Canada rated world's soundest bank system: survey

Canada has the world's soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

http://tinyurl.com/4loypq

What stocks are a better haven if we want precious metals?
Let's have a look at the YTD returns:

SILVER - SLV -> -19%
SLW -> -65%
PAAS -> -51%
SIL -> -88% (a lot of debts, but P/E +9%
ABX -> -17%
NEM -> -30%
GFI -> -41%
GG -> -13%
HMY -> -10%
KGC -> -14%
AUY -> -47%
IAG -> -38%
LIHR -> -45%

It seems to me that the suggestion of GG from Bill was really almost the best!
But I have many doubts about SLW. Why is its performance so poor? Does it deserve our trading?

For those of us who have been lucky enough to play these well, be careful. I get the sense they may be a game of musical deck chairs on the Titanic.

RevShark on TSCM made this comment in the last paragraph of this entry this morning, which has always made me wary of being a long term holder of these instruments:

"The big event this morning is going to be the auction of Lehman assets. This is important because what it does is set some firm prices on Credit Default Swaps. The counterparties are going to know their actual liability for insuring some of this Lehman debt. The face value of this debt is trillions and the losses it is predicted by some to be as much as $400 billion. Once this price is firm it will set in motion a lot of other valuations. The auction is at 10:30 am ET. If losses aren't as bad as expected that may be a trigger for a rally.

Speaking of CDS's I'm very curious who the counterparty is on all the CDS's that are used in conjunction with the UltraShort ETF's. Those instruments are not backed by the underlying stocks. It is all CDS's and who ever is on the other side of the trade is getting killed. Any further details on this would be appreciated.

Good morning from Interlaken

The quote du jour comes from Richard Russell’s Dow Theory Letters of yesterday (spelt precisely the way it appeared in his newsletter): “Flash! Lowr;s reports trhat todayh was another 90% down-day, rhw rhird this week! Unbewlievable.” The 84-year old R man usually has a calm demeanor, but was obviously flustered, like most of us, by the voracity of the bear.

I normally publish a performance round-up of global stock markets at the end of each month, but the meltdown around the world of the past few days necessitated an update. Here is the link: http://tinyurl.com/5xhraa

Thanks Bill, always....
For a lesson on thinly traded stocks and margin calls, one can look at two North Carolina muni funds, NII, and NRB. Look at last two days five minute chart. Someone(not me) had to sell a lot of each stock, way above normal volume, and the price just went straight down...
Disclosure, I am long both funds and they are still paying what I need them to pay, have no plans to sell. I just found it interesting...
Best Regards to All.

The leveraged debt debacle continues.

Equity bulls are under the debt Bears' steamroller.

There's not much else to say.

SLW:

Bullish setups that usually work in bull markets tend to be broken down in general bear markets.

SLW might still make it, but odds are now against it I'm afraid.

Perhaps it was wrong to even look for a long in the current situation, but I do not like being only short.

prieur--you'd think after 84 years nothing would surprise you. Just shows you how unusual this is.

Moab:

I wish to personally thank you for some of the most thoughtful commentary on this blog. Would you please elaborate on your comment yesterday evening: "Looks like we are approaching a Graham/Dodd bear market, where some stable companies can be had for less than cash on hand"? Do you know any way to screen for a list of such companies? Thank you.

Bill, these are challenging and historical times for all, even for honest, generous and financially knowledgeable people like you.

Our great-grandchildren will read about this week in school.

I can only thank you for sticking with us and sharing your life's learnings. Also for creating a space of teaching and discourse between individuals of all walks of life, that have a common interest in not being fooled any longer by institutionalized financial misrepresentations and shenanigans.

Again, these are trying times - this is where each one shows their true nature and character. We know who you are, and we (should) know who each one of us is.

As for me, I'm proud to be part of this community, and to learn from you and the rest of the gang. We're awake. Our time will come, again and again, as long as we stick to what we know is true.

With any luck, it'll be sooner than we think.

It's amazing to me how some folks start pointing fingers when their portfolio's start to fall apart. If you had followed the plan laid out by Bill in Lessons from the Trader Wizard, you would have protected your capital as part of the strategy.

Please, people, read Bill's book prior to jumping in head first, and implement accordingly. This will allow the rest of us to concentrate our efforts on the important matters at hand as opposed to being distracted by cries of those without discipline. Yes, it can be painful and perhaps some discussion of the pain is to be anticipated, but pointing fingers just isn't acceptable IMO.

Sorry for repeating my post, but some lines disappeared (!) so the meaning was not good.

What stocks are a better haven if we want precious metals?
Let's have a look at the YTD returns:

SILVER - SLV -> -19%
SLW -> -65%
PAAS -> -51%
SIL -> -88% (a lot of debts, but P/E is less than 1?!?)

GOLD - GLD -> +9%
ABX -> -17%
NEM -> -30%
GFI -> -41%
GG -> -13%
HMY -> -10%
KGC -> -14%
AUY -> -47%
IAG -> -38%
LIHR -> -45%

It seems to me that the suggestion of GG from Bill was really almost the best!
But I have many doubts about SLW. Why is its performance so poor? Does it deserve our trading?

Well, I don't post much, however I do read this blog every day and it has helped me a great deal.

I had been all cash for a while now and recently started to buy into INTC and DELL and a small cap etf.

My portfolio is down over the last few weeks, however with a long term horizon(several years), I believe I should do ok.

I am still looking for my next buy, perhaps GE.

Dab

Bill,

Humans being humans under stress (Is it to early to drink if I call it a Bloody Mary??) What you've done is make it so those who take the lessons,"Won't be fooled again." Since, to paraphrase, the new boss will likely be the same as the old boss, this will come around again in the future.

Cheers to you. Illegitimi non carborundum.

Nothing but thanks here Bill for all the education you offer here for free. I just wish I could pick up on all you have to offer Am working on it.

Jse golds have done well today, and the tsx golds are bid up as well looking at kitoo's front page at the right sidebar

Could the gold stocks actually rally today?

Seems impossible but even Cnbc just said ; "anything up ya gold stocks are up"

incredible if they do.

Bill
Thank you for your free opinion and read about market.
There is one person who post here there will be 100 who are reading but do not post
Means there are thousands who may be reading your blog and benefiting from it

Bill, thanks to your heads up I have been 90% in cash (or equivalent) for over a year.My 2% or 3%
portfolio gain was disapointing at the time but now I sleep well and have cash to invest in good companies stocks. I am retired and never use margin which can be a killer.
Regards

the CDS stuff is beyond me but here's the link to Creditex Creditfixings where the Oct. 10 Lehman Brothers CDS Credit Event Auction results will appear.

http://tinyurl.com/3kw2ko

They are going to clean up all STOP and there will be more selling because of margin call
but we are getting there

I read it here...."Money makes people funny".

Losing money makes people not so funny anymore....and being people they always look outside themselves to assign blame for their actions.

I've lost an S load and it's my fault.
I spent the early premkt trimming positions and raising a little more cash. No point in getting into GS at 100 and then riding it down to 82....right? Best to get out with only a few 100 lost instead of thousands. Same I'm afraid for GE and XOM. Still holding small positions but no point in holding my hand IN the fire.

Hang in there everyone.

DOW futures -374 and George W. to speak at 10:25 EST. That is one messy combination!

Bill,

I guess it is to be expected that people are frightened by today's uncertainty and looking for a scapegoat. You'll be getting a share of it. (No good deed goes unpunished.)

I just read this comment in The Week magazine quoting Irwin Seltzer in The New Republic.

For this sea change, you can blame the American people themselves, "Under the old capitalism, the public was willing to endure the moderately bad times that often followed the very good ones." But no more. If there's a natural down cycle—a recession— furious voters punish whoever's in office.

His Weekly Standard article, The Dismal Science, Economists talk recession (11-13-07) told the American people not to worry.

• The job market remains strong • unemployment at low levels—Goldman Sachs' economists call it "robust." • Productivity rose at the robust annual rate of 4.9 percent in the third quarter • Core inflation remains low. • Most CEOs I meet are expecting profits to grow at double-digit rates in 2008. • Personal incomes continue to rise. • The World Economic Forum ranks America number one in competitiveness
• Ben Bernanke, while at the same time warning of downside risks to any projection, told the Joint Economic Committee late last week that "most businesses appeared to enjoy relatively good access to credit . . . the overall economy remained resilient in recent months," and that he expects growth to resume in the second half of 2008 after a "sluggish" first half, "as the effects of tighter credit and the housing correction begin to wane."

To my examples refuting the above essentially as baloney, he replied, "You are too gloomy; remember that a great nation can tolerate a lot of ruin."

Now the "ruin" is the fault of the American people.

Bill,

I am thankful for all of your effort and I'm sorry that you are getting any blame at all from anyone. Those that hold you accountable should really be ashamed of themselves.

Taking responsibility for one's own actions is fundamental to life.

GG - I've been watching the Mature PM miners carefully and have been in and out of GG several times. This stock comes highly recommended from many investors and traders in addition to Bill. This was one of my first choices before arriving to Bill's blog, so the idea to trade GG was in my head prior to arriving here. I still consider it my gold standard.

Sure, you might enjoy better returns elsewhere, but this one has been very good to me.

I'm going to start buying index calls this AM. I think GWB's speech may mark the bottom- in more ways than one. Thanks for all you do Bill. You provide an invaluable service.

SLW might still make it, but odds are now against it I'm afraid.

Posted by: pappdjavul at October 10, 2008 9:02 AM

Please explain what you mean by this. Do you think SLW will go bankrupt and why? It seems they are one of the lowest risk silver investments not having to deal with the problems of running a mine, only benefiting from the production output. As I am sure you are aware they purchase silver at $3.90/oz., so it seems to me they would be likely to survive in these difficult times. What am I missing? Thanks.

Graham's screener criteria (Try google screener to apply logic)

1. PE of the stock has to be less than the inverse of the yield on AAA Corporate Bonds.
2. PE of the stock has to less than 40% of the average PE over the last 5 years.
3. Dividend Yield > Two-thirds of the AAA Corporate Bond Yield.
4. Price Twice Current Liabilities.
8. Debt 7%.
10. No more than two years of negative earnings over the previous ten years.

11. No exposure to toxic assets or derivatives.

How'd 11 get in there?

Any candidates for this list?

Berkshire halted again?!? Is this just a TD thing?

Three years ago when I retired I considered simplifying my life by putting everything into Vanguard's Total stock Fund.

Yesterday's YTD close at -36.92%

Only their ineptness in signing me up warned me off. (3 tries — wrong forms, my contact was transferred and nobody called me, wrong forms again!)

You can't retire from some things.

Don't be surprised if the markets close at the bottom of the range today - which would point towards Monday being a washout day.

Also, don't be totally surprised if the govt intervenes and actually has a "trading holiday" where they shut things down for a day or so (ala the time right after 9/11).

Don't think that the markets can't possibly go lower after dropping 22% in 7 days. They can always go lower, as crazy as that may appear.

I continue to urge caution in these markets (as I've been saying since late September). There will be plenty of time to buy good quality companies at very reasonable prices once this all settles out.

This is no time to play hero.

"Microsoft founder Gates, who has stayed on the number one spot for 15 straight years, slipped to second place after his net worth went down by $1.5 billion to $55.5 billion for the same 33-day period."

http://tinyurl.com/462mel

Looks like Bill's eating franks and beans this month.

Russell 2000 capitulates

I have Vanguard Wellesley Income fund for my IRA -down about 18% on the year-actually, not bad, considering...

Talking about TD Ameritrade - is anyone else getting yesterdays stock price numbers thrown in with todays price numbers? (says GS down 28 right now)

Holy crap am I reading right or are we down 668 at the open to 7910 on the Dow?

ummm. wow.

Buy Sell BERKSHIRE HATHAWAY DE - CL B 9:38:59 AM EDT
BRK.B US N + 3,060.00 3,074.25 3,074.25 -780.75

Yes, that is 780.75.

Lots of shirts being lost today. I think I may buy 1 more share of this one.

remember way back we used to talk about the market bottom like max fear, pessimism, ... white of their eyes and ....

well this that time, this is the time you really learn about yourself, your risk tolerance,...

It is common human nature to blame someone else for your shortcomings. But you are grown up people, you have no justification for lashing out at him for his free service. He opened his door for you to you come or leave

I am hurt like the rest you, but life goes on.

Your health is wealth,

take care

When folks are badly bruised, they tend to blame others for what happened to thme. After some time, it will eventually hit home.
We all make choices. You could have followed CNBC or Jim Cramer or Bill or Shark.
Ultimately, the choice was yours. You were not forced to make a decision either ways.

Please do not get me wrong. But learn from any mistakes you might have made. And also from the strategies that worked.

Total Fed Credit went up by another staggering $253.6 billion last week.

The news that should be driving gold prices to the moon is out! The Federal Reserve has just expanded its balance sheet more in one month than it has in almost all of its first 86 years of existence. This number is unprecedented. It is difficult to predict gold's short-term response to this shock, but the market cannot ignore the fundamental effect of this crackup for long. With interventions like this, we should get a few more $100-up days soon enough

Ted Butler, in the Market Update from investmentrarities.com, writes that "silver has never been a better investment at precisely the same time its price performance has never been more extreme", by which he concludes from the latest Commitment of Traders report that the commercial traders at the COMEX "have built up a record or near-record net long position in both gold and silver futures" and that they have also "established a record long position in call options for the first time in history."

http://tinyurl.com/3wqdk7

Hey!!! UAUA is up!!!

I think they will HALT trading on all US exchanges... (9:45 AM)

I normally stick to fundamentals & technical analysis but when those things are being overwhelmed by sentiment, I seek out other sources to make sense of things. With that in mind, I'll post the blog entry from which I extracted the Galbraith quote last night:

=====================
The Fallacy of Capitulation

It's based on a complete misreading of what happened in 1987.

As I described a few days ago, pundits, analysts and investors are actually all smiles these days because they like what's happening on Wall Street.

They're hoping for "capitulation," where the markets sell off wildly, and then the market starts going up again. This is exactly the mistake that investors made in 1929, and it leads to what I've been calling the "Principle of Maximum Ruin," where everyone gets back into the market, only to lose money again -- the maximum number of people are ruined to the maximum extent possible. In 1929, the markets fell for four years - to 10% of their peak value, by 1933.

In this article, we're going to explain why investors have the fantasy that a "capitulation event" will cause the market to rise again.

The "capitulation" concept is a complete misreading of what happened in 1987, in what I call the "False Panic of 1987."

To understand it, begin by looking closely at the following table, with data from my Dow Jones historical page, which shows the lead-in to the Panic of 1987:

As you can see, on August 25, 1987, the Dow was at 2722, the high for the year. At that point it started falling at the rate of a point or two every day, and then on Friday, Oct 16, it fell 4.6%.

I actually have a personal memory of that weekend. The market had fallen roughly from 2500 on Tuesday to 2200 on Friday, and it was being discussed on television. My memory is of an old guy (who I now realize must have been around 5-10 years old in 1929) saying the following: "The market may fall a little more, but the next 300 point move will be in an upward direction."

Then on Monday, October 19, the market fell 500 points, or 22.6%, all in one day, to around 1700.

Now you can imagine the psychology at the time. The people in charge were survivors of the 1929 crash. As I've described in conjunction with the "58-year hypothesis," these are people 63+ years old who realize that (1) the pattern from 25-Aug to to 19-Oct-1987 was almost identical to the pattern 3-Sept to 28-Oct-1929. These people would recognize the similarity, but younger people would be almost entirely oblivious to it.

(I discussed the 58-year hypothesis in these articles: "The Iraq war may be related to the bombing of Hiroshima and Nagasaki," and "Investors commemorate the false panic of Monday, October 19, 1987.")

The 1987 panic must have been pretty humiliating for the Silent Generation senior managers who had led the panic. They had told the younger people -- the Boomers and Generation-Xers -- that a crash was coming, and no crash came.

Today, the Silent Generation is gone, and the Boomers and Generation-Xers are running things. They learned completely different lessons from what happened in 1987:

* They learned there was no longer any danger of a stock market crash, because the Fed could stop any crash at any time by injecting liquidity into the banking system. (This worked fine in 1987, but the same strategy has failed miserably under Ben Bernanke's Fed since the credit crunch began.)

* They learned that when everyone "capitulates," as they did on October 28, 1987, then the market has reached a bottom, and starts going up again.

The "capitulation" theory comes entirely from that event, and a couple of similar but much smaller "capitulations" that have occurred since then. In other words, the pundits and investors believe that when we have another day like October 28, 1978, a "capitulation," then the market will have truly reached bottom, and will start going up again.

Those who believe in capitulation are missing some very big points:
=====================

The rest of the article: http://tinyurl.com/4uprtz

Thoughts?

Be safe, everyone.

CNR jumped from 43 to 47.35...

this is some ride...

Bill,
I want to thank you for everything you do here. My trading was miles behind where it is now before I started coming here. I also understand the big picture much more thanks to you. The way you artfully link together the entire world financial spectrum really clarifies everything.

I stand behind all my decisions and still do have quite a bit on the sidelines. If we keep dropping next week, I'm really considering putting some in DIA calls for May or June 09.

If we hit 7K or 6K on the DOW I think the odds are really good it would be back to at least 10K by May of 09.

Rob.

I had a printed low of 7882 on the Dow. From the previous close of 8579 that would be 8.1%.

VIX went over 70 as well.

XOM was down to 60 and change then bounced up to 64. Doesn't matter, I cant get into my brokerage account anyway.

Also,
How would someone short the VIX? That has to be a no-brainer trade right?

Do you have to buy it on the CME or can you do it through the regular broker?

Rob.

Bull Hunter
[if you are out there]

QID [High]: 91.90

Can you believe that?

Also TWM [High]: 146.15

Casey,
Thanks for your kind words last night. I'm honored to be part of this family.

Rob.

Why blame Bill? He merely shared his knowledge and opinion with this community, which is invaluable. If anything, be grateful.

In a crisis like this, it is also a good time to try to be the independent, intelligent, and responsible person that we are supposed to be.

My portfolio is way down, but that was my own fault for being wrong trying to time the market, and taking excess risk in hoping for excess gain. Learning from all these events and this community (special thanks to Bill, Vad, bsi87), I will come back a better trader.

Lost some money in BA but sold it off. Cannot handle this volatility.

Kaimu,
Like always you're right on with that post last night about saving the Big Banks at the expense of everyone else.

My question is how bad are they willing to let it get before they throw the big banks off the bus. Or do we just drive it off a cliff and ruin everyone, even the big banks they were trying to save.

Rob.

Re: POO

OIl price down ~10%

XLF back above 14:

BAC +7.5%
JPM +7%
GE now green

Looks like someone is buying off the lows this morning.

Rob.

Bill - and all other regular posters.

Thanks for all you have done and continue to do. I am a complete novice, but thanks to all of you I have stayed out of stocks and funds for most of this bear market. Based on what I read here, and my own limited DD, I think the market has some upside coming and moved some of my money into stock funds mid-week. Wrong timing, but it was absolutely my decision, and I still think it will work out.

Without your help I would have ridden the entire bear down like many of my co-workers have while saying "Gee, I diversified my 410k just like the pros told me to - what a bummer!"

Good luck to all,

Greg

Bush is going to calm the market? At least he will provide some comic relief.

Will we find out right away about the results of the LEH CDS settlement?

Only a half hour until it happens.

Rob.

Anyone think RSX is a good trade right now?

FXI is up .5% but FXP is down 24%!!!

Are ETF's unwinding too? If the ultras are based on CDS swaps could that whole market be coming apart?

Rob.

Stocks tumble on credit fears; Flaherty says CHMC to buy up mortgage securities
9:49 October 10, 2008, EDT.
(Canadian Press)

TORONTO - The Toronto stock market fell more than 500 points just after the open, joining a series of big declines on stock markets around the world as investors bail out on fears centred on frozen credit markets.

The S&P/TSX composite index was particularly hammered by energy stocks as oil prices continued to retreat, losing 240.1 points to 9379.9.

That is on top of yesterday's financial-sector led plunge of 456 points which took it to its weakest level in more than three years.

New York's Dow Jones industrials dropped 344.48 points to 8,234.71, following up a 679-point retreat yesterday to a five-year low.

The stomach-churning tumble came as Finance Minister Jim Flaherty announced that Canada Mortgage and Housing Corp. is buying up to $25 billion in mortgage-backed securities from the country's banks in an effort to maintain the availability of credit.

The news made no difference to investor sentiment and the TSX financial sector fell almost five per cent.

The Canadian dollar continued to lose ground, down 1.93 cents to 85.35 cents US following a 1.78 cent fall even as Statistics Canada reported that the country generated a record number of new jobs last month. However, the vast majority were part time.

The energy sector lost 8.5 per cent as the November crude contract on the New York Mercantile Exchange pulled back $7.75 to US$78.84 a barrel as investors believe rapidly slowing economic conditions will curb demand.

bsi87,

Tks for the capitulation updates.

Waiting for capitulation in SPX... before go long...

To anyone pointing fingers here or in emails to Bill - it is both unfair and counterproductive especially now.

To Bill - do not let an emotional attachment to your recommendations cloud your crystal ball. If the you think the situation develops not according to the plan don't hesitate to share your view.

And yes I have my doubts. I planned to be 100% in on dow 8k but maybe I should shift this target to 2k now. And maybe I should take losses now and wait for the better entry.

Guys,
If you are planning to buy, Consider the fact that the market has gone down in the lat hour of trading.

UVU,HON,BA,AA
Capitulated

watching hourly MACD.

somewhat encouraging price action this AM after the extreme early sell-off - more encouraging if we can break-out of the overnight range -

Who do you suppose were the buyers in the financials to slow the drop? Still in 70% cash, anybody willing to call a bottom here?

Thanks Bill for this forum...

Got the whoosh down.

Expect the unexpected.

there we go = gap filled

I think Bush should cancel his speech. There's no jesting left in me - I'm serious.

From Tim Knight (slopeofhope.com):

"We hit the 61.8% retracement fan line from 1932. I'm buying, people."

XLY broke through the 2002 low (around 20).

XLU is almost down to the "last chance" bull level around 24. Should be a fight there.

XLP touched down there (around 21.60).

XLE also (around 41.50).

XLB & QQQQ went a little too far, not bullish.

IYR is pretending it has (historical) support around 43.70. But it has already signaled it is going down to the 2002 lows.

Bought a little more PBT at the 50% fib @ 15.39. Still have the remaining XLE Dec puts, so I am close to neutral on the oil & gas sector.

XLE is the only sector I watch that still has a much of a bullish chance, so I am watching it most closely.

DOW just went positive. impressive up move from the low. but its only 10am. and our fearless leader is about to address the nation :/

Folks, I don't post often, but I want to share a couple of points.

This blog has been invaluable for Bill to share his knowledge and experience, and for the community to share and discuss the market. At the end of the day, no one is putting a gun to your head to buy or sell anything. I personally purchased way too early also. But it's both a lesson and a reminder that markets over-react and prices will ALWAYS come to you.

Take a look at oil and metal prices, and the price of XOM, CVX, SU, ECA, TCK, BHP, etc. They are below 52 week lows, and their profits are most probably much above last years. Didn't XOM take in $12 BILLION last quarter? There is a HUGE disconnect. These companies are practically printing it (not the way our government is printing :))

These are good companies. Take TCK - they aim to pay back $4 Billion of the debt used to buy Fording in 1 year, and their stock is yielding >5%!

Disclosure - long many of companies above; down huge, but not panicking like a bank stock investor. :)

problem with many of the "good" stocks is that they haven't capitulated.

we all know this will get worse before it gets better...companies still have to report their earning...and they will be down...creating futher pressure...

we also know that good companies out there should be bought at such depressed prices

Good companies will survive and grow.....

In the long term we will make good money

no risk no reward....

sv

Patience, I think we retest the AM lows to set up divergences.

Re: Bond Yields

Finally managed to find a pretty good page for Canadian bond yields after rummaging around:

http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en

US bond yields poised for a negative rate today after speach:

http://finance.yahoo.com/bonds

Euro rates very wonky:

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

Just wait guys...it's rallying because I threw some sacrificial GE into the fire!
If I chuck one of my big losers we will go up 2000 pts.

I prefer the AM reversal than the AM head fake of the last few days - positive price action...but today comes down to the last hour of trading IMO

I don't know how to screen for them, but I'm sure there is a way. Graham used to pore through every SEC filing. He knew every company inside out.

Wavesmash - I've been working on a spreadsheet compiling this data on the Cara 100 to find the Graham value price for them. I will have to finish this.

TICK has been excellent from the beginning this morning, but it will take some time to build a bottom and calm investors down.

Bought a canadian Bank yesterday Royal Bank OF Canada...the largest one in Canada

Bought at $ 40.08.......today $ 43.00

sv

Bush speaks stocks will go down

SV

bsi87 said:

"Patience, I think we retest the AM lows to set up divergences."

Would that not scare the bejeezes out of all the "true" knife catchers ?

That early morning action certainly "felt" and acted like a bottom, but it happened in amateur hour, which was likely largely effected by forced margin liquidation.

There's little question that some big hands came in and bought large, and many who were short covered their positions.

I'd be more confident that the markets had bottomed if that reversal would have occurred at about 2:30 PM.

We shall see ...

Uh oh, he's speaking.

Rob.

[Bill Cara note:

The President will read the speech you all could have written for him. Of greater concern to me is what I just heard from Mr. Moral Hazard, Henry Paulson. He is calling for regulatory reform. Read my lips Henry, you and your friends on Wall Street are the very last people who will accept the regulatory reform the US urgently needs. The rest of you can read from me, here in the past few days, the system of regulation we need. There is NO PLACE in that system for Henry and his friends. They would be like us, regulated, not self-regulated, not free to practice a business built on egregious conflicts of interest. Enough Henry. Just shut your face.]

The DOW was down 88 when he started.

Rob.

Damn. There goes the egg money again.

"Anyone caught doing illegal financial activities will be prosecuted."

Talk about a bold-face lie!!

Unless they're targeting Martha Stewart again.

Rob.

ZION just went through a huge reversal down.

Rob.

Lehman results.

http://tinyurl.com/3fd5wy

Not sure what this means...

Everything will be fixed in a week or so, according to Bushie.

Just wondering aloud, how much of U.S. taxpayer's $700 billion was used to stem that early morning selling ?

PPT in action, we'll probably never know the whole truth.

Thoughts for this morning:
++ GWB speaks this morning - can always count on the PPT to give a boost?
++ Couple of commenters posted that Australia stocks might be the place to go. Looked at monthly charts for both the $AORD and the $FTSE this morning.
Relative to the SPX, AORD is either holding up pretty well (glass half full) or has lots of room to fall further (glass half empty) Good recommedation. Will keep AORD listed stocks (through ADR's) on my watch list.
++ Someone posted that somewhere in SA, where currency devaluations occurred by the minute, bus drivers gave pieces of candy as change because candy held value longer than the money. HA!
So, I took a look at Tootsie Roll (TR) and its now on my watch list (long term).
++ Take a look at the monthly on SPX back to 1970 or 1980 (whatever the data permits). A Fib from those early days to the recent peaks shows us at about the 50% retracement from those highs. Might be a time for an all out push? Not a recommendation.
++ Tin Hat thought. Some have commented on the strangeness that "shorts" are again permitted at this bleak time. The "dark side" of my brain suggests that perhaps some outfits (friends and cronies) have been shorting (wink, wink) all along but needed the end of the short ban on a couple of bad days in order to cover all those shorts without calling any attention to themselves. Hmm.

Just some thoughts. Good luck.

