Here's an interesting first person view of the financial crises from Iceland.

http://tinyurl.com/3p5s4k

Enric Duran, the Good Thief?

On 17 September, Enric Duran, an anticapitalist living in Barcelona, went into hiding. He had just admitted to essentially robbing 492,000 euros from 39 different banks, and then published this admission in a free newspaper that was distributed in the quantity of 200,000 copies that very morning.

Enric accumulated this sum through fraudulent bank loans which he announced he will not repay. To add insult to injury, he presented his actions as a searing criticism of the banking industry, and explained how other people could easily pull off their own bank robberies.

“I robbed 492,000 euros from those who rob so much more,” he claimed in the newspaper, Crisi. The one-time publication was paid for with some of those stolen euros, and the rest of the money went to fund various social projects that are creating alternatives to capitalism.

http://tinyurl.com/5bxjpp

Scaling into GG, ABX, AEM, NEM on the open one third position size. Looking to sell puts today on further weakness.

"You see, the accounting principle of First In-First Out also applies to markets."

Beautitul...phrases like that help you keep track of trading psychology..

A bit anxious about by PM miners after yesterday's rout.

AUY and SLW seem to be priced for liquidation!

For those of you with much more knowledgeable about the miners, I'd much appreciate straight-up thoughts about whether AUY and S has the cash flow and low enough debt levels to be among the "survivors" after this financial crisis (including the likelihood of a, hopefully, brief deflationary cycle with lower PM prices)

Warren Buffett has been on TV advising people to buy US stocks now. He said he has been doing so with his miniscule private non Berkshire funds which represent 1% of his wealth. If he loses it all, he would recover it in 33 days on the preferred stock interest he recently negotiated. I guess that is a measure of his faith in his advice.

SID - Nice move on this Brazilian steel today. Its coming to my basis after averaging down recently. Who knows

In the past yr the single biggest mistake I made was to assume that a rising gold price would support the price of the gold miners I own. My focusing on the xau:gold chart lead me to believe that they were a "buy" for the entire past yr. Clearly not the case. Even cashed up miners making profits with no debt have been hit equally as hard.See Otto's article on fvi part way down the page,incredible! http://tinyurl.com/5aeghn

I guess what that "learns' me is that gold stocks should be traded as when they top temporarily one never knows just how far they will go before they bottom.

As recent as 3 days ago I made the same mistake buying yamana yri.to at 6.68 and watching it fall below my entry an hr later and keep going further than I ever believed it would. Yet I saw a good opportunity to sell and make a small amount and did not.

Thanks Bill and everyone,I don't give up easy

Perhaps the usd has topped for now? the miners may believe it.
http://tinyurl.com/5c2aae

lessmore,

I heard on either BNN or CNN (I can't remember which because I switched channels), that Buffett has said he has begun investing his own money (not just Berkshire's) in US stocks, and that "if prices remain attractive", he will fully invest in US stocks (whatever that means).

Yes, you sell them with decent profits.

GG @ 33? "See ya".
GG @ 18-19, "how do you do?"

Tbar- XAU:GLD is picking up...

it's just tough waiting for reversion to the mean...

AUY isn't going broke. They have $1.2b. in cash flow from their mines.

http://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=70869&sn=Detail

http://news.google.ca/news?hl=en&ned=ca&q=yamana&ie=UTF-8&scoring=n

RIO: buy back plans.

Time to buy ? RIO is in positive territory right now.

Thoughts ?

On buybacks:

I've always wondered, if they've got the money for buybacks, why don't they just pay it out in dividends. Theoretically, it increases the EPS, but that is a shell game. If I'm missing something, please advise...

Any bets on where the market will be at the end of the day ?

I'm with Tbar now ... trading account wiped out after > 6 figure losses since September.

It feels like I'm underwater. And it's difficult to concentrate on anything at all. I'm truly finished now, but I wanted to thank everyone who tried to offer good advice. I didn't take it, I didn't protect my capital when I had a chance.

Aside from watching my father die, this is the lowest I have ever been in my life.

Don't let this happen to you.

Adding a little GLD/SLV.

Options Straddles.

Can some one please give an example on using straddles ? I am trying to learn how to effectively use them.

How does one decide on the strike price ? and also on the expiry for both call and put options ?

Lets take RIMM.

placing a bet on 9500+...

Thanks, Bill. Effective volume is a great tool.

What's happening to the gold sector?

The gold price has sold off because somebody sold physical gold into the market on the LME, or a bullion bank holding gold decided to lease it out several times over and dump them on the COMEX as a short.

Gold miners were considered to trade about 30P/E as a matter of course, that one could expect to see those numbers. But base metal miners trade something like 7P/E. TCK.A.TO is trading around 5.3P/E. Its profit margins are better than AUY, and its float is 200 million less shares.

So maybe that formula where gold miners are supposed to trade at 30P/E should be discarded.

2nd ave re xau:gold , it's in the basement I hope so. I feel now that I have studied the xau:gold and intermarket long term charts so hard for so long that it has diminished my ability to sell prices because my view has been to sell fundamentals when they get recognized by price.

Thxs fransix for the yamana news link.

number2son at October 17, 2008 10:20
I am truly very sorry to hear that. I am in a state of shock at what has happened in the past yr to my/our finances, I know we am not alone, another gold stock investor I know of is losing his house for crying out loud.

Sandy- Maybe SiO2 will respond. He is more knowledgeable than I am. He also said he was going to report a study he was conducting on IWM straddles. I suggest paper trading them so you realize the effect of IV and delta. I only trade the indexes because of close strikes, higher volume and the narrower bid/ask. They have been working very well lately.

2nd_ave: lets hope thats where the market is headed

number2son, from what you describe, it sounds like you are clinically traumatized, and I'd think that anyone who's been through what you describe would be too. This is not something to take lightly, it is really quite serious. I know, I have PTSD. Please don't let the trauma settle. As far as I know, the best way to work it through is with a psychologist. Don't take it lightly. Best of luck...

Long ambac again

i notice that Jim Sinclair is posting hate mail messages on his blog. im sure Bill gets his fair share of hate mail over his calls the past few weeks along w/ letters showing appreciation.

you can never keep everyone happy,

its telling that the precious metals may have indeed found a capitulation bottom when the broader market appears to be bottoming short term, and people who are dedicated enough to gold bug sites like Sinclair's are writing him hate mail. i would think these are the last people to jump the gold ship. spot gold moving below $880 might have been the fix this morning.

as an aside, i have long wondered about the Money Flow Index compared to the RSI as a technical indicator, i rarely see it used by TA guys, and its mentioned on the site Bill posted yesterday.

from the textbook definitiion MFI seems to be more dynamic than the RSI, yet its rarely used,
any thoughts on this and what its limitations might be?

thx

[Bill Cara note:

I have not received a single piece of "hate mail", but I have gotten about half a dozen letters asking for special help, and I will try to give it because it's the proper thing to do in certain circumstances. More than anything, I have just stood up for the human spirit, which has taken a beating this month. I called a new Bull early because for most people who are fearful, it takes time to act. Due consideration is needed, and I did ask everybody to think deeply about how they intended to act now that prices are down so much from a year ago. I never strayed from the mantra that risk management is Job #1, and I never will.]

Backing up the truck
Fills this AM
POT.TO $83.5
AGU.to 39.5
TD.to $56.5
Oil.to $3.71

Not yet filled
BNS.to
TCK.B.to
CNQ.to
ECA.to
These last two are 2:1 sale

Holding into year end rally

And G.to @ $23 filled

number2son:

This is not cliche:

Life is about getting knocked down and standing back up. Casey says it much better.

I understand your down. I lost everything last year. Wife, home, and most of my money. I've definitely had my "poor Nemo" moments.

As Casey mentioned the life is the crucible in which our soul/spirit is tempered. I know a fellow who is on his "third" fortune after having lost it all twice before.

Sounds like you didn't heed the lessons placed before you. Heed them now. Life is also just a big circle (Yin/Yang Ecclesiastes). As kids we crawl before we walk. Sometimes we just have to be willing to get back on the ground and crawl for awhile until we're ready to walk.

Only you can do it. The bad times will make you appreciate the good times even more...

