Mike Morgan's Quick Notes
- Behind Enemy Lines -

Close Fidelity Accounts Now - I am advising all clients to transfer their accounts out of Fidelity to Ameritrade, immediately.

If you trade with Fidelity, you need to know that you are restricted to a 30% cap when entering a trade when the markets are closed. What this means is, if a position closed at 100, and we think the market is going to move big and lock us out of electronic trading like it did in 1987, we can only enter a trade electronically for up to 130 or 70, depending upon whether we are long or short. With most positions, that would not matter, but with double short ETFs or extreme positions, that will be a big problem if we are locked out of trading during the trading day.

Therefore, we are recommending that all clients transfer their accounts to Ameritrade immediately. If you have more than $500,000 in an account, you may want to consider two accounts or using two brokers.

I did speak with the Fidelity people, and they advised me there was no way around that policy.

Washington Mutual

Washington Mutual was shut down by the Fed tonight. JP Morgan steps in . . . again. And the new WAMU CEO walks away with $20 million for less than three weeks work!!!!!

The FDIC was not going to shut them down until Friday night, but things were set to get out of control tomorrow, after the Bail Out plans failed tonight. We are over the edge, just waiting for the last bit of string to let go. I know it is getting scary, but for my clients . . . we are sitting mighty pretty.
Let me give you something to think about. My contacts told me a WAMU failure would cost the Fed as much as $70B . . . and maybe more. Most people are putting the loss at $30B. I have a few that say it could be even more than $70B . . . BUT there is no word in the FDIC releases about who is paying for the losses WAMU should be revealing.

I like RIMM as a potential buy here on the dips.

Cara 100 Update:

GE - Downgraded to Hold @ Argus

POT - Target Price Lowered from $375 to $250 @ RBC

We all ‘know’ about buying when there’s blood in the streets, but how many of us do it? The Panic(s) of 1907, 1929, 1987-> easy to sit in an armchair reading about them (as I’m doing with the ’07), but why not use the lessons of history to make a difference for your family?

Vinod- currently 40% long and will be looking to add…

I bought Bill's book last night on Amazon and noticed that there were only 9 reviews so far....I think that seems dreadfully low considering the number of people we have in this community.

Looking forward to receiving the book!

Bill,

I don't disagree with your above remarks in theory. In practice, I'd prefer to see some clarity on this thing before putting MY hard earned $ into the market, so to speak. Not that I actually earned it, and not that I actually invest as opposed to daytrade, but you get my point. My contention is there is no need to try to catch the exact bottom. If things begin getting better we will know it soon thereafter.

With Bush talking at 9:35 this may be the strangest open in the history of the market.

There is no one in the financial world whom I trust more than Bill.

God bless you Bill. You truly are a great, remarkable, and inspirational human being.

Ron

Vadym,

I agree with your previous post. Waiting for direction, which very well could be up.

2nd
yesterday went to 50% cash from 30%
will not do anything today
busy day at work and will not be able to see marke constantly

if the plan is approved i guessing markets rally along w/ the US dollar and gold to immediately tank hard.

i will add to my existing gold position once the downdraft is resolved and hopefully the drive to $1000 begins shortly after.

if gold doesnt react badly and breaks above $900 w/ strong volume on the miners ill also add to my position.

thats my plan and im stickin' to it!!!!

I like GE and its down 5 1/2% pre-market, so this may be a day for me to pick up shares. They still make locomotives, nuc power plant designs and other stuff - I know about the capital part of it, in the $20-24 share range I'll give it a look.

Most Dow industrials look down pre-market - DE, CAT, KO, JNJ - this is my blue-chip buying list.
Of course, if u expect an economic downturn, then CAT and DE wouldn't be swell picks.

Techs - I like NVLS (used to love it before it became diluted, but a great company; I like NOK and AKAM as well - these are long-term positions for me that I started this week at 100 shares).

Also bought 25 Maple Leafs (the silver ones) last night. Still holding 70% cash plus 10 call options on Alcoa Jan 2010 20 strikes.

I like my position right now - pls dyodd.

[Bill Cara note:

I agree with GE. GE's Jeff Immelt has one failure; he is a great salesman, someone who only sees the blue sky, and oftentimes, a CEO must be acknowledging the changing weather so stakeholders can protect themselves. I like Jeff, and don't hold him accountable. He's actually the model for what I call the Immelt Rule: Use CFO's only when reporting or discussing financial results and guidance.

Some people are questioning GE's ability to maintain its dividend. If that is a concern, put on a straddle until the next dividend is declared. I think the dividend will be paid. Other than GE Capital, which I think GE should downsize, the company is well managed, financially strong, has good operating margins and ROE, and is a global leader, and will be well into the future. GE obviously stays in the Cara 100. As long as it holds GE Capital however, conservative investors may not want it to be in the core group of their portfolio.

Also, I like DELL here, for many reasons. http://tinyurl.com/4zvu9d ]

RIMM scaling in @ 75...

Short of a deal can Bush say a darn thing that will placate this market?

TD Waterhouse down again.

Looking to acquire RIM today and maybe some stuff in the US. Not GE.

waiting for my puke indicator.

When I feel like heaving, it's time to buy.

I've had good experiences with Praxair, BOC, and Air Products and used to work with them all. I was especially impressed with Air Products (APD). Also, Japan's IWATANI is a very good company if you are looking for a Japanese version.

IBN- adding a little at 24.87...

No deal

Favorite investment idea - Canadian junior oil exploration outfit Verenex (trades on TSX)

Pros
Wealth of Calgary Oil Patch experience in management
Every well drilled (14 of them) in their area of focus (Libya) has been successful
Current reserve estimate (1.6 B barrels) is based on the results from the first 7 wells.
Management recently stated intention to maximize shareholder value, including the possibility of an outright sale.

Cons
Political risk

Caveat
I have family ties. (Which means I hear zilch - these folks are smart)

As always, do your own DD.

"...however, since I started to blog, I took on a mission to show a community how to trade against those who are quick to exploit them, and the weight of this task has been a lot to bear. More than I had imagined when I started down this road."

Bill, I dare say it's probably a lot harder than anyone imagined. Even after reading your book and reading here for a year and using the RSI too some investments are still looking bad, like GE. There have been hard lessons this year. I hope you don't burn out because your blog is invaluable.

This doesn't feel right to me.

S_A:

in what way?
i dont have access to the bush speech at the moment...

Shark,

I agree. Why would the Prez come out and essentially say nothing?

The harder they say something will be done, the less I believe it.

Bill,
Thanks for the great comments this AM and always. You are the best. You've taught me more in the last couple of years than I could have ever learned on my own.

Thanks again!!

Rob.

Tried a pocket change position in RIMM at 73

I still remember my dear ol' grandma saying to me: Don't worry, Don't panic, tomorrows another day, Now eat your chicken soup". Don't let all this excitement and panic noise get under your skin. Try futures floor trading for ten years, now that's nerve racking.

Bank failure after bank failure and yet the market refuses to go down. Pretty amazing. One would think after all of this and the fact unemployment is rising quickly we would see significantly lower prices in the equity markets. Somebody or group is really working hard because I get the feeling it is all hanging by a thread.

Banks cannot be that frozen. Money is clearly making it into the markets and the economy somehow because neither is really that bad. However, we are still early. The big tsunami is coming in the form of Pay Option ARM's. We'll see who is left standing after that.

adding to gold position if we stay above here for a few more minutes.

Gold and oil trading in opposition, like yesterday.

back down to $901... wondering if this was just a mini-panic spike in gold before the dust settles on Bush's speech...

Market probably believes in a solution out of Washington...but earnings season just started...

"Why would the Prez come out and essentially say nothing?"

IMHO, the 9:35 start was key. Perhaps Bush was prepared to shut down the markets had panic selling begun.

I was talking with my neighbor about EMC, whom he works for. It has a 12 month S&P target price of $21 as of 9/20/08. 55% of their revenues is outside the US. I'm amazed at how they have and are treating him as he went through a liver transplant the past year and now as he is going through other complications. It reminds me of how HP to use to be as a company. The RSI isn't there, but then I'm no expert and I know RSI isn't the only deciding factor. They look attractive under $13. Any thoughts?

gold back under $900,
XLF reversing.

ugh.

ADR - Air Liquide is also a big player in the realm of welding and semiconductor process materials, but not quite the IBM-esk company that Air Products is.

Probably a spread of these will do quite well.

The market is more muted then expected.

With respect to a few stocks TOT is paying a nice 5% div and oil is may go lower with a global slow down, but it will rebound with rising demand.

I know Bill likes DELL, but I was never big on box makers. My play is to buy INTC, if Dell does better so will Intel.

FCSX is an interesting play here that has been beaten down from 50. I have been a customer of them for 15 years and they are first class.

When you look at the Cara 100 list it sure is skewed to the buy side right now, it offers good opportunity now and the hard thing here is to buy.

Long TOT, INTC, FCSX

Hi,

The spike up in gold may be signalling a bailout agreement....but we can not know unless we are sitting inside the room.

The price was immediately "managed" back to 900... for now.

Cheers!

"Why would the Prez come out and essentially say nothing?"
Prez is buying time, staving off enormous plunge today and ushering in weekend deliberations wherein greater clarity and concensus can be achieved (and political cover can be constructed.)
As George Will noted recently...
" Everything that has been done for the past six months has been done to cope with what previous actions were supposed to prevent."

why not give Bush the benefit of the doubt? i think what he's saying is exactly what's happening/will happen. he will give the republicans a chance to air their grievances, the kids will get to fight a little, then the wisest people in the room will calm things down and get everyone to agree on a plan...

putting sells under the 1st half hour lows for FXP/DXD.

Bubble Vision reporting upcoming Harry Reid press conference where he is expected to announce that they will be working into next week on the plan.

"why not give Bush the benefit of the doubt?"

Three letters - WMD

Tick is decent and TRIN is very low at 0.49. Seems like accumulation.

TRIN has been very low for the last week.

I think the market took the initial shock of "no deal" well. The fact that they are not rushing to a decision, whether it's posturing or not, should be viewed as a positive.

Many may not want to be long over this pivotal weekend though.

"Mike Morgan's Quick Notes
- Behind Enemy Lines -

Close Fidelity Accounts Now - I am advising all clients to transfer their accounts out of Fidelity to Ameritrade, immediately.

If you trade with Fidelity, you need to know that you are restricted to a 30% cap when entering a trade when the markets are closed. What this means is, if a position closed at 100, and we think the market is going to move big and lock us out of electronic trading like it did in 1987, we can only enter a trade electronically for up to 130 or 70, depending upon whether we are long or short. With most positions, that would not matter, but with double short ETFs or extreme positions, that will be a big problem if we are locked out of trading during the trading day.

Therefore, we are recommending that all clients transfer their accounts to Ameritrade immediately. If you have more than $500,000 in an account, you may want to consider two accounts or using two brokers.

I did speak with the Fidelity people, and they advised me there was no way around that policy."

Ooops!

"Mike Morgan's Quick Notes
- Behind Enemy Lines -

Close Fidelity Accounts Now - I am advising all clients to transfer their accounts out of Fidelity to Ameritrade, immediately.

If you trade with Fidelity, you need to know that you are restricted to a 30% cap when entering a trade when the markets are closed. What this means is, if a position closed at 100, and we think the market is going to move big and lock us out of electronic trading like it did in 1987, we can only enter a trade electronically for up to 130 or 70, depending upon whether we are long or short. With most positions, that would not matter, but with double short ETFs or extreme positions, that will be a big problem if we are locked out of trading during the trading day.

Therefore, we are recommending that all clients transfer their accounts to Ameritrade immediately. If you have more than $500,000 in an account, you may want to consider two accounts or using two brokers.

I did speak with the Fidelity people, and they advised me there was no way around that policy."

I believe you can set conditional orders that can get around this issue if you have Active Trader Pro.

"why not give Bush the benefit of the doubt?"

You are such a trusting soul!

This sentence, taken out of context, sounds like the punchline to a joke.

possible answers....Florida, Ohio, the dog and pony show Powell did before the U.N., The Downing Street Memo, the conflation of the 911 "attacks" with his determination to take over Iraq, Abu Ghraib, the Swiftboat crew...Am I missing anything? Probably a lot.

Scaling into APD

Thank you for your reply yesterday with the info about cash levels in MM accounts being at historically high levels. I'm one of the little people contributing to that situation, and I'm getting anxious to get re-diversified from having a huge proportion of my assets in US$ MM accounts. Thank you for the warnings long ago that got me in that direction and for turning today's discussion topic toward "shopping list" ideas.

Another clue: 3-month T-Bill yields are up significantly today.

For those of you in Canada with RSP accounts and stock losses, if you have enough cash outside RSP you can do a wash transfer to sell at a loss outside of RSP.

Cost is $45 for TD. They do some calculations for valuation of the stock using high/low price of day or closing price.

Not sure if this is a good tax strategy? (Not that holding stocks in RSP is a good tax strategy either...)

Made a few weeks groceries off RIMM.
I think we get a late sell off unless there is some announcement on the big deal.

Will use any downside to add to long positions.
I've been here long enough to know to not doubt Bill's calls.

2nd, we'll give you as much benefot as you want, but you've earned it. Based on the same ratings that GW guy is a liar and he is not to be trusted.

http://tinyurl.com/4clndw

Nouriel Roubini. Havent been following him as of late as all his thoughts need a subscription. but he has been the 1st economist i have followed who has been ringing the global financial crisis tune for a while.

thanks Bill for virtually slapping us in the face. I think panic is at a boil. topping and bottoming is a process right? whether that is done in minutes, hours, days, weeks or yrs. all indications feel like the bottoming process now.

i am now in hunt mode for good companies. but after i get back from san diego. forecast is sunny and 80 all next week!

FWIW, here is my wish list of companies to buy ät the bottom (or thereabouts -- thank you, Bill!).

The companies are in a variety of industries; are solid; all enjoy a history of raising dividends almost every year:

APD (Air Products & Chemicals), JCI (Johnson Controls), ECL (Ecolabs) BDX (Becton Dickenson), MCD (McDonalds), PG (Proctor & Gamble), SYY (Sysco), PX (Praxair), HRL (Hormel).

We all owe Bill a huge debt of gratitude for creating this blog for all of us to use and enjoy.

Thank you, Bill!

I'll do more research over the weekend. Well...maybe, but GDI Gardner Denver is also a good industrial company, or was.

Cara 100 Update (Final):

RIMM - Target Price Lowered from $185 to $72.75 @ Canaccord Adams

Sorry, will give you as much "benefit" as you want...

2nd - When was the last time Bush opened his mouth and the truth came out?

I was skeptical when the West Tx. folks swore to me he was not to be trusted 8 years ago... Bush has proven them right. All I can say in his defense is since 9/11 he's had many major issues to deal with and it's quite unfortunate those in his midst don't seem to be able to advise in a way that benefits anyone but themselves.

Glass half empty or half full? Some people see the WAMU failure as bad news. It was toxic waste and has been holding us down. I see them going under as refreshing so that now maybe we can get on with it.

XLE at 66.78, the 50% retracement of the "Deal!" rally. it is the only sector(?) still above that level, watch it.

"should" bounce, but volume is negative, says down.

SLW tested the 9.38 fib, "should" bounce.

Too much going on, have not had time to read the blog yet.

anyone like the steel sector? common sense tells me:
#1 they are all trading at 52 wk lows
#2 as wealth moves around the world, factories and building have to be built and steel is needed
#3 US based co's should do well with pressure on dollar

out of DXD.

long USD 32.09

Guys! I'm gonna' have to 2nd Bill's commentary on the politician comments: When does a politician not lie? They're all in this. They've scratched their constituents itch. Republicans took care of Wall Street w/Glass Steagall, et al, and Democrats took care of minorities and poor with that housing act in 2003(?), and those are two big reasons where in the soup today. Give it a rest.

Guys, let's respect Bill's request (not a first btw): "In fact, I’d appreciate more of this kind of idea being discussed in our Discourse than the many gratuitous remarks about politicians."

No value is being added to trading blog by Bush bashing.

Bought more IBKR. I really like their business model and think it should thrive in any market, especially this one. It is now trading at less than 10 times 2008 estimated earnings. Quite a deal.

POLITICS:
One thing I think the new president needs to do is come out and instill a new sense of pride for being a U.S. citizen. I think he must challenge the people to work hard, educate themselves, and take it upon themselves to make our nation great again. Who would the people be most inspired by? I think the answer is pretty clear that it is Barack Obama. More than ever, I think we need an inspirational leader when pretty much everything related to politics is failing.

Thanks for your input on this afternoon's market direction, Craig.

I'm still holding a large position in QID and feel like I've been playing with fire all week. I'm thinking that today is my last chance to get out to maximize profits.

I'd love to hear anyone's opinion on today's market direction.

Thanks to all.

I think that was my point, Vad. Sorry if I wasn't clear. Considering English is your second language, I'm embarrassed.

nyugrad
I like MT, RIO & GGB, charts are good from a bullish divergence standpoint. I bought two days ago.

"Cara 100 Update (Final):

RIMM - Target Price Lowered from $185 to $72.75 @ Canaccord Adams"

That sounds like a serious joke to me... What kind of sad analyst has to make greater than 50% modifications to price targets??? Especially when it's downward. That means you didn't have a clue what you were doing when you issued the first target!

Wait a minute! Some readers here are NOT day traders. A time to dance? Maybe, but all should consider whether any trade to be in the form of the “Quick Step”.

Here is a quote from “The Great Crash of 1929", a book by John Kenneth Galbraith:

“ ... The man with the smart money, the one who was safely out of the market when the first crash occurred, naturally went back in to pick up bargains [someone had to buy every share that was sold] The bargains then suffered a ruinous fall.

Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. .....” [Chapter 7, page 111 in my Time Inc. version ]

I read this book a long time ago, but that quote stuck in my mind and cost me a fortune in potential profits after the fall of 1987. This time who knows, but “ya put your right foot in, ya take your right foot, and turn all about .....

Re: Steel Stocks

Been looking at AK Steel (AKS), local company here in Cincinnati.

Haven't contributed something in a while so I will contribute something: These are stocks that have experienced good relative strength, most are trading in up trends and above their 50 or 200 dma and have positive technical attributes. They most likely will not pop as much as some other more beaten down names should the market turn but they also should hold up better than most if the downturn continues: I have not done any fundy analysis just the techy analysis. There are a few diff sectors represented here as well. DYOD..

-BBBB
-FCN
-FIX
-ESRX
-GPN
-JNY
-MANT
-BKE
-URBN
-NTES
-BAX
-SYMC
-ACL

Spot, Heere Spot! Couldn't resist. Anyway, the difference between now and 1987 is now seems more like 1929-in that there are systemic issues of greater magnitude at risk.

Vadym Graifer

DITTO to your 10:41 AM post!

Thought of going long AA until I realized that wealth is not being moved, it's being destroyed...

Car companies are largest steel consumers...

Your growth for car companies in the next few years will come from Asia eg. Tata in India & other BRIC members.

Steel is traded on LME as of July. Could this have an effect like GLD or USO, where speculation on an easily purchased contract could artificially increase demand & prices?

http://tinyurl.com/3ll29h

More bubbles? Worth entering into steel producers?

I'm interested too.

SLW breaking down out of the bullish pattern, into consolidation mode.

If you want out, it should go back up to retest the 9.38 fib from below eventually (maybe not today), get out there.

I'm keeping the Dec. 7.5 calls for now, still have a 20% profit margin on them.

out of FXP at 93

Spot,

For longer term oriented traders, one market "trick" is to look at a weekly chart for the broad equity indexes, and add a 20 week and 50 week MA.

When the 20 week MA closes 1% above the 50 week MA, you have a buy signal for conservative investors.

The inverse is true for selling.

By doing this:

- You will never buy a bottom
- You will never sell a top
- You do not eliminate the risk of buying before a sudden crash

BUT,

You will participate in a significant part of the move, and reduce the odds against your positions.

So, this would be comething to consider for longer term oriented investors.

Goes without saying that the 20 Wk MA is now way below the 50 Wk MA, and if you follow this signal, you will be out of the market on the long side for the time being.

Hope this adds value to your analisys.

Cheers!

I was answering 2nd's rhetorical question regarding the so-called benefit of the doubt. I did not set out to do any Bush-bashing today, though it sounds like a lot of fun if you really bash hard, particularly about the head.

It is interesting that Bush can't even bring the Repubs to the table to bail out a bunch of corporations and multi-millionairs. If it walks like a duck.....

According to one GOP lawmaker, some House Republicans are saying privately that they'd rather "let the markets crash" than sign on to a massive bailout.

"For the sake of the altar of the free market system, do you accept a Great Depression?" the member asked.

http://www.politico.com/news/stories/0908/13946.html

If you have any doubt there is an international slow down, take a look at the Baltic Dry Index (BDI). Its down another 417 points today to 3746 from an all time high in May of 11793. Shipping stocks are way down. Diana Shipping (DSX) which pays a 14% dividend is down to $20.
Most of DSX's ship are on long term charters and they don't speculate in the spot market like some of the others. I don't own any DSX at this time, but this is one I'm looking at.

re: Steel stocks
also watching Olympic steel (ZEUS) if it holds what looks like some basing action in the low 30's retracing almost all its gains for the year. I am planning a 1/2 position soon then wait for a RSI14 under 30 for the second half. I'm not strong on fundamentals so maybe someone can weigh in on those. their debt ratios look good

Chatting w/someone recently, they wondered aloud if we're headed for a major crash like 29 or 87.

Upon looking @ charts of 1929, 1987, it's apparent that those crashes were all after major run-ups. Much more comparable to 2000. Today, we have been proceeding through a downward slog and experienced significant losses already. Of course you can't fully discount the probability of a major crash, there could be a credit default swap market bomb ticking somewhere, for instance. However, barring a major seizing of the markets, it's not like a sudden bubble is being popped here, and sooooooooooooooooooooo many people are bearish.

I'm not suggesting anyone here is thinking this... just relaying some thoughts.

"RIMM - Target Price Lowered from $185 to $72.75 @ Canaccord Adams"..

Here is a list of RIMM's up & down -
* rating cut: Deutsche bank, canacord, RBC, pacific crest, UBS,
* rating raised: R James, C suisse
* # target cuts: 8 firms
* old target range: 214 (scotia) - 100 (c. suisse)
* new target range: 140 (TD) - 72.75 (Canacord)

Most analysts cut targets between 20-30%. Canacord cut target from 185 to $72.75, a 60% reduction. I had to agree with Fazeli. They were way off and will continue to be so. Barron's reader often bulk at Canacord. They came out with outrages "advise".

At this point, the chart is the answer. Remember Dell.

Thanks for the heads up on DSX, watermelon.

I've been in and out of this one several times....gotta look at it again.

Regards

did gold spike because people believed a bailout plan was going to be announced, or because people were simply nervous?

USD index rising...again... in the midst of action that most folks are saying is US dollar negative.

just wondering people's thought on that.

c3,

Chart's not looking good on RIMM. Breakdown of support at $80. No real support until $60. Below all the SMAs, and all RSIs aren't in the gutter just yet, getting there though!

I'm long RIMM at what seems to be waaaay too high an average price now ($91). I'll likely average down by buying a bit more in the low 70s. Also selling puts for March @ $55!

Been reading intermittently for some time, and directed many here during that time. But the time to join the discourse has arrived at Mr. Cara's very interesting thesis juncture.

On the face it has the compelling quality of hope: who wants to see the implications of a further bear market play out? As Cara said, it means global depression. In response the US wants to up the anti to essentially the all in position. Is that a good trade to be on? This much intervention is unprecedented, and it smacks of much more than socialism I'm afraid. We, in my opinion, do not have a clear and easy choice here: business as usual, or depression. It is more like a good cleaning vs huge step toward fascism. Middle Americans know this in their gut; they sees the choice as continuing and magnifying corruption vs the big cleanse. Middle guy is running 30 to one against this. Perhaps we should hear his wisdom.

Markets go down in normal recessions about 40%, and we are about half way there. We all are hyper-aware by now this is no normal recession, so where are attendant inferences in Mr. Cara's reversal?

It's as if Mr. Cara, after railing against Paulson's quasi-Fascist approach for months, has suddenly turned tail and joined Mr. Paulson in even more extreme prescriptions for our system going forward.