DOW DOWN 196....Thanks Bush

SV

Unfortunately, the lame duck Bush does little to instill any confidence, at least as far as I'm concerned - and I voted for him ... twice.

Gos help us all.

financials up Go figure.

The President did not seem convincing.

Canada Morning: C$ In Freefall On Extreme Risk Aversion

October 10, 2008 10:33am ET

TORONTO (Dow Jones)--The Canadian dollar is down sharply at its lowest levels since early March 2007 early Friday, as risk aversion and falling commodity prices continue to pummel the sinking currency.

The U.S. dollar was trading at C$1.1760 at 10:26 a.m. EDT (1426 GMT), from C$1.1609 at 8:00 a.m. EDT (1200 GMT) and C$1.1464 late Thursday.

The Canadian dollar so far has declined in a steady but relatively orderly fashion despite a trio of unexpectedly positive domestic economic reports, as the currency succumbs to the global atmosphere of extreme risk aversion reflected in a flight toward traditional safe havens like the U.S. dollar and Swiss franc.

The Canadian unit briefly rallied back from overnight losses on early news of a stupendous 106,900 increase in Canadian jobs in September, only to rapidly fall back in the face of the global rush into U.S. dollars.

Currency watchers say that all economic fundamentals and other considerations are being cast aside in the present environment of fear, as the Canadian dollar also couldn't derive any support from upside surprises in Canadian August merchandise trade and new housing price data reported later.

"Economic fundamentals are being ignored in favor of risk aversion and flight-to-safety," said Jack Spitz, managing director of foreign exchange at National Bank in Toronto. "With commodities melting down and cyclical currencies like the Canadian, Australian, and New Zealand dollars getting unwound through de-leveraging trades, these currencies are all just getting pasted."

Another drastic fall in oil prices to the threshold of the $80 per barrel mark has also added momentum to the Canadian dollar's downtrend Friday, although the performance of equity markets is considered key to whether the currency's descent extends or is ultimately contained.

"It's all contributing to a bid in U.S. dollar-Canada and an overall bid for the U.S. dollar that is really in many respects unprecedented," said Spitz. "And there's no relief in sight for the Canadian dollar until this current move in equities shows convincing signs of bottoming out."

Canadian bonds are sharply lower Friday, with the market heading for an early 1:00 p.m. EDT (1700 GMT) close ahead of Monday's Thanksgiving Day holiday in Canada. The benchmark 10-year bond's yield is at 3.77% from 3.64% late Thursday.

These are the exchange rates at 10:26 a.m. EDT (1426 GMT), 8:00 a.m. EDT (1200 GMT), and late Thursday.

USD/CAD 1.1760 1.1609 1.1464

EUR/CAD 1.5945 1.5729 1.5600

CAD/JPY 85.13 85.24 87.07

-By Paul Evans; Dow Jones Newswires; 416-306-2022; paulr.evans@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=pz0rU6jVsz%2FDfuqi3KLR1g%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

10-10-08 1032ET

Copyright (c) 2008 Dow Jones & Company, Inc.

Dow going down was blamed on reaction to initial LEH paper selling a bit lower than expected.

Any thoughts on energy shares? I have held onto my positions lately thinking that we'd get a bounce from the liquidity infusions. Instead, I continue to lose.

[Bill Cara note:

If you can buy or hold an Energy stock today that is trading at say 6 times annual cash flow for financially strong senior companies and say 3 to 4 x cf for well funded juniors, I think you should. These are economic numbers that relate to good value.]

From Tim Knight:

"My fervent desire is to ride wave 4 up on the long side and be ready to re-enter shorts at about Halloween. Maybe I should dress up as a bear this year."

The politicians and the people are all confused this has never happened before......

Trust in others takes time

SV

I'm still a sucker for the refiners- added to Valero and initiated position with 200 Frontier Oil at a 9 handle.

That was, *God* help us all.

no capitulation in the major averages.

I'm seeing rumors that Central Banks have given a secret directive for banks not to sell to the public, and that banks in the EU have stopped selling it. I don't know if this is paranoia or not, but it is certainly possible.

The LehmanXposure list shows these in the top 10 worst performers today.

ISP (ING Groep) down 15%
ICA
TMK
ALL
BGS
PRS
UFCS
HCC
AGM
FPIC (down 8.41%)

I have been getting a lot of searches to my blog for ING group... none are very positive.

ESLR down 4% to 3.30

WB up 29% today.
PMI (worst performer yesterday) up 16.6% today.

Seems a little too quiet. Capitulation could come either today or Tuesday.

mballard34a - I am holding STO and VLO and don't plan to sell. May buy more.

[Bill Cara note:

Pls check, but I think these two companies are trading at about 4 x cfps, which is fine. You'll be ok.]

Never underestimate your enemies.

too painful watching gold at $900 and the miners still getting ploughed.

is there a sense that they will not budge until there is a calming in the broader markets?

how high could gold go in the face of broader market declines before gold shares decouple in full. this is difficult to watch unfold. as much as these are considered buying opportunities, is there really support to make a case for gold miners vs. the metal given the relative underperformance?

[Bill Cara note:

Around the world today, there are wealthy people -- oil sheiks, for example -- who are buying the physical bullion as a hedge against fiat money devaluation and this buying must affect the futures market and also the goldminer share trading market, but the latter markets are being depressed by margin calls, forced selling, hedge fund closures, and the like. So what I think is happening here is the development of a major buying opportunity for gold and the goldminers. I expect that after the equity markets start to rally, the selling pressure will come off the goldminers and these will soar. A couple days ago, there was a pop in GG and ABX that was almost +20% each on the day. The market could give a series of such moves. Bear in mind that as bank credit is cut off, much new production of gold will be cut off, reducing supply, and increasing the upward pressure on prices.]

SLW:

Sorry, I was referring only to the falling wedge (potentially bullish) chart pattern. It has indeed broken down again.

I have no opinion on SLW's fundamentals, whether the company will do well or not.

SUNCOR at $22 and change - buy, sell, or hold ?

Why can't I buy it later at $11?

Thank you Bill. I am way underwater, but expect things to turn...this month or next.

Thanks pappdjavul,

I guess we are headed for $4.25 like Bill suggested. Seems unreal to me that SLW can go that low, but it is what it is. Hopefully, they survive and prosper again someday.

[Bill Cara note:

A couple days ago when I recommended the purchase of Silver Wheaton (SLW), I also opined that the Point & Figure charts gave a reading that the Bull move really needed a break-out to be sustained, and that a pull-back below a certain level would possibly see a drop to $4.25. In that possible event, I recommended a double down position because I strongly believe that the Global Rescue Packages must eventually result in huge increases in the price of silver (and gold).]

hi all,
Can anyone explain why USD is rising?

[Bill Cara note:

As hedge funds and mutual funds go to cash, they are selling the shares of companies in foreign nations, which is destroying or at least seriously impacting the currencies of those countries. For the same reason, the currencies of those countries soared against the $USD when US investors were buying those shares. In fact, some countries had to put a stop to foreign buying of their shares in the past year because they recognized in advance the potential destabilization of that foreign buying. Now you see the result, when the shares are being sold. Have you watched the Cara 100 gainers and losers lists each day. when the losers are mostly foreign based, the $USD rallies. This ought to be a relationship that all forex traders watch like a hawk.]

you know its bad when.....?

if you don't know what to do with SU at 22 bucks, you need more than investment advice...

i'll offer one up:

...when you look at your pets for stock advice...just a simple meow or a bark to confirm you should sell.

IMO capitulates

If you really think so, why not short it right now, you'd make 100%.

It's just incredible to me how Gold refuses to budge from a 9 handle.

I just heard on the radio we're heading for the worst week on the DOW ever.

I'm still surprised that Gold and Silver stocks aren't holding up better.

Where is all this money world governments are pouring into the system going?

Even if it's being used to pay debt, someone is collecting that debt and must be just holding the cash and waiting.

Rob.

Yep, that ESLR news (a refresher on the Lehman debacle) and yet another downgrade (this time for Calyon) is like pouring salt into an open wound. The stock is trading below book value.

Can anyone explain why a brokerage would downgrade a company so close to an earnings report? I mean, wouldn't it make more sense to wait for the earnings to be released in order to get a fuller picture of the situation?

Not that it will be of any of help to others at this stage of the game, but my biggest mistakes in trading and investing have ALWAYS been when I deviate from the rules I know well and that Bill and others here have gone to great pains to explain in detail.

I just picked the worst possible time to ignore the most basic rule about risk management.

thanks for your response Bill to my 10:45 post.
this makes perfect sense.

having watched the decimation of the jr. miners and the dramatic fall of the mid/large cap miners relative to the POG, i have grown weary that they would ever return to their historic outperformace of the metal in bull times.

i had hoped that once the broader market's pressures are lifted or at least if things stop tumbling day after day relentlessly, then the miners will beable to decouple from the broader market and rise along w/ gold, hopefully rise faster and restore the miners:bullion ratio.

thx again.

Is it true exxon (xom) has 38 billion in cash to deploy????

SV

[Bill Cara note:

I'd say $42 to $44 billion presently, but your point is well made. The company is a cash cow. XOM at 60-61 is trading at just under 7 x cfps. I recommend long calls for those who are comfortable with risk. A 60 put straddle would be a good one, I think.]

dr.cosa - Bill Cara wrote a while back that miners are dependent on credit availability in order to function. (From memory), he suggested that one use the Venture Index ($CDNX) as a canary in that mine. When it fles out of the depths, then buy the miners. So far, it looks like the $CDNX canary has taken the shaft.

Bill - Please correct me if I am woring. My memory is fading fast.

[Bill Cara note:

Margin calls and forced selling by mutual funds have hammered the $CDNX. There are even better values out there now, which is what traders should be watching for. Dead means to me you may not think $CDNX will return to health. I say it will. It always does.]

Sorry, bad joke about SU. Just looking at GE chart, trying to find happy place.

What effect will oil price drop have on tar sands?

I guess I'm a SU holder since I own XIU.

http://tinyurl.com/5y2syw

Buy anything that's down on this list and you'll probably do ok longer term. Hedge would be continuing strength in USD if you are a USD investor.

Nortel up almost 3% today.

sv - Do you mean "after bonus's" ??
8).

Michael Franti - We Don't Stop

They gotta war for oil, a war for gold
A war for money and a war for souls
A war on terror, a war on drugs
A war on kindness and a war on hugs
A war on birds and a war on bees
They gotta a war on hippies tryin' save the trees
A war with jets and a war with missiles
A war with high seated, government official
Wall street war, on high finance
A war on people who just love to dance
A war on music, a war on speech
A war on teachers and the things they teach
A war for the last 500 years
War's just messin' up the atmosphere
A war on Muslims, a war on Jews
A war on Christians and Hindus
A whole lotta people just sayin' kill them all
They gotta a war on Mumia Abu Jamal
The war on pot, is a war that’s failed
A war that's fillin' up the nations jails
World war one, two, three and four
Chemical weapons, biological war
Bush war 1, Bush war 2
They gotta a war for me, they gotta a war for you!

XOM down......$7.00

SV

vinod/craig/David-

what a shock it was to wake up this morning and realize (a) the market sold off yesterday, and (b) sold off further this morning...took off for anaheim to take the kids to fantasyland, and we may as well be in fantasyland...

i suppose it's time to focus on tomorrowland-> sticking with the plan, and holding tight...let the dust settle, and we'll work our way out of it...this time, 'working' may end translate into 'doing nothing.'

on to adventureland...GL to all

Looks like MS will be the next to go.

Then Goldman will be the only broker left.

Rob.

Did his schrubbery announce anythigm?

GS broke its September 18th low. Volume run rate is roughly 85 mil shares. This is VERY negative price action for the largest former investment banker on Wall Street.

Be careful folks.

end UP translating...

(there's a bar in SF called the end up, often closing at 5am...and hopefully we do end UP)...

The problem with solar is it definitely doesn't even come close to "paying" even at these prices. If oil drops to $50 solar will go back to the 1970's to die. Well not quite but you get my point.

re:GS

just think.

u can buy GS cheaper than Buffet. (without the 10% dividend)

;)

If SLW does go to 4.25, I have 5K ready to dump right into it.

Rob.

In addition did anyone notice that subsuquent to this mornings suckers rally that cnbc disavowed the work of the plunge protection team?

Makes you wonder...

Last night on CNBC a guest commented:

"If President had to speak, let's not do it in market hours"

He was right?

[Bill Cara note:

I have often said that nobody from the Administration or Fed should speak while US markets are open. Before and after market hour statements during breakfast and dinner meetings that are televised are recommended. The rest is not helpful.]

Mu sis told me the vix was up in the 60's yesterday. Anyone know today's reading?

Shark,
That's what always happens to most Alt Energy plays when oil plunges.

At this rate we'll see gas prices under 2 bucks again soon.

I never though we'd see that again.

I still remember when we moved here in '98 gas was 99 cents a gallon and heating oil was 61 cents a gallon.

It would be great if we could get back to that level. Then people would have plenty of disposable income.

Rob.

"IMO capitulates"

From the textbook perspective, this'll be a great time for PPT to kick start the market and get a squeeze to change sentiment. I wonder what's up with PPT these days?

On Stockcharts I'm showing it at 69.69

I think shorting VIX soon would be a great play.

But do you have to go directly through the CME to do it?

Rob.

VIX at 70.38. High was 70.90

teamonfuego - My dog hasn't barked yet today, I guess that means hold??? Truth is that dog isn't much of a financial adviser but he's got a heck of a nose for simpler tasks like running off rhinos and elephants.

I really like how Paulson had to ram the bailout package through congress only to sit on distribution for a few weeks.... Dumb-Axx!

By the way folks, I'm not ready to sell anything here, unless I were day trading. Just wait till the credit constipation gets resolved and this thing will rocket like a Russian ICBM.

It's so funny I watch BNN and I raise the volume on my tv....

I watch msnbc or cnbc and I need to reduce the volume...why are they so loud...relax

SV

[Bil Cara note:

You've heard of sticky audiences? CNBC is trying to stick it to the audience. They always do it with (i) Maria screaming with that shrill voice of hers at times like this, (ii) their reporters screaming daily from the midst of crowded commodity pits, and (iii) Bob and Dylan striding into the camera from their location on the NYSE floor. It's all a gimmick, and that as you point out is what traders don't need.]

I believe the VIX two days ago was 54

Fear is in the air

SV

Almost every stock was a bull trap this morning.

SV,

i know what you mean,
what is it about the bloomberg hosts that literally are shouting at the camera. im glad BNN kicks in after bloomberg shortly after i wake up in the morning on chanell 57 in canada, its such a jarring way to start your morning.

sharkie, VIX at 70.89, +10.90%

2nd - I'd stay away from that bar if I were you!

Bush is to the market as Mr.T is to gold.

Forget about Buffett already. Those days are gone, Buffett is the past, it's over already. Buffett is riding the Titanic to the bottom of the ocean.

Ayaye Captain!

[Bill Cara note:

sharkie, I agree. Buffett, Gross, Greenspan, Standard & Poor's analysts, et al; they have all shown their true colors in this mess.]

Mark to Market accounting to be relaxed this weekend. Just what the market needs, more opacity.

All that is going on reminded me of a book I read in a college history class on European History,

One-Dimensional Man is a work by Herbert Marcuse, first published in 1964.

From the Wikipedia reference:

http://en.wikipedia.org/wiki/One-Dimensional_Man

This line really stood out:

"He argued that "advanced industrial society" created false needs, which integrated individuals into the existing system of production and consumption via mass media, advertising, industrial management, and contemporary modes of thought. This results in a "one-dimensional" universe of thought and behaviour in which aptitude and ability for critical thought and oppositional behaviour wither away. Against this prevailing climate, Marcuse promotes the "great refusal" (described at length in the book) as the only adequate opposition to all-encompassing methods of control. Much of the book is a defense of "negative thinking" as a disrupting force against the prevailing positivism."

I think I need to dig this one up and read it again.......

Wonder why they waited until after the LEH auction to relax mark to market?

What's fair value on GE stock right now?

http://tinyurl.com/4gu388

Was going to sell today.... now I'm not so sure...

shark, you echo the view of big oil very well. They are terrified of alternative energy and are out to kill it.

Blowout, I gotta laugh when I read that on a day when the dow opens down over 600 pts it then becomes a bull trap. It truly is this bad.

This weekend will be even more interesting than recent weekends. Many of us hope to live in "interesting times." Well, we got it folks.

Will the govt opt for a trading holiday ? Any whiff of legitimacy to that notion that gets on the floor and around trading desks this afternoon could create further liquidation at the end of the day.

Will they cheer loudly on the floor if the major market averages break below their morning lows later on today ?

I maintain that there will be plenty of time for long term investors to accumulate the shares of quality, blue chip stocks at very favorable prices.

SU in the late-night TV range--$19.99

What's the S&H?

2nd/craig
Holding everything. Losing some money in OEX. But it does not expire until next month
Brought UWM 500 yesterday at 26.00 and underwater.
Gave up all my gain for year and now little more than even.
But will do lot better in long run.
I was told in morning that I own 13000. By my son
He was in money market in his 401k and I told him to get into mutual fund. You will do well in long run. Well, he is down 13K

shark_attack,

I agree that there are lots of similarities to the 70's with respect to alternative energy viability.

Just wanted to point out some of the differences: peak oil, emerging market consumption (especially China), technology base upon which to build (hybrid, r&d in battery technology), global warming accepted in political agenda, Democratic President making it a center piece for New Deal.

2nd,

do you live down by the med school, or up near Lake st.? (I'm at 5th and clement).

Gartman on BNN right now...

Only $2.00 to go and then I'm loading up on SLW.

SKF is in the Monthly, Weekly, and Daily RSI distribution zone, but unshortable @ IB ;-)

regarding alternative energy, i would guess Obama is gonna win, and Obama seems to promote solar, wind, etc. might bode well for solars that led the way couple qtrs ago such as FSLR, CSIQ. I may load up on 12 month out call options.

SOL is a very nice candidate to sell puts and buy calls if you have the cash but please do your own research. i have not done any of the above.

And for the record i am not pro Obama. I dont like either. just looking at momentum and i think obama will win.

Vinod- You just got a margin call from your son? LOL

if SLW and SU are good respective plays, why are they the dogs of all dogs in this market?

Silver down 3%, SLV down 5.8%, XAU down 7.3%, CDE, PAAS, SIL down 10-11%.... But SLW down 17% (this is not a one time occurrence).

Same can be said for SU.

schnauser- i live on the Peninsula (i appreciate those who can be candid about their occupations and locations [kaimu, for example], but i'm a pretty private guy...i'm close to 280, with a nice view of the opposite side of the Bay [Mount Diablo and the East Bay shoreline] (and at this point in my life, more likely to be swerving to avoid the late crowd at the End Up on my way to work)...5th and Clement was one of my favorite hang outs when I first moved back in 1990; now Chinatown #2, right, with Irving and 22nd #3...

BillySundance - Your post is close to my philosophy. We are all products of our culture rather than ourselves. We work for and hoard stuff because we have been conditioned that this is what life is all about!

Gartman sees deflation for at the least the next 3, 4, 5 years while everything is unwound...

[Bill Cara note:

Is he talking deflation in financial or real assets or both?]

GSS: New low 1.10

northvan,
And you know what deflation would mean for gold/silver. I think it wouldn't hurt to step away from the herd for once. GLA

You know it's bad when -
You spot your banker neighbor going to the bank early in order to check his mail.
The small talk at parties contains remarks about no longer worrying over leaving the country and losing wealth.
Children are rioting in the streets over cancelled cell phones.
New Yorkers walk the streets while looking upward.

8).

Number2son - RE started down during Reagan's term.
NYUGrad _DYODD on Flsr and other thinfilm mfgs as cost/benefit may not be in their favor
Fazelli - Silver may be down as I believe Bill mentioned due to industrial uses vs gold which has monetary value.

Gartman said something "gold will do okay until things stabilize--which they will." He suggests that it is mostly margin clerks selling. On the other hand, he says "if gold can not go up in this environment, when will it?" He owns gold but does not expect it to do much unless the system collapses.

Meanwhile, he does not see silver as much more than an industrial play.

Moab,

i am on the road...how is TRIN behaving?

If credit or private equity was a little more readily available, then wouldn't we see many public companies go private here. Take a company like Dell, it has 22B in current assets and a market cap of 26B. I wonder if Michael Dell is tempted. Or maybe they should just accelerate their buyback (which they may be doing already).

It was 0.50 at the open, now 0.75, so seems like there is a good amount of buying going on.

Rockfall - I believe the issue is Lag-Time: Ref my reply to Kaimu.

Kaimu - Thank you for your 10/4 10:42pm reply post. I agree with your inflation posit. I believe the issue is one of lag-time, as mentioned in this article (Most likely from this blog.) http://tinyurl.com/3kduqt
"A pronounced and sustained increase in the rate of money-supply growth ALWAYS leads to substantially higher prices somewhere in the economy, but due to the time-lags involved it will often be difficult to see the link between money-supply changes and price changes. For example, the rapid rises in the prices of many everyday items over the past three years occurred while the money supply was growing slowly. These price rises were an effect of the rapid money-supply growth that occurred during the first few years of the decade. Also, the quickening in the rate of money-supply growth that has just begun and looks set to continue over the coming year will probably be accompanied by a slowing rate of increase in the general price level, thus setting the scene for a "deflation scare". The reason is that the prices of everyday items have yet to react to the slower money-supply growth of 2005-2007."
Posted by: JohnE at October 7, 2008 9:15 AM [link]

US total electrical energy generation for 2007 - 4.16GWH = 11.396KWH/day.

Quick calculation reveals a required 2,933 square miles of PV panels to replace this capacity, and this does not account for inefficiencies from DC to AC conversion, cloud cover, density limitations, or energy storage. The cost would easily be in the trillions, benefiting PV manufacturers beyond our wildest dreams.

i was just browsing and stumbled upon CROX. what an amazing chart. 1 yr vs 5 yr. Ode to "we trade prices"

That is, 11.396BKWH/day

Analyst cuts solar estimates. i guess thats the 1st step to making it easier to beat estimates next yr?

http://tinyurl.com/3rypcy

To put Gartman's comments into context: he was responding to the question "why isn't gold at $5,000?"

I do not think he talked about the miners.

Disclosure: Long Goldcorp, Rubicon, and others

JohnE (and whomever else is interested)

Is this where I live?

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

"Totalitarian democracy is a term made famous by Israeli historian J. L. Talmon to refer to a system of government in which lawfully elected representatives maintain the integrity of a nation state whose citizens, while granted the right to vote, have little or no participation in the decision-making process of the government."

"A totalitarian democratic state is said to maximize its control over the lives of its citizens, using the dual rationale of general will (i.e., "public good") and majority rule. An argument can be made that in some circumstances it is actually the political, economic, and military élite who interpret the general will to suit their own interests. Again, however, it is the imperative of achieving the overarching goal of a political nirvana that shapes the vision of the process, and the citizen is expected to contribute to the best of his abilities; the general is not asked to guide the plow, nor is the farmer asked to lead the troops."

The only thing that changed since 3:30 pm yesterday for the gold market as gold was up 30$ overnight and the jse gold index rallied 234 pts with all the gold index's showing good bids coming into the market here in north america is:

That we are now in north america. The open was good but we have been smashed again.

What a thing to wake up in the middle of...

Dont treat this as a crisis no matter how badly you might be hurt.

Treat it as opportunity, with wisdom... for wisdom is patience.. and always remember life isnt based upon paper dragons... money which have no value other than what we place upon it, but upon our own actions...

Bill has been providing sound advice and thank you Bill... But in the end it is always your own actions you need to be accountable for. If you made mistakes, then the hard part right now is to accept them as past, and in the NOW, learn from them PATIENTLY and correct future actions for the better.

If you had successes then continue to follow your patience and grow them out...

but it is the same patience each way. Learn this now or you will continue to live life being led by panic and crisis.

Here's a video from Morningstar that argues for a higher p/e bottom than other bear markets due to inflation, return on capital, and other metrics.

http://www.morningstar.com/cover/videocenter.html?bctid=1846655604&lineup=stocks

BillySundance - Thank you. Much to read/study in the coming months once this market decides to start grinding itself out the crater.

Real estate property taxes - My property tax expense exceeds my annual household energy consumption expense by 78.6%.

For those of us who are watching this market debacle (and close to our computer screens, when you stand back and look at some of the prices floating by for some well established, well run companies, it's pretty remarkable.

IMO, we're certainly much closer to a turn in market momentum than we were 1 week, 2 weeks, 1 month ago, etc.

That said, I don't think it's necessary to "nail" THE bottom in order to make some very nice gains.

Patience ...

P/E ratios are almost irrelevant. This bear market is not only the piercing of a bubble and an economic slowdown, it's a systemic crisis. Until they straighten the system out, and create transparency, P/E ratios are irrelevant for where this market can go, because if the system doesn't function all companies that depend on credit will suffer, continuing a feedback mechanism down.

VIX now at 73.18, but was at high of 74.46.

I just get the quote for it at yahoo:

http://finance.yahoo.com/q?s=^VIX

I know it's a strange indicator but... the Scottrade platform is flying today - retail activity slowed down ???

IBM (no position / don't follow):
Why is it down after a decent report?

Sufggestion:
Read some random parts of this bond expert's blog.
It's not falling knives bulls are catching, but falling guillotines.

http://acrossthecurve.com/?p=1830

. . .
Since I began this closing commentary piece for this day the stock market went over the edge with another very steep decline. I searched for a story or a rationale and I think that the rationale is in the credit markets.

IBM raised $4 billion today with the sale of 5 year, 10 year and 30 year bonds. I will relate the story of the bond in the 10 year sector.

I shall begin with the IBM bond which matures in 2017, which is one year shy of the bond that the company offered today. It is not exactly the same but we can compare. That bond traded one month ago at a spread of about 170 basis points to the 10 year Treasury. Yesterday, a salesman with whom I converse, (and friend of the blog) sold some to a customer of his at T+265 basis points.

Today when IBM offers the new 10 year bond the market forced that gilt edged untainted by the credit crisis technology company to pay T+388 basis points. It was over 120 basis points cheaper than a comparable bond traded yesterday. That is a sign to me that the credit markets are in the direst state and that funding is drying up for corporate America.

Can you imagine the result if a financial company other than JPMorgan or Wells Fargo visited the market and tried to raise funds? There would be no takers for a host of large cap financial names or smaller regional bank names.

I have said this before and risk redundancy but more and more it seems likely that the resolution of this crisis will be an historic financial calamity.
. . .

We're in a vicious spiral now. As Bill said in his comments, retail investors are having their accounts liquidated to meet margin requirements. It adding additional selling pressure while destroying retail investors.

I URGE everyone to write their brokers, members of Congress and anyone else they can think of to finally get some action against naked short sellers.

Looking at the chart somebody posted yesterday about the S&P and trendlines, if you turn the chart around it really looks like a parabolic blowoff. Every day opens close to previous days close, and moves in same direction with increasing magnitude. I think that seems to correlate with forced margin selling and/or black box momentum trading.

If that is the case, how do parabolic blowoffs usually resolve themselves? Not slow topping out action, but sharp reversals, no? I think that's what Bill is calling for. But like all parabolic spikes, it's impossible to know where they stop.

I'm gearing up to dive in more QQQQ calls and maybe even more UYG calls.

I'm waiting until we see what happens over the weekend for getting more GG and SLW as I already have tons of each.

Rob.

But I'm definitely waiting until 3:30-3:45 to enter my orders.

Rob.

XLE, XLP, & XLU have still not closed their overhead gaps today. not bullish.

XOM breaking 70, with a big gap down even, is not bullish.
Had not paid attention to XOM, must revise my neutral view of XLE to negative again.