Sharkster:

Following ABK? Like that little shakout @10:34?

n2s- when jason gets back from shanghai, why don't you join us for sushi one weekend and we'll try to give you some perspective? (btw, still have a bet with shark that ESLR bascially goes up four-fold from here by next July)...

I'm really sorry to hear of your troubles #2.
I see you know the depth of your own trauma.

I urge you to expand your communication outside of the list and to seek help for yourself.

As Louis Rukeyser said, "The world didn't end, everyone in your life still loves you'.

You are in our lives.....

number2son,

I'm also sorry to read of your troubles. To add to what nemo wrote, when the world seems to be kicking my butt, I watch this scene from Rocky Balboa:

"The world ain't all sunshine and rainbows. It's a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't about how hard ya hit. It's about how hard you can get it and keep moving forward. How much you can take and keep moving forward. That's how winning is done! Now if you know what you're worth then go out and get what you're worth." -- Rocky Balboa

Regards

I think this may have legs to 2nd's target, big caps pushing the train...

number2son,

I've seen similar things happen to friends and family before. I know what you mean about having a hard time focusing.

There's little any of us can say to make you feel better. Most of us also have or have had losses too, so we can empathize. It just comes down to willing yourself into thinking more positively, taking a protective stance on what's left, and formulating a plan for how you're going to start again...

Sandy:

Take a look at some current moves required http://nexalogic.com/strangles.html (prices as of about 10m mins ago). RIMM needs moves much bigger than IWM to be profitable. Can it happen? Sure, there are better odds on the indeces.

Today my plan is on maxpain being a magnet. IMO Maxpain values will shift to current prices, as prices will shift to maxpain values. 25% of all outstanding options expire today which likely translates into big moves.

some of the stories posted here this week have totally changed me. this is real life and the ugly side of investments.

bill said it and it bares repeating...margin is an enemy and only invest what you can stand to lose.

personally, i had several sleepless nights this week. raising cash and reallocating my portfolio has given me some piece of mind while i try to make up some losses but the key for me was having capital to utilize.

my heart truly goes out to all of those...myself including...who have taken a big hit these last few weeks.

Something I read on Mark Cuban's blog stuck with me... if I can't do better than an index, then why wouldn't I just purchase the index and do some dollar cost averaging into TSX (20% discount in USD)?

Looking at some of the stocks above for entry points doesn't give me much to go on.

CNQ.TO - chart shows worse than index performance?

http://tinyurl.com/5su6d3

POT.TO - better than index (XIU).
AGU.TO - better.
TD.TO - usually worse, now better.
CNR.TO - much better.
PCA.TO - much worse.

Funny that my strongest holding over the last couple of weeks has been CNR, weakest PCA.

Looking at pages of RSI buy alerts, something I don't think we have ever seen, it tells me either RSI indicator is broken or we need to buy a basket of these stocks. Perhaps mass distribution of the RSI theory of buying stocks has compromised its effectiveness or some one is gaming the system for the opposite play?

I would think an index buy or no buy would be a good play in this market. Of course, you're not going to hit Red 23 anytime soon on the index, unless your gambling in those overseas casinos, or using double-short leverage.

The better play is on Mark Cuban's blog.

http://tinyurl.com/3n3mzg

Looking at CAD, the 50/50 rule is in effect, could go either way, which is better odds than most casinos.

And it's doing better than the index.
http://tinyurl.com/5htkxe

From my prospective, now is the time to be buying gold/related, not selling. The same applies to equities. Just try to think about whether the economy worsens, or improves from here. I'm in the camp that it improves, and inflation has to kick in from all the cash and credit flooding in as an effort to keep the economy from going comatose. I'm not looking to sell, that's for sure.

Take a look at your basis cost if you need some reassurance. I figure my basis is about half of this market decline, and somewhat embarrassed about that, but to sell now would be a huge mistake for me. Nothing I own is on margin.

Sorry CNBC/Bloomberg.LLC et-all.LLC, I'm just not going to sell.

I've been in and out of Ambac several times unfortunately. Nothing's clearly defined yet but this market continues to break hearts and take egg money:) (beer money in my case)

I think it's one thing to expect a 2 month bounce rally but another to think that this money injected into the system is going to get into commodities right now. So far the evidence is that $2 trillion has gone nowhere and that it is going to take several times that to replace the capital being destroyed.

Not only that but it will take time and a reversal of psychology.

I am still looking (hoping for a 2 month) rally, but I would expect new lows in the first quarter before a true bottoming. Actually, if we go by the last 8 years the disinflationary period should take a couple years at least, but I guess one of Bill's points is that a true recovery is not conditional on a market rally. It's just tough to see a sustained rally though.

Nemo,
I am not sure if your question on stock buybacks vs dividends was rhetorical or not, but I have always understood the preference for buybacks to be driven by the taxation of dividends.

I am certain there are other drivers, such as a desire by management to communicate a belief that the stock is undervalued, etc, but the tax issue is one that would suggest that paying out dividends destroys some shareholder value.

Of course, when stock values are plummeting, with hindsight these buybacks appear insane. LOL

http://www.fool.com/portfolios/rulemaker/2000/rulemaker000620.htm (more on the issue)

Number2son and Tbar,

Wow, so sorry to hear of your losses! I've lost 2/3 of my stake. I know why. I didn't follow my own rules about position sizing. I kept seeing more tempting stocks that I wanted to own and couldn't say no to myself. I was too impatient and to desparate to make a killing. I should have been more prudent and patient. Easy to say, hard to do! Also, my plan of cutting losses at 10% for PM stocks was unrealistic. I should have set my loss level at 20% to 25%. I would have had losses, but not so great that I couldn't recover from them. Learning the hard way that you have to have a plan and stick to it. That's the real gold mine. Otherwise, it's a minefield.

N2S, when the single parent that raised me passed I fought the good advice of others to back off, take it easy, etc,etc. My masculine pride and stand alone-ness pushed me into a downward spiral that I don't share often. That advice was good advice. I just had to hurt myself more. I eventually sought help from others.
The market has done a similar job on me but...there is a but, its just money and my masculine pride and stand alone- ness thats been hurt. I continue to love others, I choose to try and understand others even though I am Convinced they are wrong. Some days getting up is hard, so i got a dog and no I get up for her and I, and my family, and me. Grieve, learn, try. Rinse, repeat
Back to on topic.
GG was attractive to me @ 26. ?? Now, if I buy thats averaging down? I know we've wrung that topic dry but..but..isn't GG different?
peace from North Puget sound

If the media is celebrating Gordon Brown, the British PM as a hero, perhaps I'll just hang on to my gold related investments, thank-you.

Once the correction is over (and I don't think we're done just yet) then the Yen and the Dollar should sell off against other currencies.

ST07

I am with you on that 2 month rally, and those lows in the first quarter of 09 are I submit are going to be devastating.

Where's the IMF?

Iceland nears bankruptcy, goes to talk to Russia. Pakistan nears bankruptcy, goes to talk to China. Where's the IMF? - sitting on the sidelines.

When Uncle Sam disregards "his" international system, doesn't he pave the way for others to gain influence?

Sarkozy and Barroso "get it" and are calling for Bretton Woods III, but the US - I expect - will drag its feet.

A little update on the JGB market:

http://www.bloomberg.com/apps/news?pid=20601101&sid=a205orgFhNgk&refer=japan

Seabridge Gold [SA] @ 7.29

Any other reason why so low other than the drop in commodities?

Re: F6' JGB post.

Thanks, F6.

This is one of the world's most important instruments/indicators. We all would do well to keep an eye on it. Sadly, I have had a tough time finding this on the free sites (e.g. stockcharts, etc.)

If anyone knows where I can chart/watch the Japanese govt bond, please post. Same for the Japanese long bond.

"You are told that your ONLY job is take as much money from your customer's pocket as you can and put it in your pocket. Then they give you all the crappy little accounts and you hit the phones hard and convince them to buy the stuff all the bigger accounts which are "desk" accounts are trying to sell. You move up to "desk" accounts when you prove that you can sell freezers to eskimoes. Aggressive rookies in derivatives beat the bushes globally to find any smaller unloved accounts and they plug them full of exotic derivatives that were designed to have huge yields and no downside - until the markets become very volatile, that is. Before this is over, we will see that just about every financial firm around the globe is loaded with highly questionable derivatives."

