Economyths
by Bob Hoye

http://www.safehaven.com/article-11576.htm

bit of a treat:

Nouriel Roubini

Nouriel Roubini, Chairman, RGE Monitor and Professor of Economics, Stern School of Business, New York University

http://tinyurl.com/42jk4k

via: http://www.victoradair.com/

In last night's debate, Obama and McCain were to address domestic problems and present their solutions.

What we got was wallpaper pasted over the cracks.

Obama's description of the pattern, colors and design was delivered in his usual smooth and entrancing style. He made wallpaper seem like the thing to do and will even give it away free to those who can't afford to buy their own.

McCain's wallpaper was less intriguing — "I know how to wallpaper. I've wallpapered a lot. We can retrain people to do wallpapering, so they can get a job."

What we needed is a bold plan laid out in a broad sweeping way. What we got is a complete bypassing of the critical, emergency nature of the U.S. economic and financial systemicl failure. The dangerous problem is in the very foundation of the structure.

The media continued the charade with the examination and valuation of the trivial and threw in the physical appearance of the candidates — body language, voice quality, blah, blah, blah.

Earlier in the day, the wealthy investor, Carl Icahn was on CNBC's Fast Money program. The gist of his message: "We need to get rid of incompetent managers, not reward them. The same goes for boards of directors. The boards say, "These guys had a contract which we must fulfill," — What about the goddamn contract we had with the shareholders, the contract with the bondholders?"

In his view the CEO's "contract" should be lumped in with the bankruptcy court's distribution of assets remaining.

He went on to indict the SEC, Fed, regulatory agencies, the congress and everyone who ignored, permitted or participated in this fraud. (Yes, he called it what it is.)

As I watched/listened to the next president and the runner up...
I wondered if a person really be disappointed when he hears exactly what he expected?

"Make no small plans for they have no power to stir men’s blood.."
Daniel Burnham, architect

[Bill Cara note: Five minutes into the debate, I realized that neither candidate understood the issues and had a plan, one that they would admit to anyway. The highlight of my evening was the prelim show of Keith Olbermann of MSNBC who repeated a couple times the speech of Gov. Palin in New England who referred to it as the Great Northwest. It's ok says Olbermann, she can see Portland from her house. Broke me up. The rest of the evening was spent watching one candidate present himself as totally relaxed and in control and the other one fidgety, with eyes rolling, seemingly pent-up with frustration or anger. I didn't find it a good sign in a candidate for President. But while the other networks were calling Obama the debate winner by at least 2 to 1 among independent or undecided voters, the McCain friends polled by Fox had him ahead 89 to 11, which is more proof of concept that independent and objective thinking can be overrun by a consistently-themed media. Of course, the other networks like MSNBC and CNN can be accused of the same thing. I take no sides -- just telling you what I see and what makes me laugh.]

kaimu- "I recall back in 1990 I was so broke I drove around in a beat up old BMW with a broken gas gauge. I ran out of gas in the CALDECOTT TUNNEL on my way to Orinda,CA(East Bay of San Francisco))about 100 yards away from the end of the tunnel!"

was that you? don't worry, man..i'm a no horn/no gesture guy, i just turn up the volume on the music...

I would like to thank Bill and all the people in this discourse for all their insights. Understanding that there is a lot of intricate parts of the market I can't help but think in more simplistic terms. Maybe somebody can correct my views on things. I buy into the theory that booms and busts are created through an increase and decrease in the money supply. I believe we just had our boom and Bernanke will do anything to keep the money supply from a quick contraction that would put us in a depression type situation. Since I believe the previous statement I can only see a more prolonged contraction until growth or production comes to a certain equilibrium. I think this will take a few years. I see interest rates rising which will reward savers with CD's and such and keep a certain cap on the equity markets. I agree with Bill's premise that well run companies will come out stronger and with higher market shares but I just can't see the equity markets resume their partying ways.
Am I off in this kind of thinking?

[Bill Cara note:

I think you have it right, but instead of money supply, why not substitute the word 'credit'.]

This from MSM Money Central...i know...
09:02 ET Dow , Nasdaq , S&P : [BRIEFING.COM] S&P futures vs fair value: +15.50. Nasdaq futures vs fair value: +6.50. The tone in premarket trading has improved. Stock futures in both the S&P 500 and the Nasdaq 100 have a lead over fair value. Overnight U.S. dollar LIBOR rates fell more than 20 basis points to a bit below 1.94%. The one-month rate fell 8 basis points to 4.28%. Net long-term Treasury International Capital (TIC) flows for August totaled $14.0 billion, which is below the $30.0 billion that was widely expected. Nasdaq at... NYSE Adv/Dec 0/0... Nasdaq Adv/Dec 0/0.

kaimu - i'd like to thank you for giving perspective on things in these crazy times. i read your message from last night and it put me at ease. you see, i'm a 30 year old investor that has lost quite a bit in the carnage over the past year, i work in financial services and own my own furniture business, but i fear that i'll lose my job and my business will go out of business. but what i really should be worrying about is making sure i live my life to the fullest. earlier this week i decided to take today and tomorrow off to go surfing (i live in SoCal) and enjoy the weather. i think i just might do that.

thanks again.

Turkmanistn: A new Caspian energy superpower is born

The immense scale of Turkmenistan's gas reserves, revealed after an independent audit, elevates the country to the top rank of gas producers. More, it renders Moscow's energy strategy obsolescent and rekindles United States and European hopes of loosening Russia's grip on Central Asian gas pipelines.

http://tinyurl.com/4h24bf

Just stop paying your mortgage

After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away. Why pay your mortgage if foreclosure is off the table, and if you know that lower payments, and possibly a reduced loan amount, would result?

as more and more borrowers succumb to the allure and safety of nonpayment, look for the number of troubled assets to swell. This will ensure that the $700 billion merely represents the first installment in what will be a multitrillion-dollar plan.

If you have any guilt just remember, Washington argues that consumer spending is the best way to stimulate the economy. Living beyond your means is a patriotic duty.

http://tinyurl.com/3gqnhg

What I heard today is that mortgage rate went higher because of rescue plan of 700B
This is unintended result of it. And created more problem in housing than solve it
Also heard that main reason of sell off is hedge fund liquidating fund and sell off buy hedge fund because of bank calling back credit

eeyoreptz- the markets will "resume their partying ways" when they're able to-> with the advent of globalization, the US is no longer the sole ball carrier; i don't think China and India to keep economic development on hold while the US recovers...

as craig pointed out earlier, those of us who lived through the seventies know what it's like to come of age during a 'bust,' and to be honest with you, it was a lot more fun than the eighties...some things flourish during recessions, and creativity is one of them-> music/novels/art/film from that era endures to this day...even television writers came up with antidotes to the gloom-> by the time Meathead got skewered by his father-in-law for the last time, the end of the recession was in sight...

RSI scans this AM 10/16

Bill's Oct list/no debt companies - FOSL capitulation

SP500 50% list (companies that comprise 50% sp500 mkt cap) - no capitulation

Top 10 QQQQ components - 3 buys GOOG,AAPL,RIMM, 1 accum CSCO

DJIA - 15 buys/5 accum

"don't think China and India PLAN to keep economic development on hold.."

Good morning,

Bill, I enjoy your daily report, especially your brief weather report 'from the beach'. Keep 'em coming as it snowed here at site yesterday and stayed... Kind of reminds me of my portfolio, HA! Thanks to the absolutely tremendous posts yesterday by Casey, Dr.C and 2nd. Reflecting on their wisdom, I can say: I'm gettin' by.

[Bill Cara note:

'Gettin by'. Ain't that the truth!]

Cara 100 Update:

DELL - Coverage resumed @ AmTech Research with a Neutral rating.

MSN moneycentral 9:17 "CNBC reports that hedge fund Highland Capital is closing and unwinding its flagship fund, Crusader."

Associated Press

Suit against God thrown out over lack of address (homeless!)

LINCOLN, Neb. (AP) — A judge has thrown out a Nebraska legislator's lawsuit against God, saying the Almighty wasn't properly served due to his unlisted home address. State Sen. Ernie Chambers filed the lawsuit last year seeking a permanent injunction against God.

He said God has made terroristic threats against the senator and his constituents in Omaha, inspired fear and caused "widespread death, destruction and terrorization of millions upon millions of the Earth's inhabitants."

For the first time, I have a fundamental disagreement with Bill. One can't blame Roubini et al. for calling it as they see it. The problem with "fire in a theater" analogy is that these economists actually *think* they see a fire. Just because people are listening to them and acting on it doesn't make their actions "almost criminal."

Furthermore, if we break Friday's lows, which is entirely possible, all the bottom calls made 'round the world will fade quickly into the collective screaming of a continued market crash.

I of course agree w/Bill in that we should keep your eyes on the prices, but I will never completely tune out commentary I deem to be intelligent. Perhaps we simply differ on our definition of "crapola," hehe.

[Bill Cara note:

I just tell it the way I see it. Even before the Roubini interview, somebody here (can't remember who) commented that he was being brought in the spew his negatives -- the same ones we heard 3 months ago, 6 months ago, 9 months ago... Come to think of it, hasn't his baby been born yet or is the gestation period numbered in years. I need to focus on prices day to day and week to week. Yes, I was in complete agreement with Roubini two and three years ago, and you know that. But his same-old, same-old is rather thin at this point, isn't it?]

Bill, your daily report today was singularly clear-sighted and wise. It scared the daylights out of me, but also gave me the information I need to make sense out of these senseless times. Thanks.

Sunpower (SPWRA) reported strong earnings this morning and so the group will participate in today's rally. Evergreen (ESLR) reports its earnings after the close.

[Bill Cara note:

I received this letter today from an expert in US conventional and alternative energy. It says a lot:

Bill,

With all the "excitement" of solar and equities, I relish the opportunity to review the document your sent over the weekend.

You probably heard....part of the big bailout was an 8 year extension of solar energy tax credits, 30% from Fed.

This will be a massive tailwind for the solar industry. It will become an industry. People will invest in their companies as I will in mine.

/Anon]