XOM has been described as "an oil co. masqeurading as a bank".

Considering how banks are seen these days, perhaps one should change that to " . . . a bag of money".

XOM has major suppoprt around 51.

Mixed up things, should have been:

XOM has been described as "an bank masqeurading as an oil co.".

Considering how banks are seen these days, perhaps one should change that to "a bag of money . . . ".

Look at the dollar soar. Being long the dollar seems like the only thing working besides being short everything else.

Rob.

number2son - Excerpt from my e-mail yesterday eveing. Subject: H.R. 1424

Dear Senator Casey, Specter, Congressman Todd Platts voted NEA and I changed the wording for him.
It is with deep regret that I note your YEA vote for the subject bill, while I had called and sent to you my request that you not vote for the bill.

Even so, disaster may be averted at this late hour by the following actions.

Without delay, the government needs to nationalize all banks and the Federal Reserve immediately, order and guarantee all the inter-bank loans and gradually certify sound banks returning them to the private sector. Unsound banks will get injections of cash in exchange for equity or be closed/merged. Just giving banks cash or purchasing “toxic paper” will not address the trust issue, will not protect the taxpayer/depositors/clients and will not force the banks to once again lend to one another, since they are fearful they will never see their money again! Also, any bank corruption will then be a federal offense!
The government action will reinstitute trust, inject capital where needed, calm the markets, restart commerce and begin the healing process. At this juncture of the Investment Banking Crisis, private enterprise must yield to the needs of the citizens who had little hand in this debacle and are suffering greatly.
A special U.S. government body (Not the Federal Reserve nor Treasury!) must be established to oversea the nationalized banks. Another totally separate and independent Federal body should be established for auditing and fraud identification, working with the FBI and other existing law enforcement agencies on enforcement.
-----------------------
ADDENDUM:

CNBC's Bob Pisani just had an unconfirmed report the SEC is going to put a 3 day ban on shorting any individual stock which drops 20% or more.

Italian Prime Minister Berlusconi said political leaders discussing idea of closing world's financial markets while they 'rewrite the rules of international finance....looks like we might all get a few days off.

I have reentered the market, buying an initial position in Mega Uranium for my stepdaughter.

After Hurricane Ike, I was reminded how important energy is and I think nuclear will play an increased role. Cable, phone, gasoline, will all be rationed before people cut into their home electricity in any way other than turning off lights and higher thermostats.

Any one of MGA's best properties could justify a valuation of $.96 a share, so I was happy to buy the whole company. I've got some lower bids in.

cause we saw how well the shorting ban working on the financials...

Watching these for break or bounce when SPX goes down to test the 2002 low (it will):

XLE @ 40

XLU @ 24

QQQQ @ 30

These are all in rather similar positions.

and why not XLY @ 20(the 2002 low) just for fun.

The Gold price has been whacked again. Now I guess we see why lease rates climbed so rapidly, they just piled them up and took their best shot. $54 in a day.

I think this is a good addition to Bill's explanation to what's been happening to the markets this past week.

The short sale ban's unintended consequences, and here we are today. Now the stock market is as seized up as the credit markets. All for the cause of preserving power for Hank and his buddies at the banks.

Hugh Hendry, the eloquent, brash, and outspoken CIO at UK-based Eclectica Asset Management, comments on the today’s worsening selloff in markets on CNBC European Squawk Box

“It feels like the blackest morning,” Hugh Hendry, CIO & partner at Eclectica said Friday (today). “We’ve never really experienced a matter as grave as this.”
Conditions like these are unmatched, except with 1930-32. He “slakes” regulators for this, making the following points.
· The short selling ban has been a fiasco, as it has removed an entire constituency of buyers from the market, so that on weak days there is no profit incentive to buy the market.
· The tremedous slide of the last two weeks has made the market completely oversold, therefore nobody is willing short sell the market.
· The VIX index is very high, so one can’t (afford to) buy puts to protect their holdings
· Fundamentals have become an intellectual curiosity, and an outrageous luxury
· The only defense left to investors is to sell their assets, this is a liquidation
· People watch the market all day and are averaging their trades and that’s why in the final hour of trading you see a cascading of orders, and the market runs out in panic trying to fulfill those orders.

So far in the month of October, Hendry’s hedge fund is up 40% on account of his levered positions in long-term government bonds.
http://tinyurl.com/4fpgw9

"closing world's financial markets while they 'rewrite the rules of international finance"

Shut down the Matirx of reprogramming?

They going to shut down all the banks, factories, transport, stores too?

Great! everybody gets a month off!

But wait - no food, no medical care, no electricity, no . . . uh oh . . . .

GRZ is selling certain gold production assets in Venezuela. The buyer isn't mentioned in the press release, but I think I know who it is:

http://tinyurl.com/3eq6qq

I get a lot of things wrong, but there's only Rusoro and KRY left in VZ gold mining. If anyone wins, I think I know which it will be.

I also think someone will win, because the regime and its supporters can benefit greatly from the 50M oz. likely to be in the ground of Bolivar State.

disclosure: I have an (underwater) position in Rusoro.

Gold down now ~$60

I wonder what happens to options holders if they close the market during expiration week. Do you think they will be nice with the holders and extend expiration? ;-)

and gold is crashing because...

and JPM is up because...

Pappdjavul,
I hope that this analysis of XOM works out better for you than SLW.

Westcoaster - thank you for that post.

XLF (no position since spring - would not touch it now)

potential fib projection downside target:

(minor) confluence @ 12

below that nothing before (major) 6.25.

just

Seems hopeless, gold shares have their biggest day ever 2 days ago and everything looked great overnight coming into north america and here we are below the low 2 days ago.

Hbb has won against me.

Well, it's true that if you're betting in the gold sector that you're placing your bet against Wall St. banks.

ALOHA !!

As long as this mentality exists the problems will never get solved.

About MS share price decline ...
"Morgan Stanley shares have been under extraordinary pressure as of late, for no apparent fundamental reason, as we estimate liquidity, the balance sheet, and long-term earnings prospects are sound," David Trone, an analyst with Fox-Pitt Kelton Cochran Caronia Waller, said in a research note."

He did not even visit the word "derivatives", for which MS is one of the most heavily laden derivatives banks. Lets see what the LEH unwinding brings onto MS ...

XOM is a great co., world's best managed co. they say. I used to have a big position in it.

I have stopped looking for long positions now.
Only trying to figure out when to take profit on the puts. Longs can wait.

I know XOM fairly well, my father worked for it all his life. Responsible for oil production in 3 states, after retirement was a depletion tax expert for them. I actually worked for them 2 summers myself, have a "6 months" flying red horse pin to prove it.

If crude drops ~$7-10 bucks intraday, then you can be fairly certain that gold will drop as well. I'm taking screen shots of the gold price in US various currencies, finding myself repeating the action because the gold price keeps losing ground.

The dollar strength and margin selling is knocking down the miners. When the strength is over they will rise: they have real money in the ground. The FED is out of Treasuries. They have to print money to lend to anyone.

My fear is the dollar is going up because of depression.

Where is Paulson with his rescue plan?

question for group
deflation is good or bad for GOLD

gold is crashing due to Lehman liquidation insurance auction?

JPM is up because?
inheritance of Lehman insurance payments? Mark to model is back in vogue?

Just a guess based on a comment on Across the Curve blog.

http://acrossthecurve.com/?p=1839

What will Lehman auction do to counterparties?

Open the vaults....

"Sellers of credit-default protection on bankrupt Lehman Brothers Holdings Inc. would be forced to pay holders 90.25 cents on the dollar under initial results of an auction, setting up the biggest-ever payout in the $55 trillion
market."

http://tinyurl.com/4tc8xg

So is the strategy to put as many companies under as possible and collect the premiums?

How would you do something like that?

Somebody ask the Fedge Fund.

added to AA position at 10.99.

Hrly MACD divergence.

wow, look at the gold price. Somebody get serious margin call.

I heard on Bloomberg yesterday something I hadn't heard before.. that mutual fund managers receive the previous days fund redemption information at 3:00. That is why the selling accelerates in the final hour. Has anyone heard this before? I just want to try to verify if this is true. I never want to take anything as fact unless I hear it from more than one source.
If it is true I am betting on another huge last hour sell off.

Just bought:

XOM @ $58
SLW @ $3.80
F @ $1.90

Ready to buy some more stocks if they fall a bit more.

20% cash left...oh no!

SLW under $4. Anyone with the courage to buy? Rob?

Cramer was too optimistic.....<8,000.....SLW@ 3.85!!

xom,slw,f

no capitulation

RSI 7 day < 10.

all are about 15-20

GL

JMO

If the S.O.B. HB&B's would have restricted their margin ON THE WAY UP like they're doing now, we could have avoided a lot of this.

This technical analyst says we should bounce off the 820-825 area. If that doesn't hold 770 needs to hold; last ditch support.

Very admirable bOss, I hope those trades work well for you.

Link:

http://blog.stockmarketharmony.com/

I stopped buying Fords after financing the repair department at the dealer for 5 years.

My NSANY doing well, even though it's made in Tennessee. Stock is a bit rusty though... like my trim panels.

If this isn't a bottom... wait... don't call a bottom...

I have my reservations that endless tons of gold are being sold into the market. Instead the rise in lease rates makes sense as the market is flooded with leases, having a direct effect on the bullion price.

The gold price rout has affected the TSX and added to its decline.

apollo7 - silver cratered along with gold. Oil is now about where Bill forecast.

OIH capitulates.

Lehman Bonds Given Initial Value of 9.75 Percent in CDS Auction

(Bloomberg) -- Credit-default swap dealers set an initial value of 9.75 cents on the dollar for Lehman Brothers Holdings Inc. bonds in what may be the biggest-ever payout in the $55 trillion market. ...

So, if the sellers have to make up the other 90.25%, what's 90.25% of BILLIONS and BILLIONS?

"Sellers, meet Judge Smith, he'll be overseeing your Chapter 7 bankruptcy proceedings..."

Someone mentioned yesterday that Bill did not recommend or did not like the Canadian energy trust companies. I am so tempted to buy some. I just want to understand his reasoning for not liking them. Please let me know or direct me to where I can read about it.
Thanks

The LehmanXpose list of best performing stock this aft. (from an optimist view)

WB +21%
WTBA
PNX
WM
PMI
GLG
CCNE
LNC
UBSI
LPSB
PRU
CVBK
and
JPM (+3.68%)

Worst performers are ISP & GT.

Goodyear Tire?

http://tinyurl.com/4gcf6g

whoops, wrong Goodyear.

http://tinyurl.com/4dx7a3

initiated positions on that downturn - Long: TTM, SU, SLW, NOK, ABB, DELL

Vinod and Dr. Cosa,

Remember what I said about gold being vulnerable to the de-leveraging?

XLF almost positive. Banks may be signalling bottom is here for now. Sure hope so.

I think the "mandrake mechanism" (i.e. fractional reserve banking practice) is acting in reverse, causing the money supply to contract, and thus the bust we are experiencing. I think the economic boom-bust cycle might be more muted if we had at least one permanent money system in place that would be allowed to freely compete with our current unbacked, debt based monetary system. For more info, please see
http://members.aol.com/_ht_a/tma68/griffin.htm

if the market closes on weakness I will sell into the close

Question: Are the Credit Default Swap auctions over for now?

If so, my bet is that USD reverses and we rally from here... at least until the next cluster of CDS auction dates. FXE sure looks oversold here.

Just sold SLW @ $4.35 (just bought it at $3.80)

I will take a 14% gain off the table in 20 minutes any day of the week.

If only I could tell what the market was going to do next week?

Man, we could use a fireside chat about now....

No fireside chats Billy but Bush I'll be glad to recite "My Pet Goat" if you'd like to hear it....

We are entering a time of the day that bears very close watching, much more so than what occurred in the first hour of today's trading.

This is where we'll see if the market wants to make a stand, or piddle around further.

The whole problem with the theory of deleveraging having an effect on the gold price, is that nobody in their right minds will be taking Peter Munk's advice and selling their physical in a huge panic on a drop in price.

You'll get lots of paper with official stamps on them and no connection to the physical gold, because there simply isn't any available in large quantities. In a recent large percentage decline in one day, more gold was shorted than is available from one month's production of total world mine supply. I'm sure today is just another example of how many large funds were taken in by the paper gold market and dumped their contracts, when they found they could not get paid in kind, or something like that.

It IS a rare metal, and you can't just dump any quantity you want on the markets, like for instance, zinc, because its likely either spoken for, or backs certain obligations, or you simply can't get a fresh supply.

These are gold leases which are being dumped on the COMEX, pure and simple. Gold which has already been leased several times over.

Livermore said "If you do not believe in yourself, you are not going too far in this game".
Bill believes his own judgment, so should every else,right or wrong. Take your responsibility and face the consequence of your decision.

Here's an article discussion Munk's comments, which I figure is just so much rot:

http://tinyurl.com/47ss2w

The timing is perfect, it came out a day before the sell-off.

Should be a very interesting last 90 minutes. The hissy-fit that started at 3 on previous days might come sooner today. The last 10 minutes have seen some significant price movements in QQQQ.

We'll see if there's enough demand for all the supply.

Shark_attack,

Very funny! At this point he looks like he's doing it because he's been paid.

Sharing some leg work with the community. Every Friday when the IBD 100 list comes out over the weekend, I enter them into my software to track. Over time this ibd100 list grew to about 300 stocks; i missed a couple weeks but every week some companies are added and taken away based on the stock's perf.

Ever feel by the time you see the ibd100 in the paper, that its too late the the big move has already been made? Good news is they are all down. opportunity abound for right time horizon and or right entry point.

Well here is the list of symbols. over this weekend i am basically going to pick from IBD, Cara 100, Cara 36, then decide on strategy, and wait for the right time.

CLR
SOL
TITN
MA
POT
SQM
GHM
BUCY
ARD
GMXR
RIMM
PSEM
CF
SWN
TTES
HES
GEOI
MOS
SID
BIDU
DRYS
CYBS
DNR
CNQR
GTI
PCLN
GLF
NOV
ENS
ISYS
MON
NEU
RRC
NBL
AGU
JST
CSX
FLS
APA
FTI
LL
MEA
SNHY
WLL
MPWR
ABB
NGS
AAPL
KSU
KWK
ANSS
GFA
MUR
SFY
BTE
WDC
SVR
BRY
OXY
SM
CEDC
PQ
BMI
GDI
NETL
HIL
GRC
SDA
VMI
ACI
PBR
SOHU
ISRG
SCR
TNH
DR
PDE
ATW
NE
CLHB
CE
ECA
WGOV
WFT
CAM
CMP
EOG
ARO
XEC
GTLS
SU
NDSN
FLIR
WTI
AXYS
SYX
VIP
RIG
LKQX
HK
NVEC
VQ
JOYG
PVA
CLB
ATHR
BVN
RBN
OLN
ARG
PLXS
MR
MICC
AFAM
URBN
APC
APH
NXY
HOS
APEI
DSX
OII
WAB
ESV
CELG
AUY
PBT
WMB
BABY
SXE
CNQ
DVN
SPN
GIFI
HAL
FST
PXP
TRLG
HP
SCHN
BAP
EZPW
CFX
IIIN
CMED
EDU
AMED
MANT
SYUT
AIMC
MSB
BKE
TDY
TISI
SYNA
HUBG
AZZ
ICLR
EOC
ESI
IIVI
PMTC
TYL
FLO
FORR
VAR
VLTR
SF
TECH
BCPC
STRA
LUFK
EAC
CSH
CVA
CMI
ACL
DXPE
QSII
KNDL
BWLD
WRC
EME
SONO
WBSN
UTHR
ENSG
BRKR
LMIA
SKH
HOMB
IT
LPHI
NPK
PRXL
GTIV
SCL
HLF
SYKE
CIR
CRN
BIG
NPO
SY
MLHR
PSYS
ESRX
HS
SCHW
BKR
PETS
FAST
SYMC
DMLP
NCIT
CSGS
QLGC
FSLR
NCS
IPGP
BCO
FMC
NFLX
AMTD
HCBK
CSGP
GMKT
ATVI
AVAV
ANGO
ITC
MFW
NTRS
CVD
NWPX
NNBR
KOP
SJR
FTEK
SMTS
PSS
NDAQ
VPRT
RMG
LB
PRGO
PWR
GEF
MIDD
IWOV
FPIC
LG
GPN
CHTT
WHG
JOSB
MCD
MWIV
SPTN
SBSI
GMCR
SRCL
GENZ
FCN
ROST
UMBF
GXDX
PNFP
RKT
SWS
MMSI
ENI
IRIS
STJ
OTEX
PSSI
IART
PRA
NEOG
AMMD
STE
CHD
SXI
THOR
TWGP
MSCC
BLK
IDXX
OMI

copy paste into notepad. then into excel should work with any copy paste software.

From Reuters:

"NEW YORK, Oct 10 (Reuters) - Banks, hedge funds and other sellers of protection on Lehman Brothers are facing losses in the area of 91.25 percent of the insurance they sold, based on the initial results of an auction on Friday to determine the value of the credit default swaps. ..." [no link given at source]

Does this mean that if one has money in say an insured money market that has Lehman bonds, then theoretically, no money in the fund is lost because the bond has an established value of almost 9cents and the insurer knows now to cover the rest?

All we have to worry about then in this csse, if true, is that the insurer is to big to fail - right?

closing SNPIX I bought in my pre Bill days. Boat anchor

We are getting fairly close to what will culminate in a thousand-plus point selling cascade, which was an expression I was using before Dylan Ratigan did last night.

They are selling the bejeepers out of oil, gold, probably all the commodities I don't watch all of em, but this thing will accelerate into a death-dive which will be a great buying opp. Sorry about the long RIMM suggestion the other day but I know yu set very close stops and hopefully got taken out prior to this morning anyway.

They're selling anything that doesn't move, and probably lots of things that do. Gold is going out the window because when you need to sell, gold's the only thing that's good as gold?

A twist in Kaimu's argument is that debts are not payable in gold, but in the fiat by law. So it maust be converted each time it's used. So gold is being crucified on a cross of fiat!

Bill, it's the middle of the afternoon and I've just found time to read your blog today. I am a neophyte in the world of stock investing and I lurk daily on your blog, soaking up all the information you provide. I have an un-satiated appetite for the knowledge you share freely and am most appreciative to you. There are those who will bash good people like yourself particularly when THEIR decisions go bad. However difficult it may be, ignore them. Your knowledge is appreciated by the vast majority of us. Your ethics are beyond reproach. Those who soak up the information and thoughts you offer, make their decisions and then attack you do nothing more than publicly describe their own ignorance (and character).

I've been basically in cash for the past year+ except for holding some micro positions in a handful of junior mining stocks. Returns are similar to Lelik posting yesterday morning. I kept them just so I would pay attention to what was happening.

In the past when I did have larger positions I would see the market dropping and bail out, considering myself a genius for having done so. They were good stocks so a while later I would look at them again to see when I should reload. Most times they had taken quite a jump and often were above where "the genius" had sold them. I couldn't buy back then! You know how the rest of the story goes.

Certainly having deployed cash again in the past two weeks was too early. But, I'm having trouble bailing on what I believe are good companies, especially with my past mistakes in this regard. When I can buy stock in companies whose stock price is just barely more than the cash on hand, I have troubles not seeing them as good long term holds.

The other major change in my investing strategy is moving away from the junior mining/oil stocks and towards the majors (Cara 100) stocks. Not totally - but I'm waking up to the fact that there is more out there than just what is in my backyard.

So I've taken a kicking the past few days like most everyone else after I sat out a long time, which hurts the ego more than my retirement. A few years ago I had 5X as much in the market as now, and on one day I took a way bigger hit than the total I am down now. But I feel secure because the rest of the cash is now sitting where the province of Alberta covers 100% of the deposits. I would certainly not have all my funds sitting in brokerage accounts and the only borrowing I would do to invest would be to use broker margin so I didn't have to expose the rest of my cash to higher risk.

I believe it would be foolish not to be taking a stab now at finding a bottom in the market. There may be short term pain but hopefully it is only that -- short term. I may be trying to justify sitting here looking at the red, but that's my story and I'm sticking to it.

On a different note, I would like to know what it is in my psyche that when I put on a hedge I can manage to lose both on the hedge and the initial position.

how low can DJ go?
From here, plunge protection team theory does not work. if there is, PPT should do the trick.

I think DJ will go lower, because every day 4-5% is not a big drop. But slowly, slowly, that sucks.

anyone interested in WGW here @ .82 ??

From Jesse's Cafe Americain:

HB&B forcing margin calls on their hedge fund customers. If this posting is accurate, the real slaughter will be on Monday.

http://tinyurl.com/3j7ej7

It seems they have won for good...

From http://jessescrossroadscafe.blogspot.com/

Is This a 'Deflationary Moment?'

In short, no.

This is what is called a short term liquidity crunch, where traders, in this case most likely hedge funds and small speculators, go into panic selling to address margin calls and short term cash obligations. It is the unwinding of leveraged positions under extreme short term duress. There is some talk that the CDS situation is causing this, and rumours that the banks are forcing the selling by raising short term margin and issuing margin calls, perhaps to an excess.

It is possible to turn this into a deflation, given time and a tightening of the money supply relative to economic growth. The word 'moment' is the tipoff here. There are no 'moments' in a real inflation or a real deflation. They are trends of weeks and months and sometimes years. Short term events, whether due to a storm, the collapse of a company, a panic, are just that: events.

What we are seeing today, almost across the board, is hedge funds selling almost everything to raise cash to meet their obligations. We suspect that the Lehman CDS settlement today may be a precipitant. We are also seeing banks continuing to tighten their lending even to the funds.

It will reach a climax and then things will begin to normalize. VIX is at crash levels today.

For this to become a true 'deflation' would require the world's central banks to start tightening credit, raising interest rates, tightening government budgets. Lets see if they do that. Merely doing nothing would probably not even be enough, since the market would just find a level at which it could clear and then normalize. It takes serious government meddling to create problems like a hyperinflation or a true deflation.

Its important to keep these things square in our minds. Cooler heads prevail, given a little time, and panicking is never a wise strategy, unless you panic first. We're probably beyond that point..

ALOHA !!

F6 is right about the physical ... One of the top producers South Africa just posted a 23% drop in gold production. Watch out GLD people ... that's coming your way!

Perth Mint which is a true measure of "demand" has had to double gold output! Luckily they are in a gold friendly environment and have access to one of the largest goldfields in the World ... I toured it in JAN 2008!

For those who doubt the US government and the US FED and their bullion banks would attempt to manipulate prices or any way be dishonest I suggest you cover your eyes NOW!

LEH AND GOLD
As I type the pricing on LEH derivatives holdings are being marked $0.10 to the dollar! The second phase has yet to be determined which is total amount outstanding. That would determine the overall size of losses.

Do you not suppose that the US FED and all those cronies in the US TREASURY already know LEH counterparties will suffer massive losses and are taking gold and commodities down prior to the weekend so that the only "safe haven" appears to be a US Peso? Would they be that dishonest? What's their track record? Hummmmmm????

ITS THE WEEKEND ...

I do not trust what is heading our way. Isn't it obvious they choose to sort LEH derivatives values out on a Friday? DUH-H???

10 CENTS ON THE DOLLAR !!! MAN ...

I want to meet the idiot who is willing to shell out 10 cents on the dollar for this trash! It's probably going to be the US TAXPAYER! HA!! As I look in the mirror ... "HELLO IDIOT!!!"

FranSix at October 10, 2008 2:26

Wish I had seen that, he has immpecable timing, as I remeber he came out(from wherever) just before the 730 top and the 1033 high within 3 days or so.

I am so destroyed by the gold share market I do not know if I can recover. I am not a trader yet really, but it was really easy and common sense almmost, back in 2001-4. If gold went up a buck the miners flew.

Maybe the gold miners are now in a place where they are considered a threat to the equity game, while back then they were not really.

Should've listened when Bush muttered: "This sucker could go down". But then I considered him a contrary indicator...

"Bill believes his own judgment, so should everyone else,right or wrong. Take your responsibility and face the consequence of your decision."

Well said.

[Bill Cara note:

Well said, indeed.

btw, here is the IBM report.
http://www.valueline.com/dow30/f4786.pdf

I like the company; I like the price -- now down to $85.31. Write the Jan 80 puts for the bid price of $8.50.]

TED Spread now up to 4.6

bought SLW @ 3.92

http://tinyurl.com/4ho8fy

"Radical Measures May Be In The Wings"
Friday October 10, 12:12 pm ET

Excerpt
“I don't wish to spread alarm on the line people but the big issue confronting the market is I'm afraid the health and sustainability of Morgan Stanley (NYSE:MS - News) and Goldman Sachs (NYSE: gs)," Hugh Hendry, Partner and CIO at Eclectica, told CNBC. "It is unimaginable that they can be allowed to go, I suspect that they will be nationalized at some point today or over the weekend," he add."

bought EXK @ 1.28

Jesse,
I've decided I have enough SLW for now. I'll wait and see about next week for more.

Right now I have a bid in for a bunch of Jan '10 QQQQ calls.

We're back to early 03 on the Nasdaq and I'm very willing to bet we'll be significantly higher by Jan '10.

Rob.

bought AUY ABX GG WGW at low low prices of the day as well.

According to RealMoney:
"The final settlement price for Lehman's credit default swaps is 8.625 cents"

moab,

If all we are witnessing is a mega-margin-call then wouldn't some of the cash be coming off the sidelines to scoop up bargains?

Equities are being priced for a long term recession/depression where companies will struggle to survive (in every corner of the world) and cash will be king. On the other hand, if reflation is just around the corner, then we are about to experience some serious whiplash.

I would say that if you have done a more than thorough due diligence on your affected miner, whose principal activity is that of mining gold, then there is no embarrassment at dollar cost averaging at this point. Or waiting out the correction. We are only days away from a resolution. Either the capitulation comes today or Tuesday.

I've been ready to ride it out for a long time, but I could not forsee that miners would not index to the gold price. This situation will change, and I believe remarkably.

Have the market fundamentals more or less fallen along the lines that were determined as a starting point for the investment? Have currency values, costs, politics, management values all conspired to create a valuable investment?

Demand for gold is unprecedented and investors the world over are taking physical delivery, rather than participate on the COMEX. So the COMEX has become a killing field for speculators leveraged to the hilt, looking for a rapid solution to their losses.

Investors familiar with the gold markets would know that you wait endlessly for returns, plan accordingly for gold price corrections, and try to ignore criticism. Even at this late stage, people simply have not wrapped their heads around why gold makes a sound insurance policy and oil or uranium doesn't.

http://www.dw-world.de/dw/article/0,2144,3698865,00.html

I believe in gold as a store of value.

I also believe in uranium, because no one wants to contemplate their stored value in the dark without heat or a/c.

If and when we break the lows of this morning on the major indexes, it's "bar the doors, Katie" time.

CNBC continues to report that GM is not considering bankruptcy as an option. The question is, are they solvent - do they have resources to cover their obligations - all of them ?

This is not looking that favorable, folks.

ALOHA !!

And why would GS and MS be nationalized over the weekend? L-E-H ...

Lack of CONFIDENCE in US Banks and the markets will absolutely CRUSH the US Peso. The US Banks represent our entire monetary system which is represented by those little green pieces of paper in your wallet fondly known as FRNs.

My past experience with these clowns is that the POG and POS prices always tank the most prior to a major negative US financial event.

I would not want to be holding GS or MS over the weekend!

Painful... What's going to happen in the last 55 min! If it's anything like yesterday, we'll close at -700 on DOW! But I'm hoping we'll find somewhat of a bottom here above 8000!