Mr. Cara, I feel you are glossing over some very significant points in this reversal to a bullish stance on the markets, and I am trying the best I can to point some of them out to you. You may be correct, and if so I want nothing more than to be convinced in time to take the trade. But so far I afraid I am quite sceptical. I am sure there are many in a similar quandary as to your new stance. Please take some time to flesh in your case against the elephant that I and the many others continue to see mid room here.

Best regards,

In '29 and '87 everyone was long and leveraged and the turn came quick and caught everyone off-guard. Today most people are scared and have already sold: sentiment is already extremely negative. The odds of a crash are less in my opinion. I'm no expert, just thinking aloud.

Our 30% decline from August 2007 is comparable to these crashes.

BA straight up from the spike down open.

Gatearrayed. You made 1 point regarding the % market decline. I'd have to disagree regarding Paulson: He's called for his impeachment all along, what he is currently agreeing with is Paulson's solution. You can be a mass murderer and still be good at your current profession (Hannibal Lechter comes to mind)

Bill

What if your in a 401K where there is no distinction between strong or weak is this a buy for the indexes

pappdjavul

Do you see SLW breaking below 9.00?

Nemo - great comment, they all probably have their hand in the cookie jar.

Fuego - great point about inspiration. Let's face it people only come together in time of panic or fear. Naturally. National psychology is not healthly. Your right more than ever pride has to kick in. We must all work hard to get through this but a bail out doesn't inspire people to work hard. Encouages the EXACT opposite. We have a conundrum.

Moab - on bailout quote. A friend told me on the phone that he would rather lose his livelyhood than his country to this bailout. That statement is interesting none the least.
It seems there is a massive disconnect of what exactly is the problem and how these solutions will address the problem.

Nemo - a rose by any other name .... 8).

Actually, I agree with you that there are many similarities of this market to that of 1929. In 1929, banks were uncontrolled, a land (FL) boom went bust, serious flooding in the farmlands wiped out crops and silos (looked at ADM lately?), (no political comment), and so on.

That doesn't mean that our "crash", if one occurs must be like that of 1929, but I would not tell anyone in my family to pick a good stock, buy, and hold-on, no matter what, because, unfortunately, noone in my family has the slightest desire to learn charting nor fundamentals nor timing. Typically American? I don't know, but hopefully the readers here have benefitted from Bill's shared wisdom enough to do their own due diligence in light of their own circumstances and knowledge.

I think Bill has said the same, many times.

Fazeli,

I am not lobbying RIMM at this moment, but trying to minimize further down-side risk. I still believe the fundamental of smart phones and that'll be RIMM & AAPL. RIMM looks bad in the short term for sure and perhaps $73 will stick, if the market does crash from here. The market is so psyc'ed now, its hard to do anything rational, but selling at this point will be very irrational, IMO.

Nemo -

I agree with your friend, but that doesn't mean they can't pass something similar to the Paulson plan but leave Paulson out of it. Hire an independent administrator that reports to Congress and not a Wall St crony.

Paulson and Bernanke should be discredited already. I know they are dealing with a 100 year panic but the way they are dealing with Congress and the people is unacceptable.

I’ve followed Bill’s blog since being placed on the Forbes Best List. The WIR content and informative daily commentary keeps me coming back. Lately there has been a lot of “my guy vs. your guy” political back and forth and I want to thank Bill for asking for restraint. Political views aside, we are traders and investors and Bill is absolutely right; today’s events will present real opportunities.

MOAB:

I don't think either of them will be there come January.

Gatearrayed, I would love to read more from you. I don't think Bill has "turned tail" nor do I think he is glossing over much. Do you read the Daily report? How many have you commented on in an elightening or specific manner? Care to do a point counter point word for word? You may become as much as a teacher as Bill has. I and many many others need the benefit of traders and investors with a plan to elucidate, share and defend. Thats the only way the moms and pops (i are one of these) are going to get a clue. Are you doing that? Until I read a more instructional thread in your postings rather than sniping, I will skip your posts and keep reading those here who offer substance. If you put your name at the top of your posts that would help alot.
Sincerely
GG

here's a plan for everyone....an ALTERNATIVE...if you will

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

Of course, it would NOT be tax free.

So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.

That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.

A husband and wife team has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?

Pay off your mortgage - housing crisis solved.

Repay college loans - what a great boost to new grads

Put away money for college - it'll be there

Save in a bank - create money to loan to entrepreneurs.

Buy a new car - create jobs

Invest in the market - capital drives growth

Pay for your parent's medical insurance - health care improves

Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And, of course, for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ("vote buy") economic incentive that is being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!

As for AIG - liquidate it.

Sell off its parts.

Let American General go back to being American General.

Sell off the real estate.

Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion

We Deserve It Dividend more than do the geniuses at AIG or in Washington DC.

And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh...I feel so much better getting that off my chest.

Moab,

If everyone has already sold, why is the market down 20% compared to the 40-80% of other major indexes around the world? Clearly the institutions are still quite long this market. If you think that cannot change you must be hoping for Fiat decree, another name in this case for Fascism.

Unfortunately even that drastic solution does not last for long, if history provides good guide, as usual.

With reference to Gatearrayed:

Everyone must make their own call... Mr. Cara has made his... he's taken his stand based upon his own unique approach to trading. Where is the mystery (opaqueness) in his recommendation? It seems very transparent from where I'm sitting. Given present economic circumstances... no amount of hand holding can soothe the rattled soul... only time will provide the ultimate answer to the question on everyone's mind. Given equal access to information... the real question is: am I comfortable making a stand and taking sole responsibility for the results. The man (Mr. Cara) has simply provided a platform for the sharing of ideas... the ultimate decision for what is right for you is in your hands.

Best of luck...

Gatearrayed -

Bill has said he says signs of the turn in the price action. Fundamentals are a lagging indicator and will not show you the turn. As Bill has described, he is not calling a roaring bull market, but a muddle through.

You are also wrong about Fascism. It was the big cleanse (Depression) that brought Fascism to Europe as people became destitute/desperate and turned to authoritarianism.

-Rayg

With all due respect...you failed at math...looks like about 3 more zeros in that number then it deserved.

Try $425

SDA ~10.0, 62 wks low

Brazil's Sadia posts big loss on currency market

Moab,

Yes, as the current depression threatens to bring it to US now.

This is called the denial stage.

[Bill Cara note:

When CNBC ran their Let's Hype Real-estate at the Peak Tour in the summer of 2005, I screamed they were the take-out party for special interests who were selling. I said "Books will be written!" It was the public who didn't agree for a long time. Then after the Paulson Folly started, I admonished that source as the problem that would lead to a bursting of the credit bubble, and the public did not agree for a long time.

In talking about the word denial, I don't think it applies here, at least not to me. I look ahead and see that the world's strongest nation will bring about legislative and regulatory change that will lead the world once again. I believe that equity prices (except for Financials and some Consumer Discretionary industries) are completing a long-term cycle bottom, awaiting the legislative/regulatory changes to come. Much of the world may be in a recession, but this is unlikely going to be a depression because govts everywhere are reflating to take the pressures off markets that have been sinking as HB&B has been deleveraging. The strongest of HB&B will be around to help build the next Bull cycle. Life will go on -- albeit a lot differently. The public in the US, UK, Europe or Japan will not permit these Fascists you called them a couple moments ago to continue with policies that benefit the rich and powerful. Btw, I call those "Fascists" the Interventionists, and when I first started using that word, there were people who called me a conspiracy theorist. Now the extremest of you are calling them Fascists, Dictators and whatever.

I don't think Americans are in denial or under Fascist rule just because the weaker markets have fallen more than the DJIA. Many of those markets are less well regulated and consistently sell off before the US, and harder. Also, look at the Chinese equity market. Nobody can say that the Chinese authorities are less controlling than the US authorities; in fact we all know it is just the opposite. Yet, with an economy that has soared, their equity market has been plunging faster and much deeper than the US.

Markets are complex. I don't think it's helpful to use words like Fascist and Depression without having a deep understanding of the subject matter, and used in an academic argument. On their own, words like that just play into gratuitous scare tactics. People are scared enough as it is. They want answers.]

Bought NOK at $19.35, max pain (Oct) $26.

Bill Cara, thank you for all you do here. I too would rather you hit the beach rather than burn out altogether. Its actually good for all of us to know you can do both.
Thanks to all posters
Safe trading

STO taking hit, apparently for lax safety standards. I'm long STO.

30yr fixed now at 6%... Isn't that just horrible???

arrrgghhh....I copied from an email...my bad. It sounded so good though. My apologies.

There was an article a few days ago that Hedge Funds have approximately $600 Billion in money market funds. That is an awful lot of money on the sidelines.

This crisis is similar to the Bankers panic of 1907. That panic was stopped by a JP Morgan backstop to the banks. A similar solution may stop this cyclical bear market, but obviously the secular bear market will return at some point.

I've been bearish for two years now and it is time to look for a reversal. It may not come but some signs are there.

Emerging markets always fall more than the biggest markets as traders flee risk.

"Hedge Funds have $600 Billion in money market funds"

Is that before or after the Great Deleveraging runs it's course. Oh wait, I forgot, the US gov has put it balance sheet behind all those money markets. How reassuring. OK then, is that before or after hundreds of Hedge Funds disappear?

By my view that elephant mid room is growing day by day. "The Package" yet more elephant food.

Cara 100 update: VCP, PDA

In case anybody's been wondering what is ailing the above-mentioned, Dow Jones only in the past hour has reported [excerpted]:

By Rogerio Jelmayer
Of DOW JONES NEWSWIRES

SAO PAULO -(Dow Jones)- After five years of consistent gains, the recent depreciation of the Brazilian real against the U.S. dollar has caught many companies by surprise and could lead to losses from bets in derivatives markets.
"What is important for a company to know is that a market, such as the forex market in Brazil, has two directions, up and down, and you can't assume risk on only one side of the market," said Jason Viera, owner of UPTrend, a consulting group that advises companies on hedge operations. "You have to be conservative."
Years of continuous appreciation of the Brazilian currency led many companies to protect themselves against foreign exchange losses by locking in exchange rates using futures contracts. The currency, however, reversed sharply in recent weeks due to the global crisis in financial markets, and in the 30 days ended Sept. 26, the Brazilian real lost 12% versus the dollar.
On Thursday night, large Brazilian meatpacker Sadia SA (SDA) reported a one-off loss of 760 million Brazilian reals ($417 million) after it closed out some loss-making foreign exchange positions.
Hours later, Brazilian paper and pulp giant Aracruz Papel e Celulose SA (ARA) said an internal audit detected unusual losses in its foreign exchange operations. The firm said the losses could surpass an internal limit and said financial director Izac Zagury had stepped down, but didn't provide further details.
Investor retribution was swift. On Friday, Sadia's American Depositary Receipts plunged 29% to $10.85, while Aracruz's ADRs fell 16% to $38.59. The Bank of New York's index of Brazilian ADRs was down 4.3%.
Both companies used the foreign exchange derivatives because of their significant export business; investors are now concerned that other companies may post similar losses.

Hi,

Nicole Elliot's weekly comment:

http://www.mizuho-cb.co.uk/TresInternet/PDF%27S/weekcomment.pdf

Have a good one.

Cheers!

After looking at the futures pre open and no deal overnight, I honestly thought the markets would crash at the open. Shudda closed the shorts right then and there. Oh well, made a few bucks.

Anyway, with month end window dressing coming up and perhaps the end of fund selling, I've set a series of buy stops for QLD, DDM, UYG, NOK above the first half hour highs.

gatoraid - You've said your piece, now come back next month and say I told you so. enuf already until then?

Maromatics - I have hoped to get into some chart discussions with you. Thanks for your comments.

I pulled up a chart of $SPX in the manner that you described in your 10:55am post and agree with you that for a long term investor the results of trading in accordance with the weekly MA(20) closing above/below a 1% envelope of the MA(50) could be very good for someone who has the patience and determination to trade in accord with the chart. It looks to me that one might miss the fist leg up/down in any major price move but would still come out very much ahead, at least in the last 10 years.

Although not trading at all today, I routinely day trade (not so much), and weekly trade (for the most part) but am too old for many more "trade every two or three years" routines. Your suggested method does look pretty good for use by a lot of people who are young, discplined, and willing to look at a chart once in a while.
.......................

On a different subject, I looked at your trade process, posted a few days ago, and agree with much that you have built into your routine. Perhaps I missed it, but I would definitely add a couple of steps:

Rule 1 - Buying on weekly basis (ie IT) is best done when the monthly SPX trend is moving upward, and selling on a weekly basis (ie IT) is best done when the SPX monthly is moving down. I use a simple MA(12) for monthly trend determination. Day trades may be done at any time but I find it easiest to make more money in a day trade if it is in the direction of the Monthly trend - that is, if my weekly trade would be in accord with a monthly DOWN trend, then my easiest/most profitable day trades also most like will occur in the downward direction

Rule 2 - I have bought so many "bloody daggers" in the past that after stringing them together, I made red curtains for all the windows im my house. My rule is to wait for a buy confirmation before buying a "bloody dip". I would accept as confirmation for a day trade the rules used by Bill Cara plus the rule of g034 (wait for a trend line break that holds), but have some other confirmation plots that I personally use.

I know you know all this, but hopefully others might profit by it.

Thanks for your comments and willingness to share along with Bill Cara.

bill has been calling this economic situation we are all in for a very long time and some of us have not been listening.

TIME TO LISTEN AND LEARN

Thanks sv

Spot,

Thank you for your kind words.

You are absolutely right.

One final remark: there is no "sure fire" recipe for this. In reality, this is a sort of craftsmanship, in which you work hard in learning everyday.

:-)

Have a great weekend.

Cheers!

Not much day trading going on. i s everyone sitting out?

Mr. Cara, Thanks for your response. I will refrain from using the more incendiary terms as you wish. My point was to put a fine tip on the point this is not business as usual, and choices made may reverberate for decades, if not longer.

The crux of your case I find only in one sentence, "Much of the world may be in a recession, but this is unlikely going to be a depression because govts everywhere are reflating to take the pressures off markets that have been sinking as HB&B has been deleveraging". Why then have all the reflation efforts failed miserably to this point? The more govts around the world do, the worse the situation becomes. How can you say now, all of the sudden, they will begin working? The question reamins I think.

There are cases when interventions do nothing - excuse the analogy - certain disease conditions come to mind, and immutable laws are found as if anew. So please, I am listening but not suaded as yet. Why do you think after interventions galore continue to fail this is the point of reversal?

Am I missing something, or have you not yet made that particular case?

Best regards,

"You are also wrong about Fascism. It was the big cleanse (Depression) that brought Fascism to Europe as people became destitute/desperate and turned to authoritarianism."

A "big cleanse" does not necessarily bring on a great depression. Quoting Ron Paul ( http://www.campaignforliberty.com/blog/?p=616 ):

"It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year."

Also, I thought it was the Weimar hyper-inflation that brought fascism to Germany, no?

Looks like about 11,150 on DJIA today.

I just ask myself, would I rather buy high or low? Big blowup? My money is no good anyway. I'd rather have shares in the Cara 100 than paper in the bank.

I see posturing, then both sides will claim victory.

re: 11,150 DJIA.

Assuming it breaks above the close/open.

bsi87

I'm curious ...how did you arrive at that? Or was it just a best guess?

Guys and Gals,

Long time reader....love the discussion here...and am learning alot from you all. Sorry about the silly alternative plan.

Is anyone trading today? I added to my GS calls and added an X call.

Ray

banks are rallying...do we have a deal?

Burning Down The House: What Caused Our Economic Crisis?

http://www.youtube.com/watch?v=H5tZc8oH--o

[Reader Digest / Cliffs Notes version]

Progress being made?

McCain Agrees to Attend Debate
AOL Canada, Canada - 5 minutes ago
Spokespeople for McCain said earlier Friday that he was looking for some kind of "progress" in the bailout talks before committing his participation, ...

The German economy recovered from the Weimar hyperinflation by 1929, as that ended in 1924. It was the depression collapse that opened the door to Fascism. It is true that a big cleanse may not bring about a depression, however you define 'big cleanse'.

Jesse's Cafe has an excellent discussion of where we are politically/economically: http://tinyurl.com/3et5e8

re:DJIA.

lotta chart reading. Look at an intraday chart of $indu. Draw an ascending trendline under lows.

10,900 near the open, 10,925 about 12:20.

Horizontial resistance is about 11,020

difference between 11020 and 10900 is 120, add 120 to 11020, 11140.

Holding that horizontal line at 11,020 is critical.

bsi87

Thank you
Danke schön
Efcharisto
Merci
Grazie

Firstly - What is JPM going to be able to do with WM assets that WM couldn't do? How? By my calc's the withdrawals were only 9% of the deposits (16.9B vs 188B). Seems hardly enough to be critical.

Secondly - The government media complex is saying we have to have a deal right away or else. Why? Who says what day and why is there a rush? And if it doesn't happen by Sunday can they guarantee the result? And if it does happen, can they guarantee the result? What is the probability of their speculation and based on what have they established these probablities?

I don't buy this hard sell on the public using scare tactics without full disclosure. The markets are not black and white. Maybe the government media is afraid, that given enough time to consider, we might actually start doing our due diligence and requiring the same of our elected officials.

re: DJIA

It's called an ascending right triangle.

If the ascending support line is broken at 10,950, 10800 next stop.

Since we saw the early sell off to take the small guy's funds, I think it's more likely to rally. JMO.

Nemo, Let's say I had $1000 to start my investment career. Would you invest in Bill's book and Active Trader Pro (assuming it comes with directions) or leap into gold futures or derivates today? I nervously await a closing to fund today...assuming it does..Btw with mortgage pros down 70% it's a great time to become one. I happen to have a spare desk. Thanks for your pearls.

I was doing nothing for the past few days, trying to preserve the 30% gain in my portfolio between last Tuesday and this Monday. I didn't see anything that was unreasonably oversold this week and so was not motivated to buy anything (I did pick up a little USD and TBT on Tuesday, but that was all).

Today I see another opportunity in the market: oil down and VLO down. So I just picked up some VLO at $33.49, placing a sell limit order at $35.

SLW is beginning to look attractive, but I am trying not to be greedy. I have 15% of my portfolio in SLW now, and if rebounds Monday and starts moving up, I'll be glad. On the other hand, if it keeps going down, the cheaper I'll buy the new bunch of shares, the greater will be the probability of it being a quick profitable trade. I currently have a buy limit order at $8.50.

Fascism, boys and girls, is nothing more than a partnership between corporate power and government...it can take many forms and is called by many names. It has nothing however to do with Olympics, sports, racial hatred, Gypsies, Jews, or homosexuals.

Fascism happens when corporate power backs political candidates who go on to win. Sound familiar?

Fascism has very little to do with Hitler by the way, Hitler was a Nazi. It was Benito Mussolini who "invented" Fascism, and in truth, it was a heck of a lot like what we have here in America.

Loannetter,

u didn't ask me but I'd buy Bill's book and all of Alexander Elder's. Read them 3 times and paper trade for 3 months while building up some capital.

JMO.

bsi87

"Since we saw the early sell off to take the small guy's funds, I think it's more likely to rally."

That makes sense. Some what similar to what Vadym Graifer mentioned the other day.

Can't afford to be short darn near anything if Congress gets something put together over the weekend.

ALOHA !!

I would be looking at LMT(NYSE) and other US defense contractors since they will not be hit like most other corporations in AMERICA who struggle with profit margins and unfunded benefit liabilities. The US government guarantees pension funds of defense contractors literally within the contracts written. Many here know that when things fail on financial and economic front there is no better way to get the economy moving than inflating the hell out of the money supply and going to WAR!

I just heard the SCHWINGGGG from Medvedev and he has pulled the sword out of its scabbard. Why? It is because of US FOREIGN POLICY and the dictates of such a policy require every Nation on the Earth to be Democratic not unlike the Islamic jihadist who require every Nation on Earth to be Muslim! This is the kind of "meddling in foreign affairs" that our Founding Fathers warned us of and why going to WAR required a full debate of the US CONgress prior to any President's declaration of WAR. Yet once again in modern times, as has been done with US banking and money, there has been concerted effort to skirt the US CONSTITUTION and do "pre-emptive warfare" with little to no debate at all. Where is the debate on the US FOREIGN POLICY that has now mired us into COLD WAR 2 right in our own backyard again? Hello OBAMA? (cricket noise) ... Hello McCAIN?(yet more cricket noise) So there was NO DEBATE to set up missile shields against IRAN in POLAND on the Russian border? Then we got GEORGIA and there is still NO DEBATE about the effectiveness of US FOREIGN POLICY. There is NO DEBATE about our relationship with ISRAEL either? I wonder why? Is ISRAEL an ally we can afford? Where does all our FOREIGN AID funds go and what are those funds being used for?

Look in one word the AMERICAN EMPIRE is in DEFENSE mode. When I hear the word DEFENSE I think of LMT and GOLD. They are both tied to DEFENSE but for completely different reasons. They are both to me a STRADDLE on EMPIRE.

Now here is an article that must be sending chills down the spines of every US general and admiral. Not so much Bush and Cheney because those two draft dodgers are leaving soon and moving to Dubai. I believe we need a US CONSTITUTIONAL amendment that makes drafting ex-executive branch members a priority. I mean, if they start the WAR can't they at least be in it? They didn't show up for VIETNAM so maybe in their latter years they can make up for that "oversight" and go to POLAND to defend against IRANIAN missiles headed for Gdansk!

READ ON:
From Times Online
September 26, 2008

Russia to build missile defence shield and renew nuclear deterrence

Russia's President Dmitry Medvedev speaks during a meeting in the Kremlin in Moscow (RIA/Reuters)

The Russian President has signalled a new arms deal with the US

Tony Halpin, Moscow

Russia is to build new space and missile defence shields and put its armed forces on permanent combat alert, President Medvedev announced today.

In a sharp escalation of military rhetoric, Mr Medvedev ordered a wholesale renovation of Russia’s nuclear deterrence and told military chiefs to draw up plans to reorganise the armed forces by December.

He said that Russia must modernise its nuclear defences within eight years, including the creation of a “system of air and space defence”.

The announcement puts Russia in a new arms race with the United States, which has infuriated the Kremlin by seeking to establish an anti-missile shield in eastern Europe. The US argues that the shield is aimed at rogue states such as Iran, but Russia is convinced that its own security is threatened.
Related Links

* Russia sends warship to the Caribbean

* Russia rattles sabre with arms sales to Iran

Mr Medvedev told military commanders that “all combat formations must be upgraded to the permanent readiness category” by 2020. He added that Russia would begin “mass production of warships, primarily nuclear cruisers carrying cruise missiles and multi-purpose submarines”. (more)

LINK: http://tinyurl.com/3nstly

Please go to this link and read the entire article and you will see what I mean when the not only two of biggest oil producers in the World team up, but then they also seem to revel in the demise of the US EMPIRE as well.

This does not bode well for gas prices globally or for global stability. Yet, I am sure as usual the US leaders will point the fingers of blame towards Chavez and Putin as the root cause yet they will not even examine what part their own misguided FOREIGN POLICY has played in this turmoil. Why Kissinger still has any clout in DC I'll never know! This is the guy who masterminded the whole East Asia/Communist DOMINO thingy that worked out so well for us in the 1960s and 1970s causing a massive global default on the gold standard!

ITS THE MONEY STUPID!

i started reading Bill's commentary a few weeks ago. At the time he was saying that DOW 10K and NAS 2K was in the cards. Based on his call and other similar opinions i reduced my equity exposure.

Now he is calling a bottom and so i'm slowly re-upping my equity exposure (USD ETFs XLK,SPY,Q's, etc), but i have a nagging concern - What happened to the call for DOW 10K - are the reasons for that call no longer valid??

Loannetter,

Bsi87 was reading my mind.

I pray to GAWD that if these jerks do pass a deal that they do so DURING market hours so that me and VAD and BSI can make the coin instead of the buy-and holders who at this point could only be large institutions, 'cause let's face it, who in their right mind would hold stocks overnight these days?

RE: IBKR:

Interactive Brokers Guides Q3 $0.55-0.65 v $0.47e; Unit IBG LLC will buy back up to 8M shares of registrant's common stock (19% of shares oustanding) - filing
- Expects income before income tax and minority interest to be between $325 -375M.
- Company believes that the impact of the recent significant market events have unduly depressed the price of the company’s common stock, and the company’s Board of Directors has therefore determined that a program of stock repurchases would be an opportunistic use of available funds.