My LAST post dealing with Elliot Wave & phi mate turn dates.
~~~~~~~~~~~~~~~~~~~~~~~
From my yesterday's 2:21PM post

"Any way we cut it, we should see one more sharp decline, either several hundred points, or several thousand, starting between now and late next week."

From Wednesday's night newsletter.

"I don’t mean to scare you tonight, however there is a set-up scenario where we could see a
panic plunge, another crash leg, a market meltdown that is simply terrifying over the next three to four days. Last night we presented three scenarios calling for a plunge of at least several hundred points that was imminent. We wrote, “Any way we cut it, we should see one more sharp decline, either several hundred points, or several thousand, starting between now and late next week.” The Industrials went out and plunged 733.08 points Wednesday.

(1) The first scenario is where the coming phi mate turn date is a top, with a 2,000 point plunge
starting next week. If that scenario is occurring, it means wave 4 up is forming a symmetrical triangle,which requires a series of volatile reversing waves, like we have seen so far this week, the first leg up of the triangle the rally Monday and Tuesday, the second of five waves, Wednesday’s sharply sell-off. This scenario requires three more reversing “sideways” waves occurring over the next several days, then wave 5 down starts next week at our phi mate turn date, scheduled for October 23rd +/-. That decline could be 2,000 points +/-.

(2) Two other scenarios: One is a catastrophic crash leg that could take the Industrials down to
the 6,000’s +/-, and the S&P down to 600 +/- over the next few days, which would seem like a complete market meltdown. That would be wave 5 down, of e down of a-down. It suggests wave 4 topped Tuesday, October 14th. It would bottom next week around our coming phi mate turn date. The carnage would be devastating. There are no signs of a final bottom here, precious few buy signals from our many key indicators, so this scenario is frighteningly possible.

(3) The third scenario, is that wave a-down bottomed Friday, October 10th, and that Wednesday’s plunge is a nearly completed correction of the first leg up of Minor degree waved b-up which started intraday Friday, continued Monday and finished Tuesday morning. That scenario requires an immediate and powerful rally. A break below 7,882.51 eliminates this most optimistic scenario.

According to reports, the light at the end of the tunnel is a proctologist administering a no-anesthesia colonoscopy, and he's in a hurry, late for golf game. Fore!

[Bill Cara note:

I've had a couple and there is nothing to worry about. You remain fully conscious and get to watch the operation on closed-circuit TV while chatting with the surgeon. I'd only be a bit worried if I saw a driver in his hand.]

Buffet now following the Cara strategy of selling short puts to reduce costs of stocks...

Warren Buffett Sells More Puts on Burlington Northern Santa Fe, Berkshire Hathaway Filing Shows

http://tinyurl.com/3wf7mm

[Bill Cara note:

Warren is waiting for traders to throw away the stocks he wants. He also is enjoying the record high premium income from a put-buying public that has run amok.]

RE: Averaging down as an investment strategy

By and large, averaging down is an amateurish investment methodology for the average investor, because you're putting good money after bad.

There are probably a select few professional traders who can use this strategy (by using options, as Bill mentioned) to their benefit, but they're the exception rather than the rule.

Generally speaking, "losers average losers." I personally would not recommend it to the average investor.

Just my opinion, as always.

Speaking of terrorism....that's what someone is doing to PM's and miners today.

Craig
GG anthoer loser I pickup yesterday?

time to add GLD???

Gold Worth Nothing ! Film at Eleven.... ;^)

Re: Gold Price

There is literally zero participation on the COMEX because its a rigged market, thus the price takedowns. We've seen it before again and again. This is no different. People want physical gold, not paper or futures, its doubtful they'll get the COMEX discount.

Thanks for the post QT.

I don't understand most of the technical analysis behind it, but I think it's telling us to buy some backup underwear.

Even Kaimu's considering digging up his stash for a quick sell!

re:Averaging down

My experience is usually the trader wants to prove he was "right" by buying more. Instead of waiting to buy more with some trading signals, he plunges in. And about the time the stock bottoms, he's out of cash and patience and sells the position.

The voice of experience.

[Bill Cara note:

While I don't disagree with you that unsophisticated traders do this too often, it is a fact that averaging is a strategy of successful professional traders.]

Good morning to all

Thanks bill for your Daily Report

We were punched in the face yesterday and damage was done to all...

let's pick ourselves up and continue the fight

It's hard...but in the end we will succeed

have a great day looking for opportunities

SV

Wow,
Look at Gold $797. In the space of 20 min. People are hungry for cash..........and I'm hungry for gold. This doesn't get any better.500 more GG @ 22, and a lovely stink bid @ 18 ready for next week. Happy Days!!!

Be careful using the Horizon Bull & Bear ETFs. I knew they didn't track their index exactly and to expect some differences but these are something that has to be considered when using them. To compare the index ETFs to the Horizon Bull & Bear ETFs that are supposed to move 200% of their respective indexes:
- from Aug 29 to close of last night:
XEG.to - ishares S&P/TSX oil & gas ETF: -48.9%
HEU.to - Horizon energy bull plus ETF: -76.5%
HED.to - Horizon energy bear plus ETF: 176%

XGD.to - ishares S&P/TSX Global Gold ETF: -21.8%
HGU.to - Horizon Global Gold bull plus ETF: -48.7%
HGD.to - Horizon Global Gold bear plus ETF: +2.2%

On Sep 12 I bought some HGU and I'm down 26.7%. If I had purchased $10000 worth I'd be down $2670. If I would have put $20000 into the XGD ETF I'd be down 8.1%, or $1620. That's quite a tracking error.

how low can yri.to go?

I need help please? should I hold on longer till the end of day? I dont know what to do.

Sawtooth morning - what's getting chewed?

Yamana is a penny stock (under 5)

TED Spread continuing to ease. If this comes off big one day soon, we'll see another huge up day...I smell it coming? Options Expiration Day Friday?

[Bill Cara note:

Agreed, but also what about the low price of oil, and the falling price of gasoline at the fuel pumps. That is like tax relief, and the fuel surcharges can now be lowered, for corporations and consumers alike. Isn't that going to have a big impact on the economy.]

Today's early morning uptick provided courtesy of your friendly PPT.

Let's see how far they're willing to take this thing.

shark you think people are not ready to jump and that is your help. That fits well.

teamonfuego

Hope you are right!

anyone have a good clue for support on gold?

Re: LME

There would have been a sizeable dump of bullion on the London market, because that's the only place that trades in physical gold. I wonder if an ETF collapsed and had to sell its gold. There is a very wide differential between the near futures and the spot price right now.

GOOG getting close to the Friday lows...

Tbar

The pain is brutal and I am with you. There is alot of good advice on this board and right now 2nd_Ave wisdom is running thru my head.

Here it is again as a reminder. "a" makes a lot of sense to me and I have to believe that holding quality PM stocks will be rewarded someday.

Good luck man!

(a) selling into a panic is almost always a mistake, (b) markets recover, (c) markets do not recover in a predictable manner that guarantees an entry, (d) any position at all (including no position) carries a risk (not the least of which is underperformance), and (e) having faith in human nature (or psychology, call it what you will) rarely lets me down

Cara 100 Update (Final):

Price Targets Lowered:

KO - from $57 to $55 @ Credit Suisse
LLTC - from $38 to $26 @ UBS

JesseSLC at October 16, 2008

thxs I am on a margin call now,47yrs old with only enough money left to last 4 months, my disability ran out in april,r.a. took away my life career, I am not trained to do anything else other than general contracting /cabinets.

My good miners have been cut but 50-80% in the past yr

My wife couldnt go to work on tuesday because of the stress of losing everything.

I worked very very hard all my life and now everything is lost

w/r/t shark's suggestion of avoiding "guessing" turning points:

there's nothing wrong with guessing a potential turning point, (always @ support / resistance) watching the price activity over the couple minutes while it's there, and trading based on that, right? your max loss is capped, b/c within a few minutes you'll know if you're wrong, which is the important thing. just curious if i read the post incorrectly.

Tbar- how did Bill put it yesterday- they're attempting to smash your will...and you can extend that to the global markets as well-> when they look back in a year, guess who will be celebrating buying into the sell-off? turn off the PC if you have to...

Never answer a margin call by putting up more cash. Sell stock before you put up any money.

JMHO, of course.

Tbar - I'm still holding my miners. It's very tough. But they are the only ones with money in the ground.

Tbar

Get a chance if you want email me latter today

qt.car[at]gmail[.]com

latter:later [sorry]

Tbar, best of luck to you. This is an absolutely brutal market.

Tbar

Your story sounds alot like mine except I also lost my wife in the deal. You and I are not smart enough to know what is happening in this market so it makes sense to listen to the advice of the wise elders on this board, Bill in particular. There is some type of massive hedge fund liquidation going on and we got caught in the way. I believe Bill's assessment that once things settle the gold/PM market will turn up.

Please read 2nd_Ave, Casey, Dr. C posts again. Don't let the despair get to you. Give your wife a hug. Focus on the good. Take care man, we can make it thru this together.

2nd,I believe what you say and Bill of course but as I said I will be out of any money to work with in 4 months,maybe sooner,entirely bankrupt with everything reposeessed.

I am strong willed maybe that is what got me.

Maybe when everyone gives up on calling a bottom, even Bill, the bottom will be in. No disrespect intended, just gloomy.

[Bill Cara note:

Agreed, but also what about the low price of oil, and the falling price of gasoline at the fuel pumps. That is like tax relief, and the fuel surcharges can now be lowered, for corporations and consumers alike. Isn't that going to have a big impact on the economy.]

I agree, but its all about credit. The market doesn't give a hoot about relief at the pumps if they can't get the money to spend less at those pumps.

Keeping an eye on BAC, JPM and C as Bill suggested. All down between 3-5%.

Tbar, I feel your pain...

But in such violent markets, it is really unwise to buy stock on margin. Esp gold stocks...

Jim Sinclair has repeatedly warned against the use of margin in gold-investing.

http://www.jsmineset.com/

If its any comfort, Bob Hoye notes that gold stocks do well for at least 2-3 years after a post-bubble contraction.

But he cautions that gold and gold stocks will be under strong pressure in Oct due to the credit crisis. He is confident gold / gold-stocks will recover after Nov.

http://www.321gold.com/editorials/hoye/hoye071408.html

"In the past eighty years there have been three secular bull markets in North American equities. The gold sector declines during these periods, then puts in an important low as the secular bull market crests (1929, 1966 & 2000), continues to rally through the post bubble high seven years later (1937, 1973 & 2007)."

Tbar - You will make it through this and we all will make it through this. Perhaps poorer, perhaps richer. But we will make it. My parents did it and they had many more rougher times in the 1900 - 1945 period.

Tbar- re the margin call, you're going to have to take the hit; maybe posters here can help you decide which positions to sell...once you take the hit, you've taken off the leverage, and much of the anxiety that goes with it...do NOT allow the broker to decide which positions to sell...

SSRI diverging on hourly chart.

Do ur own homework.

Tbar

2nd is right about the margin. I don't have any stocks on margin but once I got out of my futures contracts I felt alot better.

"anyone have a good clue for support on gold?"

Gold and silver do not have support during NY COMEX hours. However, we do offer a multitude of resistance levels as provided by the PPT and associates.

Looks like the PPT did what they could this AM and then said, "OK boys, it's all yours ..."

875 on the S&P needs to hold to form the "w" that everyone is hoping for, or ...

Just my opinion.

Bill:

Won’t valuations be further affected by new government imposed taxes? I cringed when XOM was singled out as an example of a company that makes too much money!

Some of the bigger gold miners along with the intermediates had downgrades on the assumption of a lower average gold price for the 2nd quarter and higher costs.

Finally - the near futures price adjusted downwards in the last few minutes. What we're seeing is an orchestrated takedown of the bullion price in the face of the failure of market interventions.

We're not seeing the awaited market capitulation supposed to occur, and I believe its because the emphasis was in an oil price mania, and that trade stubbornly refuses to accept that the oil market is crashing and are attempting a turnaround, believing the bottom was put in last week.

That being said, gold markets have been resilient to say the least. The yield environment is still very, very low:

http://finance.yahoo.com/bonds

The futures chain in gold shows a healthy contango:

http://finance.yahoo.com/q/fc?s=GCX08.CMX

If you compare yields to the Japanese bond market, its small wonder that the gold price in Yen continues to rise along with the bullion price in Yen. Its no different.

We are seeing yet another costly intervention in the gold markets, I just wonder which taxpayer in the G7 is footing the bill for this one.

could it be possible to sell options to eliminate the margin call?

how bad is the call, how close can the call be satisfied?

throwing out ideas...

