readers) so that we can stay on the correct trend as much as possible.
Thanks to you, yesterday I went long RIO TCK GGB & ABB. The trade looks good for about at least 2 weeks. The reason I mention 2 weeks is because my independent study of the charts has convinced me that the market lows will occur in late OCT early NOV.

My view of the short selling ban is that in times of economic chaos the government will confiscate wealth in an effort to save financial institutions. Kaimu's posts show that in the last depression this was accomplished by confiscating the gold people had been hoarding in their safe deposit boxes. But this time, that is not where the wealth is, thus the ban beceause this time the wealth is in trading accounts.

I don't see COF or AXP on the no short list. They look ripe to me.

thx 2nd.

this situation could end up very,very ugly. After the shorts cover, there will be minimal support other than the Fed's printing presses. I'm tempted to say even it will run out of ink but we'll see.

the classrooms and professors must be buzzing at Stern NYU. wish i could be back there to hear the lectures.

This SEC ruling banning short selling is further embarrasment to the regulatory bodies governing our markets. This is just more of the same old binge and purge actions that have already failed us.

The SEC had a good chance to make some logical long term changes to eliminate abusive short selling but instead chose a market equivalent of the Atkins diet - trying to fix a long term problem with a short term solution.

I truly feel for those home gamers who will be negatively affected by this rule change. Certainly many "in-the-know" parties had prior knowledge of this action.

Sadly I think this will be one more action preventing us from naturally bottoming. The recent actions of the SEC/HBB/FED genuinely frighten me and force me to question whether they are trying to help or simply seeking write the history books themselves.

US Gov't is the biggest market manipulator of all!
If they are gonna stop short-selling, why not across the board, not just financial. This is sooooooooooo unfair!

http://tinyurl.com/3qqe66
Treasury, Fed move to bolster money market funds
Seeking to deal with a severe financial crisis, the department said that for the next year the U.S. Treasury will insure the holdings of eligible money market mutual funds.

Cara 100 Update:

AMAT - Coverage Initiated @ Soleil with a Buy

bsi87,

I didn't hold any Goldman overnight, but wishing I did! If I HAD held it, futures would be DOWN 400 pounts and GS would be bidding 92. Such is life.

2nd
My feeling is today they will kill all PUT option holder first.
and than will market will come down and kill all call option holder
end the end HB&B will not have to pay anyone
also Have 1000 UYG for Long(2-6 month)

bsi87 makes an excellent point. This ban is simply going to cause a huge short covering rally and then we'll drop like a rock.

shark,

yup but the mkt is giving another opportunity at the open. one just has to recognize it and carefully take advantage

If DXO takes off, I'm going to puke. (sold it yesterday)
SKF - Looking for my entry.

Could this really be the start of a new sustained bull market? Can it really be that easy for the authorities to throw money at the problem and fix it from a prices point of view, at least?

I am having trouble reconciling the timing here. There still looks to be a slowdown on the horizon in emerging markets. My thoughts had always been that at the inflection point when so much money was thrown at the problem that what would transpire is a flight into hard assets and hard asset equities due to a wake up call of soft assets. That would not fix anything for the authorities but rather eventually exacerbate the commodity bull market into a bubble eventually. Perhaps leading to a wage/price spiral also - for which we have already seen the first attempt to squash.

Is the deleveraging unwind finished? I have trouble seeing this as over. How long does re-inflating work before the entire bubble of a ponzi system go bust? Certainly a breton woods 3 would need to be in place as a minimum. End of thinking out loud rant.

We had it all before. 1857, 1917, 1929. It didn't help. Just do a search for short selling in the New York Times Archive.

vinod,

the big boys want the max number of puts AND calls to expire worthless.

http://www.iqauto.com/cgi-bin/pain.pl

Using this market manipulation to clean up my account, i.e. go to some cash from margin.

ESLR bid 10% higher pre-market. Sold 1/5 of my stake at 5.94.

SLW went off too at 9.35. Will scale back in with an 8 handle ... I have a stink bid at 8.01!

Also hoping to get back into QID today!

Good scalping, everyone!

my lord. the connected must have lined up their billions on the long side all week. i am sure many on the top floors of 30 Hudson Street Jersey city knew 1st.

Thank You Bill for your willingness to share your experience and wisdom. I have received better info here for free than I've paid for elsewhere. Never in my life has a broker of mine called me with an idea half as profitable as your GG call. With all the help you have kindly given, you should never have to buy a beer again. I know I owe you plenty.
Pat

I want to vent. This corporatist short selling policy is going to skew the markets and alter the game we've been playing. Ever play Monopoly with 3 dice, or blackjack where the daler doesn't have to hit 15's?

These FASCIST corporatist swine are going to ruin our market like they ruined housing and the economy. And I don't mind telling you what I want to do to Paulson.

I want to attach electrodes to his balls and hook him up to a lie-detector machine, and of the course of several days, find out everything he knows about economics.

The taxpayers are going to bail out wall street? FUC* THIS!

They aren't saving anything in the long run. All they are doing is controlling the downside (to the degree possible) when they get to key levels.

Remember the last time we were here?

The 10,600 area must be very important to them.

Nice move for the TBT holders....

fiddling around, trying to figure out where DJIA resistance is.

max pain appears to be 11,800
50 DEMA is 11447 (already there)
trendline resistance is 11751

Jim,

Thanks for posting that tally of 'what it's costing'

Ultimately this is all inflationary. There is no way around that. We can and will have massive deflation in some sectors and higher inflation than we are used to in others.

It seems nothing has changed since the Byzantine times - all empires eventually overspend, overleverage and ultimately experience long term rising interest rates in order to finance when others stop financing them, a deteriorating currency and eventually inflation as a result of printing in an attempt to quell the same cycle of problems.

A question or two for brighter minds

Doesn't the new rule constrain the effectiveness of options trading as well?

How do the option traders keep their accts balanced when they cannot offset, say, GS paper by selling short the underlying common stock?

bsi87
will hit 11450 and than bounve around

I want to thank Bill and all the members of the discourse.....I would be completely lost in all of this if I had not found this site.

Regarding the politicians not knowing the differences of short selling, I'm sure GW thought it meant no one under 5'6" would be allowed to sell stock.

GW: Why Comrade Paulson....that's a great idea...if short people can't sell then the market has to go up,up, up....brilliant.

There's a phrase in Texas. Big hat no cattle. That's exactly what our nation has become.

so, whats a trader to do today?

vinod,

I'm not that smart. I'd prefer to see a high and a reversal and then maybe another nominal high, then pull the trigger, all in the first half hour to hour.

Schleppy,
Let's throw in a tall-buying in the GW's vocabulary.

pesche

Option expiration weeks usually trade bullish, and the following week is unwinding.

The Federal Reserve will now provide liquidity for the Asset Backed Commercial paper market.

And the Open Market Desk will purchase short term agency paper from dealers.

http://tinyurl.com/compaper

from notablecalls blog

The Pakistani example of banning short sales:
A smart hedgie pinged me with the following:

An extreme example comes from Pakistan where the local SEC responded to a stock slump last month by banning short selling and limiting daily price declines to 1% while allowing them to rise by 10%. The initial reaction was a massive 8.6% one day rally followed by 15 straight days of slumping prices amid extremely low turnover, the worst such period for that market in several years. As rioting investors stormed the Karachi Stock Exchange last week, the rules were rescinded."

bsi87
My friend, I know very little about Market
I started on feb 2008
and whatever I learn is from this site and from people like 2nd
also can not say enough about Bill cara

according record keeper here one in five expiring friday market goes down
so, odd are it is going up

Don't fight the fed, how about don't fight the treasury. This is now gambling, not investing. Thanks to all and especially to Bill.

Amazingly, max pain values have converged for SPY, XLF and IWM, which was unthinkable a few days ago. Your biggest bang for the value today is on QQQQ and DIA: http://nexalogic.com/maxpain.html

These numbers will change. Hang in there.

I wonder where the fed is getting all this money...

Mr Cara

Do I understand you correctly...

"These are the sectors that will most likely sustain the new Bull; the Financials and to a lesser extent the Consumer Discretionary sectors will have to re-test the lows"

That yesterday would of been the bottom for all sectors except Financials and Consumer Discretionary? So for small caps and tech stocks the new bull has begun?

[Bill Cara note:

Yes, I believe the new Bull started on Wednesday afternoon. The first leg is being led by the Financials because of the goings-on in Washington, but ultimately markets are driven by corporate fundamentals. So I think that the Financials will pull back after this current moon-shot, and will test their lows while waiting for the next US Administration to set policy. But there is no reason to withhold buying the sectors I referred to. I believe that over the next year, these sectors will do well.

I had been prepared for the turn, which is the time to make the trade decisions. Today, it's kind of hard to be a buyer after the DJIA has already rallied about 1000 points since Wednesday afternoon.

Also, on Monday AIG comes out of the DJIA and will be replaced by Kraft (KFT), which removes a Financial and inserts a Consumer Staple (XLP).
http://billcara2.com/tkchart/tkchart.asp?stkname=KFT&wt=1&ind=nn ]

SiO2 - Thanks for post!

Dominion's natural gas storage field in PA is on fire.

will cover my XLU puts, at least the short term ones, as soon as they start to trade. XLU often goes opposite the general market for a little while, then turns & follows. We shall see.

Still think the utes are short going ahead, but time to go flat for a while.

All this talk of jumping back into SKF:

I'd be veerrrrry careful about guessing a bottom, unless of course you're just scalping for a few bucks.

It's certainly not for someone who isn't watching it trade second by second.

I'd be wary of letting greed get the best of you this morning. After all, the rules may have changedm, but it's still us you're dealing with.

Kaimu....How do you like the Big Government bailout already? Got any macadamia nuts?

DJIA set to open up 529 pts...

bsi87,

I just noted your trading yesterday.

I am curious at what price (today?) you intend to sell SKF?

If we expect a big crash after this short-squeeze, then it would seem more profitable to hold on till then.

This is quite amusing. Both Obama and McCain are part of the US Congress and have had clear visibility of the war taking place between Wall Street short sellers and Public issuers. Lawsuits filed, Senate Hearings where few senators want to come forward to raise doubts about the safety of these markets, state legislation efforts to thwart the abuse and neither candidate spoke up.

An intelligent person would ask, what did each know?

Certainly it would not be a stretch to think that McCain was visited by TASER seeking assistance after TASER was throttled by short sellers (one of the high time issuers on Reg SHO list) and after the level of false rumors they encountered that destroyed public confidence in their market. TASER has resorted to seeking legal action because McCain failed a constituent. Today McCain wants Cox fired but McCain did nothing about this before Cox was even exposed to it.

This is only a problem to these members of congress because it can be used as a political hot button. As members of Congress today they had the power and the opportunity to step in and help long ago and neither did nothing. It is ultimately what is wrong with this generation of Congress, they never hold themselves accountable for anything.

This problem has existed through both parties control of Congress and it existed under both parties control of the White House. It was ignored because the companies destroyed in the past were small companies not worthy of a news report. Now that it escalated to companies with the capacity to destroy our nations markets and economy this is suddenly an issue.

Shame on both parties and shame on both Senators. This is not a partisan issue it is a class issue and neither party nor senator cared about the middle class company or the middle class investor. Is this a sign of our future with either Senator at the helm?

The actions today by the SEC, it was both irresponsible and most likely illegal. They just created the largest pump and dump in the history of teh stock markets and did so costing small investors who short legally huge money.

CALM back up to $42.

I wonder if the Federal Reserve bought index calls yesterday. It would one way to pay for the bailouts.

Fidelity unable to execute...

People are hesitant to go long at these prices...

out of FXI at 39

Banks showing profit taking in the first 8 minutes.

Waterhouse is down.

2nd
My fidelity does not work are you having same problem?

The action on AMZN is amazing. Tried to short a few shares.

SKF has been showing 93 for several minutes on scottrade?

I am getting network timeouts from waterhouse too. Can not make any trades :(

Too much vol, system overload - quotes basically frozen

vinod- that's right, man...canNOT even get a decent quote..

According to DOWJONES:

ProShrUDFnl(SKF)Halt: Dissemination. Last 155.44

td waterhouse showing skf halted

todd,

why should we be cautious about SKF?

Miners outperforming gold itself.

Make that Last 115.44. It was going up fast.

My vanguard trade account is not functioning.

Can't execute an order.

bsi87

Well for one thing, some of the trade platforms are frozen right now which makes it hard to even get a decent quote.

Also, the volatility today esp today because of options expiry will make everything in finl. sector trade with even greater volatility than normal given these events.

Looking for a # to call at waterhouse but their 'contact us' page is down.

Yep....can't get a quote on SKF after 9:33 at my broker

Wait until I get off the phone. :)

just google them.

Discount Brokerage. 1-800-465-5463 (416) 982-7686

toDD,

Volatility is good.

Gordon Gekko

i didn't realize i was talking to GG :)

I so wanted to load up on financials this morning but cannot execute my buy orders.

Those SPY high volumes calls I mentioned yesterday have disappeared, simply gone, puff, all of them, no trading, just gone.

This was the picture yesterday: http://nexalogic.googlepages.com/spy2.jpg

Today, open int. is zero, and volume is zero as well., it's magic. The casino's roulette has gone back in time.

Besides the crooks at the Treasury, the SEC and the FED, this whole thing is rigged.

Something about this order smells: "IT IS ORDERED that, pursuant to our Section 12(k)(2) powers, all persons are prohibited from short selling3 any publicly traded securities of any Included Financial Firm.
Similar to the Amended July Emergency Order, we are providing a limited exception for certain bona fide market makers . . . entities are excepted from the requirements of the Order: registered market makers, block positioners, or other market makers . . . In addition, we are providing an exception to allow short sales that occur as a result of automatic exercise or assignment of an equity option held prior to effectiveness of this Order due to expiration of the option."

Oh yeah it is the exceptions.

Who can actually perform a naked short?

what's weird is that this is the first day scottrade's worked right.

BCE @ 37.59
GE @ $27.50
PCA (TSX) @ $38.61
FXI @ $38.12

Fun day.

Cpookie

Time to buy finls was yesterday. I wouldn't touch them right now.

Scottraders... Anyone having the ususal problem with the their trading screen? The adjustment to my firewall did zip...I then disabled it and it still doesn't help.

damm fidelity this shouldn't be like this
no one answer the phone
recording

re:SKF.

One has to calculate a price level where the upside outweighs the downside and trade on that price. I went long a position pre market at 91.

vinod- you should be OK now...

SKF -

Is trading halted on SKF? My screen stays flat at 93.00.

After the big boys are done with their trades, you will be allowed too.

RBC platform has been fine.

ZION Banccorp went up 120% in the first five minutes of trading. After going up about 25% yesterday. It is now up 3%. Bill, this is fraud. I was lucky that my broker was swamped and did not force me to cover margin, or I would have taken a tremendous loss. Is there anything that will be done against this fraud? Is there anything that individual investors can do at all now?

BSI87 - did you get any SKF at 93?

CAF- vinod, can't help it, man...out at 32.11...how can i leave a one-day gain of 21% on the table...will look to re-enter

My Vanguard trade acount is LOCKED. This is all I get
Contact us for assistance.
Return to the page you were just on.
Go to the Vanguard.com® homepage.
And I have been on the phone waiting for a VG broker for 20 minutes, with only a computer voice telling me to wait.

Bull Hunter

QID is coming back at least it looks that way on my sloooooooooooooow motion Scottrade screen

UYG is trading more liquid than SKF, yes ? You can still short UYG (I think) if that's what you want to do.

2nd
May be they are using different server for west coast
mine still does not work

Re: ETFs

Warning light on ETFs, they are capitalized using derivative obligations and dervative swaps, often within the same company.

Derivatives are like option contracts, so if you have puts and no short selling, your puts are now worthless, but your call options may have no value as well, since there is no liquidity for margin.

I bought some SKF at 90.99 premarket

Just got through to a TD rep... their internal Waterhouse portal is down too.

Set some limits to sell on FXI/PCA down a bit.

Reminds me of the time we played poker with a pinochle deck.

"I got 5 aces."
"I got 5 aces too!"

http://en.wikipedia.org/wiki/Pinochle

We ended up calling the pit boss in the Bellagio for some poker rules afterwards. (We were in Virginia.)

Someone placed magnets under the roulette wheel.

nice move - you will make a killing on that side now...none of us regular folk can get in, apparently, so i may go with SRS...

Re: Bond Yields

Yields are up this morning

http://finance.yahoo.com/bonds

poor vadym - he came to America to escape Communism...

Forgive me for sounding like a WUSS, but this is absolutely scary. I'm glad I did nothing.

From my RBC Direct Screen:
SKF last price is frozen at 93.00.
The last bid/ask is 0.01/125.02 (also frozen). I assume that trading was halted.

Thanks Fransix for the reminder about trading ETFs. Perhaps now is a time to be wary about any trades involving derivatives and counter parties.

SKF has a bid of .01 on Interactive Brokers!

Something strange going on, good luck to all the SKF gamblers here.

is anyone else seeing SKF not trading on their program???

QT,

Looks like we'll be ok with QID after a few days.

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

Anyone else thinking that SKF could be halted because Hank is adding it to the short list? One would guess that SKF would now be the vehicle of choice for financial short sellers.

Thats one way to stop speculators. Crash the quote system and trading platforms. Scottrade still down.

bsi87 bought SKF this morning at the lowest price we'll ever see again.

Folks I'm seeing SKF @ 98 and change

ok.. the bid ask is now moving on SKF... $98 b/a

The 'read' I get on SKF is that it crashed:

http://www.stockwatch.com/

This is a delayed quote.

EVERYTHINGS selling off after the big open

They ran the stops of short sellers who had stops submitted. This is so rigged, so now like Bill said I have my stops written down but they will be submitted manually if the prices get there.

Bull Hunter

You know if you and I would of sold yesterday our QID along with my TWM and bought back we could of be semi rich guys today.

I sould of, I could of, I would of!

rob d,

LOL! Disheartening, isn't it

that's weird my Scottrades working for once

be:been
[the tears in my eyes makes it hard to type ;-) ]

this is a joke - multiple platforms down - no news reports of this by the media - pockets are being picked in the process...this is a sad day and a sad week for America and the world.

I feel like Rubashov in "Darkness At Noon" waking up every morning to the same totalitarian nightmare...

Paulson
Bernanke
Bush
Cheney

It's like a freaking X-files episode isn't it?

Craig,

Help!

I too, got nailed on a small number of SKF shares, but I see you are thinking of re-entering. Won't the no short rule prevent them from gaining? I think this is more than naked shorting. Right? They set a date of Oct 2 on this, but with the option to extend.... until?

Maybe I am missing out here.

Ok, let's go thru this.

Say u have a $100,000 portfolio. Using Elder, one would risk no more than 1% of one's equity on a position, or $1000 in this example.

SKF 10 day average trading range is 15. Say u're willing to let the trade move 1.5 days worth against u, that's 22.50.

1000/22.50 = 44 shares. Assuming a decent entry, u have a sell stop of ur entry - 22.50.

Could it drop more than 22.50? Sure but good entry price/analysis will help. If SKF goes to zero, u lose $2000 or 2% of ur equity.

This is how to calculate position size which helps control risk.

1000/22.50

But I haven't traded. Would have shorted all the financials at the open and made a pile, but....

I still can't trade SKF at my brokerage.

QT,

I'm sickened and wildly angry at the latest Hank gambit but think that we'll be back in the 50's in no time on QID.

My few longs are covering my losses on QID today.

Regards

SKF is halted. Maybe they are stopping ALL shorts?
SKF at 88, out at 100.
GS out at 140.29
CAF out at 32.35
XOM out at 81.60
SLV out at 12.36
TTM out at 9.84
MSFT out at 26.25

Paulson just dodged all the important questions. and shook his head sideways while walking away from podium. not the most confidence inspiring press conf. at least the billionaire's club is cheering.

fido now works
this is bad it took 45 minutes to work
bad bad bad for small trader

my feeling at this moment is that gold is bouncing around $858-$872 and will at some point today run up hard and fast or fall hard taking the shares even farther.

just a feeling im getting from the price action in the mining shares right now.

fast market, use limit orders on EVERYTHING.

If u want a guaranteed execution, set your limit order under the bid.

Re: Paulson

I think its time to buck up and realize the magnitude of events unfolding this week.

GS trading well below the open, they took Ma and Pa's egg money

[Bill Cara note:

Goldman Sachs was pumping for $200 oil, and set a price target of $145. Today, they re-set their PT to $110. If anybody sees value (and objectivity) in what these analysts do, I don't.]

so if we somehow end down in the next few days, without the shorts involved on 799 financial stocks, then who will they blame? britney spears?

They halted TBT too.

Now this is F'ed up.

Welcome to the USSA.

"After the big boys are done with their trades, you will be allowed too."

LOL...no f---ing kidding...

All I need to see is Larry Kudlow praising the actions of Hammerin' Hank while spewing his catch phrase that he believes in free market capitalism and my shoe is going thru the TV screen.

(Bloomberg) -- The market storm that brought down Lehman Brothers Holdings Inc., American International Group Inc. and other pillars of U.S. finance may have also blown holes in the portfolios of House Speaker Nancy Pelosi, Senator John Kerry and more than 50 other members of Congress.

Pelosi, in her most recent financial disclosure form, reported that her husband owned between $250,000 and $500,000 of stock in AIG, which ceded majority control to the U.S. government this week in exchange for $85 billion of loans.

Kerry, the 2004 Democratic presidential nominee, disclosed that his wife, Teresa Heinz Kerry, had more than $2 million of AIG stock at the end of 2007, when shares were worth $58.30. AIG has fallen 85 percent this week to close yesterday at $2.69. The lawmakers' aides didn't respond to calls seeking comment.

Altogether, 56 senators and representatives had stakes in AIG, Lehman, Fannie Mae, Freddie Mac, Bear Stearns Cos. or IndyMac Bancorp Inc. -- some of the biggest casualties of the market bloodbath, according to the Center for Responsive Politics. The most recent annual disclosure filings list investments as of Dec. 31, 2007, and reveal the size of holdings only within a range of values. Lawmakers may have sold shares since then.

re:SKF/FXP

If they're not gonna trade SKF, I'll look at FXP.

Watching for the hourly divergence.

Re: Margin Rates

Margin rates up on precious metals:

http://www.bloomberg.com/apps/news?pid=20601012&sid=a6TkCUg_VQjI&refer=commodities

[Bill Cara note:

This is more of the Paulson Plan to seize control of capital markets. Was Gold setting new records today, out of control as they say? No way. US legislators had better be careful as to whose ring they will have to kiss in the White House.]

Jim - The article forgot about all the mom&pop accounts taken down in the bloodbath... Those are the one's I'm worried about. But, it is nice to know muckety mucks were caught but I'm sure thay won't loose even though the speculating went on under their watch.

or maybe long EEV

re: short selling
Watching the price action in my MPEL holding makes me wonder about the ramifications of banning short selling on the financials. Presents the investor with several options:

1. do nothing
2. buy financials
3. sell existing holdings
4. buy something else
5. SHORT something else (i.e. casino stocks, discretionary)

Just a speculation/observation. Where are the short-sellers going to turn next...

Was hoping for more of a pop in the mining sector with a "crackdown" on naked short selling.

vinod- i don't like the freeze on SKF...thinking about exiting the ETFs for now?

My remaining IYR puts were seriously under water in the open, buy lookie now - IYR down 1%?!
(no, I didn't add - no dry powder, bad planning. oh well . . . next time)

where's that bull market in real estate they just promised me?

"They ran the stops of short sellers who had stops submitted."

They've always done that, nothing new there.
That's why I only use options, and only wide mental stops.

Did everyone that wanted to buy already buy (in the overseas markets & the futures)?

And now it is time to sell?

Confused on CEG. If the buyout is $26.50/sh why isit trading at $22?

Surreal. Was away from the market all day yesterday. I caught a CNBC monitor before going into the can, the DJIA was down 150 pts. Felt like crap. Left the bathroom, the dow was down 35 pts. I no longer felt crappy, in more ways than one.

Caught CNBC again after the market close, saw the rally, and just shook my head. Caught up on all the news this morning. Exited DDM on the morning rally, 8% gain. Sumbitted a market order on TBT 20 minutes ago that didn't execute. Called Scottrade, and "they're getting on the phone with the trader." finally triggered just now. All cash.

Surreal, insane, rigged, awful. Luckily I was profitable... but awful nonetheless. Part of me wishes I'd picked up SKF premkt.

have been exceedingly lucky this month. my long run equity curve is finally positive by several percent, and have been very profitable since May, (not consistently, July was dismal)

holding DGP SLV, and some TBT in the 401K.

Just nuts!

These hydrocephalics couldn't even get their short selling rules right. They forgot all about SKF and now they don't know what to do.

I hope you SKF holders don't get screwed.

Anyone tried shorting XLF instead? I didn't see it in the list of 799 companies. ;-)

regarding SKF: It might be difficult to price given the restrictions?

Mining shares are mostly listed on the TSX, which is the wild west of naked shorting as there are no laws against it.

They banned shorting in the UK and banned it in the US, so Canada has to step up to the plate. I think this will expose the level of government corruption in Canada and how deeply ingrained government and the banks are in this country. Separation of church and state, I say.

2nd
thinking about buying SKF/SRS
will buy when market is up over 400
also my sell all my holding, will be able to buy them cheaper
I am up a lot today

2nd,

Discretion is the better part of valor.

try RFN instead of SKF. Less liquid though

Picked up some GOL (Gol Linhas Aereas Inteligentes SA (ADR) yesterday and it's ambling up (probably what isn't?) I'd appreciate any insights about the company. Also, anybody got a feeling for TGP (Teekay LNG Partners L.P.) It's up off the floor and pays a nice divvy. These are both Cara 100 co's, by the way.

Good point FranSix,
I was hoping that the issues listed on dual exchanges (e.g. Polymet, Minera Andes etc) would get some relief. Like many others who post here, I am disgusted by the recent intervention restricting legitimate short-selling. Way to fleece the average investor while adding to the coffers of the criminals.
MCM

SDS is the short on SPY, which contains lots of financials. If SKF is not trading, why is SDS trading...

XLY, XLU, IYR - all being sold - even XLP?!

kept my puts on all of those except 1/2 the XLU, had maxed out on it.

Of the ETFs I'm looking at, only XLE is being bought. We'll see next week if the world wants oil, or is moving to bicycles & roller skates.

XIU seems ok.

Re: Short Selling

If it weren't for legitimate short selling, then you would not get rallies on certain days which are necessary to make a long bet.

btw, banning short selling means banning the majority of trades on any market, as the emphasis is usually on short selling, rather than long term holdings.

I wonder how the commercials are going to deal with their deep involvement with credit derivative swaps and short sales that rely declining markets.

2nd,

I'm with you on the ETF issue. Dumped my SKF this AM first thing.

Just sold 1/2 my long time GLD after picking up 10 pts this week and placed a tight sell stop on remainder.

Paulson has proven he can do anything he wants without being inhibited — in any way — by anyone.

Will be totally in cash (except for a 3 month T in taxable account). Wondering where is a safe place for retirement majority since brokerage m/mkt, while SIPC insured, gives little confidence these days.

I need to find a bucket in case I throw up. All I need to hear is another media story attributing the woes of AIG, HB&B to the "short sellers" or the phrase "financial terrorism" one more time. Governments blame terrorism and use fear to make people feel good about giving up their freedoms...