Thanks JMO, Strongly considering that. Is Andrew Tobias considered old hat?

Not to beat a dead horse but I think the only way things will change is the decision makers have skin in the game.
'Wall Street Executives Scored $3 Billion as Banks Rose and Fell'
http://www.bloomberg.com/apps/news?pid=20601109&sid=a96vQtgKS3BM&refer=home
and
http://www.bloomberg.com/apps/data?pid=avimage&iid=iq7r42H3bCtw
There is nothing ironic about this...........

little more chart reading, sez if DJIA hits 11,150, then 11,500 is the next upside target.

we'll see.

ambac could get interesting today....comeone guys do the darn deal already. Although the "scary surprise" as bsi suggests would be an upside jump negating holding shorts, holding longs isn't exactly a comfortable feeling in this climate either.

gravity's rainbow, he talked about that at some point over the last week, but it might be buried in the daily discourse.

ROS buy stop limit 46.50/46.55.

Kaimu:

Did you ever think that maybe the Russian and US foreign policy moves are coordinated? For Russia an the US to revive the bipolar world/economic organization, they have to be enemies.

Oh: put the guns away folks-but I was just listening to Rush Limbaugh, as I sometimes do as a counter to the left-leaning media influences. Looks like the legislation for this bail-out allegedly contained a significant sum (20%) for ACORN-which is a pet project of Obama and an organization for whom he worked. SURPRISE!!! Politics is part of the legislation.

Point is-if the democrats want to send this to the Senate, they can. They have the horses to send this to the Senate. Which makes you wonder, outside of not wanting to walk the plank alone, they don't.

Thanks moab.

thanks denny. i'll have to scan through previous discourses to see if i can find it.

does anyone here still believe we will see 10K on the DOW in the coming months?

shark,

I gotta think about it. But seems like when the dot com bust was going, the trade was to go long at the end of the day and then sell the open the next day which was often a gan open.

Main thing is to stay flexible. U can't afford to hold a bullish/bearish view and trade off of that.

yea but isn't it safer to just fade (short) the gap open that morning as opposed to playing the overnight guessing game?

shark,

I definitely must not be in my right mind. I've loaded up RIMM all day, betting that any announcement with regards to a bailout comes this weekend, and that a bailout WILL come, and what seems like an over-reaction on RIMM will reverse.

Am I crazy doing this?

If a bailout doesn't come, well then I guess I'm screwed!

PS: I can hold RIMM for quite a while here if I'm wrong, but I never like being in the red and I find this market too volatile to set stops.

gravity's rainbow -

The call for Dow 10,000 was a very approximate number. 10,500 is pretty close.

BSI87:

Yeah, but do you go long SKF or UYG today at the close. Get an agreement over the weeken and SKF will suck wind. No agreement, just the opposite for UYG :)

Hi All,

I have been gradually buying positions in the last few weeks, as I expect we are nearing the lows. I have purchased PLM for a multi-month to multi-year holding as they look to produce in late 2009 or early 2010. For income purposes, I have recently bought NGLS and PSEC. Both have had recent insider buying and pay excellent dividends. I am a long-term bull on natural gas.

rainbow,

I believe Bill's thoughts in calling the turn before Dow 10K had to do with the reflation policies of central bankers in response to the latest financial calamities.

"But, please send us your “quality company” ideas."

I submit WDC. Solid financials, good ROE, forward PE of 5, book of $12/share, stock around 21.

Hi Gents; Typekey problems prevented me from posting this info pre market.
Disclosure long Rim & DELL as of today.

Scotia Capital Edge Report
RIM.To; RIMM

If the Stock weakens Today - Buy It
■ Recommendation unchanged: There is little doubt earnings expectations will come down
today as a result of the guidance. However, we believe the street will factor in all of the bad
news regarding the margins and not look to alter the top line -- since granted the company
gave them no reason to do so. The shares were trading as low as the US$78.00 level in the
after markets which based on our EPS expectations is 13.5x our F2010 EPS expectations.
We have lowered our target multiple to reflect the heightened short term risk associated with
launching several new devices in the quarter to factor that influence into our numbers. Based
on our expectations that top line numbers for 2010 are low, EBIT profitability decline will
not be nearly as severe as gross margin decline, RIM will maintain or grow its market share
in Smartphones and the Smartphone market will, despite economic conditions, experience
robust growth we see RIM shares as very attractive at these levels. We do not believe
investors will get many chances to buy RIM shares with a multiple in the teens and have not
had that opportunity since the company experienced its legal issues three years ago. We
recognize the risks associated with the current economic environment and executing on
RIM's ambitious device launch strategy but, overall, would strongly encourage investors to
maintain or develop an overweight position in the name. The short term ride may be bumpy
but we believe the returns in 6 to 12 months will be very rewarding.

David Merkel's take against the bailout:

http://alephblog.com/2008/09/26/let-the-current-bailout-die/

"Can't afford to be short darn near anything if Congress gets something put together over the weekend/"

that's what they want you to think . . .

looking at the chart patterns, their trying to paint what looks like "springboards" - setup for a gap up & rally.

but looking at the volume, it's giving a different picture - like everyone that believes in a rally has mostly already bought in.

dyodd

Fazeli,

I can't tell you how to trade, it must be in accordance with your own personality, your own temperment, your own risk tolerances etc. I for example am very impatient and I am surprisingly uncomfortable holding stocks, even profitable ones, which is a tendency I'm fighting. My sister on the other hand will buy 1000 Apple (over 100k worth) and just hold it for 6 months, barely checking the price, and she's probably been more successful than I have. I like to make quick money each day hopefully, and some folks like to own the company for 30 years. Both methods can be valid.

As for you being out of your mind or not, that's an issue between you and your shrink no?

FWIW, S&P upgraded RIMM to a "buy".

On RIMM: I think in the current environment looking to 2010 after yesterday, is not a good reason to buy now. I think a dead cat bounce is in order, but it's sitting on the precipice of resistance down to the sixty area. Now, imo, if you think legislation is forthcoming-then you should definitely get an amplified DCB. Does it hold after? I would think it sells off because traders are protecting profits

Took a small flyer on NCC @ 3.66

shark,

LOL! I can't afford my shrink anymore so I turn to the Cara boards!

I understand your temperament. I do not (yet) have the ability to do high frequency trading, although I am fascinated by it and follow the notable individuals on this board who do so very carefully.

I'm also not one to sit on a stock for years. As we speak, I keep watching the red number beside RIMM keep growing in amount in my IB Trading window! But it just seems to me a good play, considering the data that has already been posted here today.

ksobo2000,

I definitely have WDC on my "to buy" list. I think they're a great technology play going forward seeing as how the world only becomes more data hungry and solid state storage solutions are nowhere near ready for primetime.

Trading My Chips,

Thanks for that post on RIMM.

"why not give Bush the benefit of the doubt?"

Been there, done that.

IBKR:

Up almost 20%.

This is a company that is market neutral and that thrives during times of distress and higher trading volumes. It is currently trading at 10x earnings when companies like AMTD, SCHW, etc trade at 13 to 16 times earnings. And with them buying back 20% of the company, earnings will grow 20%. So take $2.2 (current run rate on earnings) x $1.4 x 1.2 (shares o/s reduction) = $37. This stock is still significantly undervalued in my opinion.

gravity's rainbow. I believe Bill explained that the 10,000 was not a absolute number. It was just an approximation and Bill believes we have hit bottom already.

Anybody have thoughts on FCX down here?

Just got the following announcement. ~OG

With Congress examining the Treasury Department's proposed emergency legislation for solving the financial crisis, the Harvard Law School's Program on Corporate Governance has just issued the following discussion paper on addressing this crisis:

A Plan for Addressing the Financial Crisis
by Lucian Bebchuk
Download Paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1273241

Below please find the abstract of the paper.

Abstract: This paper critiques the proposed emergency legislation for spending $700 billion on purchasing financial firms' troubled assets to address the 2008 financial crisis. It also puts forward a superior alternative for advancing the two goals of the proposed legislation – restoring stability to the financial markets and protecting taxpayers.

The proposed legislation can be redesigned to limit greatly the cost to taxpayers while doing much better in terms of restoring stability to the financial markets. The proposed redesign is based on four interrelated elements:

• No overpaying for troubled assets: The Treasury's authority to purchase troubled assets should be limited to doing so at fair market value.

• Addressing undercapitalization problems directly: Because the purchase of troubled assets at fair market value may leave financial firms severely undercapitalized, the Treasury's authority should be expanded to allow purchasing, again at fair market value, new securities issued by financial institutions in need of additional capital.

• Market-based discipline: to ensure that purchases are made at fair market value, the Treasury should conduct them through multi-buyer competitive processes with appropriate incentives.

• Inducing infusion of private capital: to further expand the capital available for the financial sector, and to reduce the use of for public funds for this purpose, financial firms should be required or induced to raise capital through right offerings to their existing shareholders.

Compared with the proposed legislation, the alternative proposal put forward in this paper would provide a far better way to use taxpayers' money to get the financial sector out of its current predicament.

Such anguish over Bill's end-of-the-bear call!
Reminds me of my kids' reaction when I advise them that I think they are following an erroneous path in thought or deed: they want ME to change MY mind so that they can feel comfortable with the path they are intellectually and/or passionately attached to. It's a sign of deep respect.

FCX bounced off resistance at $60 from 2006-2007 where it primarily channeled. Looks like it would have to break above 75 and hold. Having said that no technical indicators are currently trending positive.

Mmmmmh...I guess this is a general thought to keep in mind...end-of-month=sell offs for hedges. PE is close to what Bill would consider a bear market low of 8.11 TTM

Just noticed that the market is about where it was a few minutes after the Monday 9/15 open and is 500 points above the 9/18 low. I hope it holds into todays close.

Thanks ,nemo.

Bull Hunter!

I know this puts me in questionable company, but...just saw where Cramer is calling the selling in FCX as redemption related.

nemo, so that would be 20% of 800 billion, or 160 billion. Congrats to Rush for finding that needle in the haystack. The 'real' media would never report an insignificant detail like that.

Today is kinda' like watching paint dry.

I view IBKR as a good example of what Bill has been talking about. Finding good quality companies at value prices, regardless to an extent of what the broad markets are doing.

Maybe the broad indexes will rally strong...maybe not but, there are individual companies and even sectors that are beginning to look attractive and will beneift once the capital starts flowing again.

Killer:
Again, I'm in nobody's corner. What's great about opposition is they flesh out the gotcha's. Truth is always in the middle.

2nd and shark,

Powell was "used" in that U.N. bit. He was left out of the loop on a lot of the pre-invasion info and they knew people trusted Powell. More bad stuff than you'd ever want to know in the book, "Cobra II". Powell (before resigning as as Sec.of State) advised Bush if he was determined to go into Iraq — "Be sure you have enough troops. You break it, you've bought it."

As a career military guy, Powell is unlikely to ever do a tell-all expose on his Commander in Chief or the Sec. of Defense. Sometimes personal code trumps pay-back satisfaction.

maromatics.

Thanks for the LT buy signal info.

FCSX and paint drying:

90 day vol 935k
10 day vol 663k
today 117k

moab,

"For the sake of the altar of the free market system, do you accept a Great Depression?" the member asked.

If that's what it takes to restore sanity, a loud YES!

The current solution of promising to restore access to credit for people, is like giving an alcoholic a gift card to the local bar.

wow, Mark Faber (nickname Dr. Doom) who apparently called the 87 crash was just on CNBC and he is expecting a short term rise in SP500 as he says stocks are oversold, but then a selloff to new lows. He forecasts that ALL assets to decline in value as the great unwind continues over the next several years.

Bought 1k AUY @ 9.01

What are everyone's thoughts on earnings moving fwd. i am worried even with a bail out that earning will be very very soft in the next few qtrs?

An Alternative Plan you will never see.
Anyone with an ARM coming up for a big rate hike... contact your lender/mortgage holder and offer to continue to pay at a better rate. The alternative is you walk.
I doubt any mortgage holder wants to foreclose — to poor a market and too expensive to maintain property until sold.
The mortgage holder who makes the offer to his customers first will get a big publicity boost and good will benefit.
Any reason they aren't doing this?
Sure, free money from the government.

ALOHA !!

nemo ... It is the same INTERVENTIONISM policy that Ludwig Von Mises speaks so eloquently about in his book PLANNED CHAOS, written in 1947.

Essentially the World is run by BULLIES and it is in truth no different than the same bullies you encountered in high school except the ones running governments have these sophisticated degrees from IVY LEAGUE colleges and the likes in order to be accepted into the CLUB from whence all political power must originate ... You cannot just walk up to the podium at the upcoming DEM and REP debates and say, "HI, I'M NEMO AND I WANT TO BE PRESIDENT AND HAVE A LOT OF POWER ... I DON'T HAVE A DEGREE AND I HAVE NEVER BEEN IN POLITICS ... SO VOTE FOR ME INSTEAD OF THESE TWO IDIOTS!" Well, idiots they may be but these idiots paid their dues and are members in good standing within that elite CLUB that is the IVY LEAGUE colleges! Is BERNANKE from a junior college with a two year degree? The way he runs things you'd think so, but unless he forged his Princeton credentials then there is no way he gets to where he is with a two year degree! You just don't get to bat unless you have the necessary credentials! Gone are the days of Lucius Quinctius Cincinnatus ...

So when the USSR was toppled by the USA bully what do you think the Russians would do? The post USSR leaders all were very palsy-walsy with the SUPER BULLY. Isn't that how it is in high school? Then while you are pals with the bully that humiliated you sneak off to the gym and BEEF UP and then come back one day and SUCKER PUNCH that BULLY who took you down ... So when Russia was forced to dismantle its military during the 1990s it would not have been wise to attack the USA. But I never trusted PUTIN. Putin did a lot photo-ops with BUSH and I never got the media SPIN that BUSH and PUTIN were best friends and "cowboy pals"! Remember all that? Well, what do you expect PUTIN to do? Okay fast forward to today and now look! The USA just got sucker punched right in its own backyard! Where is the "palsy-walsy" stuff now? Any BUSH and PUTIN photo ops where they're both riding horses and wearing cowboy hats, smiling and laughing?

Just as there has been a major imbalance in the financials due to INTERVENTIONISM there was also a major imbalance globally in geopolitics and EMPIRE when the USSR collapsed in the late 1980s. Whats is it VOIDS abhor? Every US administration since Reagan has been maneuvering to capitalize on that imbalance and void, but I believe the resilience of the Russian people surprised the heck out of American leaders just as they surprised the German generals in Leningrad during WW2. Russians know how to suffer and have great practice at it. Americans haven't had any suffering since WW2 ... There are cycles to EMPIRES even while they're EMPIRES and then there are the cycles where every EMPIRE ends. Its not magic or doomsday its just HISTORY and the HUMAN CONDITION! The HUMAN CONDITION part is why I always say that these BAILOUTS are just BAND AIDS until we base our money on something other than the HUMAN CONDITION(which is FIAT). I mean, if you're at the TOP where else can you go? Our Founding Fathers were more reluctant to take on the mantle of EMPIRE since they saw what happened to the British EMPIRE, so they steered a course in the middle where freedom would dictate the course of events and markets and economies not large government, but with the success of that model so to was its demise and the need for "meddling" that humans who have power seem to NEED DEEPLY. Who among us spends a lifetime attaining power and then once it is attained does not use it? It goes against the human condition to not believe your own PRESS and your own PEDESTAL! So folly wins out and here we are!

ITS STILL THE MONEY STUPID ...

Bill's 11:20 AM note to Gatearrayed: Definitely worth re-reading!! Copy and paste below.

http://www.billcara.com/archives/2008/09/caras_commentary_community_cha_200.html#c76082

In addition, many thanks to so many of you, including Macromatics, bsi87, Vadym, Kaimu and others.

Like Bill, you have been gifts to the rest of us and we're grateful. Thank you.

Watching for a nosedive into the close and an announcement over the weekend.

Grym, Powell also had a son in a high paid position that he was not remotely qualified for. I think family may also have had something to do with his disappointing performance.

Bert, you mention the total amount of deposits held at WM. What you didn't look at was their working Cash, or their short term investments. WM died because it ran out of cash. It still has all of the deposits, but couldn't liquidate the long term investment it has put those deposits into.

THAT is the problem. If WM had not declared bankruptcy then it would have either take on more debt so that it had enough cash to pay out the deposits that were withdrawn. Or it would have to liquidate the long term investments it has made, and take a loss on these.

Correction:

Lynch, Finch or the Grinch?

I said Peter Lynch played in the movie Network. It was, of course, Peter Finch. Close, but no cigar :--)

(I wonder what Peter Lynch is doing these days — he could be mad as hell too, I guess.)

Kaimu:

I'm in your choir-you make such a nice lead...tenor or baritone??? Naahhhh...your the bouncer at the door who reads Nietsche.

I'm kinda' in Faber's camp also. Not that I'm necessarily against Bill's view, but...if you need to de-leverage the entire financial system, that means a HELLUVA lot less pieces of paper, or mouse-money to chase assets. Frankly, I don't have the CPU capacity to figure that one out.

Kaimu:

I have two degrees and an 18 year apprenticeship. PHhhhhht!!! Lotta' good it did me. Nevermind, you were right.

any thoughts on AZZ as an infrastructure play? plays in to Bill's posture--
InPlay:5:13AM AZZ Inc. beats by $0.13, reports revs in-line; guides FY09 EPS above consensus, revs above consensus (AZZ) 38.40 : Reports Q2 (Aug) earnings of $0.92 per share, $0.13 better than the First Call consensus of $0.79; revenues rose 26.6% year/year to $103.3 mln vs the $103.6 mln consensus. Co issues upside guidance for FY09, sees EPS of 3.25-3.35 vs. $3.07 consensus; sees FY09 revs of $420.0-430.0 mln vs. $416.03 mln consensus. Co reports backlog at the end of Q2 was highest in co history at $190.8 mln vs $149.2 mln in Q208, an increase of 28%.

we're probably still watching Act I...

XLB & XLU just made new lows for the day, they are not looking helthy.

If XLE closes below the 66.78 minor fib level, that is shortterm bearish. It is also not looking so healthy.

QQQQ also looking sick, it is hard to see, too heavily manipulated to be an easy reasd.

I have watched RIMM shares for a long time but was always afraid of the high price.The price is now lower and I dont want to squader a chance to start a partial buy.
I sold 5 dec $55.00 contracts for $U.S. 3.34 with the following thinking.
(a) If ths stock stays at $U.S. 70.72 I earn 3.34 a share and can buy shares at 67.38
(b) If the stock goes up I will just take the pofit but not yet have the stock.
(c) If the stock goes down to the strike price I will have the shares for a price of $U.S. 51.66.

Came back from my morning routine and saw that SWC has entered the "bargain territory." Bought some at $6.37, placed a sell limit order at $7.20.

It's no accident that we're all alive now. DId you know that there are more people alive right now than have been born, lived and died in all of human history?

Sharkster:

Does that mean we'll soon have a reversion to the population mean....:) or :(

Still waiting for the big sell off.

AEM just went sub-Cramer-effect.

Britain's Gordon Brown calls for new global financial order at U.N.

Sounds like what Bill has talked about several times here.

http://tinyurl.com/4c5857

nemo - CPST still tumbling....

What is going on with SLW? Why is it falling especially with the 700 billion bailout package about to take shape.

We could get "sell the news" on bailout announcement, with big boys selling into any relief rally.

This will undoubtedly be followed up with a wave of bad news through earnings season. While a near term bottom may be in, and I am positioned to benefit from any short term bounce, I continue to remain cautious and vigilant.

$INDU is slowly trudging higher into the close. So who knows something or is it all just hope?

UYG moving up = workout?

Just bought RIMM @ 70.37 to average down my overnight order filled first thing at $77

No to a Great Depression. Are you people insane? Many people lost everything in the great depression; many people starved. We don't need economic devastation to restore sanity to markets and government. We need citizens to stand up for themselves and their rights and their money. Politicians will do what the voters want; the voters just are not telling them what they want, until perhaps this week.

Protest ended the Vietnam war. Protest will end Wall St. domination of the economy.

ALOHA !!

"Britain's Gordon Brown calls for new global financial order at U.N."

Will we get a NON-FIAT based currency with this "new global financial order"? What good is financial order without monetary order to stabilize it?

It was GORDON BROWN who sold all of the UK gold for $300 an ounce! NOW THERE IS A GUY WHO DESERVES TO LEAD A NEW WORLD ORDER! He failed at the "old world order" so what makes anyone believe he will succeed at the new one?

I call this kind of SPIN ... SHUFFLING THE DECK OF MARKED CARDS!

Gemma,

thank you... you have no idea how few people would characterize me as a "gift" (grin)

Wow, what a nasty fakeout @ the top of the hour. Lesson learned, (w/o skin in the game) wait for 3 or 5 min candlestick or two to confirm that a break down or break out is actually happening, and not just a shakeout.

nibbled a bit of SIL at 2.37. Hedging a bit.

FCX: what I like about it is that in their last earnings statement they said that the price of oil is the major factor contributing to their mining costs. With oil down so much since the last quarter, their mining costs should decrease significantly. But then copper is also down...

I currently have no position in FCX, and today's break below the recently established support level might mean it will fall lower in the days to come. However, if I had free cash now, I would start scaling into FCX.

BA has been noodling along about the same line for 3 DAYS!

SLW - why has its price been so WEAK? moreso than silver itself for sure. Any ideas why?

UAUA is under9.

another washout in the shares.

gold at $885 and the shares moved lower and harder. close to another all time low in the shares vs. metal ratio.

re SLW:

note that GDX is down 2% today but gold is up, XLB & XLE are down 3%.

"why" is anybody's guess, but I think the idea is supposed to be -

who needs that junk metal & grease when we're going to get a bailout - you want to buy financials, realestate, all that good stuff . . .

Look at FED... but I thought banning shorting was supposed to protect against such declines? Right...

Bill mentioned Canadian junior o/g stocks recently.hope u find this info useful.No position yet.My rump is still burning due to construction cost increases at Fort Hills (ie uts.t)

Scotia Capital Edge Report
Junior Oil & Gas Target Prices

Sector Outperform

Galleon Energy Inc. GO.A C$17.00
Iteration Energy Ltd. ITX C$7.50
NuVista Energy Ltd. NVA C$19.50
Rock Energy Inc. REC $5.75
TriStar Oil & Gas Ltd. TOG C$25.75
Breaker Energy Ltd. WAV C$11.75

Sector Perform

Trafalgar Energy Ltd. TFL C$4.25
Storm Exploration Inc. SEO C$16.00
Delphi Energy Corp. DEE C$3.00
ProEx Energy Ltd. PXE C$21.75
Alberta Clipper Energy ACN C$2.75
Anderson Energy Ltd. AXL C$4.25
Bow Valley Energy Ltd. BVX C$4.40

Sector Underperform
Compton Petroleum Corporation CMT C$9.25
Birchcliff Energy Ltd. BIR C$11.50
Paramount Resources Ltd. POU C$16.50
MGM Energy Corp. MGX C$0.70
Twin Butte Energy Ltd. TBE C$2.80

GS and JPM had a very nice run today. Don't need any PM's, the bailout is coming and the party's about to pickup where we left off. And all the bankers are so much closer together now.

Vadym: FED and also WB, DSL, NCC, ...

FCSX, just sold at 19.15

It's tired and I'm getting late.

Sold overweight QID position.

In $41.33 Out $51.33

I should have listened to 2nd and left the party several points ago but I feel like I've been allowed to dismount from a wild horse.

Have a great weekend, everyone.

Volume picking up on the close. Hank, is that you calling?

JPM opened @$40.85, now @$47.xx and that WaMu meal was so tasty!

I am going to sit this weekend out, 100% cash.

Good Luck to the longs over the weekend!

COF shot up good in the last few minutes.

double inverse ETF's: a plumbing question

They say these ETF's aren't adequately priced, and that options markets are skewed because of the short-selling ban.

Can anyone explain how shorting is used to create inverse ETF's and by market makers to take on options positions?

Is it true that both instruments are failing to reflect true price action because of the short-sale ban? TIA

watch IYR, it may go parabolic into the close -

if your brave, short it at the close.