Time for stink bids-GG 18.5ish, ABX 23.5ish, NEM 24ish, SLW low 3s. Talk about trashing stocks-time to scale in.

2nd_ave at October 16,

I only have one position that is in my margin account yri.to

My rrsp' are all I have left after that and they are what I was referring to that would last me 4 months.

As Bill has correctly mentioned numerous times in the past, the under capitalized junior gold miners will be hurt the most in a credit crunch as their ability to borrow for projects is severely diminished.

That's what we're seeing reflected in the stock prices of the junior miners.

Tbar- i don't know how concentrated you are in the gold sector; another suggestion would be to diversify, and you couldn't have picked a better time to do it-> virtually the entire Cara 100 is in the AZ...if EVERYTHING is down by 50-80%, then allocating capital across the board makes more sense than putting it all on gold..

Yri.to is a good one to hold, because they have copper hedges going out past 2010, and their balance sheet will look good when the copper price falls. I believe this will be the same with ABX, though I haven't read anythiing in the papers about their copper hedges recently.

Sorry to hear about the margin call, tough times are claiming the best.

can you explain what "r.a." and "rrsp'" refer to?

VIX at all time high...

Additionally, YRI.TO will have their quarterly report on Nov. 4.

I have had some big losses over the years.

Somehow I skirted disaster in South African real estate this year but I lost my now unaffordable dream house there but gained my sanity in return.

Today at the local mall here in Thailand, my son drew my attention to the sidewalk sale of camping equipment.

My goodness, tents are cheap these days. Bear in mind, I hate roughing it but a new generation water proof tent with integral ground sheet and mosquito netting is a lot better than sleeping out in the open or on a park bench. We're off to Europe soon, take some extended cruises but I am going to carry my insurance policy with me, a lightweight tent and sleeping bag for a "policy premium" of under $50.

During a previous financial crisis, I was all set to move from country club living to buying a single wide mobile home for $5000.

In other words, there's always a Plan B and we can always come back.

Specific investment advice? Pay off the margin by reducing your holdings, then walk away from trading for a long time. Let your miners function as a form of perpetual LEAP, waiting for the inevitable appreciation somewhere down the line.

One of the most brilliant stock market plays I ever saw was in 1998 in Thailand. An Israeli hotel owner in Pattaya told me all he did was buy the all but worthless warrants of the crushed Thai banks, selling for the minimum 10 satang (less than 1 cent), stay awayf from the market and hold them for a 100x rise. It went on to happen.

TBar, I can only commiserate as I have made a number of bad decisions and suffered substantial losses, too. If I knew what to do, I'd do it myself.

I wish you good luck.

Bill Cara - The link to Pascal Willain's web site cantains the suffix " .eu" which doesn't work at least for me. Is there a link that has " .com" or whatever that works in US?

Thanks.

FWIW (and probably not much) I saw a bid for 150,000 shares show up on IWM (RSK index) when it got down to $49. I'm not used to seeing bids/asks much more than 30,000......

2nd
r.a. is rheumatoid arthritis, 5.5 yrs ago it ended my contracting business.I was at the top of my game then. Wealthier than I had ever been in my life. rrsp is registered retirement savings plan(canada)

I only recently did margin for the first time out of desperation.

Thanks very much all of you for all comments.

ALOHA !!

2nd ... Since you live in the SF region you know what traffic is like when someone runs out of gas in the CALDECOTT TUNNEL! HA!! To top it off it was around 4:30pm!!! HA!! I think I made the evening news on CBS that day ... When that happened I just laid back in my seat and started laughing!!

ive been all over the map the last few days due to a minor eye surgery. and ive been sitting in front of my computer in alot of pain, with all the lights off and shades closed because light makes it worse, im off work for the week and making myself sick watching the market especially the PM market get beaten down.

what happened in gold this morning is manipulation of the highest order in my mind. its been a regular routine for gold to base then make swift downward plunges before basing back up. i cannot believe we were sitting at gold above $900 last week.

yes i got out of my entire position of the HGU yesterday at about $9.60.

call me crazy but i see the massive swings in gold going both ways from here on in, and the more the broader market tanks the less fuel there is for it to continue to take down the miners.

id love to get this all over with and restore some sense of sanity to things but hey, im trying right now to focus on the fact that i have a great job, a great little condo downtown in toronto, health and family are doing great and this board continues to be a source of great information and idea exchange.

call me crazy but i just got back in and am hoping to ride this out.

the reason being:

the HGU was at about $12 when gold was last at $900. IF the market can settle down and find a bottom soon, even if its just basing action, and IF gold retraces back up towards $900 i believe the miners will follow to some degree. so HGU at $14-16 wouldnt be that unreasonable,

im viewing the recent dump in gold as a sort of corrective action in the miner:gold ratio. but this is all predicated on the broader markets finding some sort of bottom.

im down quite a bit from when i started 3 years ago despite being long gold. i think that makes this all the more painful. but it is what it is, and this is my theory going forward, i dont need this money right away, i just need to convince my only client to let the market do its thing, that can be the hardest part of a longer-term strategy.

i sincerly hope we all make it through this, i hate to read about people on margin loosing money they cant afford to loose.

here is my bet and you can quote me on this:
if the HGU can get over $37 (the price it was when gold last touched $1033) before the start of next years PDAC i will personally buy each and every member of this board a drink in toronto one night when we all meet. preferably some single malt.

good luck

RRSP = 401K for Canadians (Retirement Savings Plan)

You don't usually want to withdraw from this until retirement... usually better to borrow unless income is low. Most planners say stick with low risk GICs in this account... since the bulk of my savings is in here I play the stocks and don't listen to them.

CNR is down today.. ho hum.

Would suggest that anyone with credit concerns see a credit counsellor rather than this board... we can try to help but after all this is just the internet and isn't the best medium for personal things like that...

best wishes to all.

GG Nov 17.50 puts bid at $1.55. Want to buy GG under $16.00? Here is your chance. Or walk away with $155/each. I'm in, but I've thought it was the bottom before, so DYODD.

Yes, I agree. Things are every which way but loose.

oh and forgot to add:

TBAR:

i have some information about RA that you might find helpful (i work for a health insurance company)
email me at jaycobal at gmail dot com

Kaimu...

I posted this yesterday but you may have missed it.

"I will be in the ASX today buying up beaten down commodity stocks I have been following since 12/07 and averaging down on companies I already own who keep putting out improved reserves and production and profit! To each his own ... Besides how I can ignore the ASX discount on the USD?"

I too believe this is a great course of action for the next few years. How are you purchasing the ASX stocks? Are you using a US broker for the orders are did you open an account with an Australian broker and transfer funds there? If so would you recommend that broker?

Any insight into the stocks you prefer?

My wife's paranoia is that we will run out of gas. I have to fill up when we get down to a 1/2 tank.

XLF still way above the lows means we still have a chance for a rally.

[Bill Cara note:

Maybe this piece in a Reuters article will bring a laugh:

"Bush is to the left of me now," Chavez told an audience of international intellectuals debating the benefits of socialism. "Comrade Bush announced he will buy shares in private banks."

Chavez, who has insulted Bush in the past as a drunkard or the devil, called him clueless on Wednesday. He accused him of simply parroting the words of his aides without understanding the new policies that rely on heavy state intervention.

"I am convinced he has got no idea what's going on," said Chavez.]

dr.cosa- "if the HGU can get over $37 (the price it was when gold last touched $1033) before the start of next years PDAC i will personally buy each and every member of this board a drink in toronto one night when we all meet. preferably some single malt."

and what if all 100,000+ of us show up?

kaimu: I heard that surfing sucks and that one shouldn't try it. At least that's what the bumper sticker said.

p.s.: the farm is very green and doing quite nicely. That long term plan is going well. Now if I can only get a chance to get out of SF and go visit it ....

S&P sliced through 875 like a hot knife through butter. This is not a positive development for the bulls.

Be careful folks, this is no time to play hero.

UNG turning around

Looking at GG this morning, placed my stink bid at @$20.12.

Does anyone really believe gold will loose value from this fiat system expansion? I fail to see how.

Dr cosa

thankyou I will.
tbarrett@xplornet.com

looks like VIX/VXN retesting the RSI 70 area.

Both showing distribution using RSI scan.

Man....face to face with the cattle catcher.....will the train stop?

true enough 2nd-ave,

and if gold miners go back to those highs, there may be that many more folks who can afford to make the flight down!!

ill take that chance!!!

I have suffered the financial equivalent of running out of gas in the Caldecott.

Just sold some ESLR to protect my remaining equity. I expect a very positive earnings report, but have no confidence whatsoever in this market. And if they do miss, I would have been completely destroyed.

I have sold a growth stock trading at a fraction of its book value and even a smaller fraction of its forward revenue.

Todd,

Let us know when u think it's time to buy.

Or maybe I should ask

What signals/indicators would tell u to buy?

Screw it - about 20 minutes ago I sold half my longs and am hedging:

QID - in at 82.89 (with tight stop)

Mr. Market - you can now officially bottom.

Tbar, I'm desperately sorry to read your story. I happen to be much luckier than you in that I have invested (and therefore lost) less in the market. From a bankroll of 14000 I did have it up to 18000 two months ago and it's now languishing near 10000. I've decided that I might miss an up move in the near term, but it sure as hell won't be getting any worse for me. The market IS very close to a bottom I feel, but who knows how many painful washouts are coming? Zero? Two?

It's interesting to read about how the market can bottom when despair is at its highest and people throw in the towel. I'd be lying if I said I hadn't just joined that camp with my actions, although it doesn't quite feel that way.

team where is that historic vix reading?

GG - that worked out well, will buy again if/when $17 appears on the horizon.

In over 35 years of investing and trading I have never used margin. I have frequently used my Personal Line of Credit, and maxed it out on a few occasions knowing I could always service the debt. My thinking is that I need the wall between the broker and my shares. My current PLOC is only 2K and I'm holding my miners for the reasons given here, particularly because the money is in the ground. When I see my particular points for entry I will draw on my PLOC and get back into trading. Good luck to all in these difficult days.

Wow!!!!!!!!!!!!
what happen to GG.I just check market and it is down big.
look today is the day to have real bottom?

Last check ^VIX was 76.6, up 10.79%

Real time VIX at 80.95

Chickenpookie- GG @ 17.00 - should be about an hour the way it's going.

TerryC - Beware "Claim Jumpers"; this is my fear with PM miners.

Richard Russell says "HOLD YOUR GOLD":

http://www.321gold.com/editorials/russell/russell101608.html

He says reflation will boost gold if it works.

I'm getting $40 fluctuations in the near futures price of gold. First its down $40, then up, then down again.

Mate, some people are going to make themselves very wealthy out of this mess. These prices are unbelievable. I can't resist. 12 months out no one will believe you.

One thing I didn't know about the VIX is that it's logarithmic function. going from 20 to 30 is the same as going from 40 to 60, same as 80 to 120... So we could easily spike up into the 100s and it doesn't mean that we're parabolically getting more and more fearful... we'd be linearly getting fearful.

...I think. Anyone care to comment?

hui support?
http://tinyurl.com/3psmkj

What is a good price to buy Silver Wheaton? I looked at the November $ puts - they are trading for $1.50. Meaning you could have stock put to you for $3.50. Is that a low enough price?

I don't see any bankruptcy or credit risk here. Just upside. Must be missing something.

I think basing trading on numbers like VIX doesn't make a whole lot of sense.

Ask the Black Swan guy what he thinks about the log function...

Waiting for 11:30am support buys..

hulgar - yea, I hope not to miss it, but if it happens today I might pass and catch it on the way back up at $17..

With the dropping price of oil, low MPG SUVs will be back in vogue . . . . oil sands companies dropping . . . on sale??? or more to come?

let's see what happens when/if VXN/VIX drop below 70.

Note that the RSI is not making a higher high while the VIX/VXN have and the MACD is diverging as well.

What's that sound? Shovel hitting dirt? Is somebody digging up the gold and heading for the pawnshop?

Tbar, take heart. It is not what you earn today in the market, but what you learn today. It is the trading skills you acquire, not the amount of capital, that will make the real difference down the road.

I haven't posted here before, but your comments brought tears to my eyes (okay, I'm a girl). A year ago, my account was at 370K. A week ago it was at 120K. Now today it is back up to 190K and I am no longer afraid.