Otherwise, lookout 7500!

kaimu

I agree regarding MS and GS. Steer clear for the weekend.

to supplement my IBD list above, here is the Cara 35. seems like i am missing 1 or was there a duplicate?

DELL
CSCO
IBM
GOOG
IBKR
JNJ
RY
OXPS
INTC
TEF
NOK
EXC
CCJ
QCOM
ORCL
MICC
RIMM
DNA
DOW
ABX
SLW
GG
IMO
ECA
XOM
SU
ABB
PG
MCD
WMT
WAG
GE
BA
KO
DEO

kaimu - I'm very glad you're with us through this and truly hope to have the priviledge of shaking your hand one day, as well as Bill's. Maybe at vinod's clam bake?

Its funny, but speaking about pesos, the Mexican Peso is the only currency rallying today, along with the Yen.

1$ = 1¥ if bond yields continue to decline and stay there.

Looks like everyone is planning on the powers that be acting over the weekend, or we get a big shake out at the close.

They better do something....

financial going up

ALOHA !!

CAUTION
For those of you who have "paperless" statements and trade executions and the likes, which are encouraged a great deal by online brokers, I would make sure you have a paper copy of your latest portfolio with stock executions listed.

If for any reason markets are closed or you are denied access to your account then you need to make sure your positions are documented.

TOG - When do we start looking at that again? I notice that TNX is on the verge of breaking upward on the wkly chart (TNX up therefore UST down). Surely the US Gov has so many bonds needed to sell that demand (price) will fall.

I have TBT on my watch list - no position yet.

They must finally be selling off SKF profits for the weekend. Hell, they were only 100% in one week.

above 8600 would be promising...

I doubt we will get the same final flush as we did over last days. IKt became too customary, can;'t be that easy for shorts. Market gotta k,ill those who become too complacent relying on the pattern

btw Bill, thanks for the call on the IBM put - caught it just before the pop...

Beard!

Got some big fingers there...

I've completed my cara 100 investments...my floor is ESZ8 840, if we go back there I will add to all positions.

My SLW is up over 22% now.

Thanks Bill!

they took Ma and Pa's egg money at open. They'll probably try to get them long at the open on Monday.

LOL nemo... just had an open position in ADBE from 26.51 while typed, and it moved fast... so my attention was spread

(not that my typing is a lot better when I focus on it)

The DOW rises 500 pts. within minutes based on non-fundamentals. Definitely a red flag here!

how about a 700 point up day for a change :) - but I am happy above 8600 at the moment

IWM absolutely soaring. Bought another straddle this AM, looks like today the call will be the winning side.

I will add on all dips to my longs...

short squeeze seems to have petered out, XLU and XLE have still not closed their overheasd gaps for today (XLP did).

Now we'll see how many want to be long over the weekend.

I will be selling at the 50 DEMA or RSI 7 day of 50.

Short sell ban lift finally bringing some balance back to the markets?

[Bill Cara note:

PLEASE SEE ADDENDUM TO TODAY'S COMMENTARY.
I HAVE ISSUED A BUY ALERT ON 95 STOCKS.]

I got my calls on the QQQQ for Jan 2010 just before the updraft. Let's hope it's for real.

Rob.

Caught some of the moves in SLW, AUY and EGO so I have egg money for the weekend, which I promise not to spend on transitory superficial pleasures.

woah. i dont think i have seen Bill ever do that here.

[Bill Cara note:

It's called putting it on the line. Traders have to make decisions. I just made a big one.]

If default insurers have to pay about 91 cents on the dollar for the bankrupt Lehman debt, that means that the bankruptcy court was only able to get 9 cents on the dollar(to cover the long term debt) for the assets Lehman held.

Can someone figure out how this is good news for the market? Was the bankruptcy court able to pay off everything else, except the 91% of the long term debt?

The CDS holders have to pay out ~$116.5B. I wouldn't say that's good news. Does this mean that of the liabilities of ~$613B, that the bankruptcy court was able to recover ~$496.5B? So everyone is happy that Lehman only lost about 19% of it's total assets before it was forced to declare bankruptcy?

We just witnessed over 1000 points DJI range... stuff to tell your grandkids.

And this giant squeeze is a sign of things to come, IMO

happy with the day - not convinced about the close - busy weekend for me studying the charts - luckily its a long weekend in Canada...Thanks Bill for all you do here...have a good weekend folks.

From Vadym:
I doubt we will get the same final flush as we did over last days. IKt became too customary, can;'t be that easy for shorts. Market gotta k,ill those who become too complacent relying on the pattern

That is a very thoughtful advice. Thank you.

for those who wish to run the Triple RSI screen against Bill's list of today.

http://tinyurl.com/4wgwpo

According to Doug Kass:

"You will read on Monday that two large hedge funds liquidated today and plan to close their businesses.
Their sales made the cycle low, in my view."

#90 VSEA - Varian's ion implanters are the cat's pajamas, I used to work for this co.. Very nice machines indeed, should do well if/when semiconductor industry needs additional capacity (in China?).

My biggest question right now is where energy prices are headed. I suppose we're nearing a bottom.

http://tinyurl.com/4n3x43

They are talking about closing the markets for a period of time and a new Breton Woods agreement pegging currencies to gold. IMO, the drop in the price of gold and other precious metals is related.

Kaimu-

your 3:11pm post - I could not agree more. Though, even if anything does come of it; getting your money back through litigation can be one of the hardest things to pull off.

Chicken,
I agree. I would love the opportunity to shake all of your hands someday(hopefully I'll be invited to the clambake.)

Even though we've never formally met I feel like friends with quite a few of you out there.

These truly are historic times and I'm glad to be sharing it with such a great group of people and the best Captain we could ever hope for.

Cheers to a great weekend!!

Rob.

Finger Lakes:

I ditto your feelings my friend. :) and I share that respect to all members here as we do form a larger family in this

An awful lot of financial blogs have turned bullish today. Seems too easy...

There are tons of buyable stocks now but I want to mention if you are comfortable with Steve Jobs' health outlook AAPL is buyable PROVIDED that conditions continue to improve and the stock find it's expected turnaround here.

What's behind the green curtain at GE?

http://tinyurl.com/4h7fk6

Were we in front of the green curtain in the last 2 hours today?

Thanks to everyone here for keeping things enjoyable, passing information, and sharing observations during this truly amazing (and brutal, for many) time.

I can't think of a better place that allows one to "come in from the market," knock the rain from our coats, and sit down and learn and share. I just wish we had the hot meal and a cold beer, but then a lot of us would never leave.

And, hopefully, someday, we'll be pulling off our sunglasses instead, in the middle of a great bull market, and telling stories about how we made it through 2008. ;-)

lessmore - That's HUGE news, thanks for the post!

wavesmash,

I just read the outstanding snippet you posted there on tulip mania comparison on last Friday - thanks for sharing.

2nd ave,

With oil down where it is ya gotta like the airlines IF a rally ensues in the market. UAUA, AMR, DAL, CAL all look promising.

vinod- sorry to hear you 'returned' those phenomenal gains to the market...i'm now also down by 16% YTD (but off 34% since the high of 9/26)...hard to believe those numbers reflect just a two-week change...

My portfolio value has closed down 9 out of the last 10 sessions; at the close of each day, i would mentally mark all positions to market and ask myself if i would be buying at these prices, and the answer was always affirmative, so you might say i actively sold myself down the river...however, i STILL like the end-of-prices my positions have today, and in the absence of having been able to see the future, not quite ready i totally blew it-> NO one (OK, except shark), saw this coming...i also see EEMTRADER chimed in a couple times with going with the trend, and he certainly played this one correctly-> hope you made your year the past two weeks...

"end of DAY prices" and "not quite ready to SAY"...not used to typing on this laptop...

shark- the airlines are a completely different play now, no? less pegged to oil prices, more to consumer demand...no, at these levels, i'm more inclined to play the Cara 100...

Not only UAUA stopped working with oil, it didn't even react much on general market rally. With all that huge squeeze we had all UAUA could do was to touch 6. Until something changes in its behaviour, I'd stay away.

Oh, and it's oersonal... it was one of my two or three stops today, spoiled a little otherwise spotless perfomance on both short and long sides.

There was a story on Bloomberg today about UA being tied into a $137 Oil Hedge!......could be part the reason.

Rob/BP- great attitudes to have...sometimes we appreciate summer twice as much after the rainy season- year-round sun has its downside too...

the clambake is still on, IMO (ie, we should still see good returns from here)...there will also be many upsides to the experience- aside from entry prices we may not see again in our lifetimes, there are also opportunities (yet to be identified) that will arise from changes in the financial landscape, ones that may end up benefiting you more than any ST hits you take now...life is like that, right-> the disappointment of not getting into U Penn leads you to the professor who changes your life at Penn State; the girlfriend who leaves opens the door for the woman with whom you celebrate your golden anniversary; the stock crash of 2008 that changes your perspective on trading and paves the way for a 300% gain by 2011...all kidding aside, as long as you kept your head, refrained from selling at the low, and bought on weakness-> which is the more likely outcome? life goes on, the global economy returns to health, investors becomes optimistic, and maybe you'll be the one who had the foresight to buy the Cara 100 at 2008 lows...

re the disagreement on calls being made: have you noticed how often a stock that is about to break out gets sold down hard immediately prior to it? the same psychology may apply to broad market moves...we'll have to see how it plays out, but if 'the market is us,' then why would we behave any differently when trading an index or even the entire global market?

..continuing the thought-> no one bats an eye when an analyst downgrades a stock for a 40% capitulation sell off one week before it breaks out into a new uptrend...why expect global markets to act any differently...same investors, same behavior...

2nd,

re: capitulation,

I believe it almost has to be that way; sellers have to be thoroughly used up so that the only hands left are strong ones--ie., long-term believers and recent purchasers.

re: capitulation

Yes, but did we get there? I think its possible, but it will be Monday to know.

It might be that people that sold today were doing so because they were afraid of a panic on Monday, given the history of Monday panics after bad weeks. The fact that it caused a 700 point panic and very high volume says its possible they caused the very same panic they were trying to avoid...

thriftybob,

kind of reminds me of the "Inconceivable" chess scene in the movie "The Princess Bride."

"Remember that as it is a shame to be surprised if the fig-tree produces figs..." Marcus Aurelius

Should we be surprised by Paulson Bernanke at all?

Folks,
There still may be other hedge funds that have to sell out. Had to talk to a guy in technical support tonight. He talked about yesterday when he had to relay the data about how much the fund managers had to redeem. They were aghast...We're getting to caputiliation (for Vadym :-)).

On another rest (or note, as the case may be)if the G8 decide to peg currencies to gold, and Kaimu will surely have an opinion on this (or is that surly), what implications does that have for the US's fiscal future. My un-thought-out intuition hears "austerity."

Technical support at Fidelity, that is

"2nd:Remember the days when we used play FXP on a weekly basis. Today it gained 66.92pts [OMG!]."

Posted by: QT [TypeKey Profile Page] at October 9, 2008 7:19 PM

yes, i do...i suppose the take-away would be to look for the day QLD/USD/UYG jump 67 points...

nemo- "We're getting to caputiliation (for Vadym :-))."

that's even better, man...a term that describes embodies the combination of capitulation, mutilation, and humiliation ;)

forgot the "/"

The airlines are a completely different play than when? A month ago when we were fighting over this 6 dollar stock at 12 bucks and oil was at 110?

We knew about the slowdown picture then as now. These stocks will do well provided a good market and stable/falling oil.

But hey I'm not here to sell you a stock. How about ESLR? Are you ready to throw in the towel on that bet yet?

shark- would you have thrown in the towel on an intraday low of 7900 on the DJIA a year ago, when we were looking for 15000? ask me about ESLR late June 2009, and i'll have a better answer...

From Stratfor this evening:

Politics and the Financial Crisis
The finance ministers of the G-7 countries are meeting in Washington. The first announcements on the meetings will come this weekend. It is not too extreme to say that the outcome of these meetings could redefine how the financial markets work, certainly for months and perhaps for a generation. The Americans are arguing that the regime of intervention and bailouts be allowed to continue. Others, like the British, are arguing for what in effect would be the nationalization of financial markets on a global scale. It is not clear what will be decided, but it is clear that this meeting matters.
The meetings will extend through the weekend to include members of the G-20 countries, which together account for about 90 percent of the global economy. This meeting was called because previous steps have not freed up lending between financial institutions, and the financial problem has increasingly become an economic one, affecting production and consumption in the global economy. The political leadership of these countries is under extreme pressure from the public to do something to solve — or at least alleviate — the problem.
Underlying this political pressure is a sense that the financial class, people who run global financial institutions, have failed to behave responsibly and effectively, and have therefore lost their legitimacy. The expectation, reasonable or not, is that the political system will now supplant these managers and impose at least a temporary solution. The finance ministers therefore have a political mandate, almost global in scope, to act decisively. The question is what they will do?
That question then divides further into two parts. The first is whether they will try to craft a single, global, integrated solution. The second is the degree to which they will take control of the financial system — and inter-financial institution lending in particular. (A primary reason for the credit crunch is that banks are currently afraid to lend — even to each other.) Thus far, attempts at solutions on the whole have been national rather than international. In addition, they have been built around incentivizing certain action and increasing the available money in the system.
So far, this hasn’t worked. The first problem is that financial institutions have not increased interbank lending significantly because they are concerned about the unknowns in the borrower’s balance sheet, and about the borrowers’ ability to repay the loans. With even large institutions failing, the fear is that other institutions will fail, but since the identity of the ones that will fail is unknown, lending on any terms — with or without government money — is imprudent. There is more lending to non-financial corporations than to financial ones because fewer unknowns are involved. Therefore, in the United States, infusions and promises of infusion of funds have not solved the basic problem: the uncertain solvency of the borrower.
The second problem is the international character of the crisis. An example from the Icelandic meltdown is relevant. The government of Iceland promised to repay Icelandic depositors in the island country’s failed banks. They did not extend the guarantee to non-Icelandic depositors. Partly they simply didn’t have the cash, but partly the view has been that taking care of one’s own takes priority. Countries do not want to bail out foreigners, and different governments do not want to assume the liabilities of other nations. The nature of political solutions is always that politicians respond to their own constituencies, not to people who can’t vote for them.
This weekend some basic decisions have to be made. The first is whether to give the bailouts time to work, to increase the packages or to accept that they have failed and move to the next step. The next step is for governments and central banks to take over decision making from financial institutions, and cause them to lend. This can be done in one of two ways. The first is to guarantee the loans made between financial institutions so that solvency is not an issue and risk is eliminated. The second is to directly take over the lending process, with the state dictating how much is lent to whom. In a real sense, the distinction between the two is not as significant as it appears. The market is abolished and wealth is distributed through mechanisms created by the state, with risk eliminated from the system, or more precisely, transferred from the lender to the taxing authority of the state.
The more complex issue is how to manage this on an international scale. For example, American banks lend to European banks. If the United States comes up with a plan which guarantees loans to U.S. banks but not European banks, and Europeans lend to Europe and not the United States, the integration of the global economy will very quickly shatter, leading to significant limitations on international trade, currency convertibility and so on. You will nationalize economies that can’t stand being purely national.
At the same time, there is no global mechanism for managing radical solutions. In taking over lending or guarantees, the administrative structure is everything. Managing the interbank-lending of the global economy is something for which there is no institution. And even with coordination, finance ministries and central banks would find it difficult to bear the burden — not to mention managing the system’s Herculean size and labyrinthine complexity. But if the G-7 in effect nationalize global financial systems and do it without international understandings and coordination, the consequences will be immediate and serious.
The G-7 is looking hard for a solution that will not require this level of intrusion, both because they don’t want to abolish markets even temporarily, and more important, because they have no idea how to manage this on a global scale. They very much want to have the problem solved with liquidity injections and bailouts. Their inclination is to give the current regime some more time. The problem is that the global equity markets are destroying value at extremely high rates and declines are approaching historic levels.
In other words, a crisis in the financial system is becoming an economic problem — and that means public pressure will surge, not decline. Therefore, it is plausible that they might choose to ask for what FDR did in 1933, a bank holiday, which in this case would be the suspension of trading on equity markets globally for several days while administrative solutions are reached. We have no information whatsoever that they are thinking of this, but in starting to grapple with a problem of this magnitude — and searching for solutions on this scale — it is totally understandable that they might like to buy some time.
It is not clear what they will decide. Fundamental issues to watch for are whether they move from manipulating markets through government intrusions that leave the markets fundamentally free, or do they abandon free markets at least temporarily.
Another such issue is whether they can find a way to do this globally or whether it will be done nationally. If they do go international and suspending markets, the question is how they will unwind this situation. It will be easier to start this than to end it and state-controlled markets are usually not very attractive in the long run. But then again, neither is where we are now.

Re: Airlines

The fuel hedges are about half their consumption next year while their immediate needs are dependant on spot prices for jet fuel, which don't fluctuate as much.

With a hefty rise in the $US, this mitigates fuel costs somewhat, but reduces US based airlines competitiveness due to a sudden increase in labour costs.

Its exactly the reverse with a declining currency. Your immediate costs are higher, but, in the instance of the Canadian dollar in particular, your labour costs are suddenly 10% lower compared with US airlines. Really it depends on the extent of the currency move. I suppose Australian based airlines are looking hard pressed to pay their fuel bills, but not their labour bills compared to Japanese airlines.

Re: NOT.V

"Rosseau Asset Management Ltd. to Propose New Slate of Directors for Noront Resources Ltd.

Last update: 10:58 a.m. EDT Oct. 9, 2008
TORONTO, ONTARIO, Oct 09, 2008 (MARKET WIRE via COMTEX)

-- Rosseau Asset Management Ltd. ("Rosseau") announced today that it will be proposing a new slate of directors for Noront Resources Ltd. ("Noront") for election at the upcoming annual and special meeting of the shareholders of Noront to be held on October 28, 2008 (the "Meeting"). Rosseau and its officers and employees collectively own or control an aggregate of 11,912,901 common shares of Noront, representing approximately 9.2% of the common shares of Noront entitled to be voted at the Meeting."

http://tinyurl.com/48np45

QT- i just read your 'other' post from yesterday...i can't agree with not having another opportunity like that again-> you have one right now, if you play the reversal..in fact, it's easier playing something like that on the long side...(it would also almost have taken more faith than humanly possible to have held the TWM for that kind of gain, sort of like playing black 7 consecutive times, stacking all winnings behind the original bet each time)...

Yo Beard!

Enlighten me on the "threei" handle?

Now and futures.com sometimes just seems to have the goods:

http://www.nowandfutures.com/images/sp500_2007vs2000.png

Nemo

I don't think it will be possible at all that major currency peg gold again. It will immediately create a crisis in the value of the currency -- probably 1000X worse than what we have now ....

re chart in the 12:28 post

One could add these dates to the comparison chart too.

http://tinyurl.com/48a6ho

shark,

UAUA as a trading vehicle is different now than when it had a certain pattern to exploit (inverse movement vs oil). That's all.

nemo, 2nd... my favorite version is "kaputilation", with k... as in "kaput", with nod to german after-WW2 term, you know?...

nemo, origin of Threei is simple - there is no any hidden meaning to it although I heard a lot of versions, most frequent is about third eye (well, I wish).

In reality it went like this. To be qualified as a business immigrant, I needed my own business, so I decided to register a company for trading. Since my English was pretty much limited to hi, bye, thank you, and please, I asked a friend who was helping me to suggest a name. He said "Well, what do you intend to do? Trade online as incorporated? So... Investment, Internet, Incorporated... How about naming it 3I, Inc?" There it was... and when I picked an internet handle, it was a derivative - Threei. Known as such ever since :)

On top of everything else, the SEC implemented a no short rule which had the effect of squelching anyone from buying a short hedge to cover a long purchase. Finally, the rule has expired now buyers should begin to enter. The rule only served to drive prices down so HB&B could swoop in and buy on the cheap after selling off of hedge funds, etc. Impeccably timed with snail-mail delivery of monthly 401k statements to worried HB&B clients.

Great plan, huh? Problem is this drained huge amounts of capital from 401k's and scared everyone away from the listed stocks. duh! (mission accompliced)

Paulson plan A "failed", plan B "failed", now on to plan C? Do I hear "Bingo!", or will it be just another "failure"?

They think we don't know?

Socialism?

Latest reports on the economic discussion.
http://tinyurl.com/4pee93

Ron Paul and his opinion.
http://tinyurl.com/4hoy5z

To all:

I take no sides here
But I have a question I am curious what everyone thinks about this Interview with Naomi Wolf especially with what we saw happen this week?

http://tinyurl.com/3vs3ea

If they suspend the markets next week, as they passed some pretty extreme bail out conditions

Is she far from being right? If so does that explain some of the extreme behaviors in the market we saw in order to push forward such a statement rather than just bad policies being used as an excuse to step in?

Again I am not taking sides, but she makes some valid points and considering that freezing the economic system is a traditional step in taking control of a country

is this something to fear now?

Please only for civil discourse and it does apply directly to the economics of what we are investing in right now.

Thanks for sharing your opinion on this matter.

sincerely c0-caraian me ;)

[Bill Cara note:

The bankers have drawn their line in the sand. It could be that Goldman Sachs and/or Morgan Stanley fail this weekend. They don't have the time needed to deleverage from investment bank to commercial bank status. Paulson's Goldman people that he brought into the White House this month to engineer the new plan will deny they are working in the best interests of their group, ie, the bankers, and not entirely in the public interest, as called for in the Constitution. The Congress, in their abject stupidity, have given absolute power to King Henry. The Constitution has been lost and it will not be given back until these bankers (ie, the same people who were in control for the past five years) ensure the new deal is one they also control. So, yes, you are right to fear it; Paulson and friends have seized control of the US. It happened right before the Presidential and Congressional election, where most legislators will be changed. Their timing was perfect. Congress has already placed their vote for the winning side and has individually and collectively received their compensation. The public needs to stand up to this coup because their elected representatives have walked away. The shame of it all.]

Yesterday I found a very bright side in the current situation -- when the market turns around, it will most likely mark THE bottom in this bear market. At the very least, it should generate a VERY decent rally. What should one do at THE bottom, besides being fully invested? One should buy call options! This limits the amount of losses to the size of the options position (which for me is usually 1/10 of the stock position I take when I start scaling into something), but provides 10X gains at the bottom of a market crash like the one we are having now. So I don't care how much my portfolio loses between now and the bottom -- all I know is that I will make some extra money on the ride up, and eventually my long positions will return to the levels where I opened them (in the last 2 weeks).

I am currently thinking about call options on RSX, since I think Russia (as any other emergent market) was unjustifiably hit by US investors pulling their money out without regards for the underlying fundamentals. Does anyone think that there is a better choice than buying call options on RSX during the first up day in the market that coincides with LIBOR coming down (as an indicator that credit unfreezes)?

I generally agree with Bill here. At these valuations LT investors should be about 20-25% invested and scaling into their positions on the declines. Valuations are the best I've seen since 1990 and the SP500 is FINALLY priced to produce acceptable LT returns.

Peace.

Oh, my Go(l)d!!!

YTD Returns:
**Gold GLD: 0%
HMY -10%
GG -25%
ABX -29%
KGC -30%
NEM -40%
GFI -43%
IAG -52%
LIHR -55%
AUY -57%

**Silver SLV -33%
SLW -71%
PAAS -61%
SIL -89%

I'm not an expert in the Dow Jones Bullish Percent Index, but * zero * seems like a pretty important number:

http://tinyurl.com/4nvcwv

White House denies considering closing stock markets
By Greg Robb
Last update: 11:30 a.m. EDT Oct. 10, 2008Comments: 36
WASHINGTON (MarketWatch) -- The White House denied Friday that it had any intention of closing financial markets. "There are absolutely no plans or discussions to interfere with the functioning of markets in the United States," White House spokesman Tony Fratto said in an email message. Earlier Friday, Italian Prime Minister Silvio Berlusconi had given conflicting statements about the possibility. He first told reporters that the idea of financial leaders closing markets was on the table, but he later told reporters that his only knowlege of such plans came from reading media accounts of the financial crisis. Berlusconi also said that G8 leaders may have a meeting to discuss the crisis in coming days.

http://tinyurl.com/White-House-denies-considering

Jagvocate - I'm not an expert in the Dow Jones Bullish Percent Index, but * zero * seems like a pretty important number:

Hey that zero is nothing to worry about! Be happy! I have it on good authority that that Bullish Percent Index won't go any lower.
The "bottom" is here! 8) - just funning ya!

Note to math neophytes: Less than 0.00 is mathematically impossible in this case. According to StockCharts:
" The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group...."

White House denies considering closing stock markets

When to be a true contrarian?

Re: Naomi Wolf video
- Great video
- Makes me happy not to live in the U.S.

Re: New gold standard
- It makes sense that this would be denied. I was not surprised to hear Paulson suggest that it naive to believe that governments could act in concert.
- If this in truly in the works, it would also make sense for insiders to stage a massive shake-out in gold. This seems to support the $500-550 target over at tradethecycles.blogspot. Joe Ferrazano has been consistent in his message since 2006 and had predicted the 40% fall in share prices. Without specific timeframes, it is hard to judge the prescience; but it seems like events are bearing him out. The remainder of his scenario seems very compelling if the powers are preparing for a new gold standard.

Riddle: How many stocks in the Cara 100 are in the accumulation zone? 100!

:0

F6

RE: Joe Ferranzo at tradethecycles

I started following tradethecycles around the time I started following Bill in 2006. These days, I am not a frequent visitor; but, as I said, the messages have always been consistent (albeit technical and a little obscure). Joe is certainly not trying to capitalize on recent events.

Re: Gold Standard

Paulson is correct on that one. Just look at the history of gold standards and the disparity of interest rates in the world.

What you do instead is allow gold bullion or coins to be freely exchanged for hard currency and vice versa without being subjected to any kind of tax or premium. Banks would then hoard gold as part of their asset base. You also allow gold miners and refiners to pay their taxes in gold bullion.

David - RSX:

My first thought was that RSX options will have pretty wide spreads. Based on what I see right now, the spreads are probably tolerable during the trading day. The spreads are likely still wider than we should really trade (and I do not expect to make this trade), but I have traded worse...

Dow Average May Be Poised to Fall to 7,000: Chart of the Day

By David Wilson

Oct. 10 (Bloomberg) -- The Dow Jones Industrial Average would have to fall about 18 percent more to reach its ``trend line'' since August 1982, when the 1980s bull market started, according to Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York.

As the CHART OF THE DAY shows, the average is closer to the reading indicated by the trend line than it was in October 2002, when the last bear market hit bottom.

Yesterday's close of 8,579.19 was about 23 percent higher than the level indicated by its past performance -- about 7,000, Boockvar wrote in an e-mail today. The Dow average's earlier low was about 35 percent above the trend line.

The Nasdaq Composite Index fell to its post-August 1982 line ``almost to the penny'' after the 1990s Internet bubble burst, he wrote. The index plummeted 78 percent between March 2000 and October 2002, when it reached a six-year low.

Since Sept. 29, the Dow industrials have fallen 23 percent. The retreat started with a 777.68-point plunge, the biggest one- day drop in history.

The Standard & Poor's 500 Index would have to lose only about 6.5 percent more to hit its trend line, according to Boockvar. The reading suggested by the index's swings in the last 26 years is 850. Yesterday's close was 909.92.

Stocks may hit bottom before the benchmarks drop to these levels, Boockvar wrote. ``We certainly don't need to get there in order to create a bottom,'' the e-mail said.

Just glanced at the tables in Bill's Daily Report for Saturday, and I don't recall ever seeing so many red numbers.

Absolutely incredible carnage.