From Bloomberg...
Hedge funds and investors who profit from share declines are being scrutinized after $3 trillion was wiped from stocks globally this week as financial shares swooned. Goldman Sachs Group Inc. and Morgan Stanley, the remaining independent securities firms on Wall Street, plunged by the most ever, prompting Morgan Stanley Chief Executive Officer John Mack to say short sellers are using abusive tactics to attack companies.

how long wil the market be in rally mode ?
I do not think 1 day is enough to unwind the financial shorts will it ?

Bill,
Would you only buy shares of tech, etc companies whose RSI"s give buy signal? Also, is your call for $85 oil off?

[Bill Cara note:

Yes, I believe Crude Oil will drop to 80-85 based on slowing economic growth, but I also feel that some of the junior oils are trading at values that should be bought through this cycle bottoming phase. They are trading at 1.5X to 3.0x cash flow and have sound balance sheets, in many cases. Re the Tech companies, I agree the economic slowdown will impact many tech companies, but some of these have sold to incredibly low levels. I stand by the RSI-7 system, but would avoid the Financials/Consumer Discretionary (unless it is oil price affected like BC and CCL). Too many traders are pinning the slowing economic story on their forecast for a continuing Bear. I remind people that China had a booming economy and a collapsing stock market recently.]

President Bush: "Anyone caught in illegal financial transactions will be caught and PERSECUTED."

This guy is so dumb...he can't even read his teleprompter.

[Bill Cara note:

Isn't "persecution" their game plan. I feel all legitimate short sellers are being persecuted. Look at the hedge funds who hedge a long USD with a short gold or a long XLF with a short weak component of XLF. I'm sure these hedge fund managers feel persecuted today.]

Re: POO

Oil chart seems to be building a 'dunce cap' with a right shoulder around the $100 mark.

Picked up AMD, DELL, GOOG, INTC, MSFT, and RIMM this morning in small positions...

Unfortunately grabbed DELL, INTC, and MSFT a bit too expensive!!!

vinod- exited the balance of my positions in QLD/USD until it's clear what's happening with SKF...

re: President Bush: "Anyone caught in illegal financial transactions will be caught and PERSECUTED."

The place to look for those engaging in "illegal financial transcations" is not on Main Street- it's on Wall Street!

Sent to the powers that care:

This is ludicrious. By eliminating 100% the contra party in a market the SEC essentially manipulated market prices in a bull run. They did so temporarily (EO ends 10/02) and when the EO terminates the market will collapse under normailized price discovery.

How is this different than a P&D?

What about the legitimate short sellers who executed short sales at these lower levels and are now receiving margin calls with the markets up 20, 30, 40%? Who will take responsibility for their losses?

The SEC's actions were both irresponsible and illegal. The SEC can not create market sentiment and can not create conditions for the markets to travel in only one direction. It goes beyond their powers handed to them by Congress to do so.

Consider carefully, pre-market trading. Todays pre-market set the tone of market pricing. Problem is, pre-market is generally limited to the big players and it blocks out the average investor. So how then does an average investor, short these stocks, gain access to exit their position painlessly when they can not get the trade in that would protect them? The SEC put out a notice late at night that was effective immediately and then allowed pre-market trading to exclude all investors from acting on this news. Furthermore, this is options expiration day and the manipulation of pricing today directly impacts each and every option play executed leading into this trade day.

What the SEC did here was criminal stock manipulation and without the evidence of a national security (homeland security) incident they should be brought to task for their actions.

Bush will go down in history as the biggest disaster of a president in all of American history.

Crude broker the buck also, not just Putnam MOney Markets funds. I hedged myself for this shitstorm with canroys and continue to hold them. Though the hedge was not as strong today as I hoped.

Took my first nibble in High Pine and Celtic Energy as the Daily RSI(7)'s crossed 30.

I'll back up the truck after oil gets finished gyrating and tests the 80's again.

Bill,
You have been amazingly accurate in calling the markets, so I take a risk in playing devil's advocate on your call for a new bull. However, I just do not see how a new bull market can start when there are still valuation issues with the markets. For example dividend yields are higher now than before the crash of '29 and PE ratios are still high.

Those are just a couple small items related to the market, the real question is the economy.
Debt remains at record levels (these hide the debt games don't make the debt disappear). Americans are still swamped in personal debt and declining housing values. Wages are stagnant or declining and unemployment is rising. Where do you see the capital coming from to bolster this bull market? The credit markets? More borrowing? Isn't that what got us into this problem? Money printing is one answer, is that why you're now bullish?

The US has an eroding infrastructure, huge dependence on others for energy and mounting legacy costs of nearly $60 trillion in medicare and social security. Call me crazy, but I'm dubious of a bull unless it is an inflationary bull.

We are a country that needs to borrow into existence about $3.5 trillion a year to maintain a flat GDP (US Flow of Funds).

[Bill Cara note:

Healthy discourse is what this blog is all about. Yes, this will be an inflationary Bull, of necessity. The govt is now removing the first wave of deflation ("the bad mortgages"), but they need the inflation to crank up stock prices and real estate values in order to maintain their tax base. So money printing will lead to higher commodity prices, and the govt and Fed will take increasing steps, like today's higher margin requirements on gold trading, to attempt to control it where possible. Of course, this action has started govt down the slippery slope. It will hide the source of the problem for a while and the next Bear will be even more severe. Until these Interventionists stop using the People as chattels and start permitting the free functioning of capital markets, there will be very serious problems.]

If the bull has started, what happens when the next large bank folds, will we see a repeat?

[Bill Cara note:

At some point, the People will see that banks can fail and life will go on. There will be prudently managed banks taking over the good assets of the failed banks.]

CEG, makes no sense to me either, but BAC downgraded the stock (maybe they want some on the cheap). Moody’s also dinged the stock with comments.

They are getting plant assets below (probably) replacement costs. I know many people who have worked 30-40 years at this company and cannot believe what’s going on.

This stock has been on my watch list since 84 and Quad witch is also affecting it. The biggest problem is unless a competing bid comes in your appreciation is capped at 26.5 from point of entry assuming consummation of deal.

Fortunately I bought CEG & CEP yesterday which helped a lot, but let CEP go on the open. Long CEG.

Good day, but government intervention sucks and they were trapped like a rat in a corner, but this market can do anything.

President Bush is a blowhard. He and his staff requested a white paper on naked short sales back in 2004. The request was made of Washington lobbyist Jack Wynn. I have the e-mail Wynn sent me as well as the communications with Wynn referring to a $2,000/plate dinner I was invited to where members of Bush 's staff were available to discuss this issue and promised to stay on top of it.

Bush has been hiding this for years because the abused at the time were the smaller companies. There is no way he will survive coming out of this the tough guy. I will bury him.

FXI blew up past my sell order.

I got to put in a higher bid. :)

well, I got other things to do than watch paint dry.

Put in a one cancels the other order, good for the day.

RFN buy limit 49, FXP buy limit 81.25, EEV buy limit 74.

My guess is the big boys gun the sell stops under the LOD for these stocks before the close. They would make lower price low with MACD divergence. JMO, do ur own homework.

they saved the financial world and we are only up 280 pts? i guess paris hilton is to blame next.

Paulson video from this morning:

http://tinyurl.com/4ckryh

It should be interesting if we have a big down day while the short-sell rule is still in effect.

Since the US gov. will not let banks fail with this farce, the BCE buyout deal has been effectively derisked. BCE up 8%.

I think the Republicans were closet communists all along!

Paulson's video - didn't his hand gestures look like a casino dealer collecting chips?

insurance is closed. dealer has blackjack.

The thing about Canada is, that you have banks and churches often across the intersection from one another. There was a time when going to the bank was often confused with going to church as the pews and tellers wicket were often made from the same carpentry. Of course they tried to modernize what with the victorian feudal architecture being so outdated by the 70's hoping that a heavy dose of Mise Vanderoe would correct that, but they could not erase the railway era parochialism out of the Canadian psyche.

GS, MS -

GS broke out 10min ago, but MS stayed put. Wonder what's cooking...

TBT- out at 63.85...

holding just IBN + cash for now...

"Congressional leaders said after meeting Thursday evening with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke that as much as $1 trillion could be needed to avoid an imminent meltdown of the U.S. financial system."

http://tinyurl.com/4lhck7

[Bill Cara note:

$1 trillion is not the half of it. That's why gold has to rally once traders realize they can overwhelm the Treasury/Fed, which has too many crises on their hands to address the gold problem.]

FranSix

Your silly Canadian comments ring hollow.

jsaxman

gold still bouncing around the lower end of its range, Venture exchange having a nice up day while the large/mid-cap miners now faring too hot.

i havent seen this for months, possibly over a year. sign of the times or one day blip?

wondering if gold will jump once this rally runs out of steam next week...

Thank you all posting and my hp for giving me the idea to tighten my stops. If it sells now its in the green cept for QID, thank you 2nd who mentions share sizing as a strategy I have 20 shares, I can hold. it will bounce back. will add other short etf's as it gets to 400+

My gld sept 85 puts just sold. woo hoo

Funny how the OSC has been mum on the issue of banning short sales affecting the TSX and Venture exchanges? Good chance many juniors would pop immediately on such an announcement.

"FranSix

Your silly Canadian comments ring hollow.

jsaxman"

People don't like what I say. I blame the Scottish.

re: SKF

BETHESDA, Md.--(BUSINESS WIRE)--Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.

Does anyone have the ability to pull time and sales data on QLD? I'd like to find out when the ASE executed it's first trade today.

Some information just out on SKF:

ProShares Announcement
BETHESDA, Md., Sep 19, 2008 (BUSINESS WIRE) --
Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal.The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.
SOURCE: ProShares

Anyone know a good technologies ETF that's listed on the TSX?

Fans of Peter Morici (U. of Maryland), commenting on statements today: "the flower generation must be taking over at the White House they all must be smoking dope". Interview with BNN as an MP3 file: http://nexalogic.com/morici.mp3

Anyone caught will be caught? Hmmmm... It's not a crime unless you're caught. Nixon taught us this.

Sorry - I didn't see the same post by BH

Apparently FXI got dumped at $37.25...
my original limit order.

at $38 now. :(

I'll take 17% any day.

Vanguard online trading just became active for today.

ksobo:

QLD first trade at 04:38 @ 62.50
2nd trade 06:18 @ 52.50

Dylan had a pretty accurate analogy to today's events....

It's like watching a man being paid millions of dollars to work on the edge of a bridge who slips off but when he hits the ground you die.

skf just opened trading just over 94

Scaled in a little SRS @ 74.50

Eh 2nd trade was 62.50

Okay, on a day like today it helps to add a little fun and humor to it.

What I Want for my Tax Dollars - September 19, 2008
David Patch

The US Government is about to put up between $500 Billion to $1 Trillion of our tax dollars to bail out those financial institutions that have systematically raped us over these years. I figure that if I am paying for the bailout, I should have a say in how I prefer to see my tax dollars spent.

To begin with:

http://investigatethesec.com/drupal-5.5/node/406

First time poster, long time lurker. Thanks for many months of free education!

I'm curious- does this action by ProShares in effect turn SKF into a closed-end fund? And if so, do we use UYG as a proxy and look for arbitrage? Or is that way too risky? :-)

TRIN, VIX -

Trin seems high and so is VIX. It is very quiet for a option expiring day. Is the market still skeptical? O

I am going to have nightmares over ZION. Opening at 105 I will never forget.

Paulson et al are criminals and everyone sucks up to them about what a good job they are doing. This is not a market but a racket more insidious than the mob. God help the republic.

Thx Nemo. Are those pre-mkt trades? I'm looking for the first ASE trade in regular hours. Where are you getting this data? Do I have access to it? I really appreciate any help.

QLD first trade at 04:38 @ 62.50
2nd trade 06:18 @ 52.50

2nd_ave..why out of TBT? will you share thoughts?

Wanted some CCJ, I think I will wait as its a rocket. Tightened my stops again

ksobo:

ASE which exchange is that American. 2nd trade was 62.50, I mistyped

yes, the American. Fidelity told me the ASE didn't start trading it until 09:36est, but thousands of trades went off starting at 09:30.

Dear Mr. Cara,

Thank you for your time, energy and wisdom above all which you shared selflessly and honestly. I've learned so much from your perspective and disection of the economy and markets, more than the trades themselve.

I'm sure many people went to hell this week, some came back, and some on their way back again. Now that we are here and understood what our government is capable of, where do we go from here, in your opinion?

First trade on American was 09:36 @ 65.92

Get it from Fidelity

Mr Cara

I just got your email. No need to bring it up here you answered my question.

Late-Day: Resolution Trust Corporation II

Hope it’s better than "Weekend at Bernie’s II".

For those of us too young to remember the Resolution Trust Corporation, it was the U.S. Government vehicle used to help clean up the Savings and Loan crisis of the 1980's and 1990's. The ghost of resolution trust was revived after CNBC's Charlie Gaspirino reported that Hank Paulson, U.S. Secretary of Treasury, was
contemplating the creation of a new Resolution Trust-type organization to buy up the bad and illiquid assets festering on the books of America's financial institutions. This would provide liquidity to their largely frozen balance sheets, while the U.S. Government sits on these assets and slowly liquidates them in an orderly manner – an ability which many financial institutions do not have in this environment. This added much of the fuel to yesterday's rally, which added about 400 points to the Dow Jones Industrial Average in the last hour and half of trading. While such a Resolution Trust-type solution may be a reasonable idea, the details of how large it would be, or how it would price distressed assets, or how it would choose which assets to put into the trust. Apparently, Treasury officials have studied such a structure for weeks but have been reluctant to ask Congress for such authority unless they were certain it could get approved. Treasury Secretary Paulson and Federal Reserve Chairman Bernanke had scheduled a meeting at 7 p.m. yesterday to brief top lawmakers on recent developments. Such a vehicle would essentially make Hank Paulson the head of the world's largest hedge fund. While such a move would be good to melt the frozen
liquidity, it would cause the U.S. Fed to run the printing presses overtime to pay for this, which would presumably further sink the U.S. dollar.

Nemo, are you getting that online?

Gold still down but ABX, AEM, and KGC all up nicely.

RE:Late-Day: Resolution Trust Corporation II
From Canaccord Capital 'Morning Coffee'

I do not understand and I hope someone here can explain to me how yesterday's announcement by Paulson ended the bear market. With all the bad news out there from unemployment to bad assets plus missed earnings, how did this idea of a RTC turn it around in a blink of an eye?

[Bill Cara note:

Financial services companies are now is a stronger financial position. Shorting of those companies has been made illegal, so their prices must move higher because when trader A enters an order to see, the banks will ensure that traders B, C and D will bid for the stock. Without $800 billion of "bad" mortgage-related paper and $400 billion underwater Money Market Funds on their books, the banks will be ready, able and willing to support those who support them. These moves by Treasury, Fed, and SEC, are unprecedented, and will turn market psychology from bearish to bullish. Moreover, the lessened capital risks will serve to lift the P/E multiples. Another factor will be the hundreds (if not thousands) of scriptwriters being employed by Bush, Paulson, Bernanke, Cox today will become media contributors. I expect financial editors will be flooded by their lemonade--just as I see it spewing from the moving lips of guests on FETV. All this is on top of a market level that I opined was early last week within a few percentage points of a long-term cycle low (except for the Financials).]

Ksobo:

Active Trader Pro

Paulson plan fall-out...

Federal Reserve historian Allan Meltzer said U.S. government efforts to cleanse financial institutions of troubled loans shouldn't be financed by taxpayers.

``I certainly don't think this is the taxpayers' problem,'' said Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh. ``This is not a place exactly with a great big surplus that can afford to do these things. This is social democracy at its worst.''

``If they remove financial losses from the financial institution,'' the government should ensure that ``the financial company will still owe the money,'' he said. ``Civilized countries like Chile do that.''

http://tinyurl.com/42urb7

JIM, thanks you for the post on your elected politicians holding hundreds of millions in AIG, BSC, LEH, FRE and FNM.

Does anyone know how much these people you voted for own of GS, MS, BAC, etc? Who are they trying to save?

How about letting your elected politician know what you think of this plan before the weekend? Or will you sit idly?

thx Nemo, last question....do you see a trade of 66.01 or higher after it opened on the ASE at 09:36??? I really appreciate your help! Thanks so much...

Ksobo

No Ksobo. No trades above 66.01 on the AMEX

thanks very much...I owe you one.

They might have ended the bear market by guaranteeing all losses, including money market funds. How can you lose? This might get confidence back into the market as they've decided to hyperinflate. Credit markets are the issue as no one wants to lend to anyone else. Watch bonds - IRS and TNX are up big.

If this doesn't restore confidence I don't know what will. FT had an article about long lines at WaMu branches to pull funds. I think that is the next crisis. We will see how badly it affects the markets.

Welcome Comrade, please step to the back of the line.

http://www.youtube.com/watch?v=4-2LQGigK-0

Interesting comment from Senator Chris Dodd today:

Sen. Chris Dodd told reporters, "We're anxious to hear the specifics. None of us have any idea what the details are. We understand the gravity of the moment."

So here we have a key Senator on the finance committee and they all went along with this plan while not knowing what any of it will cost and not knowing the details.

It goes back to former Fed governor Wayne Angell's comments 2 days ago when he said on CNBC: "the most important lesson to understand is that the Fed's balance sheet is infinite."

Our "leaders" (I use that term loosely) operate under the notion that they can just print as much money as needed; to infinity, in fact.

http://tinyurl.com/4sd52t

What's neat about this market is you can actually trade of the FETV news. For example, they said

"GE is going to get the short selling protection"

and I womped on the buy button, a very cool idea:)

long FXP at 81.

(inbetween projects)

e-trade has locked down, can't buy or sell or even see my portfolio, I am so f...k... mad

FXP. buy stop limit 85.71/85.75

catch the rebound.

Max pain for Oct 95

Bill, I read the open letter, and it is good. All I can say is you are on one high falutin CC: list in the letter....
Thanks for all our ringleader and everyone else does here.

FWIW

Sold out of CLF, NYX, AXP, TOT, because with the exception of TOT when the market lifted to new highs these stocks failed to go to new highs.

Looking to buy back TOT, today , tomorrow ext.

With all the down action this week, is this rally really just laying out a short-term bottom?

Or will the lack of short selling cause a steady level of buying until next options expiry?

One stock I'm still holding is PCA. Petro Canada appears to have found a level between $36-$38.

Just wondering if we see TA indicators that would bring it back to $45.

shark - Was it GE told you to buy GE?

gray- i opted out of TBT for the simple reason the weaknesses in any ETF that depends on derivatives/swaps for execution...i'm going to continue reading any posts on this subject, and maybe there will be discussion in the media as well...when in doubt, get out-

let me rephrase that- b/c of potential cracks in execution for managers of the ultra-long/short ETFs...what happened to SKF this morning could easily have repercussions i can't think of right now..

Look at CEG up 9%

Thank you Mr. Cara.

if trading in skf can be stopped what is to prohibit the trading of GLD? are the etf's safe at all?

Our 'leaders' do not have a clue about economics or markets. Cheney summed it up with "debt doesn't matter". Yes it does you ****! Our leaders have ceded total control of the economy to the Fed and Treasury for several generations and allowed criminal abuse of those powers.

How can you endorse a plan with no details? When you have no clue and are scared out of your mind.

Here's an update on VCP (Cara 100 company which is up 15% today at the moment).

According to the board president, Ermírio de Moraes, interviewed by Folha de São Paulo and published on Wednesday:

http://tinyurl.com/46h3jx

(Monday's announcement of) the fusion with Aracruz (whose ultimate objective is to dominate the world's paper market) will result in a company with cash flow of R$6,3 billion.

In 2 years (by 2010) but depending on the effects of the current world economic crisis, the company will expand production from the present 4.5 million tonnes to up to 7 million tonnes. In addition, new projects already under way will bring the total expansion up to 13 million tonnes.

Additional fusions are being considered, notably with Grupo Suzano.

Efficiencies gained from from Aracruz deal are expected to be approximately R$4,5 billion.

Wooly, Fidelity was down around 9:35 until 10:00 too.

http://www.brillig.com/debt_clock/

How can $9.7 trillion dollars in debt really matter? What's an extra $2-3T?

How are you ever going to pay that one off?

I'm sure many retirees with even $40-$60k of debt have the same thoughts.

According to this, China has around $1.8T of USD reserves.

http://tinyurl.com/6dlcqw

FXI @ $38.70

moab - Cheney summed it up with "debt doesn't matter".

Tomorrow, Bush will say: "Debt is good, the higher the better"!

Interactive Brokers platform has operated flawlessly today.

Unfortunately i can't say the same for the small account that I have with Sharebuilder (now part of ING Direct) - a market order took an hour to execute, and having not used the account much in the recent past, I did not realize that there was no cancellation button for market orders.

Luckily, this only cost me about $20 of profits but could have been very costly. I wrote a complaint to them about it and demanded a reimbursal. I told them I would be looking to close the account and move my money elsewhere if they could not compensate me (which I might just go ahead and do anyways).

Absolutely ridiculous.

Fidelity:

Active Trader Pro platform has been fine all day for me.

ALOHA !!

Look at this chart ...

Link: http://tinyurl.com/3md97r

Ameritrade has bounced me out of my account 4 times today, but I have been able to login immediately afterwards.

Scotia: Slow as Molasses in January.
TD Webbroker: Down for a long period this am.
Qtrade: Worked fairly well for me.

I can't wait until they unleash the Lehman emails on everyone just like they did with Enron.

http://www.cs.cmu.edu/~enron/

This proves the golden rule: He who holds the gold makes the rules. Paulson and Bernanke hold the gold even though we believe it is false gold.

Missed selling CEG at 28, too fast. Maybe with the change in overnight rules, they will not have to sell.

SEC List of banned Financial Shorts -

Can someone tell me where I can get a copy? The one on SEC website is not loading for me. Thanks!

Just the Fidelity website was down. I use it for my wife's IRA. I also found out they route orders to the primary market maker where your order sits until they open a stock or ETF. Meanwhile, the rest of the world executes trades on other exchanges.

I'd appreciate some help here if possible.

There's a technology stock I currently trade in and out of on a regular basis. When I looked at options quotes for this stock this morning (Oct 08 ITM), there were two options symbols for options at the same strikes.

For example one symbol began with QU, and ask price was around 11 dollars, roughly in tune with the stock price.

A second listing, beginning with UU, same stock, same strike price, is asking 5.8. I assumed something was wrong, bt tried to picked up one batch at 5.8, and to my surprise, it executed.

This seems like free money, and that has me thinking that something has obviously gone amiss.

My big questions are:
Are there ever two symbols listed for stock options at the same strike prices?

Has anyone ever seen such a crazy disparity?

yea, but it was a good tip anyways...now is it turning up?

Good morning! I see we have another crazy day in the market today. :) I obviously had wrong positions for today -- should have bought call options on financial stocks (so as to limit my losses in case the exhuberance is short-lived but to have a great upside in case Thursday's exhuberance continues). However, a rising tide lifts all boats, and since my whole portfolio was invested into stocks yesterday, and it is up about 7% today, reaching the highest point it ever had after hitting the lowest point for the past year on the Tuesday morning -- what a change in 3 days!

I just sold at $33.60 the VLO shares I purchased at $31 yesterday -- the 11th time I do this with VLO in the past couple of months. :) The sell limit on ESLR was hit at $6.50 for 1/2 of the shares I purchased at $4.50 (I purchased A LOT, and already sold 1/2 at $5.50). Finally, a buy limit order I had for WGW at $1.30 was triggered this morning at $1.26 (apparently, WGW opened low). So I placed a sell limit order at $1.50 for these shares.

I won't have time to read today's discourse as I am packing for a weekend trip with my family, so congratulations to all those who were long in the last couple of days!

c3,

I just download list from SEC website no problem. Here's a link to PDF. I'd cut & paste the list into a comment, but it would be rather large.

If link still doesn't work, i'd be happy to check a couple of banks for you.

http://sec.gov/rules/other/2008/34-58592.pdf

Thank you Bill but:

I'm having a hard time switching gears in the fact I've been so accustomed to buying and only holding for days or weeks. Now I want to hang on and not miss out on some profits. I'm prepared to hold for several years on a majority of the purchases I've made in the past few days. Bill called the bottom, does anyone care to call where we might be by the end of October? Will the miners regain their 52 week highs or only go half way or less in say a years timeframe?

I think it would be interesting to compare the number of Bill Cara discourse responses with the DJIA & volume over the past 2 years. No I'm not volunteering. I imagine Bill has it graphed already anyway.

ALOHA !!

"if trading in skf can be stopped what is to prohibit the trading of GLD? are the etf's safe at all?"

Hummmmm ... After looking at my chart showing Wall Street malfeasance what do you expect from ETFs run by Wall Street? Really if anyone here ever did any sort of research on JP MORGAN, especially with the Blanchard Coin lawsuit, they would RUN from GLD!

If you go to any brokers office in America(it does not matter what company)and asked them about investing in GOLD their only two replies would be GLD and ABX! Actually their first reply is always, "WHY?" HA!! And then they show you a chart of the DOW performance since 1908! These brokers are where they are because they strictly SELL Wall Street. Would you go to a Harley dealer to buy a Toyota?

Has anyone found the missing SPY calls? That's $0.5B we are talking about that simple vanished.

http://finance.yahoo.com/q/op?s=spy

60 calls for example, they don't exist today and have not been traded either. Black magic?

ksobo2000, if you use Fido’s Active Trader Pro, you can direct where your order goes (7 different routes).

Also, I recommend setting up a futures account or a second account somewhere for times like these (down primary broker etc). I prefer a futures account for cases like this so at least you can buy or short S&P’s quickly to protect or hedge your assets.

Bill warned not to use broker stops. I didn't remove mine in time and got caught. Had a trailing stop on GE at 26. Just before my order got executed this morning the stock was at 27.50 and just after it was back up near 28. I have removed all my broker stops. Live and learn.

The bailouts are based on the idea that FNM/FRE and AIG were simply "too big to fail" and would cause massive economic problems.

Riiiiggghht.

Has anyone considered the current "solution" has allowed, even encouraged, merging of several of these into even larger entities?

So, what kind of intervention will the next one call for?

Is it misinformation or what?
US Government to secure mortgage market with gold reserves

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=173208

proudPapa,

Thank you for the reply. I kept stopped out :( on loading this file. I don't have any shorts on financials. But, does anyone know how this would impact other index short ETF since SPX/Naz also include bank shares? I currently holds both QID and QLD.

Dave Hyde:

Re two differently priced options.

yes, I see that kind of thing often - it usually comes from a stock split, merger, or some other anomally.

You have to check out what the difference is betwen them, should be able to through your broker.

No free lunch, and usually only one is actively traded, though you can trade the other one if you want.

Great open letter but emails, pen and ink wont change the minds of the corrupt. citizens are not ready to do what is needed to stop it. which really is to boycott the economy. in 1 swoop every American just stop production, dont go to work. no one. then when that gets their attention ask for reform.

i guess it would call for every tax payer to unionize as 1 and go on strike.

Dave Hyde

Sometimes when you have options that are trading at the same strike with different symbols, it involves an impending stock split - one symbol for pre split and one for post split.

OCC CEO says SEC move to have "dire consequences" for U.S. equities markets - Reuters

XLU is not acting bullishly, intraday volume sell signal.
Though it did make a halfhearted try. Not adding back puts today, no hurry, market will probably stay afloat into the middle of next week or so, unless "something happens".