What made the difference? A book: Trading in the Zone, by Mark Douglas. It helps you understand the real source of your losses, which is not the lack of market knowledge, but fear. It also shows how to, not master the fear, but eliminate it altogether (i.e. reach Vadym's ho-hum-just-another-day-at-the-office level). I wish you all the best...

[Bill Cara note:

Isn't it interesting that today, for the first time, former SEC head Arthur Levitt says that the SEC needs to be set up as an agency that is independent from the White House. Where have we heard that before? It's one of the points in the Cara Plan! (see last Week In Review.) In time, the other points will be recognized for their 'wizdom' as well.]

shark - That's the sound of a seven handle! Low prices causing selling? I like to think not!

ToddinFL,

Just an anecdote about averaging down: my Dad made a small fortune by investing in Chemical Bank in the late 70's. What made it a great investment was that he kept buying more shares as it kept getting its price chopped in half. The blowoff really came when they dropped their dividend in the early 80's and buying then was the difference between a good investment and a great one. Chemical merged with Chase which then merged with JP Morgan and a fortune was made.

Now granted, this took 20 years to play out, but that is not a long time for long term investors.

ive been a lurker and reading everyone's comments for about a year but only recently do i read this every day. i pretty much was up 65% for the year until about 2 weeks ago when i started buying stocks. now, i am down about 10% for the year.

i sold out this morning with the dow up 100.

my rationale is that my money was made trading...short term buying and selling. the last few weeks, ive had no edge whatsoever. just watching my positions fall like a deer in headlights.

i also felt that i owned all of the wrong stocks for this environment...SU, DELL, BA...GE, CMI...all industrials and energy and tech. i shouldve been buying healthcare and staples.

i read mr. tbar's comment earlier and my heart goes out to him. this market is bigger than all of us combined and real damage has been done. i follow john hussman a lot and he is pretty bullish for the first time ive ever seen. he is a very smart guy who has made me a lot of money.

Not posted for the day traders - day traders, please skip to the next post.

In the field report:

Portfolios: currently greater than 70% cash. (1) Investment account and (2) retirement accounts.
Buy/Sell: holding for now
Bull/Bear: moderately Bearish
Inflation/Deflation: Deflation
Frame of mind: member of DENSA / hold for the medium term (1 month) or longer. Dancing
market bottom? don't know, don't care - acknowledge we are at a turning point
Methodology: using technical analysis on Fundamentally strong businesses - EMAs then Bollinger + MACD then + Stochastic then + RSI

market view:

Still looking at the carnage occurring. It is getting beyond belief. Technical Analysis just can't match market manipulations. No new positions entered so far this week or last week. Considering selling the TMX ultra short gold HGD.to that I bought in late September 2008 as this might be capitulation for the gold stocks. I still hold to my view that we are experiencing deflation. And to repeat my comment in my last post, the USA Big Boys in New York and Washington may win a battle here and there, but the war is being lost.

Changes in margin requirements first pointed out on Monday September 29, 2008 (there is no margin on the penny stocks/small cap stocks) at Interactive Brokers is hitting all areas of the markets.

Stock tip: I don't personally advise anyone, but recently people who know me and my interest in the stock market have been approaching me about their portfolios. I really don't want to know what they hold (I have enough to worry about on my own investments), but I have been looking at statements lately and giving my outlook. I would surmise that this sample group have followed my conservative view for their situations and they are doing okay considering the times. But, I will say that all the cash going on the sidelines is staying on the sidelines with this group. My opinion is that you should not be buying here if you are a long-term investor and with these individuals stating that it will be a long time before they venture into the stock market, I would be very careful buying here.

Now I do think that this blog has moved beyond price and volume. That is a danger (especially with this fixation on gold and fiat money). Do look at the bigger picture. If I look at prices and the Technical Indicators that I follow, then my conservative portfolio wants to see that the trend has reversed. I am in no position to put money into stocks with the belief that the trend is "about" to turn positive. This is a Bear market. Yes, you can be a cowboy and help the sellers get their shares out of their portfolios and into cash and you will be doing these individuals a great service. And keep your buying positions small.

And to repeat from my posting of Friday September 19, 2008 and from October 2, 2008:

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

Happy days are not here quite yet. Put some money to work, but keep some powder dry. And forget about the last "Highs" on some [hyped] stocks in the last year. Faulty logic can make you believe that they will get back to those levels. The same logic that will get me elected to Congress in November.

----

PS: re: "Help with your trading plan, Thur., Oct. 16, 2008, 9:42am ET"

Finally, a discourse that will hopefully bring some sense to the road map and discussion.

But, when I see a list of stocks ["My associate in Belgium, Pascal Willain, has prepared a list of 90 companies that he named “the survivors”] called the survivors, then I am going to be even more cautious, and buy a parachute. LOL. [061]

John Mack of Morgan Stanley on CNBC - displayed a seemingly unwavering voice of reason and confidence, while still being realistic with the current situation, and what the economy is facing going forward.

We need to hear more from people of his ilk and capability.

[Bill Cara note:

Agreed, but why are they there on CNBC? Why not under oath in front of people like Dr. Ron Paul, Sen. Bunning, and people like that. The public has a right to their testimony now that their colleagues in the Treasury Dept have transferred several hundred billion dollars of the people's money to these bankers.]

don't look now, but the TED spread continues to ease, albeit at a tortoise's pace.

ALOHA !!

I was on the ASX buying yesterday and I picked up FMG for $1.90USD!!! I bought right off the bottom for the day as soon as the market opened. That is a score ... FMG is the essence of "real wealth".

THIS IS NOT A JUNIOR
FORTESQUE METALS - FMG. I have been watching it for a year now. This is a huge company that BHP BILLITON tried to squash in court, but now the Australian government and more importantly the Chinese government have thrown them their complete support to proceed without hesitation! This is iron ore but with a niche. The major producers like BHP BILLITON can now only sit back and watch or they can put up the cash and buy FMG out. Their reserves are growing by leaps and bounds and the Chinese are begging for their product(because it is cleaner than other iron ore producers and makes steel production less costly) and are willing to sign contracts until hell freezes over. If you go to their website and see the infrastructure they have in place it is truly astounding that now they can compete head to head with the largest iron ore producers in the World while their reserves just seem to double up every year.

When I first bought XOM in 1983 I bought it for $3.80. I still have those XOM shares and even at the LOW price of $60USD per share today it is a 1500%+ increase over 25 years or 60% annual average plus dividends. I believe FMG, in time, is another XOM moment for me!

China and India and the other emerging countries cannot afford to call it quits just because US Banks are bankrupt. I believe the USA will end up being a "speedbump" in a shift from Western economic dominance to Eastern economic dominance. The US EMPIRE is definitely unwinding and the rest of the World is struggling to compensate for that, but I believe the rest of the World will decouple in time. It is all happening NOW! The shift of EMPIRE is here ...

Now some may be questioning buying iron ore right now since the World is sinking into a recession, but I did not buy "recession" I bought "resources". I believe the global SMART MONEY is now looking at commodities in "real wealth" terms. I bought from a monetary aspect ... As money supply expands exponentially on a global scale that money has to go somewhere and that somewhere needs to be as "liability free" as possible. I find it curious that while MERRILL LYNCH(MER) is supposedly suffering and in need of BAILOUTS in the USA they are this week buying major positions in ASX listed miners and juniors! YES ... juniors! Some of the MER buys are some I own! Do the US TAXPAYERS know this?

FMG LINK: http://tinyurl.com/4cargg

By my MORGAN STANLEY(MS) ex-broker's definition buying FMG at $1.90USD is considered a penny stock(anything less than $2). I would have to have signed a "release form" if I wanted to buy through MS ... I guess the US Treasury will have to sign release forms when they buy FNM and FRE stock on the NYSE!!! N-O-T !!! HA!!!

DYODD

Brown-Cal

There are MANY investors (both average and professional) who averaged down on any number of stocks in the recent downturn thinking that "it can't possibly go any lower", only to see the stock fall further.

WAMU, Fannie, Freddie, Lehman, the list is almost endless.

I said "generally speaking", that averaging down is an amateurish methodology because MOST people don't have the stomach nor the bankroll to stick with an increasingly losing position.

bsi87 said it correctly when he mentioned that most people who average down usually end up selling right at or near the lows.

There is always the exception like your father in Chemical Bank. But it's the rare occasion when that happens to the average investor.

[Bill Cara note:

A downturn the likes we are seeing is also the rare occasion -- in fact it's never before happened and you are attempting to compare it to a successful strategy. Apples and oranges.]

Dealta breaking out DAL

since I know I always buy too early, I will be putting sell stop limit orders under the LOD for the past 2 days for those issues I bought yesterday - after today's close.

Tbar - Thank you for sharing and I hope all the positive thoughts from this comnmunity will bring you luck. I now consider myself lucky since I was TURNED DOWN for margin earlier in the week because my account has fallen dramatically! I can only imagine the trouble I would be in right now.

Miggs

What a ride...hold on...maybe up maybe down

SV

kaimu - The US taxpayers/401k savers don't know for certain, because politicians keep the truth under cover. What the US taxpayer/401k saver does suspect is there's a huge transfer of wealth going on that's not likely in their favor. If an honest politician were to stand up and blow the whistle, he would be instantly transformed into King.

Sounds like a good campaign strategy, doesn't it?

ToddinFL,

I think we're talking about different things. Correct me if I'm wrong, but when you say people "generally" average down are you talking about traders (that intend to sell in days or weeks) or long term investors (that are committing cash that they don't need to live on)?

If you are saying that a trader keeps adding to their position in the hopes that they are catching a turnaround, then this is very different than the strategy that I am talking about. Perhaps yours is a "tactic" and mine is a "strategy".

looking at hourly VIX chart, looks like one more thrust to the upside between now and the close to set up the divergence.

JMO.

WTF? I thought 10/15 was the last day of hedge fund redemptions? Or is this the final retest of lows?

Feel for people on margins. This is unbearable.
TDAmeritrade yesterday liquidated ~$20,000 positions with my cost basis of ~40-50,000. The worst part is that I tried to do a balance transfer from a 0% credit card offer. That did not go through and was denied with a lame excuse (first time ever as I have an excellent credit score). The credit card did not bother to notify me and I learned about it after the liquidation.
Sucks big time!

Of course I don't blame Bill for his too early call but my own stupidity!

http://tinyurl.com/4njnoo

Autumn
1929 vs. 2008

Do you think Warren Buffet is next to his computer like us looking at this crazy market stressing himself out...I don't think so...he looks to the future...

AND IS RIGHT NOW LICKING HIS CHOPS

SV

Brown-Cal re: averaging down

What I'm saying is that the strategy of averaging down is not one I recommend for the average investor, either for short term trading or long term investing.

It's a flawed strategy unless you're one of the following:

1) In the board room where real decisions are being made.

2) An extremely sophisticated professional investor and able to use different strategies to hedge your trade (even then things can go wrong)

3) Lucky

The average investor is none of these, thus, I don't recommend the strategy.

Interesting to look at a VIX chart with 50/200 DEMA. The 50 crossed above the 200 in early Sept.

What it sez to me is that volatility is here to stay. And we'll get huge moves one direction or another that will convince bulls AND bears that a top or a bottom is in.

More likely it'll be a large trading range that will frustrate the most people.

JMO.

If today's lows can hold, then a move back up to S&P resistance at 1075-1100 is certainly a possibility.

Watch the action in the market averages from 2:30 PM on ...

Re: Averaging down

Other than averaging down, what strategy is recommended-predicting the future?

I'm thinking 1250 before this move is over, 30-40 days out.

Wow, I just glanced down at my system clock and noticed the date had changed all by itself to 1929!

Tbar;
I have no position,just posting this new report from Scotia Capital for your information.Hope you can hang in there!

OCT 16/08
Yamana Gold Inc. (AUY-N US$5.24)
(YRI-T C$6.12)
Trevor Turnbull, MBA, MSc - 416-863-7427
trevor_turnbull@scotiacapital.com
Leily Omoumi, MBA - 416-945-4527
leily_omoumi@scotiacapital.com
Est. NTM Div. US$0.12
Div. (Current) US$0.12
Rating: 1-Sector Outperform Target 1-Yr: US$11.50 ROR 1-Yr: 121.8%
Risk Ranking: High 2-Yr: US$11.50 2-Yr: 124.0%