David- i would be careful trying to time a bottom using options...personally, i'm still reading too many comments about the bottom to suit me, and too many assurances about the (eventual) 'recovery' to mark a capitulation...having said that, if we get a sharp bear rally here, it might give you an opportunity to zero out your margin and raise a little ammo...

The Dow lost 2,000 points this week, making it the worst sell-off since 1933, Cramer said. He doesn’t think we’re done, though.

Today’s late-day rally brought us too far too fast, he said, and bottoms rarely happen on Fridays anyway. Main Street isn’t paying attention, they find out what happened over the weekend, and then Monday they start to sell.

Keep this in mind as next week starts. Cramer can’t decide if this market is closer to 1987 or 1929, but he’s pretty sure bad news from Morgan Stanley and lack of good news from the world’s industrialized nations could cause a sizable drop in the markets on Monday and Tuesday. The Dow could go as low as 5,886, he said.

I have lead to understand that the only time that all asset classes including GOLD go down together is durning the first stage of a "depression". What are the chances that we are at that point? What can we do if we are at that point? Any suggestions.

vinod- sometimes life is about RELATIVE performance...bottoms are marked by capitulation, which is when panic selling leads to exhaustion-> if you're down, let's say, 30% at that point, but the average portfolio around the globe is down 50%, and you are furthermore prepared for the ride back up (rather than having jumped off for good), you're way ahead..ultimately maybe even more so on a relative basis...

"The Dow could go as low as 5886, he said"

What a precision

I happened to be down at Nettie's BBQ last night for a late snack and caught Bill Moyers with George Soros chatting over in the corner... This little birdie isn't singing a very pretty tune. Not chocked full of new news, but an interesting take on where we are now, and where we might be headed.

http://www.pbs.org/moyers/journal/10102008/transcript1.html

Apparently tinyurl is down, however this link isn't extremely long so the post.

Bruce - I'm thinking about taking delivery of physical, my confidence is that low.

Look at it this way, markets will come off until they see their 2002 lows, or very near. But gold bullion prices will never see $250 again.

FranSix - I think what you just said is we should be considering cash.

Vinod,

Just about the ONLY thing that makes me bullish is that Cramer is bearish.

Naomi Wolf is so sexy isn't she? She makes you want to protect her and take care of her every basic need.

What is true of the video is that we are now teetering on the edge of full-blown fascism. What is not true is that this condition, which has gained a lot of ground since history took a sharp right turn in the year 2000, is a brand new condition. This is a direction America's been heading in since the hippie movement was destroyed and the opposition (us) fell comfortably into a condition of bourgeois liberal capitalism in the mid-late 1970's.

The presidency was taken by force in '63, never to enjoy sovereignty again. The congress, which moved to the left after Reagan and which was probably out best hope for legislative reform faltered under the "leadership" of Jimmy Carter who never gained traction for the left when he/they had the chance and congress under the black hand of direct corporate influence. The Supreme Court died a slow death under the bizarre legal beliefs and interpretations of Chief Justice William Rehnquist. The rest, as they say, is history.

Speaking of $250, FDIC is now insuring up to $250,000.

From their homepage
"New Deposit Insurance Limits
On October 3, 2008, Congress temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009."
http://www.fdic.gov

"Dow Average May Be Poised to Fall to 7,000: Chart of the Day"

Vinod, in the 1929 crash the DOW also dropped to the 1924-1927 trendline (~250). Over the next two years it dropped to 41! Some attribute this to the Smoot-Hawley tariff and other bad govt moves. If our crash is the beginning of a global margin call on a 20 year credit bubble the selling pressure will be relentless. The only solution will be to close markets, declare all CDS contracts null and void, nationalize banks, and start over.

it's looking like shark's batting average is on an logarithmic turn upwards. lcs - I'm inclined to agree form this angle.

The only thing keeping me in the game at this point is my PM hedge, but I'm not too confident the government won't be controlling that to my disadvantage. I'm feeling pinned down to a mat board in preparation for dissection.

Dude, the "Hippie Movement"? You mean the commercialized bastardization of the 60's values turned into a commercial image masquerading as a "movement"?

A movement doesn't include harvest gold, avacado green, stick-on flowers (flower power?)Herbie the Love Bug, The Monkeys, The Sonny and Cher Show or Bobby Sherman, need I say more. That would be what is known as commercialism.

There was a movement for about 30 days in the Haight until loosers, bums, preditors and addicts took it over, followed closely by wall street and Madison Avenue.

Haven't you ever seen those tapes of people like George Harrison meeting with various executives giving sales schpiels about what they thought would sell to the "kids"? It wasn't a movement, it was business.

The values themselves remain. The "movement" wasn't destroyed, it did what all commercialized products do, it ran it's course and died, like the Ford Pinto and trickle down economics.

No more stick on love bug flowers for the fridge and tub....but you blog daily and trade alongside "hippies". We aren't destroyed.
It's all energy man. LOL!

Hey, watch it! I once drove a Datsun that had vinyl flowers placed on it...

re: Cramer...

He's been screaming SELL, SELL, SELL for at least a week, now. My guess is that like when he pumps, after a few days it gets to where it has no effect, and fading his call becomes correct. I'm thinking by end of day monday there really can't be anyone left to dump.

The article below is more of what Bill has been saying about Paulson and how the plan is to create a small number of mega banks. Interesting history about Paulson as well.

http://www.321gold.com/editorials/engdahl/engdahl101008.html

This social democracy may indeed have once inspired the intellectual elite of the West, seeking (as many were) alternatives to fascism
and communism, but today it inspires hardly anyone. And for good reason, for what else is democratic social reconstruction but that postwar system of fine-tuning the economy, the reign of countless redistributive social programs designed by politicians and social scientists to meet those alleged “social needs” that a host of special interest groups are pressing upon the political systems of the West as “non-negotiable demands”?

Interventionism, piecemeal or not, has worked its inevitable way, and has led to precisely those consequences that Mises, Hayek, Rothbard and others had predicted: economic stagnation and political conflict. Democratic institutions themselves are threatened by those whose vested interests are entwined with the State apparatus. Dime store tinkering, even with freedom of criticism and revision leads us to the closed society.

Required weekend listening: Charlie Rose talks with Paul Volcker.

http://calculatedrisk.blogspot.com/2008/10/charlie-rose-discussion-with-paul.html

David - When I buy calls these days, I am generally looking to 2010 (sometimes even 2011).

After reading Saturday's daily report, I'm beginning to wonder if "buy alert" is supposed to mean "buy" or "don't buy".

So today, instead of 95 out of 100 on "buy alert", its now all 100.

Pretty dismayed, here...

[Bill Cara note:

Give me a break, thrifty. I don't have time for your dismay or your b.s. If you want to comment like that, at least read my words, and if you don't appreciate them, then get lost. Write your own blog.

Here's what I wrote for tomorrow's WIR before I read your crapola. I won't waste my time reformatting it for the discourse because it's people like you who I really hate writing for.

"To prove the point that when I put a stock on the Buy List it doesn’t mean to say I am buying it right then and there, please re-read my words in this space just a week ago:
Procter & Gamble is on my Buy list for now, but believe me, the stock is relatively over-priced…

Just like Wal-Mart, I like P&G. Hard working people from Cincinnati, producing great products, with an excellent distribution system. I do have issues with a slightly weakening balance sheet and lower Return on Shareholder Equity percentages in the past couple years, but I like the stability and financial strength. I look to this company for income, largely by writing put options to add to the dividend.

With the high share price today, and the rough consumer environment – even for Staples – I would exercise extreme caution when buying this stock. The price has popped from 66 to 71 in the past few days in what is a safe-haven move.

I’m guessing here because I can’t remember – somebody please check – but I think there would have been a Buy Alert from my simple little system in late June in the very low 60’s, and the +12% to +14% gain in the past three months would be pretty much all she wrote. You get greedy, you get hurt.

As much as I love P&G, PG is not my child. Stocks are not children; they are merely prices. The value in understanding them is in the understanding of trends and cycles.

Hopefully, the next couple of weeks will see broad market forces or insiders or selling by institutions bring PG back to earth, and then we’ll buy it again, maybe at ~65 this time.

If so, I’d count on dividends of $1.55 (2008), $1.78 (2009), and $1.99 (2010). With a price of say 65, you’ll probably average +2.75% dividend yields for the next couple years. Then, if you support that with put write premium income, you can improve that. Let’s say you want capital growth; you’d apply the put premium and dividend income to your cost base, which would take your cost to the high 50’s. Then if you could sell the stock at its peak in 2011 say at $105, you could hit an annualized return of about (say) +22%, which isn’t bad for a defensive stock...

This chart shows that in the space of a week, I didn’t have to buy PG at 71 or even at my guesswork price of 65. The price cratered to a low of $54.92, closing at$59.56."

ok, did I make my point a week ago or did I leave myself open to your garbage? Believe me; I don't need it.

While working for Dominion Securities Investment Management Ltd (now RBC), I once had a new client who wanted me to put him into four large blocks of stocks, so he could test me. After three months, two were up over +25% each, one was positive but flat, and the other was down about 8-10%. The new client would constantly phone me to find out why I was in a losing position. After a couple weeks of that nonsense, I then asked him to visit me in the office where I resigned from his account, telling him I would recommend to management that we never had the pleasure of dealing with him again. Am I always right? No. Am I always trying my best? You bet. Do I ever take nonsense from people? Never in my life have I, so why would I start now.

You show me disrespect, thrifty, and look what I throw back.]

"There was a movement for about 30 days in the Haight until loosers, bums, preditors and addicts took it over, followed closely by wall street and Madison Avenue."

Those were beatniks, man.

Bill: I agree with you the timing is not by chance of the market fall.

I also agree this has been staged over very long time so the intentions wont be to protect "us" the people.

In fact we will see another 500 page document appear out of nowhere this weekend to save the world economic system...(I mean seriously these acts are pre-written months before this has happened now...that last bailout bail is a prefect example of this...

The first bail out bill was 3 pages... and less than a week later a 500 page bailout bill magically gets passed..

Seriously friends this was stage so masterfully, and no one has a had a chance to digest the details of this last bail out bill... no of course not! That final 500 page document was ready to be inserted for approval at the last minute. Now the same thing is happening at the global level this weekend...

These bankers won't fix the system to "protect us" These are the very same bankers and officials who let this system grow into what it is... and they won't let it become a system which magically gives us "social equity".

Kaimu and others here have pointed out this has been evolving since 1913... and what we see today is continued logical growth from those actions.

Don't think we are seeing an economic revolution. This is evolution being forced and directed and controlled.

After watching this for years as you, seeing the actions systematically take place.

My only conclusion is this which I need to say to Northvan since he mentioned he is glad not to live in the USA.

Northvan: effectively every major country is meeting in the USA this weekend to re-do the world economic system

It won't matter soon you don't live in the US. The way to control the world is by controlling the economic system...

Here is my opinion: the coup d'état which is happening in the USA is actually now occurring on a world level.

We are seeing something new, something that has never occurred before.

Don't expect since this is all new, it will be for the better, don't expect it to be for the worse...

I think in the next few weeks we will see the framework the opposite of what Bill has been calling for.

What ever comes out this weekend and next few weeks will give power to elite few to do what they feel is right to make adjustments as required without oversight.

Welcome to one world under a single economic system that allows the illusion of separate country freedoms, but economically controlled by single set of power elite more firmly than ever before.

This is my opinion...

I am not calling for action. I am just stating this out loud, to help myself digest what is happening and two be more aware of what is happening so I can then act in patience and wisdom... rather than panic as this unfolds over the next few months.

IN other words we each can do many things to better our lives from all of this.. but it requires being truly aware what is happening, rather than going on as if this is business as usual.

I am always free becuase I always live to my heart.. No world coup d'état can change that. However it can change how I need to act to my heart to stay true to my heart.

Thusly I am watching this one closely, and sharing these opinions with my fellow co-caraians so they have the have chance to take a longer view to what is happening and not get caught by surprised either.

Thanks my friends for letting me share in this discussion. I am honored to be in this community.

Whole lotta bottom calling going on out there... seems that stocks are still not despised.

Hey Guys (which means girls too you know I love you),

I found an interesting thing out of Austria. First of all, a week or 2 ago it became clear that the far right, Nazi's basically, were about to win a lot of elections across Austria, which has a long proud history of equanimity and equality of freedom for all kinds of different people. A typical story of a week or two ago was like this:

"by Sim Sim Wissgott
Mon Sep 29, 10:59 AM ET

VIENNA (AFP) - Resurgent far-right parties dealt a severe blow to Austria's mainstream Social Democrats and conservatives in an election that left the country facing tense negotiations for a new government.

The success of the anti-immigrant Freedom Party and the Alliance for Austria's Future in Sunday's election also created international concern with Israel saying it was following events with "anxiety".

The centre-left Social Democrats and conservative OeVP, whose coalition collapsed forcing the election, made their lowest scores ever while the far right made huge gains.

The Standard newspaper called the election a "debacle" for the mainstream parties, while Kurier newspaper said they had "deprived themselves of power" by calling the snap election.

The Social Democrats held on to first place with 29.7 percent of the vote, but the result was a 5.6-point drop from 2006, while the OeVP was the biggest loser with 8.7-point drop to 25.6.

The Green party slipped slightly to 9.8 percent in an election with a turnout of more than 70 percent.

But the election was a triumph for Freedom Party leader Heinz-Christian Strache and his Alliance counterpart Jorg Haider, who are known for their populist rhetoric and anti-immigration stance, both having vowed to defend the rights of "true Austrians".

So Austria is about to go fascist, can Germany be far behind?

What's interesting is, Jorg Haider, a bizarre figure himself, both a known homosexual and a rabid fascist of the German type, was killed in a car crash yesterday and the events seem undeniably suspicious timing-wise.

"Haider was killed in a car crash in Köttmannsdorf near Klagenfurt, in the state of Carinthia, in the early hours of 11 October 2008. Police reported that the Volkswagen Phaeton that Haider had been driving came off the road, rolled down an embankment and overturned,[10] causing him "severe head and chest injuries".[11] Haider, who was on his way to a family gathering in honour of his mother's 90th birthday,[12] was alone in the government car and no other vehicles were involved.[13][14] An initial investigation uncovered no signs of foul play.[14]

Austrian President Heinz Fischer said of Haider's death that it was a "human tragedy".

Politics is a contact sport.

in the end share prices will have to rise to enable any long term wealth creation. it may be the end of the system as we know it but prices must rise eventually.

whether the system is fair or not, we as a community must take on the challenge of learning it and making money in it.

CP,

Not to discuss politics, but hey, it is Saturday! Although the US is not a social democracy, we do have our own source of "non-negotiable demands". It's called the Military. I believe we give the Pentagon $700 billion per year (7 trillion in 10 years). We also have our $1.5 trillion war in Iraq. How much is Homeland Security costing? It would seem that with expenses like these that our middle class might have a hard time trying to make ends meet, that we can't afford for everyone to have medical insurance, particularly those who are unemployed, etc. Why do people always ignore the military when discussing economics? (Not that I'm accusing you or anyone on this blog.) I really think we need to "think military" when we discuss the economy. Then maybe we can run a cost benefit analysis. It's not only social programs like unemployment insurance and other safety nets for the un-fit that cost money.

October 12, 2008
White House Overhauling Rescue Plan
By EDMUND L. ANDREWS

WASHINGTON — As international leaders gathered here on Saturday to grapple with the global financial crisis, the Bush administration raced to overhaul its own strategy for rescuing the foundering financial system.

Two weeks after persuading Congress to let it spend $700 billion to buy distressed mortgage-backed securities, the Bush administration has put its original idea on the back burner and is trying to come up with a new plan over the next several days.

http://tinyurl.com/3orwlq

shark - Wow, I'm pretty sure if the playing field really is that rough, the public won't be a beneficiary of rats assuming control of the command console.

ALOHA !!

All the solutions being proposed are nothing more than putting the cart before the horse. So long as we retain a monetary system whose basis is debt and debasement then no markets will ever flourish.

I keep saying, "Fortunes will be lost trading the market successfully!"

Right now the G7 are deciding your FUTURE as a trader and more importantly as holder of fraudulent money. It does not do the US economy any good at all to have a few thousand successful traders while the other 99.9% of the population is in ruins.

Money's most important feature is its "store of value". Without that there is no money. After all the G7 meeting and the Hank & Ben Show is over that is what all this will boil down to. That is why I say this is a monetary crisis, only no media pundit or politician will ever admit that publicly!

I just have one simple question to ask all the economic and financial gurus that proliferate TV and G7 meetings ... "Why can't I buy a new house for $1,800 like you could back in 1908?" If our current monetary system is so great then it should still "store value" so that I could buy a new house for $1,800 now! Because I cannot buy a new house for $1,800 means my money has no value! My next question would be,"Since my money has no value why can't our leaders fix that and give us real money with "real value"?" After all our US Constitution defines what money is and who shall issue it and there is nothing in the US Constitution that allows the Federal Reserve Bank of NYC to issue anything!

Once again we have the same idiots who created the mess and perpetuated it to the NTH degree being allowed to solve it! Are WE idiots or WHAT? Here is the really scary thing ... We are allowing a sitting US President to decide our financial fate while foreigners dictate terms! The Founding Fathers if they could would rise up out of their graves and hang Bush and Hank where they stand. Because the USA is so dependent on foreigners to hold our Pesos(debt) we now are beholding to them and they will decide our fate. Let me clue you in ... the G7 are a dead entity walking! The real meeting will be with the G20 who own most of our debt and most of the World's manufacturing! The G20 are the entire Western World's counterparty! I read somewhere about the G7 meeting being described as a meeting of the "Wealthy nations" and tomorrow's meeting with the G20 as a meeting of the "emerging nations"! What a load of crap!!! The G7 are wealthy alright ... if you consider DEBT as WEALTH! They're still playing that con game right up to the end! How many Americans sit back and watch TV and see America being described as one of the "Wealthy nations" and they nod their head in agreement and feel smug and comfortable with that lie? OPRAH is always calling America a wealthy nation! Its laughable at how many people have been conned by this MOUSE MONEY!

How does it feel to have your FUTURE and your kids future being decided by unmitigated liars and conartists?

The number one lesson you should be teaching your kids nowadays is this ...(maybe even yourself)

QUESTION AUTHORITY !!!!

AT ALL TIMES ...

QUESTION AUTHORITY !!!!

Kaimu,

I have. i have written emails & letter to my gov, senator, and even a close friend who is the State Political Director at Obama for America.

No one who has the power to voice my concerns has the intent to change this correctly.

:(

ALOHA !!

NYU ... Thanks for the new BAILOUT PLAN update! I have distilled the entire NEW DEAL into one sentence that should disturb the hell out of all US TAXPAYERS who are funding this crime!

"In exchange for providing capital, the government would demand some kind of nonvoting minority stake."

KEYWORD= NONVOTING

This is what you get when you allow BANKS to decide their own future! Remember what I have posted so many times before what the founder of the Rothschild banking dynasty said regarding, "whoever controls a Nations money"!!

“Permit me to issue and control the money of a nation and I care not who makes the laws.” Mayer Amschel Rothschild

[Bill Cara note:

An honest independent banker would never invest OPM in that fashion. It's an outrage, but when Bank of America (BAC -39.5% W/W) and Morgan Stanley (MS -59.5% W/W) are near bankrupt, and they have a friend like Paulson in control of the White House (elected by Congress), what does anybody expect? Truly, this is an outrage. The man should have been impeached before the crisis came to a head, which is when I first recommended it.]

I see that everybody is trying to predict bottom. I believe that equally important is to figure out the change. We have to engage more in critical thinking. These are extraordinary times. We cannot assume that history will exactly repeat again. I am not looking for repeat of 1929 or 1987. This will be crash 2008. Do not expect a single huge capitulation of 1987 and do not expect prolong death of 1929. I think that we are smarter than in 1929, we learnt lessons since and we will get out of this faster.
It is more important to figure out the change and new rules. What works now in stock market? Technical analysis. Human psychology, irrationality, fear, following the crowds, love of what I already own. Assumption that trend will continue forever and we can extrapolate it. Remember 9/11 time? We were expecting such terrorist attacks every week after that... I think that traders and investors are now similarly shell-shock and overreaction is happening. Investors are not capable to judge risks.
What rules has been thrown out, but are likely to come back? Fundamental analysis, risk/rewards ratios, links between yields of the investments vehicles and their price. What rules will never work again? Will high leverage be illegal? Are rating agency staying? Will insuring insurer of insurer be illegal? I think that governments will forbid to spread risk around again and again. Because of this, people cannot understand inherent risk and ignore it. That is the central cause of the crisis. People and companies that made loans did not bear and feel the risk. Is easy credit out? What are new rules? Companies that help governments to implement new financial order will benefit enormously. They will be in control.
Help me with the list.

ALOHA !!

auccorant ... DITTO !!! However, I have been very vocal about the costs of policing the World and the "WAR ON TERROR"!!! I even made postings about it this week about how it has been totally discounted by the markets and the currencies!

The WAR ON TERROR is now now nearing what WW2 cost(it has surpassed Vietnam)and our WW2 involvement only lasted for four years! The entire WW2 lasted six years from 1939 to 1945. We are now entering our eighth year for the WAR ON TERROR! I mark the beginning with the WTC attacks. After eight years what have we accomplished? I don't see an end in sight ... Good for LMT!

ALOHA !!

I ran across this today in my readings that adequately describes the current situation in America with regard to the BAILOUT!

"In a ham and eggs breakfast, the hen is involved, but the pig is committed".

By my reckoning, Paulson and Central Banks are the chicken and the world's taxpayers are the pig. We have no choice in the matter, and by the way, to get ham, the pigs are always slaughtered.

http://tinyurl.com/Two-more-banks-fail

[Bill Cara note:

If Paulson steals the funds for which Congress signed for to use them for buying non-voting shares in the banks he wants not to fail, you won't see those on the list. But there will likely be another 100 at least before this fiasco is brought under control. For these two banks, Paulson earned more in the last single year of his employment as head of Goldman Sachs than these banks had on deposit, combined. So I hardly thinks those banks are up to his standards.]

Alright, reasons you want.....
These are snippets from a market letter I get.
I think I can tell you this much before they try to kill me. Besides, you'll have to do a little work, but it's worth it.

Run an RSI chart for the S&P back to 1928. Note where we are.

The S&P gave up almost all of it's 02-03 gains.

All 30 DOW components are below their 200 DMA. That happened once before, 1987.

Investor cash is above the 21 year mean and are the highest since 02, 98, 90.

Last week saw three 90% down days. That can't continue for long...

% of NYSE stocks trading over 200DMA is at multi year lows.

Cost of an ounce of gold is now greater than the S&P.

Extreme VIX. These extremes historically lead to rallies.

S&P down 47% YOY, Trannies 38%, historically suggesting upside.

The last is mine....when everyone else is running out, it's time to run in....in little bites.

Here is the 7 month spx,hui and gold chart

Since Sept 10th low gold has done best, hui second best and the spx last. It does look as if the gold stocks are basing for a move.

http://tinyurl.com/4wnq97

On thursday when the sm started tanking again gold reversed by 30$ upwards. Overnight gold remained strong and all the gold index (especially jse golds were doing very well.)
Even cnbc stated friday morning that the only thing positive in the world were gold stocks. I bought slw.to on thursday seeing the run to pm's only to see all the pm index's look great friday morning and then get summarily beaten to death after a good open. Terribly frustrating and depressing losing ones wealth when it seems you are doing the right thing to keep it but these henchmen/mobsters take it away. The last time I checked Puplava holdings owns over 18 m shares of a gold stock that I own, it has dropped 85% in the past yr as gold has moved up nearly 200$,fairly typical for my pf and certainly the man is capable of good fa analysis.

On another note the xau:gold looks similar to 1986 when gold was doing so well but the shares crashed.(it doubled shortly after)
but we aren't in kansas anymore either.

http://tinyurl.com/3jcu7u

a subprime laugh courtesy of the brits for anyone that can stomach a laugh.

http://www.youtube.com/watch?v=UC31Oudc5Bg

From Bull’s Eye Research

The selling has reached historic proportions. There literally is a “run on the market,” as investors worldwide are dumping stocks. It seems that the major catalyst for this selling is the fact that the newest large banks primarily J. P. Morgan, Goldman Sachs, and possibly Morgan Stanley as well — have issued massive margin calls to hedge funds and other professional traders who use these banks as prime brokers.

These calls were not issued because of market losses, but more because the banks arbitrarily decided that they wanted their customers to use less leverage. Margin rates as low as 15% for broker dealers were raised to 35%; hedge funds who had been used to operating on high leverage were told that they had to bring accounts up to a much larger percentage of equity.

In this illiquid environment, where all manor of exotic securities literally have no bids, the only place to raise the cash to meet margin calls was to sell stock. That is what really set this market over the edge — as the first notice of these calls were issued on October 2nd and 3rd. There was something of a grace period to meet the calls, but funds realized they weren’t going to be able to meet them other than by selling stock. There are rumors that the most massive of the calls are due Monday (October 13th). If so, this market could continue to decline through then.

Thank you onlineaces. So after the margin calls are done we should shoot up? Reducing margin sounds fine.

The above comments are correct. I think its best to view the two political parties as "crime syndicates" controlled by HBB & Int. Corps. We no longer have a republic and now I am afraid the democracy is gone too !

I'm listening to the these IMF'ers speak now spewing rhetoric. Obviously last year when they were talking about how these mountains of derivatives 'reduced and spread risk' they didn't have any understanding of the pyramid of leverage they were built on.

One thought - I would not be surprised if at some point we see worldwide price controls instituted on key commodities once this reflation works through the system and works its way into prices.

Thoughts?

Worldwide price controls would be a disaster as shortages would create an underground black market.

Agree - disaster long term, but I would not put it past them in a desperate time.

Si02 -

I don't know. I don't own a tv or a radio. I only get my outside information via the web and I'm glad for it.

I am a day trader first, but i have a longer IRAs as investment.

So take what I have to say from that perspective.

I only trade what i see in the charts and here are my tells for the market and what I plan to do (as a day trader on Monday).

I've entered all of my cara 100 initial positions on Friday. I will add on further weakness. If we go down from Friday's low on ESZ8 840 (plus/minus a few s&p points).

I will add with greater conviction as I see fit. I know I will not catch any bottom, but I know the risk going down further from here is going quickly down to 0, so my risk is getting smaller and I feel more comfortable adding appropriately.

If we blast up from ESZ8 840 further, I will wait to add to anything. I'll set my pivots accordingly and look for higher high and higher lows. If it breaks any of those pivots, I will again add appropriate to my risk level.

I am in complete agreement with Bill. We have started the bull market here. I am not listening to the general news at all. I only visit a few blogs that I trust and this is one of them.

I know the s&p index and the dow index can hide their real truth (quant funds can't hide their footprints) and I look to the Rus2k for the real direction of the market.

Friday's close told me everything. the true direction of the market. The s&p was showing at one point a -4% while the Russ2k showed +1.5%. big divergence....hmmmm. I might be wrong, but that was a big tell for me.

When I trade this market, I only use ESZ8 as a "dampening index" to filter all the noise and to trade by ( and I mean trade any other index too)...the other indexes are too erradic on the smaller time frames for me.

good luck to all. if you are a day trader...best of luck.

Bill thank you for all you do here.

sorry, I meant quant funds can't hide their footprints on the Rus2k as they can on the other indexes.

This weekend i have been to Target, Staples, Home depot, Wegmans and the mall. Above avg attendance in all. Just an observation.