XLY is porbably a short here, IYR also - but I have learned to only short it on one those recurring magnificent parabolic runups into the close.

"US Government to secure mortgage market with gold reserves" ...

What reserves? Weren't they loaned out to bullion banks?

I fear that the government's gold is gone and only exists on paper, like the USD!

Ron Paul blasts bailouts on CNN
http://www.campaignforliberty.com/blog/

to extend my comments above, i am all for that letter. just a skeptic on the intent of our govt and leaders with tax payer funds. if the tax payer is having to pay for this, every c level and board member should also have to face consequences to their own personal wealth.

i am hopping letters like EO' sparks actions within the American community to fight this until death. it would be fitting to air the homes and wealth of these leaders/board members/ceo's on prime time tv every night, as our own wealth and ability to make an honest living dissapears everyday.

SSFs:
So, is the market in single stock futures on the anointed short-free names now halted as well? I don't see how you can make a market if you can't turn around and immediately short the equities when someone goes short the stock futures.

Anyone who trades these as SSFs know what's up?

It's Friday. Anyone know if the FDIC has reserved a block of rooms near any regional banking headquarters?

SLW is just now testing the 38.2% fib @ 9.38 for the third time. Setup looks reasonably bullish, if it holds there and turns up, it " should" be in bull run mode to the next fib @ 11.35.

If it doesn't, it will go back down to the 8:ish level for another test - if it breaks below 7 it is dead meat.

"US Government to secure mortgage market with gold reserves"

If they do use U.S. gold reserves, it will mean we will finally determine the definition of "deep storage" gold. More likely, the Pentagon will have to raid a few Indian villages to obtain U.S. gold. Wasn't there a report of an aircraft carrier group recently ordered to the Indian Ocean?

I'm curious given the week's developments if frequent commenter 'maromatics' is holding to his earlier prediction made back on September 2, 2008.

Here's what was said:

" - Gold is in a process of retracing back to somewhere between 650 and 700. The actual price of the low will actually depend on when it gets there. You see, price and time, are related entities.

- Meanwhile, starting very soon I expect that an upmove will kick in in gold. Targets for this (spot) are 876 and eventually 900, not more."

Well, the first target has certainly been met. Maromatics (if you're reading), are you holding to your target of a retracement back down to $650 -$700 ?

TIA

For what its worth - Some interesting perspective from financial entertainment.

http://tinyurl.com/3jlq93

I think Liesman speaks for the gov't and the average joe who isn't paying attention (which seems to be the majority of the public). While it makes me sick to my stomach . . . He has a point, we (general taxpayer) are all incurring costs by these bailouts to try to keep those pictures from happening and for not doing something about the fraud sooner. Unfortunately, the fraudsters and media propaganda machine has the public nicely comforted - don't worry about . . . everything is going to be ok . . . mother gov't will protect you . . . Just keep doing what your doing. Meanwhile, those independents who effectively manage their own finances and are in the minority must now shift their strategy to keep up and/or stay ahead of the game. The question remains, however. Will they pull it off?

Santelli seems spot on as usual. Pisani identifies why ETF's are a risky long term trade especially if your thinking about gold and silver ETF's for the TOG. Derivatives - who can you trust?

From Todd Harrison at minyanville:

"I don't profess to know how long this synthetic bid will last but it will remove an integral layer of demand in the marketplace. Once the life is squeezed out of the shorts--quite literally--the risk to the downside will perhaps be greater than during any time in history."

Correction: The question remains, however. Will mother gov't and the propaganda machine pull it off?

I have complete confidence in the independent.

let's see:

stocks up, EUR moving up & just broke up over yesterday's high, gold is moving up, silver is moving up, oil up, interest rates (TNX) are moving up & bonds down (TLT).

Could it be that the market is now front running the $US printing presses and has forgotten about it's debt-deflationary worries?

Not sure I would call this a true bull market in equities, rather a many faceted run to stay ahead of the loomingf massive monetary inflation.

This may help anyone having trouble with Ameritade. (using ie6 or higher)

Close all browser windows.

Re-open browser

Go to tools / internet options:

Clean out cookies, temp files, and history.

Close browser

Open control panel

Double click java

Under temporary internet files: click on settings

A window will pop up and you click on “delete files”

Restart the browser and login to Ameritrade.

Hopefully this helps to keep the connection and provide access to your settings.

Good luck.

Anyone notice that the USD has dropped about 0.57 since about 8:00 AM while gold has dropped slightly. Generally, such a large move in the USD would cause an inverse reaction in gold. Even in the last day or two, gold has not followed crude oil up or down.

Although too early to confirm at this stage, it just might be that a new golden creature was born on Wednesday that seems to have a much more independent life of its own. Possibly, this is the first sign in decades of gold's ultimate currency role.

Can anyone explain to me the mechanics of quadruple witching hour....and how prices of equities behave during this process....Curious

thanks sv

At the moment the roulette wheel just came up "Black" for the longs.

F

Took profits on strength in F earlier after @20% move. Will reload if/when it visits 4.25-4.50 again.

Now we know what/who Bernanke/Paulson/Cox are. They are wraiths in disguise. There's a picture of Paulson with a wig there:

http://en.wikipedia.org/wiki/Wraith_(Stargate)

Sucking the life out of all shorts and capitalism.

Bill,

In your Markets Re-cap for today you indicated that the equity market would split the financial from non-financial and that the financials would test their sector bottom again while the non-financials have started a new bull market. I’m having trouble connecting all of the dots. This economy is built and requires credit in order for it to run. If the financials are still having troubles, they are not going to be willing to loan out funds thus companies will not be able to expand or have enough operating capital. Isn’t this just a bear market rally?

If Bill is saying that a new bull market has started (excepting the financials) where does this leave the TOG. Since the rules have been changed maybe the trade is off?

For U.S. readers

This is an election year. The economy is at the forefront especially with market action this week. That's putting it mildly.

NOW is the time, TODAY, to contact your Congressman and Senators.

This issue is hot. Staffers do keep track of complaint issues from the public, believe it or not. The representatives stay up on the hot topics and don't want to be on the wrong side. This fall, they'll visit their district and states. Yes, there will be spin, but also expectations by the public and they're voting.

And again, it's election time. This is the kind of issue that can unseat them. If you don't believe me, remember the "It's the economy stupid" which was ignored by the first Bush. For you youngsters, he lost because of it.

If you don't, don't tell me your complaints.

It think it will be a bull market in nominal values for hard assets not tied to debt, but a bear in real terms, IMO.

I have skimmed Panzer's book and it seems like his hyperinflationary scenario is coming true. He says there will be a small window beween the collapse and the hyperinflation to move into gold.

[Bill Cara note:

Thank you stone and wooly; I will try to explain this weekend -- probably 1st thing Sunday morning in the WIR because I'm going out deep-sea fishing for the rest of the day -- computers are not allowed on the boat. :-) I am too whipped right now. At 6pm, I will be meeting some of you who are visiting Paradise Island this week.

Re Michael Panzner; he asked me this week to be a reference on the jacket of his next book, to be published by Wiley in (I think) February. I am sure he will be one for my next two.]

woolybear1

The govt. can change the rules temporarily, but market forces will ultimately prevail.

It may change the timing of the TOG, but not the trade itself, IMO.

Seamus -

My complaint is: what to tell them? That we want Bill's vision enacted? These clowns wouldn't begin to understand it!

Huh!!! They got an email on FET about what they should call the new RTC thingy

Securitized Housing Investment Trust

Nice acronym :)

AXP, COF, DFS -

The credit card companies are not on the unshortable list! COF rocketed in the last few days.

km - stop loss orders

On the other hand, if "fast market conditions" make access to your broker impossible, and you have not stop loss, the floor's NOT the limit.

Maybe a compromise is to have a "deep stop" with your broker, just in case all hell breaks loose like 1987.

Bulk United Lending Losses Securitized Housing Investment Trust

"Because you can trust us with your garbage."

I second what moab says and gold seems to be reflecting it at this point in time. The online dealers have alot of sold out and shortages indicated. It seems there may be a disconnect between the physical and paper market.

“These clowns wouldn't begin to understand it!”

That’s true Jock. That’s why I think if you keep it simple (even though it’s a complex issue for them), something may register. And all it takes is a stamp or a phone call or an email.

Something like: I am very disappointed (mad, angry) the Senator (or Congressman) hasn’t spoken out (done anything) about these market manipulations that put the public, your constituents, at risk to placate rich bankers and brokers (HB&B).

Don’t have much time to post today. Perhaps a visit to Patchie for ideas to put something together.

Have to run.

"ksobo2000, if you use Fido’s Active Trader Pro, you can direct where your order goes (7 different routes)."

Thanks Telestar, all good advice. I have Schwab StreetSmart Pro as my primary trading acct. They route my orders correctly. The Fidelity acct I ran into problems with is just for my wife's IRA which I trade infrequently. Even still, getting burned by a bad fill is no fun even if it's only once/yr. I may setup the Active Trader Pro just for these infrequent trades. I already downloaded it so it's just a matter of setup. Thanks to you and Nemo for the help!

The OIl Sands are on fire today. Wonder what's up? Cos-un.to is up 16 percent right now.

I for one do not believe here in Canada that the Bull started on Wednesday. If it is then good for those with the ability and personality to get back into equities.

Pension plan managers and Mutual Fund managers are going to face a lot of questions about what they have been up to. To me this market is no longer a casino but now a "Rodeo". I talked about "cowboys" in my previous to last post. So you are riding the bull now and those good old boys have thrown in a few more clowns into the ring so if you fall off you won't get gored by the bull.

Now just because I said the Bear market is alive and well, there will still be opportunities in select stocks. We need to talk about those now. I am a longer-term equity trader and not into day trading (not convinced yet). Thank you very much. When the majority of the stocks I follow show negative Technical signals, it does not give me comfort to get in the market in a BIG way. That being said, I was a buyer today, but in a small way. Please, if you have a longer view of this market wait. I want to see some price data (series) showing that happy days are here again.

My sense is that the bulk of investment funds are with the baby boomers, not the 20 - 30 something generation. With October just a few weeks away, I am sure the media heads are going to play out doom and gloom to get those viewers watching. I am sure that the media heads invest as well in the same market as we do and I am sure their family and friends do (if they still have them). If they live on my street they would get an earful. Ultimately the doings from interventionists are creating deflation not inflation.

And if you want, use me as a contra-indicator - it is your money. [051]

[Bill Cara note:

Great, Bernard. We'll get a good dialogue going. You know, after October 19, 1987, I opined that there would be a Bull market start right away. The following 3rd Quarter of 1988, some of the world's best (and I mean best) technical analysts got with the Bull program, including Ian Notley and Martin Pring.

What traders are going through now is a catharsis. Read this to see what I refer to: http://en.wikipedia.org/wiki/Catharsis

Recognizing this extreme volatility was about to happen, I touched on the notion of cathartic sacrifice when I referred to confirmation of the cycle bottom coming with the suicide or termination of Henry Paulson or the firing of Bernanke. McCain had the same thing in mind, I think, when he said he would fire Chris Cox, probably hoping the man would resign from the SEC.]

It will be interesting this weekend when the Fed/Treasury make another announcement in the middle of the night w/no input from stakeholders ie. public
I feel awful for the US taxpayer being forced to bail out the thugs of industry/government who robbed everyone blind and created this mess.

which are the best oil sands?

Best headline of the crisis so far, from Minyanville today:

"Fed Amputates Invisible Hand"

Oil in slight backwardation, Oct - Mar. So will XLE continue to rise?

Pesche: A few are in Bill's Cara 100, I believe. Suncor (Su.to), Encana (Eca.to), Imperial Oil (imo.to). You can also look at Canadian Natural Resources (CNQ.to). I aslo like Canadian OIls Sands trust (cos-un.to) that is part of Syncrude. They pay around 10 percent distributions, however, I'm not sure of the implications of what happens when 2011 hits, I believe they will need to convert to a regular Company, not a Trust Company. If anyone on this board knows the implications of this, I would like to hear it. Thanks

SteveC/km/Jock - Another alternative is to place "contingent" stops; that is, limit or market orders which are placed (and thus made visible) only after the contingency is satisfied. For example, place a limit order to sell 500sh at n-.05 of X if, and only if, the most recent bid for X falls below n. This can be used both when entering and when exiting positions, and is the approach advocated by Tim Knight at slopeofhope.com.

NASDAQ Operations has recently updated the status of the following NASDAQ Market System(s) to the NASDAQ Trader website:

Pursuant to rule 11890(b), NASDAQ, on its own motion, will cancel all trades greater than 20% away from the prior day’s close executed today between 9:30 and 10:30 a.m. ET. This decision cannot be appealed. MarketWatch has coordinated this decision with other UTP Exchanges except CBSX, NYSE & AMEX. NASDAQ will be canceling trades on the participant’s behalf. This decision cannot be appealed. The stocks affected are as follows with the reference price (previous close) to calculate the high & low break point: ACWX($40.83), AHD($24.82), APL($24.46), ARA($44.34), BBY($41.23), BWV($45.90), C-G($15.30), CHRS($5.31), CNBKA($16.47), CRA($16.23), CTV($40.55), CVI($12.05), DOG($69.40), EEV($117.50), EFU($122.00), EFZ($95.00), EPR($57.54), EUM($95.50), EV($35.97), EXH($36.90), FIG($10.45), GBL($48.30), GGB($12.72), HBHC($57.11), HCP($41.25), IAI($28.24), IGT($17.88), IHI($60.02), IVE($61.63), IVW($58.58), IWD($65.89), IWF($50.28), IWM($71.80), IX($61.03), IYG($72.73), IYK($59.90), IYR($65.07), KRE($41.36), KSU($48.12), MI($22.98), MMS($37.56), MOR($8.15), MTX($62.74), MYGN($62.74), MZZ($61.01), NGT($25.33), ORCL($18.75), PAGG($26.44), PCBC($24.06), PRFZ($48.20), PSAU($27.03), RMS($88.02), RSP($40.46), RXD($78.66), SCC($90.20), SDP($72.20), SDS($72.50), SFG($49.50), SH($72.20), SIVB($59.41), TDG($37.98), UBSI($34.50), UKW($41.86), UVU($37.81), VV($54.30), WABC($64.68), WTFC($32.81), XRT($33.99). The list of reference points with high and low break points will be posted on NASDAQTrader.com.

Please refer to the link for additional system status updates.

http://www.nasdaqtrader.com/Trader.aspx?id=MarketSystemStatus

Bill..the NYSE busted those trades in ZION that I was screaming about in the morning. From 40 to 120 in five minutes after the open is a bit much, since appearances of three card monte games must not be allowed to permeate the exchange.

MArket makers can short but we can't. It's a license to print money.

David -

"I just sold at $33.60 the VLO shares I purchased at $31 yesterday -- the 11th time I do this with VLO in the past couple of months...."

Congrats. Guess Sushi for dinner tonight...

I got in on FTO a couple days ago. It moved quite a bit last week, but seems to lag other refineries.

shark, I am hearing that market makers are fearing to step in and make a bona-fide market because these actions are not supported with the backstops of short sellers and other sellers. Why sell short in a bona-fide market at $25 when the market is full of buyers and no sellers and the market will most likely go to $30? The market makers cannot afford to take the losses in an uncontrollable upside market.

There is an orgainized petition here at this site, which might make you feel better, even if it does nothing....

http://financialpetition.org/petition-nobail.shtml

and a small congratulations to me too.. I just bought and sold my very first quick (under 48 hours) turnaround for a cool 600 clams. (don't like sushi, c3)
Of course if PWE never again exhales I'll be cussin' into the wind.. but that sometimes is what we do here isn't it..?..
:-)bill (in washington, dc)

Thanks for the postings on the options questions I had.

The one contract that I tried to exercise has been "processed" according to questrade, but I think anything coming of it is very unlikely.

I will post back with the outcome.

Did you guys notice the TIMING of this thing coincides with Goldman's stock doing a death-dive? Thats the difference, sociologically between working at Goldman and working at Lehman. Goldman got the bailout of all God-forsaken bailouts the WEEK they needed it, and Lehman is worth 21 cents and their employees are making golf and fishing plans.

(LEH up 313 percent on the day, it's worth noting).

New Rules per Bill Maher:

Options: only Trades on Tuesdays and Thursdays

Oil: all Longs banned, shorts only

Stock Index Futures: under review

Futures: only Trades on Monday & Wednesdays except on options expiration, then Fridays too

Gold: you may buy or sell Gold at any time the buy price is fixed at $700 and the sell is fixed at $500.

Updates to Rules: Check back on Sunday evenings for next weeks new rules.

Enjoy Saturday!!!

Smart money indicator - first half trading vs last hour. Retail/small/Ma & Pa trade at the open, big boys trade in the last hour.

SKF, -22.44, +5.75

FXP -19.44, -.71

GS +20, +2.45 (guess they still want to be long)

MS +4.20, +.17

DJIA +375, +22

We'll see what happens Monday but if I were wanting to be bullish, I'd much rather see heavy buying in the last hour in the financials.

Long SKF/FXP.

music city man, I think that unfortunately short sellers and predatory short sellers are commonly lumped together as one.

There is a very real need for the short interests in our markets. without teh short seller we would have every day be as chaotic as today was. But with this trade strategy comes responsibility. Responsibility that most of the short sale public must adhere to.

Unfortunately there is a second set of sellers that do not contain such moral or legal responsibility. They trade in predatory fashion and they trade to destroy as part of the plan to profit. These type traders are who tried to destroy the financial markets.

I have got to be one of the most vocal people on predatory short sales but I voiced my opinion today to teh SEC, reporters, and Jim Chanos and I can tell you, I was on the side of the legitimate short seller today.

wonder if Congress has the cojones to block the Fed/Treasury?

Wow, that'd be a 2x4 to the head.

Bill,
Congratulation on your good calls, and you have every right to be proud of them. But you called a great shorting opportunity in housing stocks which proved to be a total bust. I think it would serve credibilty well if you mention both your successes and your failures.

best reagrds,

jane

Wow Jane, that's cold.

Thank you Patchie.

Barry Ritholtz on NPR explaining (among other things) the SEC decision to exempt 5 investment banks (of which 2 survive) from rules limiting leverage:

http://tinyurl.com/3zsym9

What happen to the TOG?????????????????

Patchie - Who can naked short? Don't you have to be an insider, broker or an institution with deep pockets in order to set up a naked short?

Posted by: jane.colder at September 19, 2008 4:52 PM

I am not going to repeat what you posted, but I will repeat what shark_attack posted:
"Wow Jane, that's cold."

From time to time, its seems we get this kind of response which adds no value to the discourse. Bill can trace who posted this; I know he has this capability.

But to Jane: please don't tell us something from the past. You are most likely intelligent and can make your own decisions. Bill does not give advice. He provides his beliefs about the market's future like no one else (my opinion) and gives us the "low-down" of HB&B, etc. and what I am up against.

What would be useful Jane is for you to tell us what Bill has posted over the last five days where you share or don't share the same beliefs. I would have more credibility in your response if you had given us your views way back when bill said something about housing stocks and you gave your reasons for why housing stocks would follow a different route.

And the day that Bill C dictates what I do or don't do is the day I stop following this blog. This discourse is here to help the BernardFs and jane.colders of the world. [052]

regarding Bill's call to short homebuilders.

I follow this blog very closely, but it's a lot of info to take in, so i don't even recall if it was a full on endorsement to short homebuilders. However, even if it was, XHB was down about 10% from when he called it and before the government jumped in and changed the rules of the game.

I doubt strongly that this weeks intervention changes the economic outlook. Even if banks can dump their junk on the taxpayer, are they going to suddenly loosen lending standars? Would regulators let them? How many people are in the market for a house, let alone a new house in a fractionally filled development?

Alt-A/Option ARM mortgage problems are still coming down the pipe. I suppose the tax payer may buy all those as well, but surely not (or at least I hope not) at par, so banks will need to at least take write downs, hence further capital impairment, hence further restriction in credit.

I bought some puts on XHB today, but was probably way too early, always my mistake...

Jane is not looking for information or knowledge.

"Bill, your idea on X day that housing stocks were looking weak was a big miss. What was it about the market that you didn't see?" is the type of question that would likely get a good answer and be useful. But she isn't trying to figure out where the error is.

Jane just wants Bill to eat some crow. What I have seen here is trying that just yields a lot of feathers, an uneaten bird and a pissed off pseudo-Irishman.

Aint' gonna happen, nor should it. You own your own trades, Jane. If you lost money because you read that Bill thought something about housing that didn't happen, there is exactly one person responsible for that loss: the angry woman in the mirror with the deathgrip on some fowl.

re: Bill's comment to QT at 12:10. "Shorting of those companies has been made illegal, so their prices must move higher because when trader A enters an order to see, the banks will ensure that traders B, C and D will bid for the stock."

The gov't is making it so the "Naked Longs" will have control of the market for awhile.

About the only thing to stop this kind of ponzi scheme (http://en.wikipedia.org/wiki/Ponzi) will be if everybody cashes in at once. The probability of this happening seem remote with all of the managed funds (who are in on the scheme) controlling money.

Jane - Not every hand is a winner--Bill's, yours, mine, or anyone else's. The key, as Kenny Rogers said, is to "know when to hold 'em, know when to fold 'em". Bill has done a marvelous job of identifying--in advance--the potential for major market movements. When I have disregarded his views, it has generally been very much to the detriment of my portfolio's value. Likewise, when I've neglected my stops, the result has been the same. (Case in point: I'm still very long AOD, though much less underwater at the moment than I was a few days ago; I held on rather than exit the position at the recent--and quite painful-- low based, in part, on Bill's prognostication that a rally was in the offing.)

Can anyone tell me why housing stocks are so "up" over the past few months?
I've been wondering about that for a while.
Has anyone looked at recent financials of say PHM to see what their balance sheet and income statement is looking like?
I've been attributing it to cheer(mis)leading by PPT. Are there good reasons for these stocks to be rising when the housing market is nowhere near bottom?

ALOHA !!

Welcome to WALMART ... I love you!

Welcome to WALMART ... I love you!

Mike, the image of having a fowl in a deathgrip reminds me of the time the drunk bar owner here strangled a swan at a backyard party, wound up getting arrested and even doing jail time.

Bill has been UNCANNY in his ability to call markets, I've been watching and believe me, I'd be the first to jump all over him, but the guy's been like prescient, especially lately.

As I recall, Bill made the perfect call on builders. If Paulson drops a bomb later what did you expect? Sayonara Ms. "Colder".

----

Did you folks notice that there were no bids for OTM puts on some of the financials today? You could not sell them if you wanted to. Very scary business. This may be the explanation:

"Prices for options today show that market makers are already seeking to compensate for the added risk by widening the difference between their bids and offers, according to Peter Bottini, an executive vice president of Chicago-based online brokerage OptionsXpress Holdings Inc. The wider spreads make it more costly for investors to buy or sell options. "

No short selling -> no actual market. They cannot possibly allow only market makers to short stocks, what else do they want? Why not print money straight from the Treasury into GS?

----

The case of the Missing SPY calls: yesterday: about $0.5B traded in deep in the money SPY calls. Today, no trading, and the calls have vanished.

Before and after, see the volume and the open interest:

http://nexalogic.com/spy-sep2008.jpg

Very fine market no? Not! It's all rigged.
It's only $0.5B anyway.

Does anyone know how much GS stock Paulson holds? Doesn't he have to declare this before taking office? How about all the people you voted for? Do you know?

In Boston the bums that live in the little pack of woods down near the BU boathouse were eating the pack of swans that wander up and down the Charles from MIT to Harvard. Anyone who regularly travels along the Charles on the Cambridge side knows exactly the pack I mean.

I cheered the bums. Swans are great and all. But this pack was nothing but trouble. I shoulda bought those guys a rotating spit.

ALOHA !!

This is what we are up against, because we cannot be the World's Consumer forever. Sooner or later we must compete.

A global shift of economic power is happening and what I see is more an unwinding of the US EMPIRE than an unwinding of credit. They call it "credit" but its EMPIRE! Its bank related because our EMPIRE was built on US Banks and the global acceptance of their only product ... paper US dollars backed by "faith and credit"!

Link: http://tinyurl.com/2we7hw

With an unwinding of EMPIRE there is always an unwinding of the EMPIRE'S money ... It happens to every EMPIRE!

Si02: Couldn't those calls simply have been sold and then bought back the same day?

Closing them out with an offsetting sell\buy removes them from the OI.

Mike, the volume was astronomical in all deep ITM strike prices on Sep 18 and *all* transactions happened at 4PM +- 1/2 minutes. If there were two transactions on the same day, they would need to have been sold and bought in the same minute, and at exactly the same price for both transactions.
Something went on there. Thanks.

As confidence continues to erode, I'm coming to think that, to restore it, we'll need a new confidence man!

Re: jane.colder

I wasn't going to respond but after reading the comment I thought, "I haven't been watching the homebuilders, just how high have they jumped since Bill made those remarks?"
Sep 9 Cara's commentary
Despite rising mortgage rates and tightening credit, the share prices of US House Builders soared yesterday. Some of the gains were of the nose-bleed variety, such as Meritage Homes (MTH +18.1%), KB Homes (KBH +14.2%), Beazer Homes (BZH +13.3%) and DR Horton (+12.2%).
Sep 9 Daily Report
I recommend selling the shares of banks, dealers, insurance companies, REITs, and residential construction (homebuilder) companies whenever the Relative Strength Index (RSI-7) gets above 70-80, and don’t buy again unless you buy to cover a short.

MTH Sep 8 $27.20 cl Sep 19 $26.03 RSI 7 daily on Sep 8 - 78, at 9/19 - 55
KBH Sep 8 $23.54 cl $23.87 RSI 7 daily on Sep 8 - 78, at high on 9/19 - 65
BZH Sep 8 $8.92 cl $6.93 RSI 7 daily on Sep 8 - 79, at high on 9/11 - 72
DHI Sep 8 $14.11 cl $15.04 RSI 7 daily on Sep 8 - 76, at high on 9/19 - 69

So of those four builders mentioned, 2 are down and 2 are up as of today, even with the huge spike moves the past two days. But look at how the RSI has been dropping. I don't think you can state that these trades at this point have "proved to be a total bust".

[Bill Cara note:

I haven't been following this discussion (if there is one), but on the surface, it ignores any discussion of risk. Moreover, there is no recognition of the fact that I write my reports and comments in real-time, without intention (for the most part) in getting into specifics. In this situation, I was really discussing the principle of selling into sudden rallies of high-risk industry groups when there is no discernable reason for a rally. Over the years, I know this tactic works.

Some traders here are day traders, so they know that many general statements I make are not pertinent. Also, everybody knows that I make statements with no axe to grind. In this situation, for example, maybe the negative commenter has a personal interest in homebuilder companies. Nobody here would know. So I welcome the critique, but I ask people who are strongly critical of others to be fair in disclosing for us their personal positions, biases, and so forth. If every time, someone here wrote something that affected the personal holdings or beliefs of other people who then wrote in response "what a joke," we wouldn't get very far here, would we?

Anyway, just as the banks, broker-dealers and insurance companies have been soaring lately, I have been saying that, particularly for these high-risk stocks, as soon as RSI-7 hits a high in the 70-90 range and then drops back below 70, I think it is prudent for most traders to sell them. That is a general statement of opinion based on my belief that central bank liquidity injections are (i) temporary (or else the currency is devalued), and (ii) do not fundamentally resolve problems.