SNDK has had a huge runup EOD

"It was GORDON BROWN who sold all of the UK gold for $300 an ounce! NOW THERE IS A GUY WHO DESERVES TO LEAD A NEW WORLD ORDER!"

kaimu, warn me before you post something like this - laughed so hard i spit my coffee all over the screen

otherwise its been a long day with not a lot of news - my limit order of $55 hit with deere so i now own 150 shrs - that's about all that happened for me today.

have a good weekend all.

bsi87.....wow, I need to re-read how you came up with that. Nice call, again.

Looks like about 11,150 on DJIA today.

Posted by: bsi87 at September 26, 2008 12:58 PM [link]

bsi87

"Looks like about 11,150 on DJIA today.
Posted by: bsi87 at September 26, 2008 12:58"

GREAT CALL ! ! !

Off by less than 3pts ... Amazing

Ok...one last question...
Give me tomorrow night's Powerball Lottery numbers [Jackpot $200million]

bsi87 Left USD to go down for RIMM, just before the runup. Hopefully RIMM gets back to high beta behaviour next week. Reiterate others, you are great to have around. Thanks for sharing.

Vadym,

Maybe people who don't characterize you as a "gift" characterize you as a "present"!

Also thanks TMC for the list from Scotia

ALOHA !!

Well, yesterday was a very unusual day for me. Two German tourists stopped by the nursery unannounced returning from a tour of the volcano. They were in their 30's. WOW ... they had impeccable English(well for Germans)! I was very impressed ... I always am since it seems foreigners know more English than Americans know English! HA!!

The blonde, Marie, owned an orchid nursery in Germany up near Hamburg by the name of ORCHIDEEN GARTEN. Her boyfriend who was smoking was named Jorka(probably misspelled) since his name was not on the business card. Turns out he knows nothing of orchids, but he does commute to London where he is in finance(supporting CFO) at the company RIO TINTO! He asked me if I had ever heard of RIO TINTO? I told him YES ... At first I thought he was going to say he was a geologist, but he said he knew nothing about geology! He liked to smoke and Marie has given him three years to stop or their relationship is over! Hummmm?? Now I have a contact inside RIO TINTO finance. I look forward to getting some insight regarding their finances and the possible juniors they have in play. RIGHT FROM THE HORSES MOUTH!!!

I asked them about the Euro and the EU problems and currency debasing and inflation and the FTSE and the LME. They were kind of shocked that the Hawaii orchid farmer took such an interest in their currency and economy! It wasn't all MONEY TALK ... I toured them around the nursery for a half hour and then they had to get going as they were staying in KONA and had to drive back(it was about 6pm when they stopped in). They were off to MAUI then to SAN FRANCISCO then flying back to Germany. That was the first German tourists that have stopped in here. WELCOME EUROS!

Jock,

Morningstar.com has a story about Short sale Restrictions and Inverse ETFs.

Sorry, I can't seem to link the story for you.

Regards

Good job Bull Hunter.

One of my neighbors was discussing financial matters with me today. She called her broker and got completely out of the market this morning.

This is a lady who, every time we talked about the market and things like short ETFs, etc., she always said that those things "sounded nice" but that she was "staying in" her long-only mutual funds. She's been saying that all year.

She's now out completely and she's as mainstream as Middle America can get.

The market goes up for sure now.

Canadians:
Globefund Closed End Funds Reports. Column for premium/discount to NAV. Notice CEF.A trades at a 10% premium. Anyone know the reason for that?
http://tinyurl.com/3szc

Quentusrex - I get that. And for a non-ponzi system that makes sense, but we are on the fractional reserve system.

Under fractional reserve banking, do the banks even need operating cash? The reserve requirement for many banks is zero. How can a bank fail from a bank run in that environment? Don't they just put in an order to the Fed when they need some cash?

It seems to me like the only reason for failure would be where the bank is unable to make promised interest payments because of uncollectible interest receivables. If that is the case, how does it change with JPM?

I think I may have found an answer as to why WM was shut down. Here is WM balance sheet: http://tinyurl.com/4bn5o6

Notice the % deposits insured by the FDIC.

Now look at JPM balance sheet: http://tinyurl.com/mwo5v

I was too d-mn early on RIMM.

Went long DIA on close, if no deal by Sunday night will hedge risk with S&P and reloaded CEG.

Bull Hunter - Congrats on your gain, quite nice. I wish you comparable or better returns in the near future.

Bert,
What is also interesting about WM is the TIMING of their failure. Over the past week and a half Fed has also removed more and more and more "slosh" from reduced open market actions, i.e. removing liquidity and ever shortening WM's last remaining lifeline to stay open.

Then the FDIC swoops in last night and says, thanks kids, now go run and cry to momma. Your toys now belong to our good friend JPM.....

I was to early on RIMM too. Boy did it get whacked - the weekly bollinger lower band is at 88! There is nothing wrong with the business though.

bsi87,

You and me both on RIMM... I've sold a couple put options on $55 March and $50 March to lower my buy-in. I see their 3G strategy as being too solid for them not to keep carving up the competition.

Great job on the 11150 call too!!! Impressive!

Kaimu,

That's a pretty cool story (RIO TINTO dude that is)!

Seems the links didn't work.

WM indicates 76% of deposits insured while JPM indicates 32% of deposits insured.

TTM - closed the initiated long position - do not like the weekly close below previous low - on weekly chart - broke below consolidation and closed the week below previous low.

Look for some selling pressure and possibly better entry price in the near future...

re:RIMM

What I should have done is look at the hourly chart. It made a lower price low in the PM but MACD diverged.

Jock - I've been comparing ETF charts to benchmark inverse performance of those I'm interested.

Jock: [double inverse ETF's: a plumbing question] at 3:55pm

Canadian ETFs.

I am trading these short/long ETFs. Here is some info:

Horizons BetaPro ETFs Not Affected by Short Selling Prohibition
Last Update: 9/22/2008 8:00:00 AM

TORONTO, Sep. 22, 2008 (Canada NewsWire via COMTEX) -- Jovian Capital Corporation (Jovian) (JOV: TSX) and its subsidiary BetaPro Management Inc. (BetaPro), the manager and trustee of the Horizons BetaPro ETFs (each a "HBP ETF"), is pleased to confirm that the temporary order issued by the Ontario Securities Commission on Friday, September 19, 2008, prohibiting the short selling of securities of certain financial institutions does not affect the HBP ETFs, which will all continue to be offered on the Toronto Stock Exchange. [058]

Well, I ordered a copy of Bill's book, too. At this point, things are so bad that nothing can hurt. To be honest, as bad as the economy is getting, and as bad as my picks have done this year, I have no guts to own anything, anymore.

[Bill Cara note:

Thrifty, I assure you the book won't hurt. If I thought there was any possibility of that I would not have published it. Enjoy. It's called "Lessons". I hope you are a student.]

yvrapx:
thanks for posting (1:40p today) the link to the bloomberg article 'Wall Street Executives Scored $3 Billion as Banks Rose and Fell'. The profit/compensation numbers are staggering.

On the subject of gold mining stocks, its my opinion that they sold off in advance of gold getting slam dunked on Monday when the amount of the bailout ends up much smaller than the original $700 billion and it gets sold as more of an "investment" that should return most or all of its original outlay, plus expenses. If that is true, and it was financed by the government borrowing more dollars instead of printing them, then I don't think there would be an inflationary effect, and if it isn't inflationary and ends the fear, then I think gold will get slammed.

Longer term, I think gold will be $5000 before I die, because they have already printed over $5000 for every oz of gold the US govt is supposed to own, but that's a different story, one of the dollar's demise as world reserve currency.

From Marketwatch:

The U.S. Mint said it was temporarily suspending sales of American Buffalo 24-karat gold one-ounce bullion coins as soaring demand has depleted inventories. In a memo sent to the coin's authorized purchasers Thursday, the Mint said "demand has exceeded supply" for the coin and inventories "have been depleted." The Mint also said it's building up inventories and sales could be resumed shortly. The Mint still has inventories of American Eagle gold fractional coins (1/2 oz., 1/4 oz., 1/10 oz.) and American Eagle platinum. Allocations will continue for the American Eagle 22-karat gold one-ounce coins and American Eagle silver bullion coins, it said in the memo.

westcoaster,

Just a surmise
CEF.A is RSP eligible proxy for bullion

I know of no other.

Do you think a lot of folks who don't trust the words 'money market' of fiat currency might be hitting up CEF.A?
I do

To all of you RIMM buyers,

I want to share with you what I think was a mistake on your part. I do so knowing that by preaching I come off like a (expletive deleted) but I do it to help you guys.

You didn't wait to see that there was strength in RIMM prior to going long. What do I mean by strength?

One of these days RIMM is going to make maybe a hammer first, and then the top of the hammer will turn from red to green. It's during this time that you want to buy. During which part of this time? For a lot of guys, the early part. But be ready to sell at or near breakeven. Don't mean to be sexist, I know some chicks trade too. But with a darling stock like RIMM, and as far as it's fallen, you don't have to worry about missing the first part of the move. When RIMM goes, it'll really go. What's safer is is to wait until price/volume confirm, unmistakeably that a move to higher levels is upon you. How do you know when this is? You've all seen it a bunch of times, when volume (speed of timestamp really accelerates and price can't help but edge to INTO a new level of value base on technical considerations which I will ask Vad to teach you after you buy his book.

Very often the upmove doesn't happen the first day or even for awhile. To catch that move requires patience and lots of observation, but that is REALLY the only time to buy the stock unless you're SO BIG that you don't really have time, but it's hard to imagine that yet I know that kind of thinking exists.

What prices would you need to see? I myself in a stock like RIMM for a trade not a daytrade, looking to get long a few days like most of you guys, I would want to see the hammer turn green on bodacious buying. Lots and lots of volume and a real uptrend on a 5 minute chart, you really need to see that higher low before going forward and at that price should be soundly rejecting that level in favor of something higher. For a daytrade, you'd want to see a real bottom, once again either a double bottom that's being rejected of a higher low and go gently. Don't buy the whole fifty thousand shares at once. Buy 1/3 at this point. Add up AFTER a retracement of a new upmove. Add more if it really goes great guns. And please do me one more favor. Don't forget to sell!

[Bill Cara note:

It will be disappointing when, rather than just spend an extra minute of valuable time to insert "expletive deleted", I don't have that extra minute and just decide instead to delete the whole entry. How many times do I have to ask to remove unnecessary foul language. It adds nothing positive to the Discourse or what people think of the writer. Nothing.]

moab,

Not to worry — they have always ignored my advice.

We will get what we will get, regardless of what we want. Protests in the Great Depression were met with tear gas and bayonets in D.C. and changed nothing.

While it got to be very serious I think starvation was not a big problem. Several in my family lost all investments including houses. Unemployment was high. Government rescues were tired, but it wasn't until the war started that the economy really recovered.

It could happen that way again. Hope not.

For a lot of people the economy has not been good for some time now. IMO regardless of what is done as a fix, we have a long hard road ahead.

Kaimu and goldbug58,

The only good thing about Brown leading a new world order is...

Better to have a guy like him out front where you can see him.

Grym -

I agree. Change is hard to achieve, but it is possible. Believe it or not but things are more transparent than in the 20's/30's. Whether citizens will get up off their a$$ and fight for their rights I am always doubtful.

These aren't stocks they're steamrollers, and if it's going this way and your price is 'behind it' then you will pave your way to profits.

But have you ever been on the wrong side of a steamroller?

One more thing...A lot of people wonder about stops. How much should somebody let a price go against you? My answer to that question is, not much. And if something HAD gone up or down and did work out for you and is threatening your buy price, just sell.

BH- nothing wrong with your exit point, my man...it IS a 24% gain at a time when the average portfolio is down about the same?

bsi- thank you for sharing your real-time thoughts...it's been an education for me ;)

2nd,

I'm happy with the gain but need to take lessons from you on exiting.

Playing SKF was like taking candy from a baby....QID was a different story, indeed. Seems I'm the only one who finds tech stocks wildly overvalued. Must be the Amish influence in my neck of the woods. ;^)

Regards

Asset Managers: Buy Gold, Commodities

BY TRANG HO

INVESTOR'S BUSINESS DAILY

Posted 9/25/2008

Even as lawmakers work out details of a tentative agreement to save the country — if not the world — from financial collapse, uncertainty looms in the market. Everybody is wondering where to put their money.

An informal survey of asset managers specializing in ETFs found that most recommend taking defensive positions by buying hard assets such as gold and commodities.

-continued at-
http://tinyurl.com/43oar5

BH- when i see drivers lining the on-ramps to the freeway and it looks like rush hour, i start preparing to exit...;)

Just got this message from IB in regards to margin increase for small cap stocks...I hold a few

Margin Increase for Small Capitalization Stocks

Sep 26, 2008 18:09 EDT
INCREASE IN MARGIN REQUIREMENT FOR SMALL-CAP STOCKS
 
Effective 12:00 (noon) on Monday 29 September, margin rates for many stocks with low market capitalization (under $100 million USD) will increase from the default margin requirements [maintenance margin @ 25%, initial margin @ 50%, short margin @ 30%]. The new minimum margin requirements for these small-cap stocks will be: * maintenance margin: 100% (non-marginable) * initial margin: 100% * short margin: 100% It appears you have one or more of the following stocks that may be affected by the margin change in your account (account and stock symbols removed). Please examine your portfolios to determine if these increases will create any capital (margin) deficiency in your account. If it appears there may be a capital deficiency, we recommend adding capital, or reducing positions/risk to anticipate the change in margin requirements.

Interactive Brokers
Risk Management

re:Shark/RIMM

We're all simple folk, trying to make our way in the world.

;)

"A lot of people wonder about stops. How much should somebody let a price go against you? My answer to that question is, not much."

Allow me to add more "quantifiable" angle to it, with certain guidelines. The problem with stop applied without a sound method is, how to determine whether your trade really failed or it's just a noize. You can't do that unless your entry is defined in terms of certain sound system. As sioon as you know what triggers your entry, you can answer the question: what constitutes a failure?

Here are two links that go into this concept:
http://www.realitytrader.com/blog/2007/04/stops-why-and-how.html
http://www.realitytrader.com/blog/2007/05/stops-deeper-look.html

Sorry, tinyurl is down for me at the moment, hope links are not too long

BH,

SMH gave off a Triple RSI buy alert on 9/18. I wouldn't recommend buying ANYTHING without examining other indicators and what the risk/reward ratio is.

That's the beauty of Korvus/Bill's RSI screener. Can look at a lotta stuff quickly and forces one to look at stocks/sectors that ordinarily he'd pass up.

So fire up that coal fired Amish PC and use that screener.

VBG

my general distrust sez we see a news driven rally on Monday that will be weaker than last Thursday/Friday. and then the big boys kick the stool out...again.

re:SKF

interesting. Bearish engulfing pattern.

No position.

BSI87

let you know I enjoy reading your post, they are very useful and it does adds value to this blog
Thanks for all your post

ALOHA !!

The financial STINK in America just got more stinky! Look at the collusion and CARPETBAGGING of the US TAXPAYER by GOLDMAN SACHS alumni who 98% are Harvard alumni! Can a USC alumni ever get a pivotal position at the US TREASURY?

READ ON:
Paulson Taps Ex-Goldman Colleague Forst as Rescue Plan Adviser

Sept. 26 (Bloomberg) -- Treasury Secretary Henry Paulson hired former Goldman Sachs Group Inc. colleague Edward C. Forst to advise him on the government's $700 billion rescue plan, a Treasury spokeswoman said.

``He is here to provide the secretary and the domestic finance team with advice on financial market issues as they work through the legislative process,' department spokeswoman Brookly McLaughlin said today.

Forst, 47, left Goldman Sachs in June to become executive vice president at Harvard University. Paulson was Goldman's chairman and chief executive officer until taking up his Treasury post in July 2006.

Forst started work this week at Treasury and will work for several weeks as a ``contract employee' for $5,000 before returning to Harvard, McLaughlin said. He worked at New York- based Goldman for 14 years, most recently as global head of investment management, before joining Harvard to help supervise the university's $34.9 billion endowment.

In his more than two years at the Treasury, Paulson has recruited other executives from Goldman, including naming Kendrick Wilson as an adviser last month.

bsi87,

Thanks for your input re: using the RSI, and for your wonderful insight in here on a daily basis.

I use the RSI daily, looking for buy candidates, but not often enough for sectors and sell points.

Regards

My pleasure gravity's rainbow try to add some input to the 'Discourse'. I use Bloomberg a lot and when I read the piece I was staggered, how can anyone,anywhere be so grossly compensated for either a)bankrupting a company or b) destroying shareholder value by ineptitude. We should all aspire to be CEO's (Chief Extraction Officers) you lose company money or the company for that matter and you make loads of dough. Heads I win, tails you lose.

2nd
Did not do anything today and it seems like I did not miss anything
Brought RIMM yesterday AH at 81.40 and look like it went down bad
After expected Monday rally it will be time to buy OEX put again

I'm just curious about anyone trading SKF right now.

Since they can't short financials what is any price change about?

Is it just people thinking at the end of the ban it will move?

What if they ban on shorting is extended for another 30 days?

I just don't get it.

In the field report:

Portfolios: currently greater than 60% cash. (1) Investment account and (2) retirement accounts.
Buy/Sell: buying small, mostly initial positions
Bull/Bear: moderately Bearish
Frame of mind: member of DENSA / hold for the medium term (1 month) or longer. Dancing
market bottom? don't know, don't care - acknowledge we are at a turning point
Methodology: using technical analysis on Fundamentally strong businesses - EMAs then Bollinger + MACD then + Stochastic then + RSI

market view:

What an incredible week. Week two of unimaginable events. As a person with a bearish position on this market, today was a record. Never in my life have I made so many trades in a single day; a total of 12 trades. Totally exhausting. Looking at the charts, trying to remove emotion to buy. Keeping my mind fixed on buying quality stocks from either the Cara 100 or sudo Cara 50 in Canada (my short list - which seems to keep changing each month). Two of these trades were for positions where the stock trades at less than a dollar, but does have good/great prospects. So the trade split was 80% quality and 20% high-risk. The value of funds placed was more like 95% quality and 5% high-risk junior mining.

This week I am letting the back seat driver tell what to do. And that is to buy.

And I am wondering how the change in margin requirements at Interactive Brokers (if this applies to other brokers) will have on the junior mining stocks this coming Monday. [059]

Grym and Jock,

The problem is that ProShares is not creating any SKF shares.

From Morningstar:

"It's true that these ETFs don't actually engage in short selling to produce inverse returns on their stated benchmarks--they typically use swaps and futures, which are contracts to pay a fixed amount of interest in return for a counterparty paying the return on an agreed-upon index (in this case, the Dow Jones U.S. Financials). However, issuers like ProShares cannot find willing counterparties to the swaps they would need to write, as the counterparty would need to hedge the position by shorting financials. With the short-selling restriction in place, there aren't any counterparties willing to assume this huge risk."

From ProShares:

"market prices in shares will fluctuate in response to changes in NAV and supply and demand for shares. ProShares cannot predict whether shares will trade above, below or at their NAV. It is possible that because no new shares are currently being created, there could be a supply and demand imbalance in the secondary market for SKF and SEF shares, which may cause those ETFs to trade at a premium or discount to their indicative values for some period of time, although, for a variety of reasons, it is impossible to predict whether or for how long any premium or discount would persist."

Hope this helps.

Thnx, Bullhunter ...

If they can't create SKF shares, will shorting UYG work?

Does anyone pay attention to Dr. Wish at wishingwealth.typepad.com? He is my second most trusted adviser behind Bill on the overall trend. His system is mostly applicable to the Naz 100 and seems to be quite timely for both intermediate and long trends. He is a momentum investor which I am not but he tells me whether the odds are good or not for bets on QLD versus QID. Now he is out of QQQQ, QLD and the market in general. That could change next week.

Thanks for those "stop-limit" articles, Vadym. Having been stopped out of 3 of my last 7 trades, only to have them all turn around after I was shaken out, this is a timely comment and information.

Maromatics
Today 26Sep, Spot referred to an earlier post from yourself re your routine. Would it be possible to repost your routine as I missed it and would appreciate the opportunity to read it?

Bill:

At least sharkster is consistent...

Pookie-baby!!

CPST: was a mo-mo and is now a no-no. They did the convertible and were supposed to maybe go cash flow positive by the end of the year. I think it's tradeable on good macro news, although I don't know that I'll be there, but the macro news will be fleeting in effect because if they don't go cash flow positive, how far off is the next convertible offering. This is more a question: Their expansion was for their new larger product which begins to push into the space of players like GE. They have to compete with them in this financial environment. Question: Does that new product become cement shoes in rough seas when GE can probably finance for customers out of cash flow and CPST says, "Go ask your bank?"

Having said that, I'm better at asking questions than giving answers.

Hey seapooch:

My daily routine when looking at the market is the following:
A. Look at price action tables, for several asset classes;
B. Choose some of the asset classes in which I feel something is changing
C. Look at the charts for that asset / asset class in the following order of timeframes: monthly / weekly / daily / 8 hours / hourly, and in general I am looking for signals in the shorter term timeframes which confirm what I had suspected initially looking at the broad price tables.
Now, lets do the exercise here for Gold (which you know I like to trade myself.
Having done that screening, I see that some sort of a price inflection took place on September 11th. It remains to be seen how relevant that low was.
But we can investigate further, and let the charts talk to us:
What the charts are telling me across different timeframes right now is:
- Monthly: Slow Stochastics (3;5;5) is crossing up at 44.88, with RSI - 7 rising at 55,14. CCI-20 is still in divergence, but is now already above -100.
- Weekly: Slow stochastics has already crossed well up and is now steadily at 54,23 with RSI-7 rising at 53,87, CCI-20 at 50,69. I also notice that weekly support is at 782 / 789, and weekly resistance at 934 / 940, which tells me that price is for now above support. When adding bollinger bands to the chart, I also notice that the low happened when price trespassed the lower band on September 11th. Price remains inside the Bollinger band 95% of the time, and usually when the bands are trespassed with a spike, that can signal a reverse, as was the case this time once again.
- Daily: Slow stochastics (3;5;5) crossed down, CCI-20 is pointed lower at 52,86, and RSI-7 is pointed down at 52. This tells me that some sort of correction is going on, but for confirmation and a glimpse of what kind of correction this may be, I look for other indicators. So, I start by taking a fibonacci retracement of the entire previous downswing from 988 to 736, and this tells me that today the price retraced to 50%, which is a regular retracement for a bullish movement. But I am not happy yet, so I look and the key averages of closes (MA 18, 25, 45, 100), and these are telling me that price remains above the 18, 25, and 45 DMA, which tells me that the upswing is not yet in jeopardy. Then I look for signals at the chart that give me a hint on the reason for the correction, and I see that on Sep. 22nd and 23rd the price was pushing hard against the bollinger band, signalling that the time was ripe for a breather in the rally. I also notice that daily support is at 874. Considering that the price action today took POG below daily support intraday, but the colse is going to be above (is is 876 as I write), when I am getting a bullish trigger.
But now I am curious...is this bullish trigger for real? what could happen next? Should I be long here?
Well, the some clues to future developments can be found at the shorter timeframes:
- 8 hour: Well, surprise surprise, the Slow Stochastics is embedded and may hint a possible up crossing. Hmm, that got me interested. So I look at the RSI-7, and I see that a divergence is developing, as it is pointing up at 50, and is actually joined by CCI-20, which is already pointing up, and is at -140, but climbing. I also notice that the lower bollinger band is coming up in an almost parabolic move, and is now at 837,99, and this tells me that support levels are rising fast, which is good. Finally, I peak at the 4 hour chart and see that the Slow Stochastics has turned up, which makes me feel more confident in my analysis.
- hourly chart: Slow Stochastics are rising nicely, now at 48, and this is confirmed by RSI-7 at 43 and rising, and CCI at 40 and rising.
Ok, with all this data in my hand, my conclusion is the following: The available data shows that POG has initiated a longer term upward movement, which went through a healthy correction, and is now generating the healthy signs in shorter timeframes that another upleg may be forming.

Sea dog, my last post is maromatics routine :). I hope it's not copyright infringement. That reminds me...should we apply GNU's copyleft principle on this website?