Valuation: 2.0x NAV and 10x 2009E CFPS Yield 2.3%
Positive Investment Thesis Intact
Event
■ Yamana remains a 1-SO despite weaker Q3 operating results and
slightly lowered guidance for next year.
What It Means
■ We expect most analysts will need to adjust near-term estimates
considerably. Our forecasts have been at the low end of the range and
did not change too much.
■ We continue to expect a 48% increase in gold production over the next
two years fully funded by operating cash flow.
■ Our net asset valuation (NAV5%) decreased 15% to $5.63 per share due
to the lower guidance. Our new target price is $11.50 per share based
on the average of 2.0x our NAV5% and 10x 2009E CFPS.

Back to discussion of patterns we mentioned yesterday. Double bottom on NASDAQ, like a charm. Just heard from a guy who made 72 points on NQ (NASDAQ 100 e-minis), enetering 1198 on my DB call. With less than 10 points stop, it's about 1:7 risk'reward and a few cool thousands in a matter of slighly over one hour.

Interesting how tunaround sync'd perfectly with turn in gold.

Any possibility "someone" dumped gold on the market to raise cash only to subsequently dump it on the market for support.

If the fed weren't such interventionists, these tin hat theories would vanish.

Bill Cara said:

"A downturn the likes we are seeing is also the rare occasion -- in fact it's never before happened and you are attempting to compare it to a successful strategy. Apples and oranges."

Fair enough, but you've said yourself that no one can accurately pick a market bottom. My point is that it's not to our advantage to put investment dollars to work when the market has not shown that it's ready to move higher.

I'd rather wait for the markets to settle down a bit and give a confirmation day where the markets rally on huge volume and advances lead declines by a large margin, rather than buy into a panic and hope that I get good prices.

Your early call to buy equities weeks back has led to huge losses. Your recommendation to buy on Friday at 3:40 PM may turn out to be an outstanding call, time will tell.

But I'd rather miss the absolute bottom and buy after a confirmation day. I agree with almost everything you put forth on this blog - it's outstanding information.

But I would never recommend the average investor to average down on a stock. That's just my opinion, fwiw.

Averaged down on VLO @ 17 - holding 400 shares.
This stock now has a P/E of 3.4 - yeah, maybe I could wait til it hits 30 again and then buy it.
But why wait?

Its a diebold market today.

goldbug58,

I'm hearing the siren call of VLO, as well.

Long term, I don't see how you can lose at this price.

Regards,

Hi All - Averaged down on ADM today - Your basic average investor

Perspective for now

My business is helping people in spirit. What bothers me most about how people work in my field is they never define spirit fully. They leave it with loose definitions, which ensure that the people they help come back for more. I suppose that’s a great business plan, selling something which never exhausts. But it really doesn’t help people.

The first thing I did many years ago was to define spirit very simply. In a way anyone could connect to and work for.

Spirit represents the movement of your life, and the destination is to live as "you". Be it “Bill”, “Casey”, “SandraT”,”2nd”,”Shark” etc. We live to be ourselves. It's that simple. So in being a “spiritual” worker it just means I help a person find happiness in how to be themselves.

Very simple, don't make it harder than it has to be.

This applies right now, since so many people define themselves to the “power” of money. We use money to do things, buy things and we then define ourselves to those things we accomplish to the money. So when we take blows like this market delivers… It translates into a big hammer blow to our very spirit. Because it crushes spirit, it stops our movement. Remember spirit=movement of our life. This stopping of movement further reduces our spirit and diminished us even more. This creates a negative feedback loop, which causes depression and other problems.

Right now, my job is simple: it’s to remind my friends here to smile :) that is the fastest easiest way to make a difference no matter how bad it gets. The second step is to move with your life, talk to others, share, go out for a walk, jog, Qi-gong , yoga, bike riding, go to a beach… This movement helps to re kick start your spirit.

Right now and always the money is always secondary in how to live your life. This time is a reminder for that. I enjoy money as much as anyone. The difference is I just don’t follow it, I use it as I need, relative to how much I have.. BUT the movement of my life always follows my smile first :) . In that way I always find wonder

Then once you do that, once you re-kick start yourself.. Go back in, follow Bills advice and kick the heck out of this market and enjoy it fully. None of us have lost here, the game is only started, This is the first quarter, third inner etc…

If we want our social equity there are many ways to do it, But always always always remember to move to your life first! Investment always follows your life.

Peace My friends

What's wrong with this market is that people who buy long in the face of apparent bullishness keep getting their asses handed to them....Me included.

Just finished watching this video....seems to me anyone wishing social equity in the markets would want to see this one.

http://video.google.com/videoplay?docid=7065205277695921912

Posted by: ToddinFL at October 16, 2008 12:30 PM

[But I would never recommend the average investor to average down on a stock. That's just my opinion, fwiw."]

This is the problem with a blog that ranges from Day Traders to long-term buy and hold. "One size does not fit all". For my style, I would be hitting a stop and selling rather than averaging down. I would only average down within a defined uptrend. With the downtrend we have currently, I would not average down. [062].

All Toronto Exchanges hit new yearly lows :

ca;TSEA S&P/TSX Composite Index 8761.02
ca;TSP S&P/TSX 60 Index 525.75
ca;JX S&P/TSX Venture Composite Index 937.88

Now where do we go from here.

Added to su.t,cos.un.t,fts.t

About 50% in so far.(25% ante,25% for the " FLOP").Trying very hard to wait for the TURN,hoping to have some to go All-in on the river.Thats the PLAN......now the hard part....standing pat.

No pun intended .....it really was a FLOP.

Dang, and I was thinking coal just yesterday while licking my wounds.

This market BITES

Correction if you don't mind Shark:
This market BITES ASS

Hi,

A) Averaging down:

Averaging down is one of the strategies I use when I make a mistake.

But like any other strategy, it has rules:

1. Investigate why you made a bad entry.

2. Does the investment still make sense in your portfolio in light of your risk allowance, investment time frame, strategy and goal?

If so to both,

3. Do not just keep buying at each train stop till the bottom. If you still believe in the investment and can still remember the reason why you got into it, then just let it fall.

Actually, the lower you buy, the better you will average down.

4. Add on a serious long signal.

It simple if you trade rationally and think of the much lower price like a sale in your favourite store - yummy!

B) Spirit

Casey, Bless you.

C) market conditions

Keep cool. There will be another day tomorrow. Markets will bottom at some stage.

Investments that make sense that were made earlier in the week / month may now be underwater, but think of the present lower prices as a sale. When it finally bottoms you can average down and make serious money: your boat will be a yacht because you deserve it

D) Gratitude

Thank you Bill for holding the hand of each and every person in this community.

Best,

I got this from another blog I read re: averaging down on losers, the quote from John Tudor Jones:
"Losers average Losers"....

something he believes in...not saying people on this blog are losers.

gl to all.

Today is a disaster zone

Earnings after the bell today: GOOG, IBM, GILD, SYK, ZION

Earnings Friday AM: HON, SLB, VFC, SAY

"Day Traders to long-term buy and hold"....BernardF you have hit my problem on the forehead.
I keep on reverting to b&h tactics thinking the market will go up, delaying taking a small loss quickly magnifys into a larger loss causing a change of plan and maybe huge losses. My student loans for this course are approaching max pain.
A nod to Casey (i always like your posts, a sort of cleansing breath and now a smile thrown in), my acct is not me but the worry I allow to infect my day to day actions is harmful.
Thanks to all who post here. Please be gentle with me and all others here. Sometimes I do not know what I am doing and am fearful of admitting it.
Peace from North Whidbey Island

Bill, as you mentioned above:

It be very interesting to see CEOs like Morgan Stanley's John Mack an others appear under oath before Congressional hearings.

But they're still working on the script. In due time ...

The masses will quite possibly never be told the entire truth. It's not the way this game is played.

Trannies going green

GOOG is moving up nicely .....with earnings after the bell could a late day tech led rally be a catalyst for market makers to move us back into the middle of recent index ranges and thus create max option pain?

Instead pissing and moaning about the markets, I'd suggest working on identifying stocks for either shorting or going long.

bsi87

I second that emotion!

ambac getting good

im looking at WFMI, GE, and IP...all with yields at or above 6%...

CNR almost back to yesterday's close.

I have been reluctant to commit more cash in this market because I have felt that we have only felt the first wave in the Real Estate Subprime tsunami.

My original concern was that more Alt-A housing will go underwater and this will create a second credit crises (on an already unhinged banking system)?

Now I have come to see subprime more as a catalyst for the current banking crisis, so here is my question: if you assume that housing has another 2 years/15-20 percent to go, do the equity markets remain in that shadow (along with the normal business cycle challenges)? Or is this a single wave tsunami and further housing declines will result simply in old fashioned bank earnings problems and individual failures (vs. systemic risk).

[Bill Cara note:

Bloomberg interviewed economist Lacy Hunt -- great job Kathleen Hays. Basically, Lacy -- who is a very bright guy -- said that the US government is about 20% of the economy but has spent so much money it now requires 80% of the credit from bankers and investors. That means crowding out. And that means -- my words -- the economy must stay weak for a while and when it does start to accelerate, then interest rates will also accelerate. Tough times ahead! So, when choosing companies to invest, please follow the list of almost 100 that I gave you recently. These are the ones with almost no debt to equity -- or at least ratios they can handle.]

Somebody made the comment about Hedgie redemption earlier. I believe redemptions are scheduled in intervals. What is often happening is forced liquidations. They're either getting margin calls, or going out of business. Look at POT today.

bsi87

Aside for those who are supremely adept at very short term trading (and that's the minority), this is largely a time to sit on your hands and watch prices, and watch things unfold.

jmho

Been eyeing Nucor for a long time, good earnings report, but its another cyclical-sensitive issue...$1.30 above its 10 Oct low of $26.30.

No position.

WALL MART...up $ 3.00 today
I bought in year 1996 at $13.oo after a 2 for 1 split couple of years later my breakeven point is now $ 6.50...should of bought more :(

solid company..even in these bad times

longterm holder

sv

Bought QQQQ straddle because of GOOG earnings today after close. Probably short term only.

FarAwayEyes at October 16, 2008 11:34
Thank you, I will try to track that book down.

I am really gratefull for the sharing and good will here(like no other place) lead by Bill, and sorry for bringing any one down this morning. At the same time glad that a story like mine may influence one to save their capital for better odds of survival.

If someone could help me understand this it would be very much appreciated. The link contains a screen shot of SKF and a Time/Sales table. The question is, why are there so many tails and what does it indicate. Are they market orders, stops being hit or taken or what?

http://docs.google.com/Doc?id=df2zfnzf_2c98gpkdw

Moab,

can u please do me a favour and post the link to TRIN and TICK. I lost all my favorites.

Is anyone placing his bets on a positive close?

AES

Try this

http://tinyurl.com/6bs3xq

Let me try to say this in a polite way.

The time to warn everyone to get out of the market is long,long past IMO.

If one thinks this market has further to fall, then identify those stocks that one thinks has the potential to drop and post 'em.

If one thinks there are stocks that have the potential to rally, identify them and post 'em.

If one has indicators that he/she feel give some direction, that's welcome. Tell the board about 'em.

If one wants to sit on his hands, that's welcome too. Tell us why/what u see that keeps u out of the market.

GL

All I can do in this market is keep my head and worry about those things directly under my control. I can't control the market, but I can control my position sizing. I can't control surprise hedge fund liquidations, but I can control how I enter and (especially) exit when things don't look right.

I can only focus on and worry about those things over which I have direct control (thanks Epictetus), and, right now, that's enough to keep us all busy.

i like bsi87...id like some stock opportunities with the best potential to run when we bottom.

BP,

right on.

Miadhach:

looks like real tight time frame..

Tails..indication of wide spreads...indecision.....lack of volume..potential change in trend, esp around support and resistance levels..see if it shows up on 3 or 5 min resistance..

Tbar/FarAway Eyes:

Second that book...easiest read of his two..and very hard to practice though very much worth the time...its all in the mind...:)

GOOGLE

From Silicon Alley Insider, Oct. 16, 2008:

Google reports Q3 results this evening after the close.

The good news: Google has a better chance of surprising on the upside this quarter than last quarter, because expectations are so low. In fact, Wall Street analysts are openly calling for a miss. With Google's stock down to $315, this could lead to a nice short-term trade.