To sum up, the last thing I do here is run a free trading advisory service and I don't appreciate anybody who tries to position me as such. That's why I rail against this cxoadvisory group.

ADDENDUM: Now I see who the writer is and that she was just asking me to spend more time discussing calls I made that didn't turn out like many of those good ones this week. That's constructive, but heck where do I start?

The biggest faux pas, I think, was my disbelief that the price of oil would keep rallying in 2007 beyond 80-90-100-110-etc Another was the series of mistakes I made on the XLF in 2006, always thinking there would be a pull-back, but not recognizing early enough the extent of the push that Paulson was giving the banks and brokers. After the cycle played out, I guess my initial "gut" feeling was correct in that Wall Street was building a debt bubble that was feeding capital to traders who were pushing oil and financials beyond reason. Now we are seeing the impact of a burst bubble.

Maybe the credit market bubble from the month Paulson took control of Treasury (June-July 2006) until Sept 2007 when it burst, is why I am so negative on Paulson -- because I think he should be held accountable for much of this mess. Most people today still don't realize just how powerful on Wall Street this guy was. Compared to him, Bernanke and Cox are midgets. They may not be the best ever heads of their organizations, but I don't attribute to them anything close to Paulson the mess the financial world is in today. In the case of Cox, I feel he has allowed his agency to have been overcome by the politics of the day. For Bernanke, he's one person among 12 who vote, and five of those directors each have their own boards of 12 directors, but how many dissenting opinions do we see? There are many people at the Fed to blame. But the President, a person who has some solid business experience in oil and baseball but none in finance, has turned Paulson into a loose cannon in that important area. Congress needs to rein him in.

All of these people have willingly intervened in capital markets to an extent we have never seen before, so it's very difficult making any call today. It's impossible to make them without making mistakes. A trader's life is to manage mistakes. I have always said that. All Jane wants, I think, is for me to acknowledge more of them. Like I say, that's fair.]

WGW and WGI

WGI (TSE) took a big hit just before the close and is now much cheaper than WGW. Any reasons? Any ideas how they will rebalance on Monday? WGI back up or WGW down? Confused here.

Thanks

Stv

It's over. "Canadian regulator orders short-selling ban." Our GS man has done here too. Rest in peace free market.

"Congressional Leaders stunned by warnings": Ben and Paulson out on quite a show apparently.

http://www.nytimes.com/2008/09/20/washington/19cnd-cong.html?_r=1&hp&oref=slogin

"Among the potential steps Congress can take include approving legislation to allow bankruptcy judges to modify the terms of primary mortgages — authority that the bankruptcy laws do not currently allow and that the banking industry has strenuously opposed."

This fraudulent deal may yet come apart, these financial entities are not out of the woods by any means.

Did anyone listen to the Peter Morici interview (http://nexalogic.com/morici.mp3 )? The problem right now is very different than when RTC. At the time it was not the banks fault. Now it is. This plan does nothing to straighten out the business practices of Wall St. No measure are being taken to address that. Also mentions that LEH gave way 50% of its profits last year in bonuses to executive. Something Bill has been saying all along. Your children will be paying for this.

WGI vs WGW

Looks like David sold 500k shares WGI at the close.....

Same here in Germany:

"Germany has suspended short-selling of shares in 11 of its financial services firms to try to protect them from damage by speculators, the Finance Ministry and financial watchdog BaFin said on Friday." Reuters

Something's going wrong.

OldGoat, thanks for the suggestion. I had previously mentioned contingent or conditional orders, and asked whether they too are some visible by the brokers and can traded against, but I received no feedback on the matter. Right now, I am still not sure about it. It seems mental stops are still better, especially for BS opens like this morning.

"Congratulation on your good calls, and you have every right to be proud of them. But you called a great shorting opportunity in housing stocks which proved to be a total bust. I think it would serve credibilty well if you mention both your successes and your failures."

what if johnny wangler calls the perfect play against ohio state, throws the perfect bomb to anthony carter, who then trips as he turns to receive, and there's an interception?

what's the right response? disgust? frustration? hell no! carter changes direction as he rises and makes a beeline for the defender. someone throw a wrench into bill's call for a short on homebuilders? hey, things change. improvise...

vinod- congrats...hope today's performance erases yesterday's regrets...

i had an unbelievable two day gain.

cheers

SteveC - To my knowledge, only your own broker would be aware of your conditional order. ~ OG

Si02
What a joke, no shorting Cdn banks.
I've got to mull this one over. My first reaction is I've been thinking it's about time to go long on all these banks. For reasons I have no time to go into now but will add over the weekend.

The list:

Aberdeen Asia-Pacific Income Investment Co. Ltd.
Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank of Commerce
Fairfax Financial Holdings Inc.
Kingsway Financial Services Inc.
Manulife Financial Corp.
Quest Capital Corp.
Royal Bank of Canada
Sun Life Financial Inc.
Thomas Weisel Partners Group Inc.
Toronto-Dominion Bank
Merrill Lynch & Co. Canada Ltd.

Ameribank of W. Virginia has failed, #12 so far.

WGI vs WGW
Because of changes to the S&P indexes, there will be many changes as of today. In this instance, WGI is being removed from the TSX Global Mining index. Full list is here:
http://tinyurl.com/3rernj

SiO2: follow up on Canadian regulators banning short sales on some financials.

"Financial companies were not among the largest 20 short positions on the Toronto Stock Exchange, as of September 15."
http://tinyurl.com/3er4je

WGI.to

Thanks bobj for the link.
I was puzzled too. I had two small orders in at $1.40 Canadian. Got both filled after hours at $1.29. I was surprised to see the fills.

Freedom57

Agreed. But they don't want Canadian Financial companies to be a target with next week's trading I suppose. Let them short Nortel instead. What a tangled mess. [053]

Freedom, that is correct, this has nothing to do with past practices on Canadian Banks. This whole thing is unraveling fast.

MaxPain: Check out the middle chart at the bottom of the page. Look where we ended up (and no MP values changed today!):

http://nexalogic.com/maxpain.html

2nd
Congrats...for "unbelievable two day gain"
I had very good gain, sold all but kept TBT 500 brought at 57 and still has 5000 ESLR also 300 AIG
Hope next week will be same
Also there will be more sorts covering in financial
Next few days. Result of option expiration and effect of PUT exercise in financial
Than will buy SKF
Brought 200 SRS at 70.00

I thought there would be intervention but nothing like this.

***Be careful SKF holders.....I also sold my 107.30's too early today but with the LEH drop there may be another rescue in the works.

Who knows...they may bring back the short sale rule for financials.

Posted by: Schleppy at September 9, 2008 3:04 PM [link]

A possible unintended consequence of the "insure money market funds" concept, as outlined by Mike Morgan:

"Now that Paulson has declared the FDIC will insure all money markets, why not earn 2-3 times more interest. In fact, I never keep any money in the local bank. All of my funds are in money markets, as I have checking and credit cards tied in. Moreover, this is tied to my trading accounts as well.

Just wait until this really sinks in. If enough people realize how much better their money is with the money markets, the banks will fail from the flood of withdrawals moving to money markets. In any event, if you were worried about the $100,000 limit at banks, Paulson has declared he (we) will insure money markets for 10 times more than we are prepared to insure banks. You can keep up to one million in a money market with FDIC insurance."

http://realestateandhousing2.blogspot.com/

realestateandhousing2

.... after all that has been said, you believe him?

seadog,

Who knows for sure? I expect that if there were anything close to a "flood of withdrawals" as Mike anticipates, changes would be made to prevent that.

Massive intervention in the markets is bound to have some unintended consequences, though. We are witnessing an historical event.

Re: Canadian Banks
I was offered 2.75% if switching to an "online" savings account at RBC (7 times more than the regular savings) in early August. Is this good/bad/ugly? What/who are Canadian Money Markets?

Kaimu - Bonjour!
I watched "shift happens". How's this for positive spin; all countries stopping short selling are "car cultures", but this week GM rolls out the Volt. But time needed to iron out the bugs*, incl. debt destruction - previous industrial wealth and related banking must be strung out (will never be repaid if using cheap oil business model 'cause no cheap oil left). Note: India and China are only beginning to create domestic non-hybrid car culture.

*incl. all/some of the following: tranportation, agriculture (petro-chemical fertilizer), airlines, etc. Most electricity generating stations run 24 hours, so ready market if switching to electric fleet (Calif. says they can do it now).

Market manipulation becomes an exercise in optimism/greed for a greatly adjusted yet similar socio-economic paradigm.

This bailout crap is really a war being conducted by Paulson, et al. The problem is they do not know who the enemy is anymore than Bush's war cabinet knew who the enemy was when they decided to go to war against Sadam. Just as the Iraq war has gotten worse for us each year, this bailout crap has been getting worse, except that the bailout crap is producing terrible consequences that are unimaginable and insurmountable.

If Paulson and Bernanke think that by burdening the US people with uncountable trillions in new government debt, that they can save our the US's AAA sovereign debt rating and continue to borrow money on the cheap, they are sadly mistaken and we, the US people, are being betrayed. We are being betrayed even if those rating agencies continue their AAA ratings just as they did with those worthless mortgage backed securities, because nobody trusts the rating agencies any longer.
Its not possible to make a credible argument that these people know how to fix this. They really do not. To borrow from Jim Cramer - they do not have a clue.

That Bill Gross is something else - he bought up a load of high risk Fanny & Freddie 2nd tier notes at a very steep discount just before he led the public outcry which encourgaged Paulson to pay full value. I'll bet a lot of other discount buyers also got full value. But then he screwed the owners of preferred stock many who had paid full value in what turned out to be a failed recapitalization effort for F&F. The F&F bailout is totally lacking in justice, morality or wisdom as is everything else these people are doing. It is all going to fail horribly.

Those who voted for Bush deserve this. I did not. This is not just about our economy -- this is about our civilization. If they do not know how to fix our economy, and they don't, we could end up without the civilization we all take for granted. The final act in the Great Depression of the 1930s was not recovery, but world war.

bsi87,

I have to say you were the one with the right idea today as well as yesterday. The skf pick was right on, as Goldman was yesterday. I will be scanning the site for your posts and taking seriously what you say.

How will moving funds out of chequing & savings accounts into money market affect the bank capital reserves?

I pulled out of MM funds a couple of days ago for piece of mind. For 2.75% I will ignore them for a bit. No point in letting their portfolio diversification hit a few "black swans" like LEH for me and cause problems. Does anyone believe in the portfolio diversification strategy any more?

I thought this was kind of ironic.

Google money market.
One of the results from SEC site.

Money Market FundsA money market fund is a type of mutual fund that is required by law to invest in low-risk ... Money market funds typically invest in government securities, ...
www.sec.gov/answers/mfmmkt.htm - 6k - Cached - Similar pages - Note this

Follow the link.

http://www.sec.gov/answers/mfmmkt.htm

"U.S. SECURITIES AND EXCHANGE COMMISSION

ERROR 404: File Not Found
You are receiving this error message because your browser tried to reach a page or location that does not exist on this site.
You may have followed a link that contained a typographical error, or the material may have been moved or renamed. To find the page you wanted, try any of the following:

Main Menu (on Home page)

Site Search

Site Map
We regret any inconvenience, and we thank you for your interest in the SEC website. "

Maybe they had to pull it because it was now wrong.

"Money Market Funds
A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. Unlike a "money market deposit account" at a bank, money market funds are not federally insured.

Money market funds typically invest in government securities, certificates of deposits, commercial paper of companies, and other highly liquid and low-risk securities. They attempt to keep their net asset value (NAV) at a constant $1.00 per share—only the yield goes up and down. But a money market’s per share NAV may fall below $1.00 if the investments perform poorly. While investor losses in money market funds have been rare, they are possible.

Before investing in a money market fund, you should carefully read all of the fund’s available information, including its prospectus, or profile if the fund has one, and its most recent shareholder report.

Money market funds are regulated primarily under the Investment Company Act of 1940 and the rules adopted under that Act, particularly Rule 2a-7 under the Act."

http://www.sec.gov/answers/mfmmkt.htm

So is the advice now to buy up the list of stocks banned from being shorted come Monday?

Where's the ETF for that one? :)

Here is the candidate list for the ETF from the SEC's release this morning. (all of the banned shorts)

Ticker symbol will be either BAIL or BULL. Or maybe HANK.

http://tinyurl.com/3ohcpx

Do companies on this list have an unfair advantage against their competition?

Donald Coxe today - A change of course

Coxe has long looked to the TED spread as a signal. When the spread between interest rates on (uninsured) euro-dollar deposits and (insured) dollar deposits rises above 2, it's a sell signal for US stocks. This morning, the TED reached 3.14, an all-time high. Coming on the heels of an $89 rise in the gold price, this convinced Coxe to recommend a reduction of an average 10% in the allocation to equities of client portfolios.

He doubts that an RTC-type approach can work as well as it did after the S&L crisis. Today, the savings rate is much lower, risk is much more widely distributed, and the economy lacks growth as well as the "peace dividend" enjoyed after the end of the cold war.

An RTC-2 can take bad loans of banks' books, but cannot increase banks'equity. The real problem won't be solved until banks raise at the very least $50B-$100B in equity. Sovereign wealth funds are not interested. Despite his massive cash and low returns, Warren Buffett has also shown no interest.

Coxe believes US markets are still in "hurricane season" and that more storms lie ahead. A solution will take a long time to emerge. For perspective, he notes that, inflation adjusted, the DJIA on 8.12.82 was below the close after the first day of the crash in 1929 - 53 years previous!

He believes future booms will occur in the BRIC nations not burdened with toxic levels of debt.

The audiocast is worth a listen:

http://tinyurl.com/2htvq3

(It takes a full hour, the longest audiocast he has ever done.)

Looking over the weekly charts,
I notice that almost everything including the major indices was down for the week(!?).

Only these were up for the week: financials XLF, real-estate IYR, energy XLE, materials XLB, transports IYT.

Most notably, consumer staples XLP actually closed on the low for the week(!), looks to be under major distribution, and may have signalled a key reveral.

Looking at the daily charts, we seem to have gotten what the Wyckoff folks call an AR (Automatic Rally) in most things, which is a signal for a potential trend reversal. This on a daily, not (yet) a weekly basis - important!
Weekly the trend is still down, follow through or the lack thereof will tell the story.

Going ahead, it loks to me like XLF & IYR have had their run, and are fades.

XLU should consolidate for a while & then continue on down more or less with the financials, being partially held up by any bullishness in the energy sector.

Best short sector short term: XLP

Best long sector short term: XLE

XLB & IYT may do decently also, harder to see.

[Bill Cara note:

Terrific report/opinion. Thank you.]

Ted Spread Chart and small discussion.

http://tinyurl.com/4mbvxd

Gentlemen and Ladies,

Mr. Bill Cara is a light of truth helping to educate whoever wants to learn standing almost alone in a sea of corruption.

Of course he is going to be attacked.

Mr. Cara is going to be attacked viciously over any reason the people who hate him can.

Who would hate Mr. Cara? I think you know the answer to that.

Mr. Cara voices many opinions on how the market will react. Most of the time he is amazingly correct. Sometimes he may be wrong. Sometimes he may be wrong because of unforeseen government intervention.

Mr. Cara has also WARNED us the probability of this unforeseen intervention and how it may occur and why.

Valid differences of opinion should be discussed.

But please, do not feed attention to those who desire to destroy Mr. Cara's reputation because of the truth he speaks as best he can.

[Bill Cara note:

I am humbled by your comments JVS3; however, I read jane.colder's entry (if that's what you are referring to) and I feel she was being constructive, if a little "cold" as sharkie wrote. When I initially wrote the first paragraph (taking credit for some great calls this week), I actually considered editing it. But then I got caught up in the market like you all, and I let it go.

The one thing I know people don't like is hearing anyone brag when many others are losing. I ought to be more sensitive. In that respect, jane.colder is right.]

Just an update. The TED spread was moving down yesterday (Friday) and now is listed at 2.33. That is still very high, but better. The influx of billions of dollars of liquidity didn't seem to do it. It was the promise that all that bad debt will just disappear.

Jock,

More and more I think that Coxe's view here is correct. The TED spread has been reliable for 40 years. If the spread did not come down when hundreds of billions have been injected into the system between the US and Europe, why then should we believe that this rally is the beginning of a new broader bull market?

I think the key difference between Coxe's view and Cara's view is that Coxe does not believe that a bull market can begin anew until the financials are truly fixed. Both expect hard asset stocks to lead. That does not preclude Coxe from investing in gold and ag presently and exposure to energy and lastly base metals, however it does seem to preclude him from being fully vested - i.e. have plenty of cash to pick up bargains when/if this happens.

If you look at the now publicly traded Coxe fund, you can see his top ten holdings and his cash position so because of the timing of this fund we have a window into what he is actually doing in a buying sense for once. Though he is not the actual manager of the fund everything being bought is in line with his comments over the last 3 years minimum and the stocks being bought have all been mentioned in Basic Points during that time. Note he said again that there will be a 'gigantic rush' into the ag stocks. He noted that in the first run up in these stocks many of the people were momentum players who didn't know what they were buying or the long term value within - I must agree with that.

What seems more and more likely is that the real downdraft is yet to come here after this short covering / momentary euphoria blows over.

I suppose the 'hedged' position would be to keep some powder dry but have positions.

http://tinyurl.com/5xkrxt

Saturday Morning Coffee: Blood Money

An unprecedented week that will be one for the history books. It's just amazing and disheartening to see the collapse of our Capital Markets into what is now a "Rigged Game" for HB&B
and Friends and Family. But for how long? Thanks again to Bill for all his efforts and I agree with ST07 that the real downdraft is yet to come (probably in the traditional late Sept. - Oct. time frame).
Lets Face It, after the Shenanigans of the "Ben & Hank Dog & Pony Show", this week the dollars demise is in, and in this community it is obvious that the "Emperor has no clothes".

Colin Twiggs (who has counseled against paying too much attention to the media and calmly taking stock of what's happening) is out with his take on the rally: "Investors Rally Or Shorts Covering?"

http://tinyurl.com/54qccl

"The press is full of headlines about stocks soaring and massive rallies. I cannot imagine too many fund managers rushing out to buy stocks in the middle of a market cave-in. That is how you lose your job. The current rally is not driven by new investors rushing in to snap up bargains. The SEC and UK financial regulators have both banned short selling of financial shares, forcing shorts to cover their open positions — causing a huge upward spike in financial stocks like Morgan Stanley [MS] and Goldman Sachs [GS].

We are undergoing another bear market rally. I often equate these to a drowning man's relief at finding a life-raft — before the realization dawns on him that he is still lost in the middle of the Pacific ocean without food or water.

Spot gold climbed sharply during the week as investors fled to the safety of precious metals and treasurys. We can expect sweeping measures from authorities in an attempt to restore stability to financial markets. If successful, the latest gold rally is likely to be short-lived. Breakout above $850 is a large correction which some analysts believe signal the start of a new up-trend. Reversal below $820 per ounce, however, would warn of another test of primary support at $725; while recovery above $900 would confirm the new up-trend."

Bill,

I have not heard anyone explain just why these mortgages, which are polluting the financial balance sheets, cannot be evaluated.

Both my sons have mortgages which they pay each month. One is a 30-year fixed (at CHASE), the other an ATM (FNM). The checks are being cashed.

Maybe I am just not economically savvy enough, but what's wrong with "follow the money"?

Sure, some may go into default, but each must be costing the payer a specific amount at any given time. Just as stocks and bonds are priced daily (even to the minute) why not a mortgage?

Since no one asks this — should I assume everyone else knows the reason except me?

ST07 -

A good piece. thanks for sharing. Here is a question for you - from your study, do you think that the hedge funds or funds are done unwinding the commodity? From my limited experience & study the past bull markets, it seemed that the next leg up in commodity/energy/gold still needs a retest or basing at the present level before a sustained bull-run can happen. This weeks' financial armagedom is global. We have seen a lot of governments (Chinese, Russia, British, etc.) fighting back the free fall. There will be more effort to sustain the market at this level until the government stop its manipulation. In the meanwhile, the bull may stage a "short-squeeze/relief" rally. What is your opinion on that?

re Paulson, Bernanke, and Cox- they are all pretty much like you and me, and for all we know, our own kids are playing soccer with a future chairman of SEC...we can bash their policy decisions, but attaching motives to them is speculation- i still think when we read an historian's take (or maybe their memoirs) in another 20-30 years, maybe things looks different; there's a lot we don't know...

reminds me again of my grade school/high school years- a few of the kids that were made fun of went on to become highly successful and admired...and a few that we admired went straight downhill from there..

having said that, i also believe that were we to be sitting in a boardroom with paulson/bernanke/cox at the table, most in this community would certainly hold their own in a debate...one should never underestimate the intellect or power of those who lead, but neither should one attribute superiority in intellect (or common sense) to them...

correction: ARM not ATM

"The one thing I know people don't like is hearing anyone brag when many others are losing. I ought to be more sensitive."

and i certainly feel bad for anyone caught in a bad position at any time...i also think more of us should post experiences with losses in real time as well as how manage positions/portfolios out of nosedives...

i usually post my entries in real time, and being early 99% of the time, also end up posting the experiences of watching them go against me in real time...being a contrarian also means i take positions that will be counter to those held by others, either ST or LT...(i've also taken hits that took me completely out of positions, which i've posted in real time)...

whether it's a short squeeze or a selling panic (or even a run at the baccarat table), nothing matches the excitement of watching a play against the crowd take off...if i get carried away, i will honor any request to shut the ---- up and get back in the huddle...

good luck to all next week...i think we go down from here...

how THEY manage positions out of nosedives..

make that how WE manage positions out of nosedives...

2nd,

Well said on a different point of view which I was too chicken to say. Just take Greenspan for an example - what we thought of him then and now.

For many years working for corporate america, I was taught to look at many perspectives, weighing pros and cons all the while. I can not imagine the magnitude and the complexity of the problem we are in. And, it is difficult to come up a 'win-win' solution when the big picture is vague at best. I would not want to trade places with Hank, Berneke at all cost. I just pray that they don't rush judgement and allow time for many to voice their opinion.

Latest from MarketWatch.com

"Germany bans short-selling on some shares" ...

"The one thing I know people don't like is hearing anyone brag when many others are losing. I ought to be more sensitive."

I followed Dr. Brett Steenbarger's blog on psychology of trading. Here is what I learn about losing trades - a losing trade is a losing trade if one don't learn from it. I am sure like to hear/share how NOT to lose a trade next time around.

c3- we all make losing trades, no way around that...what's important is learning how to manage them, whether it's taking the loss (and keeping it small) or turning it into a winner..

wondering how people feel about holding gold stocks vs. the metal during the next potential downdraft in the market.

seeing the ratio's of shares vs. metal still at their lows im wondering if the GDX and its ilk may get dragged down during any serious general selloff while the metal might hold up.

though w/ the shares so low compared to the metal, im considering that people may be loathe to dump them in favour of everything else...

dr.cosa- maybe this is the one time that a short gold/long miners seems to be a no-brainer? maybe combination of DZZ/GDX?

Grym - Mortgages -

Not so simple anymore. Now that mortgages have been “sliced, diced, and reformed” into neat packages (sort of like taking cow turds, adding a few bits of flowers to change the color and smell, and then forming the resulting paste into chewable vitamin tablets), how can anyone go back and find the original cow?

“Tante” has some excellent posts on the “Calculated Risk” site in which she tries to help those of us who want to know the “rest of the story” so to speak. Here is a link to her explanation of why it is so difficult to pin down the actual content and value of a mortgage “asset” that didn’t get sold in time by a now-failed bank.

Unfortunately, a lot of these “assets (turds)” were sold to you and me, and we just don’t know yet how our pension plans, 401k’s, etc., will fare in the future.

A snip from Tante and the link below:
“ .. The primary market is where loans get made in the first place. The secondary market is where loans that have already been made get bought and sold. Is this always an easy distinction to make? Nope. It used to be, when loans were always made by lenders who used their own capital: the primary market involved a borrower and a lender, and you could ace the quiz on that with no effort. But we wouldn’t be having this blog post if that were still the case. ...”
http://tinyurl.com/4kgp5b

2nd
Losing trade does have psychological effect.
I brought AIG 300 average cost 11.00 to make a quick turn around and got stuck with it
Because of this losing trade I was hesitated to do other trade in STT/MS or GS, worried about losing again
If I did not have this AIG I would have traded other financial and may have made money

re 2nd ave:

im torn on this one,
i feel good about gold going forward,
but im wary of the miners getting the usual 1-2 punch from the rest of the market during any downdraft.

the miners vs. metal ratio's are still sickeningly low and i have yet to see an indication that they have revered considering the extent of the damage.

at the same time im wondering if this little short-selling repreive will see all markets lifted including gold stocks, which tend to outperform gold on the way up, but crash harder on the way down.

so im basically playing the HGU and HBU (gold miners x2 vs. gold x2)

though im also wondering if these leveraged ETF's may face troubles in canada as more dislocations occur within the banking system.

when the FED raised rates to 5% in May 2006, I thought here is a sign that the FED and others can see that the excess printing needs to be stopped. It created to much easy credit and debt. Here today we are with even more printed money. Until the power that be correct the printing of instant money, paying of unjustified CEO salaries, and stop other various market interventions, I will trade this higher risk by waiting for a much lower prices before I can reasonabily put on any long term positions. rnick

Vinod,

Let that AIG thing be a lesson to you. There HAS TO be a price where you sell, it probably ought to be an electronic on-the-books stop because in case of calamity you won't be able to enter orders (remember yesterday?)

Ii probably should be, at most, about 10 percent away from your buy price, IMHO I would use much less. because I am TOTALLY disinclined to hold underwater postions, I just don't do it.

Selling at a loss sucks. Holding 300 AIG at a 65 percent loss sucks more. But hey. Maybe it will come back. Maybe "Bazooka" Hank will pull out his nuclear flamethrower and AIG will go back to 70 or whatever. You have my prayers, which is what we're talking about here. They say when you find yourself hoping you're not trading anymore. What do they call it when you find yourself praying?

Gotta honor your stops, and they probably oughtta be on the books.The trick is, if you buy at a good low and then set a good stop, it you're really right it will never be hit. And you can always buy back.

pappdjavul - Thanks for sharing your evaluations on so many components of the Market. I admire you quickness in reaching these conclusions - I am still working on mine. I do, however, have a comment that I would like to place along side of yours, fwiw.

You didn’t mention the $Dollar which has strong negative correlation to many possible commodity plays.

Looking at the weekly chart for the $Dollar, I think I see a double bottom within a 20 wk consolidation range (Mar-Aug) followed by a breakout of that range upward and a move strongly through a previous consolidation range (Nov - Feb). That move-up totally regained a full year’s loss and puts the $US price back at where it was in September 2007. Not bad.

Whither now? I hesitate to put much faith in chart moves during Expiry even in “normal times”, but if I shut my eyes to everything other than the chart, I would say that the $Dollar is still in a strong uptrend, that it has fallen only to strong support (weekly chart) but might fall a little further to its 1st Fib level at around .77 before taking off again in a continued move upward to around the .82 level.

Next week, I will use “mental stops” in any case, but will possibly buy some UUP on a break through the $US's ST down trend line.

All this must assume no “surprise” wars, etc..