Confessions of a Wall Street Bond Trader

Jesse's Café Américain

Groupe Caisse d'Epargne, the French customer-owned bank in merger talks with Groupe Banque Populaire, reported a 600 million-euro ($807 million) loss on equity derivatives after stock markets plunged last week.

http://jessescrossroadscafe.blogspot.com/

JPY bond?

http://tinyurl.com/5ublvj

My expectations about long bonds, the boringest part of the market ever, is that they will continue to sell off.

Sandy,

By definition - a straddle is the same strike price, same expiry, at-the-money call and put option for the stock or index.

With RIMM - it is trading around 62.00. When buying the straddle - your risk is the amount you spend for both sides. Buying a November expiry $60.00 call would cost about 6.80 and the $60.00 put would cost around 7.10. Total Cost is 13.90 for both options. That means you only make money if the stock moves more than 14 between now and 34 days from now. The problem is that with high volatility, moves must be extreme to collect money (you are paying alot of money for the options). But, you have limited risk which is advantageous.

If you are a novice investor - I would advise not to work with options until you have paper traded it for about 6 months and understand fully the risks.

I currently sell credit spreads on the E Mini S&P. These are out-of-the-money calls and puts on an index wherein I collect money from a short position (sold it) and buy insurance (long position). An example would be selling a 600 put for 6.00 and buying a 525 put for 3.00. I would collect the difference (3.00) at expiration provided the S&P closed above 600. I also do this on both sides (meaning calls as well). During periods of high volatility - being a net seller of options pays well.

Hope it helps.

I caught some GGs @ $19.00 and now averaged my stake @ 22.00. Break even is closer to home, and all economic logic points towards a significant price increase once the impact of all the rescue programs kick in.

Will buy again at $16.00 if it comes to that.

GG's a keeper until it shows a handsome profit. My guesstime is sometime mid-November, but that's just me.

Re: NG.TO

NovaGold getting a downgrade. Guess they are preparing the turkey for a feast.

Number2Son, TBar and others in same position

Photogray is right on when he says
fighting the good advice... My masculine pride pushed me into a downward spiral ... I just had to hurt myself more. I eventually sought help from others.

This is very standard in grieving since you will blame yourself and whip yourself for your mistakes. Some of this is natural, some of it you can shorten a little... IN personal acceptance.

The important thing to understand is this is a hit on your spirit and the negative feelings you are experiencing right now can set you off into a "negative cycle" very easily.

Sharing,talking to others, movement practices like qi gong , bike riding etc, smiling all help counteract that negative spiral.

Right now literally going out with a friend, sharing and then going to see a funny movie. Could be one of the most important steps to help stop that negative spirit spiral. To give yourself a break... Give yourself a break, be kind to yourself. No amount of self beating stops what happened... Being kind to yourself does everything to restart your motion of life back into tomorrow...

Grieving goes through natural cycles and you can look up on the web lots of resources on how to handle it, in a sense you are dealing with a personal internal death. Don't be afraid to get some help either if you can't let go.

Personal acceptance is the hardest thing for most people and don't think you have to do it alone, Lots of services are out there, lots of community events and practices to explore.

The world might give us hints and occasional helpful hands... But it is up to each us to decide when enough is enough, release and then to begin again.

We each live many many lives in the one we have... child, adult, parent...and many forms of adult in between... this is another transition point to start in a new and wiser role from what you have learned before.

Its ok to take some time to grieve and release

and then

Be kind to yourself. Be yourself anew and move forward again

PG: If you got trapped in a *partial position* for whatever reason in GG and it drops to 18.56, then adding is technically averaging down but it could also be trading your way out of trouble....depending on your initial position size and timeline. Timeline would be pretty important here....

I was adding GG with Vinod quite a bit higher and I missed it breaking it's 52 wk low....and it went much lower. Luckily my initial position size was small enough that I had enough room to buy near the low.

MikeNYC, could you elaborate on why you think this: "This is one of the world's most important instruments/indicators"

Seabridge is not a gold producer. Seabridge buys lnad that may have some percentage of gold content in it, the idea being, in some future-world wherein gold costs 2, 3, 5 thousand dollars an ounce it would pay big time to go get that gold. It's like a long-term call on a much higher future price of gold, hence it does best when gold is threatening new high levels. And actually Seabridge was the "stock of the year" about a year ago when it went from about 11 to about 40 during the gold runup.

BTW I told yous guys gold would be vulnerable to the de-leveraging...When the man is standing at the door and needs the money now, you sell whatever has value...

[Bill Cara note:

sharkie, I thought you were American. Try speaking English. "yous guys gold" is something that not even the Chinese, Russians, and Argentines here would say. :-) ]

TED Spread down huge today...

I'd like to know more about the logic behind 1Q'09's lower lows.

I submit that once economic growth shows infantile signs of life, commodities will move upward. In fact, this will be an anticipatory move.

Hastily wrote earlier this morning that I was buying select gold stocks on the opening. Here is my reasoning. These stocks are approaching levels last seen in 2002-03. RSI's on these stocks in the twenties on a monthly basis. Since the short term RSI's have not turned up there is no way of knowing if buyers have regained the upper hand. Obviously during that period gold was much lower under 400 I believe. The US government's plan to inject huge sums of money into the financial system to unfreeze the credit markets HAS to be at some point inflationary. In my trading account I am beginning to put the TOG spread on, short long dated Treasury bonds and long gold. Also have begun to sell puts on some golds-implied volatilities are off the charts, 100% percentile on all time frames I monitor. Instructed my father this morning to sell GG Jan. 2009 20 puts at 4 dollars, ABX Jan. 2009 20 puts at 2.40, and NEM Jan. 2009 25 puts at 3.20. I am scaling into these positions as I feel there is still a chance of sudden though short lived collapse in equity markets over the next month or so. During the 87 crash gold stock acted as equities and were hammered even though gold rose appreciably during the turmoil. For me the passage of time is more important than price so I am taking a one third position this week, a one third position around the end of the month, and a final position in mid November assuming these stocks are still languishing. If I am not fully invested at the bottom I can always pay up when it becomes clear a bottom has been established. There are some terrific values in all sorts of sectors, just need to let prices come to you, trade conservatively and scale in, and above all use good money management.

Number2son and Tbar,

I have also sustained 70% losses from my peak and have no choice but to ride it out. You are not alone.

2nd ave - are you located in NYC?

SF Bay Area...

aucourant, casey
I see the wisdom of your words. I had never invested for myself prior to 2001. As fate would have it I lucked out in retrospect and quadrupled my investment in three yrs in the gold share market. My wife and I were thrilled having 800k in stocks at 400 gold back in 2003. In may of 2006 it had dropped to 350k at 730 gold and now at 780 gold today the total is around 45k.

That may sound incredible but here is a gold stock that did well back then that may be a good proxy for what happened. It has lost 95% of its value cough...price...since then. Many other examples are available, add in the whipsaws and poor decisions and voila

http://tinyurl.com/648eqr

I bought eldorado for .24 cents, novagold for .65cents, kinross for 1.30,gss for 1.17. Caledonia for .o6 and it went to .60 in 6 months etc

The list of miners that lost 100% since then like thistle mining, etc bit into those gains handily.

In Sept 2003 there was a lot of talk about the building short positions in gold and I wrote to J.S. re my concern. He dismissed it as a non issue, gold would just keep going up etc. As a new investor/unexperienced I had already been unnerved by the vicious drops in the gold share market so when in late sept the pog dropped 14$ in one day I sold the entire gold stock portfolio and went to cash. A happy and wealthy camper at that point.

Honestly, I barely knew what rsi was back then etc but my gut instinct was saying I should reinvest in the oil market all of the proceeds so I bought some large and small cap oil stocks during the fall. As oil ran from 25 to 35 over the next few months the oil stocks went mostly down, while the gold stocks continued up.

I ended up selling all of my oil positions convinced I had made a mistake.

Here we are.

Gold was 394.80 at that sept high that I cashed out 800k, the hui was at 213.88 just below it’s 1996 high with gold 417
The hui was 17 pts below that high at 780 gold today and our life savings have been wiped out.