Shark_attack:
Your negative view of the stocks in the last couple of weeks was totally vindicated. Your position was opposite to what Bill Cara and most of posters here were saying. I used both TA and sentiment analysis and it totally failed me too.
I'm curious now, how did you know about the crash, was it just a gut feeling or anything else?
I'm curious and want to learn.
Thanks!

re The daily gold chart earlier

http://tinyurl.com/4wnq97

looks like a flag building to my tired eyes. The po is about 1130ish, that is a 50% fib ext off the old high using the bearmarket 38% fib.

re the xau:gold chart,during the 1987 rally the $usb was in a bear market,is usb about to go bearish?

Just some desperate ramblings.

Kaimu you are right

we must question authority... But in addition we have to declare action to follow those questions.

Without action our questions will remain just unanswered statements!

This isn't a time to wait for a leader to save the day, right now, we must listen to our own heart, must begin connecting out in local community , with friends and sharing...

The leadership is us collectively reaching out again locally to make a statement globally.

Paulson and the gang are just stealing all that money. What happens if we just leave the show?

That's what is feared, so the next act will be to lock down funds, lock down how much capital you can take out etc to prevent people from leaving the show.

The question is what forms of lock down will come out of this economic crisis relief package?

Too bad we just can't throw paulson and the group in lock down and jail for what they have done wrong.

onlineaces: if what you say is true, I wouldn't be surprised that the call on margins is designed to hammer home the new rules. To break all last resistance in the average person, small banks, businesses etc...

What we saw last week was purposeful and criminal in my mind, and it was done to install fear and break down ALL resistance to push new agenda's. One more day of extreme hammering could be in the works for that reason.

Hammering everything Monday would further that point. It is also possible they will call back on the margins last minute to "save the day"

We don't know, can't know since the game is being played way above us now.

The only way I know to break the game as a small fish, single family father teacher simple me: Is to walk away from it all the way now.

What ever paper dragons they took from me they can keep, I can happily build a better life in laughter with my friends, family and those here.

Why not start ;) here.

I would moon paulson with my shiney white butt right now in a little icon, but I think that would violate Bill's posting rules. :) but at least I can chuckle at it (they probably will send some swat team at me for that also...) Let them swat away...

So Kaimu:

Question Authority!!

DISRESPECT MIS-USED Authority!!

Walk Away from Abusive Authority

This is no different than any domestic violent partnership.

Walk away from the violent partner...

peace

Jacek

Thanks for the kudos. It was definitely not "just a feeling". It was the way the market reacted to, first, the bailout. Stocks would have rallied 1000 points had the bailout been perceived as positive, but they crashed hard. Also, each night Asia go down 5, 6, 7 and more percent. Then there was the craziness in Russia, Indonesia etc. The news was that what is happening here was happening in Europe also. So really it wasn't that much of a trick. How does a native scout know of the impending arrival of 1000 horses? It's the sound of the earth when your ear is to the ground. Same thing the market. The stock market is ALWAYS trying to tell you something. The question is are you listening.

I have little doubt that soon, in hindsight, all the bullish calls of those here whom I greatly respect will also be vindicated. In our busines, the timing part is as important as the direction part.

Thanks again.

BTW prior to the market crashing Bill was looking short (the correct way) before most others including me, who as of a year ago held open my mind as to the possibility of a rise, in other words I was wrong then, prior to adopting a firmly down-view based on some catalyst I don't recall right now, but it really felt like the die was cast. Might have been the Countrywide thing. Now here we are and I'm really not personally sure it's safe to come out of the woods. I think there are other shoes (companies) to drop. GM's disavowal of that possibility makes you wonder about them and it would help kill the psychology behind stocks if a huge name old line American manufacturing company bit the dust. GM. Ford. Maybe both eh? Can you see the cops driving Toyotas?

Oh. Just the other day the RTM in my town approved money for the purchase of Tasers. In Westport CT. If I haven't about seen it all. I am working on a scholarly paper on Tasers and their use and will share it with you when it's done.

Bottom Line: The credit crisis on Main Street is far, far from being over, in fact many of the problems are now just gaining traction. Housing prices have cracked which ensures further housing problems down the road as all participants deal with the reality that they can't sell, can't move can't re-finance and in a lot of cases, can't afford their homes. All the Obama-momma-womma in the world (programs designed to prop up the sickly housing market, a horrible idea to any student of markets)can't put Humpty-Dumpty back together again.

onlineaces, thanks for sharing that. It may well be right. My favorite vehicle is... IWM!

http://tinyurl.com/5yhrsn

Levels that might attract attention;
Beware the impact of volatility on options pricing.

onlineaces, just a question, why do you say
"quant funds can't hide their footprints on the Rus2k as they can on the other indexes."?

Casey,

But you could post it on your website, maybe with a caption, "This is for you Hank, pal"

Why don't you have a tan on your butt yet, you have been in sunny paradise over a month now! :)

Thank you Ron, point taken (for options holders). Also, the VIX is more a measure of bearishness than volatility, so I think you are right. Very good point.

Jesse: lol,

I was expecting people to say but you are a Taoist you can't moon paulson.

To which I would reply... I am not a Buddhist to turn the other cheek. (almost works...as a pun)

But you just go around my beautifully planned retort and point quite rightly I should be tanned by now...

*sigh* perhaps I should just moon him in sunlight to get that tan, rather than only electronically???

Oh well time to be constructive and peaceful again... Thanks Jess I needed that laugh!

Here is an interesting perspective from Bespoke Investment Group:

http://tinyurl.com/MARKET-PERSPECTIVE-WITH-BESPOK

Roubini explains the current crisis in detail as well as what needs to be done to get out of it. He says that we will absolutely have a severe recession but are also at high risk for a systemic meltdown followed by a deflationary depression. Based on the amount of international cooperation necessary to avoid a depression a la Japan, the depression scenario would seem inevitable. Precisely because China would have to prop up our system to the tune of perhaps one trillion per year without the expectation of a revived American consumer. At any rate, he lays it all out and anyone would benefit from spending 10 or 15 minutes with this video, his most recent produced on Friday.

http://tinyurl.com/4gezwh

Si02

sorry I don't have the link for the article, as I saved this a few months ago w/out the link in case the article was no longer available....

please forgive the length, but I do think it is v educational and interesting what institutions are capable of doing (never mind governments!)...

Relative to the other indexes, Rus2k index is thinly traded. Btw, is Si02 is silicon dioxide, right? just curious.

Here is an article I saved concerning the tricks used by quant funds to give observers of market movements an alternate impression from intended trading objectives:

By Will Acworth | 25 August 2007

Algorithmic trading in the U.S. futures industry is well past its infancy, with a host of tools available for use in a wide range of markets. In fact, there are signs that some traders are beginning to design algorithms that prey on other algorithms, or hide their presence from other algorithms behind a flurry of order messages never meant to be executed.

Traders and vendors are now increasingly looking for ways to sharpen their edge, either by making their already fast trading engines interact with the market even more rapidly, or by tailoring their algorithms ever more closely to the specific characteristics of individual futures markets. In fact, there are signs that some traders are beginning to design algorithms that prey on other algorithms, or hide their presence from other algorithms behind a flurry of order messages never meant to be executed.

It is a difficult world to track, especially since so many of the algorithms in use in the futures industry were developed by proprietary traders, who naturally are reluctant to reveal any clues to their trading strategies [[or allow peer reviewed evaluation of their success or failure: normxxx]]. The field is getting crowded, however. Several independent software vendors have developed algorithmic trading tools of varying degrees of complexity for use in trading futures, and many of the broker-dealers that dominate algorithmic trading in the U.S. equities markets have adapted their models to the specific characteristics of the futures markets. Both type of vendors see futures trading firms such as commodity trading advisors as potential customers, and they are eager to talk about their offerings.

"Three years ago, most of the algorithmic trading systems in the futures industry were self-developed," Jim Johanik, head of U.S. technology for Euronext.liffe, said at the OpTech conference. "Now we see a lot more off-the-shelf products being put to use."

[ Normxxx Here: Resulting in lots of "me-too" behavior by their users. Naive users (however sophisticated otherwise) rarely tune the models from their generic, out of the package form. It's human nature; most digital lock combinations are never reset from their factory setting! ]

Although many observers assume that algorithmic trading began in equities and then migrated to futures and options, the reality is that algorithmic trading has a long history in the listed derivatives world. More than 15 years ago, traders were writing computer programs to automate their trading on Deutsche Terminbörse, the predecessor exchange to Eurex. Electronic options trading in Europe was another important incubator for automated trading engines, as market makers developed high-speed automated systems to cancel and replace quotes across dozens if not hundreds of instruments.

Arbitrage is especially well suited to algorithmic trading, mainly because the machines can operate so much more quickly than human beings. Russell Abramson, executive director at J.P. Morgan Futures, says some black box trading firms can transmit several thousand order messages to an exchange in less than a second, constantly canceling and replacing orders as the market changes, and quickly capturing any price discrepancy as soon as it emerges.

"As soon as Nymex moved to Globex, we started getting calls," says Jesper Alfredsson, head of algorithmic trading at Orc Software. "The Globex platform is well known to algorithmic traders, and the arbitrage with ICE is suited very well for that kind of trading." Both exchanges permit trading firms to locate their servers close to their matching engines. This gives electronic traders rapid access to their markets, with order message round-trip times measured in milliseconds.

Three of the world's largest futures exchanges-- CME, ICE and Eurex-- offer this type of service, and Euronext.liffe expects to do so by the end of the year.

The problem arises when a trading firm wants high-speed access to more than one exchange. If the firm locates its server closer to one exchange, it will be farther from the other, and vice versa. Either way, there will be some latency in the connection to the more distant exchange. Even if that latency is only a few milliseconds, it can make all the difference in the world of high-speed trading.

[ Normxxx Here: And ordinary mortals are expected to trade in such an environment? ]

Co-location is hardly the only way that high-frequency traders gain an edge over the rest of the trading community. The players in this game have constantly to make an overall analysis of latency in the trading infrastructure to see if there is any part of the system where a few milliseconds can be shaved off. This is not a one-time exercise.

In the old days, a trader might be watching four screens at the same time, commented one speaker. Now it's two rows of four, with one row displaying the markets and the other row displaying network conditions.

"It's all about [ultra] fine-tuning the performance of the system," says Draughon.

One of the effects of algorithmic trading is an explosion of market data. As traders use these tools to slice up their orders into smaller pieces to reduce market impact, it increases the number of trades. Average order size in the E-mini futures markets, one of the first U.S. futures markets to go electronic, has fallen to approximately two contracts, and many market participants are expecting the same result sooner or later in other futures markets. At the same time, the development of high frequency automated trading machines has contributed to a sharp increase in the order to fill ratio. Of the thousands of order messages that these machines transmit in a single second, only a few actually result in a trade.

What makes this flood of market data especially problematic is that many traders using algorithmic trading systems want every available piece of information. Just getting the bid and the ask is not enough; they need the full market depth with price and quantity, including every order resting in the order book and updated on a real-time basis. In addition, they want the data stored, processed, and available for analysis on a real-time basis. The faster their machines can receive the data, the faster they can identify a price discrepancy and act on it. This in turn creates a feedback effect. Each time a price change is transmitted by an exchange, the automated systems respond by sending a new batch of order messages, and the cycle starts all over again.

The bottom line is that exchanges are sending out far more market data than ever before. Euronext.liffe's Johanik estimates that his exchange is now sending out four times as much data as it was two years ago, and in December Eurex quadrupled the capacity of its data feed to 1096k. Database vendors say their systems have to be capable of receiving many hundreds of thousands of order messages per second, and the one million messages-per-second mark is not far around the corner.

The Options Price Reporting Authority currently has the capacity to transmit 573,000 market data messages per second and expects to raise that to 700,000 in January.

TradingScreen's Buhannic warns that it is very expensive to build systems capable of handling the torrent of market data necessary for algorithmic trading. "Only the top players can spend the money to create their own tick-by-tick database," he says. "It is not enough to have a great model. You have to have the order management, connectivity and market data infrastructure to support that model, and that is becoming more difficult to do in-house." As a result, he expects a handful of large banks and trading firms that have the resources to develop this infrastructure to gain an edge.

Andrew Yao, who heads sales to the futures industry for Credit Suisse's AES division, says the firm spent two years building models for the futures markets, and now is focusing on marketing these algorithms. He says they have been designed for use not only with equity and interest rate futures, but also with commodity futures markets such as crude oil and corn. Equity traders that also trade futures naturally are among the first to adopt these tools, he says. For example, a mutual fund that uses S&P 500 futures might use an algorithmic trading tool to minimize the market impact of its trades. But he says Credit Suisse is also having success with commodity trading advisors, who see these algorithms as a way to improve the efficiency of their trading desks.

The danger, of course, is that relying on a vendor for algorithmic trading solutions may expose a firm's trading strategies to the vendor. "Information leakage" is a critical concern for hedge funds, commodity trading advisers and institutional investors worried about someone copying their trading strategies or front-running their orders. That is why the investment banks that market algorithmic trading solutions say they take great pains to separate their algorithmic services from the rest of the firm.

Rus Newton, co-head of Global Advisors, a commodity hedge fund based in London with about $150 million in assets under management, agrees that information leakage is a concern, but says the investment banks are well aware of the damage this would do to their reputations. In his view, the real issue is more a question of resources.

"Historically most commodity trading advisers have tended to be run like boutiques, with five to 25 people. So they haven't had a massive budget to spend on algorithmic trading," Newton said in an interview. "So the banks are thinking that if they spend a few million on building better algorithmic trading systems, they can differentiate themselves from the other brokers and get more of the order flow from the CTAs."

Newton sees a problem with this approach, however. CTAs live or die by their ability to generate profitable returns on their trading strategies, and typically emphasize the unique qualities of their strategies. "If you are telling investors that your trading system is truly unique, aren't you shooting yourself in the foot by admitting to using someone else's algorithms?" he questions.

There are two sides to every story, of course. Just as the proprietary traders worry about predation by the investment banks, the investment banks are hearing complaints from their customers about predatory behavior by algorithmic traders. J.P. Morgan's Abramson says there has been a noticeable increase in complaints about "phantom liquidity" over the last six months, and he sees this as resulting from the impact of algorithmic trading on the futures markets. "What is happening is that customers will see a quote displayed in the order book that they want to hit, but by the time they send in their order, the quote is gone," he explains.

The suspicion among some firms, according to several other participants at FIA's OpTech, is that some of the algorithms are programmed to coax liquidity into themarket, a practice called "fishing." A firm will display an order on one side of the market, knowing that this will trigger a response from algorithmic traders, and then cancel the order and hit the other side of the market. This might get a slightly better price or more volume at the same price than was initially displayed.

This kind of behavior is hardly new to the futures industry. It may happen a lot faster than before, but industry veterans remember similar gamesmanship when trading took place on the floors. When one of the legendary figures in the business entered the pits, the other traders watched for any clues to their trading intentions. In order to disguise their moves, they would have their real trades executed by other brokers on the other side of the pit.

It does illustrate, however, why the development of algorithmic trading tools is often compared to an arms race. As soon as a particular algorithm is widely used, the trading community immediately creates a new algorithm that takes advantage of the predictable patterns of the older algorithm. Some vendors say they are now on their "third generation" of algorithms, and no doubt there will be many more as traders continue their never-ending search for an edge.

I may be a completely backwards, but when I heard rumors that the worst margin calls were to be coming on Monday, it made me think the HB&B's planted that story so they could buy *Friday*.

We'll know in about 30-some hours, I guess.

it does seem like their team wanted this panic selling and actually worked at getting it,the wording isnt exactly calming.

http://www.youtube.com/watch?v=BVl9SQ-KVmE

wrong link,i thought it was bush;s speech sorry

Got this from my Congressman, Barney (Fife) Frank:

THE ECONOMIC CRISIS AND THE NEED FOR
LEGISLATION. Since I became Chairman of the Financial Services Committee in the early part of last year (following Republican control of the House and the committee from 1995 - 2006), I have been doing all I could in that capacity to push for regulations and legislation that I believed would best protect those who are struggling economically or who would have the most to lose in an economic downturn. Among the bills the committee developed that were passed by the House in the 21 months of my chairmanship are a bill imposing stricter regulation on Fannie Mae and Freddie Mac (passed by the House in May 2007 and later added to another bill that became law in July 2008); a bill cracking down on abusive subprime loans (which, though not adopted by the Senate helped prompt the Federal Reserve to issue its own regulations on abusive subprime loans; a bill to give shareholders a greater say on CEO pay and benefits (not passed by the Senate); and a bill to establish important new consumer protections against abusive credit card company practices (also not passed by the Senate). I regret that some of these bills did not make it through the Senate, but I will continue to push for their passage into law.

These bills are particularly important because middle class and less well off Americans do not have a large economic cushion. Many people in this country did not benefit at all or very much from the economic growth of recent years, and they will likely be hurt by the problems we now face. And, I regret that, in passing the economic stabilization legislation to respond to the current crisis, we are in effect saying that some people who have diligently paid their mortgages or otherwise lived within their means should contribute -- as taxpayers -- to the solution. Indeed, under normal circumstances, I would not be inclined to support the idea of having those who didn't create the problem make a significant financial contribution toward solving it, particularly when, from the perspective of some who are not in financial trouble, they will be "bailing out" those who took imprudent risks, either on Wall Street or in their own communities.

However, in this case, it is my belief that, unless we take action along the lines of the legislation we adopted, the impact on virtually everyone in our country will be much worse, including those who are blameless. For example, if foreclosures continue to increase, local and state governments' tax bases will decline and they will have to cut back on key services, including potentially in such areas as fire, police and education. In addition, with credit markets locked up, small businesses will increasingly face problems in meeting their payrolls, which in turn will lead to increased unemployment. People who have invested in the stock market for their retirement or to supplement their income will see further erosion in the value of their stocks. Those who continue to make their mortgage payments will, through no fault of their own, see the value of their houses continue to drop. I agreed with the suggestion made by many people that we should pass a new economic stimulus bill or an infrastructure improvement bill in order to help address some of these problems, though I believed a bill along those lines should be in addition to the stabilization bill, not instead of it. In any case, because of strong opposition by the Bush Administration, we were unable to get traction for a stimulus bill.

With all of those concerns in mind, I felt that, as long as we were able to include strong protections for taxpayers over the long run, it made sense to pass the economic stabilization legislation in order to prevent a much worse outcome. I appreciate the fact that many people do not agree with my assessment of the situation or on whether the specific bill we have adopted will help over time. But, I think the bill - though not perfect - does offer an appropriate, workable response to the difficult economic circumstances in which we find ourselves. And, I would add that having legislation in place along these lines moves us away from the kind of ad hoc approach without major oversight that Treasury and the Fed took with Bear Stearns, Lehman Brothers and AIG.

I believe that the economic difficulties we face are primarily the result of a lack of adequate regulation of key aspects of our financial system. The more traditional commercial banks, which have been well regulated for years, contributed relatively little to the current crisis. It is the unregulated sectors of the economy, including non-bank mortgage originators and unregulated dealers in exotic financial instruments like credit default swaps that were largely responsible for the problems. I have fought for tougher regulation of our financial markets. And, as Chairman of the Financial Services Committee, I will be holding a series of hearings, starting this month, and continuing next year if the Democrats remain in the majority in Congress, to thoroughly review the regulations that did and didn't work, and to take whatever steps are necessary to put in place in the future the regulatory structure we need to prevent this from happening again.
In a related effort, while the Financial Services Committee probes how best to prevent this from recurring and what kind of regulations we should adopt in the future, the Government Oversight Committee under Chairman Henry Waxman is holding a series of hearings, which have already begun, focusing on the problems in specific companies like Lehman Brothers and AIG, including any wrongdoing by company officials.

THE BUSH ADMINISTRATION PROPOSAL When the bipartisan leadership of the House and Senate, along with top members of relevant Congressional committees were informed on September 18, 2008 by Treasury Secretary Paulson and Federal Reserve Chairman Bernanke that we were facing an imminent crisis in our financial markets, we all agreed that it was necessary to take action as soon as possible. Obviously, there are many people who don't share the view that we were then or that we are now in a crisis that requires major government action. As I already explained, I disagree with that view. I thought that the information presented by Paulson and Bernanke was extremely persuasive, and I believe that many of the recent negative developments we have seen in financial markets and the broader economy, both here and in other countries, have demonstrated how serious the situation is.

Once it became clear that we needed to take action, and the Bush Administration submitted its legislation, the next question was what the Congressional response to their proposal should be. As you are aware, the initial Administration plan was extremely brief (three pages), very general, and lacked some very important provisions. Our task, as I saw it, was to move quickly, but not without making improvements to the bill. Some have suggested it would have been better to wait, or develop an entirely new bill.
And, indeed, as mentioned above, a number of thoughtful alternatives were proposed. If this had been less of a crisis situation, taking the time to review a broader range of alternatives may have made sense.

But, given the severity of the situation and the need to have a bill that could pass both houses of Congress and be signed into law by the President, most Congressional leaders took the position, which I shared, that we ought to start with the Bush bill and improve it as much as possible without undue delay. Others have suggested that it would have been preferable to take no action and allow the markets to in effect correct themselves. Most of my colleagues and I disagreed with that approach, because as part of that correction process, a great many middle class and lower income people would have experienced severe economic distress, with the likelihood that additional government intervention, more costly than the bill we did in the end adopt, would be necessary.

THE CONGRESSIONAL RESPONSE. When the Bush Administration bill was initially proposed, I made it clear that we ought to include at least four key changes: curbing executive compensation, protecting taxpayers, providing some relief to those facing foreclosure, and ensuring adequate oversight. As Chairman of the Financial Services Committee, I played a lead role in fighting for these principles, and in the end, while none of them were drafted in the precise form I would have preferred -- because the final product was developed based on bipartisan negotiations -- all of these concerns were in the end addressed satisfactorily in the bill in my opinion.

Specifically, the bill subjects companies participating in the program to limits on executive compensation, including loss of certain tax benefits and restrictions on "golden parachutes." The bill also protects taxpayers by requiring participating companies to provide warrants to the government so that taxpayers will benefit from any future growth of these companies. It provides relief to homeowners by requiring Treasury to modify troubled loans - many the result of predatory lending practices - whenever possible to help American families keep their homes. And, the bill ensures strong oversight of the program by establishing an Oversight Board as well as a Congressional Oversight Panel so that Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse. In addition, rather than giving Treasury all $700 billion at once, the bill limits Treasury to $250 billion initially and requires the President to certify that additional funds are needed ($100 billion next, and then $350 billion subject to Congressional disapproval).
Commenting in an October 4, 2008 article in the New York Times ("Anxiety on Economy Wins Out"), Joe Nocera wrote that "[t]he executive compensation limits, the aid for struggling homeowners, the toughened oversight provisions - those all came from Mr.
Frank and his allies, who knew that Mr. Paulson's initial "give me the ball and get out of the way" approach was a nonstarter."

Beyond those key points, as most people are aware, the bill at its core would allow the Treasury Secretary to use those funds to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses and other countries to access credit. The bill also establishes a program that would allow companies to insure their troubled assets.

Another issue that arose during negotiations on the legislation was the treatment of preferred stocks in Fannie Mae and Freddie Mac, something that affects community banks and individual investors.
At my urging, in order to ensure that community banks and other institutions holding the preferred stock of Fannie Mae and Freddie Mac are not unfairly harmed, the bill allows losses from such preferred stock to be treated as ordinary loss for tax purposes.
While I fought also for inclusion in the bill of protections for individual investors who had been holding preferred stock in Fannie Mae and Freddie Mac, this set of issues falls under the jurisdiction of the Ways and Means Committee, rather than the Financial Services Committee. As a result, I had less influence over the final form of that part of the bill, and despite my efforts, the bill does not include protections for individual investors who held preferred stock in either of the two companies.

I would also add that during the negotiations on the bill the Senate proposed that 20 percent of the profits made from the resale of assets purchased by the government under the rescue plan would be automatically shifted into the already existing Affordable Housing Trust Fund (under which funds are provided to State governments, which make decisions on distributing the funds to organizations under a competitive grant program, with political advocacy activities banned). While I am a supporter of the Trust Fund, I thought it would have been a mistake to include this idea in the bill, and because many of us on the House side of the negotiations objected, the proposal was withdrawn from the bill.
Because some people have raised questions about the organization ACORN, I should point out that ACORN is not mentioned in the final bill, nor was the group mentioned in the earlier Senate proposal.

As you are probably aware, because the House initially defeated the bill, the Senate decided to add some provisions to the bill in order to give it a better chance of passing when it came up for a vote the second time in the House. I agreed with some of the Senate additions, including for example temporarily increasing the FDIC insured deposit amount from $100,000 to $250,000, and temporarily lifting the cap on the FDIC's borrowing authority from the Treasury Department. However, I did not agree with many of the tax provisions and the earmarks that were added. On the other hand, once the Senate passed the bill with these additions - and again taking into account the crisis we were in - I felt that attempting to remove some of the objectionable Senate items would have been a mistake because it would have led to further unacceptable delays in getting the bill adopted.

As a result, I argued in favor of accepting the Senate bill without further changes, not because I agreed with all of it, but because I believed that its essential provisions focusing specifically on how to respond to the economic crisis were appropriate, and that it was important for us to pass it as quickly as possible. With the bill now passed, I am hopeful that it will soon have a stabilizing effect on the housing, credit and stock markets, but it will obviously take some time for that to occur, and we may continue to face serious economic difficulties, as we have obviously seen in the stock market.

THE COMMUNITY REINVESTMENT ACT, AND FANNIE MAE AND FREDDIE MAC. A number of people, including both critics and supporters of the legislation, have argued that major causes of the economic crisis have been mortgage lending to poor people under the Community Reinvestment Act, and the activities of Fannie Mae and Freddie Mac. Some have also suggested that I contributed to our economic problems, because I have been Financial Services Committee Chairman for the last 21 months and a long-time supporter of providing opportunities for less well off people to have access to affordable housing. These allegations are not only inaccurate, they are being put forward in order to make it harder to put in place the stronger regulation of our financial markets that we need. I understand that as a public figure, people will criticize me when they disagree with the positions I take. But, in this case, groups that are opposed to more regulation are spreading inaccurate information about CRA, Fannie Mae and Freddie Mac, and my role, as part of a coordinated effort to prevent more regulations.

Claims that the Community Reinvestment Act of 1977 (CRA) forces banks to lend to unqualified minorities and low-income borrowers and is therefore a major cause of the mortgage crisis are contradicted by facts. CRA does not require banks to make loans to risky borrowers, it only encourages them to serve their communities and qualified low-income borrowers, consistent with
safety and soundness. In fact, the great percentage of troubled
subprime loans (85%) were made by lenders who are not subject to CRA and who have no federal obligation to make loans to low or moderate-income or minority borrowers. Default rates on loans by CRA lenders are much lower than default rates on subprime loans, and are comparable to prime loans. Studies by the Treasury Department and Federal Reserve have shown that CRA has actually increased the volume of responsible lending to low and moderate income borrowers without negatively impacting the safety and soundness of financial institutions.

In addition, any claim that Clinton-era CRA changes caused loan losses is belied by the fact that the riskiest subprime lending which created the crisis did not take off until 2003, the very time when Bush Administration regulators were decreasing both the number of institutions subject to comprehensive CRA exams and CRA data reporting requirements. Finally, analysis of lending data shows that fewer than 30% of problematic subprime loans went to low or moderate-income borrowers in 2006 and that the majority of borrowers receiving high-cost subprime loans between 2005 and
2007 were not minorities.

With regard to Fannie Mae and Freddie Mac (also known as Government Sponsored Enterprises or GSEs), there are two key distortions that have been circulated. First, it is untrue that I opposed stronger regulation of the GSEs, and, second, it is inaccurate to say that the two companies caused the current housing crisis.