That said, even if the company clears a low bar, any hint that the tanking global economy is starting to bite the company (and how can it not?) will likely keep a lid on the stock over the next few months. Also, Street estimates for 2009 are still too high, in our opinion, and need to come down. It's hard to see how the stock rallies sustainably in the face of that

PREVIEW

Mark Mahaney of Citigroup offers the following excellent "Cheat Sheet" for Google's Q3. Citi's net revenue expectations are in line with the Street's ($4.05 billion). Note that Mark thinks that a "neutral" performance would be below the consensus estimate. The Street's adjusted EPS estimate, meanwhile, is $4.79. Mark thinks traders are actually looking for EPS in the range of $4.70-$4.79

As it has been over the last year, the big story for Google is revenue deceleration and margin compression. These have led the stock's multiple to compress from 40X-50X free cash flow to a far more reasonable 20X. The latter multiple is sustainable. We don't expect a sustained rally in the stock, however until revenue growth stabilizes (i.e., stops decelerating). Anyone's guess when that will be, especially with Google having no new products in the pipeline.

Mark Mahaney's revenue analysis and Street earnings estimate analysis are below. Note that Mark's 2009 revenue estimate is far below the Street's. We agree with him that consensus estimates need to come down.

long ambac still (more)

EEMTRADER

Thanks for the input. The top SKF chart is 1 min. The one under it is also SKF but a 5 min. Tails show on it also. My guess was that market makers were hitting trailing stops.

Thanks again

MOAB....see that H&S on SPY? GS acting punk though..

market finally catching a bid...

I think Google earnings may change some perceptions as to how bad things really are, especially for tech.

The company is trading at a P/E of 15 (forward P/E even less) with fairly steady growth projected. They are not subjected to the cost of commodities, financials derivatives. They are somewhat tied to consumer spending as advertisers may scale back advertising budget. They have $12B of cash on the books and no debt.

Point is, long term earnings potential has not been affected with the credit crisis other than an across the board revaluation in the markets.......

As I mentioned earlier, I think they will use this as a catalyst to move the market closer to max pain by tomorrow afternoon

ooops...thats inverted H&S , can it cross 9.50?

third crack at positive territory. failing this one might lead to another bad end to the day...

91.50

Averaging down is a very nice think if you do it on indices or broad ETFs etc. I would not do it on a stock, maybe only on blue chip. I did just that with german DAX ETF and Emerging market EEM ETF and it turned out very well. I bought EEM before the bailout plan when it was 33, then I bought again when it was 26. I knew this index cannot fall forever and also I could hold it for a long time, because I have a portfolio that needs an emerging market alocation. Well on monday EEM rallied 21 % percent and I could sell for a small gain My average price was 29. I sold for 30.60
I did the same thing for DAX. First bought index at 5800, then at 4500 and sold at 5300 2 days ago for a small gain.

So averaging down on indexes and ETFs is a nice play. We all know those things cannot go to zero. Stocks can go to zero, can be downgraded, bad management etc. Index that has many stocks cannot go to zero and in the long run should go up. I also only do that with my long term account.

The next thing is, trying to catch a bottom. Those that wait for confirmation will buy at higher prices than those that try to catch the falling knife or. averaging down. Or they will buy at somehow the same level. If I buy at 4500 thinking this is the bottom and then DAX falls to 3500 I will average down to 4000. Someone waiting for confirmation will buy at 4000 or higher, waiting for some X positive days, price above MA50,... So I agree waiting for good signal to go long might have higher sucess rate and lower drawdowns but does guarantee you will buy at somehow higher prices. On the other hand someone buying at panic times wont buy at the bottom but will surely buy lower than someone waiting for confirmation or at least at the same level,.

Trucker RSI scan

http://tinyurl.com/53se3w

Note that there are stocks in accumulation and buy modes. Truckers are leading indicators. R and YRCW look interesting.

full disclosure: long YRCW ...at higher prices

A year from now, all this talk about whether the bottom is now or next week will most likely show itself to have been irrelevant, one way or the other.

Tbar:

Over the past few days we have had many stories about running out gas, reaching end, etc

The point to them all is simple. Never stop living your life. Fill it with other joys right now. If you do that, your situation will turn around in other ways to carry you through.

There is never a "right" path to do this at your point, you must work to it each day patiently, enjoying the sun, loving your wife, smiling at the silly things.

Right now more than any time in your life, find and follow some movement which gives you simple joy.

While it might sound too simple as compared to the financial problem you face... IN truth, it's greater since it connects directly to your heart. IN that connection to heart is the fire of spirit that can carry you to new and better places later.

Show me any great comedian, I will show you a person who lived through hell and use the joy of a smile to find their freedom.

Life is our comedy, as hard as it might be right now find a way to laugh. It will help you turn it all around.

IMO
Tomorrow will be a true test of that Max Pain theory.

Stk Max Pain #

BA 60
GG 35
PX 85
RIMM 75
SU 40
TTM 15
XOM 80

Huge ETF scan

http://tinyurl.com/3epnnt

Only sell signal is TLT

Muzie

Fair enough, but it DOES matter from what level the market bottoms and ultimately lifts.

I'm not smart enough to guess bottoms or pick tops. I'll wait for the confirmation day in the major market averages and forgo the exact bottom.

But I'd rather do that and put the odds of success in my favor than take a stab and lose 10%-20%-30%, etc ... It sounds boring and dull, but it's the prudent way to mitigate risk in a declining market where no one can call the turn.

jmho

re:Max Pain

I see options expiration as exerting pressure. Not necessarily reaching that Max pain point.

For sure, when I see Max pain either below the current price or less than 5 bucks/20% above the current price, I get less interested and more picky.

TED Spread is now down pretty significantly. Down 7% for the day and down almost 20% from it's highs last week.

Anyone follow CAE INC..????...FLIGHT SIMULATION COMPANY

SV

BSI

RE: Max Pain

I'd agree with your assesment of Max Pain as an indicator of pressure rather than an absolute target.

I'd be interested to see a tool that could calculate current Max Pain for all existing option contract months simultaneouslu rather than just the currently expiring month. Could give a more vivid indication of real "Max Pain" since in a liquid options market, contracts can be opened/closed at any time, not just expiration.

everything just turned green at the same time. the wizard of oz has some great power!

A name I'm watching closely = ISRG Intuitive Surgical

Owned it prior at $72, then fortunately sold it at $333. I held that stock in an IRA for over a year and watched it go sideways for a good long time all the while the company came in with great quarterly sales and earnings reports.

I sold it into an incredible short term run up in the price back in October of last year.

The company continues to perform well, but the stock is EXTREMELY volatile due to its high valuation. The EPS come out after the the market close today.

If the sales and earnings (and outlook) continue to be good, and the stock sells off, then I would be looking for an entry.

Looks like BA tested the low of Oct 10 (after potential capitulation..RSI7<10) today and bounced off of it... anyone willing to go in with me? Still in 70% cash...

ToddinFl: Monday looked like a pretty good continuation day to me. Huge Friday close rally, and continued by biggest up day on Monday. When it pulled back on Tuesday, buying seemed sensible to me, so I bought some stock about 10% below the morning high. Looks like that was still 10% too early.

I'm not sure there is any such thing as "continuation" in this type of market. What we know is traders will give you a very wide range of price choices to buy from this week - every price value within a +/-15% range will be offered within a week. Question is, in what order :-P.

In chaotic markets, cost averaging does make some sense to me. Assuming one still relies on fundamentals, one has in mind one price he is willing to pay for a stock. Of course, the stock might be offered at lower prices later.

As a buyer you cannot know if there are future sellers that will offer these lower prices. The lower prices don't necessarily mean you we're "wrong". If your fundamental analysis is correct, they simply mean you could have gotten a better deal, nothing more. If you have very solid reasons to believe a stock is worth 20$, then the fact that some sellers are wiling to sell that same stock at 1$ is totally immaterial - it's their business, not yours.

Cost averaging is a way to spread out the risk of missing out on better deals. If the current price is acceptable to me, then if I find that other sellers are willing to go even lower than cost averaging simply means keeping some powder dry so that you can take advantage of more panicked sellers. Doesn't sound so "amateurish" when you put it that way.

Cost averaging is not dumb - buying more of a stock simply because it did go down and you're trying to make up a loss is dumb. It's the intent behind the cost averaging that matters.

You and I don't know if hedge fund XYZ will dump 10B$ in the market tomorrow. It's unknowable. In fact it's more likely that a hedge fund would try to do a big dump after the "continuation day" that you speak of. So I don't view continuation days as much safer than a random pick at this juncture. Spreading the risk over multiple price points is the only way to minimize risk when such a big part of the investment landscape is unknowable.

Todd - I missed ISRG big time. Saw it drop to $90 maybe 2 years ago and was ready to pile in, but I think at the time I was in BIDU and wanted to stick with that. I sold my BIDU at $130 (ouch) and then watched ISRG go to $350 or so...

It's a great company.

Hammer1,

I want some more BA at 42.50, at which point I'd also consider the 40 and 35 PUTS for March time frame.

I'm going to wait until 3:30 to make up my mind about today's action. We've seen a lot of 3:30PM selloffs lately.

Averaging down:

Presumably, those that don't ever average down are left with two choices; either go "all in" with one purchase, or if they do scale in, they always do so at higher prices. I'm not sure I'd think of those as superior strategies, (though maybe the latter is a safer one).

Ya' pays your money and ya' takes your choice.

Big reversal in the DOW

Waiting for the TSX to turn Green

SV

re:Max Pain

Does the rally usually continue into option Friday?

the irony is if the VIX drops below 70 and the DJIA rallies, a 600 pt rally is just an average daily move.

LOL

re:max pain

hard to tell, sometimes the big boys unwind by Wednesday.

bsi87

thanks

XOM rocking and rolling. In Monday at $64

SV......
I follow CAE. I think CAE is undervalued at this $7.00. I expect CAE to earn 0.18 this quarter and 0.75 for the year.This gives a P/E of 9.33 which is great.CAE is not buying back shares but using cash to make aquisitions, etc.

Regards

sv- used to follow CAE a few years ago, sold about 3 years ago for a double after holding for maybe 5 yrs. Not as beaten up as I thought it would be. Nice dividend. Trying to tap the Asian market I see. No position.

manx928

I have no problem paying higher prices to add to a position if it's showing me a profit, and acts like it wants to go higher.

I'll gladly add shares to an early winning stock in my portfolio, although it's usually not prudent to buy at extended prices.

I don't know why people were so surprised by the depth of the selloff the last few days. It was certainly gut-wrenching but predictable. Lows will need to be confirmed in such a volatile market before traders will get on the bandwagon. You are seeing that now as many shares revisit the lows and are bought.

Here is an explanation of TRIN:
http://tinyurl.com/3r2mbk

Averaging down only works if (i) you do it after 50% downmove of the bear market, (ii) if you are a long term trader (I hate the word investor) and (ii) if you are not on margin directly or indirectly, that is you do not need money for a while.

That said I have bad memories of "averaging down" after 2000 crisis. Mind you I started buying long after initial drop and still lost good deal of my lifetime savings.

Yet I am not sure we are going into exact repetition of 29-32 scenario with 10x loss because of the global fiat system. So for now I assume probability of >50% that we made 50% of the decline already.

Todd,

ISRG was one of Cramer's big wins....called it in the low 100s.
But he will be remembered for a long time for warning folks about this dive, especially if he nails the re-entry.

I am with ToddinFL....averaging up helps manage RISK....it aint about the GAINS...its about the loss...:).

Besides averaging down implies at some level that somene KNOWS the market will turn, If they did KNOW..averaging down is an interesting habit to fall into.

Old School...Humility over KNOWINGNESS...discipline over conviction..thts for those who can practice it..

TSX refuses to reverse...:(

SV

GOOG Max Pain $390
IBM Max Pain $105
GILD Max Pain $45

Thanks bob and RH

sv

VIX drops below 70

Volume not that great on the S&P.

I like the price action but the vol shows lack of conviction.

Options expiry could lead to incredible volatility tomorrow. Be careful.

I continue to closely watch volume and price. We should have volume stronger to confirm any move in price action.

jmho

Seeing green in XIU.to...

CNR up 1.39.

Thinking of averaging into the index.... but probably not.

"I don't know why people were so surprised by the depth of the selloff the last few days. It was certainly gut-wrenching but predictable. Lows will need to be confirmed in such a volatile market before traders will get on the bandwagon. You are seeing that now as many shares revisit the lows and are bought."