The tragic irony of it all is that I come from a very poor family, my mother lost our home in the last gold cycle/interest rate peak in 1980. I anticipated a similar cycle approaching and moved to protect myself and the cycle has come full circle. My mother has nothing and I have renovated my shop to suit her as an apartment. Life is a bowl of cherries all right.

So stocks are for selling that is for sure.

bidu at 239.

NG - Go figure ---- its in the tank with 50% interest in ~35 million ounces AU at Donlin, along with another 50% interest in ~11 million ounces of AU + ~9 billion lbs. of CU at Galore. Without the proverbial pot and in the current credit crisis w/vultures circling the stock makes for good downgrades I guess.

Lucky Dog - I second your notion.

Shark - Are you attempting to force me into adding to my gold position under $700? I wish I'd heard your de-leveraging howl the last two times while gold was breezing past a nine handle. If I'd traded based on this you'd probably have a free ticket to Bill's beach sitting on your doorstep.

With my trading portfolio standing less than half it's value of a little more than a month ago I may have reason to join the pity party. However, I am heartened by the knowledge that, in most cases, I now own more shares in each position that I have held previously and feel they are quality stocks that are undervalued today because of strong negatives presently controlling the market. Regarding G and ABX - what was the POG when they were last trading at these prices, and how long ago was that? Can anyone here offer the answer and the source? Thanks again!

meant to say stocks are sold of course.

been long ambac for the breakout

shark_attack?

ambac short covering?

Short % of Float (as of 25-Sep-08)3: 22.50%

good luck. Will wait until next week.

Hey look at all this egg money...Omlette anyone?

I suppose everyone realizes the move in coal today. I'm guessing it's due to earnings reports and oversold sentiment.

Bill,

I know this is out-of-sequence but I only saw your comment regarding Microsoft office recently.

Ive used Open office (www.openoffice.org) on linux, and Windows (W2k to WXP) and Neooffice (www.neoOffice.org)on OSX in our publishing enterprise for several versions. For composition, editing, spread sheet, and presentation work they are equivalent to the Microsoft Office suite and interoperable with it.

Except for some of the Microsoft-specific functions, we find nothing lacking and our demands in publishing (for example Chinese characters) are generally more stringent than most users will require. We find the programs stable and reliable.

Also, we use Drupal for our web site and find that it is reliable and easy to maintain. Using the ability to create memberships might be a useful way to deal with extraneous posting on the blog.

Thank you for this blog, I am a learner and "practice charting" by seeing if I can understand the conclusions of the experienced traders who post here.

Bob Felt

[Bill Cara note:

Thanks Bob. This is the way I too am headed. I tried the Microsoft and the Apple and the MT Blog Publishing software way of doing things, and found all lacking in too many ways. So, I started to move in a direction that will help me avoid what I see are mostly marketing related issues. If it's a quality product, I'll pay the price. But, if it's mostly frustration I am buying, there is only so much one can take before making changes.]

Here's cynical comment:

http://www.atimes.com/atimes/Japan/JJ18Dh01.html

I went to cash months ago, having decided that there was big trouble ahead. There is no joy to be found in being right about trouble, though.

I came back in a few days ago, in a small way and only in high quality. My purchases are down from where I bought them but holding steady and even gaining back a bit against the general trend.

I came back in for two reasons:

-- As Bill points out, markets recover. IMHO, if markets are manipulated then the likelihood of recovery may increase. If you've got skin in the game, isn't that a stretch to your sense of fairness?

-- If the global financial system truly collapses, then the "cash" I put into investment could be worthless anyway.

So it's the stock market for some of my limited savings. Barring disaster, high-quality stock bought at firesale prices should eventually become no-maintenance appreciating assets... if you can manage the market ride without nausea.

It's a horse race and as my dad once told me, "Always bet on a horse that's actually breathing." BA, for instance, is haggling with its machinists, but it has a huge backlog, is a prime defense contractor, and just picked up another meaty order. BA is breathing. In terms of appreciating value, "Cash" is just dead wood with scribbles on it.

BA, DELL, CCO. Holding -- not skilled enough yet to day trade.

Just to see--I look at 15 stocks in position and I have paid 160k for it
They are worth 110K now
If I hold them all until all reach their 52K high they will be worth 470K
And I will quite my JOB
And my friend it can happen

ESLR I have 3000 of them and losing half its value

GG- I brought at 23.00
Added today 200 at 19.00
As far as I am concern we are moving higher for few weeks

2nd
UAUA is on roll

Norton850 - You've got your head on straight!

Hello People!

Time for lunch

Norton850 - I should point out though, it sounds like you missed an opportunity to short the market.

I TOLD you guys the airlines were gonna freaking rock on lower oil.

The TED Spread continues to fall...

Mark Cuban is bullish (if you care to listen to his thoughts).

Buffett has been openly bullish.

Bill has been bullish the past few days as well.

The worst may be yet to come, but it seems like there may be some serious upside before we see major downside?

BTW Vinod I wouldn't personally buy UAUA up here. Wait 4 ze pullback nxt week.

SGP (Schering-Plough) is rocking it today, up 9%!
NVS (Novartis) up 7.5%

Anyone play these?

shark_attack
I have 1000UAUA paid 4.50

i should say 5.50

Chickenpookie,
Quite right about the missed shorting opportunity. However, note that while I am no stranger to buying stock and watching it go up and down, I'm no trader yet. Maybe next time.

I've been thinking more about the timeframe for making investment decisions. As I've noted before, I'm an investor who likes to buy "undervalued" stocks to hold them for 6 months to two years, and I've done this successfully numerous times for the last decade. This past 8 months I've taken a major loss, now 30% of my investment portfolio, although in the past week or so, I've gone to 90% invested. I think that for me a mistake to try to think I can understand price trends in the short term, meaning hour, day or two or three week period. If I had stuck to my bias that this was a bear market in the making, and that deleveraging would accelerate and economic growth would decelerate, I would have done much better than I did by scaling into the market slowly as it declined. In fact, I was about 100% in cash in January, and slowly eased into a number of different positions. Bill had said unless you really know what you are doing, it may be best to sit on the sidelines, and I failed to heed that, and paid as a consequence. He has also said many times that the gold would be the last to fall at the end of the party, and if you look at the miners, he's been so right again. I wish I had followed my predominant investment idea that the market would drop, and just sat out, maybe holding some shorts, but I didn't. At any rate, I've had numerous 30% gains in a year before, and I don't know why 30% loss is so terrible, although I know that being 90% invested could mean this 30% loss goes to 50% or 60%.... I have only myself to blame, and afterall, it's partly the cost of tuition to learn something about making and preserving capital. I'm slowing learning Bill's advice that we trade prices....Currently long TBT, DAI, FRP, GG, GFI, NOT.V, AES, AIG, SU, LEN, HOV. I suspect I'll hold this set for a while, because I believe Bill's idea that we are at or near the current bear market bottom.

To continue the thread started by number2son:

This is indeed a very tough year for many of us here. So far this year I've managed to lose about two-thirds of my *father's* money in the Russian market, and I've had to live with that feeling of guilt (thank heavens it was "house money", or profits from previous trades). To my great relief and his credit, he's more or less been taking it in stride...

Then, when the market here in Moscow crashed last month, I was abruptly laid off from my job. The past month watching the markets crash globally and even further here in Moscow has been disheartening from the standpoint of wondering if I'll be ever able to get a job in the financial industry again before my savings run out. And with a wife and four kids to take care of - this has been constantly at the back of my mind.

But, there are of course silver linings to this situation. The first is that I've been able to spend a lot more time with my family - indeed those are the ones who love me most. The second is that I now have plenty of time to study for the CFA exam in December and stand a much better chance of passing.

So although my life has been upended in certain respects, the path I see to getting out of this situation involves first and foremost patience. I will simply wait for the markets to stabilize and recover, which they eventually will, if the 1998-99 experience is any guide (and the bargains in Russian stocks in 1999 were absolutely stunning...just like they seem now).

Hard work will also be key. If I just keep on studying, and stop worrying about the markets, then I will have made significant progress towards furthering my professional qualification.

In short, once I realized I had a plan and could visualize the ultimate goal, a good deal of the burden was lifted.

number2son, my sincere hope is that you will also take some time to figure out a new plan and take the first small but important steps towards making it happen.