Bill:

Also, Sharkster's over the top language actually makes me feel better about myself. Having said that, I must apologize for using the full BS spelling yesterday, and shall endeavor to, instead, use the term "taurine excrement" in future missives. Must be Friday night.

kaimu re your visitors
http://tinyurl.com/4wcqal
anyone here look familiar?

"there is US$600 trillion of derivatives outstanding in the world. It is a whopping sum that reflects the total amount of leverage in the global financial system."
http://www.thestar.com/Business/article/503974

and why is gold not at 10,000.00/oz?

re: resistance to Bill's bullish market view

Here's why we NEED always to consider opposite views (per Jeff White in a Q&A on thekirkreport.com)

"A successful trader walks that very fine line between conviction in a trade and always observing whether or not conditions are shifting. The successful trader is willing and able to change their opinion in the heat of battle if the environment changes, at times even reversing a trade once they recognize they’re on the complete wrong side of it."

Here is a little lite reading for you weekend warriors...

http://tinyurl.com/4z9c8m

Enjoying the beautiful fall weather here in CO. Hope it is as kind to each of you.
Sincerely

Went out for drinks tonight and had a Manhattan on the rocks!

nemo - I still have no plans to enter CPST as the trade has too much of an emotional appeal. None the less I still follow (curiosity, like that sweet young thing you just can't take your eyes off) and was making a simple observation confirming the heads-up you had previously provided... 8)

TGIF

Here is an energy stock with a dividend.

ETP * 37.99 48.39 31.01 33.92 Buy alert (trig. 6 days ago [on 2008-09-19 at $37.59, +1.06% chg], after a 1 day AZ)

Vanillabean - thanks for pointing out the ETP stock.
Just my 2 cents, looking at the balance sheet of ETP - http://xrl.us/osa4m - it seems to me that the total debt to equity ratio is too high, so that this will be quite an interest sensitive stock. So, for now I would prefer to look at HAL, just for instance, waiting for AZ.

BVN - Compania de Minas Buenaventura SA
I'm trying to build my own Lelik's list (I'm pretentious I know, but I feel it's important for me to learn how to pick good stocks, and to learn how to examine data, financial, balances, news). And for precious metals I like this stock: BVN. But it seems to me that it's lagging. Do you have any information about why I should avoid this stock? The data I have found sound good and strong to me.

Pookster:

I was just having stream-of-unconsciousness on CPST. Found this today:

"Capstone sells its microturbines for use in cogeneration (using both electricity and heat), resource recovery (converting oilfield and biomass waste gases into
electricity), backup power supply, and remote power applications (when no utility grid is available). After ten years of research, the company shipped its first 200-kilowatt (C200) microturbine on August 28 to a distributor in Italy for installation in a wastewater treatment facility. This stock offering is critical in raising some of the estimated $35.3 million needed in inventory for the manufacturing and timely shipment of approximately 511 units in backlog of C30 - C200 unit series in Fiscal 2009 (ended March 31).

Management admits that it currently does not have any credit facilities or other committed sources of financing, and will likely need to raise additional cash in coming months to fill new orders, for some of the components and materials used in the manufacturing process have long lead times and must be purchased by Capstone well in advance of scheduled shipping dates.

Capstone represents the lengths a financially-strapped company will go to develop its prized technology. Pursuant to the terms of an OEM Agreement with UTC Power Corp., an affiliate of United Technologies, UTC contributed $12.8 million towards the development of the C200 as part of an integrated cooling and heat exchange power equipment (CCHP) unit sold by UTC. If this customer does not achieve its forecasted sales growth or Capstone fails to complete the specified development and commercialization of the C200, the non-exclusive, perpetual, and worldwide license to the C200 would revert to UTC.

Given the current credit crunch, if additional financing cannot be obtained after this offering, Capstone might be unable to continue as a going concern."

I'm not sure if this was posted yet but I think many will consider it a must read - it is brief:

Perhaps this rout, too, will stop at the gates of Rome
AVNER MANDELMAN
September 27, 2008

After Hannibal had crossed the Alps and beaten the Roman army twice, the alarmed Roman Senate spent the nation's treasure and sent eight legions against the invader. Up to then, Rome had rarely thrown more than two legions into battle. But when the state was in danger, there was no limit to what the authorities would do.

And so it is today. The financial system has just buckled before a financial marauder - Freddie and Fannie's huge debt - and to save the system, the U.S. government took over their $5-trillion (U.S.) of debt, annihilating its own balance sheet. It is just as the eight Roman legions that gave battle to Hannibal in Cannae in 216 BC also were annihilated. And, just as after Cannae the moneyless Roman state lay defenceless before Hannibal, so does the broke U.S. government now lie defenceless before the remaining debt - which is a hundred times bigger than F&F's.

--continued at Globe and Mail--
http://tinyurl.com/5xrswd

Vinod - "After expected Monday rally it will be time to buy OEX put again"

Is is time to buy calls if a big fall? I say yes!

Something for the silver crazies, but more seriously -

Here is an alternative, shall we say monetary-fundamental view of this (the leveraged-realestate ponzi scheme) that had not occured to me.

Essentially that the US - no, not just the US, but most of the world (exceptions? try Belarus, perhaps . . .) has been trying to monetize realestate, got greedy, and has botched it.

"Oh, it is completely correct that there is a worldwide shortage of supply of silver compared with real demand.

The upside for silver compared to gold is absolutely explosive. The caveat to those buying immediately for a quick gain is that this 'financial crisis' is going to take some time to resolve into an aknowledgement that interest rates are radically too low.

The structure of interbank trading of cash along 'rated' lines is a simply meaningless notion devised by thieves and fools who have been systematically undermining the Basel Agreement and the Prudential Supervision of Banks by the BIS. The results are clear.

The Money Supply is being defined as a composite of Cogressional approvals
of discretionary tribunal style spending of taxpayer funds, and the global
value of real estate assets qualified by a market clearance rate, times the
presumption of the liquidity of big player daily acceptance of paper
receipts (derivatives) of those real estate-linked assets.

There is no such definition in any written-down hypothesis; it is an ad hoc
definition.

The removal of the underlying historical liquidity tests have been
experimental - and erroneous.

Nothing can be surer than that the administration will persist in its flawed
course to 'create' a master view of money that prevails everywhere, and that
the actual world of money demonstrates the ridiculousness of this arrogance.
And it is arrogance because it is calling a power to itself that it simply
does not have.

The true definition of money, is all the real transferable wealth of the
world expressed as tokens. Those tokens either rise or fall in global esteem
according to the reality of their representation of real wealth. The US
Dollar will certainly still exist. But not as a token of high esteem in its
present state and condition.

And that is quite certain."

http://tinyurl.com/3qk8vh

Some of you may have read about the Swedish bank crisis solution:

Stopping a Financial Crisis, the Swedish Way
http://tinyurl.com/4uvkg4

Here is the alternative/conspiratorial view of those times:

Undermining the Welfare State in Sweden
http://tinyurl.com/46lsvf

" . . .
In 1985, the SAP deregulated the credit market. This, in combination with the excess profits created by the devaluation's, led to an orgy of reckless corporate borrowing and speculation in real-estate and stocks. When the bubble burst in 1990, all that remained was financial disaster (worsened by deflationary policies). Between 1988 and 1992, the total credit losses of Swedish banks and financial companies amounted to a staggering Skr 153 billion.

. . .

There are two major explanations for the free fall of the Swedish economy since 1990: first, a Reaganite tax reform, which explains a large part of the spectacular deterioration of government finances; and second, the complete priority given to the fight against inflation, which pushed the economy into depression, starting under the social democrats but intensifying fatally under the Bildt government that assumed power in 1991.

. . .

In the Fall of 1992, the 15 Swedish TNCs that dominate the Swedish currency market recognized that keeping to the fixed exchange rate would severely damage their profits. Although they certainly supported the long-term objectives of the Bildt government, in the short run it would be too costly even to them. What they needed now was a depreciation of the krona to boost their foreign sales; they started to sell off their kronas; in response the Central Bank raised the marginal interest rate to 500 percent. The Central Bank proceeded to empty the foreign exchange reserve and borrow massively abroad to enable the Swedish TNCs to get rid of their kronas before the depreciation: what was taking place was an orderly socialization of the depreciation losses. On November 19, the krona was left floating, and it sank by about 25 percent, reflecting, apart from its earlier overvaluation, the fact that the economy was contracting.
. . ."

Mike Kahn/Barrons.

Great chartist.

http://tinyurl.com/4ls3yg

Bull Hunter

Don't forget to add in your QID divident of 0.20184/share when you add up your % of return.

http://www.proshares.com/funds/distributions

ALOHA !!

Michael Randallbard ... MOST DEFINITELY! The young lady on the right of your photo looks VERY familiar ... it's MAREI! The rest of the people do not!

I also went to their website and was reading that they were established in 1896. WOW ... now that's a long time ago! I am but a neophyte compared to the Karge's!

Marei said they mostly did potted orchids, which seems obvious from their website photos. I do both and actually more cut flowers than potted.

FLOWERS are very calming and represent peace.

Some of my most fond memories as a child was playing and working at my Grandmother's flower shop. That is one of the reasons I do this ...

My prior work I always had lawyers and administrators breathing down my neck threatening me with $5000 per day liquidated damages! LOTS OF MONEY ... BUT NO FUN!

Good point, QT.

I had some of those shares since May 2007. Nobody can accuse me of lacking stamina for staying at the party. ;^)

Regards

Bull Hunter

Wish you would of blocked the door Monday. I left toooo early... Missed the divident by one day and the run up of an additional 6 pts. But in reality I should of left the party 1:30PM Thursday the 18th. Woooow I not only left $$$$ on the table but on the floor and every where possible. Oooooo well... C'est La Vive

If the US Central Bank is shoveling fiat money out the door as fast as the failed banks can take it, then ...Why do we need a bailout? Perhaps it's only window dressing for the lowly ignored citizens.

Check out the monetary base and discount window charts.
http://tinyurl.com/5vpus9

Kaimu,

ITS STILL THE MONEY STUPID ...

¥ € $!

Bull Hunter,

Thanks for the info on SKF.

I had a nice run while it lasted — about 10 months.

CP,

LOL!

"Manhattan on the Rocks" (Sounds like a capital idea.)

I maintain that the interesting news from this week is NOT the prospect of a bailout. The interesting news from this week is that all the banks in America are going under. That's the news.

Lelik - re your 4:30am-BVN. Wish you success on your efforts with the "Lelik List".

As you know, BVN is headquartered in Peru. Other factors are involved, of course, but out of curiosity I looked to see what effect that location might in itself be having on the price movement of BVN. I used a DJ Latin exMexico index for comparison and location does seem to have at least some influence on BVN's price. Hope this link works for you, but if not, I will post the chart.

http://tinyurl.com/429dzr

QT,

We all leave money on the table. Try to keep in mind that most investors are getting hammered in this market....if you've made money during the Bear, imagine how much you'll make during the Bull.

You made a nice haul, even getting out early. Congratulations.

Regards

Grym - "Manhattan on the rocks" - A prudent use of liquid assets!!

Question for the forum (Thinking out loud): Anyone considering the benefits/disadvantages of holding individual stocks vs ETF's? It seems if the market forecast is one of volatility and questionable performance based upon limited availability to capital, an indexed ETF might offer some valuable advantages?

nemo: I believe the CPST technology is too important to fail and the technology will survive even if the company does not?

I'm worried that Shark is right.
It seems like we're just winding down one step at a time.

One bank goes under and we shift our attention to the next.
Bear Stearns, Fannie, Freddie, AIG, WAMU, now wachovia, then?

Re: Bailout

If there was such an impressive emergency going on and requires immediate attention of all concerned, the usual remedy is to lower rates. Right now, T-bill rates are 150 basis points below the overnight rate.

Bernanke at one time could reliably assume that if they set interest rates at a certain level that T-bill rates would eventually climb to the set rate and match it. That might not happen this time around.

My guess is they will be obliged to lower interest rates, but the attempt is to stave off that decision with the bailout. To presume that Americans will allow the kind of banking socialism which exists in Japan may be a little too much for the system. You can expect to pay $5.00 for a can of coke if they do.

This has me revisiting the notion of 1$ = 1¥, because at this level of low interest rates, it shouldn't escape anyone's notice. Either way, the currency regime will look very different than it does today.

The fly in the ointment is Japan. Nowhere in any place on earth is there so much potential for hyperinflation. They can't lower rates, although they have done so in the past into the negative. But their currency can be demolished at the same time.

In Europe, the bond yields are much lower this week, and European Central Bank wonks will have to lower rates at least 100 basis points. But they're still sitting at 4%. They have at least a few months before we see the same kind of low interest rates, if ever.

The vast differential between yields in Europe and Japan calls out for a balancing between the two.

Is there a case to be made for a stronger dollar? If they manage to keep the status quo, in the U.S., then the swings will be in the ¥ and the €.

Craig,

Yes I am worried about the same thing. I fear that the issue is far larger we might be seeing.

I have been hearing a lot of smart people come out with articles about how this is the wrong approach and re-capitalization would be better. I disagree with that. I think what is taking place is the expunging of the very instruments that are clogging the credit system's arteries - i.e. banks will not lend to each other because they lack the transparency of who is holding troublesome assets.

Expunge the assets to the treasury and therefore reduce most of the concern - in theory. My worry is that there are far more troublesome assets in the 1.16 quadrillion nominal (arguably $70 trillion real) derivatives than just $700 billion of sp loans.

I am fully vested again, but am keeping my eyes on the situation closely. I think it's a given that a deal is cut Sunday afternoon and the markets rally next week - the real question, imo, is whether or not credit grows from here and BRIC moves forward.

The bailout is for the banks....to prevent further failures and start the flow of capital again.

Without capital....you can't have capitalism.

Re: Capitalism

Well, its definitely not capitalism in the U.S. with the bailout, but capitalism seems to have been preserved on more socialized countries for now, somewhat ironically.

The immediate problems are in the U.S. and the world is not in a position to bail out Wall St. banks, but only to recapitalize their own banking systems. You can't say that Europe is expected to rush in and recapitalize the failure of the money system in the U.S. Foreign money interests will be waiting in the wings for really cheap investments, and Americans should be demanding that an immediate bailout not occur.

What is causing the decline in markets and prices in the U.S. dollar? Its because dollars are escaping the U.S. market, and the bailout is a futile effort to replace it. It goes along with the decline in the U.S. currency since 2000.

"European bonds outperformed U.S. Treasuries this quarter on speculation the bailout plan will add to the U.S. government's fiscal burden. Bonds in the euro region handed investors a 2.97 percent return since the end of June, compared with 1.91 percent from their U.S. counterparts, according to Merrill Lynch & Co.'s EMU Direct and Treasury Master indexes."

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7n4IOD2GDfk&refer=home

In my view, the American public isn't just saying no to a wall street bailout, they are saying yes to a prudent form of recapitalization. The unknown is whether the illiquid assets outweigh liquid assets enough to overcome. As of yet, failing banking institutions remain unwilling to take their losses and move on, so public distrust remains high. After all, who was it just a few months ago was claiming everything was fine and that the bottom was in? These are the ones in which the public has lost confidence.

There are many prudent financial institutions still standing because they followed responsible lending practices, and these are the ones which the public wishes to support first. Don't discount the importance of these institutions.

Some months ago, I remember the concept here was that the failing institutions should be allowed to fail so that the fallout could be absorbed and the economy move on. So what happened? Well, there was an initial attempt at providing capital for the purpose of easing the financial constipation; in spite of assurances, apparently this effort was unsuccessful. Where to now... more of the same? Recognize that this time assurances were not included in the bailout package, and the definition of bailout has attained new meaning.

Colin Twiggs: A Decade of Deleveraging Ahead

http://tinyurl.com/54qccl

"The reaction to this blow-off is bound to be severe: tighter regulation of financial markets; discouragement of securitization and other methods used to by-pass banking regulation; formalization of the massive credit default swaps market; greater supervision of hedge funds; and closer attention to capital to asset ratios in the banking sector. The result is likely to be a multi-trillion dollar global credit contraction, lasting for a decade or more. The deleveraging process is currently proceeding at too fast a pace for the global economy to handle and measures need to be taken to restore confidence — slowing the process to a gradual phase-down, in order to avoid a crash."

I do not know whether this has been posted previously. It is quite an interesting theory by Michael Panzer and others.
http://tinyurl.com/3vg4g3

"I’ve been speculating all week that the pressure being used on the Congress to pass the Paulson Plan is the threat of Fed illiquidity. As of two weeks ago, the Fed had lent out more than $600 billion of its $800 billion balance sheet Treasuries against crap MBS collateral.

The Paulson Plan would have allowed the banks to unwind the repos putting the Treasuries back in the Fed, get cash for the crap MBS, and get more Treasuries from the issues financing the $700+ billion funding of the Plan."

Oh my gosh. Imagine the FED filing for bankruptcy protection.

the section of Twiggs' diary that really interests me this morning, however, are his comments re TA:

"Markets are open to manipulation, even in this day and age, by many different players who may at times distort market signals for their own ends. Technical analysis is now widely used, which makes market reactions readily predictable. The incidence of false breakout signals has increased to the point that Curtis Faith, in his book Way of the Turtle, claims that breakout trading models are no longer viable.

"Apart from scalpers and day traders we also have large fund managers influencing the markets. The temptation, close to quarter end, is sometimes too great to resist. You may see prices supported at artificial levels until after the end of the quarter, especially if bonuses are riding on fund performance.

"Recent performance of the Dow and S&P 500 at the end of the third quarter in 2007 is one such example. By mid-July 2007 the sub-prime crisis had broken, with most participants aware of problems in the financial sector. But the index bounced off support and, strangely, floated upwards for several weeks, making a new high shortly after quarter end. Then selling began in earnest. Fortunately a large bearish divergence on Twiggs Money Flow gave us a clue as to what was going on, but any serious student of economic fundamentals could have seen the warning signs much earlier.

"Sophisticated participants may also attempt to by-pass formal markets, taking positions in unregulated over-the-counter markets in order to conceal their strategy. Goldman Sachs, for example, took massive bear positions in sub-prime markets — in late 2006/early 2007. Almost a year ahead of stock market reaction to the crisis."

i've seen TA (successfully) inform entries and exits of many here, but how useful are they once the signals become widely used? does a higher principle not kick in-> if everyone is using them, there's no longer an edge?

furthermore, as Twiggs points out above, we're trading against highly sophisticated (and well-capitalized) organizations who are quite good at throwing out mixed signals and concealing their own trades...

Twiggs is careful to state that "Neither technical nor fundamental analysis is perfect. The best signals are when the two confirm each other." Any brokerage with sufficient capital and understanding of TA (mathematically and psychlogically) should be able to distort signals to their benefit. So I guess the question would be which signals remain relatively immune to distortion?

next monday and tuesday we have the confluence of EOQ and (potential) "bailout" (they need to come up with a better 'title' for the Plan, man) optimism-> which of course leads to a selling bias...

on the other hand, massive amounts of cash on the sidelines may lead to a sustainable rally (if we in fact get one)...

Here is an article from Bloomberg about the Mexican bailout plan, and how it affected the homeowner:

http://www.bloomberg.com/apps/news?pid=20670001&refer=news&sid=a995IUbqAcaM

2nd - I'm wondering if the name chosen and disclaimers attached to the "plan" were done in an deliberate effort to make it unpalatable. What better way if Paulson & co. wanted to ex-foliate and insulate themselves from the situation? Knowing full well the plan wouldn't meet approval as proposed, he has provided himself a new layer of protection....

The headline should've read "Paulson delivers Hot Potato to Washington".

What's next, will he neal in front of Barney Frank?

CP- LOL...you're kind of way out there, you know...the world at large does not run at your two-steps-ahead pattern..

OT:

RIP Paul Newman

http://tinyurl.com/4n6br2

"Sometimes nothing can be a pretty cool hand."

Not saying this will happen Craig, but why do you think they passed those no-short selling rules last week? Is it because the value of these companies is so great that in a free market any prudent investor would buy buy buy and never expose himself to the short risk?

No it is not. They passed those rules because they reasonably expect stocks to do a death-dive and they don't want me to be able to short Wachovia at 10 bucks and to get rich from the destruction of their monetary system of malfeasance as it descends to 11 cents.

I wake up this morning... go through the routine and turn on the news. My mindset is that we might actually have some sort of alternative to this "goldman morgan" bailout. BOY, WAS I WRONG... The same crummy proposal that was 3 pages is now over 42 pages and will be 102 pages???
102 page book has a lot more information than a 3 page book right? Why are we still working on a plan that does not address the problem?

Yesterday I phoned, my two senators, congressman, frank, pelosi, and 3 other figurehead on capital hill.
I told any and all, vote yes and i'll vote you out. Dont pass this bill. We need a bill, if there are smart minds who say this is a bad idea shouldn't we listen?

All of the individuals who answered the phone said that there has been an overwhelming response to this situation. Unbelievably the majority of the "we the people" are saying NO!!

If we are saying NO, why are we still pushing this bill through?

WHY WHY WHY....

News outlets are reporting nothing about this grassroots response.

Why did Paulson (a grown man, who had some respect before, I said small) GET ON HIS KNEES and beg?

What man does that? Who.... When would you get on one knee?
Lets see why would I get on one knee.... proposal (maybe, not really the romantic type but maybe)...
to pray... (hardly)
broken ankles... (spained one or two, not together)
another reason... maybe I would forced to.... Gun to my head, just before execution...
Maybe he really believes his plan is best for OUR country (YEAH RIGHT!) Best for his friends and family in high places.

Not trying to go conspiracy on all of you.. Why would one of the MOST POWERFUL money mans in the world get on one knee?

Step back and think...

If you are for it or against it call your congress person/senator and let them know. Make the call either way it is our time to make noise in washington. This weekend will be historical in either expediting socialism, or it actually gets on the path towards fixing the system NOT, not this plan.

What will we do?

2nd - kaimu is twenty steps ahead, I'm simply documenting the travel itinerary.

Anyway, how about the Republican mutiny that offed the potato onto the Dems?

Glad I left Capitol area sometime ago but miss my birds eye view of the drama and maneuvering. I expect something will pass this weekend.

Financial IQ Test #2:

1) Do you believe the taxpayers may actually profit from taking on the bank's toxic waste?

2) Did your parents lose the scorecard on their cousins?

;^)

There is ban on short sell on over 1000 stocks and more than 20% are in S&P
Question is what will happen when this ban is over?
Will it take market down?
Lots of hedge fund is hearting because of this ban on short sell and their computer algorithm is not useful in this environments. So if and when this ban is over, PUT on some of this stock may give us good return
Also earning season may kill some of the stock, like what happen to RIMM while GE confession gave us quite different result even though it has big financial component to it
After this short term volatile period is over we will be headed higher like Bill has mention

i'm still going with Vad's original working model, which would be buy on doubt, sell on the announcement/and maybe EOQ, violent shake-out, gap-up rally...

if there's one 'signal' relatively immune to distortion, it would have to be human nature-> you can sense the same emotions in yourself: the inclination to (a) dump shares on gridlock/continuing bank failures, (b) buy shares on the announcement/EOQ performance numbers, (c) dump shares again as investors take profits, and (d) doubt the real rally...those are difficult sentiments to shake, therefore the need to trade counter to each one: (a) buy shares on gridlock, (b) sell into the annoucement, (c) buy again on profit-taking, and (d) be fully-positioned when the real rally takes off...

when trading, it's often better to stay just one step ahead...the cyclical nature of the market actually increases the odds of losing bets if you're too far ahead-> to use bill's analogy, the perfect dance is to be in synch..too far ahead/behind, and it gets awkward..

cp,

I value your opinion but i hope not.

we have 539 retards that are working on a "plan"?

The paulson plan that is.... ignorance can't be bliss in a time like this..

Not once have they had a hearing and bring in a third party opinion. This plan stands nothing to benefit the very few who put us in this situation. 5 years from now we will be sorry. I am sure many of us here would agree that we might be sorry 6 months after it was signed. who knows... what upsets me is the people are speaking and no one is listening.

the paulson plan is a ineffective truss that is the most critical support for the home.... it was already defective and would have the integrity to hold the house up. now that the DEMS and REPS have grandstanded for over a week, they managed to paint the truss with about 50 different colors, drill a bunch of holes in it, and carve the infamous "I heart you". Thank very much.