Warning to all who read the above: I look at many other considerations than those discussed here before actually making a trade - make your own decisions before trading!

Hi Grym,

"I have not heard anyone explain just why these mortgages, which are polluting the financial balance sheets, cannot be evaluated.

Both my sons have mortgages which they pay each month. One is a 30-year fixed (at CHASE), the other an ATM (FNM). The checks are being cashed.

Maybe I am just not economically savvy enough, but what's wrong with "follow the money"?"

From what I understand, the complexities are not tracing down the value of individual mortgages, it's tracing down the value of thousands of bundled mortgages and other instruments at different misleading ratings, and then bundling those in some other instruments, and then bundling those, and then bundling those, and then adding some extra conditions, and then bundling those... and then playing musical chairs trading them back and forth until the last sucker standing takes the fall. Plus you add in some insurance in case the counterparty fails to pretend you are hedging your bets, which is a good deal if they don't fail but a disaster if they do and the party hedging for you also fails.

Unwinding these transactions is like unwrapping an onion peel. It's gonna make you cry all the way to the middle, where you find there's nothing in there, and your insurance company doesn't cover the cost of the onion and the onion is worth $400b. :)

Buffett's take on this is a good read.
http://tinyurl.com/42psrr

It's not that the assets are worthless - they would still have tons of value if they are not fraudulent. It's the fact that nobody wants to buy them anymore and the mark to market model makes them worthless on paper, since there's no market.

This is just my understanding... I could be wrong here.

Someone on BNN last night said the banks are going to make a killing in a couple of years and everyone should get a large exposure to financial stocks.

If the government is going to take bad debt off the books, on paper this sounds like a good idea. Comparing Year over Year, if this is the worst year, next year will look great by comparison. Their books will look really good. :)

The graph Kaimu posted about LEH bankruptcy compared to Enron & Worldcom is a bit misleading, though still frightening. Lots of the balance would have been paper value or "notional amounts". I think it's like saying I lost $100k selling my $10k car, when I'm using some proprietary model to figure out the valuation, instead of what the auto trader is telling me.

http://en.wikipedia.org/wiki/Notional_amount

"As to the size of the counter-party risk - other banks with complex financial instruments held through Lehman - no analyst or credit market expert could hazard a guess as to the likely cost. Mr Chen said Lehman had $729bn of "notional derivatives contracts" that Lehman believed in May were worth $16.6bn. Again, should that turn into a loss, those will have to be punched into the complex, interlaced banking system to work out where the liabilities ultimately may lie."

http://tinyurl.com/5ndk2z

I wonder what the risk models for the banks are showing us from last week?

Nassim "Mr. Black Swan" Taleb is probably laughing his ass off right now and selling a lot of books.

Here's an essay of his from a couple days ago that's definitely worth a read, though a bit technical.

On "THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS"

http://tinyurl.com/6dngnx

Basically you have mortage-backed securities and credit default swaps that have been sold to counterparties based on volume per fraudulent rating and not individual quality, and portfolios assessed with measures of "Value at Risk" with numbers that Nassim tells us are fraudulent and misleading.

This comfort number, which costs the banks millions to generate and is required by regulatory agencies, could be the root cause of the problem.

http://www.bis.org/publ/bcbs140.htm

2nd - May I suggest a view contrary to Bills, which until now and I'm certain into the distant future would be one of nearly daily loss.

So, may I ask you to qualify your definition of contrary position?

vinod - I went to the ATM this morning to withdraw some cash, but it only produced an IOU!!!

Spot,

Thanks for the link, I'll check it out.

I always want to know not just "what", but "why".

Vinod, 2nd, Shark - on trading psychology

I wondered if the sharp-loss experience on Wednesday & Thursday is causing risk aversion such that the Friday's rally are not broad-based and may not be long lasting until more confidence is restored. Perhaps the gold/commodity/energy has at least one more day to run, if not two?

Wavesmash,

Thanks for the reply. Between what you and Spot have sent I should be able to advise both the Fed and Treasury on this issue in the near future. ( If they should happen to call me. :-)

If you want a good overview of Coxe’s Commodity Strategy see:

http://tinyurl.com/3ls6nw

Starting on page 17.

I was at BMO’s site, but could not find his holdings, if someone knows a link to that info please provide.

There is a good article on energy stocks in Barron’s.

TIA

snipped from Calculated Risk just minutes ago folks:

Bailout Proposal
by CalculatedRisk

Here is the proposal so far: (hat tip Michael)

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

history rhymes, it does not repeat.
weekend reading suggestion.

View from the time of the world wide credit bubble that started with WWI.

A few other of his books are apparently also available as free ebooks, I believe at mises.org

http://en.wikipedia.org/wiki/Garet_Garrett

____________________________________

A BUBBLE THAT BROKE THE WORLD

By

GARET GARRETT

1932

http://www.itulip.com/images/bubblethatbroketheworld.pdf

COSMOLOGY OF THE BUBBLE

The Lord giveth increase, but man devised credit.

Mass delusions are not rare. They salt the human story.

The hallucinatory types are well known; so also is the

sudden variation called mania, generally localized, like

the tulip mania in Holland many years ago or the common-

stock mania of a recent time in Wall Street. But a

delusion affecting the mentality of the entire world at one

time was hitherto unknown. All our experience with it is

original.

This is a delusion about credit.

I just read the newest bailout proposal (the RTC like thingy). In a nut shell it seems Treasury wants to raise another $700 billion in debt, and spend it on buying bad mortgage from financial firms at unknown prices.

Was this what market had in mind on Friday? It seems to me $700 billion is low. To clean banks' balance sheet, wouldn't we need 1.5 trillion or more? Now, counting the commitment to FNM, FRE, and AIG, Treasury is 15 billion shy of 1 trillion in recuse efforts.

I wonder how market will react to this on Monday.

CP-

"So, may I ask you to qualify your definition of contrary position?"

I'll reply using real time posts, my man

aANATOMY oF A (cONTRARIAN) tRADE:

[CP- the best time to buy (IMO) is when you don't want to buy...when you're able to hit the buy button effortlessly, you're getting pulled in...when you're afraid to hit the buy button, someone else is getting pulled out...so the time to buy UYG will be when you're afraid to do it; doesn't sound like you're there yet...
Posted by: 2nd_ave at September 15, 2008 10:38 AM]

[the huge drops in asia are (IMO) a good sign that we are close to a trade-able bottom...the drops stop sometime; at some point there is true value and that's when we each decide whether or not to grasp the opportunities out there...
Posted by: 2nd_ave at September 15, 2008 10:52 PM]

[n2s- what you have this morning is an opportunity to turn your situation around...it is now the best of times to diversify-> almost anything you look at is now down 50%, and anything you buy has the potential to double...think about shifting some of your oversized longs into other areas: china, emerging markets in general, miners, technology, financials, even a short bond position-> every one of these moves will spread your risk without taking anything away from potential upside...Posted by: 2nd_ave at September 16, 2008 9:15 AM]

[dr.cosa- what you have here is a ticket to a bullet train...we're all going to try to board the one that takes the best route, but honestly it won't matter in the end whether you board today, tomorrow, thursday, or friday...JMO...
Posted by: 2nd_ave at September 16, 2008 9:27 AM]

[May I ask you, 2nd_ave, what signal are you waiting for before starting to scale into CAF? When do you think that signal will come?

What negative forces do you think are still pushing the Chinese market down? I thought that the major problem for China (and other emerging markets was the high commodity prices, but now that they have come down considerably, I am surprised that China did not rebound.

Thanks!
Posted by: David at September 16, 2008 7:53 PM]

[David/(n2s)-

i'll tell you exactly what i plan to do (which is also exactly what i would advise n2s to do if he wants to run a back flip on the strangle hold his ESLR shares/RYL puts have him in):

take the portfolio, divide it into equal increments, and invest the entire amount in some combination of China+India, technology, the mining index and/or selected miners, bond shorts, financials, and energy.

you can try it on foot with a(n) (over)load of ESLR/whatever, or dump the backpack and head for the high-speed rail line...at this point, I honestly don’t think it matters if you're able to snag fully-discounted tickets; you could pay full price tomorrow and still be content...
Posted by: 2nd_ave at September 16, 2008 8:58 PM]

i was definite early (as usual, right?):

[CAF @ 24.98...
Posted by: 2nd_ave at September 17, 2008 9:43 AM]

[USD @ 33.24...
QLD @ 61.51...
Posted by: 2nd_ave at September 17, 2008 9:50 AM]

[left out GDX (earlier) @ 30.76...
Posted by: 2nd_ave at September 17, 2008 9:59 AM]

[UYG @ 18.35...
Posted by: 2nd_ave at September 17, 2008 9:54 AM]

[TBT @ 58.55...
Posted by: 2nd_ave at September 17, 2008 10:09 AM]

[CAF- adding at 23.80...
Posted by: 2nd_ave at September 17, 2008 10:33 AM]

[IBN @ 23.78...
Posted by: 2nd_ave at September 17, 2008 10:34 AM]

[QLD- adding at 60.37...
Posted by: 2nd_ave at September 17, 2008 10:37 AM]

[David- so I did exactly what I planned to do...I can see the engineer is beginning the journey with a downhill curve, but that's OK...there will be a ton of hills and valleys on the way, but at least I don't need to be trading every single of them...
Posted by: 2nd_ave at September 17, 2008 4:31 PM]

vinod was tuned in against the crowd also:
[2nd
Buying BA/CAF/GE/USD/QLD/SSO
will go upto 50% of my capital
Posted by: vinod at September 17, 2008 10:01 AM]

[one phrase from bill i caught on the fly last night was "IBM will still be making computers..." to really make money, i think it's necessary to buy during weeks like this...it's not as if life as we know it is coming to an end, right...there are still people playing "Chelsea Morning" right now and looking forward to classes at the art school or coffee with a boy/girlfriend...it's a nice day here in SF, and out of a couple thousand employees i'm probably the only one with enough interest in the market to be blogging about it...
Posted by: 2nd_ave at September 18, 2008 9:18 AM]

[2nd_ave,

aren't you worried that UYG hasn't crossed it's July low..even with this getting worst! Weird!

I notice that with SKF too. Hasn't come close to the $200+ mark.. and I think this is worst then July! IMO
Posted by: Grantmi at September 18, 2008 9:56 AM]

[Grantmi- of course i'm worried, but the time to listen to your worries was last October, when it was time to sell (and i think most of us here did)...now i'm worried, but not REALLY worried, right...i'm more worried about missing the return train, which is why i bought early...
Posted by: 2nd_ave at September 18, 2008 9:59 AM]

[with those kinds of stories playing across the ticker, it has to be close to a bottom...(if not THE bottom)...
Posted by: 2nd_ave at September 18, 2008 2:57 PM]

Don't make the mistake of thinking it was 'easy,' man...it is never easy holding with headlines having everyone thinking armageddon, right?
that's what makes it contrarian! so when the market finally turned on a dime:

[exiting the tunnel and accelerating up the grade...
Posted by: 2nd_ave at September 18, 2008 3:10 PM]

[shifting into overdrive...
Posted by: 2nd_ave at September 18, 2008 3:12 PM]

[QT- it't time to take the shirt off and join the skins...
Posted by: 2nd_ave at September 18, 2008 3:22 PM]

so vinod and i had 50-100% of our portfolios invested in financials/technology/industrials/China and India/TBT (i sold the GDX early) when no one else would touch them...and we're now entitled to a cONTRARIAN weekend...

As to why XLP is being sold off, I was stymied for a while. I had been sitting on some Jan. deeply ITM puts on it for some time (months) as being the cheapest "crash puts" I could find, nothing ever happened, and I sold them all Friday ar a small profit to free up some funds for something more interesting. I think I will by them back on any pop Monday morning.

Then I chanced to read a news item where some GS analyst had said that people were rotating into staples & health care, and I thought - gee, GS wants to unload those now.

Then I read a comment somewhere else, sonmething like: that now that the crash risk is over, people are selling staples and moving into something with more momo.

I think it's just a classic bear market case of everyone that wanted to buy has now bought, some have started to sell, and few new buyers are to be found.

Which means that consumers staples are going down longterm - not with a bang, as in a crash, but with a whimper, as in a "lack of interest". This does not mean that the individual companies are going bust.

Still digesting the potentuial consequences of this week's (nearly world wide) bailout of the financial system.

What they have done, to avoid a crash Thursday, is tell the general world public that the financial system is truly up to its armpits in alligators. The general public did not now this before, was not paying attention.

Read the chapter "The Rescure of Germany" from Garrett's book I posted a link to above. It is too long to post here, but here is a small piece which may "rhyme" with what is going on now:

" . . . international finance at the same time
made a direct loan of $100,000,000 to the German Reichsbank
to meet any emergency. The money was provided
by the Federal Reserve Bank of New York, the Bank of
England and the Bank of France. On this day's work international
finance heaved a great sigh. Nothing less than
the bankruptcy of Germany had been averted. For several
days there was a wonderful rise in German bonds, in
securities of all kinds, even in commodities, the whole
world over.
What followed immediately was a headlong flight from
the German mark. . . . "

pappdjavul, thanks for your link to a
A BUBBLE THAT BROKE THE WORLD, and your other thoughts.

Does anyone know how all these short funds, ie. qid, dxd, sds, mzz, twm, etc. will be affected by this new rule??, especially the sds.

TIA,

Dab

I would like to simply say "thank you" to the entire poster's here who share their thoughts and contributions here at Cara community.

A big "mahalo" (thank you in Hawaiian) to Bill Cara for his generous time and incredible insights.

Mahalo Bill.

T3d

As I mentioned previously, Sweden has been largely on the outside of this financial meltdown watching. It has a positive balance of payments, no significant government debt, and has already adjusted its pension & health care systems to economic reality. Sweden has significant other problems, but apparently less than most other countries I know of. Exception would be Norway.

Now, Sweden has no need of selling more treasuries or bonds to finance anyhing, but the banking system, being under pressure from the rest of the world, was complaining that they could no longer make a market in treasuries as there were no sellers(!), only buyers. Late this week the Swedish Debt Office (=Treasury) after consultation with the Riksbank & government, has arranged to auction off a significant amount of new treasuries, just to help the banking system keep working normally.

I have as yet no clue as to what the consequences of this might be, I'll spend some time Sunday reading up on what is going on.

ALOHA !!

wavesmash ... Regarding the LEH bankruptcy and the chart I posted. The US FED had to come in after the bankruptcy was filed and spend $138bil, just to make LEH "toxic trades" whole. Compare that to what it cost the US FED to make the LTCM fraud in the 1980s go away ... $150bil! I believe there are more LEH trades yet undiscovered that the US FED will need to rescue. LEH was counterparty to huge derivatives and as Buffet found out you do not unwind them in one day! More to come on that, so in fact the LEH bankruptcy "total cost" is not over yet!

LEH DECLARED ASSETS AT BANKRUPTCY
In New York, shortly before 1 a.m. the next morning, Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection[26] citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.[27] It further announced that its subsidiaries will continue to operate as normal.[28] A group of Wall Street firms agreed to provide capital and financial assistance for the bank's orderly liquidation and the Federal Reserve, in turn, agreed to a swap of lower-quality assets in exchange for loans and other assistance from the government.[29]

Lehman's bankruptcy is the largest failure of an investment bank since Drexel Burnham Lambert collapsed amid fraud allegations 18 years ago.[29]

Later in the day the Australian Securities Exchange (ASX) suspended Lehman's Australian subsidiary as a market participant after clearing-houses terminated their contracts with the firm.[30]

Lehman shares tumbled over 90% on September 15, 2008.[31][32] The Dow Jones closed down just over 500 points on September 15, 2008, the largest drop in a single day since the days following the attacks on September 11, 2001.[33] The conditions on Lehman's trading floors that day appeared grim; one-third of the sales force were absent.[34]

In the United Kingdom, the investment bank went into administration with PricewaterhouseCoopers appointed as administrators.[35] In Japan, the Japanese branch, Lehman Brothers Japan Inc., and its holding company filed for civil reorganization on September 16, 2008, in Tokyo District Court.[36]

Where are their "declared" LIABILITIES. My guess is the bankruptcy court is still looking for those and will be looking for years although I am sure the US FED will pressure the court to get the "reorg" done and over ASAP!

I wonder if after "reorg" the NEW LEH will still have any power left as an insider at the US FED?

2nd - I'm feeling guilty and honored by your reply to my "silly" (for lack of a better word?)request, and I will give your response serious ayalysis and provide reponse tonight after returning from an imperative day-shopping trip to the city. Thanks!!!

Meanwhile, suffice it to say, I do put great faith in your decision making process which I'm in no position to question. (My port value is nearly even, and arguably slightly positive at the moment; not counting what all I have learned from Bill and all those posting here which I'm convinced has provided me with a valuable and useful toolset).

ALOHA !!

So after all that has gone on this past week on Wall Street and the global Wall Streets is there anyone left here that does NOT believe markets are rigged and manipulated? Not just the DOW and bank stocks but ... ALL??? They rig the FX and commodities and "even" gold and silver! I wrote a published article a couple years about the manipulation of the US Dollar via the FOMC dating back to 1978 where even Paul Volker(Mr. Abyss) participated, documented by the US Federal Reserve Bank from their own website achieves. During that time period Arthur Burns was the US Federal Reserve Bank Chief.

If you do not think gold and silver are manipulated then you best stick to the stuff you know that are not manipulated. When manipulation happens behind closed doors at the highest levels of banking and government there is no way for you, Average Joe Blow, to know or predict what will happen from day-to-day. Just look what happened to stock traders this week and what happened to traders since July in commodities and gold.

Right now we have the entire US financial system in LOCK DOWN mode ruled by the GANG OF TWO(Bernanke and Paulson). So here we have a HUGE financial system based on FIAT with two DICTATORS that none of US Voters voted for. This is truly "TAXATION WITHOUT REPRESENTATION" and the effects that these two dictators have on the US financial markets this week will be minuscule compared to what the "lagging" effects on the US Dollar next year. And now we all know why Paulson has decided to quit and run for the hills. I would not be surprised to hear that Paulson takes up residence in the Haliburton building in Dubai with Cheney or moves to some non-extradition country with the Bush Family at their Paraguay spread!

FINALLY ... Citigroup metals analysts are "starting" to ask the RIGHT questions are you?

READ ON:
Citigroup metals analysts ask why gold is not already at $2,000/oz

2008-09-20 — mineweb.com

"Our sense is that gold has been temporarily depressed by a series of ephemeral, short-term trading dynamics that served to mask strong physical off-take in what is ultimately a tiny market," the analysts said. "We continue to regard as a barometer in the grand battle between hard assets and paper assets."(more)

The Citigroup idiots above made one mistake in their analysis and that is the word "temporarily" ... Have they figured out what entity has the most gold and silver inventories to make these shorts move the spot prices?

I always see this ... HARD ASSETS and PAPER ASSETS! Why don't they call it what it really is and what I have been calling it for years ... "REAL WEALTH" and "FALSE WEALTH"! Its all a con game and its been going on for hundreds of years but it seems to me the most gullible people to fall for this CON in history have been the people of the "high tech" modern era ... the supposed geniuses of the Homo Sapien era who can put a man on the moon but have absolutely no sense of what their government and their money really is! The US Voters of today seem to have no qualms, after witnessing the bank and insurance collapses of this week, to hand over their kids and grand kids future to the same old criminals who have caused this fraud. The same criminals that have run the show since 1913 ... the REPS and DEMS!

ITS THE MONEY STUPID!

spot,

thanks for the praise, now don't take me too seriously on anything, I'm largely just thinking out loud, to see what if any flack I might draw.

I've no background in finance or the markets, just part time trading over the years, which has now become fulltime as I am retired since a few years back. So I can spend all the time I want on this, which I realize many cannot.

Not sure what you wanted me to comment on the USD, of course I pay attention to currencies, I have assets in 3 different countries and live parttime in two (currently domiciled in Latvia).

I see the recent USD rally just like the equity rally this week. It was definitely initiated by intervention, and whether it gets legs or not remains to be seen. Just like the equity rally, if you look at the shortterm it looks significant, if you look at a longerterm it looks like a tiny blip. It will get legs only if the fundamentals support it, just like the equity rally. Personally I don't see that - for now. But I am no forex expert. I do understand the reasoning that all other currencies have various problems of their own - in the forex world everything is truly relative.

Full disclosure, I am currently fully hedged against a USD crash with some Oct. FXE calls. First time I have ever done that, I don't trade forex. That doesn't mean I'm predicting one, and I have rationalised this as a good short term trade also.

Grym,
Sounds like I may have a similar struggle with IRS. Could you please send me an email to friendly_jacek at yahoo.com? I need to ask you a question. Thanks!

I have been lurking here off and on for a few weeks and have to say WOW! You rarely see someone who works so hard to defend ordinary folks who try to protect their hard earned and hard saved retirement money (like myself). Bill Cara should be a folk hero! Or better a president. Anticrook and true patriot. America needs people like him badly.

BTW, I was so lucky to spare some lunch time from work to cover shorts and go long on Thursday when VIX shoot over 40. Perfect timing due to pure dumb luck. Feel for folks who were not so lucky.

jacek,

I'm not qualified to offer any advice, I'm afraid. I simply call my tax preparer (same guy since 1963) and my broker and have them work it out with the IRS.

I certainly agree with your opinion of Bill. He would be a better bet and is accessable thru his personal email at the upper right on the main page.

Sorry.

2nd,

IBM doesn't make computers anymore, PCs at least. It's China's Lenovo. lol. Good call on China...

My thoughts are after the record highs on Friday we are in for some more jaw-dropping corrections Monday. The taxpayer should have serious buyers remose on those $700B of mortgages, LEH, AIG, etc. and Congress, once they calm down, should realize that draining the lake to put out the fire will get rid of the water supply.

Which is why I tried to bail on everything Friday, but my broker only let me get out of the good stuff in between lockups. (China)

Isn't it what goes up must come down? Looking at PCZ, one holding I kept, there is still tons of potential downside... though we'd probably need to get back to $50 oil to get there.

A co-worker at one of the banks I worked at told me that when we get past $50/barrel the US should be in a recession. That was $54 ago. Wonder what 2x a recession equals?

Kaimu,

LEH is going to be a big disaster, agreed. Not sure who will inherit the hot potato, and I wonder how many 99 year contracts they have to decipher? Sounds like they could rehire some of their staff on contract at higher wages to figure things out...

I wonder why Gold wasn't put on the short ban list... I'm sure somebody's been trying to short it illegally back into the ground since it stopped being fixed at $35/oz.

Wavesmash,

I'm with Warren Buffett who said he doesn't invest in anything he doesn't understand. I missed out on most of the tech boom 1990s since I couldn't see investing in companies with no earnings as a good idea.

Needless to say after a few pages this got to complex to keep track of — which simply says to me the idiots who bought into it should not only not be bailed out, but banned from ever operating any sort of licensed business operation for life.

I'm not even sure they could run a lemonade stand sensibly.

If there were'nt a whole host of laws broken in this shell game, there should be.

ALOHA !!

I love all this ...

People around the World are now seeking to find the one currency ... the one government ... that has the least liabilities to the global financial system meltdown. They look far and wide ... Yet, they limit their thinking and stay within the prescribed box of their limited experiences in dealing with financial catastrophes and monetary crisis.

Right here is an example of this on Bill's Blog. I just use this to make a point and I think this new poster is a great asset to Bill's community. I appreciated his German comparison to today's events.

From pappdjavul ...
"As I mentioned previously, Sweden has been largely on the outside of this financial meltdown watching. It has a positive balance of payments, no significant government debt, and has already adjusted its pension & health care systems to economic reality. Sweden has significant other problems, but apparently less than most other countries I know of. Exception would be Norway."

I would have to ask about Sweden ... Can you still buy a new home for the same price you could buy a new home in 1908? If the answer is NO, which I suspect it is, then the Swedish and Norwegian governments have failed to preserve monetary value just like the US government has and every other government on the face of the Planet. The whole World sold out to the FIAT KINGS many decades ago ...

I personally don't have to spend my Sundays studying up on the degree that governments are corrupt or not ... I know they all are corrupt and I have my "hedge" against that.

Its great if you love FIAT and if you want to stick with the same old con game and fraud, but if you want to move your wealth where there is absolutely NO LIABILITIES to governments and their miscalculations then I would suggest buying some GOLD! SOME IS BETTER THAN NONE! With GOLD you do not have to worry how many trillions Paulson is planning on stealing or what problems may or may not hit Norway's banks! Guaranteed, when the World's Reserve Currency goes down all FIAT will go down in the end. Why? Because when Germany crashed the other Nations of the World had a "gold standard" in place. Today there is NO gold standard as there was in the 1920-30s and therefore no SAFETY NET! All we have today from global currencies is "promises to pay" and the "faith and credit" of that government. FAITH AND CREDIT ... Hummmmm???

Here it is right off the FDIC website. The entire World is depending on this. Our image as the one WOrld's Super Power is at stake here:

"Title IX: Full Faith and Credit of Federally Insured Financial Depository Institutions -- Expresses the sense of the Congress to reaffirm that deposits, up to the statutorily prescribed amount, in federally-insured depository institutions are backed by the full faith and credit of the United States.END"

FAITH AND CREDIT ... yeah-h-h, I get ya US government ... Hummmmmm???

If you grew up in the baby-boomer era that word IMAGE is pretty dame powerful. Other terms come to mind like "peer pressure" and "fitting in" and the gambit of human behavior that accompanies those flaws we so cherish and now our elected leaders who grew up in that system are in charge of the "FAITH AND CREDIT" thing. You don't suppose they'd say and do stuff that would be fraudulent just to protect their IMAGE do you? In reality FIAT is based on IMAGE ... And that concept really shined through this past week!

How long ago was it that Bernanke and Paulson were in front of the US CONgress promising the US financial markets were stable and the bazooka would never have to be used? What government promised the US TAXPAYERS the IRAQ WAR would only cost $1.78bil? So when Ben and Hank say they only need $800bil to clean up the financial mess does that make you warm and fuzzy? Well, the DOW rallied and so did the rest of the World ... OKAY MAN ... "warm and fuzzy" it is! YEAH ... its over!! These guys have KNOWINGLY set the stage for a complete collapse of the USDX. The World believes the US financial ills have been cured so if there is any hint of a new cancer ... it's KABOOM TIME!! Does anyone here at Bill's Blog really believe the US bank crisis is over? Its a MONETARY CRISIS and the unwinding of an EMPIRE based on "false wealth" so where do you think the World will run to next for safety?

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

Mike Morgan's Quick Notes
- Behind Enemy Lines -

King Henry is now officially taking over. If you don't write your Senators and Congressman immediately, this one man will have complete control over everything we ever stood for or ever hoped to be. If you think I am being dramatic, just read what he asked Congress and the Senate to approve in the Bail Out Act . . .

This deals with what he can do and who can review his decisions of hold him accountable . . . No One. He is demanding complete, ultimate and absolute authority. This is directly from the draft he sent to Washington.

~~~~~~~~~~~~~~~~~~~~~~~~~~
Sec. 8. Review. Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
~~~~~~~~~~~~~~~~~~~~~~~~~~~

You had better start emailing and calling your Senators and Congressman. He already has enough votes to get this passed. If you don't act, King Henry rules.