[Bill Cara note:

Very inspiring comments, which shows that it's a small world and there are good people everywhere.]

vinod- whatever happens, don't quit your job, man...healthcare benefits are the same as gold, and pharmacy school for your daughter will set you back a little...

Can anyone tell me what symbol I should use to purchase shares of Royal Dutch Shell in New York?

shark - UAUA - what pullback and why? Not that I'm interested in airlines, but we should attempt to qualify our ideas...

I should say why Royal Dutch Shell.
Alliance Bernstein favors them among international majors as they have invested the most in replacing and growing reserves.
Their top US holdings in the value portfolio in descending order of expected returns from here.
EG expect Shell AT&T and Pfizer to approx double up to Motorola a potential 7 bagger.

Motorola
Macy's
Sprint
Western Digital
Apache
Mckesson
Cardinal Health
CBS
Merck
Devon Energy
AT&T
Time Warner
BP
Royal Dutch Shell
ConocoPhillips
Chevron
Dow Chemical
Pfizer
Altria
ExxonMobil

ALOHA !!

Jock ... Last I heard the IMF needed a $60mil loan so they could keep their doors open and that was way before the current bank crisis started!

ON BANK LOANING FEARS
That is what I don't get! Why is it the people of the World who produce products and derive actual incomes always have to keep the paper shufflers from going bankrupt?

I see no problem with letting the entire US Bank system fail. Then the next day we just hire construction crews(out of work homebuilders) all around the country to take down the Bank America signs, the JP Morgan signs, the Citi signs, the Wells Fargo signs and put up signs that say "PEOPLE'S BANK US TREASURY"! Keep all the furniture and computers and systems the banks had set up, so WE THE PEOPLE have no start up costs. FIRST IN ... FIRST OUT(FIFO) takes on a whole new meaning!

Here's my simplified flow chart of the current "credit" crisis ...

US TREASURY(A) >>> US FED >>> BANKS >>> LOANS(B)

The way I see this chart is that the US FED and the US BANKS are nothing but "middlemen" skimming profits. SO if we need to get from POINT A(money supply) to POINT B(business) then just eliminate the "middleman"! They say banks won't loan to each other and they are hoarding the bailout money, well then I would be in CONgress proposing to eliminate the US FED and US BANKS and loan direct to the US corps and people who qualify for loans. Let the US FED and its member banks sort out their own derivatives losses from their private unregulated markets in the basement of their private US FED. Its their problem not ours! These banks are nothing but middlemen shuffling paper for a fee! It would actually be cheaper to get a loan without them in the way of America's cash flow!

That is simple business logic!

Perhaps this will be useful:

The Devils of Doubt and Fear

Pupil: Doubt and fear are the devil, are they not? Is not fear the more destructive of all wrong elements? It seems to me that it is ever present in one form or another. Can this monster be entirely eliminated from one's mind?

Sage: Surely. Although fear is the most destructive of all the mental enemies, and, as you say, seems to be ever present, yet when you realize that your fear is just as certain to materialize as is your faith, you will grow more and more guarded as to the quality of thought which you harbor. Practice makes perfect.

Pupil: Try as I will to inhibit fear, I am unable to succeed at present. At times I utterly fail, and I am overwhelmed with it.

How to Drive Out Fear

Sage: The moment you begin to feel fearful, get into the open if possible, walk briskly for a mile or two, taking deep breaths, and holding your chin in and chest up. Think of yourself as a monarch of all you survey and assume a corresponding commanding attitude. Repeat with every breath this affirmation:
"I am breathing in the Life, the Love, and the Power of the universe RIGHT NOW!" Hold the breath a second, with the affirmation in the center of your mind; then expel the breath with the same thought and send it out to mingle with the ether of the universe.
"I and my Father of Love are ONE."

If you cannot get out into the open, assume, wherever you are, the same attitude. Take deep breaths, repeat the affirmation, and you feel certain that you are protected and supplied with all the love and power which Life has to give, fear will disappear, and you can resume whatever you were doing.

Attaining Your Desires By Letting Your Subconscious Mind Work for You
By Genevieve Behrend

Westcoaster - I found RDS-A or RDS-B. I'm not sure if this is exactly what you're looking for but it's a start.

ALOHA !!

Jock ... Last I heard the IMF needed a $60mil loan so they could keep their doors open and that was way before the current bank crisis started!

ON BANK LOANING FEARS
That is what I don't get! Why is it the people of the World who produce products and derive actual incomes always have to keep the paper shufflers from going bankrupt?

I see no problem with letting the entire US Bank system fail. Then the next day we just hire construction crews(out of work homebuilders) all around the country to take down the Bank America signs, the JP Morgan signs, the Citi signs, the Wells Fargo signs and put up signs that say "PEOPLE'S BANK US TREASURY"! Keep all the furniture and computers and systems the banks had set up, so WE THE PEOPLE have no start up costs. FIRST IN ... FIRST OUT(FIFO) takes on a whole new meaning!

Here's my simplified flow chart of the current "credit" crisis ...

US TREASURY(A) >>> US FED >>> BANKS >>> LOANS(B)

The way I see this chart is that the US FED and the US BANKS are nothing but "middlemen" skimming profits. SO if we need to get from POINT A(money supply) to POINT B(business) then just eliminate the "middleman"! They say banks won't loan to each other and they are hoarding the bailout money, well then I would be in CONgress proposing to eliminate the US FED and US BANKS and loan direct to the US corps and people who qualify for loans. Let the US FED and its member banks sort out their own derivatives losses from their private unregulated markets in the basement of their private US FED. Its their problem not ours! These banks are nothing but middlemen shuffling paper for a fee! It would actually be cheaper to get a loan without them in the way of America's cash flow!

That is simple business logic!

Bill mentioned to keep an eye on the 3 banks:

http://nexalogic.com/3banks.html

Watch out. A lot of things going on today moving prices higher (maxpain magnet).

Does anybody know if there is a favored class A or B?

Re: HRG.TO

Just look at this chart:

http://tinyurl.com/5k3k5w

ALOHA !!

Jock ... Last I heard the IMF needed a $60mil loan so they could keep their doors open and that was way before the current bank crisis started!

ON BANK LOANING FEARS
That is what I don't get! Why is it the people of the World who produce products and derive actual incomes always have to keep the paper shufflers from going bankrupt?

I see no problem with letting the entire US Bank system fail. Then the next day we just hire construction crews(out of work homebuilders) all around the country to take down the Bank America signs, the JP Morgan signs, the Citi signs, the Wells Fargo signs and put up signs that say "PEOPLE'S BANK US TREASURY"! Keep all the furniture and computers and systems the banks had set up, so WE THE PEOPLE have no start up costs. FIRST IN ... FIRST OUT(FIFO) takes on a whole new meaning!

Here's my simplified flow chart of the current "credit" crisis ...

US TREASURY(A) >>> US FED >>> BANKS >>> LOANS(B)

The way I see this chart is that the US FED and the US BANKS are nothing but "middlemen" skimming profits. SO if we need to get from POINT A(money supply) to POINT B(business) then just eliminate the "middleman"! They say banks won't loan to each other and they are hoarding the bailout money, well then I would be in CONgress proposing to eliminate the US FED and US BANKS and loan direct to the US corps and people who qualify for loans. Let the US FED and its member banks sort out their own derivatives losses from their private unregulated markets in the basement of their private US FED. Its their problem not ours! These banks are nothing but middlemen shuffling paper for a fee! It would actually be cheaper to get a loan without them in the way of America's cash flow!

That is simple business logic!

Kaimu - If your idea were actually implemented it would eliminate the current ponzi shell game and force government fiscal responsibility, not to mention, how/what would the associated lobbyists do for "honest" work?

Dream on pal, it won't happen until after Rome is literally burned to the ground. There would be no signs to replace, but there would be replacement buildings to construct and rubble to haul away.

Re: CG.TO

Another 'crazy' stock:

http://tinyurl.com/6ggat8

ALOHA !!

Oops ... I posted twice ... HUMMMM???

I left out one important item. Once the PEOPLE'S BANK opens and we just move the riff-raff out we can offer the former employees and potential whisleblowers a special deal where if they testify they get amnesty and a free month vacation at any of their former execs mansions!

The former execs won't need their mansions since they will be spending their last remaining wealth on lawyer fees defending them from the NUREMBERG BANK TRIALS being held in major sports stadiums across the country!