I don't understand how you can say this with a straight face. Look at the S&P on a candle chart pre and post Sept 18th. It's like somebody flipped a switch and you're looking at completely different eras. Daily ranges have become as wide as the monthly ranges from before.

We have traders here and everywhere saying they've never seen anything like this in fourty years - including Buffett. And 98% of market participants have lost money in this debacle (including many bears, like me, who covered shorts on the short selling ban date). And yet you think this was entirely predictable?

POT - Wish they would clear out the final hedge funds redemption selling on this one. Although I own free after selling a portion its been a long trip down from $240. Having bought in 2005 with little reinforcement from p/e etc. - now its a real company. Probably time to start chipping at AGU, MOS & TNH as well. Happy Trading

volume on SPY was 484 million yesterday on the selloff, now 640 million on up day.

What's the problem?

screw max pain...i just made a buttload in ambac...and yous guys can thank me later if yall got in.

Dow up 404 points ....nice...very nice :)

SV

we're just not the trader u r sharkie.

"long ambac still (more)

Posted by: shark_attack at October 16, 2008 2:42 PM"

It only went up like the devil is all...

everyone on cnbc is mentioning "is it time to be a contrarian? maybe time to buy" etc. But every short etf is still in bull mode trading above their 50 day. I may be looking for bargains and switching to buy mode, but do i really want to buy when Maria Bartiromo is telling America to think about buying?

TWM
SJF
MZZ
SDD
SFK
SJH
SKK
SJL
SDK
SH
MYY
PSQ
DOG
SBB
DXD
SDS
RWM
QID
SMN
EFZ
EFU
SDP
EUM
DZZ
DGZ
EEV
EWV
REW
SKF
RXD
SZK
SCC
DUG
SSG
SIJ
SRS
FXP

And now we got something to look forward to tomorrow...as in all the late day buyers getting massacred like Indians. 'Tis ok, it's the market's way.

re:abk

great trade, Sharkie.

(pat,pat)

re:bear ETF

let 'em come back to the 50/200 DEMA and THEN think about buying.

Sell resistance/overbought, buy support/oversold.

Repeat.

Looks like gold stocks across the board are crushed again today, well today the gold spot is down not like yesterday..

I am holding GG 27.50 Oct call and it will probably be worthless by tomorrow. I don't see any miracle happening. Should not be whining but I am not sure what happening to gold now is some manipulation or a beginning of down turn from here...

wahhhh...nucor went up 16% after i posted about it at 2:19pm...can't I get honorable mention...??? of course, i didnt make a dime in it.

Great GOOGly Moogly!

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

Green....Green....Greeen.....Greeeeeeeeeeeeeeeen

Now that's nice for the DOW up 404 points

The tsx comp still in red - 50 points...maybe tomorrow we will see green

SV

http://tiny.cc/W83Fz

Bear ETF RSI scan

Taking bows, collecting $50's from the group...

Sharkie,

I thought u'd give all of us $50's to celebrate ur good fortune.

grin

bsi87, I couldn't get that bear ETF RSI scan to work. Had the symbols in, but with the percent signs, which messes it up. Might be just Safari, though.

You can Google the title and get this as a free PDF. I ran across this passage and I thought that I would share it with Bill's readers.

From, The Pitfalls of Speculation (P 49)

Summing up, the man who speculates in a
business-like way trades only in standard properties
with whose history, physical condition,
earnings and prospects he has thoroughly
familiarized himself; forms for himself a careful
estimate of normal value and uses this
value as a gauge by which to decide when
prices are too low and too high ; takes into consideration
also the technical condition of the
market, and does not embark with bad company,
even at low prices ; is not misled by the
thrills of inflation, or the chills of depression;
operates, not for the purpose of gathering a
small profit from many transactions, but to
gather a large profit from a few; trades with
responsible middle-men, and, above all things,
is patient. In short, he maps out for himself
an intelligent and well-founded plan of operation,
contemplating all that may occur, and
having mapped it out, follows it.

Very few speculate in this manner, and
very few succeed.

Re: Another slant on averaging down

I am heavily into a particular call option (2010 expiry) that has been trading within a particular range. When it approaches the bottom of the range, I buy a little more. When it is approaches the top of the range, I sell a little off. And then I repeat (as bsi87 would say). This continues to provide capital for my other trades.

[Bill Cara note:

As you all know, I was encouraging traders to buy IBM. Here are some highlights of CFO Mark Loughridge's prepared comments during the Analyst call today:

"Although this is a very tough environment, we were ready for it. We are executing "a play" that we called some time ago. It has two major elements:

1. We have been investing to capture opportunities in the emerging markets. You can see the benefit in our results again this quarter, with double-digit revenue growth and good returns.

2. In the more established "major" markets, our goal has been to drive productivity. We’ve been systematically attacking our spending base, taking out infrastructure costs – reducing our cost and expense levels – and improving our efficiency.

Because of these actions, we have a more efficient structure. So in the 3rd quarter (fully announced today) when the revenue growth in the major markets slowed we had great margin performance and hit our profit objectives. These ongoing actions to address spending shore up the base in tough times. But they also improve our balance point over the long run. Our focus on continuous improvement is an element of our model.

And there’s another important aspect of our model. The balance between annuity and transaction-type businesses. We have a number of annuity businesses like outsourcing, maintenance, and the majority of software that not only provide a good revenue foundation but also provide a steady source of profit and cash. We’ve been building these businesses – and their recurring revenue streams for years. They’re part of our DNA and provide a distinct advantage especially in today’s environment.

So our annuity base – together with our ongoing structural changes in the business – resulted in solid profit performance in the 3rd quarter. It has clearly been the right gameplan.

For the year, we expect earnings per share of at least $8.75 – which is up 22% over last year. And while the current environment is challenging, we have the right operational plan to drive double-digit revenue growth in emerging markets, substantial productivity in major markets, and continue to extract cost and expense from our spending base and drive ongoing improvements – to meet our full year objectives."]

To sum up the day...

- for longer term holders, we had SO FAR hat double bottom mentioned yesterday. Volume shapes up right. Now, as g034 would say, "double bottom is a double bottom until it isn't" - we still need a confirmation which occurs when the top between two bottoms is broken on the upward move.

- for day traders... I've honestly no idea what the moaning about today was about. Beautiful day, not too hectic, relatively easy to read, with formations playing out just right; volume was good yet not excessive; both breakouts and breakdowns worked, so did bounces.

Another day in the office.

Vad,

I have not yet gotten to the point where I ever have "another day at the office". Unless your office is the drivers seat of a Maserati!

re:WAG

Bullish engulfing.

Full disclosure: long

Leisa,

Nice seeing you again..

Who wrote that stuff, Buffett:)?

I've been seeing some nice looking bottoms lately.

How are things at "perplexed"?

ESLR is beaten up AH.

"screw max pain...i just made a buttload in ambac...and yous guys can thank me later if yall got in."
Posted by: shark_attack [TypeKey Profile Page] at October 16, 2008 3:54 PM [link]

shark- bsi87 pointed out yesterday the correct trading term is s---load...congrats, though...

I was talking about this week, not since September. Once the 10% rally kicked off it was evident that we were going back down to confirm or negate the change of trend.

Shark....

Thanks for the greeting. The author is Thomas Gibson, 1906! It's a Moody's Publication! And...Here is one of the ads in the back--

Moody's Magazine
The Monthly Review
for
Investors, Bankers and Men of Affairs
Edited by Byron W. Holt
It is designed to serve the investor, the
banker, merchant and man of affairs in an
attractive and popular, but not superficial way.
In this respect it is original and unique and
occupies a formerly unoccupied field. Briefly,
it gives, in plain, simple language, the gist of
all important news; it looks inside and outside
of reports; it does not suppress or color
information; it is the organ of no corporation
or interest; it does not publish advertisements
as news matter; it does not sell its editorial
columns to its advertisers; its editorials are
fearless and truthful, but not malicious; it is
independent; it has no private pull rope from
the business office to the editorial desk; it is
fair and honest with its subscribers and advertisers,
and it deserves the support of all honest
investors.
Features, besides Special Articles and Contributions:
Critical Comment on Current
Events, Monthly Summary of Events, Stock
Market Outlook, Inquiry Department, Correspondence,
Quotations, etc., etc.
SUBSCRIPTION, $3.00 PER YEAR
Moody's Magazine
Publishers
35 Nassau St., New York City

[Bill Cara note:

Hi Leisa... Wish Moody's were that way today. I had to remove them from the Cara 100 a year ago.]

Bill--Moody's ended up being an organ allright (but I won't say which!)

Thanks 2nd,

Ambac obviously isn't done moving...One way or the other anyway:) That's a fine looking chart....In fact I hear something about them getting a bailout too.

Still waiting for my bailout.

Blowout Preventer

Thanks for that chart.

http://tinyurl.com/4njnoo
------------------------------

Bill Maher interviews David Walker

http://tinyurl.com/3k4pt4

Spreads Between the Central Commodity Markets and Market Prices Continue to Widen

http://tinyurl.com/3z6grf

Boy I've done some dumb things in the last year but this one might take the cake. I officially declare myself a member in good standing of the Densa Club:

Sept. 22, 2008: 4+ hours fundamental and technical research on EBS.
Sept. 23, 2008: Buy 500 shares EBS @ $13.34
Sept. 30, 2008: Sell 500 shares EBS @ $12.48 (stopped)
Sept. 30-today: Didn't bother to follow it.

I could itemize at least 5 other such examples from the last 2 months (e.g APOL, TJX, HUBG) which have put me in the hole $10K.

It might be fun to hear some of the other trading gaffes we've all been committing over the last while.

Mackinaw: Mine is hard to beat.

Held puts on many banks, some SKF shares, all sorts of shorts - about 30% of my whole portfolio, or 120K$, most of it leveraged, from July onward. Was tough to hold on to it all during those few months.

Panicked when the short selling ban happened and sold all shorts and puts on Sept 19th at the exact top. Couldn't have timed it worse. Feels like when you're skying on a slope and you hit that one tree within a ten mile radius.

The lost opportunity I estimate must have been on the order of 100-150K$ (and would have more than covered my YTD loss of 20%). I never got the heart to start shorting again as things seemed oversold, yet just went oversold some more.

Other than that, I'm recovering psychologically and life is ok :-).

Mackinaw
How this for a barrel of laughs...

Update from one of my posts from last week....

"Posted by: QT at October 9, 2008 4:29 PM"

TWM = 9000 shares x [146.15-67.25]= $710,100.00

QID = 6000 shares x [92.53-40.64]=$311,340.00

Assuming I could of held out from the end of Aug.
I could of made upwards to $1,021,440.00
on a one month trade [thanks to the Elliot Wave McHugh]

I ended up losing $1900.00 on the trade all because I got nervous after the big 2 day rally [Sept18-19] on the rumor of Paulson plan. Then got burn bad going long.

So be life!

Muzie

Nope..you take 2nd place!

"Other than that, I'm recovering psychologically and life is ok :-)."

Not me... I am still upset over all of this. It will be one of those things a person takes to his grave.

Correction re: vol. from what I said at 3:48 PM today.

The S&P along with the Nasdaq comp. showed a nice recovery off the lows on increasing volume, forming a nice "w" pattern. That's a positive and should be noted.

Will look for a confirmation (and hopefully a continuation) of the trend off this move up today.

Bill & Shark,

Re: colonoscopy

When I had my first I was put totally out. There I was all wired and the Dr. breezed in saying, "Let's see now, you're the one for the sex changed."

Zap I was out like a light. When I woke about 45 minutes later I was relieved my voice was not an octave higher :-)

I believe McCain was more coherent and rational the last time he ran.

This time he could be:

A. Too old and tired. He's nearly two years older than I am. (I just drove for about five hours today and would be in no mood to be genial when tossed questions I'd like to avoid.)

B. He may be doing what his "handlers tell him." (Not something I want from a head of state.)

C. I have heard his years of torture have left him in a lot of pain. (This is something else I can relate to and it does not put me in a tolerant frame of mind.)

My wife and I are not happy with the choices and a friend just emailed me he cannot bring himself to vote for the office this time at all.

Vote? Damned if you do, damned if you don't. Think I'll reread the Richard Russell piece from today — things could be worse.

Just now am watching the McCain-Obama debate on Youtube. Boy did McCain miss the mark on that question: "Why would the country be better off if your running mate became president?"

I mean wow, what a loaded question directed right at Palin. Why didn't McCain take the opportunity to emphasize that Presidents, like all executives, are only as good as the people that they sorround themselves with as advisors, and the leadership that they provide to them. What a golden opportunity lost; all he had to do was say: "Sarah is a down-to-earth person. As a woman - and mother - she knows what is right and wrong and knows bu$$##it when she hears it. Americans have nothing to fear about a decent, good-natured person moderating the policy advisors of America. What they DO have to fear is crafty, duplicitous, and payed-off pawns of the lobbyists."