On the first point, I have consistently been a strong supporter of the mission of the GSEs - helping to expand home ownership - but I have also worked for stronger regulation of the two companies.
And, I have been a leader in seeking federal aid for rental housing, recognizing (unlike the Bush Administration) that homeownership is not the best option for everyone. As mentioned above, the Republicans were in the majority in the House and on the committee for the period 1995 - 2006. No GSE reform bill passed during this period. Within a few months of my becoming Chairman, the House passed a GSE bill, and it became law this year. In October 2003, I was working with the Chairman of the Financial Services Committee at the time, Rep. Mike Oxley (R- OH), on a bill the committee was scheduled to consider to strengthen GSE regulation, but unfortunately the Bush Administration opposed that effort and it died. Two years later in October 2005, I again worked with Congressman Oxley, and a bill I helped draft passed the House, but the Bush Administration formally opposed that bill and it died.

In January 2007, I became chairman of the committee, and in March I led committee passage of a GSE reform bill. By May 2007, I succeeded in shepherding the bill through the House, by a vote of 313 to 104. The Administration supported the bill, and said that it included the elements that were essential for proper regulation of the GSEs. When it stalled in the Senate, in January
2007 I suggested to Secretary Paulson that we include the bill in the economic stimulus legislation that we were about to adopt, but he rejected that idea. It took another six months until a bill could be agreed to with the Senate and signed into law. When we passed the bill, Secretary Paulson said that he didn't expect to have to use
the increased authority we had given him. Less than two months
later, however, Treasury concluded that the financial position of the GSEs had deteriorated to the point that the federal government took them over. So far, the Treasury has not actually had to inject any of the $200 billion in capital the Department has committed to using to prop up the GSEs. In fact, Fannie and Freddie are continuing to play a critical role in stabilizing our housing markets, as most other lenders have exited the mortgage market.

The GSEs played much less of a role in the current crisis than many Wall Street firms and unregulated lenders. It would be more accurate to say that Fannie and Freddie's difficulties were a symptom of the overall subprime mortgage crisis, rather than a cause. The subprime crisis proliferated during the period 2003 - 2007. It was primarily caused by unregulated lenders making loans with weak underwriting standards, and the massive growth in mortgage backed securities related to those loans. The GSEs did not substantially reduce their underwriting standards, but they unwisely purchased some of those securities, and that put them in financial difficulty.

Finally, though Congress passed legislation in 1994 giving the Federal Reserve the authority to crack down on abusive subprime loans, former Fed Chairman Alan Greenspan refused to use that authority, though we urged him to do so. I joined with several colleagues in the Financial Services Committee in pushing for legislation to more strictly regulate subprime mortgages, but it was only when I became Chairman, with the Democrats again in the majority, that we passed legislation along these lines through the House. Again, the bill did not pass the Senate, but it spurred Chairman Bernanke to issue his own subprime regulations under the original 1994 authority.

THE NEED FOR REGULATION OF OUR FINANCIAL MARKETS. Thus, the major factor is the lack of regulation. It led to the crisis, and that is why I am determined to fight for increased regulation going forward. Those who are opposed to regulation have raised what I consider to be red herrings - the alleged role of CRA, along with Fannie Mae and Freddie Mac.
This is being done because the alternative explanation - that unregulated, exotic financial products and unfettered Wall Street activities caused the financial crisis - is a serious indictment of the anti-regulatory philosophy, exemplified by Ronald Reagan, and carried to an extreme by Alan Greenspan.

But, I want to stress that this is a philosophical disagreement, not a partisan one. I worked closely with key members of our current Republican Presidential Administration and with top House and Senate Republicans in developing and passing the recent economic stabilization bill, and I cooperated on past committee efforts as mentioned above with the Republican former chairman of the Financial Services Committee, Congressman Oxley, along with other Republican members of the committee. Now, however, those who are ideologically opposed to regulation and against encouraging appropriate assistance to less well off people to purchase homes when they can afford it, are taking advantage of the uncertainty and stress that has resulted from the financial downturn to try to assign blame in ways that will further their own ideological goals. I will continue to do everything I can to fight against these efforts, and to push for the fairest possible response to the crisis.

Again, I appreciate your taking the time to contact me, and I appreciate your willingness to read through this lengthy response.
I am attaching additional information that provides further background on some of the matters discussed above.

BARNEY FRANK

Timeline for Fannie Mae/Freddie Mac Regulation

Prior to 2005, no bill to further regulate or oversee Fannie Mae and Freddie Mac (also called Government Sponsored Enterprises, or
GSEs) passed the House of Representatives. The last major bill regulating the GSEs passed in 1992-when the Democrats controlled Congress-when the Office of Federal Housing Enterprise Oversight was created. Republicans who controlled Congress from 1995-2006 did not pass reforms. President Bush did not sign a tough regulation bill until the Democrats were in the majority in Congress.

2005

May 25- House Financial Services Committee, under control of House Republicans and Chairman Michael Oxley, passed a GSE Reform bill, H.R. 1461, by a vote of 65-5. Every Democrat on the Committee voted for the bill.

July 28- Senate Banking, Housing and Urban Affairs Committee, then chaired by Sen. Richard Shelby (R-AL), passed S. 190 out of Committee. The bill was passed by a party-line vote of 11-10.
The bill did not reach the Senate floor for a vote.

October 26- Bush Administration issued a Statement of Administration Policy on the day of the Floor Action on H.R. 1461 stating that the Administration opposed the bill. H.R. 1461 passes House by a vote of 331-90

2007

January 31- Chairman Barney Frank organizes the Financial Services Committee

March 28 - Committee passes H.R. 1427, a GSE reform bill, 49-
15

May 22- House of Representatives passes H.R. 1427, 313-104

2008

January 2008 - Chairman Frank offers to insert both GSE Reform into economic stimulus bill then in negotiations. Secretary Paulson declines.

May 8- House of Representatives passes H.R. 3221, which contains GSE reform provision, after receiving the Senate amendments to the original bill.

May 20- Senate Banking, Housing and Urban Affairs Committee passes a bill containing GSE Reform provisions- The Federal Housing Finance Regulatory Reform Act of 2008

July 11- United State Senate passes GSE reform as part of a bigger bill.

July 30 - President Bush signs GSE reform as part of H.R. 3221.

CONGRESSIONAL EFFORTS TO CURB SUBPRIME LENDING ABUSES

1994 - Congress Enacts HOEPA to Curb Predatory Mortgage Lending.

In 1994 the Democratic Congress passed the Home Ownership and Equity Protection Act (HOEPA), which included a host of consumer protections for high-cost and other exotic mortgage products, and required that the Federal Reserve write rules that would stop abusive lending. The law specifically required that the Federal Reserve "prohibit acts or practices in connection with mortgage loans" that the Federal Reserve Board finds to be unfair, deceptive or designed to evade the provisions of [the Act], or refinancings that are "associated with abusive lending practices, or that are otherwise not in the interest of the borrower."

1995 - 2006 -- Federal Reserve Fails to Issue HOEPA Regulations.

Fed Chairman Alan Greenspan never used the authority he was given under this law, even though he was asked numerous times to issue predatory lending rules, by Members of Congress, and - internally -- by Former Fed Governor Ned Gramlich. No predatory lending regulations were issued, and no new predatory lending legislation was approved by Congress during this period, when the Republican party was in the majority in Congress. When Rep. Spencer Bachus (R-AL) - then Chairman of the Financial Institutions Subcommittee - tried to work with Financial Services Committee Democrats to address predatory lending, his efforts were shut down by the House Republican leadership.

2004 - Federal Preemption of State Consumer Lending Laws.

In 2004, federal banking regulators preempted the application of state mortgage lending laws to national banks, federal thrifts and their state-chartered operating subsidiaries. Many Republicans in Congress supported these efforts by the federal banking agencies to preempt the application of state anti-predatory lending laws.
The preemption permitted bank regulators to essentially carve out big players in the industry from coverage under state laws, without putting any new standards in their place. A number of Democrats joined in opposing this preemption of state consumer mortgage lending laws. Their opposition included introducing "The Preservation of Federalism in Banking Act" a bill to overturn the preemption and make state mortgage lending laws applicable to these entities. The Republican Congress never considered the legislation.
2004 - 2006 - Democrats Push for Passage of Mortgage Reform and Anti-Predatory Lending Legislation.
Prior to regaining majority status, and well before the current crisis, Democrats introduced comprehensive subprime lending legislation which could have substantially reduced the number of mortgages going into foreclosure. In March 16, 2004, Reps. Brad Miller (D-NC) and Mel Watt
(D-NC) introduced H.R. 3974, the Prohibit Predatory Lending Act.
Congressman Frank cosponsored the bill. And, and in the following Congress, on March 9, 2005, the bill was again introduced (this time designated as H.R. 1182). The Republican Congress did not bring the legislation up for a vote, and the Financial Services Committee did not take any formal action on the bill in either Congress. In 2005-6, Representatives Miller, Watt, Frank and Paul Kanjorski (D-PA) engaged in initially productive discussions with Congressman Bachus that could have produced a bipartisan bill, but the House Republican leadership ordered an end to GOP participation in the effort.
2007 - 2008 - Democratic Majority; New Curbs on Subprime Lending Adopted.

When the Democrats regained control of Congress as a result of the 2006 elections, and initiated specific legislative reforms in the subprime area (including passing comprehensive subprime legislation through the House), the Federal Reserve under Chairman Ben Bernanke finally issued its own regulations, using the authority the Fed had possessed since 1994.

* After a series of hearings in 2007 held by the Financial Services Committee highlighting the Fed's inaction under HOEPA, on November 15, 2007 the House passed comprehensive subprime lending legislation (H.R. 3915, the "Mortgage Reform and Anti- Predatory Lending Act of 2007.) by a vote of 291 to 127. The bill would establish a national standard to rein in the abusive lending practices that contributed to the current mortgage crisis. This comprehensive legislation would create a licensing system for residential mortgage loan originators, establish a minimum standard requiring that borrowers have a reasonable ability to repay a loan, and attach a limited liability to secondary market securitizers. The legislation would also expand and enhance consumer protections for "high-cost loans," includes protections for renters of foreclosed homes, and would establish an Office of Housing Counseling through the Department of Housing and Urban Development. The Senate did not act on H.R. 3915, though several provisions from the bill were included in separate legislation that became law in 2008.

* On December 18, 2007 at the urging of Congressman Frank (which included a May 11, 2007 letter to Chairman Bernanke) and in reaction to the House passage of H.R. 3915, the Federal Reserve for the first time used its HOEPA authority to establish rules to curb deceptive home mortgage lending and advertising practices.

After reading through the blog today and following - and reading - the many linked articles, I found myself becoming decidedly depressed. But then I discovered this gem on Youtube and I found my spirit rising:

http://tinyurl.com/yvslpk

I had the distinct pleasure, as a child, of sitting on Glenn Gould's knee at our piano during a dinner party almost exactly 45 years ago this weekend - a Canadian Thanksgiving holiday. It's important to remember during times like these just what is important - family, friends, memories, contribution, the human spirit, and its endless possibilities. Enjoy.

Hey all..been a long time since I have posted anything...I don't feel real competent or confident in any market analysis i could offer...my portfolios have been hammered pretty hard over the last few weeks, but strangely enough i don't feel horribly panicked about it as i would have been had i not had access to this blog and Bill's perspectives.And the discourse from everyone has been a great comfort during this trying times.However knowing that there is sure to be a turn around and actually getting the turn around are really 2 very different things.the problems seem to be larger and wider spread than anything we've experienced before.It seems that the equity markets have been thrown way off kilter by the troubles in the credit markets. Esspecially those caused by the poorly engineered and badly or poorly regulated derivatives which have spread to markets around the world.How the MBA geniuses who concocted this stuff could not foresee any of the resulting fallout is really frustrating to many of us.Like it or not the result is that we have all been dragged into the mess. And the powers that be have responded, firstly with interventions that appear to have been designed to paper over the problem and delay the inevitable when the whole structure was weakening to the point of collapse.I guess my feelings jive with those of Weekend Update's new financial expert Oscar Rogers as seen in this clip available from NBC:

http://tinyurl.com/3jbvod

Mackinaw,

my wife is a professional piano accompnist, Gould is one of her idols. She would be happy to attend that party. Thanks for sharing that.

Immersing oneself in a single topic, especially as troublesomw as today's state of financial markets, can be depressing. You know, read all the crime-devoted pages in a newspaper, and you start feeling there is nothing but crime all around. Let's all find something to enjoy - hobby? family? good movie? music? Then return to markets refreshed and with new perspective - any today's trouble is a cocoon of tomorrow's opportunity, just as any today's solution is tomorrow's problem.

Are 401(k)s Still Viable for Saving?

http://tinyurl.com/4qh6np

http://tinyurl.com/America-s-Second-Wake-Up-Call

401Ks - not that it would've helped much this year, but you're supposed to be shifting your 401k assets to less-risky holdings the closer you get to retirement...

the bigger fear (to me) is if money markets can toe the line and maintain the $1 share price...

A lot has been put forth as to how and why we're in this mess, and what our leaders should do now to fix things.

Here's a quote from Bill's Friday Re-cap that succinctly sums up the essence of the issue.

"The capital market, however, can survive if only legislators can remove the control that bankers have over it."

This is clearly a power struggle, and ultimately a battle for control of the entire country.

Bill & Sarkie, I'm confused about this comment and your reply.

Buffett is riding the Titanic to the bottom of the ocean.

Ayaye Captain!

[Bill Cara note:
sharkie, I agree. Buffett, Gross, Greenspan, Standard & Poor's analysts, et al; they have all shown their true colors in this mess.]

I thought Buffett's deal was pretty much loaded in his favor — high interest, stiff penalties for failure, etc.

From "Hard Times", Studs Terkelt's oral history of the great depression.

Opinion of a psychiatrist who began his practice in 1937—

"I think a depression today (1970) would have a paradoxical effect, at least temporarily. Political upheaval, on the one hand—and bringing people closer together, on the other. Greater consideration for one another. Something like the quality of caring in London during the blitz. Everybody's suffering was everybody's concern. They drew together and gave each other solace."

I am beginning to see some of this with friends and neighbors and also a bit is evident on TV.

If things get bad enough (or are perceived as such) we may see more of Bill's prediction that the American people will not stand for this.

Since we are experiencing a decades long stealth tax being imposed by an unelected dictatorial despot —

"No taxation without representation!" comes to mind.

There is only one way that the US voter can break the political corruption in Washington DC. That way is to vote for the non-incumbant, regardless of party, regardless of ideology, and regardless of charisma.

Since Congress will not impose reasonable term limits, in this manner the voters can impose a one term limit. There is no other way that Citizens can take back government. There is no other way to get back to the theme that when our elected representatives go to Washington they should represent the interests of their constiutents and not the interests of the corrupt elete and their lobbyists who pay for immoral unwise and unjust legislation.

Independent voters should consider this as a viable alternative to whatever else they might otherwise consider. The independents are the ones who really control an election. If they make a choice between candidates on some other basis they will simply nullify their votes. But if a substantial majority of independants just vote of the non-incumbant something can change for the better.

We may be seeing the bottom for equities in the next little while, probably dragged down by the crashing oil price. It can only go so far, until actual, real supply & demand limits are reached.

What we should be looking for now, is the failure of the massive leverage of credit derivative obligations and swaps held against U.S. treasuries and bonds. We have seen chronically firm long bond prices for several years, which started just prior to the Nasdaq crash, making it 10 years in the running. No wonder reflation occurred after the 2000 crash.

Yields have been moving inexorably lower, so going to zero or into the negative is not necessarily safe haven buying, but not unlike a risky gamble at forcing a corner in treasuries. Treasuries have to be bought to settle Credit Default Swaps held against them, in effect an open-ended naked short held against the treasuries with the long hedge in long term bonds.

Now, I am really out of my depth on all this stuff. But it seems to make sense at this point. Equities and commodities were not the focal point of the pyramid, U.S.-issued bonds and treasuries are. Small wonder then, that long term yields remain above 4% and short term yields are collapsing to zero. No wonder then, that the whole of the risk must be socialized by Wall. St. banks at this juncture, that U.S. citizens are now the principal debtor (not creditor.) No wonder then, the powers that be would much rather you think it was all because of mortgages, and not the OTC credit derivatives in government issued paper. Talk about vending the public trust. Congress just signed it all away.

Quite frankly, it should be the other way around.

http://finance.yahoo.com/bonds

http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en

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

http://www.bcaresearch.com/public/story.asp?pre=PRE-20081010.GIF

Listened last night to Joe Jackson's "Big World".
Very simple song, gets me every time.....

Shanghai Sky; Joe Jackson.

Strange
How the world got so small
I turned around and there was nowhere left to go
So sad
The dream always dies
Each new arrival closes places in my mind
But I can dream
Until I go
Of smells that I don't recognize
And by the river
In Shanghai
The colour of the sky
Is something I've never seen
After the summer rain
Children smile
Curious and kind
And the world is big again

G-7 can't come up with a coordinated plan. Doesn't look like they will guarantee interbank lending. I think we go lower.

British gov. to buy a majority stake in RBS and big stakes in HBOS, Lloys and Barclays.

I laughed when reading newsclips that not too long ago US "experts" wanted to teach the concept of derivatives/debt securitization/CDS, to the developing/emerging countries.

Enough is enough, the harvard MBA's!

Bill,

It looks like I misinterpreted or took out of context your "the financial system is finished" comment, because it appears from your reply that you still believe in buying value, which BTW, I do agree with.

I still have hope that the stocks I bought Friday will recover because I was buying companies with good prospects even in a downturn at 1/2 or 1/3 of recent prices and below book value.

If I didn't appreciate your comments and other discussion here, I wouldn't be here, nor would I have bought your book.

I'm hoping Monday will be the beginning of the recovery or at least the end of the crash.

Couple of days ago a few people were posting chart links to the INDU comparing the present to 1987 and showing that 87 was not such a big deal.

Well the only problem was those charts were using the linear scale which is very misleading when looking at the long term. Problem is a constant growth of say 10% per period on a linear chart is an exponential curve, parabolic uptrend. Its much easier to view on a log scale which will be a straight line over time.

I put together the following image which shows the comparison of linear vs log charts for both 5 & 10% growth per period. I also show how it would look if there was a change in growth, 10% 1st half the 5% for the 2nd half.

http://tinyurl.com/3emae6

Now here is the chart of the INDU from 1980 to present, linear and log scales. The advantage of the log chart for long time frames is that a 10% price change anywhere on the chart is represented by the same vertical "Y axis" distance.

Note I've also added the MACD to the bottom of the chart, for long term charts this is also a problem because its based the magnitude of price movements over time. Price movements today are very much larger than they were in the 80's, BUT we really need to look at the percentage changes to make a fair normalized comparison over time. Thus I use the PPO, which is exactly the MACD but calculated on a percentage basis and as you can see provides better long term information.

http://tinyurl.com/5yox7x

Quasi

onlineaces - "J. P. Morgan, Goldman Sachs, and possibly Morgan Stanley as well — have issued massive margin calls to hedge funds and other professional traders who use these banks as prime brokers."

It's our responsibility to anticipate moves like this by HB&B. This one caught me completely by surprise.

Any ideas on what they might do to further push the market off the cliff?

Help needed

Up until Sept 19th I had been short the market through ETFs [QID/TWM/SKF]. Then because of the Paulson plan, I understood the sentiment here that day was changing from the ending of the bear to the beginning of the next bull. So I begun buying some of the Cara 100 stocks which had been previously listed as those which would do well in the next bull market. Looking for that initial big surge up I also made the serious mistake of buying on margin. Friday I got my first margin call and now I got one for Monday. My question is this, from the list below could I get opinions on which stocks I should sell off first and in what order to meet the margin call. They are all down and unfortunately in some cases big. This ordeal has shattered my confidence and my ability to reason correctly. So any help would be greatly appreciated. Also if possible could any follow up posts refrain from telling me the dangers of margin buying, I know and already feel bad enough.
Thank you.

ABB
BA
DELL
GG
PX
RIMM
RIO
SLW
TCK
TTM
WAG
XOM

Quasi - thnx for your INFORMATIVE post

I was aware of importance of using log scale on long-term charts, but not that PPO (using %) is more accurate than MACD (using price)for seeing momentum.

Very helpful! -

Big rally next week...... but

The outcome of the G-7 meeting yesterday will probably be to announce big plans to shore up bank equity (both here and internationally). This "coming together" of all of the top players will likely be the catalyst of a potentially big rally next week.

This from the G-7 meeting notes yesterday http://www.treas.gov/press/releases/hp1195.htm

G-7 Finance Ministers and Central Bank Governors Plan of Action
Washington-- The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to:

Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.
The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the IMF's critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan.

The but comes from the following...

http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article4926251.ece

Sorry - I don't know how to do the tiny link.

tiny url very simple, go here follow instructions.

http://tinyurl.com/

"who at this point really believes there is more gold in Fort Knox than Cinderella’s Castle?"

Fort Knox was emptied some time ago. I suggest we check Cinderella's castle first.

"In time, however, the net effect of global reflation ought to be a weakening of the $USD, possibly headed for a test of the all-time low of 70.70. The charts at StockCharts (links below) reflect that opinion, in my view."

I'm anticipating this will rally the DOW as a falling USD makes these prices more attractive in terms of foreign currency. Energy prices falling due to demand destruction and USD strength will be slowed and possibly reversed. (higher energy/USD)

Tear this apart please!

wabrew - you need tinyurl . com. It wasn't working properly last night, maybe today...

DC

My confidence in making predictions is not the best either. I would defiantely keep XOM, DELL, WAG, and GG. Since the three former stocks were recommend as buys by Bill on Oct 10th. GG has preformed quite well during these times. I would be tempted to sell BA, since a rise in commodities may affect airlines stock. In addition, airlines may be cutting back on purchase if we hit a recession.
As per Margin calls, I can relate. Learned my lesson in the past.BTW nothing wrong with feeling stupid, don't be too hard on yourself.

Jock - have you considered the application of log/log charts? I've used these before, but not in terms of trading.

DC- after trying to put myself in your shoes (which, believe me, would not be that difficult for any of us right now), my suggestions:

(a) create an Excel spreadsheet-> for each of your twelve positions, create columns for all variables you track and/or consider important, as well as an additional column to jot down your notes/thoughts about each one..

(b) after sorting out/finishing the above, you should have a pretty good idea which ones need to go. my guess would be to dump the more volatile positions first, as they have the greatest potential to trigger more margin calls...

(c) mentally mark all positions to market, and ask if you would be buying at these prices-> if the answer is yes, keep them; if no, sell them...for all intents and purposes, the ending balance in your account(s) right now is what you have in cash...

(d) cheer yourself up a little with the reminder that on a relative basis, almost every investor on the planet saw their portfolio value go down the past two weeks-> in terms of performance, many things in life are measured on that basis, right? if we're all racing to the summit, and an avalanche takes us all down 2000 feet, then the only thing that has changed is: [the ones able to keep their head, recover, and able to plan/regain ground most quickly will WIN!]..there are, of course, others who were either fortunate enough/experienced enough to avoid the avalanche-> but hey, how you handle THIS ONE will give you the edge NEXT time (wagering they either paid their dues on an earlier crash, or will in due time pay their dues on a later one-> pay yours THIS time and be grateful for what it teaches you)...

(e) having said all that, there is no one way out...use your ingenuity/connections/personality/instincts to find your own path...you could get a family loan to keep your stake until we're clear; sell a depreciating asset and shift it into what we hope will be appreciating ones...whatever...it's amazing how many answers to life can be found in music lyrics (thanks, craig, btw for posting shanghai sky):

"The problem is all inside your head, she said to me
The answer is easy if you take it logically
I'd like to help you in your struggle to be free
There must be fifty ways to leave to trade this market"

"Just slip out the back, Jack, make a new plan, Stan
Don't need to be coy, Roy, just listen to me
Hop on the bus, Gus, don't need to discuss much"

and when it comes to you anxieties:

"Just drop off the key, Lee, and get yourself free"

good luck, my friend

"This ordeal has shattered my confidence and my ability to reason correctly."

and if you're unable to spend the time on the worksheet, forget it...the short answer is it ultimately won't matter-> watch the twelve positions on monday, and sell down to where you need to go in any order that makes sense without pressuring yourself on the details...

i've had my confidence shattered many times-> taking a walk, watching a movie, or reading a book works for me..

wabrew - I wouldn't be surprised if Iran received the green light to explore NWMD with the caveat that if something went wrong anywhere in the world, Iran would be first in line for retribution. This might just change their minds?

Anyway, as I'm sure you already suspect, keeping energy supply lines open was the purpose for Iraq invasion. I'm not sure of though why that goal couldn't be accomplished from Afghanistan?

there are many inteeresting stocks -- bac, gs, ge, ba, c, pfe ...

ba labor still on strike, engineering union waiting. plastic airplane working (?) is a big question mark. In the old time (747 era) management was nuts and bolts/engineering, not much ROE. But now its all ROE/financial, not much nuts and bolts/engineering.

Jock at 12:17, re MACD vs PPO

Another nice thing about the PPO vs MACD is you can use it to compare different stocks with very wide price differences. I use PPO as a regular indicator on my candleglance views of watch lists, then I can directly compare the momentum strengths.

MACD values for say RTP vs SLW, widely different stock prices and thus widely different MACD values.

As an example I put together a chart of Berkshire Hathaway, both A and B stocks, (basically same stock just different prices, (~100K vs ~4K). I show the charts side by side and below the MACD and the PPO, with the scales adjusted to be visually as close as possible.

http://tinyurl.com/5ykzts

Quasi

European Leaders Vow Bank Guarantees, Bid to Stop Financial Rot

http://tinyurl.com/4sg3wz

Kaimu,

The fact that the US remained in denial after attacks on US marines, embassies and WTC/93, doesn't mean we were not in a war back then. Granted the Iraq invasion was a colossally bad move, but whenever we do leave Iraq it will not end the terrorist war. It will have accomplished little or, even worse, exacerbated the motivations of our enemies. That will continue as long as any radical Muslim chooses to seek our destruction.

For a variety of reasons we entered the briar patch en masse when a few Special Ops strategically engaged would have been more than enough. Wars are historically fought based on prior wars and are most often politically motivated.

Folly marches on. (Especially when arrogance trumps prudence.)
---------

"In a ham and eggs breakfast, the hen is involved, but the pig is committed".

I LOVE it!

am i missing something or has the US $ index just gapped down to $81.60 according to Kitco?

Ron B,
"Worldwide price controls would be a disaster as shortages would create an underground black market."
This is probably the only truly "free market" will will ever see. The Soviet Union operated on it for years while pretending to control prices. The illegal drug market has been a wild success. Prohibition funded and expanded organized crime.

Early euro trading is very optimistic folks!

@1.3582 up 2.3% from the trough...

dr. costa what is your source of information?

CP,

Anyway, as I'm sure you already suspect, keeping energy supply lines open was the purpose for Iraq invasion. I'm not sure of though why that goal couldn't be accomplished from Afghanistan?
I haven't heard anything lately about the massive, self sustaining fort labeled as the US embassy in Iraq — have you?

There is no question we must have oil (30 years of ignoring the alternatives aside), but I would have felt better about it if we had just said "We need oil and we're taking it." and skipped the democracy spreading crap!

sry...got it kitco.com..thx

DC, I don't how much your losses might be, but Monday is looking to be a very big upward blast.

You may have much less of a loss than you think.

Thoughts on STLD?

It has fallen from heaven like most.

Stochastics forming a base. Way oversold on the rsi. 75% off from 50 day moving avg.

Thoughts from the group?