Hummmmm ... HA!!

westcoaster - Class A and B have virtually the same chart over the last year, very minuscule difference. They are buying back more A shares than B shares, I'm not sure how that will effect performance or why not the same.

http://biz.yahoo.com/prnews/081017/ukf008.html?.v=101

UPDATE: Canadian Banks Get Relief On Mark-To-Market Rules

October 17, 2008 1:43pm ET

(Adds comments from member of Accounting Standards Board, adds share-price movements, additional background.)

By Monica Gutschi

Of DOW JONES NEWSWIRES

TORONTO (Dow Jones)--Canadian banks may be able to delay write-downs on debt securities under more flexible rules issued Friday by Canada's Accounting Standards Board.

Under the new rules, financial-services companies can move debt or equity instruments out of trading books, where any changes in fair value must be charged to net income, to other categories where they can be held until their values recover.

Ian Hague, a principal with the Accounting Standards Board, said the rules mean entities that hold debt or equity on their trading books "wouldn't have to account for declines in their fair value immediately."

Rather, he said, the securities could be transferred to a category known as "available for sale" where they are still measured at fair value, but any declines in the value aren't recorded as losses on the income statement.

"From a company's perspective, the losses don't go to earnings per share," he said.

Alternatively, the securities could be moved to a category where they are accounted for at amortized costs. In such a case, they would no longer reflect fluctuations in fair value.

Hague said all of the securities must still go through an impairment test, but with a longer-term outlook. Using that criterion, he said, companies can decide to delay writing down the assets if there are indications that the drop in value isn't long-term.

Any decision taken by a company must include comprehensive disclosures given the optionality involved, he said. As well, he said, companies are under "no requirement to reclassify any of these assets."

Mario Mendonca, financial-services analyst for Genuity Capital Markets, said the new rules will spell relief for all the country's banks, but especially for Canadian Imperial Bank of Commerce (CM).

"On a go-forward basis, (CIBC) should not experience nearly the level of earnings and capital volatility," Mendonca wrote in a note. "This assumes, of course, that as management has stated, the cash flows are not impaired."

He said CIBC could still book a mark-to-market charge in the fourth quarter as the bank could decided to transfer its non-subprime exposure at fair value.

As well, he said there are a number of questions about how a transfer could be accomplished. "Specifically, is the transfer made at the carrying value as of the last published financial statements or at the new fair value? If it is transferred at the new fair value, is the write-down through earnings or recorded in shareholders' equity? The details really matter here," he noted.

Still, investors appeared to welcome the news. Royal Bank of Canada shares are up C$6.1% to C$48.50, Toronto-Dominion Bank (TD) is up 4.3% to C$59.05 and Canadian Imperial Bank of Commerce has gained 10% to C$59.85.

Canadian banks have collectively taken about C$11 billion in write-downs on distressed securities since the U.S. subprime mortgage market collapsed last year, sparking the ongoing credit crisis. Globally, banks have taken more than US$500 billion in charges.

The new rules bring Canadian accounting standards into line with U.S. standards, and with newly amended International Financial Reporting Standards (IFRS). The amendments are effective as of July 1.

Fair-value, or mark-to-market, accounting, has come under some criticism in Canada lately. Some executives and analysts have complained that many assets now hold little to no value because of distortion in the markets, but could recover their value if held to maturity.

Web Site: http://www.cica.ca

-Monica Gutschi, Dow Jones Newswires; 416-306-2017; monica.gutschi@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=%2FYK%2B0D%2FD2mOTWDfGxW3QRw%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

10-17-08 1341ET

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

FranSix at October 17, 2008 re cg.

you obviously have access to my portfolio lol..

They have had strong insider buying for many months although I dont know how much that can be trusted as an endorsement.

i read this column every day but seldon post. i had a philosophy that if a stock went down 20% i would sell. i didn't follow through so am hurting i find so many of the comments here helpful and i will try to be more disciplined in the future. i wish those of you who have lost so much to remember that your health is the most important thing.....money isn't any good without this. ann

Re: Social Equity and Kaimu's banking system

If we rounded up all the bankers, brokers, and financiers, taught them how to throw a chain on a derrick drilling floor or how to plow a straight row or how to operate cranes or operate blast furnaces, we'd be well on our way to national economic recovery. Under Kaimu's monetary system the money gets to the people without skimming, and I'd have all the former skimmers become productive by actually CREATING SOMETHING.

Dealing in wild generalities here, as a generation, America's original founding fathers were craftsmen, merchants, and farmers--productive, thrifty, and more likely to save than borrow. Today's wild leverage was foreign to them.

Then, post-Civil war, America became home of the writ large entrepreneurs...industry creators and industry changers...the Vanderbilts and Carnegies and Fords of the world. This era created men that were much cagier than craftsmen, yet incredibly PRODUCTIVE.

After a period of two World Wars, America reached its stride. Industry was on cruise control at 70 mph . . . things were great and innovation was everywhere--but in a different way. Gone were the game-changing Titans of old, we now had a nation of "Company Men." Yes sir, No sir, get the job done, provide for family, and don't shake things up too much, just keep the trains running on time.

Somewhere in the 2nd half of the 20th century we started seeing a new crop of leaders. The emotionally neutral thinking man, the strategist, the odds-maker, the one who calculated all sides and positioned accordingly. A new group that sought admiration and hated to be unloved, the type of man that won't look you in the eye when firing you but instead will "reaorganize" the department and leave your position out. "Damn shame about that reorganization, Bob, I really wish you well"--type actions. This leader gets cold feet in the face of doing the unpleasent, dirty work of crisis leadership.

And so, in a time of crises, we have these types of leaders today. They borrowed and spent our future before we got to today. And now, instead of rolling up sleeves and really FIXING our problems, they go back to more of what caused our problems.

Please, please, from this day forward, please don't let anyone tell us that circumstances are UNPRECEDENTED. America has survived revolutions, slavery, civil war, world war, terrorist attacks, financial turmoil, depressions, and we're supposed to belive that these times are unprecedented? This is code speak so that those involved don't have to shoulder as much responsibility, and it is code speak for taking our rights. It is a license to steal from us. The exceptions made in the name of UNPRECEDENTED circumstances will slowly turn our law and our morality on its head. The all-bets-are off mentality allows them to undermine us. Why do we let them?

shopper - Only the really smart (and I suspect most cautious) of us went unscathed in terms of the magnitude of this downturn. shark-attack's story and his reasoning is a great example which I admire.

At the 2 PM watershed, will be interesting to see if there will be a retracement, or if they will ramp it into the close.

Volume/accumulation generally pretty stretched intraday - nearly as stretched as on the pop in the open Tues., so on a normal day I woud call a retracement. But on opex day anything can happen.

Will not do anything today (almost never do anything on opex) unless there is a mega-parabolic ramp into the close.
If there is, will sell a few longs and add a few puts. IYR would be the primary put candidate.

As to buying straddles/strangles, the premiums are so high now so that's not a very good idea.
Instead you would want to sell strangles and pocket that great premium - except that could wipe you out if you miss.

I spent considerable time & studied the "market maker" business many years ago, and decided it was only for the really deep pockets - or the suicidal.

The only way I would consider buying a strangle now is to lock in an already profitable directional options position.

The only way I would consider selling a strangle now would be to work around a long equity position that I wanted to add to.

If you had say 100 RIMM and wanted 200, you could sell a strangle. The put at a strike you would like to buy another 100 shares at, and the (covered) call at a strike you would like to sell the 100 shares you already have at.

thank you pookster

Buy to Open Call 2 Contracts of -OXBJL
Details Filled at $3.50

Sell to Close Call 2 Contracts of -OXBJL
Details Filled at $5.50

Was that really a four minute trade on the -OXBJL? Damn.

What's the line on how long it is before vinod is down in the Bahamas trading for Bill?

But then he wouldn't have those little OEF birds whispering in his ear anymore....

;-)

Smaller packages - Just consider how size of packages are being reduced in the US market. It's as if there's no consideration for the expense or environmental impact of excess waste.

I wonder how many people concerned with global warming insist on drinking designer bottled spring water.

Sheesh!

Vinod, OXBJL

Great trade, gutsy. I guess you don't want to hold em long when they will expire in 90 mins.