If paulson and bernake meet two thursday ago and said if nothing is done we are screwed and it has to be done now... well news flash... 6 business days later rome has been burning but hasn't burned to the ground yet. to much smog and smoke to see what is really going on here..

There was psychology about the bailout that might of held the credit markets together but WHEN BANKS admit they have OPEN CREDIT lines but are choosing not to use them.... I would argue there is a bigger scheme here.

SMELLS FUNNY....

as kaimu says "its the money"

BH- cool hand luke has to be one of my all-time favorites...

Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say

By Laura Litvan

Sept. 25 (Bloomberg) -- A group of House Democrats is proposing to make Wall Street companies and investors pay more of the cost of any financial rescue plan through a new tax.

In a letter sent late yesterday to House Speaker Nancy Pelosi, 16 Democrats asked her to ensure any rescue legislation include a ''transaction tax'' on all U.S. stock trades and on other types of trades, such as credit default swaps, options and futures. They are proposing the tax would be at a rate of one quarter of one percent on all trades.

''The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it, not U.S. taxpayers,'' according to the letter, which was signed by Representative Peter DeFazio, an Oregon Democrat, and Representative Pete Stark, a California Democrat.

In a news conference today, House Speaker Nancy Pelosi said she would support some mechanism that could return more funds to Treasury coffers if the $700 billion to be spent to acquire troubled investments isn't later recouped. She didn't endorse any specific proposal and suggested it is likely to be explored later.

''You might make a judgment down the road that there is a shortfall and it should be covered,'' Pelosi said.

President George W. Bush in a televised address last night urged swift action on the $700 billion rescue plan to help avert ''a long and painful'' recession.

The $700 billion proposal would allow the Treasury to buy troubled assets to restore financial stability, Fed Chairman Ben S. Bernanke said yesterday.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

One who follows public opinion and makes his decision based on this public opinion is not a leader and we should avoid him
One who believes in his plan and be able to sell it people is the leader
I think bailout is good for present short term financial situation
Otherwise result will be very unpredictable?
I know my position is not in tune with most of poster here

2nd
Ordered Vad's book today, will be interesting reading for next few week

I'd buy the idea that the Federal Reserve is bankrupt.

In addtion, if the Federal Reserve is really bankrupt, and America requires capitalization to continue as an economic concern, it will need a real, bonfide central bank rather than a private company.

Really, that's what Paulson and co. are asking for, isn't it?

I agree. The Federal Reserve Bank may have done a lot of harm here. Instead of rushing to pass a bailout bill to save the FED, Congress should take its time and debate whether to have a Federal Reserve Bank or a US gov't owned Central bank.

You know, "The Central Bank Of The United States Of America" with like, marble and greystone architecture and mahogany finishings, and perhaps.. brass door knobs...

:0

marble and greystone architecture and mahogany finishings, and perhaps.. brass door knobs...
:{:}
That's a capial idea.

Here is a very informative interview of Tom Barrack who made 50% on his money during the RTC. His best single idea now is “survive” something Bill Cara has helped us do. He talks about three phases we will most likely go through.

1. Paulson plan equals a liquidity solution
2. we will need a capital solution
3. we get asset liquidation

It is at this debt liquidation stage that prices will be at their most depressed and time to buy.

The link:

http://www.colonyinc.com/cnbcinterview092208.php

Hello all. Long time lurker (2+ years?), first time poster. First, just want to express my gratitude to Bill and, as well, to the regular posters over the last couple of years. I've certainly learned a great deal from you all and, though still making my share of mistakes, am undoubtedly miles ahead of where I'd be had I not stumbled across the site. A special thank you to Bill for your tireless efforts at passing on your insights to all here. It is very much appreciated.

Just a quick question to throw out here. I've been using the RSI app to help time purchases. Will the app work for Canadian-listed symbols?

I'm glad to have the opportunity to consider all the viewpoints here, really appreciate the effort and thought behind these various points of view. Thank all of you!

Current post from Robert P. Casey Jr. - Senator from PA http://tinyurl.com/3kjq6v
Letter lists the Senator's understanding of the "bailout bill" issues and where Senator Casey stands on the issues.

I have no relation to Senator Casey nor his office other than being in his district.

vin,

you are correct leaders don't do that...

The problem is we haven't elected leaders. I would begin to argue that Ron Paul and very few others that are elected officials are "leaders".

Since when have these elected officials lead?

Our officials don't lead, they follow the money. That is our problem. If 95% of a populace essentially is against an issue and the elected official has voted against the populace, how are they representing the people?
Last time I check, we elect these people to serve the people. Lead on issues when opportunity arrives. Our current officials that are trying to draft this proposal are doing nothing but following the BullTard paulson. Yeah, I remember when this blog author wrote about Bulltard's arrival to washington we had a nice bull market for several months. I remember in that spring season the dow was up almost 3 of 4 days.
IMO Bulltard was placed to try to fix what was coming... How could the CEO of GS not know this was coming? They were a part of the lobbying of the SEC to allow their leverage to go up to 40 to 1.

Lets have a look at GS balance sheet as of MAY 30th... GS stock price was $176.31. Total assets of 1,088,145,000 and owners equity of 44,818,000. that is 24.2 times leverage as of MAY 30th!!

As of Friday the price is 137.99 and yes they have raised 5 Billion from Buffet and 5 Billion in stock issuance.
10 Billion is 1% of 1.088 trillion in assets. THAT IS NOT ENOUGH TO STAY SOLVENT. My accounting skills are very rusty so please correct me if I am wrong. Especially if their stock price went down 20% IMAGE was the CFO of GS was thinking two thursdays ago when the stock traded in the mid 80s...
as of May 31st. Morgan Stanley's leverage was 29.8 times...
Stock was trading at 43.10. now trading at 24.75... a stock price drop of 42% and i believe that they have RAISED NO CAPITAL! NONE ZERO ZILCH.... Imagine what their CFO was thinking two thursdays ago when the stock was trading below 20!!!
Short sale ban on financials...

I do believe if the plan is passed, I am in agreement with Bill's change of the tides bull phase. However, in my opinion this plan isn't the best possible plan on the table. In fact we haven't even really heard another plan besides the republican's insurance plan (which smells bad also).

Who is the plan going to benefit? Only the tax payers who are in the "circle" are going to benefit as we all lose.

I could be off course but it wouldn't be the first time.

This post is my opinion and mine only, it is not a recommendation in any sense of the matter. The balance sheet information I got was from finance.yahoo.com

I also encourage many of you view the link below about how worthless this paper is quote from website link below.

http://tinyurl.com/4mwrg4

"For what it's worth, I was just offered Wachovia (WB) 5.8% hybrids at $0.10 on the dollar, and I passed. A block of 30-year Wachovia paper just traded at $0.35 on the dollar."

To my understanding a block of paper offered at 10 cents on the dollar was passed? How desperate are people really? or how worthless is that paper?
Let me see... i were to buy that and hold for two years I could make my principle back and make a few bucks????? yeah if the paper didn't self-destruct before then....

ALOHA !!

I see you guys are finally getting around to eliminating the US FED as we know it. If the US government(meaning WE THE PEOPLE)owned the central bank and took control of our own money then why would there be any need for interest on loans? Who invented interest? Don't we constantly need to increase the money supply to just cover the interest on ever expanding TOTAL debt? Why does GDP need to expand?

The US CONgress and the US Banks are simply debating BAND AIDS. The real CURE is to do away with the current monetary system otherwise we will keep repeating the same mistakes.

Its very simple ... its a battle between REAL WEALTH and FALSE WEALTH!

I vote NO BAILOUT and NO REP and NO DEM!

To anyone who is familiar with Mark Cuban - (not saying I am a fan or not)

he brings up an interesting point of view towards himself investing in the bailout up to 50mil of his own money. I'll post the site and post below. Interesting... i am still trying to digest the mindset of his idea.
http://tinyurl.com/82lbz

My BailOut Solution - I’m In For At Least $50mm
Sep 26th 2008 11:52AM

As you can tell by the number of the posts on this subject, I think we are in a very serious financial situation in this country. It’s bad for everyone and like many others while I think the Bailout is necessary, I would prefer any solution that doesn’t involve the government. Unfortunately, I don’t think a pure market based solution is possible.

That said, I considered what it would take for me to part with my money to provide liquidity into the banking system.

I will not just write a check to the Treasury. Thats like handing it to Ted Stevens. I’m not going to voluntarily give a year’s supply of crack to the junkies.

Here is what I will invest in:

If Treasury Secretary Paulson were to create an ETF to buy all the assets the bailout was planning to buy, along with all the warrants and shares of stocks in the bailout companies it can get, and then have any receipts generated by those assets, whether by sale, or regular income such as rent or mortgage payments or servicing them, go into the fund, I would buy at least $50,000,000.00 of shares in The Fund.

It would not be difficult to do. Whatever funding that the Treasury Secretary says is necessary for the Bailout would first try to be raised privately from other Funds and individuals by selling them shares in The Fund.

If the amount of shares sold falls short of what the Treasury has defined as being need, the underfunded amount would be funded by the purchase of shares in The Fund by the treasury.

The ETF would initially be valued at the total amount raised and then trade based on its financial results and the trust the American people and international markets have in the job the Fund is doing to monetize the assets. If the fund is making money, the ETF will trade up. If not, not. Either way, the share price and the transparency required of the ETF will make it obvious to taxpayers just how well their taxpayer dollars are performing.

If The Fund is as successful as some think it could be, it could pay dividends. Those dividends will be paid to investors, and to the US Treasury.

In addition, once the assets purchased by the ETF are aggregated and documented, and hopefully the economy has improved, it would be possible to trade out baskets of assets with institutional shareholders. This is a process that will help keep the fund honest in how it manages the assets. If the Fund is not doing a good job of monetizing the assets, Institutional shareholders will look to exchange their shares for baskets of assets in hopes of better monetizing them.

This fund, like every other, would have investment guidelines. The same guidelines that the Treasury would use to work out the assets it would have purchased directly. The fund, like every other, will have analysts and accountants and the same type of people that the Treasury would have hired to work out the assets, except hopefully it would be run more efficiently as a publicly traded fund.

I can’t think of any reason why this wouldn’t work, and why it wouldn’t be a better idea than the current Bailout options that I have heard discussed.

If they need someone to help put it together and/or run it, I’m happy to help.

Tell me what you think

Thanks, JohnE.

I'm from PA, as well.

Casey hasn't been in Washington very long and I don't assign him as much blame for allowing this to happen as I do our other legislator, Senator Magic Bullet, who has been in office since Philadelphia, PA was the Nation's Capital. ;^)

Nothing like having politicians watching your back.

Regards

ALOHA !!

norm ... Do you really think you're looking at GS "total" balance sheet? Do you really think a company like GS, who switches from INVESTMENT BANK to COMMERCIAL BANK at the drop of a HAT and lies all day long to its own clients, who has international holdings all over the World and uses computer models to project derivatives values in a market that has no market and is running the US TREASURY really puts out an honest set of financials?

If this was a REAL banking crisis like past banking crisis then we would have seen more numerous small bank failures. Why is it this time the BIG BANKS are failing first and failing at such a rapid pace now?

Do you guys really think these guys at the TOP of the money system tell you the truth and honestly report their "total" liabilities and assets?

Its to the point where only one line item on a financial needs scrutiny ... the PP&E !!! In the end that was all BEAR STEARNS was worth! I suspect many other US and international banks will fall into that category as well!

For starters ... look at their PRODUCT!

Rebuttal to my last post... Looking for ideas... maybe do nothing is the best...

http://tinyurl.com/3ga3kl

Mark Cuban Is In For $50 Million, I’m Sitting This One Out

Mark Cuban just wrote a really interest blog post suggesting that the government create an ETF with the assets it purchases as part of the bailout. The key point of this strategy is that the government would sell shares in the ETF to the private sector, thereby reducing the load on tax payers, and adding a level of transparency to the fluctuating value of the assets.

The idea is very interesting, and it’s hard to argue that anything requiring less tax payer dollars or more transparency would be a bad thing. The problem with this strategy is that it does not address the key problems with the bailout:

If the ETF shares are sold initially at purchase price asset value, no one in the private sector will invest. The point of the bailout is that banks aren’t willing to sell their assets at the prices the private sector is currently attaching to them given the risk profile. The reason the government is stepping in is because it is the only buyer willing to pay above market prices for those assets.
The ETF shares could be sold in auction, and the government could release full financials on all the assets. This would probably be sufficient to get the private sector to purchase vast amounts of the shares in the ETF. However, it will also cause the government to take an immediate loss on the value of the shares being sold, with no potential upside later on.
In either case, the companies selling these assets will still be taking a net financial gain on the asset sales at the cost of the tax payers. This will still create distortions in the market (allocating resources to the players that deserve them the least, while robbing resources from everyone else). Likewise, the enormous losses accrued by the government (and the need to still finance them with public money) will serve as a further tax on the American people through depreciation of the dollar.
I applaud Mark for both putting new ideas into the fray, and also for being willing to put his money where his mouth is. But while the ETF idea has some nice features, it still won’t address the key issues of the bailout.

At the end of the day, as the guys at The Mises Institute often point out, when you have a major investment bubble, the only true solution is to allow the excesses to liquidate. Allowing the market to do it tends to be the fastest and most efficient path.

kaimu,

I only look at the "facts" nothing more than the "facts" presented to us...

GS and whoever else most likely has Level III assets all over the world hidden off their balance sheets.

I do not disagree with you on that whatsoever.

My question to someone who can help me understand this problem.

If the FED is eliminated... What are our options?

Gold standard? how do we pay for the gold right? May or may not get that personally....

Hybird of peg?

Ideas...

ALOHA !!

THIS IS WHY NONE OF THE BAILOUTS NEVER WORK ...

This single 47 minute video needs to be shown on NATIONAL TV. On CNN and CNBC and even on OPRAH!

To understand what we are up against and where your kids futures lie then you best WATCH THIS!

Oh come on KAIMU, not another BORING AS HELL MONEY lecture????

This explains it all ... This is why AMERICA is where it is today and why there will never be a level playing field or social equity unless we change our monetary system first.

THIS IS IT!!!! Its the best video I have ever seen on MONEY 101. I guarantee your stock profits depend on this so even if you day trade or are in for 20 years it does not matter! You have to cash out at some point! This is why I say what I say ...

LINK: http://tinyurl.com/27jppm

ALOHA !!

THIS 47 MINUTE VIDEO EXPLAINS THE ONLY MONETARY CURE POSSIBLE FOR AMERICA AND THE WORLD!

WATCH IT ...

EVERYTHING ELSE BEING PROPOSED BY MARK CUBAN OR ANY OTHER "EXPERT" IS DEAD WRONG ...

WATCH THE VIDEO ...

senator casey is a moron. rewrite mortgages (free money) & debt relief (free money), and extend HOPE program (free money). basically savers and responsible people eating it to provide mortgage relief to liars and idiots. gee, ever wonder how we got here?

so the prudent savers sit and watch and pay for homes for other.

look, artificially trying to levitate home & asset prices to work outta LOSSES in bad paper isnt going to work. the joke is calling the bad paper illiquid - no, the holders wont sell the paper at market prices b/c once they price their holdings they would be shown to be insolvent on their ports... that is not illiquidity, that is a big fat LOSS!

so senator casey & every other moron in the world that wants to borrow and hand out free money is making it worse, not better.

European giant, Fortis facing problems:

http://tinyurl.com/3fndwj

You would need gold in the central bank, so that it stands on its own as a lender of last resort. The USA is supposed to have the largest supply of bullion in the world. The taxpayer owns it, right?

But you would not necessarily need a gold standard, you simply allow gold to act as money and remove any prohibitions against ownership of gold, such as royalty taxes and allow its free exchange as if it were a currency.

Norm,
I do not believe that there is any market for this illiquid crap. Merrill sold its crap for 20% of purchase price and John Thain said he was fortunate to get out at that price. The crap is secured by overpriced property, some of which is abandoned, some of which is foreclosed, much of which is neglected and all of which is decaying faster than road kill.

The purpose of the bailout is to let a few of Paulson's best friends out the door before the next bailout request when we will be told that it was presumptuous for us to think we could fix the tottering worldwide derivatives market of $160 trillion? with only $.7 trillion.

Nemo - CPST

What, please, is the source you are quoting in your last post on CPST?

Lessmore - Merrill's toxic securities sale

Merrill got 22% of par for the securities, but also financed the purchase. The figure I read for what they really got (after considering terms of the financing) was 5%.

Bull Hunter - I am in debt to you and all the other posters on this forum.

So it was 5% that John Thain said was an awfully good price that others would be lucky to get. Why bother to take title to this garbage. The cost of administering it will cost more than 5%.

I speculated the other day, why would Buffett want to buy into GS - did someone twist his arm?
I was apparently not alone in such thoughts:

http://londonbanker.blogspot.com

Did Buffett Just Give Us A Coded Warning?
Warren Buffett, new stakeholder in the megalithic survivor-biased Goldman Sachs, has referred to recent upheavals in the financial markets as "an economic Pearl Harbour". He is a very smart man who knows his history, having lived it and seen it up close. He will know better than most that Pearl Harbour is now understood in well informed circles to not only have been foreseen by FDR, but provoked by FDR in an orchestrated campaign to engineer a war with Japan dating from a plan adopted in 1940.

. . .

Warren Buffet knows better than most just how dirty and mean this Bush administration plays. The politically motivated prosecutions of AIG after he endorsed Kerry in 2004 will have left scars, and his advising Obama puts him at huge risk if Rove succeeds with another GOP victory.

He is in the insurance business, isn't he? So think of his acquisition of a huge stake in Goldman Sachs and his endorsement of the Paulson Plan as insurance. Meanwhile, he may just be patriot enough to have provided a coded clue as to what he really believes you can expect.

Jock, and after that MER reported balance sheet showing the same securities at 30c or 40c on the dollar!

Tom Barrack - IREI Summit - 09-16-08

Insights that are well worth listening too, the price of admission is about 50 minutes of your life.

Part 1

http://www.colonyinc.com/irei0908_pt1.php

Part 2

http://www.colonyinc.com/irei0908_pt2.php

Dedicated to “Noodle” who was giving us the inside scoop here at Cara Community a year or so ago. Thanks Noodle where ever you are.

Kaimu - That money video was devastating. I had no idea and i am 61!

kaimu,

I am younger and definitely not as wise but that was devastating as JohnE stated.

EVERYONE should INVEST the time to watch that video.

FLOOOOORED after viewing it.

Challenging times ahead... it seems that the credit bubble GLOBALLY is about to pop... wonder how the chips are going to fall.

Perhaps someone will eventually explain to Paulson the subtle difference of potato placement, ie, it's not meant to be placed in posterior area of the Speedo suit. enuff said, moving on...

ALOHA !!

"wonder how the chips are going to fall. "

It depends on how much more DEBT SLAVERY the World wants to endure ...

Please notice who it is that is deciding our FATE. It is the same people that made our FATE! There is no reason that WE THE PEOPLE have to live like this. It can all change and really CHANGE in one day if WE want it to.

Like an addict ... the addict has to want CHANGE ... you cannot force it upon him. Usually addicts only CHANGE after they hit the ultimate BOTTOM. Not before ... Joe Six Pack has not yet hit the ultimate BOTTOM.

Like I say this is EMPIRE unwinding ... what is the US EMPIRE built on? World Reserve Currency DEBT!

Kaimu,
Very interesting video to say the least.

You ever wonder why we repeat the mistakes our parents make. At the time we hear the advice based on years of experience and wisdom, it sounds like mumbo-jumbo. Afterall, we are nothing but emotions. We have to experience the fire ourselves.

Could it be most religions forbade usury because they've seen this before. But did we listen? Of course not. Religions are full of mumbo-jumbo. They certainly can't be a philosophy based on accumulated wisdom of an earlier, perhaps more advanced, civilization. Somehow all these religions all communicated with each other and agreed on a common set of principles.

Well, here we are...welcome to the teenage years. Hope we grow up fast.

9/27 Release from Congressman Platt's office, 19th district, PA http://tinyurl.com/424jtf

I can't tell if he is for it or against the bail out bill?

Kaimu,

I've been watching that "Money as Debt" video for about a year, maybe seen it 3 or 4 times. Some other guy posted it here way back when. But it is definitely crucial to appreciate that in a debt based money system it is previous indebtedness that becomes the basis for new loans. So when the credit bubble really pops, it's like the universe imploding, not anything Hank and Friends can patch up with some duct tape and bllllloooooowwwwwww back up again.

They can help their rich friends with the bad balance sheets, but they can't, as that video suggests, simply pretend that the credit bubble didn't pop. The failure of prior indebtedness negatates to ability to create new loans. And since this WAS a 30 year credit expansion, this just may take awhile to fully unravel.

Enjoy the island, weather's getting not-so-nice here in Westport CT, which today grieves the loss of one of it's own.

ALOHA !!

I find that MONEY VIDEO enlightening ...

What is truly DEVASTATING is the depth of ignorance of the common man and woman in the street and the depth of CONTROL that banks have over our freedom and our CONSTITUTION. The US CONSTITUTION provides no RIGHTS for private banks to exist.

How can you find a CURE for an illness that you have no capability of diagnosing?

Kaimu, Nice video.

I'm always amazed when I study an amortization schedule and see how it benefits to the lender. Do you ever notice that the payback of principal is skewed to the lender with the largest amount of interest to principal ratio in the early years of the loan. And to top that off the average homeowner sells his house or refinances every 7 years again accruing to the lenders favor.

What a system.

ALOHA !!

Shark ... You are right I have see other similar videos on MONEY 101 as well and I must have missed the prior posting of MONEY AS DEBT, but this video puts it all together in a more easily understood way that other videos have not. In fact, this video looks like something even a high school school kid could grasp!

Why wouldn't public schools want to air this video in their civics or economics classes? Imagine seeing this video in public high school right along with all the other videos warning about syphilis and AIDS! HA!!! That's where this video belongs!

ALOHA !!

Telestar3d ... YEP ... its the AMERICAN DREAM!!!

ALOHA !!

This headline says it all ... This shows what BIG GOVERNMENT does best!

READ ON:
Bailout bill, once 3 pages, swells in length

By The Associated Press Fri Sep 26, 6:15 PM ET

A week ago, it totaled just three pages — the White House's request for $700 billion to rescue tottering financial institutions by buying their devalued mortgage-related assets.

By Monday, after an intense weekend of negotiations, the draft of the bailout legislation before Congress had swelled to 42 pages.

"How can you find a CURE for an illness that you have no capability of diagnosing?"

Oh no, it's worse than that.
How can you diagnose what you don't see or know exists? Our level of ignorance and denial about our debt is unmatched.

“That paper money has some advantages is admitted. But that its abuses also are inevitable and, by breaking up the measure of value, makes a lottery of all private property, cannot be denied.” - Thomas Jefferson

42 pages for $7 Billion?
That's nothing. You've seen bigger construction contracts than that for far less.

Remember, it's not quantity, it's quality we need. Hell, the bylaws to most dog clubs are 10-20 pages. To describe the kind of restrictions I want will take more than 42 measly pages. If I have to put a dime of my money into this boondoggle then it at least has to be on a tight leash.

I'm still trying to imagine how both parties are going to get right in our face and pass it anyway. But then, when there is only two parties, the problem becomes quite visible. And they own the media so it's too late to draft a real leader. I can't put in print what I'm thinking as I type this.....

ALOHA !!

I honestly really don't follow the whole PM futures markets in depth like a David Morgan does, but I do follow my niche. Lately there have been a lot of headlines about silver availability on the retail side. THIS IS A RED FLAG to me. Not from a COMEX point of view, although the COMEX is not a bastion of free markets because the INTERVENTIONISTS have corrupted all free markets to the point that there are none.

What this tell me is something I have posted many times before, which is silver is the "Poor Man's Gold"! The Chinese based their money on silver for centuries, so in Asia silver is well known as real money. Only us baby-boomers can recall a time when silver was money in the USA. Remember there were pure silver coins ... dimes, quarters, half dollars, silver dollars and even silver certificates(paper warehouse receipts). Not any more in the USA. In fact the US silver reserves were all sold off and what is left is used in minting US coins. America has no Strategic Silver Reserves!