Senators - http://tinyurl.com/b1lm

Congressman - https://forms.house.gov/wyr/welcome.shtml

[Bill Cara note:

I have been on Henry Paulson's case for about 18 months. I have been calling him all the names that you are now calling him. Moreover, I told you that Americans need to lower the flag because this man has taken control of the government. The dialogue I am getting through the media from McCain and Obama is that they don't understand what's going on here. Either that or they have been told to accept it. The crisis is in the White House, and Congress had better wake up today or this battle for supreme power could be over tomorrow.]

ALOHA !!

wavesmash ... Lets add Bank America to the list. My take is they essentially took over MER with a couple days of due diligence. I spend more time than that researching junior miners! So given that, I believe Bank America moved on MER with a behind the scenes guarantee from a very powerful entity. Of course its the US FED!

So Bank America took on TWO huge mergers within the past six months CFC and MER. Someone tell me the success rate of HUGE mergers even in the best of times?

Bank America has a guarantee ... Don't be shocked when someday soon Bank America is getting bailed out! In fact I am sure the new $800bil toxic dumpster Hank and Ben have created was created with Bank America's toxicity in mind! What ever dollar amount this new toxic dumpster will be valued at times it by at least ten for the real value! We may never see its real value before the USA defaults.

There ya go ... now that's real dollar value for you! That's the STRONG DOLLAR POLICY we all know and love!!! HA!!

THE GREAT SOCIETY ...

Here's a mortgage-backed security sample contract.

Easy Sunday afternoon reading... this is why there are so many lawyers in the states. lol.

http://tinyurl.com/4fblvv

This one is short... it's only 74 pages. I bet there will be at least 10,000 years of reading in order to get through the contracts at LEH.

Here's a cleverly-timed press release for speeding up those pesky Value at Risk calculations. A few different companies released them last week.

http://tinyurl.com/3ne6q9

I will probably be looking again at NVDA Monday as I'm sure more firms will be looking at GPU processing to increase the speed of their risk calculations. Basically any gamers machine has about 100x more power in their graphics card than in the CPU itself.

Plus the 1 year RSI looks to be about... 0?

http://tinyurl.com/4dk79s

Would one strategy be to look at the list of short ban stocks and see who has the largest % shares short, and then buy?

Based on the list I uploaded, any takers on that exercise?

I found the URL if anyone wants to check the short %.

http://shortsqueeze.com/?symbol=ge&submit=Short+Quote%99

GE has 0.7% of float short?
526% percent traded vs. avg on Friday.

BAC has 3% short with 4% increase Friday.

GS had a 10% drop in shorts Fri with 3.4% short float.

The Pep Boys Manny Moe & Jack PBY should try and find a way to get on the financial short list. 18% of float. With their $333M market cap they could buy out the $89M capped LEH.

Can you find out how much GS/(et al) stock your representatives own and see if they have any conflict of interest? The man who is seeking supreme control of the US had Goldman Sachs stock holdings at the end of 2005 worth just under $700 million at the time, not including the value of his stock options.

http://money.cnn.com/2006/05/30/news/economy/snow_replacement/index.htm

Kim, I hope everyone already called and wrote their member of congress yesterday or today. Otherwise you cannot complain later.

Here's an interesting article about credit default swaps.

"The Real Reason for the Global Financial Crisis…the Story No One’s Talking About"

http://tinyurl.com/3k2lgj

Ron

Think the spikes in open in XLF & especially IYR were wild? Just for fun, look at the chart of IYF - a very lightly trade US financials ETF, just like the popular XLF.

See that c.a. 34% spike in the open Friday? That was some account getting it's stop taken out.

That's why you never place a stop in the market on anything, but especially on lightly traded stuff.

The next shoe drops.

GM Will Draw on Remaining $3.5 Billion in Credit Line

``This is not something we expected they would need to do until next year,'' said Mirk Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets including Ford and GM debt.

GM has its own cash needs and its decision to use the credit line may add to the concern in the capital markets. ``It's not good either way,'' said Mikelic.

http://tinyurl.com/3j9jvx

GM is probably a way bigger CDS exposure candidate than LEH, since it's one of the worlds largest borrowers of capital.

Apparently GM has to spend $1.2 billion to pay Delphi's pension fund...

http://tinyurl.com/433en2

Lehman's CEO needed more "fail" to get bailed.

"Lehman did not measure up because its chief executive, Richard S. Fuld Jr., simply was not reckless enough as he ran Lehman into the ground."

http://tinyurl.com/4jgk3j

kaimu -

thanks. you know, I always wanted to take a trip to Hawaii but never managed to do it, maybe I will finally some day.

Interesting to hear your perspective. Curious, now has Hawaii any secessionist plans for breaking away from the US? Didn't you used to use seashells as money, or was that somewhere in Polynesia?

Now as to fiat currencies in general, I will have to differ with you. I believe a well run fiat currency, which is debased not more than 2%/year, is the best system yet devised. That 2% is just enough to force old stodgy rich folks to put their assets to some productive use instead of just sitting on them, but not so much that it creates problems for business.

I posted some time ago some info about how the Swedish medieval kings gradually debased the silver mark for a period of 250 years, from c.a. 58g. to c.a. 6g. I believe it was. The inflation tax has thus a long tradition.

pappdjavul- " As to why XLP is being sold off ..."

My thought exactly. In fact, FAST MONEY are recommending WMT and TGT on Friday. However, this is a Bear Market, nothing last very long.

"The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit."

But as for me personally
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=24973210

"The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time"

Gee, this Paulson guy is a really good man, is he really going to buy all that junk for his own personal account and save the financial system for us?

C3 (PO?) - Good question on the deleveraging saga. I don't know, my gut tells me there is more to come. Here are the thoughts of another guy I consider very smart (i.e. has proven himself over at least two decades or longer)

The Pain of Deleveraging Will Be Deep and Wide
Felix Zulauf, Founder, Zulauf Asset Management
By LAWRENCE C. STRAUSS
AN INTERVIEW WITH FELIX ZULAUF: A bleak long-term view on stocks.

AS THE CREDIT CRISIS INTENSIFIED LAST WEEK, radically altering the Wall Street landscape and the government's role in stabilizing the financial system, Barron's sought out Switzerland-based Felix Zulauf for a global macro perspective. A longtime member of Barron's Roundtable, the founder of Zulauf Asset Management is now equity-averse -- he prefers gold and government bonds -- but further out, sees untapped growth potential in emerging-markets.

continued at-> http://tinyurl.com/45e5xl

Was just finally reading Bill's weekend recap, he called the top on bonds Thurs.

I don't trade bonds or any fixed interest stuff, just study them. But I have worried at times, what if the US does go into a Japan-like 0 interest rate lock-down - for years? Or conceivably even negative interest rates on treasuries, in a meltdown? Where would that "top" be in such a situation?

Selling bonds at the top on Thurs. probably took some real balls.

By the way, IRX was up something like 1200% on Friday. Have never thought to check if there are options on that.

ALOHA !!

pappdjavul ... Which FIAT system has been successful at keeping a cap at 2%? Wasn't that what the EU was based on ... an INFLATION CAP? So the Europeans are just as gullible it seems ... The Germans are not convinced on the EURO and they have a long history of spotting monetary fraud!

It wasn't just the Swedish Kings that had a monopoly on debasing but the Romans and English and French as well! Shave a little off here and there and instant inflation! Yet as medieval as the Swedish Kings were they never bought the "FAITH AND CREDIT" and paper IOUs con job! We did though ...

FIAT is essentially a BLANK CHECK and human nature dictates that if you can reproduce money at will that BLANK CHECK will be written for as many zeros as the check can hold! Modern governments seem to believe that all you have to do is print money and the resulting DEBTS do not need to be repaid. Not only that modern governments believe it is prudent to promise a craddle-to-the-grave safety net paid for by those who will need that net in their old age, yet "borrow" from that Fund until there is in reality no safety net left rxcept printing IOUs to repay IOUs. Who will repay those "borrowed" Trust Funds once redemptions come due? Those redemptions are now killing the US Banks and the Hedge Funds, so why would the US government escape unharmed? That is just not sound financial policy. If you tried not paying your DEBTS what would happen? Yet governments have a cart blanche! This is not true and we are seeing this carte blanche unwinding. The monetary crisis this will produce will not be felt immediately, but it will begin within the next 12-18 months and be felt for generations to come, because there is no paying DEBT there is only printing more so you can roll that DEBT over, so long as the minimum interest payments are paid technically there is no default. Now if the US Sovereign Rating is lowered then the interest rate on US DEBT will rise and of course so will the DEBT! The debt ceiling for the National Debt in America was just raised by $700bil USD in one day to $11.315trilUSD. This does not count the unfunded liabilities in Social Security and Medicare or the supplemental and off balance sheet costs for the WAR ON TERROR. Just two of those liabilities exceed $100tril USD now ... Where's the 2% cap and better yet where's the future deflation? When have these guys ever "deflated"?

ON HAWAII
Yep, we had sea shells and "feathers" as currency, yet even with that there was no default because ancient Hawaiians could not reproduce sea shells or feathers with a MOUSE click! Essentially it was a commodity based currency not one based on FAITH AND CREDIT! The Hawaiian Alii didn't see paper until Capt Cook came along.

I actually believe the global currencies which are tied to countries with vast commodities will be the ultimate winners in the FIAT GAME. Just like the ancient Hawaiians cherished their commodity backed currency. Government promises will end up as empty as their IOUs which will have to be reflected in their money's value.

Yes ... come to HAWAII and I will show you my semi-private black sand beach full of sea shells! HA!! Hummmmm ... yeah, hey, I would be okay with a sea shell based currency!!

GOVERNMENT IS ONLY AS HONEST AS ITS SEA SHELLS!

I wrote earlier that the major indices were down for the week. I was partially wrong.

I was looking at SPY, DIA & QQQQ - not the cash indices.

The cash INDU was actually down like the DIA.

But there was a divergence - the cash SPX & COMPX were actually up slightly for the week, while the SPY & QQQQ were down.

In intraday trading that would usually be a bearish signal.

kaimu -

Of course in any financial system if the leadership strays from the straight & narrow bad things are going to happen.

Sweden is fairly well run now probably because in the early nineties we had a bank crash (speculation in commercial real estate) and currency crisis, with a devaluation of the SEK by some 20% as a result. That's not so long ago so everyone still has that in fresh memory.

It's when the elite gets greedy, like when they want to fight expensive wars, that they start thinking up all sorts of creative financing:

Why Sweden's Central Banker was Beheaded - 1719
http://www.financialsense.com/fsu/editorials/tustain/2004/0109.html

Sweden in the 17th century was not the peaceable country of today. Enjoying the best metalworking and gunmaking technology of the day the Swedes were the military masters of northern Europe. There were frequent wars against Russia, Denmark, Poland or Germany. They were expensive too.
. . .

The Swedes were running on empty as regards precious metal, but they were still a mighty military force, and these copper coins were further issued in large numbers by Gustavus II in 1625 to finance yet another war (successful) against the reputedly vengeful and expansionist Ferdinand II of Germany who was on a mission to impose his version of Rome’s will on the protestant north.
But now the military debts of the Swedish state combined disastrously with a substantially overvalued copper coinage, and a legislative structure designed for commodity money which meant that there was no limit on the amount of money in circulation. It launched Sweden into an absurd copper currency system. Mined copper was minted to achieve its overvalued status, and promptly sunk the money to its commodity production cost, which in a country rich in copper mines was small. The savings of the population – one of the few European peoples not to have been oppressed under serfdom – were wiped out.

. . .

It eventually fell to Baron George Heinrich de Goertz to offer his services as central banker and sort out the mess.

He minted a new representative currency in copper, validated with the kings head and a legal tender face value of a “daler” – the original dollar. He did not limit the issue, nor ensure the quality of the coins which were beneath the technical capabilities of the day. Moreover he attempted this exercise on behalf of an administration which had lost virtually all financial credibility with its population, and he then compounded the error by allowing to develop a widely held belief that at some unspecified time in the future tax collectors would refuse the coins as legal tender payment of dues. His currency became detested and soon sloshed around the Swedish economy depreciating rapidly.

Goertz had been a successful minister in other areas of government and he never profited from the debacle, but he was still blamed for the financial misery and the associated irreversible decline in Swedish power.

He was eventually charged with "ruining public credit with imaginary money." He put up a brave and articulate defense - on his own behalf because he was denied counsel. It was not enough. He was the modern world's first central banker to be beheaded, on March 3rd 1719, and the punishment was generally popular.

First post by someone that has considered this the best single source of unbiased financial information for some time. First comment has to be Bill Cara- thank you, thank you, thank you. You are truly special.
My question for the group may have been addressed here but I haven't seen it. In these extraordinary times when the gov't is doing whatever if damn well pleases, what is to stop them from calling in the gold like FDR did in 1933? Friday AM on CNBC a guy said part of what Paulson did was enabled by that law which is still on the books.

re: TOG

Interested in how the community plans to play this opportunity (sell bonds, buy gold). All of the recent interventions seem to justify this trade...

Specifically,

1. How do you all think manipulation can influence the POG here? Seems like the ammo should be running low with the projected "bailouts".

2. If you believe in this trade, how do you plan to execute it? e.g. 10-20% physical bullion, 30% cash, 10% DGP, 20% mining stocks, 30% short bonds TBT or whatever.

3. What are the possible vehicles for the trade with pros/cons (GLD, SLV, GDX, DGP, TBT, futures, options, etc)

4. If this plays out, it could be huge. Just wanted to poll you all for your thoughts and ideas...

5. Thank you Bill for your time and insight. This blog has made a very difficult time bearable in so many ways...

Regards,
MCM

Hulgar,
Wouldn't put it past them. If you want to take my life for example, I have worked my ass off since the age of 15 (starting at $3.65/hr), lived beneath my means, am and have been debt free, and have accumulated what I thought was close to enough to make me feel secure. What do I have to look forward to? Higher taxes to "bail out" the stupid, selfish, and greedy. If gold is confiscated, you will find me on a boat to Cuba or in the bed of a pickup truck on the way to Mexico...
MCM

re: gold confiscation
Of course, the easiest way to do it would be through the derivatives (SLV, GLD, DGP etc). BUyer beware. Refer to Kaimu's posts on the matter...
MCM

MCM- I believe what Kaimu says after watching the ETF's trade, or more accurately not trade in SKF's situation, on Friday. I have been accumulating a small amount of gold, but I wonder what will happen if we get hyperinflation. I don't doubt for a second they will call it in if it is to their advantage.

rgr, thank you for that link to ""The Real Reason for the Global Financial Crisis…the Story No One’s Talking About"

BTW, does anyone know how these $0.7T solves the credit default swap issue? Don't see anything to address this. $0.7T won't make a dent on that.

"Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Are you folks marching on the Capital already?

Kaimu - Here's the head of the Fed Rsrv Bank of Dallas http://intelstrike.com/?p=263, telling us what the U.S. unfunded liabilities are $99T, not including gov debt. I share your deep concern that the U.S. is heading for a day of reconing!

"And I want to thank you, Mr. Secretary, for working over the weekend.
[LOL!!!]
You've shown the country and the world that the United States is on top of
the situation. Secondly, you've reaffirmed the fact that our financial institutions
are strong and that our capital markets are functioning efficiently and
effectively." - George Bush 3/17/2008

"Trust in Me" - Kaa, some years ago

2nd_AVE
How much time did it take to put together all those past responses.It is good to see yours and the other traders live trades. I think that more can be learned from that then anything and of coarse you have a record for yourself. i will try to real time my trades in the future which might be a great opportunity for the rest of you to get a contrary indicator and make a bundle taking the other side.

I feel there is much more financial turmoil brewing and these toxic loans are going to backdoor the US equity market. I think the catalyst will be when a large foreign bank bites it. I predict A great britan bank because they had a huge housing bubble also and I am sure G.S. exported there financing shenanigans there. Then the Dominoes could start falling everywhere.

Confiscating gold or silver via the ETF's isn't going to work to well because the SKF for example is nothing but a paper play. In the case of SLV anyway they have the actual silver in vaults
https://ebts.jpmorgan.com/ebtsWebMod/ebts_downloads/BONYBARLIST.PDF
so it isn't going to be easy without starting a worldwide revolution in my opinion. If anyone is worried then maybe they should buy the Central Fund of Canada because it will be a cold day in hell before our government here screws its own resource sector by pulling a fast one. Meanwhile I agree that EVERYONE should go to their coin dealers in their neighborhoods and collect as much as possible of gold and silver. I would also make sure you have a gun to protect your wealth, not from street thieves but, from the government. Live Free with Gold or Die

bobbyo- it actually didn't take that long; someone here posted the "Ctrl F" shortcut to locating posts...should be even simpler once that function is automated with the new software program bill plans to install..

btw, i should also mention that i cashed out all ETF holdings friday (vinod also, although he may still be holding a position in TBT) due to concerns about liquidity...on top of that, i'm skeptical that a 1000 point move in the DJIA is sustainable...

i would have tried opening a position in SKF near the close except for the liquidity issue...

"toxic assets"

although we all know face value is a joke, there is in fact an underlying value to the assets...at some point (in time, as well as price), they will become attractive...i would be looking to buy into a company/mutual fund/ETF bidding on CDOs at the right price...who knows, it could become a hot sector at some point in time...;)

ST07 - Coxe

Thanks for pointing out his fund, which has also found the market challenging!

A couple questions on gold...

I missed when Bill Cara went positive on gold. Does anyone recall when that was? I recall an article on Seeking Alpha on maybe the 11th where he was positive on GG figuring even if it dropped more it was a good price, or something to that effect, but didn't notice his comment giving gold a green light. Not trying to be picky, but rather trying to look in hindsight to see what I missed at the time so next time I don't make the mistake of missing it.

My 2nd question is since I missed the boat, and they are raising margins, which usually at least temporarily hurts the price, should I wait for a pullback to buy, scale in, or what method would you suggest?

In general, for obvious reasons, I don't trust the dollar to hold value, but tend to get shaken out when positions go red by very much, always managing to buy at the highest highs and sell at the lowest lows. Even when I manage to buy the lows, I seem to sell for a smallish profit only to watch things rocket up immediately after I sell.

Help or suggestions would be appreciated....

ThriftyBob,
What your lacking is conviction. At the moment I have the same problem. When you have this affliction you do the poor trading that you described. I believe most traders would tell you that you need have a plan before you enter a trade and you need to follow it without being swayed by all the market noise. There is a lot of methods that could help you take your emotion out of trading. You mentioned scaling in which can really work. You could scale in by averaging down, but you might miss a run up if we are actually on a bottom. You could scale in by time. By gold the next 4 tuesdays at the same time no matter the price. ect Use some technical entry. RSI 30? What ever you try you should no what you are willing to lose and put a stop loss order on that.Don't panic early. If it goes up you can scale out of the position so you can take profit early and still have some in if it Rockets. I believe Bill is recommending Gold if you have a 18 month time horizon. Before investing in gold which will have extreme volitility right now you might want to practice trading with a low beta stock that will not have extreme spikes up and down.
Have faith,
Bob

ALOHA !!

With all the firings on Wall Street and the shaky outlook it seems the Wall Street Journal is in trouble.

Today I got an e-mail from them advertising 80% off to subscribe for $99 per year, a $450 savings off the regular price! What would that say about Wall Street and US stock market sentiment and the "C WORD" if the Wall Street Journal went under? Maybe its all the angry foreigners canceling their subscriptions? Or is it all the Warren Buffet wanna-bes that have capitulated due to emotional and financial attrition? Hummmm??? Will the Wall Street Journal need a bailout too?

ALOHA !!

2nd ... I have been making the point that housing in the USA will not make a grand resurgence due to demographics and the unwinding of America. Some 70mil baby-boomers are retiring and they want to unload real estate and other assets such as stocks, so they are not buying more! If they are buying at all they are buying a lot less! What 20-30 something has plans to buy a 4-5 bedroom "Father Knows Best" house in the distant suburbs?

The other factor that's killing the suburb concept is commuting and the cost to do that. Oil is down but gas prices aren't back to $1 ... Living closer to the bigger cities where most of the jobs are will be more desirable in terms of cost savings and family budgets, but less desirable in other ways.

Ask the 20-30 somethings whats tops on their list? Most of the ones I know are either still living at home because they don't have a decent paying job or they're renting with their pals because they can't afford a house or they think its the wrong time to buy! I only know one out of twenty that could put up a down payment of 10% on a home with cash he actually worked and saved for. Most of them have a great looking Honda car with an awesome sound system but that's about all asset wise ... How low would housing prices have to go so that the average McDonald's worker or retailer or truck driver or government worker could afford a house comfortably along with the basics of food and clothing and utilities?

The other side would be to raise wages. The US CONgress has already done that with minimum wage, but that's not an across the board wage increase. Some sectors like construction and financials are seeing wage deflation due to the tremendous loss of jobs in their sectors. I currently have a construction crew working out here at the nursery and when the boom was going I couldn't find any contractors or workers because they were all too busy and if they could pull off a job or had some spare time they were crazy expensive. I waited ... Now I have them calling me for a change and talking much less in bids and wages! I know the construction biz ... I was in it many decades ... and I would not want to be bidding public works now! I can picture the once steady "goat ropers"(electrical contractors that specialize in residential running romex) moving into public works. Its sink or swim and I'll learn how to bend EMT before I sink! Those "bid walks" must really be packed these days since the government is the only one with cash these days!

I think we would need a well-heeled foreign invasion(legal or illegal)to pick up the natural selling cycle of the baby-boomers! I think Paulson just announced to the foreigners this week that the USA is no longer the land of opportunity it once was! More regulation and money printing is not the answer most foreigners were hoping for! With that I am sure the foreigners, especially the Asians are in buyer beware mode! Those experts running those Sovereign Wealth Funds got burned badly buying USA assets(if you can call US banks an asset)and Union Oil is not up for sale ...

This adds to the concept of an EMPIRE unwinding not recovering.

Yes, bobbyo, that is exactly what I had done, and what happened. My stop loss price was hit and I exited with a loss when it went sub $740 on the futures. I entered the sell order and within a few minutes it was recovering, and that was the bottom.

It was a very sad day to say the least.

And yes, I have lost *ALL* faith in my ability to trade at this point. I'm basically doing a post mortem trying to figure out how I can improve, since I see no possible way I can do much worse than I have been lately.

My problem is fear. Fear of everything. Its a terrible fate.

Kaimu, the WSJ has been doing the $99 offer since the sale to Murdoch, possibly longer.

thriftybob,

For what it's worth, you're not the only one. I, too, missed Bill's Goldcorp call - mostly because I wasn't really paying attention to what he was saying closely enough.

Am kicking myself as I then proceeded to watch it rise from the mid 26's to 32ish, all the while waiting for it to pull back to the low 25's (as if it was gonna do it just for me!)

It's a very surreal feeling: having the means, the will, and the trust in Bill that he's not going to steer anyone wrong on this board, yet somehow disbelieving someone would actually hand me a trade on a silver platter like that. Kind of like deer-in-the-headlights type of thing. And it's not the first time for me. Same thing happened earlier in the year with the WMT call @ approx $40. And the Dumping of XOM in the $90's.

But the worst one has got to be Bill's Brunswick call. I mean I am a total newbie but even I could see that there was NO WAY oil was gonna go much past $149 - consumers would just not be able to take it anymore, the whole "killing off the plankton" thing. And here was bill saying (paraphrasing here) 'hey, man these guys are solid and it's getting pretty damn low here at $10. If it dips into the $9's yer gonna wanna take a bite'. And I'm saying to myself, yeah, that sounds right. But all the while I'm thinking what if we're really at Peak Oil here, and it's not HB&B juicing the futures to save their asses from the crappy paper their holding. Oil could go higher, right? So I do nothing. About a week later there it is @ 14 bucks. 50% man. I thought I was gonna throw up.

I'm learning it's really about position sizing and scaling in/out to cover your bases. Break it down. Baby steps are confidence builders.

It's a lot to take in, I know. I'm still very much stumbling around. But most folks on this board are here to help each other if they can.

This is tough 'cuz yer human. Fear and Greed are a real bitch.

Didn't mean to ramble on like that, kinda got carried away.

Cheers,

Thrifty bob, I know your pain. Many of my sells were exact bottoms. No worse feeling in the world really. I think you need to listen to Bill.And make small trades until you get your confidence back. If your not confident you shouldn't be trading.

ALOHA !!

Saturday, September 20, 2008

Risky Business

"The fact is, the markets work, and they are working. And people - some of the big companies obviously - have taken risks. Risk means risk. And there's an upside as well as a downside in some of the choices they've made. We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy. We don't want to interfere with the basic, fundamental working of the markets."

Dick Cheney 11/26/07

posted by The Cunning Realist

ALOHA !!

killer whale ... I have never subscribed to the WALL STREET JOURNAL and yet I get an e-mail out of the blue for the first time in my life at an orchid nursery e-mail address.

They must be expanding their advertising to farmers now! Or am I on some billion e-mail list they bought?

Mojo,

Good advice, One thing i learned is not to regret missing trades, because there is always another train coming around the bend. Of coarse last Thursday afternoon and the friday gap up may not happen for awhile. Here is what happen to me. I saw that Gasparino story on Cnbc about the bailout. I ran to my computer and put a position on Goldman sacs. It went up 10% in about 10 minutes i sold. Dummy Dummy Dummy. i have been watching this sight for a few months. i have only posted about ten times. About 7 of those posts was whinning about how the whole world is fixed for Goldman Sacs. Then when I see the Fix is in I don't have the conviction to see it all the way through. What a chicken, but there will be another train coming around the bend.
Bob

ALOHA !!

Here it is ... THE GREED FLOW CHART ... in all its glory!!

Link: http://tinyurl.com/233pfv

ALOHA !!

ON SHAKEOUT.ORG
This was brought to my attention by some friends of mine who live in Southern California.

On November 13, 2008 there will be a massive earthquake drill that will involve more than 3.5 million people in Southern California.

Here is a link to the computer model of a massive 7.8 earthquake in Southern California.

Link: http://tinyurl.com/4glngy
(there is no audio)

Go to SHAKEOUT.ORG to read about the massive earthquake drill and more about USGS and Dr. Lucy Jones and their predictions.

I have lived in Southern California and I was in the Simi Valley quake in 1968. Then I was in the Loma Prieta quake in San Francisco as well. All the time I have lived in California the scientists have been predicting the BIG ONE! I find it interesting that the public has really taken an interest in this stuff right now.

Anybody here live in Southern California and is taking part in this earthquake drill? My friends who told me about it live in Indio, CA and 29 Palms,CA and they said there was a meeting with Dr. Lucy Jones there at the school and it was packed out full of attendees. Is it that urgent now?

ALOHA !!

This is what our current US Tresury Sec., Henry Paulson, said about the ENRON crash. Back then he was CEO of Goldman Sachs.

“We've all got to work to restore business confidence...but I believe that longer term we may look at Enron as being a positive as opposed to a negative. It may lead to greater transparency.”

Henry Paulson quote

Greater transparency has never been achieved by Wall Street or the US government. One of the main obstacles to greater transparency is the US FED! Given the corrupt nature of our money these entities can never allow transparency to flourish! Go figure Hank!

Special Report:

The ungodly evolution of credit.

http://tinyurl.com/4uhvjc

2nd, c3,

I usually agree that we should give individuals the benefit of the doubt. I did so with Bush on Iraq, thinking a president must have info he cannot reveal.