No typo on Kitco:

http://www.kitco.com/

scroll down.

Sheese. When are we going to get a chat for every day?

:)

Another follow-up on European bank rescue as reported by IHT.

PARIS: European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks in a bid to restore confidence to the teetering financial system.
*************************************************
. . . . . . because of the danger that funds would flee Sydney banks for countries where governments had guaranteed deposits. . . . "I don't want a first-class Australian bank discriminated against because some other foreign bank, which has a bad balance sheet, is being propped up by a guarantee by a foreign government," Reuters quoted Rudd as saying.
*************************************************
Other British banks that are likely to receive tax payer funds include HBOS, Lloyds TSB and Barclays. That these banks, which for weeks have been saying they did not need new funds from taxpayers, will now welcome the British government as one of their largest shareholders is a reflection of how deep the confidence crisis has become in Britain.

http://tinyurl.com/4x3fwf

I wouldn't touch anything unless the RSI 7 day is below 10 and the hourly MACD divergences.

http://tinyurl.com/3fzdxk

IMF: World now has a plan
World lender confident governments will avert meltdown
By MarketWatch
Last update: 5:00 p.m. EDT Oct. 12, 2008

Well, now that government bond issuances around the world are under the exclusive patronage of the banks, why would the IMF not come to that conclusion?

2nd
ETF and price I paid
UYG 600 @15 UDS 400 @30 SSO 200 @50
UYG 1000 @ 13 QLD 700 @50 UMW 300 @26
Also have TSO/VLO/SU/RIMM/IBM/SLW/IBN/BA/UAUA
GOL/BC/CCL/CCJ/TCK/TGP and some more
May take time to recover. But, I intend to hold all the ETF for as long as it takes.
For stock I am not sure about some like SU. If oil stay around 60 than I do not think oil from sand will be profitable.
Will look at each stock and make a note to see if it is worth holding or money should deploy in other stock
Stop reading lots of news about market and stock. Lots of noise there and they all and their uncle claim to be expert in market while loosing their shirt.
We have lots of NOBEL price winner in economy in our country, are they phony?
Or this NOBEL price may be a jock other wise why do we go through this kind of mess every now and than in last 100 year
In last 50 year we went through many crises and came out lot stronger economically.
And socially and there is no reason to believe otherwise this time too.
Also cooperation going on around the world because of this financial crisis, tomorrow’s world will be more stable and peaceful

2nd_ave - "Just drop off the key, Lee, and get yourself free"

Jingle mail??

ps: loved that song. Good advice.

Youse guys (bulls) MIGHT be right, but I'm still gaming it on the belief that the US Markets will not rise until the banks get their "surprise" or regularly sceduled rate drop.

Even if I am wrong, it is a loooong way up and there will be opportunities to trade WITH THE TREND UP, if and when it occurs. JMHO.

bloomberg market futures...

us futures up

S&P 500 917.60 +26.60 909.30 926.10 909.30 18:47

Was down earlier today.

vinod- who awards the Nobel prizes? that should take care of that question ;)

spot- you can send jingle mail to evadn2[at]yahoo[dot]com

hulbert- i'm happy to see he's titled his latest "We haven't seen the bottom yet," as that is exactly the kind of headlines we need to see:

http://tinyurl.com/4wenuu

lessmore - "There is only one way that the US voter can break the political corruption in Washington DC. That way is to vote for the non-incumbant, regardless of party, regardless of ideology, and regardless of charisma."

I whole heartedly agree on the basis that if only non-incumbants are elected, the result will be at least a short term respite from CONgressional plunder while they figure out who in Congress/Senate holds the power.

We can always hope.

ESZ8 futures gap up 30 points, over 3.25%

For me futures indicating Friday may have been the bottom for quite some time, maybe 4-6 months.

My trading positions:

put option positions in:
VIX C MS BK BAC

call options positions in:
VCP UYG QLD IWM SPY

stock positions from Friday:
EXK SLW UYG USD IWM ABX GOLD AEM GG

http://tinyurl.com/MS-Mitsubish

spot,

many of my comrades and i have discussed the very same thing.

it is refreshing to hear others thoughts too.

hopefully a movement starts.... enough is enough.

I didnt like AMZN at 90, but i sort of like it here at 56. Relatively zero debt, hoards of cash, and churning along. this holiday prob wont be the best but i am sure they will do better than big box stores.

Watching for Stoch to roll up. but it hasnt dipped below RSI 30 yet.

http://tinyurl.com/4hl9nr

an "all incumbents out" movement would certainly send a message...the drawback would be a number of losers would take office, but sometimes the message is more important than suffering a little chaos..

Australia & New Zealand up over 5% they just opened

NYUgrad
AMZN it is retailer selling at PE 0f 41
WMT PE is 15
correcrt price of AMZN is under 30

Bill, buy and hold is ludicrous on the face of it and I've believed that for 40 years.

If you can't define a sell discipline up front, you have NO business ever buying anything but a bank CD.

Buy and hold is a hustle by mutual funds, brokers, and those that don't want competition for the bid when THEY bail.

This is so obvious that it's amazing it has to be stated at all.

indptrader / 2nd / onlineaces

Thanks fellows for taking time today for giving me your thoughts on what to do. You are right onlineaces on tomorrow's big blast upwards. I just checked the futures and it was at +282 so I should sleep a little better tonight.

Again, thank you fellows.

Question to whomever can answer in regards to buying gold canadian maple leaf coins...

Has anyone used "Nucleo Exchange" if so, is that a good place to get competitive prices?

The maple leaf coins seem to be difficult to get, been looking at obtaining "gold shot" or US Mint - Commemorative Arts Medals...

I would appreciate if anyone can provide insight to this...
please note this is a very small purchase and I am IGNORANT when it comes to buying real stuff such as gold.
thanks

"highly-respected money manager Jeremy Grantham" interview by Barron's per Seeking Alpha: http://tinyurl.com/4xl7w5

He is shocked by the incompetency of U.S. financial stewardship. Yes, and the environmental stewardship has always lagged even that of the exploitive capitalists. Help!

Jeremy Grantham's quarterly newsletter July 31,08 has an amazing chart on the housing bubble on page 4/7. How could any economist have been aware of this and not been alarmed? A bubble yes. Built on the phenomenom of corporations holding wages and unions down for many years.

http://tinyurl.com/4f9xmj

Ok Guys,

If Asia and Europe post significant gains today, and given that oil seems to be stabilizing here at least for now, what stocks do we want to be looking at long?

vinod,

Nobel Prize in Economics is offensive and dangerous to many economists according to Naseem Tauleb, author of Black Swan. It perpetuates theories that may be much riskier than they are portrayed to be.

Which kind of gets us to where we are today.

http://tinyurl.com/374hll

If they have a Razzie for economics I would suggest the current leader of the Fedge fund.

http://tinyurl.com/papew

ABB
BA
DELL
GG
PX
RIMM
RIO
SLW
TCK
TTM
WAG
XOM

DC,

Sorry to hear you're in the situation many others are in. I would suggest focusing on it as a debt issue rather than a stock issue. Pick either your largest position and get it down somewhere you are comfortable with, or pick one that has the least potential for upward mobility or your smallest position.

High beta stocks are also candidates for the chopping block, if you want to play like everyone else.

Point and Figure charts help me out with determining potential direction of stocks.

It seems as though the riskier plays are interlisted stocks such as RIMM, since there are many ways to play the arbitrage game right now due to currency spreads, wide bid/ask spreads, and differences in exchanges.

I would not like to pick any individual stocks as I don't want to give you any opinions that may be incorrect or different than your investment strategy. If you're in it for the long term, than this is just 4 weeks of your time that could look much better in 3-4 years than today.

Though I don't see P&F chart for this being too positive.

http://stockcharts.com/def/servlet/SC.pnf?c=abb,P

But P&F charts are probably useless in this kind of market, because they aren't showing any kind of bottom.

What I don't like seeing is a huge down day like Friday and then a gap up (but lower than Fri's gap down) and then a slow dismal decline.

http://tinyurl.com/4tdl7r

Would be nice to see the biggest weekly gain in 100 years next week. Not sure if that would get us back to where we were before last week?

I'm still thinking the market's not convinced as of yet...

RDR: I think you were asking where someone can screen Graham type stocks.

AAII.com has a stock screening section that has two Graham screens
a. defensive and b. enterprising.

Mr. Cara has listed his stocks and they are excellent choices, but since you asked here are the Graham screens from AAII.

Norsk Hydro ASA (ADR) NHYDY
LCA-Vision Inc. LCAV
Nature's Sunshine Prod. NATR
Graham Defensive Investor Screen—Non-Utility
Companies are ranked by PE (a)
Spartan Motors, Inc. SPAR
Nam Tai Electronics, Inc. NTE
Nucor Corporation NUE
POSCO (ADR) PKX
Seaboard Corporation SEB
Ensco International Incorporat ESV
Thor Industries, Inc. THO
Signet Group plc (ADR) SIG
Tidewater Inc. TDW
Ennis, Inc. EBF
Carlisle Companies, Inc. CSL
Reliance Steel & Aluminum RS
Telemig Celular Participacoes TMB
Methode Electronics Inc. MEI
Movado Group, Inc MOV
Goodrich Corporation GR
Hubbell Incorporated HUB.B
Sun Hung Kai Properties Limite SUHJY
Cheung Kong (Holdings) Limited CHEUY
Ashland Inc. ASH
National Presto Industries Inc NPK
Schnitzer Steel Industries, In SCHN
Canon Inc. (ADR) CAJ
Tomkins plc (ADR) TKS
Pfizer Inc. PFE
Watts Water Technologies, Inc. WTS
Graham Defensive Investor Screen—Utility
Companies are ranked by PE (a)
Dominion Resources, Inc. D
Consolidated Edison, Inc. ED
DTE Energy Company DTE
E.ON AG (ADR) EONGY
UGI Corporation UGI
OGE Energy Corp. OGE
Sempra Energy SRE
Atmos Energy Corporation ATO
MGE Energy, Inc. MGEE
Constellation Energy Group, In CEG
Integrys Energy Group, Inc. TEG
Wisconsin Energy Corporation WEC
Chesapeake Utilities Corporati CPK
AGL Resources Inc. ATG
Southwest Gas Corporation SWX
Vectren Corporation VVC

The latest bank reserves numbers of the US banks are completely off the wall.

http://www.federalreserve.gov/releases/h3/Current/

Global currency regime change ...

Bill has mentioned this theme recently, so this article caught my attention. It is a must-read !

http://www.safehaven.com/article-11551.htm

The author, Mencius Moldbug, sounds to me like the Mogambo Guru.

George Soros has a plan, and at this point I am on board. Will Hank listen to people who are not quite so sleep deprived as him?

This is how Tarp ought to work. The Treasury secretary should begin by asking the banking supervisors to produce an estimate for each bank, how much additional capital they would need to meet the statutory requirement of 8 per cent. The supervisors are familiar with the banks and are aggressively examining and gathering information. They would be able to come up with an estimate in short order provided they are given clear instructions on what assumptions to use. The estimates would be reasonably reliable for the smaller, simpler institutions, but the likes of Citibank and Goldman Sachs would require some guesswork.

Managements of solvent banks would then have the option of raising additional capital themselves or turning to Tarp, which would state the terms on which it is willing to underwrite a new issue of convertible preferred shares. (Convertibles are better than warrants because the banks should not need additional capital infusions later.) The preferred shares would carry a low coupon, say 5 per cent, so as not to impair banks’ profitability. The new issues would dilute existing shareholders but they would be given preferential rights to subscribe on the same terms as Tarp and if they were willing and able to put up additional capital they would not be diluted. The rights would be transferable and if the terms were set right, other investors would take them up.

Using this approach, $700bn should be more than sufficient to recapitalise the entire banking system and funds would be available to buy and hold to maturity mortgage related securities. FT

ALOHA !!

It is mesmerizing to see how blind people are to what money is and what it is suppose to be.

"Bill, buy and hold is ludicrous on the face of it and I've believed that for 40 years."

Most everyone here on this blog has been "buying and holding" US Dollars for all their lives, yet they cannot see the difference between that and the folly of holding stocks denominated in USDX long term! Is anyone here talking about selling US Dollars yet?

Friday there was a major drop in the bond market, so what happens if bonds are no longer seen as a safe haven? Even after all the global attempts to boost confidence in the USDX bonds were off. So when stock markets crash bonds go up right?

BONDS=US DEBT

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

ALOHA !!

Grym ... Maybe I should make the start of the WAR ON TERROR with the Oklahoma City Bombing by Timothy McVeigh ...

Why didn't we invade and occupy Oklahoma?

TERROR is in the eye of the beholder! I have posted before here many times that terror has existed in the World for a very long time. I was nearly bombed in Israel back in 1970. Anyone standing near the El-Al ticket counter then was dead. I missed it by one day! The photos of the bombing in the Athens, Greece newspaper the next day my brother and I were pointing fingers and saying, "Holy ____ , we were just standing there the day before!!" Our entire 1970 tour of Israel was passing by one bombed out tank or bus after another and watching 17 year olds tote automatic weapons around the streets like we toted our backpacks! I have not been to Israel since, but I doubt it has changed much in 38 years! The Holy Land has a lot of violence ...

We won't wipe terrorism out by invading Middle East countries, even Daddy Bush warned junior of that plan! Bush Sr saying, "But, what can ya do the kids a maverick ... He never listens to me?"

ALL OUR BEST THINKING GOT US HERE!

Placing a buy stop limit order for 1000 shares of SWC, stop at 3.4, limit at 3.5. SWC historically tracks palladium very closely (since it mines a lot of palladium), and it was trading at about $7 when Palladium was at the same level a couple of weeks ago.

Likely big gap up tommorow in US/CAN. Good day to sleep in and see if there are any bargains left around midday.

[Bill Cara note:

Europe and Asia-Pacific equity markets did surge at the beginning, but at 4:30am ET have run into a small degree of selling. At 4200, the FTSE 100 was knocked down about 100 points in an hour to 4100, now looking a tad stronger at 4120 (+4.83% on the day so far --6:00am ET). I think the FTSE has to close the session higher than ~4300 to help rebuild the confidence needed for a monster rally tomorrow -- and it may not. Hong Kong did close up +10.24% because of the property developers recovery along with the banks. All in all, it's a good day, something that makes me feel better, having given the strong Buy Alert at 3:40pm on Friday for NY and Toronto. Believe me, that was not easy.]

Placing a buy stop limit order on SLW, stop at 5.06, limit at 5.2.

Mackinaw: that's exactly what I am planning to do. :) I thought that I will be able to catch the beginning of the bull market and make some money on the way up, but seing the huge gap up promised by the index futures, I am not sure any longer whether or not the opening gap will be sold. So instead of buying at the open, I'll stick to my usual practice of placing tight buy stop limit orders and hoping they get hit tomorrow.

European bank rescue plan may work well enough to avert immediate systemic seizure, though no details yet as to what they actually will do.

Sweden will do essentially the same as the EURo-zone countries, "we can't really not do at least nearly the same things as everyone else", as someone put it, but also in Sweden nothing has really been decided yet.

Swedish bourse up 7%, but Stibor (the Swedish interbank lending rate) was only down slightly midday (it is only fixed once a day) and still at an elevated level.

Caution is the better part of valor until the dust settles and what real actions to be taken are decided.

Could well be just another case of buy the rumours / sell the reality.

If there truly is mutch more accumulated debt in the world than can be serviced or inflated away (still my working hypothesis - a 100 year event), then a lot more of it is sooner or later simply going to be defaulted on in some manner no matter what the authorities try. Worst case - bankrupt / defaulting countries, as Iceland.

Good morning.

Here are your Cara 100 Ratings Changes:

LLTC - Upgraded to Outperform @ Credit Suisse

ADBE - Price Target Lowered from $40 to $33 @ Friedman Billings

They're gonna take Ma and Pa's egg money at the open...again.

kaimu - I sold a huge chunk of USD earlier this year. More than a fist full. I think you did too.

Here is an attempt to size a portion of the world-wide debt problem.
Is the European cure worse than the disease?

http://acrossthecurve.com

In the previous posting I noted that the German government rescue plan which includes guarantees and capital injections totalled 470 billion euros.

I hope that someone can point out a flaw in my logic but that would equate to about $2.7 trillion if one compares the relative GDP size of the US and Germany. In dollars the 470 billion Euros is $635 billion. The US GDP is about 4.3 times that of the German GDP. Do the simple extension of 4.3 times $635 billion and you get something in the neighborhood of $2.7 trillion.

There are no words to describe that sum. I dare say that it would be impossible to raise that sum in timely fashion without a total disruption of capital market flows.

acourant - "Why do people always ignore the military when discussing economics?"

So true! The military is a huge tax burden and a necessary evil (or so we are programmed to think?).

bsi...what tells you that the open will be a bear trap or are you guessing?

lessmore & spot,

I can't buy into your corruption solution of voting counter to incumbent party for one simple reason...

It seems to me we have a one-party system and have had for years. The Republicrats have a long record of bipartisanship on such things as: • Congressional pay and perks • Avoidance of addressing the most important issues like — energy independence (30+years), Social Security/Medicare funding, Tax Reform, Election Paper Trail, and too many others to list. Nearly all of these span my entire 70+ years.

Compare their job/pay/benefits to those of CEOs — Siamese twins joined at the pocketbook. The current financial mess is a prime example of joint CYA and that of your buddy. Just another case of self-regulatory Kabuki.

All else — committee hearings, investigative task forces, rants before an empty chamber — just theater for media parrots to pass on to the general populace.

We are a two class system — them and us.

The conflicts of interest are legion.

Grym:

You're basically describing my "Cow Theory" of the political system.

I'm seeing most of my holdings higher pre-market by at least 10% - yes, bsi - what is behind your statement re: egg money being taken again...???

kaimu,

We're basically on the same page (I think). My main point is that leaving Iraq (should not have invaded) will end nothing.

I agree a fade off the open is quite likely and that's how I plan to play it but I was wondering if you knew something.

2nd what do you have planned today?

Actually that's not true. While I think the above scenario is likely I will be prepared to go long if I feel fairly sure.

"We are a two class system — them and us."

Grym, YOU ROCK!

Anyone that buys into the "class warfare" BS needs to find the rest of their brain cells or they're alreay in the top 2%. By definition that can only be a few Caraistas or citizens, 2 out of 100.

If we can get everyone to focus on their economic place in life it would solve most of our other problems. Which of our social ills (currently used to divide us) wouldn't be solved by higher incomes?

I can't think of one.

Step one is to get one of us into Kudlow's job.

Sharkie

We'll already had a 1000 pt reversal on Friday and looks like another 400-500 pt move today. A 10% gain for most big boys in 2 days would make their year.

That said. 1/3 of stocks have already bottomed, 1/3 are in process, and 1/3 will be bottoming.

Correct position size and good entry/exits are even more important than stock selection IMO.

Cara 100 Update:

Upgrades:

CSCO - to Market Outperform @ JMP Securities
BBBY - to Hold @ KeyBanc

Downgrade:

SU - to Hold @ Deutsche Securities

Price Target Lowered:

DELL - from $30 to $18 @ Credit Suisse
IBM - from $120 to $90 @ Credit Suisse

goldie,

do u think buying a 400 pt up move at the open is good trading? do you think selling into a 700 pt down move at Friday's open was good trading?

On the contrary bsi, I was buying Friday, and holding all (stock) positions which I purchased at what I see as good values.

I would however like to unwind some of my calls which are now seemingly way out of the money.

I translated your statement re:" there goes the egg money again" = strong open, poor close.

Are world governments (inclusive) executing? This rally could fade if/when the market has the opportunity to fully digest this weekend's Kabuki show... I'm still in this cesspool.

goldie,

there's the rub. what is a good value? some of the issues mentioned are good values compared to where they were a year ago. but if you look at them, they've gapped up and are now trading below their open.

The bear market will end but it, IMO, take individual issues lower than most expect.

I haven't seen capitulation in the major indices, just individual issues. One must be very picky IMO.

Grym - Nothing I said is in opposition to what you responded. I merely said that voting the incumbants out would provide a temporary relief while Congress/Senators argue over who is in charge. This statement is based on the fact that power is normally allocated by seniority; thus, if all incumbants are out, then who can be named king if all children are bastards? 8)

Here's what I said: I whole heartedly agree on the basis that if only non-incumbants are elected, the result will be at least a short term respite from CONgressional plunder while they figure out who in Congress/Senate holds the power.

We can always hope.

Canada's Supreme Court awards RBC, Canada's biggest bank, damages for employees 'defecting' to another bank in a small town in B.C.:

http://tinyurl.com/4m3xkk

I'm not very impressed with this rally at all.

I'm hoping ma&pa sixpack don't forget the fleecing when they arrive to the voting booth. Maybe they'll determine the best course of action(s) between then and now.

chickie

unfortunately they will vote their pocketbook, not necessarily who will do the best job. And probably the best people aren't running anyway.

Wish in one hand... crap in the other. Which one fills first?

TED spread has dropped from 4.64 to 4.57. That's not dramatic enough to turn me into a buyer...

Volume is weak! Of the Cara Survivers list MSFT and INTC have the most volume. But they both are low volume, granted its only 10:20am.

but its nice to see mostly green so far. Let's see if they sell into this mini rally

[Bill Cara note:

In the context of the radically over-sold levels of Friday, the rally this morning does seem muted. So, you are right to be cautious. I am too. But, a one-hour rally of +5.5% in the S&P500 and NASDAQ Composite is a significant one.]

No signs yet of any level of restoration of market confidence, IMO. It looks like the market is being made this morning by gamers who placed buy orders at the close on Friday on the bet that there would be some seminal event coming out of the G7 over the weekend ( there wasn't ) that would cause a sustained recovery. I think it is far too early to take long-term positions when many good companies are still being re-priced based on future profitability in a recessionary environment. DYODD and don't be mislead by trailing earnings that are likely to be eclipsed by earnings downgrades and lowered expectations by those who have access to the hard data. We have a long way to go before there is a sustained rally where trust and belief replaces skepticism. Right now, governments don't trust governments, bankers don't trust bankers , brokers don't trust brokers and the buy-side doesn't trust all of the above. Good luck to all.

holy crap! Is it time to load up on ABX?

I like Chesapeake long here

Markets are closed in Canada today, Oct 13 for Thanksgiving. Its a statutory holiday.

shark- my hands are tied..

Mackinaw - ABX - I think you'll be very happy with PM miners in the near future. GG looks great down here too. I'm overweight in this area and considering trading PM's if this nonsense keeps up much longer.

Craig,
"If we can get everyone to focus on their economic place in life it would solve most of our other problems. Which of our social ills (currently used to divide us) wouldn't be solved by higher incomes?

I can't think of one."
.......
Child Abuse
Teen Pregnancy
Racism
Religeous discrimination
Family disintegration
Drug addiction
Epidemic STD
Alcolism
Child Pornography
.....come to mind

Meaning what? Can't trade? Ask your wife to untie you!

Don't know if anyone read about this:

Unlimited short-term funding for European banks by Central banks

on Monday, the U.S. Federal Reserve and central banks in Europe opened the spigot to allow European banks to access as much dollar funding as they needed at a fixed rate of interest and through regular weekly auctions. The European Central Bank, Bank of England and Swiss National Bank said they would be offering the funds on loan for terms of seven, 28 and 84 days.

http://tinyurl.com/4nwhm3

Buy cheasapeake...be like shark

Jaketh

Woooow! Excellent come back.

Bought some GG at 23.81. No clue why people are so desperate to get rid of gold and gold miners when the whole world has just decided to go on an unlimited money printing binge.

HERE'S THE PLAN!!

1) Vote all incumbants out EXCEPT Ron Paul in Congress and ?? in the Senate.
2) Vote Independents in for the rest of postions.
3) As most senior, Ron Paul will hold most power and will become Speaker of the House, who can then lead Impeachment procedings on the newly elected Pres and VPres.
4) As third in line, after the Impeachments, Ron Paul will then become President of the US.

Simple, hunh. Tell all your friends!

Anyone else that would not be surprised to see this market up 10% today?

I think it would be a kick in the shins for those who got taken out on Friday and would leave people very reluctant to buy in......perhaps waiting for a "buy signal" that isn't obvious...

Caramba!

Thanks, Telestar3d, for your Graham screen results.

Hate to contribute to blogging not related to investing, but must comment that the factors listed by Jaketh are all worsened by bad economic circumstances. Altho those problems do occur at all income levels (e.g. President G. W. Bush has admitted to past problems with alcohol), poverty exacerbates all of them in severity and rate of occurrence, plus limits ability of the individual to get help for the problem.

Consider if you will, that since government issued bonds are now under the exclusive patronage of private banks the world over, and that government issued bonds are supposed to be the vehicle through which governments are to raise capital to fund their obligations, this leaves bond markets the world over exposed to a massive sell off.

The complete privatization of the bond markets through derivatives have destroyed any notion that these instruments are backed by governments, in actual matter of fact, taxpayers are now only 'the counterparty.' The 'value' in bonds is gone. They are tied to notional values as they are the capital underneath a vast complex of derivatives and swaps.

Damn that felt good.

FXP hits $200 on Thursday, now down to $109. Talk about short term trading vehicle!

Good morning from SoFla

Today's Community Chat is up and running...

See you all over there...

APWR - Pushing highs for the day (up 45%). Buy alert - Oct 7.

Long but cautious.

Posted to the old thread...

APWR has been making a move this morning (up 58%). Buy alert - Oct 7.

Cautiously long.

Craig,

Sorry, but while higher incomes make life better and easier in many respects (less day-o-day anxiety over basic needs) but I don't see most of our social problems being cured simply by more money. In some cases the reverse may apply.

My grandfather was an immigrant, coal miner — not much money, large family (9 kids) everyone's help was needed daily. My father was somewhat better off, but we were not wealthy, but while I mowed the lawn and a few other minor tasks, I was not that necessary to the daily routine. I had it better financially than my father — able to support a family of four on only one income. My kids did even less around the house.

Each generation had it easier due to labor saving inventions which in my dad's childhood needed to be manually addressed daily.

Today the wealthiest hire the lawn care, cleaning, etc. and kids are free to get into more trouble. Look at the increase in school security needs — cops in the halls, drug abuse and sales — affluence IMO is a contributor, not a solution.

ALOHA !!

CP-My discourse yesterday was about how holding any government paper including foreign currency and especially any paper the USA doles out(which includes the paper in all our wallets)is denominated in DEBT! Why hold DEBT? DEBT is essentially 100% liability. That is why I paid off my mortgages, bought art, bought bullion, bought farmland ... What do all those "trades" have in common? I have eliminated "counterparties" that are based in DEBT! The original Charles Blackman I bought in 1998 in Sydney at a Sothebys auction has no counterparty. A 1890 British Gold Sovereign I bought in 2002 has no counterparty. Of course when you pay off your mortgage your property becomes an asset not a liability. You own it not the bank(unless you forgo paying your property tax)!

You're really only safe when you have no DEBT counterparties.

Over the weekend the global governments just announced they prefer the ZIMBABWE MONETARY SYSTEM! We are all GOVERNMENT WORKERS now here in the USSA!! We have no moral ground to criticize the government of Hugo Chavez! The banks won, just like they did in 1913 ... What's next now ... the Bill Of Rights?

What CHANGE?

In past posts here I proposed that the US government and the US FED would take this route as they have been choosing inflation for as long as I have been alive. To call for deflation is just not their style! I once again say this is not a credit crisis ... it is a monetary crisis! The weekend G7 meeting just made my point and its now a global monetary crisis. Would you call ZIMBABWE problems a bank crisis?

I'm writing in RON PAUL in big red letters!