Back to my point of silver scarcity ... Isn't it logical that if you cannot afford $900 for an ounce of gold you could afford $18 for a silver ounce? If you had $1000 paper IOUs to spend on PM you could get more bang for your buck buying silver. Plus lately people are really eying that gold/silver ratio!

Remember that dealers like CNI and even the Perth Mint require a minimum $2,000 and $10,000 to buy in, sort of like a cover charge! At EBay there is no cover charge to buy. You can literally buy one silver coin if you wanted to, with shipping and ins that would be about $22-$25 per one ounce coin. The premium is higher but its more affordable for people with less means. Seems the poorer you are the more you pay! Hummmmm ... that observation extends past silver coin purchases! HA!!

Anyway ... scarcity is here for the smaller retailers like it began there as well back in the late 1970s! Hummmmm ...

David Morgan says ...
"Precious Metals in the Physical Realm."

"Today we are getting feedback from many of the
largest retail metals dealers that finding gold and especially silver is becoming increasing difficult. Additionally, some of our sources on the wholesale side are also expressing concern that the market is tightening significantly."

“Paper is poverty,… it is only the ghost of money, and not money itself.” - Thomas Jefferson

kaimu - on silver...

“Experience has proved to us that a dollar of silver disappears for every dollar of paper emitted.” - Thomas Jefferson

Remember, the first three pages was a fricking joke that had to be thrown out. You gotta hand it to Hank, he has balls. That's how Goldman does it. They GO for it. Ask for $7 Billion?

I can see them all at the Whitehouse laughing and joking.....
"Let's put zero restrictions on it and say there can't be any review, oversight or legal challenge and see if they actually go for it!!!!
What do you say, about two and a half pages should do it! I bet they won't even read it! HA,HA,HA,HA!"

just posted up some weekly charts of the USD vs. Gold, interesting how weak the USD appears technically on a weekly chart, while gold is the opposite.

i guess ive been looking at daily charts too much as of late. comments/observations as always are welcome:

http://jglobal.blogspot.com

Re: Technical Picture

Given the technical picture on gold vs. dollar, any downsides in the gold price will be very short lived as they were during August, especially given the seasonality.

Just look at the massive buildup of shorts in the dollar futures on the commercials side. They want dollar depreciation which might help them out of the mess. Its very simple.

The black swans here will probably be the bond yields and interest rate moves by central banks around the world.

Goldman stood to lose $20B from AIG demise -

So reports Gretchen Morgansen in today's NYTimes. She was told by several Wall Streeters, who needed to remain anonymous.

Goldman's CEO was the only Wall St. CEO at a key meeting discussing the fate of AIG. A Goldman spokesman denied to Ms. Morgansen that their CEO had been there pursuing their own interests, but rather those of the financial system generally ...

LOL

Bailouts, subsidies, derivatives, whatever...

The true value of ANYTHING is only what someone I willing to give for it.

How many times have we heard the one, "Greetings, we're from the government and we're here to help you."

Katrina, corn for ethanol subsidies, federal education dollars — there is always a catch and always a screw-up.

If ever there was a time to let the market work, this is it. The same people who said it was wrong to add tariffs to protect jobs are now tearing their hair out to "protect the taxpayer." Yeah, sure. I can take care of myself, thank you and so can others if they must.

If we had government assistance to organize the revolution it would have died an early death. If we had waited for government assistance to settle the west, invent the light bulb, or any of a milling things we'd still be an emerging nation.

I know I'm an idealist, a type A, and I've had the migraines to prove it — all my life, but this massive planning is far more scary than anything. If Marc Faber is right the $700B is a low ball figure. If Jim Jubak is right it may go for nothing.

It was stated on TV this morning that $700 Billion is enough to redo our entire infrastructure. Think of the jobs and that would generate. Think of the economic boost it would mean — for years.

Until globalization ruined our manufacturing sector, every recession I gained clients. As a one-person business I could provide advertising direct to companies (saving the 15% agency commission). Suely someone with a bit of imagination and salesmanship could turn the housing/mortgage mess into a workable and profitable situation with more benefits to more people than this resuscitation of the credit-based fictional economy.

What we need more than anything is to be left alone.

Kaimu,

Thanks for the pointer on the video. Great learning in 47min!

thanks vadym for the links to your articles on stops.

stops = always essential yet frequently frustrating, particularly in these choppy conditions.

btw, i enjoyed reading another of your articles, "History teaches us..." on the necessity of moving against the obvious and being contrarian, which is definitely a relevant topic given Bill C's bullish call amongst the sea of negative sentiment.

http://www.realitytrader.com/blog/2008/03/history-teaches-us.html

kaimu,

On the topic of silver . . .

Do you still like ECU?
Or do you have other preferences?

Gratitude - ECU has been a recent and positive position for me

Ag & Fertilizers -

AGU was downgraded on Friday. It was upgraded just last quarter. All Fert. stocks went down in sympathy of AGU or Gold, I am not sure. One analyst on CNBC describing that farmers being squeezed by the lack of credit and not being able to pay down seeds and fertilizer.

Any take on how this group will act after the bailout? Will it run with Gold Stocks or will it see as a commodity stock and get punished?

Debate:
One can see now why Obama did not want to debate Mccain. All of Obama's "grand plans" have been deemed a "sell" by the analyst due to the bail out of Wallstreet. McCain did far better than anyone had expected.

A Memo Found in the Street
By BARRY L. RITHOLTZ
Uncle Sam the enabler.
To: Washington, D.C.
From: Wall Street
Re: Credit Crisis
Dear D.C.,
WOW, WE'VE MADE QUITE A MESS OF THINGS here on Wall Street: Fannie and Freddie in
conservatorship, investment banks in the tank, AIG nationalized. Thanks for sending us your new trilliondollar bailout.
We on Wall Street feel somewhat compelled to take at least some responsibility. We used excessive leverage, failed to maintain adequate capital, engaged in reckless speculation, created new complex derivatives. We focused on short-term profits at the expense of sustainability. We not only undermined our own firms, we destabilized the financial sector and roiled the global economy, to boot. And we got huge bonuses.
But here's a news flash for you, D.C.: We could not have done it without you. We may be drunks, but you were our enablers: Your legislative, executive, and administrative decisions made possible all that we did.
Our recklessness would not have reached its soaring heights but for your governmental incompetence.
THIS MEMO PROVIDES A BRIEF HISTORY OF your actions that helped create this crisis.
1997: Federal Reserve Chairman Alan Greenspan's famous "irrational exuberance" speech in 1996 was
somehow ignored by, um, Fed Chairman Greenspan. The Fed missed the opportunity to change margin
requirements. Had the Fed acted, the bubble would not have inflated as much, and the subsequent crash would not have been as severe.
1998: Long Term Capital Management was undercapitalized, used enormous amounts of leverage to purchase all manner of thinly traded, hard-to-value paper. It failed, and under the authority of the Federal Reserve a "private-sector" rescue plan was cobbled together. Had these bankers suffered big losses from LTCM, they might have thought twice before jumping into the exact same business model of undercapitalized, overleveraged, thinly traded, hard-to-value paper. Instead, they reaffirmed Benjamin Disraeli's famous aphorism: "What we learn from history is that we do not learn from history."
1999: The Financial Services Modernization Act repealed Glass-Steagall, a law that had separated the commercial-banking industry from Wall Street, and the two industries, plus insurance, came together again. Banks became bigger, clumsier, and hard to manage. Apparently, risk-management became all but impossible, even as banks had greater access to larger pools of capital.
2000: The Commodities Futures Modernization Act defined financial commodities such as "interest rates, currency prices, and stock indexes" as "excluded commodities." They could trade off the futures exchanges, with minimal oversight by the Commodity Futures Trading Commission. Neither the Securities and Exchange Commission, nor the Federal Reserve, nor any state insurance regulators had the ability to supervise or regulate the writing of credit-default swaps by hedge funds, investment banks or insurance companies.
2001-'03: Alan Greenspan's Fed dropped federal-fund rates to 1%. Lulled into a false belief that inflation was not a problem, the Fed then kept rates at 1% for more than a year. This set off an inflationary spiral in housing, and a desperate hunt for yield by fixed-income managers.
2003-'07: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability. The borrower's ability to repay these mortgages was replaced with the lender's ability to securitize and repackage them.
2004: The SEC waived its leverage rules. Previously, broker/dealer net-capital rules limited firms to a maximum debt-to-net-capital ratio of 12 to 1. This 2004 exemption allowed them to exceed this leverage rule. Only five firms -- Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley -- were granted this exemption; they promptly levered up 20, 30 and even 40 to 1.
2005-'07: Unscrupulous home appraisers found that they could attract more business by inflating appraisals. Intrinsic value was ignored, so referrals kept coming in. This helped borrowers obtain financing at prices that were increasingly unsupportable. When honest appraisers petitioned both Congress and the bureaucracy to intervene in the widespread fraud, neither branch of government acted.
THERE'S ACTUALLY A LOT MORE we could add to these items. We could mention impotent supervision of Fannie and Freddie by the Office of Federal Housing Enterprise Oversight; the negligent oversight on ratings agencies; the Boskin Commission's monkeying around with how inflation gets measured; the "Greenspan Put," etc.
We could mention former Fed Governor Edward Gramlich, who warned about making home loans to people who could not afford them, and who said the runaway subprime-mortgage industry would create problems in housing and the credit markets. But Gramlich was up against a Fed chairman who apparently believed that markets can regulate themselves. (Gramlich died last year, three months after the housing bubble started to deflate.)
We on Wall Street do not deny our part. We created these securities, we rated them triple-A, we traded them without understanding them. Now that they have gone bad, we are real close to getting the rest of the country to take them off our hands.
Thanks, D.C. None of this would have been possible without you.
Very truly yours,
Wall Street
BARRY L. RITHOLTZ is CEO of Fusion IQ, a research firm, and blogs on financial topics at bigpicture.typepad.com.

I like this quote:

"To put this amount into perspective: if you had spent $1,000,000 a day, from the birth of Christ until today, you would have only spent about 732 billion dollars."

http://www.321gold.com/editorials/casey/casey092908.html

thanks bsi87 for the Barron's article link, and unfortunately I'm in agreement with your Monday call of "my general distrust sez we see a news driven rally on Monday that will be weaker than last Thursday/Friday. and then the big boys kick the stool out...again. "... that's if we even get a rally.

ST07 thanks for link to globe and mail article (the ROB cover story that day was good as well on Nation of Debtors)

I'm very impressed with the quality of postings and links on this site.

On Capstone questions:

http://industry.bnet.com/energy/1000274/will-financing-engine-seize-up-at-capstone-turbine/

I haven't researched the UTC angle, but I simply use CPST's need to recently provide a warrant/convertible offering to finance the new product which is moving up into competition with other players who may be better capitalized in a terrible capital environment. I agree with Pookster on the value of the technology, but that doesn't make it investable.

Re Barry R thru Craig:

"THERE'S ACTUALLY A LOT MORE we could add to these items."

Yes, and I will never forget Alan Greenspan saying publicly that now was the time to get a super low rate adjustable rate mortgage. I don't remember the year (2003/4?) but I remember a comment from an astute analyst the next morning on NPR's Dianne Rheam show. He said Greenspan was trying to protect the banks. It did not work. Greenspan's advice was bad not only to the poor homeowner but eventually for the banks.

They're saying on Bloomberg that congress agrees on a bailout plan.

Re Capstone...

This stock was one that Dr. Wish got into after the first breakout and on the advice of a stock picker whom he trusts even though he does not usually dabble in stocks below $5. They both made money if they had a stop. Dr.Wish does not report detailed results. This is not one for me either although I have known of it for a long time and it is an interesting speculation.

Did someone just turn on some really fast techno dance music to keep the musical chairs game going?

Monday will be interesting with up to $700 billion in recapitalization of the Fed.

"Democrats pressed hard for further taxpayer protections, including a fee that would be imposed on the financial services industry if after five years the government had not fully recouped its money."

I predict a $1,000,000 fee for every ATM withdrawal in 4 years 9 months.

There's gonna be a big party starting Sunday night.... but the hangover's gonna be hell.

http://tinyurl.com/3jrbol

"Yesterday's negotiations, which began shortly after 3 p.m., were at times tense and confusing, according to participants. At one point, a senator sought advice from investor Warren Buffett, one of the world's richest men, according to Sen. Kent Conrad (D-N.D.). "

Should have just read the last few days of posts here... would have some less biased advice than the guy who just invested $5B in Paulson's old company.

"Democratic leaders have emphasized to rank-and-file members that Paulson has told them that he could only spend about $50 billion a month on the securities purchase program"

lol. They forgot to underline and bold _only_.

That's some serious allowance he just got from Dad.

I first became aware of Paul Gringon's "Money as Debt" film thru a link posted here on Bill's blog (I do not remember who posted it). Here it is again:

http://tinyurl.com/27jppm

I was positively stunned thru the whole thing, couldn't belive it. Most certainly, as kaimu puts it, it is Money 101 in a nutshell. The best 47min you could spend teaching your kids what they're clearly NOT going be taught in school, but should.

Shortly thereafter I came across G. Edward Griffin's book "The Creature From Jeckyll Island". Amazing. Couldn't put it down:

http://tinyurl.com/3skpdg

Recently, I came across another link (again, probably from someone on this epic blog, for what is what I consider to be Money 201 (and everything else: Chris Martensen's 'Crash Course'. The best 2 hours you ever spent, divided into easy-to-digest 3 to 7min segments.
Clear, consise, well produced, and scary:

http://tinyurl.com/66vzgt

And the other wake-up call, professor of Physics at UC-Boulder Albert Bartlett's "Arithmetic, Population and Energy" long and somewhat dry but well worth it. It will completely change your perspective:

http://tinyurl.com/2q7eka

Bill is not passed yet though...

Over in the Middle East, they are making this out even worse than it really is...

http://tinyurl.com/4qgget

"Indeed the only way that Obama and McCain made the news was by taking part in the ill-tempered bipartisan White House summit George W. Bush held in attempt to drive through his $800 billion bailout plan for the US financial system. "

Give or take $100 billion.

$700 billion is also what last year's world trade deficit was for the US.

Give or take $11 billion.

http://tinyurl.com/42f758

For the latest on bailout news...

http://tinyurl.com/4nf6z7

Somebody picked up the napkins scattered around Nancy's office and documented some of the highlights of the proposed bill.

http://tinyurl.com/4gyreb

My favourite is the Financial SOBs.

"Financial Stability Oversight Board comprised of the chairmen of the Federal Reserve, Securities and Exchange Commission and Federal Deposit Insurance Corp, and two members appointed by Congress to oversee activities of the program."

PPT just got bigger.

Another interesting one....

Investors who sold preferred stock in mortgage finance giants Fannie Mae and Freddie Mac, between January 1, 2008, and before September 7, 2008, to pay higher ordinary income taxes on any gains rather than the lower capital gains tax. The government announced the seizure of Fannie Mae and Freddie Mac on September 7.

I guess I made the cut by buying them around $0.86. Too bad I sold them. Should be an interesting ride Monday.

Kaimu, I just got to watching the video Money as Debt, and it seems to provide a clear answer about when a country should expect inflation and when it should expect deflation. When the amount of credit (debt) is growing, more money enters circulation and inflation takes place (the fastest growth of debt was in the recent years of the housing boom, and hence gold price has increased a lot since 2002). When the amount of credit decreases, the amount of money in circulation decreases and monetary deflation takes place. Some time ago I posted a quote from Bernanke where he said that people have a totally wrong understanding of the monetary supply – it is not M2 or M3 but the DERIVATIVE money created. Now I understand better what he meant and why he was (and is) expecting inflation to come down despite the lowered interest rate and continual injections of liquidity (government money) – he knew that the collapse of the credit bubble will overwhelm all injections of liquidity. Recently, the amount of bank lending has decreased dramatically, implying that the rate at which new money is created has greatly decreased. Therefore, it would be natural to see the core inflation rate keep going down while the credit contraction keeps taking place. Do you agree?

John Mauldin wrote in his most recent e-letter that a silent run on the banks has been taking place for the last few months, where large corporations and investment funds have been withdrawing their deposits from the bank (which contributed to the recent downfall of several major banks). As the video Money as Debt implies, when a $1000 deposit is removed from the bank, the amount of loans it can have outstanding is also decreased, thereby decreasing the amount of money in circulation. Thus, in addition to a much slower rate of new debt creation, we are also having debt destruction now, which should have an outright deflationary effect. Am I missing something, Kaimu?

Well, you've removed all doubt, that's for sure.

A stunning example of American strength and security. How sad.

David, when they have a $1000 dep removed, they can't simply call the $20,000 to $40,000 in loans it was levered to make, so they have to recapitalize and go to the Fed window to get the proper reserves to stay open. The Fed has to get that $ from somewhere, thus issuing treasuries and increasing money supply.
That only recapitalizes them to the reserve requirement, so they still don't have anything to loan....unless they borrow more.

JVS3, why would you want to make a post like that when Bill said earlier on this page not to use unnecessary foul language? Why do you want to possibly mess this up for the rest of us by having Bill waste his time editing or deleting your post? This is not the Yahoo message boards. Though Bill encourages free discussion, it's still his blog and the least you could do is follow his guidelines. Treat it as a room with a bunch of people you don't know where you want to follow at least a minimum standard of behavior in your discourse. Otherwise, you may kill this for all of us. Sorry, emotions aroused or not, there's no excuse.

Craig and David:

Which brings us back to the lack of savings in the US. You can only have debt creations if you have the reserves. If you don't have savings (deposits) you can't create debt. That was the stroke of innovation (notice I didn't call it genius) for collaterlizing debt. It allowed banks to continue to function without increasing deposit size, thus increasing, as Kaimu would say, the velocity of money through the system as well as the volume, because collaterlization allowed for an increase in the nominal amount of debt in the system without a corresponding increase in savings. This increase in velocity and nominal volume inflated the nominal price of assets (houses). Since people weren't necessarily saving, lending standards had to adapt over time to evaluate someone's ability to manage debt as opposed to buil their balance sheet. Now, that increase in inflated values created apparent equity in houses, which became the new source of reserves for banks, which further funded velocity and volume. Then it got to the point where lending institutions began lending on the expected increase in reserves. Oy weh!!

Of course, this doesn't address the additional derivative products (CDSs) but the principle is the same. However, CDSs seem to be insurance policies. Unlike the personal insurance industry's requirement that one who takes the policy have a demonstrable interest in the insured, that is, it is easily understandable why a wife would take life insurance out on her husband (well, at least early in the marriage), or why a lending institution often requires insurance policies on the loan an inidvidual takes. In both cases, the wife might be looking out for the interests of the family if the husband were to die, or the lending institution simply wants to get their money back if the debtor dies or is incapacitated.

However, CDSs written against companies can be used by shorting syndicates (if they exist)to make money. If you can short a company's stock and drive down the price to affect their credit ratings, the value of those CDSs increases or get triggered. Triggering the CDSs force the counterparties to have to pay. Now, in theory, makes sense, but if the CDS owner has no demonstrable interest in the underlying company (or their debt) and the CDS underwriting process was shoddy, as has been the case, the economy is based on Alice in Wonderland.

So, it would seem, deflation is the leading horse.

There was another interesting post about money and it's value. Of course, I think it was interesting because it parallels what I've thought, so perhaps you should take it as a contra-indicator, but in a fiat system, the value of the money depends on the value of the underlying assets and their real increase in value. Thus, increases in productivity meant you were getting greater output (value) from a unit of input, whatever that might be. Which then brings us back to something Herr Professor Doktor Emeritus Kaimu pointed out: the increases in the money supply were having a reduced effect on GDP-why? HA!!! Because GDP is a nominal measurement based on a unit known as the $. We've all heard of the GDP deflator, come to think of it, not lately. Well, that was supposed to take account of inflation in GDP measurements. Now THERE is shifting sands. HA! How do you measure two lies??? HA!

Anyway, I can keep heading down that path...productivity, then is the source of value, that is producing something useful (philosophically gold is really fiat, but it doesn't matter because the world buys into it-which is more valuable in the desert, gold or water?). As we know, the U.S. produces less and less not only because it's shipped many industry overseas, but because of the welfare state growth and Wall Street stripping the assets away from the economy for the benefit of a few. We've just been lucky (?) other countries have been willing to fund our credit card. Bill may be right, they might have to come to the table, because if they dump the $ all those nominal assets in foreign currency reserves become worth zilch!!

Having said that as HPDE Kaimu says, the owners of real wealth oil, resources, etc. will become the Poohbas. I also think the creators of productive value will also, but those creators of productive value have to have somewhere to sell their productivity. That's where I've thought that if China can develop it's internal consumer market and become less dependent on exports we could be in trouble. As countries need less and less of what we've got, America, like an individual with no marketable skills, will be out of a job.

So, what does the US have of value to others?

One last thing...on the impassioned reply to the denigration of the US-alas, he was right, and I'm from the People's Republic of Massachusetts. Having said that, let me suggest that one should never get caught up in Patriotism. A country's institution are there for the benefit of they system, and those who know how to use them-whether it's the US, Canada, or European, or Asian. They are never specifically for the individual. All you have to do is look at the proportion of funding that goes to maintain the institutions as opposed to providing an end benefit to the target population to see that.

However, because we are a relatively open country, our dirty laundry is either visible or discernible, where in many other countries it is not.

Let me give you another example: There are some very wealthy suburbs west of Boston. After 9/11 every Joe Sixpack had a flag on his car. If you drove through Volvo/BMW/MB/Range Rover/Rolls country, you saw nary a one. I'll leave you to draw conclusions?

I would suggest not getting wrapping yourself in the flag of any country. They all have their issues, whether we see them or not.

kaimu - LMT - I wonder if you've considered UTX as a secondary option for defense sector? They have a pallet of interesting applications for technology.

Bailout Deal Reached?

Vote Tonight?

http://tinyurl.com/4rgl6v

nemo - I maintain that a primary reason Americans wrap themselves in the US flag is in respect of the sacrifices made by our forefathers for our well-being. Americans have since put infinite amounts of sweat-equity into refining the US lifestyle, and I intend on doing my very best to carry out the tradition as well. I know you feel the same way, so this isn't a lecture in any way, just how I feel personally and why everything I do and say is always an attempt at supporting my country and those in my midst who's intent is parallel.

http://tinyurl.com/3sb4p2

Debt, Delusion, and Central Bank Fraud

This isn't the best article I have ever read, nor am I near as financially astute as many of the members of this forum, but I have read little mention of the "Community Reinvestment Act" here or anywhere else. There are those who include this act with the repeal of Glass Steagel, in the basket of wrong turns taken to bring us in the U.S. to this pitiful state. http://tinyurl.com/4tpnuq

Bill,

I just read your rules for this community.

We are guests in your house.
The least we can do is to remember that fact.

Thanks for keeping on keeping on

Warren Buffett warned in 2002 that derivatives were a time bomb because, among other things, large amounts of credit risk are concentrated in the hands of relatively few derivatives dealers, who trade extensively with one other, and are owed huge amounts of money by non-dealer counterparties. This, he warned can be catastrophic for them as a result of a single event. The single event turns out to be a peak and then decline in home values. This hardly seems like the kind of event that these masters of the universe would not have anticipated. They had to know that they were unduly endangering their companies. Yet they continued to construct an ever larger derivative time bomb based on the bet that home values will forever rise.

It made no sense. But then as I wathched the FED spend its entire stock of Treasuries buying up Wall Street's bad paper, it seemed that their foolishness had been predicated on a secret promise by the US Government to hold them harmless. The FED had honored the promise to the full extent of its asset base.

As I watched Congress in action last week it seemed that one could identify the Congressional leaders in both parties who had participated in giving the promise. Paulson and Bernacke did not have to provide persuasive arguments for the bailout bill because they were really the agents of Wall Street. Their role was to collect further on the promise which the FED could only partially honor.

reCara - "Watch LIBOR move down for opportunities to buy the strong banks" (my paraphrase).

I matched $LIBOR against a bank index, the DJ US Banks Index, on a daily chart but had difficulties in interpreting what I was seeing due to the daily flux. So, I played around with the chart until I came up with what looks to be a very simple, easy to read, daily indicator for accomplishing Bill's guidance.