MikeNYC
EXECUTIONS FOR THIS TRADE
Date Time Price Quantity Total
10/17/2008 2:27 PM $3.50 2.000
NET TOTAL 2.000 $700.00
EXECUTIONS FOR THIS TRADE
Date Time Price Quantity Total
10/17/2008 2:36 PM $5.50 2.000 NET TOTAL 2.000 $1,100.00

Kaimu,

Logic seems beyond government comprehension, I'm afraid. Well, they probably understand it, but it doesn't suit their purposes — saving their buddies.

This AM on CNBC Rick Santelli (perhaps the only logical person there) gave a simple econ lesson to Mark Haines.

"Mark, let's pretend we are capitalists.

Say you run a bank and have $1million to invest.

Let's say interest rates are very low and equities are falling.

What would you do with that cash?"

Mark, "Aaaa..."

Rick, "How about short term Ts?"

My thoughts:

You are in fine company with your thinking kaimu.

Roubini, "...$300B of public works is more effective than spending $700B to buy toxic assets." 10-9-08 Carl Ichan said nearly the same on Fast Money this week.

I think Paulson and Bernanke know it too.

ALOHA !!

LOOK ... A CLUE!!

Physical market versus paper market ...

"The above seems like compelling evidence to me that something is seriously amiss in the futures markets for gold (notably paper markets, easily manipulated because physical delivery of gold to settle these contracts happens less than 1 percent of the time); and that rampant manipulation for profits by just a few players is occurring in an unchecked fashion. According to data recently released by the Office of the Comptroller of the Currency, a division of the U.S. Treasury Department, of the $135 billion of gold derivatives contracts (including futures and options) controlled by financial institutions, JP Morgan controls $96 billion (71.11 percent) of these contracts and HSBC Bank USA controls $34.4 billion (25.48 percent). In other words, just two players control almost all gold derivatives contracts in the entire United States."

What a shock to see JP MORGAN mentioned!!

Wouldn't that be a market corner in derivatives if you own the majority share in any market?

ALOHA !!

F6 ... Of course, but derivatives are unregulated! HA!! Certainly there is an element of ANTI-TRUST! Isn't that what was used to break up the oil companies? I guess banks are exempt from ANTI-TRUST! BANKS HAVE CARTE BLANCHE ... Isn't it obvious yet?

Has anyone been able to get the link from yesterday's Planning post by Bill to work. I keep getting an http 404 - Site Not Found.

Pascal Willain’s web site
(http://www.billcara.com/archives/2008/10/www.effectivevolume.eu)

TIA

ALOHA !!

Just recall what the founder of the ROTHSCHILD BANKING EMPIRE said about controlling money and laws!

I truly wonder what happens if bond markets collapse, if it takes derivatives with them, since derivatives and swaps are considered 'bonds.'

Monty, 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

www.effectivevolume.eu

Going into the close I think it would be very positive if there was not a move greater then 1% in either direction. I know I am a dreamer.
Bob

Monty, try this:
http://www.effectivevolume.eu

Quasi, wavesmash, & cyderman,

THANKS!!!

vinod,
nice.

those are ITM options? is that your preference?

i think i noticed on an earlier trade you posted that they were deep ITM. but i may not be recalling correctly.

Thanks Bill, best laugh that i have had all month, commercial is too funny.

Yep, gold is a safe haven of wealth... With all the hoopla paraded lately about how the economy is going into the toilet by tomorrow morning, POG gets stuck with a seven handle... notice it isn't a six handle? I think I know why.

Yes folks, better hold onto your paper tight, just in case (something?) happens!!! Sell off your 401k, because we're in a financial crisis (Sorry we forgot to mention this was going to happen in advance because we were too busy selling at the top). We'll let you know when it's time to buy just as soon as we know (once we've re-bought having driven the market down as far as possible).

Sorry for needlessly scaring you.

MikeNYC
I do not know about ITM
what is ITM?
they are oex option

Rough day/week for ECU.

ECU Silver and Golden Tag Cut Additional Massive Sulphides at San Diego (Oct 17)
http://tinyurl.com/5d3cz2

MikeNYC
best time to gamble is at last hours of expiration friday on oex

Ordered both Effective Volume and the wizard's tome. I'm really looking forward to both of these.

I've studied with great interest Ord's volume work and read and re-read Pascals chapter in Entries & Exits.

ITM = In the Money.

You'd think that in our litigious society, somebody would have brought a lawsuit against one of the big controlling banks alleging market manipulation. if not, then why not?

there are couple solar stocks which i may execute the sell puts and buy calls, strategy.

My personal intuition is that obama will win, and solar will become a growth industy. Thus far it has been similar to the dot coms of early days (netscape & aol) and has been directly tracking with oil prices.

But i am thinking with new public projects, tax benefits, and mandates, it will decouple from oil prices and become one of the next bull areas once this market launches.

Am i smoking something?

Vinod re OEX

Congratulations, daytrading on steroids, options 90 mins before expiry.

Not having the skill set for that kind of thing, never really thought about it. But you got me interested, so pulled up the 1 min chart on OEX and watched the $460 call action.

Did you rinse and repeat for that next move from $2 to $6.50 in only a couple of mins, then few mins later back down to 30 cents. Now that’s volatility, big gains / big losses and the results happen FAST, TOO FAST for my heart right now.

Quasi

Quasi
yes, I did few at 450
lost 200 in last one
not good to post all.

NYUgrad re Solar

Ya I'm probably smoking the same thing and not just solar but the whole alt energy area. When Bill's new site comes online hopefully we can have a separate forum for stuff like this where we can get into more detail for those with interest.

With respect to solar there's also the silicon manufacturers like WFR who would benefit in general.

But the whole area has potential, wind, solar, micro-hydro, tidal, geothermal, biological etc. Most would be in the highly speculative part of the portfolio with small positions sizes. Hope to discuss further in the near future.

Quasi

"Going into the close I think it would be very positive if there was not a move greater then 1% in either direction. I know I am a dreamer."

bobbyo: LOL! DOW down 1.5%

Is there any place to see price history of options? day high/low, maybe even charts?

NYUgrad and Quasi - the problem with alt energy is that too many people smoke the same thing (myself included) fundamental investment based on widespread belief frequently fails. The entire sector is priced for fast future growth which may be postponed if we get a deep worldwide recession.

proudPapa

Try this site

http://www.prophet.net/quotes/options.jsp

ProudPapa, re options

There are lots of pay services, but the free one I use is www.Quotemedia.com delayed service but you can look at the history and see a chart. I can get RT quotes from my brokers site.

Here's a link to the page with the intraday chart of the OEX options Vinod was playing above.

http://tinyurl.com/56hftd

OptionsMonster.com also has some interesting stuff on there site, but I like the charts on Quotemedia and there site is much faster.

Quasi

Also, a new software i am using and learning is Stockfinder.com. Free trial. and i do not get paid to promote them.

but the system is nice. still learning. real time charts and the best part is you can setup unlimited conditions or filters.

With the efforts of Bill Cara on Cara 100, Cara Survivors, Cara 36, and my own watch list and IBD 300, it would be impossible for me to scan stocks one by one with minimal time invested.

With this software i can set up conditions such as
- 50 DMA moving up (even at which rate)
- RSI crossing up up through X value
- Trading above 50 MA
- Stochastic crossing up through OS ( or x value)

and these are just examples. you can create unlimited conditions.

then you apply any of the condition filters and it sorts all the stocks in the watchlist you highlight.

after trial i think its $100 per month.

If anyone else has a better software recommendation please let me know. i need tools for the next bull market.

http://tinyurl.com/5gateb
For those interested in TBT. Ryan Krueger from Minyanville

NYUgrad, software

Take a look at Stockcharts.com I've been a member since they started, I'm currently at the "Extra" level of membership, which I highly recommend. ( I think I pay about $200 US per year) and no I don't work for them.

Easy to make watch lists, charts with annotations, scanning etc. You can get real time for an extra charge but they are not streaming charts, just update every 15 secs or so. I don't daytrade so don't need that, now the index charts are realtime but still have to update or set on auto update every 15 sec.