QT: Funny we seem to have made about the same mistake. Helps to know I'm not the only one :-).

This is truly the market where almost everybody loses, bulls and bears alike.

Grym,

Hot off the wire: "GALLUP's 'traditional' likely voter model shows Obama with a two-point advantage over McCain on Thursday, 49% to 47%, this is within poll's margin of error... "
Go figure.

Mackinaw - VP moms

Should we just have a lottery open to all the down-to-earth moms in the US to be VP? Why not a lottery for all down-to-earth dads to be President?

For the world's most difficult and important job, don't high intelligence and long experience count for something?

Jock,

Clearly Palin didn't rise to the level of Govenor of Alaska by lottery (at least I think that's not how they do it up there?). Let's not get carried away with the "hockey-mom" theme.

As far as "high" intelligence counting for something - I suppose so, in theory. Sadly, history is riddled with geniuses screwing things up with their myopic-visions. After all, isn't Nixon recognized as being one of America's smartest Presidents and don't we daily - here - mock the failed prognostications of the countless highly educated Economists that spout off their highbrow theories of "what's to come" and "what is wrong"?

... not to mention that it's some of the smartest people in the world that have crafted this financial calamity with their overworked and innapropriate models of risk/reward in investment.

Re: IBM

Bill posted this comment from IBM CFO "And there’s another important aspect of our model. The balance between annuity and transaction-type businesses. We have a number of annuity businesses like outsourcing, maintenance, and the majority of software that not only provide a good revenue foundation but also provide a steady source of profit and cash. We’ve been building these businesses – and their recurring revenue streams for years. They’re part of our DNA and provide a distinct advantage especially in today’s environment.

So our annuity base – together with our ongoing structural changes in the business – resulted in solid profit performance in the 3rd quarter. It has clearly been the right gameplan."

I remember sometime in the mid 90's, IBM was criticized for manipulating with their numbers by booking long term contracts as current sales. Maybe hard to teach an old dog new tricks??

Re: LTCM

Went back to watch the short quote at YouTube on LTCM in 'The Trillion Dollar Bet'. The comments of some of the stock market activity about how traders relied increasingly on instinct and short term trading in the markets were what caught my attention last time. This time we're seeing it on a grand scale. If you had been leveraged 100X, then a 1% decline loses your original capital. The banks had no reserve requirement whatsoever and were probably leveraged in excess of 1000% through CDO's, prior to the oil price collapse. The oil price ran up 1400% from the bottom. Losses on the market exceeded several trillion dollars as oil prices came off and currencies collapsed. I would speculate that the same formulae in use prior to the LTCM were applied to bond markets, currencies and commodities.

http://www.youtube.com/watch?v=xGfXyVtiB1E

"Surfing sucks, don't try it" ... that's supposed to be a surfer joke. Ok, I guess you had to be there.

Buy American. I Am.

By WARREN E. BUFFETT

http://tinyurl.com/56bkbx

Top Stories
Bush to give pep talk to anxious country Friday- AP

Argh. This ain't no baseball game GW.

"But the entire experience taught me quite a bit about how the market works. For years on end a company’s price can have less to do with a company’s real prospects than with the excitement it and its supporters are able to generate among investors. That lesson was reinforced as I saw the Gandalf experience repeated with many different stocks over the next 10 years. Brokers and bankers market and sell stocks. Unless demand can be manufactured, the stock will decline."

Mark Cuban's post on the influences of talking heads over analysts recommendations is worth a read.

http://tinyurl.com/5zew75

"Volume creates demand. Stocks don’t go up because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about fundamentals? Fundamentals is a word invented by sellers to find buyers."

Just as stats are used to sell baseball & basketball players I guess...

I wonder if Palin likes his team... Goooo Mavericks!

"If you really think of it, when a stock doesn’t pay dividends, there really isn’t a whole lot of difference between a share of stock and a baseball card."

I think investing in this kind of market is more like like wrestling than baseball - fighting for years in a gamed system then finding out it's real enough to leave bruises, broken bones, and scars...

http://tinyurl.com/5naet4

Some mixed markets overseas. British Bulldogs are flat after a strong open. C'mon Bushie, lay the smack down.

http://www.gwjokes.com/pictures/wrestler.php

"Equities rose across the world on Friday after encouraging earnings signals from technology firms such as IBM and a slowly improving tone in beleaguered short-term money markets helped ease recession fears.

European shares were up more than 3 percent following gains in Asia. Overnight, Wall Street ended a volatile Thursday with gains of more than 4 percent."

http://tinyurl.com/5ubjkx

Then I guess they heard who was on the card for today's match.

AMSTERDAM (Reuters) - Shares in Dutch financial services group ING (ING.AS: Quote, Profile, Research, Stock Buzz) dived more than 20 percent on Friday, and asset managers said the move was triggered by reports on ING's capital position.

http://tinyurl.com/6cezgj

It would be interesting to see what sort of referring keywords make people come to Bill's site. My site is getting a lot of these lately.

"ing direct market crash"
"market crash and tax savings account"

and one a lot of us are probably thinking about.
"dollar cost average and excel"

Everyone is also searching for info on the BDI.

Warning... ugly chart from Big Picture.
http://tinyurl.com/5ofg6j

Something tells me excess is almost out of the system.

If I was looking at catching knives next week I would probably pick dry shippers. That BDI chart can't go much lower, can it?

http://tinyurl.com/6yu574

The development from yesterday on the charts seems positive at the moment - although certain key levels are to be broken for confirmation of 'double bottoms' or 'w' formations - buyers have stepped in to support the prices with good volume - selling does not require large volume in the current environment but buying does and that I see. It seems many people are underwater and will jump out at break-even levels - don't blame you - so there will be a lot of resistance to go through - but we should hold on for better prices...JMHO

I encourage readers to make use of the information noted by Bill in regards to Pascal Willain's 'Effective Volume' studies. I am familiar with the work and believe you will find it useful. If anything it will help with confirmation of your own analysis...

Vinod,
Thanks for the Buffet post, part of which reads:

"Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."
WB and BC saying: Don't be a Robin.

Or the moral of the story....The earlybird gets the worm.

Picked up some gold premarket.

Bill mentioned how the two candidates body language during Wednesday's debate and demeanor sent warning signs to him.

I agree these are signals loaded with meaning, but we must look deeper.

Trust is something which seems in very short supply lately — in politics and financial dealings.

Politicians, though they seldom say flat out, "Trust me," try to give a trustworthy image, citing their voting record (when it suits—ignoring when it doesn't), smiling and are coached by their campaign advisors in various dos and don'ts.

John McCain — I trust his patriotism, but doubt his wisdom. Sara Palin has a degree of common sense, some governing ability, but is not (yet anyhow) someone I trust to be Relief President of the United States. This first decision does not bode well for John's judgment IMO. His financial/economic views are simply those of Wall St. — obviously not a wise idea today.

Barack Obama — I trust his intellect. I do not trust his motives, past associations (not just because of who, but why). I see him as a highly ambitious, political opportunist in the mold of Bill Clinton. I voted for him once, but he certainly did nothing for our state. (He did well for himself.) Any of his financial/economic ideas, which differ from those on Wall St., seem unlikely to pass congressional muster. Several are just plain the wasteful pandering for votes (at a rather cheap price for the value I place on my vote).

Bernanke, Paulson and others have stated trust is something they want to restore. So far they have only exposed a lack of understanding of human nature. Paulson stands there with bloody hands claiming incredulity that such a thing could happen and at the same time that he is fixing it. Bernanke seems to truly believe the public can be convinced it will be better if left to his expert leadership.

This all makes great fodder for comedians — those who understand economics.

This whole process in both financial and political realms seems to be based on the premise that the solution to disillusionment is RE-disillusionment.

Jaketh,

I think it will be close. Even though Gallup is a long time and well respected poll taker, I seldom pay attention to polls, since I don't know how the questions were posed.

Racial bias is in play both directions. Blacks are expected to vote black and a number (?) are expected to vote white. I find this personally puzzling since Obama is half each.

With their quest for viewers by cauing controversy, I think 24/7 media blather does us a great disservice.

Good morning.

Here are your Cara 100 Ratings Changes:

Price Targets Lowered:

GOOG - from $675 to $575 @ Cantor Fitzgerald
GOOG - from $600 to $551 @ Jefferies & Co.
UTX - from $85 to $67 @ Jefferies & Co.

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

Have a great day and a better weekend.

As a person that has served on a Board of Directors for a non-profit corporation, I find it absolutely astounding how ignorant most people are as to their structure and function.

That a community activist is asked to serve on the Annenburg Foundation Board to improve education with a Professor that USED to be in the Weather Underground is NOT an association.
That's like saying that all politicians approve of picking up gay partners in mens room stalls, because they all serve together on the same BOD....called Congress. While I don't necessarily respect politicians, it would be stupid to paint then all with that brush.

Let me say, I have served with people on Boards of Directors that I wouldn't normally have a civil discussion with much less call them an associate. Some were outright criminal. They sure weren't my pals. The nature of most BOD's is exactly like our government, there is staggered terms, parliamentary procedure, and people that don't see eye to eye.....IOW, there are people of all backgrounds, some from previous Board elections, some new and some held-over. Those serving don't pick their cohorts.
They don't get to pick one another.

Seriously, I LOVE you guys, but some of the stuff you parrot from politicians doesn't make you look as smart as you are.
A basic understanding of how these things work would tell you ALL of the hoopla surrounding this story is total BS. Your meter should be pegged.

To all Cara readers,

Not having much trading experience in my 40 years of investing, I seldom feel qualified to offer my opinions on anything other than broader issues.

During such an uncertain time as this, I'm doing very little. I sold in time to limit my YTD losses to less than 10%. Looking occasionally at the long list of Vanguard funds (mutual and ETFs) I'm tempted to feel pretty smug. (This is not a wise thing.)

I am confident that when the dust settles we will all have plenty of opportunities. Bill's list is enough for me to ponder and dabble in while the "experts" continue to sacrifice long-time companies to the "gods" on Wall St. and D.C.

People will spend once again as soon as a new credit source is created for them. Some may even learn the value of saving and compound investing. We are in the midst of the formation of a new world order beyond of poor power to alter to any great degree. We can, however, discover how to best take advantage of it personally.

Hang in there. Time is on our side.

Potash and Agrium cut again
Posted: October 17, 2008, 8:32 AM by Jonathan Ratner
Mining
After slashing its price targets on Potash Corp. and Agrium Inc. dramatically just last week, UBS is cutting again as a result of the weaker economic outlook.

Analyst Brian MacArthur got the Street’s attention when he cut his forecast for Potash shares from US$308 to US$180 and Agrium from US$135 to US$80 on Oct. 6 as a result of lower fertilizer prices. Now, those targets have moved down again to US$165 and US$72, respectively.

UBS cut its 2009-2011 average price forecasts for fertilizers such as potash, diammonium phosphate (DAP) and urea by 19%, 45% and 36%, respectively.

As a result, its earnings per share (EPS) forecasts for Potash fall to US$12.01, US$17.93 and US$18.08 for 2008 through 2010. For Agrium, UBS forecasts EPS will come in at US$8.50,

Mmmmmhhh....that link to Mr. Willain's website to view the charts is not working for me. Anybody having the same problem? Suggestions?

Is the drop in oil/gasoline an economic factor or a pre-election ploy?

Chavez may not be aware of the doll, Chatty Cathy. I have for some time suspected W is a larger version with a limited number of repetitive phrases.

Recently a new disc seems to have been inserted.

[Bill Cara note:

Today in the WSJ is an interesting take on politicians: Do we really need them?
http://tinyurl.com/57fc3b ]

Nemo re Willains site

The link in Bills posting seems to accidentally have a prefix to the page that it was posted on. Just strip that off and you get the following.

http://www.effectivevolume.eu/

Quasi

ING: Should I withdraw money in my Orange account ? Is it less that 100K .

ING accts are FDIC insured.

My one worry is loss of interest and money getting frozen for sme time.

You can feel the fear in the market.
No one is able to take a stand where the market is headed. Price going all over the place.