Sorry, this method I think only works for StockCharts "members" who will be able to bookmark the page for daily reference. Here is the link. Be sure to remember to look for Banks to rise when LIBOR falls and vice versa, but nothing is ever perfect - this obviously works, though, as seen in the chart.

http://tinyurl.com/3zf5jd

If you are curious but are not a "member", post a request and I will try to post a chart snapshot.

Note: For my own curiosity, I also put a chart of WBK in the above chart just to see how it was doing against $LIBOR and US Banks - looking good so far but DYDD.

I should also have said in my last post that the key is to look at the $LIBOR:$DJUSBK and use the cross over/unders of the lines shown there.

Sorry for leaving this critical part of instructions out.

I maintain that anything like a person, company, or country benefits from self examination, introspection and criticism.

That is how improvement happens. Like our talk of finance, fiat money and debt, you have to first observe a problem and accept it before you can change it. Sometimes that means dragging out some dirty laundry, acknowledging the stains and getting busy with some elbow grease.

The USA is not perfect. It may not be the "greatest" country on earth but so far it's doing alright. It would be greater if it had thicker skin and could look at itself a little more critically and accept a little ribbing without flying off the handle.

It won't hurt anyone.

""If the government loses money, the financial industry will pay back the taxpayers," the draft proposal says."

http://tinyurl.com/54m5cp

i can see that 'guarantee' playing in the coffee shops of main street-> together with stern warnings from the white house that retirement accounts/jobs/confidence in the US economy rest on back stopping the financials, this pretty much ensures passage of the plan...

technically, of course, it's possible for a financial company to repay 'principal' in 5-10 years while still losing money for the public in the form of opportunity cost-> give me 250b today to play with at the beginning of a bull market, and i will place bets that pay off big over the next 5-10 years...with no ownership in the company, the public gets the 250b back, and i'm back in business with, let's say, 750b of my own money...

it's not really that simple, of course...but buying 'toxic' assets is how they're spinning this...personally, i don't think they're that toxic...

in the final analysis, the Plan provides seed capital for failing companies, who can then 'pretend' they are starting clean with 'toxic' assets marked to market, allowing them to sit back and watch prices recover, siphon off all profits, and return the seed capital to the public after full recovery...it's like a hedge fund that charges 100% of any profits...

i'll be betting on the companies that get the money...

..to clarify the above, the assets were 'toxic' at the time of purchase...at this point, they're being sold to the public at >FMV, immediately transforming them into 'valuable' assets...

i see the media has stopped calling it the 'bailout' plan, and come up with the 'rescue plan'...

sounds better, and i'm sure the Senators and Congressmen who agreed to it against the backdrop of protests in their districts like it even more...

Craig - totally agree with your statement. I wish we could look ourselves in the mirror and be humbled. we feel entitled or owed instead of privileged. Generations before us earned us those privileges.

2nd,

these toxic assets are not even worth 10 cents on the dollar... there is not market for them.
I can't wait to hear the outcry from the ones who are against this bill when we see the treasury department buy assets that couldn't' get 9 cents on the dollar on EBAY OR CRAIGSLIST (I mean auctions) as the department will pay 60-70 cents on the dollar. What a waste. Now ideally if houses were to ever appreciate it could pay off.
However ... Joe5pack (inflation tax on beer) will now want their portion of the bailout and I could ONLY imagine how many checks won't hit institutions for mortgage payments and other debt related items because Big Banks got theirs and the public got was a lousy t-shirt financed by other countries inwhich we will use debt to pay off debt?

We are going to have to sell everything to pay this back. all natural resources, foreign territories, grand parents, kids, parents, stars and stripes on the flag (obama did that already). Sit tight and hope kaimu that the lower 48 will sell hawaii and alaska.

Tuning into the money and debt video....

I would love to hear the answer from mccain and obama on a either simple question. How is money created? or how can you articulate the banking system and how money is tied into it?

Both knuckleheads answer.... my opponent votes for bush 90% of the time, that is not change; he is the most liberal of the left, how can he come from across the isle.

Steam Boat Willy for president. Write it in...

""Most illiquid assets are illiquid because they're not worth anything" - Ron Paul

norm- without knowing the details, i can only guess...i would say over the next 10 years, these 'assets' may in fact turn into real assets....in the meantime, try getting back your share of the bailout by trading the financials...

hi guys, great blog - trying to promote some discussion:

what do you think will happen tomorrow - will we get the big pop on S&P etc?

What do you think will happen to Gold? How will Gold stocks fair short term / long term?

test test test

http://www.federalreserve.gov/releases/h3/Current/

AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND THE MONETARY BASE
Adjusted for changes in reserve requirements(1)
Seasonally adjusted unless noted otherwise
*****Millions of dollars*****

Note that in August 2007 the banks were able to meet the 10% required deposit reserve. That is, with non borrowed funds. As of Sep 24th 2008, the banks no longer have those minimal deposits and further more have borrowed 158.345 Trillion dollars from the FED. With the US population at roughly 300 Million those borrowings equate to $526,222 per man, woman or child.

Of additional interest is that the Total Borrowing from the FED is 267.861 Trillion dollars. If the FED gets 2% on the loan, the FED and whoever owns the FED, will receive 5.357 Trillion per year. Just some food for thought when dealing with these large numbers.

Consider this: I don't think the problem is reserves versus loans. The Fed can simply change the reserve requirement to zero and has for many banks.

The issue scaring the pants off of the government is what would happen if everyone goes to their respective bank and requests their deposit in cash.

Last year there was $750 million placed in circulation. http://tinyurl.com/54atxp

According to the Bureau of Engraving and Printing, paper notes have a lifespan of approx. 2 to 7 years. http://tinyurl.com/3mqz7t http://tinyurl.com/4wjyhw

Also according to the BEP, it takes 2-6 days to print the notes. http://tinyurl.com/49c3ve (As a side note, Modern Marvels offers some excellent and informative TV http://tinyurl.com/48uhgu)

By my calcs from this info, there is approximately $1.5B to $5.25B of actual notes in circulation. The rest of the debt money is 1's and 0's in the computer.

If Mom and Pop America goes out tomorrow and demands cash or Federal Reserve Notes, the banks won't be able to give it to them - at least not right away. This will have a dramatic effect on psychology.

Now everyone gets upset, the banks close down - temporarily. The government tells you, you can only withdrawal so much a day - because they can only print so much a day. Tell me, in this scenario, will you accept a bankcheck?

I believe this is the root of the problem today and why government feels the pressure to restore the CONfidence of the banking system.

test

Consider this: I don't think the problem is reserves versus loans. The Fed can simply change the reserve requirement to zero and has for many banks.

The issue scaring the pants off of the government is what would happend is everyone goes to their respective bank and requests their deposit in cash.

Last year there was $750 million dollars placed in circulation. http://tinyurl.com/54atxp

According to the Bureau of Engraving and Printing, paper notes have a lifespan of approx. 2 to 7 years. Also according to the BEP, it takes 2-6 days to print the notes.

By my calcs from this info, there is approximately $1.5B to $5.25B of actual notes in circulation. The rest of the debt money is 1's and 0's in the computer.

If Mom and Pop America goes out tomorrow and demands cash or Federal Reserve Notes, the banks won't be able to give it to them - at least not right away. This will have a dramatic effect on psychology.

Now everyone gets upset, the banks close down - temporarily. The government tells you, you can only withdrawal so much a day - because they can only print so much a day. Tell me, in this scenario, will you accept a bankcheck?

I believe this is the root of the problem today and why government feels the pressure to restore the CONfidence of the banking system.

2nd, can you tell at what price they will be valuing those currently worthless securities? Book value, or real market value (5c/10c on the dollar)?

I think that the possibility of the tax payer making money vs the banks here is wishful thinking. The oversupply of houses will not go away for many years. Maybe with (hyper) inflation those 700B or 7T will be repaid one day, but will be worth 10-100x less in real terms. These people who control the system may be floating those ideas around to make the bailout more palatable, keep the markets working, their banks and business working, in essence preserving status quo - for their lifetime.

Friend mentions that he brought LMT way back for around 40. And Kaimu also mention about LMT in one of his post.
So, this weekend I look at LMT

Question for Kaimu
If democratic administration take over with democrat in senate and congress having majority. What will happen to defense spending and also do you think China will keep financing our defense spending for long time as they are doing now indirectly by buying our governments bond and fill our budgetary deficits?

What's next, a ban on stock sales?

A worthwhile read from Bill Fleckenstein:

http://tinyurl.com/4eszct

Re: Illiquid Assets

Well, ok. So there's money from the bailout. But I would presume that this money will not be used to invest in illiquid assets. Or, at least, that the money will be siphoned off to write off the worst parts of the derivatives trade and the liquidity remaining in the system is paried on viable investment vehicles.

A good source of Pi-cycle date analysis showing gold charts:

http://AstroCycle.net/Gold.php

(it looks like a gold price correction to the $850 level until Oct. 15, then onwards and upwards, according to this fellow)

A rather erie pi-cycle date analysis of short term bond yields:

http://AstroCycle.net/IRX.php

Note that April 19 is a significant date in the pi cycle regimen on both the gold chart and the IRX.

Craig: According to Wikipedia, Patriotism is commonly defined as love of and/or devotion to one's country. What is country? To be a patriot, we have to define country.

The United States of America as we define it has substantially changed from 1776 to today. Are we patriotic to the ideals upon which this country is founded yet no longer seems to adhere? Or are we patriotic to the government no matter what it is - socialist, communist, fascist, dictatorship, capitalist?

I think nemo was right on. Being emotionally invested in a country or ideal removes the ability to rationally debate its successes and dysfunctions.

"Who'll Bail Out the Fed"?

".... a downgrade to the U.S. Credit Rating is lurking somewhere down the road..."

Jim Jubak Video:

http://tinyurl.com/4jqlob

DENSA Approved.

RE: BIG MEDIA

CNN is spinning this as a rescue to help Main Street, NOT a bailout of Wall Street.

But we know better boys don't we?

For all the discussions we can do we can't forget the core of the problem: the devaluing real assets - real estate across America.

I have met so many young couples who have already bought their houses in 2005 just one or two years after graduating from college.

The demand for real estate is simply gone. In fact, houses are over-bought. We can't expect a lot of people to go ahead and buy a 2nd house, knowing that real wages didn't go up at all in the last 7 years.

Hence only time can heal this mess. The economy needs another 10-20 years for the buyers to show up -- your sons and daughters who are still in school today.

If the above is true, how can we expect the "illiquid assets" become desirable in two years? No they will keep going down. And if Paulson pays something like 60 cents on a dollar for those.... taxpayers should be prepared take a huge loss on this $700 billion (and potentially much much more).

Of course when government calculate rate of return on these they don't have to consider time value of money ... (it's good to be government)

btw, the last and only RTC was supposed to last 2 years (I may be wrong here), but it actually lasted 10 years if I remember correctly. Doesn't that tell us something?

Guys we need to get one thing straight...

Who among the fiancial fell the most, is poised to rise and WILL mbenefit greatly from a bailout plan?

Let's get together a list.

I don't know the fundies so I don't know who's helped by a bailout, but will Downey Financial benefit? (DSL) How about PMI? ABK? FRE/FNM?

I presume it's good for Goldman, Morgan, how about Capital One? COF Or BAC? Will it juice ALL of them?

Lemme know you smart people.

to discuss with Shark:

I think BAC and JPM will benefit the most. They have bought lots of mortgage assets (Countrywide, WM) with government backing. I believe they will be bailed out first.

GS is obviously a must-not-fail. I am not sure how much benefits they would get though.

I also believe FRE and FNM will get no benefit in the near term. The government is trying to prevent further failure of banks, not to revive the already dead ones. Over longer term, however(2+ years), FRE and FNM may get benefits as well.

I am not so sure about MS and WB. I still have doubts about their survival. But whoever that is going to buy WB will benefit a lot.

I want to stay away from financials after this bailout, at least for a while. We still don't know how much "illiquid assets" they have, it sounds to me $350 billion is far from enough to clear up this mess.

“It is a cruel thought, that, when we feel ourselves standing on the firmest ground in every respect, the cursed arts of our secret enemies, combining with other causes, should effect, by depreciating our money, what the open arms of a powerful enemy could not.” ~Letter to Richard Henry Lee, 1779 by Thomas Jefferson

“Our public credit is good, but the abundance of paper has produced a spirit of gambling in the funds, which has laid up our ships at the wharves as too slow instruments of profit, and has even disarmed the hand of the tailor of his needle and thimble. They say the evil will cure itself. I wish it may; but I have rarely seen a gamester cured, even by the disasters of his vocation.” by Thomas Jefferson

Dow currently at 11,143.

Presuming the Congress passes the bail out bill before the Monday opening, anyone care to predict what the Dow will be at Friday's close.

If the PPT has been rearmed ( they had to use their $$$ to prop up money funds last week) I would guess we could see 11,700 by Friday. The Government is desperate to restore confidence and promote the idea that the crisis is now finally over. Could we have a bull market now thru to the election? A big ole fat dead cat bounce is certainly possible.

With the shorts banned, could the financials fail to get a big boost this week? Will traders not buy this sector due to the inability to short?

“[The] Bank of the United States… is one of the most deadly hostility existing, against the principles and form of our Constitution… An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries.” ~Letter to Albert Gallatin, 1803

Above was a quote by Thomas Jefferson to ALbert Gallatin 1803

I suspect that I am one of a very small minority here who believes that we will not have a rally on passage of the Wall Street rescue/welfare bill. I think whatever rally we were going to have has already occurred in anticipation of passage.

shark_attack
It will benefit all of them short term.
Real problem is auto load, credit card balance,
And housing is not going to improve until mortgage rate is around 5% for 30 year fix.
And right now employment is going up not down.
So, there is more to it than we can see
But, in short term they might spin that market expected this bailout so it went up last Thursday and Friday. And they might shift their focus on earning.

“Scenes are now to take place as will open the eyes of credulity and of insanity itself, to the dangers of a paper medium abandoned to the discretion of avarice and of swindlers.” ~Letter to Thomas Cooper, 1814 by Thomas Jefferson

lessmore
I just notice your post and you have said same thing

vinod
I agree with your post (smile)

''We are not ready to say that a deal is done,'' Rep. Eric Cantor, R-Va.
from NY times

Rep. Roy Blunt (R-Mo.), who represented House Republicans, the group that had raised the most serious objections to the plan, said he was pleased with the progress made but that he had to take the proposal back to his caucus before committing his support for it. "I look forward to what we're going to see on paper and presenting these ideas to my colleagues and getting their reaction," Blunt said.

We can expect many members of the house will vote against the rescue package, yet the package will pass by at least a slim margin.

Still confused by Sec 112 Coordination with Foreign Authorities and Central Banks...anyone care to help?

Here's a site which I trust that's been posting regular updates:

www.politico.com

Mojo, Chris Martenson’s presentation is fantastic, powerful, frightening, depressing, yin yang, and creates opportunity.

Every citizen of the United States should have to watch this. Congress should have to watch it 5x for 5 days in a row. Every television station should broadcast this for 5 days straight similar to the John Kennedy media blitz.

The country then needs to plan and act. I’m completely blown away from this video. Thank you so much for posting.

Chapter 17b is stunning.

Aloha & Peace T3d

By the way here is Martenson's Crash Course courtesy of Mojo.

Every Carista should view.

http://www.chrismartenson.com/crashcourse

Posted by: mojo [TypeKey Profile Page] at September 28, 2008 12:58 AM [link]

Telestar3d - Thank you for the link

John E.

I've mentioned that act on more than one occasion. It was the straw, or Sequoia, that broke the camel's back.

Another bank nationalized in the U.K.:

http://www.marketoracle.co.uk/Article6498.html

What is happening to house prices in Canada?

http://www.gettingtechnical.com/01_home/market_commentary/can_en.html

Bert, Nemo:
I think we agree.
IMO, the USA is a document(s) containing our ideals and how the country is to function.

I think we have lost this concept in favor of a physical discription which I feel is weak and panders to that group of folks that Benjamin Franklin criticized for the same reasons.

All members of the military, judicial, legislative and executive branches take an oath to defend that document and the ideals contained within it from all enemies, foreign and *domestic*. That document (documents really) are the United States Constitution and the Bill of Rights.

That is what Patriots have sworn to protect.
It makes a patriot's job rather more complex than they presently think. It's MORE than following orders. It's more than protecting real estate or the populace. Much more.

Re: S&P TSX Capped Real Estate Index

Here is a weekly chart of the TSX Capped Real Estate Index:

http://tinyurl.com/3l37fo

Note that there was a similar time lag between the peak of the Philadelphia Housing Index and the housing price crash.

nemo - A friend had mentioned the "Community Reinvestment Act" to me in so many words, but didn't give me a link until today. Sorry I missed your post. I was truly astounded by what I read about the history of the act.

Bye bye FASB157, from the text they will vote on: "Securities and Exchange Commission will be given the authority to suspend mark to market accounting rules if the agency deems it necessary. "

We will go back to make believe land.

Anyone read Mauldin this week? Losing all credibility in favor of this Wall ST bailout, blasting the 200 economists who dare condemn this fiasco (a group which happen to include at least three Nobel prize winners), and quoting... Cramer as a reference. He does not pay any attention as to what the real people are saying.

Craig - I agree whole heartedly, the USA is a set of ideals, virtues and aspirations. I consider myself a patriot and that is nation I serve and will fight for.

The "deal" is online at the House Financial Services Committee.

http://tinyurl.com/3gl6fc

It's called the Emergency Economic Stabilization Act of 2008.

On the state of the market Monday, I assume up all day. I will be away in the am and not able to catch the opening. I hope to see 300 points up and the talking heads all aglow with thankfull predictions.

This link goes to the draft copy of the bill.
www.foxnews.com/projects/pdf/rescuebill_First_Draft.pdf

Dear Bill,
Thank you for today's WIR.
I needed the perspective. I was getting far too caught up in the negativity and it was not healthy.

But that is what you do better than anyone...
Capital Markets, Social Equity, Perspective and discussion.

Thank you again for putting in focus.

TOG...

I am very happy with the position I have scaled into over the previous months/years. I own gold and silver coins, miners, and a few contracts in the bond and gold futures market. Although I have felt some pain with the gold miner shares I haven't sold since I think the timeframe for this trade to work out will be sometime in 2010/2011.

Is anyone still waiting to put their trade on ? I'm not trying to pick the "perfect" point in time to put the long gold / short bonds on - I'm just trying to dollar cost average into it. I still have quite a bit of capital to put to work on this trade.

Any comments ? g034 - are you short bonds ? I think for the banks to make money in the years ahead they are going to steepen the yield curve.

As always - thank you Bill and everyone involved in the discourse.

muniman - I have not shorted bonds. But am overweight in pms and will look to add more when the price goes lower.

Bill,

The bailout will be good for some financial stocks, and probably for stocks in general to some degree or other. But in your expert opinion, how good is this news for stocks? What do you consider to be the limits of this plans power to heal? For example, it really won't help the residential housing market to any significant degree, above and beyond makeing it a little easier to get a loan, right? If you're a bank with a bad balance sheet then this bailout is great news. But a lot of our problems are still our problems, right?

JohnE:

I had mentioned the act as recently as 2 or 3 weeks ago. It billed as a law that would give home ownership to minorities so they could share in the American Dream. I was assailed for blaming minorities for the crisis. My point, which I then went into detail to explain, was that the mortgage industry and Wall Street, as well as the Democrats, cloaked themselves in the mission of the bill (much as the last bastion of the scoundrel is the defense of chilren), and then raped the system of the fees, passing on the misery of what presently is occuring. I have much respect for Barney Frank, but he pooh poohed the financial danger of the act back then, when certain republicans were raising the alarm. Perhaps, also you remember the short news arc about those senators who got their palms greased by Countrywide. Those in the system take care of their interests, whatever they may be.

Even Bill talks about how this bill basically sustains the current power structure. It will morph, but the system will survive, and as Bill says, use the system and it's workings to your avantage. It is much bigger and more powerful than us. Frankly, Congress is overmatched in this endeavor, not only by their lack of sophisticated understanding, but by the endemic human weakness of SELF-interest and greed.

Where's Kaimu????

Sorry folks, my "D" key has problems. So, Bill, my spelling might be specifically lacking in the key of "D".

I read the WIR with much interest.

I don't think we saw THE low for many of the averages on Sept 17. I am seeing RSI buys for DIA and SPY but I also see limited upside. DIA has 50 DEMA at 113.38, Oct max pain 112, Nov 114. However when one drills down into the DJIA, there are 7 Triple RSI buys and 2 accumulation modes.

I suppose that's a fancy way of saying it's a stock picker's market. But I'd prefer to say certain stocks/sectors bottom first.

Anyway I think there is money to be made trading the EOM effect, the options expiration effect, etc.

My concerns are that the big boys will back the train up to retest that Sept low in mid-late Oct, roughly 30 days after it occurred. My other is heavy selling as we approach the election to reflect what potential impact the winner may have on sectors and heavy selling after the inaugeration (sp) as the winner implements his programs and tries the kitchen sink approach to blame his predessor (sp) and take all the economic hits in the first year of a new Administration.

Those are in the back of my mind.

I will continue to screen and take on those positions with appropriate risk/reward.

Long BA/RIMM.

2nd_ave: if you believe that a new bull market will start once the bailout plan is adopted, then you must believe EITHER:
- that the unemployment rate will rise minimally from this point and US will not have a quarter with a negative GDP
OR
- that US will in fact have a negative GDP quarter and unemployment rate of 7% BUT it is already priced into the stock indices.

Which one do you believe, I am just curious? Or do you have some other set of beliefs?

Thanks...

Re: Mexican Bailout

Here's another article on more aspects of the Mexican bailout

http://biz.yahoo.com/ap/080928/lt_mexico_bailout_lessons.html?.v=1

Here's one way to find out about Area 51... get on the "Group of 5" Oversight Panel.

Apologies for posting format.

(3) OBTAINING OFFICIAL DATA.—The Over13
sight Panel may secure directly from any depart14
ment or agency of the United States information
15 necessary to enable it to carry out this section. Upon
16 request of the Chairperson of the Oversight Panel,
17 the head of that department or agency shall furnish
18 that information to the Oversight Panel.

Will this group of 5 soon be some of the most powerful people in the US or am I reading this wrong?

Some other draft bills on Google, including buying troubled assets.

http://tinyurl.com/4pbyez

Add search terms as you like. inurl:gov sends you to government sites. filetype:pdf sends you to PDF files.

Hong Down Down Sharply:

"HONG KONG (MarketWatch) -- Hong Kong stocks dropped sharply Monday after opening higher, with property stocks tumbling in the wake of a half-point increase in mortgage rates by HSBC Holdings' local unit."

Looks like they have their own problems.

muniman,
I'm in the TOG trade to the gills and hope it works out. Mostly from the PM perspective. Still looking at ways to short bonds (other than TBT). David Bensimon predicts the BIG move for PMs will be 2011-2014. The guy has had some great calls (and I hope he's right about this one...)
MCM

Make That Hong KONG, sorry...

nemo - I was wondering about your "fear" of the letter D...

Roubini's latest blog entry on bailout:

http://tinyurl.com/4nokgz

Red day overseas today.

FTSE still above the 1 month low of 4880.

4801 4-Year support below that. Then maybe 4301?

If we're filling a bottom we should maybe see a pop back to 5300?

Currently sitting 4912.

7% gain (5300) or 12% loss? Probably a better chance of a 7% gain from these levels...

Huge move in the dollar this morning:

http://quotes.ino.com/chart/?s=NYBOT_DX&v=s

I would think it was a mistake if circumstances weren't what they are.

Good morning, Brave New Worlders.

One Cara 100 Ratings Change to report at this time:

ERTS - Target Price Lowered from $66 to $53.50 @ Wedbush Morgan.

It seems to me the "bailout" "rescue" is not having it's desired effect. Libor is up this AM and futures are tanking hard.

Could this be a head-fake to shake out the weak holders before the vote?

Or do these futures tell the real story about how much confidence this Un-American Bill inspires?

Even though I'm holding DIA calls I'm starting to think the latter.

But I am ready to jump aboard the ship with the 95% of my money that has been idle since October when we hit DOW 14K.

What I'm waiting for is the dollar to top out and then I'll divide it between energy, basic materials, tech, and precious metals.

Good luck and great trading everyone.

Rob.