• With the subprime mess the handwriting on the wall had been pointed out years before.
• The Sec of Treas is a Wall St. product and loyal supporter.
• There are enough conflicts of interest here to justify a revolution.
• The lies, ignoring of fraud and incompetence and pathetic assurances are so blatant it insults our intelligence.
• The complexity of these derivatives is no accident, but a carefully constructed, long term scheme to plunder the financial markets and anyone dumb enough to buy them should at the very least lose his net worth.

I'm sure they are not like me and doubt they are like you.

The repeal of the Glass-Steagal act may be one of the catalysts of our current situation. Consider why congress and the senate would repeal this act and in who's best interest they were acting. Here is the wikipedia link Glass-Steagall Act:

http://tinyurl.com/52fu7m

We, as citizens, cannot expect to be respected by those elected and appointed in Washington D.C. so long as we continue to re-elect them despite their corruption.

We must first change our own actions before we can expect change elsewhere.

Kaimu - Baby Boomers - “... some 70mil baby-boomers are retiring and they want to unload real estate and other assets such as stocks ...”

I have posted this before but I guess it bears repetition. “Baby Boomers” refers to all babies who were born between 1946 and 1964. That’s an 18year period.

Retirement age is now 67 for BB’s; so any and earliest surge in retirement might be around the year 2013, five years from now, and would stretch out until 2031, twenty-three years from now.

Given the loss of savings, the inflation rate, and weak or no pension plans, I question whether there will be any surge at all.

Then too, let’s not forget that many babies who were born to “Baby Boomers”, an even bigger surge, will have their day at some point during that 23 year period and more - one surge will offset the other’s declining purchases by a large margin..

When I read comments such as yours about some supposed changes that retirements of Baby Boomers will bring about in 2013, if at all, I cannot help thinking that continuing, insidious efforts of Gov to inculcate acceptance for the coming denial of Medicare and Social Security benefits through its fear mongering of specious claims has been very effective, but needs to be shown for what it is.

Please rethink your opinion in this case. I agree strongly with most else that you have said.

I am one PISSED OFF trader and possibly soon to be X- TRADER!

Based on this article posted below from today's New York's Post, I WAS ONLY 500 Trades from reaping the mother load. Bigger than what I had ever planned when setting up the trade.

But the big investments houses and their clients were tipped off early. Paulson [that SOB] tipped them off in advance. Note this excerpt from the end of the article.

"The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market

Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday.

By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown."

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ALMOST ARMAGEDDON
MARKETS WERE 500 TRADES FROM A MELTDOWN

September 21, 2008 --

The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.

Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor.

According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value.

The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.

While many depositors treat money market accounts as fancy savings accounts, they are different. Banks buy a variety of short-term debt, including commercial paper, with the assets. It is an important distinction because banks use the $1.7 trillion commercial-paper market to fund their credit card operations and car finance companies use it to move autos.

Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," Paul Schott Stevens, of the Investment Company Institute, told the Wall Street Journal.

Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. It had purchased what it thought was safe Lehman bonds, never dreaming they could default - which they did 24 hours earlier when the 158-year-old investment bank filed Chapter 11.

By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals.

Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion by Wednesday, Lou Crandall, chief economist at Wrighton ICAP, told The Journal.

And for good reason. By the close of business on Wednesday, $144.5 billion - a record - had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services.

By Thursday, that level, fed by the incredible volume of sell orders pouring in from institutional investors like pension funds and sovereign funds, had grown to $100 billion. It was still not enough to stem the tidal wave.

The banks knew something drastic had to be done. So did Paulson.

The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market.

Paulson knew the $105 billion injection was not a real solution. A broader, more radical answer was needed.

Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday.

By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown.

[http://tinyurl.com/4jwwga]

re:DJIA.

looking at the DJIA:$vix on stockcharts.com. On Wed. Sept 17, it made a lower low than all the other 2008 crisises (sp)(Sogen, BSC, LEH/MER). BUT MACD did not diverge. The pattern in the past 30-60 days appears to be panic low, sharp rally for a couple days, then retest the low. I believe that low will be retested and fail but the MACD will diverge and set up both a tradeable/strong bottom.

$naa50r shows a similar situation. In the past 3 years, the real strong bottoms were made when this indicator was below 20. The Sogen crisis was actually lower in Jan than now.

On the flip side, lot of my RSI screens are showing buys but my indicators are not showing a bunch of upside here between now and next options expiration in October.

Trade carefully, use correct position size, watch entry/exit prices.

GL

Grym - Mortgages

Some discussion of the slicing and dicing...

Betting on Financial Armageddon, John Mauldin:
http://tinyurl.com/3tnucg

Running my screen of Cara 100 stocks and looking at the buys.

Most potential
GOL
TTM
ABV
NOK
GRMN

GL

Paulson’s done it now (as if he hasn’t already). At least one interpretation of Paulson’s plan, based on the Treasury Fact Sheet allows for Paulson to bailout all foreign gov’s and banks at will.

Wonder if those Govs and foreign banks that are run by Goldman alumni have preference? I really liked this chilling comment on Calculated Risk by someone tagged Comrade Short Bucky:

" One bank to rule them all;
One bank to bind them... "

Read more at link, especially the last sentence:
http://tinyurl.com/5yaeqp

Under questioning on ABC's morning show, Sen. Dodd and Rep. Bohmer refused to characterize what Paulson told them Thursday night about the severity of the crisis.

These bozos want the US taxpayer to put up $1.3T or more without telling us the key reason why. To hell with them.

http://tinyurl.com/4lv6xj

Includes sites to write your representatives.

Write your Congressman and Senators immediately. Turning over the entire bailout to ONE MAN with no oversight and EXTENDING the bailout to foreign institutions and govts PAID FOR BY THE AMERICAN TAXPAYER is unacceptable.

The gun to the head bum's rush into chaos cannot happen.

Bill adapts to the new realities of the market with ease and speed. It is remarkable that he is willing to share his time, years of experience and hard work with us. I would be interested to know if he thinks the TOG has been postponed or if it will happen as a part of the new bull market (excepting banks). Bill, if I make it to the Bahamas, dinner and drinks will be on me at the restaurant of your choice.

Bill

I am amazed! That kindergarten class which is being exposed to your writings must be precocious to the nth degree and/or that teacher must have extraordinary skills for bringing difficult understanding to her level of kinder. Protect her name at all costs from the local school board!
......................................................
OT -
Like you, I remember and traded/invested in stocks (but on a very small level) during the years between 1973 and 1982. I sincerely hope that we do not go through the worst of those times, again. My perspective as an American might likely be different from yours as a Canadian, but I most remember the CONSTANT media grind of negativity among Americans about themselves and about their members of government during that time.

At the end, although President Reagan might not have been our best President in many respects, he did bring about a glimmer of positivity and humor that helped to change the “doom and gloom” feelings that prevailed during the time and helped a rebound finally occur (no political party endorsement intended nor defended).
.............................

Recently, I read that a rumor has circulated some trading desks that all this financial distress and destruction of the free market process is being brought about in order that Pres Bush will be able to “suspend indefinitely” the next election. I certainly hope that that rumor is baseless, but at the same time, it sure seems to me that all this determined effort to push forward some very questionable governmental policy changes by otherwise respectably intelligent persons MUST have some underlying reasonable basis - whether we like the basis, or not.

If I remember correctly, it only took about a 6% minority of Russian population to change their form of Gov from the Tsar to Bolshevik (Communist). Americans are prone to allowing minorities make changes in Gov - not to say that all such changes were good/bad - but if this country’s elite, rich intend to do away with the US as it was created (the “Constitution is just a piece of paper...”), then the majority had better get busy NOW!

Thanks Bill for all you say and do.

TOG and Back to the Future- so it seems a little anxiety dissipated with last thursday's sell-off and now we have two trade set-ups-> TOG2008 and a repeat of (may as well call it) TOG1974 (which i believe ended with TOG1981, which was to buy 'risk-free' bonds yielding 18%)...

everything below is cut-and-paste for future reference- reminds me of sitting in a lecture hall taking notes on a China tour, except here we're talking about a trip through financial terrain...

i think trading gets easier, more fun, and highly profitable from here...appreciate the potential buys posted by bsi87...

US Indexes:

"the 2007-2008 Bear market is over. You probably also won’t agree with my opinion that the next few years will be much like the period from 1974 through mid-1982."

"..please don’t ask me to justify the Bull on the basis of economics or corporate fundamentals. Markets are prices, and sometimes prices don’t operate the way one might expect. In 1974, only two people in a hall full of technical analysts called the bottom of the 1973-74 Bear – it was an awesome Bear. Those people were Ian Notley and Joe Granville."

"What is happening at this point, particularly Friday (announcement day) and mid-day Thursday (point of agreement within the White House, whereupon everybody involved ran for the phones to call their broker), is stupendous. Frankly there are no words to describe it. This is history. And my point is that, having been in the trenches I know the mind-set: In for a dime; in for a dollar. Paulson cannot afford to fail. The $USD is cooked, unfortunately. The new Bull has started.
We won’t have much of a Bull without the Financials and the Consumer Discretionaries, but like the end of the Bears in 1974 and 1978, which the last time the market encountered stagflation, we’ll muddle through it, probably hitting DJIA=15000 sometime in 2011."

Financials/(Consumer Discretionaries+/-Oil):

"I continue to believe the equity market will split the financials from the non-financials, where the non-financials started a new Bull market on Thursday afternoon, but where the financial stocks will only rally for a time before falling again to test the sector bottom."

"The 2002-2007 Bull market is believed (by almost all people) to have started in 4Q02, but after an initial rally in the Financials (XLF), the sector failed and returned in the 1Q03 to re-test the previous low. Only in the second up-leg of the Bull market did the Financials catch fire.
What I am saying in the paragraph above is that I believe there will be a repeat of the 2002-2003 cycle bottom process with XLF.

Moreover, because inflation is so much higher and consumers much less well off at this point than they were in 4Q02, I also think that the Consumer Discretionary sector (XLY) will lag as well. However, those stocks in the Consumer Discretionaries that are most affected by oil prices, like the airlines and cruise lines, will lift first as fuel costs drop and fuel surcharges are better accepted in the future, which I expect."

Bonds:

"Bond prices peaked late in the day Thursday. I belive they are headed south from here."

"As I opined two weeks ago, “The bail-out of Fannie and Freddie (and other Financials) will now likely push rates higher in order to save the $USD from cratering.” There was a mid-week safe-haven move into bonds, which crushed yields, but by the end of the week, with Paulson’s cards on the table, the yields were soaring.

The thing is, Paulson is fooling nobody at this point. These people are desperate. However, my earlier point is that all central banks are now in lock-step, so I think capital will come out of bonds and move into equities, for purposes of seeking capital growth and avoiding the high inflation levels of the times."

Oil:

"Yes, ultimately I do feel that Crude Oil will drop to the 80-85/bbl level, which is still a rather large pull-back if it happens; but I’m certainly not negative on the shares of the high quality Oil & Gas industry companies, which I believe will lead the commodity price turn-around – as they usually do."

Gold:

stay tuned (LOL)...this is the one market where in spite of knowing where it's going, no one has a clue how it gets there...

Emerging Markets:

"The biggest winners will be BRIC – Brazil, Russia, India and China, I think. So, watch the Cara 100 companies that are non-Financial and non-oil related Consumer Discretionary in those markets.

"Some of you will disregard my advice because you will hear from others that the rally that started mid-day Thursday was merely short-covering. Yes, there was short covering, but I totally disagree that's all the market is about at this point. Short covering did not send these international markets on moon-shots. In fact, looking at a list of some of the best performers in NY, many had negligible shorts to cover."

"Traders can look at the glass as half full or half empty. That’s why there is a buyer and a seller. Presently, there is an overwhelming sense of emptiness, but at mid-day Thursday, I switched to the Bull camp. But it won’t take long to see if the traders in these international markets agree with me."

Closing point:

"Anyway, you have my view. People didn't like it when I was bearish; now I am sure to be criticized because I turned bullish. Remember, bullish or bearish is only a state of mind. If you get it right, your strategies and tactics are easier to employ. In a Bull, you hold longer. You expect to see a pattern of higher highs and higher lows. But, in any case, you stay vigilant."

should correctly attribute all of the above cut-and-pastes to bill's 9/21/08 WIR...

check out the changes in the NYSE Bullish % Index last week:

http://tinyurl.com/5nxymn

I would think after a 700-pt runup, there might be some profit-taking here. But, given the state of these freestricted markets, any dips will likely be bought over the next 2 weeks. Downside seems limited given Gov't backstopping and protection of the Fin'l sector.

Isn't a Section 8 in the military a dishonorable discharge?

Shouldn't Paulson's proposed Section 8 be used as such to justify his dishonorable discharge!

Dan

Listen again to this old man in the light of recent events. He was 100% spot on.
http://www.youtube.com/watch?v=kJ4SSvVbhLw&feature=related

The discourse over the last two and a half days have been the best and I do appreciate the many links to the Bearish position that I took up and the Bullish position Bill has taken (most invigorating). Now Bill told us he was on the beach so I assume he was under the influence of a "sunstroke" when He wrote it. So it is once again a sunny day here in Toronto and I am going out to get sunstroke too as this may be the only way for me to read the WIR (I have not read it yet - just 2nd's summary; thanks 2nd). Later tonight I will write up some (just a few) thoughts. (lol). [054]

Why can't post? I have before.

Group

I am trying to post an important update from

Mike Morgan's Quick Notes
- Behind Enemy Lines -

but the system is putting a hold on it. I will try one more time.

sorry guys.... Mr Cara has put a hold on me.

WSJ has a daily update of MoneyFlows for "selling into strength: and for "buying into weakness". In light of Bill's bullish prognostication, it seems to me that a place to look for bullish moves might be the "buying into weakness" listings and especially those for which there were strong "block" moves.

Some of these are Cara listings. Discussion?
http://tinyurl.com/25k5fn

EXECS CRASH & EARN
LEHMAN 'ELITE' TO GET BIG CUT OF $2.5B PAY POT

Top executives at Lehman Brothers' New York office, who were at the helm during history's largest corporate bankruptcy, have been guaranteed the lion's share of a $2.5 billion bonus pot.

Lehman had "walled off" the fund, telling buyer Barclays Capital that it couldn't use the money for anything but severance payments or bonuses.

The platinum payout will go to executives who rode the collapse of the nation's fourth-largest investment bank. In the past year, the company's stock price dropped from $68 a share to as low as 21 cents, and since June 2007, the bank has laid off 6,000 workers

Israel.........

Tel Aviv suspended trading Sunday when stocks soared past 8 percent

re:BA

Max pain for Oct is 65/70 for Nov. I'm gonna stick in a buy limit for about 56 for the open, see if I can catch a retracement.

re:ABV

buy limit 49.80 showing max pain 75 in Oct.

These orders will be cancelled if not executed by 10:30 AM EDT.

Do ur own homework.

bsi87,

Great trades on GS/MS on Thursday! Regarding your post on Friday about going long on FXP/SKF, I wonder what is your take now?

I think that given a 700+ points run, it might still be a pullback, yet if I understand Bill's WIR correctly, it seems this bull run will continue in the next two weeks. Although a pullback is inevitable, are you still confident that it will come next Monday or Tuesday?

Thanks.

Just read the week in review. Couldn't stop once I started reading it. Catch a bunch of good fish Bill and start that 2nd book soon.

here is a passage i came across from Jame Collin's
"The french revolution"

ominous doesnt begin to describe it:

"by the 1780's, the goverment of france staggered from policy to policy and its support for the american revolutionary wars brought the state on the verge of bankrupcy. this new debt added to existing debts from the 7 years war.

by 1786 the government did not know where to turn for more money, because its traditional lenders, fearful of an imminent bankruptcy became unwilling to purchase more government paper.

reform became the order of the day, but the parliment of paris rejected many of the king's reforms which he forced through regardless, the king's cousin the duke of orleans told King Louis XVI "it is illegal", to which the king replied "i want it, so it is legal"."

NYT: "Meanwhile, a key banking industry trade group called for key refinements to the Treasury rescue plan, such as temporarily suspending mark-to-market accounting rules for all mortgage-related assets. "

Bill,

That is a very disturbing commentary including the following:

~~~~~~~~~~~~~~~~~~~~~~~~~~
Sec. 8. Review. Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
~~~~~~~~~~~~~~~~~~~~~~~~~~~

My first question is — Who is Kim?

Second — Where did this info come from?

I have no problem with each of us writing in opposition to any such action — it is clearly unconstitutional, but having written scores of letters on economic policies and issues since 1993, I see no hope of the letters making any difference, or in fact, ever being read by a legislator.

BB,

I hate IE and it crashed. I wrote a lengthy answer. The Readers' Digest version is:

1) there are divergences that make me want to be long SKF and FXP short term.

2) my bond RSI scans showed sells on 9/16 (would have shown on morning of 9/17) but with everything going on, I didn't look at it. (PS HYG shows a buy but I'd wait for a retracement).

3) my SP 500 earnings yield vs corporate bond yield model showed a switch back to equities about 2 weeks ago. It's not a great timer, more about asset allocation.

4)The $djia:$vix did not show a real rejection of the recent low and the MACD did not diverge.

Everyone should trade according to their time frames/risk tolerance/indicators and not worry whether their views conform to others' viewpoints.

The entire bill along with pertinent commentary may be viewed here.

http://market-ticker.denninger.net/

Ron

bsi87,

Thank you so much for the answer. I have been a pure fundamentalist until till I started to follow Bill's blog, and I am slowly (think in terms of crawling) learning to time market entry/exit with technical analysis.

I have bought Bill's and Vad's book and started reading it, and I deeply appreciate you and many others (2nd_ave, fatty, and many more) share your thoughts with inexperienced traders.

As for Mr. Bill Cara, I wish I could write elegant thank-you notes like many others, but all I can come up with is a simple "thank you". I wish I had found this blog years ago!

Doesn't Paulson still own about 1% of Goldman Sachs common stock? How does he not have a conflict of interest here? This guy needs to be put behind bars for life.

http://www.forbes.com/static/pvp2005/LIRVY36.html

Grym

1)My first question is — Who is Kim?

She is a memember of this group

2)Second — Where did this info come from?

From:
Mike Morgan's Quick Notes
- Behind Enemy Lines -

See original post @

Posted by: Kim at September 20, 2008 3:25 PM

eyes wide open, as power shifts

http://tinyurl.com/47zex6

Every day we are free if we live freely as ourselves.

and

Governments will shift and tumble like rain
and within the thunderstorm we are now

Everyone on this blog is intelligent, soap boxing doesnt really work and preaching is just a way to float a hot air balloon

In times of change, most people watch rather than be free to their own life. The opportunity of freedom isn't to change the larger world, but to free oneself and live well.

The real question I would ask, just to give perspective: What story would you want to tell your grandchildren later? That is the true measure of each one of us, from our own life's perspective :)

peace in your travels, I grown to respect everyone in this community and I wish you each much fortune in your own path.

I am off to wander again, looking for tales to tell grandchildren myself, not in electrons or elections but in my life itself, I wish you all much luck in that also.

The Aussies raises the stakes..AMAZING

"Australia Bans Short Selling Altogether"

http://tinyurl.com/3ole7c

Another interesting view.

excerpt: My cycle work projects that a 9-Month Cycle low is due at the end of October -- about the time a retest would take place -- and cycle forces could take us to a new price low.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

From Stockcharts.com

by Carl Swenlin of DecisionPoint

FINALLY A BOTTOM?
In my September 5 article I said that I thought is more likely that we would see a continued decline, rather than a retest of the July lows. This week the market blew out the July lows and was very near to crashing on Thursday. Then prices blasted up out of the lows in a dramatic upside reversal. There was good follow through on Friday, and now we must ponder if a significant bottom has been made.

With historic levels of fundamental turmoil in the financial markets, and unbelievable volatility in prices, it is extremely difficult to keep a level head and keep focused on technical basics. I am reminded of my flying days and the primary directives for emergency procedures.

- Maintain aircraft control (don't panic and crash for no good reason).

-Analyze the situation, and take corrective action.

I have always thought of these rules as being appropriate for handling all of life's problems, and they especially apply to the current problems in the stock market. No matter what your current situation, you can't go back and start over. You are stuck with what you've got, so do your best to work through it.

Getting back to the charts, we can see below that prices are still in a long-term declining trend channel, which currently defines the bear market. The rally is approaching a declining tops line, and it will probably penetrate that resistance and head higher, possibly to test the bear market declining tops line. The most interesting feature is the positive divergence between the PMO and the price index -- while price made a lower low, the PMO made a higher low.

http://tinyurl.com/3kr4yq

There are also positive divergences on our primary breadth and volume indicators shown on the next chart. These positive divergences are bullish.

http://tinyurl.com/444z6d

Our indicators and price action suggest strongly that we are beginning a rally that should last at least a couple of weeks. I also think that this week's deep low needs to be retested, and I am not convinced that a retest will be successful. My cycle work projects that a 9-Month Cycle low is due at the end of October -- about the time a retest would take place -- and cycle forces could take us to a new price low.

It is worth mentioning that the unprecedented avalanche of failures and bailouts is likely to get worse before it gets better, and we must wonder if a meltdown is over the horizon.

Bottom Line: While we continued to be buffeted by one crisis after another, the best thing we can do is "stay on instruments" (keep our eyes on the charts). At present, the charts say the rally is likely to continue, albeit not at the current rate of climb. At the end of the day, we are still in a bear market, and we should expect that the rally will fail before prices can break out of the major declining trend channel.

QT- GE is asking to join the no-short club:

http://tinyurl.com/4u4vqz

it's basing its request on the fact that financial services make up 45% of its overall business...

2nd

Did you see where I posted [5:34PM] Australia has banned ALL shorting.

My friend I feel like I fell into a coma Thusday and this is all a dream. Everything that is unfolding is so hard to believe. So quick.

not sure which companies represent value when sifting through the rubble? 5 mutual funds that can do it for you:

http://tinyurl.com/3rc7ck

"These are good times," said Bruce Berkowitz, manager of the bargain-minded Fairholme Fund. "This is it. It usually has paid very handsomely to be greedy when everybody else is running for the hills."

"People are running for the exits; we're going the other way," said David Winters, manager of the Wintergreen Fund. "People are willing to sell you stuff at great prices, and the prices might get even better. You can buy companies at valuations I have never seen before; I've only read about it in the history books."

"Berkowitz, Winters and their peers look to buy shares or debt of companies at a substantial discount to the managers' estimate of its true market worth -- taking advantage of what's called "impaired value."

"Winters saw this disconnect in Chesapeake Energy Corp. By his analysis, Chesapeake's assets, joint-venture relationships and potential gas reserves should be worth between $100 and $120 a share to an outside buyer. The stock, meanwhile, trades just north of $41 a share. "If you can buy something at potentially a third of transaction value, that's pretty exciting," Winters said."

"Distressed-asset buyers quote chapter and verse from the classic value investing playbook of pioneer Benjamin Graham and his most famous practitioner, Warren Buffett.
Not surprisingly, both Berkowitz and Winters own shares of Berkshire Hathaway Inc."

"Fund managers with the temperament for this kind of investing are about as rare as Winters' trifecta, said Russel Kinnel, director of mutual fund research at investment researcher Morningstar Inc. That's why he sees distressed strategies playing an important, supporting role in any investors' portfolio.
"It's a combination of being a contrarian and being someone who is very comfortable wading into complicated situations," Kinnel said. "This is something that's not going to go up or down with the market. It's all about how well they've assessed the company and its prospects. It's obviously not something you can get from an index fund."

here they are:

Fairholme FAIRX -5.8% 9.0%
First Eagle Global SGENX -6.1 7.9
Wintergreen WGRNX -17.8 N/A
Mutual Recovery FMRAX -23.9 - 1.9
Third Avenue Value TAVFX -25.8 - 1.6

i'm familiar with marty whitman's Third Avenue Fund, which used to be an option in my company's 403(b) plan (it was removed a couple of years ago, not sure why)...i would include LMVTX, but i doubt bill miller would attract much interest right now....

QT- it's not going up in a straight line...you will have plenty of time to exit any short positions...you also have the option of changing your colors every other day/hour/minute if you wish...unlike the ridiculous penalties imposed by mutual funds for 'excessive' exchanges (LOL, what's excessive here, our need to trade or their need to handicap our trading?), there are no rules re minimum holding periods for ETFs or stocks...

complete list of US financial companies for which shorting is disallowed:

http://tinyurl.com/3styf5

Margin..

Precisely why I will not have anything to do with the junior PM stocks until margin is abolished once and for all...and it WILL happen and it will happen soon otherwise the system will entirely collapse. If a person cannot afford to buy something then they shouldn't buy it. If one cannot afford to buy shares then put them on a credit card but buy the damn things, don't screw the rest of us by buying shares that can be shorted thus depriving those of us with ethics of a potential profit on our investments.

Even on these boards, and the short selling syndicates that destroy mining companies must be getting a good laugh over this, you have people that profess to be helping each other make money but in reality they are doing exactly the opposite.

Greed kills.

With a margin account it doesn't matter if you purchased stocks on margin for them to be lent out. As long as you have a margin account as opposed to a cash account, those shares are available for the broker to lend, no matter how much excess cash you have in the account. If you do not want your brokerage to lend out your shares, you have to open a cash account.

A contrarian opinion on where bonds are headed, compares the US with Japan.

"When that country's real estate bubble burst, leaving a trail of bad real estate loans, officials flooded the economy with cash only to see banks hoard the money instead of lending it out. The result has been a series of recessions and persistent deflation for more than a decade.

``Although the government tried to debase the yen by printing a lot of government bonds, the economy went into a standstill,'' said Cheah, an official at the Monetary Authority of Singapore from 1991 to 1999 who manages $2 billion at AIG SunAmerica Asset Management in Jersey City, New Jersey. ``The banks used the money to buy safety. I see a repeat happening here. The banks will use it to buy Treasuries.''

While U.S. bonds tumbled on the plan to buy soured mortgage-related assets from financial institutions in the most far-reaching federal intrusion into markets since the Great Depression, they still ended the week little changed.

To investors such as Cheah, that's a clear sign the economy is facing many of the same risks that have afflicted Japan. The yield on the benchmark 30-year Treasury bond, which stands to benefit the most of any government maturity from a drop in inflation expectations, fell to 3.89 percent last week, the lowest level since the U.S. reintroduced the security in 1977.

`Same as Japan'

Only Japan offers inflation-linked bonds that pay lower rates than similar securities issued by the Treasury. "

http://bloomberg.com/apps/news?pid=20601087&sid=aMY..1Q4savU&refer=home

Here we go again......Another trade, another margin call

Version 3

http://www.youtube.com/watch?v=WfvIstgOugc

Paulson's decisions not subject to review?

A comment filed on the NY Times site said:

"Excuse me, but why is the NYT completely ignoring section 8 of the bailout bill?:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

— Posted by onebackwardglance"

That would be better than the retro-active immunity Congress gave telephone companies which had spied on Americans under the "Patriot Act".

now that's funny.

Dan
I think a Section 8 is for mental problems which is also fitting, perhaps even more so.

I wrote my representatives and told them basically that when Paulson said it was "all contained" he was lying then and he's lying now.

section 8 also refers to a federal housing assistance program for low-income renters...they must have titled the non-reviewable clause for maximum obfuscation...

QT,

Thanks, but —

I went to the Mike Morgan Quick Notes and there is no explanation of how he could know this. There is so much misinfo and rumor on blogs, I would like some documentation.

Has anyone seen anything in print about the what the supposed "consequences" of not acting and adopting the King's plan are (besides these rich people losing money)?

Calling Paulson's bluff:

http://www.huffingtonpost.com/robert-kuttner/calling-paulsons-bluff_b_128075.html

Now AMBAC and GICs aren't safe?

http://tinyurl.com/3hjk5h

I'm with Slope of Hope this week I think.

"the Chinese market looks ripe for another plunge. I'm going to be buying FXP this week."

http://www.slopeofhope.com/

Any ETFs to short treasuries? Or are those considered financial stocks?

Why would you put money in a treasury vs. cash?

Shanghai & Hang Seng are up north of 9% as this point.

"I would like some documentation."

Posted by: Grym

Just google...the dam thing is every where. Here is a reported copy of the draft by the NYT.

Scroll down to sec 8

http://tinyurl.com/3pypj8

c3- i don't think shanghai and HK have opened for trading yet...

2nd -

Sorry! I was an hour early.

NYT: "Mr. Paulson is resisting efforts to limit the pay of executives whose firms participate in the program and plans to fight it "hard," according to a person familiar with the matter. He fears that provision would render the program moot, since many firms might choose not to participate."

If the consequences of not acting are so dire, why would Paulson even bother with these provisions, and why would the companies not participate? Then the consequences are not so dire... What consequences??

wavesmash - TBT is the Ultrashort ETF for the 20-Yr Treasury. Note that Si02's link suggests that Treasuries may go up for a while.

Si02 - Great posts. Thanks for Japan/Bonds.

for one year
FXP up 0.68%
FXI down 35%
CAF down 38%
so, which one is good to Buy?

wavesmash -

Check out Rydex's Juno Fund and ProFunds Rising Rates Opportunity Fund

http://www.bondsonline.com/BOL_Advisor/February_2004.php

Short-Sale Restrictions and Inverse ETFs -

"If these funds use swaps agreements to replicate inverse returns on their stated benchmarks, then why are short-selling restrictions on individual financial stocks affecting SKF and Short Financials ProShares SEF?..."

Here is an article by Morning Star... It answered a number of questions I have on Ultra-short ETF's.

http://tinyurl.com/4gsukf

I apologize if this is a repeat.

calling Paulson's bluff-

i can't see Congress doing it; it would be up to the people who elect the Congressmen to do it...

since writing/calling/emailing elected officials has such a low acknowledgment/success rate, the only way i can see it getting done is to write/call/email all of the "challengers" in the upcoming elections, and get THEM to do it for us...

2nd_ave

Greetings,

If you would be so kind as to indulge my general inquires as you have so gratiously done so in the past. Two quick thoughts seeking your input:

(1) "N2 - i'll tell you exactly what i plan to do (which is also exactly what i would advise n2s to do if he wants to run a back flip on the strangle hold his ESLR shares/RYL puts have him in):
take the portfolio, divide it into equal increments, and invest the entire amount in some combination of China+India, technology, the mining index and/or selected miners, bond shorts, financials, and energy."

Based upon Bill's strong conviction that a bull bias has ensued would you feel comfortable with suggesting the above listed port allocation for an investor who is looking at intermediate to long term positioning (await the proper entry point for financials). Due to job constraints no way can I consistently have access to the market on a day to day basis. Thus trying to hedge my entry points and sector allocation.

2. (TOG) I was obviously was too early with entry into RRPIX several months back, however, still holding. Still haven't made any entry into the second half of the trade (GLD/GDX/SLW - either stocks or ETF as a 401/457 account)and wanted to get you thoughts if I'm already too late (based on last weeks move), maybe start scaling in on dips or await a possible significant pullback (if one is to transpire).

I read the WIR, commentary & chat on a nightly basis so I'm most humbly seeking a blatant suggestion, clue, directive, hint, etc. as to maximize my chances to have success in what is a very difficult market to negotiate for a guy like me (read obtuse)!!!!!

As always thanks in advance for all of your assistance and "heads up"

Geez

The next 3 warning (settlement) dates on the calendar.

September 25.
October 9.
December 4.

The TAF auctions.

http://tinyurl.com/2zb734

If you can't short a certain stock would you still go long the opposite way without a hedge against your bet?

Markit Monthly Sector Changes
http://tinyurl.com/4mv2ca

The CDS spread on 5YR BBB in financial sector is 583, up from 70 a year ago.

Maoxian translated this for me as being "really bad"

http://www.maoxian.com/index.php?s=bbb

Lies From Paulson Keep Stacking Up: What You Can Do About It ....complete with email contacts of key senators to ask them to fillibuster
http://www.safehaven.com/article-11324.htm

I recently read some interesting outlooks by a fella - Anyone know much about David Bensimon's track record?

I love to read the commentary that comes from this blog because the bloggers here appear very intelligent with so many having agreat deal to offer. I have one question to ask each of you though; how far do you extend your intelligence and your experience?

I have found these last 8 years that people ae willing to speak out in a blog but few speak out directly where it matters - to their representative in state or national Congress. It doesn't work if you don't reach out to them.

You think Paulson is lying - tell your Congressman articulately. you don't like the recent emergency orders, or if it impacted you financially, write your Congressman and let them know.

The Computer has provided itself easy access to vent through blogs but it has also prevented the most intelligent to vent in the right manner and to the right people.

From Bloomberg: U.S. Treasury Widens Scope of Plan to Buy Bad Debt --
The change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset. That may force an eventual increase in the size of the package as Democrats and Republicans in Congress negotiate the final legislation with the Bush administration, analysts said.
http://tinyurl.com/3t6lpt

-----Original Message-----

From: jackwynn [mailto:jackwynn@mymailstation.com]

Sent: Saturday, June 26, 2004 12:02 PM

To: idpatch@attbi.com

Subject: Wynn message

Dave: Can you MAIL me all of your naked short selling memos? I only need the latest ones mixed with others that are educational in nature (in other words, memos that explain how naked shorts work ,etc.). I'm organzing a policy paper on this issue for distribution to the White House (which has requested it) and Members of Congress (who support us). My email does NOT accept documents or attachments. Thus, you need to mail me materials and NOT email me. Thanks for your cooperation!

Jack Wynn
President
Small Public Company Capital Formation Club
P.O. Box 20044
Alexandria, VA. 22320-1044

Hang in there. Bush is aware of this issue and is concerned.

Best,

Jack

g52- well, the gist of my suggestion to n2s has not changed: i still think a combination (equally-weighted or not) of the sectors mentioned above over a 6-12 month period will pay off well...

i had two reasons to clear the table friday morning: (a) uncertainty about the liquidity of the ultra-long funds i was invested in (see c3's link above, which could well have implications for ANY ultra-ETF, not just SKF...it's still not clear to me), and (b) the one-and-two-day percentage gains were just too large not to cash in (IMO,unsustainable)...

RRPIX- if you read Bill's WIR, then obviously it's a long-term hold, right...it's the inverse of the trade he made in 1982 (buying long bonds paying 18% or something close to it...can you imagine owning relatively risk-free bonds today paying that much interest?)...maybe a few years from now you'll be cashing in the RRPIX at 35? who knows?

GDX/GLD- as mentioned previously, i use Rob Mcewen's 2006 Denver Forum presentation as a road map to the ultimate destination of gold prices (somewhere in 4 figures); I would be the last person, however, to advise on when to enter a position...if you follow Bill's lead, that should do it-> i think he's mentioned that silver with a 12 handle or gold with a 7 handle should do well over a one-year horizon? we also know the XAU:GLD ratio is at an historical low...put all that together, GDX/SLW/SLV are at reaasonable LT entry points...not as sure about GLD...

bottom line: the first paragraph still sounds good to me- i will be implementing some version of it myself...the exact vehicles will (depending on my trust level) be some combination of ultra-long ETFs, selected Cara 100 stocks, and ST trading...

Sound Restructuring Principles
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=24975500

g52- would also add that you might have considered selling the RRPIX into strength and buying it back on weakness...and of course the same strategy can be used with any sector...if bill's 1975-1982 redux scenario plays out, then by trading the swings you will have very nice gains...(as opposed to hiking up/down hills/valleys only to end up...nowhere!)...seriously, allow the (non)performance of your RRPIX position in the last few months be a learning experience..;)

Paulson unmasked?

http://tinyurl.com/3gf6ho

Before I begin I want to say that these are interesting times we live in. History in the making.

Now my comments come from my understanding of the US stock market and the US/World economy that is at about 5% of the 100% ability that Bill has garnered over a lifetime of experience.

----
Bull vs. Bear

[Bill Cara note: Yes, I believe the new Bull started on Wednesday afternoon. Posted September 19, 2008 9:23 AM]

Now we know that posters in the discourse were not stating that this week was the start of a bear market as we have been in one for quite some time. Just that we are not convinced we have seen the end of the Bear or convinced of a turnaround. We are in the basement and now are seeking the truth of when we get out. It is the semantics of what Bill stated that shocked me. Had he stated that Wednesday marked a turning point - I would have thought 'gosh Yes' that makes sense [which you now have posted in this weekend's WIR - although I sill would prefer that it was not stated as a change from Bearish to Bullish - just left as a turning point]. Call it a Bull for the Wall Street gang, but keep it a turning point for the blog based on the unprecedented events of this week. I have not changed my mind that this is still a bear market and that this is an early call.

But let's face the fact that there is just too much volatility for the average Jack or Jill. Calling a bullish turn gives the impression to jump in with both feet when we are still in a state of shock and horror of the events since the beginning of the year. I am going to acknowledge that this is "a turning point" because I can slowly get adjusted to a new frame of mind as both a short-term and long-term trader/investor. No one has missed the train because of the stock market gains of Thursday and Friday this week. This is a market to be selective and attentive of the stocks to be bought.

If Monday, Tuesday and Wednesday were the result of panic selling, then maybe Thursday and Friday were only the result of panic buying. Here in Canada the TSX ended the week up 1.1%. Take Goldcorp. On Monday July 14 2008 it closed at $51.22 and in under 8 weeks to Thursday September 11, 2008 it fell to $27.39 which would require a move of 87% to get back to the previous high. Is this normal? Is it a surprise that it went up to $34.50 or 26% with panic buying and unprecedented intervention. Can you imagine the gains you would have had you been holding call options.

----
On Wednesday night - September 17 2008 I posted the following:

["I am not a day trader and I would suspect that 95% of the readers of this blog are not either. Yet, in the commentary with the few who post we get the feeling that we as longer-term holders are the losers. ... Stay calm; I have waited almost 365 days for the next step. This is not a market for someone with my personality to be in and out each day. It is easy to talk about the winners in our trades."]

jane.colder did what I could not do:

[Bill Cara note:
The one thing I know people don't like is hearing anyone brag when many others are losing. I ought to be more sensitive. In that respect, jane.colder is right.] September 20, 2008 5:57 AM]

These are stressful times and we do need to be sensitive. No need to say more on this subject. I am now practising my catharsis (see Bill's post - Friday at 3:18pm for more on catharsis - gives clarity to what the market needs). I agree we must have a great clearing out or "blow-off" to get this stock market turned around, but my belief is that there is more to come that we are not aware of. And just as the USA may sinking in the quicksand, other parts of the world may be sinking faster. So there may be an illusion that the USA is not so badly off. For now the US is buying time for stability that I welcome.

When I was out today, I saw a world not bothered by the events of this week. The birds were singing, children were playing in the park, people were shopping and behaving as they usually behave, some people were smiling, others were out for a Sunday drive in the car. Just another Sunday.

In closing, I wrote the above not for the benefit of Bill, posters or readers here. I posted it for my benefit and so I can sleep tonight. Good trading to all. After this month I am ready to join DENSA, as I seem to understand less now than when I started this posting. And somehow I can't keep these posts short. [055]

2nd_ave

Many thanks for your quick and informative response!! Your input and the gratiousness you extend to the Cara community on a daily basis should be commended!!

Geez

Just read that Morgan and Goldman have received approval to become "bank holding companies". What the hell does that mean? Please someone try to answer this, thanks.

c3- OK, so you have a decent sixth sense, as Shanghai in fact opens up 9+ %....;)

Paulson,
From what I see it appears that Henry is trying his best under the worst of times. Although his methods do not suit all of the players, I think that he and Ben are sincere in their efforts; for good or bad judgement. Henry has all of the personal fortune he needs to live out several life times so what is his motive in destroying our,(USA), way of life as many see it? I think that Greenspan put it correctly in a recent interview when asked what he thought of the current fed/treasury decisions. He stated that he could not really comment correctly because he is not privy to all of the details that the fed/treasury has at their disposal. It would have to be ones contention that Paulson took on the treasury post to do harm to the system one way or the other. And for what reason? Who does he owe and why? Does he need more money? His current job doesn't pay like Wall Street. ???

woolybear- it probably means they need more money and will now have access to more via bank deposits..

I thought it meant they are now technically insolvent.

a couple hundred years ago it probably wasn't that hard to start a bank...ride into the next boom town, put up a building with a vault, start taking deposits at the window while signing loans at the desk...

"Resolution? Trust? A Jedi seeks not these things!

Look, the financial world is a confidence game. Even simple trades involves confidence. You put your money into a Merrill Lynch account and buy a stock, you assume they're holding that stock. Hell, you assume the money market fund they use is safe. You assume your bank will be able to cash your checks. Etc. Etc.

Once that confidence is lost, the system can't continue. Everything will break down, and I mean everything. Our whole economic system would collapse."

http://accruedint.blogspot.com/

Hank's doing his chip-clearing blackjack dealer moves again.

We Need This Money By The End Of The Week! Henry Paulson - Meet The Press, Sept 21, 2008.

http://votersthink.org/?p=475

I wish I was better at reading body language. His hands, eyes, and eyebrows are saying so much more than what's coming out of his mouth.

http://tinyurl.com/4ag62b

now it's even easier...phone call away...

wavesmash- LOL, you're using my favorite analogy...thursday night was a chip-clearing move-> after allowing successive market drops to pull all the money into the short side with high-chip bets all over the craps table, Paulson rolls a...Seven Out!

"The birds were singing, children were playing in the park, people were shopping and behaving as they usually behave, some people were smiling, others were out for a Sunday drive in the car. Just another Sunday."

Funny you should mention that. I just saw Jim Carrey's Truman Show again. That totally explains what you were seeing....TOTALLY. Anyone having seen that movie knows what I'm saying

http://www.salon.com/ent/movies/reviews/1998/06/cov_05review.html

SiO2- maybe it means they need 700B, and they need it NOW..

there were two movies in '98 that played on that theme...the other was the underrated "Pleasantville" with Joan Allen...

shanghai- reminder there is a daily limit up/down of 10%, which may explain today's follow-through...absent the limit, it may well have shot up well beyond 9.6% last friday...

Looks like I sold FXI too soon.

"The Shanghai Composite index was recently up 9% at 2,261.60, after surging 9.5% on Friday" according to marketwatch.

I'm seeing relative strength of .... ummm... 110%?

Somebody took "Give me 110% effort on Monday" a little too literally.

http://tinyurl.com/3pjgd5

Gaps gotta get filled... FXP anyone?

Over in China it must be Keno being played, not blackjack.

http://en.wikipedia.org/wiki/Keno

"The probability of a player hitting all 20 numbers on a 20 spot ticket is approximately 1 in 3.5 quintillion (1 in 3,535,316,142,212,180,000 to be exact)."

Them's good odds.

"One finds that the best game for the player is the three-spot game, which realizes an expected return of approximately 62 cents for every dollar invested, or approximately a 38% loss. The seven-spot game ranks close behind, returning just over 60 cents per dollar. Perhaps not surprisingly, despite the astonishingly high payoff for strong performance, the ten-spot game is by far the poorest from the player's perspective."

Sounds like the stock market to me.

Regarding Bill calling the end of the bear market for non-financials:

I read a lot of blogs and this is the first prediction like this that wasn't worded like it came from the Delphic Oracle. It's also great to have the reasoning behind such a call explained. I wish I was knowledgeable enough to argue either for or against it. My only observation is that I don't remember a consensus on the end of the last bear within a few days of it actually happening. Widespread agreement only came much later, so I don't expect that we are going to get it now, regardless of whether Bill is right. I can see an argument that we had many of the classic elements of the end of a bear: a selling climax, possibly an automatic rally and certainly a sentiment shift (I admit though that I have never heard the term catharsis applied to the markets, but I think it is an interesting concept).

Regarding social equity:

I hope you keep commenting on this. It really sets this blog apart from the others I read. Some of the recent actions by government, regulatory agencies and those people high up in some companies are really disturbing. It's good to have them called on it and the matter discussed.

wavesmash- how much of that 700b ends up in swiss bank accounts? it's global high-stakes poker..

ttl- when i read the first line of bill's WIR this morning, it had the ring of truth...i entirely expected something along the lines of a bear market rally call, so calling an end to the bear made 'sense' to me in the way watching red indexes in asia/futures in the US often lead to green opens 12 hours later...the path of maximum frustration, unpredictability, the crowded side is always wrong...call it what you will-> it just sounded right (IMO)...

re gs and ms...

The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

also meaning its less likely they will need to merge with a traditional bank. their prices will prob go up monday. just a guess.

Re: David Bensimon

I'm just going to post this and then come back to it to see how he did in the future. Others may be familiar with him - he seems to have quite a following with large clients. I only post this because I've just been reading everything I can find on him and his precision is uncanny or so it seems - perhaps too good to be true. Well, let's find out. For the record:

David Bensimon's low on S&P by October 3rd, give or take a few days, forecast is 1173.

His low for the TSX same time frame is 11,600.

Major resource equities bottoming within this same period. Big upmove all equities and indices begins. Junior miners, on the other hand, rise from here to Christmas, but bottom in first quarter '09.

Gold and silver up until Christmas. I get the impression he means 10-15% max from today's values.

Gold and silver correct during first quarter '09. Junior miners bottom, but not much below today's prices. Majors do not reach a new bottom.

Gold and silver decline in first quarter 2009. After bottoming in first quarter 2009 (gold huge double bottom possibly $730). Big sharp upmove commences for mining equities, gold and silver begins April 2009.

Longer term forecasts - from 2001 his forecast for gold $260 to $2600 in 2014. (US$1,030 an ounce in 2009, and eventually US$1,220 in 2010. But the most rapid rise is expected between 2011 and 2014 when he expects the price to hit US$2,600.)

Silver $40 in 2010 likely when gold is around $1700/$1800. Silver in 2014, $160.

Hang Seng index goes from 20,000 to 100,000 by 2010.

Strait Times Index goes to 9,000 by 2012.

I'll see how he does and if he earns the $3,000 Gartmann-esque annual fee which many large clients and small clients pay him for his letter.

I'm a noob here but let me say that the BKX chart supports Bill's call for a major turning point. BKX 60-70 did mark turning points in 2000s:
http://tinyurl.com/4egmh8

Similarly, consumer confidence is historically low (lower that 2003):
http://tinyurl.com/3tqzx

Who didn't cover yet should consider that.

Goodbye IB Goldman and Morgan. Hello regular bank holding companies. I do enjoy saying I told you so this time. No investment banks would survive in present form and they did not as of tonite.

Paulson's four appearances on the talk shows Sunday represented a tricky scheduling feat, but they did not set the record of appearing on all five shows. Paulson did not do CNN.

If he had done all five shows, he would have accomplished what is known as a "full Ginsberg," named for William H. Ginsberg, attorney for Monica Lewinsky during the sex scandal in the Clinton administration. In February 1998, he became the first person to do all five talk shows.

CBS host Bob Schieffer, visiting with Paulson before the taping for his program, remarked at Paulson's busy Sunday.

Paulson replied using the baseball term for a home run: "It's a four-bagger for me."

http://tinyurl.com/525glw

I thought that was a Peter Lynch stock term? Maybe he was talking about the 38% jump in GS from mid Thursday? :)

Reasons for adopting BHC status
New or smaller banks often convert themselves into bank holding companies to take advantage of the greater financial flexibility this designation affords them.

Becoming a bank holding company makes it easier for the firm to raise capital than if it remained a traditional bank. It can assume debt of shareholders on a tax free basis, borrow money, acquire other banks and non-bank entities more easily, and issue stock with greater ease. It also has a greater legal authority to repurchase its own stock once issued.

The downside includes greater levels of regulation, especially if there are more than 300 shareholders, at which point the bank holding company is forced to file with the Securities and Exchange Commission. There are also added expenses of operating with an extra layer of administration. This is usually offset by the fact that BHCs are often exempt from many of the state regulations and fees that a traditional bank would face.

http://en.wikipedia.org/wiki/Bank_holding_company

Based on 2007 assets, Goldman Sachs is now the 2nd largest bank holding company in the US. MS is just above WB.

http://tinyurl.com/5367ws

But that was last year.... wonder what last week's balance sheet looks like.

Whew, I just got threw all that. 2nd - Thanks for the post-mort, I can follow. Now, I've got to hand it to you for making the right decisions ahead of the event(s). This is similar to my approach, except I think for longs I'll be placing low bids to get hit, and jump into the shorts while under progress. I was hoping to catch some DOW downside but from reviewing the RIW, it seems like that might not happen....

I believe in Bill, except I don't have a clear picture of the timing or what to anticipate next, due to FED medaling. Commodities to me includes oil, but it doesn't sound like that when I read Bill, he thinks oil jr's are good even though oil hasn't bottomed. I suppose these are low enough to be attractive (or were low enough?), perhaps we'll see previous lows once more when oil bottom materializes, so I'm not buying yet... waiting for bottom of $80-$85. The only reason I can think we might see $80 again is if the USD actually rallys, or if demand destruction vector is great enough.

I could've sold Au at $900+ but just watched the run up not knowing it would come back to earth. Now I'm still in the same frame of mind especially since Bill doesn't believe world banks will be able to keep Au under their thumb. So for the time being, this will be NO-SALE in my port. If I coulda traded it, that would have, well, you know....

Still want to see the simultaneous Au/USD rally Bill had in his sights (if he still anticipates this, if not I hope he says so, cause my neck is getting stiff), which should prove quite entertaining, don't you think!!!

NGD - Did you catch this one on your watch list?

I went swimming with the ducks today, and caught them some minnows. It's really cool when taking the boat out of the cove a couple of the males like to fly along side for a while.

There's nearly a whole day of reading here from Friday!

I saw the movie Burn After Reading over the weekend. Coen Bros latest. It is a priceless satire on Washington dynamics that'll make you laugh until you realize how close to the truth it is. Malkovich looks just like Hank. Frances McDormand looking to fund her American Dream finds it forthcoming from a surprising source...well not so surprising given this administration. The movie nails it.

Just came back from my weekend trip and saw more posts for the weekend than I have ever seen. I guess something big is happening now in the market and people are really excited about it.

Looks like some fluke happened with UXG on Friday at the close. However, just in case, setting a sell limit order at $1.58 for 1K shares I purchased at $1.08, so as to get the standard $500 gain on a trade. Still keeping the shares I purchased at $1.30, $1.50 and above.

Placing a buy limit order at $6.2 for SWC, at $5.50 for ESRL, at $1.20 for WGW. Keeping sell limit orders at $1.49, $1.70, $1.80 and $1.90 for WGW and at $12.90 for SLV. Let's see what tomorrow brings me in my sleep. :)

I had notice the discount of the SPY to the SPX in the close Fri. & thought that odd, now this appears (below).

Has the SEC unintentionally/incompetently monkey-wrenched the over may years finely tuned arbitrage system in the markets?

http://jessescrossroadscafe.blogspot.com/

"As a trader on the trading floors of both the CBOE trading stock options and the CME trading S&P futures for more than 15 years, I want to explain that the short sale ban will have a dramatic impact on the liquidity of the stock market futures and options. When there are more sellers than buyers in the option and futures pits, the prices of the futures and options drop to a level where index arbitrage provides liquidity by shorting a basket of stocks and then buying the futures or option.

In a competitive market, the arbitrage of the futures versus the underlying basket of stocks is done for fractions of a point versus fair value. Losing the ability to short stocks to transfer the selling in the futures and options to the underlying equity market will, in my opinion, result in the futures and options trading at severe discounts to the fair value.

This overhang will drive buyers away from the markets. For example, imagine the S&P futures trading 36 points (3%) under fair value. Will you step up and buy stocks when you see the futures forecasting that the entire index is being sold in the futures market 3% lower than the current market?

Liquidity for ETFs is provided in a similar manner to the Index futures and options. Normally when ETFs trade at a small discount to fair value, arbs would short stocks and buy the ETFs locking in generally a fractional spread. Now, the short side arbitrage cannot be done and if we see index ETFs trade at substantial discounts to fair value, I think those EFTs, by their own rules, begin liquidation of the underlying basket of stocks they hold.

On Friday evening the December S&P futures settled 9 points lower than the S&P 500 index. Fair value is several points higher than the index close. If this discount to fair value persists DURING in the trading day on Monday, I expect we will see the market to start to go into a spiral decline...."

ALOHA !!

Anybody still want to argue that politics has nothing to do with the markets?

It does not matter whether you are a day trader type or buy and hold type. What matters is what you're holding when you sell?

I was watching the latest 007 Bond movie Casino Royale and the villain in the movie was asked if he believed in GOD. His answer was "NO ... I believe in a reasonable rate of return!" In the movie it turned out the villain died trying to get his "reasonable rate of return". How did he try to obtain that return? GAMBLING! First by shorting an airline stock and then playing poker. Both ways failed ... Are we really any different in the ways we gamble to obtain a "reasonable rate of return"? I know the US Banks aren't!!

He wanted a "reasonable rate of return"! Well so do all of us when we aren't in church!

The leveraging that has been going on with banks and insurance companies has been seeking just that ... "a reasonable rate of return". Problem is there is so much FIAT sloshing around in the World that it is becoming impossible to get a reasonable rate of return because monetary inflation pressures are creating desperation since a "reasonable rate" has to be higher every year. A reasonable rate of return cannot be found in any global governments debt now, not even at 7%! Even a 7% return once taxation and overhead are deducted means your rate is still about 8% short of breaking even with real inflation rates. Within 18 months that task will get even harder as the true costs of these global bailouts and buyouts begin to embed themselves into money supply expansion and inflation rates will move up further. Look at all the global competition between hedge funds, banks, insurance companies, sovereign wealth funds, corporations and Mad Money types ... They're all in competition to get that "reasonable rate of return" for their shareholders and their bonuses and to just keep the damn doors open! Now everything is globalized, even a "reasonable rate of return"!

What do you need as a "reasonable rate of return"? Can it even be calculated from one year to the next now? What is reasonable? If you have little to no debt and live within your means then your "reasonable rate" does need to be so high, but what if you have a lot of debt and live like a king, beyond your means? Naturally you will need quite a bit higher rate of return on your capital risk.

Then there is the factor of ATTRITION ... I am seeing people really struggling with debt attrition and even more with emotional attrition, just from the ups and downs of the markets and all the failures. If it takes hold ATTRITION can kill you, because it is really nothing more than STRESS and as most people know "STRESS KILLS"!

What happens if you are totally wiped out? Like Bill says, the sun will still shine, kids will play, birds will fly ... really nothing of the Earth changes at all. The DOW can crash to 1,000 and my dog will still need to be fed and my plants will still need water and the sun will rise in the East and set in the West. Life goes on ...

I think most people are in the stock market for one reason. They believe that they will not make it to retirement on just their wages alone