You can set up scans for all the stuff you have listed above and more. If you want to see some of the scan stuff that can be done, just check out the Stockcharts help forum over on the IHUB site, lots of people who can help with programming.

http://tinyurl.com/5u2259

Quasi

There is an unpopular bond bear ETF which trades on the TSX:

http://www.tsx.com/en/news_events/news_releases/6-23-2008_TSX-NewListingHTD.html

Quasi,

$200 per yr vs $1200 per yr. no brainer! you just saved me some money. will check it out.

thx

Miadhach, Quasi, thanks for the options links.

I had a good day today, first in a while. Put in a stink bid on google 300 jan call for 66.00 wed night. Got it on yesterdays early plunge. Sold today for 99.50, just wanted to check if that was the day high, and it was! Yay!

Need these little bright spots to make the rest of my horrible losses more bearable ;P

dfinvest: when you ask

You'd think that in our litigious society, somebody would have brought a lawsuit against one of the big controlling banks alleging market manipulation. if not, then why not?

If not becuase there are in effect two legal systems in the USA.

The public one for show and running 95% of the day to day normal interactions

The private one: controlled by money and those with the right power base to manipulate.

From your statement you can deduce who controls the private legal system in America. Don't underestimate the ability of the private system to prevent the public system from kicking into action.

I am sure there are enough people on this board who can vouch for stories on items getting stifled in private system to prevent it from ever making into the public system. Sadly I know I can. But not for here.. what is past is past.

Chalk it up to human nature. No system is immune to this. Some systems like the American system tend be a bit better... but no where close to perfect in preventing private abuse of a general public legal system.

It is what it is. If you choose to fight the reality expect the legal system to be fully turned against you.. Occasionally people turn it back around like Nader did in the 70's. But the system re-adjusted after Nader and is pretty tightly controlled again.

I think yas both are smoking something....Now pass it over here!

Now about solar:

Solar, in case you haven't heard is going back to the 1970's where it will die alongside Jimmy Carter's Cardigan sweaters, Disco, bell-bottom jeans and the age of the guitar hero.

Until oil bottoms and starts to rise anew, that is. Then and probably only then will speculative interest in these expensive and inefficient wafers return.

Right now, I like ABX, AUY, GG, and HGU.TO for a short-term, oversold bounce up. I'll be looking to buy Monday morning.

CNBC looks great with the sound turned all the way down and Putumayo's "Arabic Groove" cranked up to 11. The talking heads never made so much sense.

After a few cocktails, of course.

That's where I'm at.

I'll join you for those cocktails chum...

Speaking of cocktails, check out the beginning of "Fast Money"...It sounds like Terranova already got into a few...

When Hank Paulson opens his mouth and out comes Khaled, well sir, you just got an upgrade.

Now they're targeting mid-day profits.

shark_attack,

guess you're not into PBW or PHO?

PBW used to be the stronger play... smooshed.

Would have done well buying ESLR today... flat in A/H after a 9%+ down day.

Gotta be a bottom for oil soon... those big tankers need oil.

wait... what tankers?

http://shipchartering.blogspot.com/

What happened to the miracle mineral that was Molybdenum?

mly.to

http://tinyurl.com/5u3pj3

Moly Mania was an obvious bubble.

John Embry seems to think gold is still a good play.
http://tinyurl.com/4c8tgg

For a charting program for stocks, the Worden products are probably easiest to use for the capabilities. Except I don't think you can get data for Canadian exchanges except end of day, with no intraday downloads. For real time charting that includes Canadian stocks, I've gone with amibroker (amibroker.com). I now am too cheap to pay for esignal so now use it with delayed Yahoo data for free. Once you pay the $200 or $280 for the program, depending on the version, there is no additional monthly cost. You can also drive it with data from IB's TWS for free.

Trader Mike mentioned this new tool based on Twitter (alert engine for what friends are doing)

Lends itself well to stocks.

http://www.stocktwits.com

ALOHA !!

This further supports my idea to eliminate the US FED and the US Banks feeding at the US FED trough! At the rate of $437.5bil loaned per day how much of that do you think will ever be paid back?

Look at the first part of this article and notice how they always classify the "lender of last resort" is the US FED and back a few weeks ago when the US FED was begging for $700bil who was it they were begging from? SO, who really is the "lender of last resort"? Who always picks up the tab for these banks failures?

I have distilled this article down into one critical sentence ...

THEY ARE IN THE BUSINESS NOW OF MAKING SURE I STAY IN BUSINESS ...

Its time to cut the FAT!

READ ON:
Banks borrow record $437.5 billion per day from Fed

Fri Oct 17, 2008 12:38am EDT

NEW YORK (Reuters) - Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday.

Banks and dealers' overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week's $420.16 billion per day.

Some analysts are concerned that banks' dependence on Fed lending might become long term and difficult to change.

"The banking system is going to become addicted to this very cheap money. Unwinding it will be very difficult," said Howard Simons, strategist with Bianco Research in Chicago.

"We have effectively allowed the central banks to disintermediate the banking system. Why would I want to borrow from you if I could do it with the central bank, because they can always print it up and say 'here'...and they are in the business now of making sure I stay in business," Simons said.

Primary credit discount window borrowings averaged a record $99.66 billion per day in the latest week, up from $75.0 billion per day the previous week.

Primary dealer and other broker dealer borrowings were $133.87 billion as of October 15, versus $122.94 billion on October 8.

"Other credit extensions", mostly reflecting loans to insurer AIG, were $82.86 billion as of October 15, versus $70.30 billion as of October 8.

The Fed's lending to banks to enable them to purchase asset-backed commercial paper from money market mutual funds was $122.76 billion as of October 15, versus $139.48 billion on October 8.

Proceeds from the U.S. Treasury's sales of Treasury bills in the Fed's supplementary financing account, which are helping to fund the Fed's support of financial institutions, were $499.13 billion as of October 15, versus $459.25 billion as of October 8. END

Quotetracker is a good charting tool... free too or pay for additional levels of quoting.

Only problem for me is it logs me out of my broker while trading.

http://www.quotetracker.com/

or Ninjatrader
http://www.ninjatrader.com

Wavesmash...

Have you seen the price of Rhodium lately? Talk about a bubble.

I'm outperforming the market YTD by 14%!!!

Then why am I so depressed hehehe.

A little Friday afternoon humor - this is hilarious. Once in the picture, you click on various objects in the room. Apparently this gets updated everyday.

http://www.palinaspresident.us/

Does anyone read the news on Bloomberg about the end of a hedge fund and a goodby letter from Andrew Lahde, manager of a small California hedge fund, Lahde Capital?

Here it is and it's worth reading it.

http://tinyurl.com/6q39re

Thanks,

Don't answer the red phone.

Here's an update from Bloomberg on the JGB situation:

http://www.bloomberg.com/apps/news?pid=20601101&sid=aymyqWgfC3cA&refer=japan

Kaimu,

This is what I too believe but take it one step further - establish a global banking center so joe the plumber and ma and pa tanner can do international business and banking 24 / 7.

Another problem is the current banking system is so outdated and not equipped for ecommerce. Ecommerce is where the economy should be growning the fastest. Why not? too hard to make the payment thing work. Currency exchanges, federal reserve, sometimes 2-4 middle banks before payment gets to the rightful owner .. example: I go into my bank and wait 30 minutes in line to wire money to india. When I receive money from india, it takes days and I get charged 50.00 from the bank for the middle man fee.

Banks are passe. We need a global currency and global payment system - In fact, I have one. Own the software rights. Anyone interested??

Regarding Gold.
Don't give up the faith. It can't go bankrupt

signed,

online global auction owner
Novice stock market trader
US TREASURY(A) >>> US FED >>> BANKS >>> LOANS(B)

The way I see this chart is that the US FED and the US BANKS are nothing but "middlemen" skimming profits. SO if we need to get from POINT A(money supply) to POINT B(business) then just eliminate the "middleman"! They say banks won't loan to each other and they are hoarding the bailout money, well then I would be in CONgress proposing to eliminate the US FED and US BANKS and loan direct to the US corps and people who qualify for loans. Let the US FED and its member banks sort out their own derivatives losses from their private unregulated markets in the basement of their private US FED. Its their problem not ours! These banks are nothing but middlemen shuffling paper for a fee! It would actually be cheaper to get a loan without them in the way of America's cash flow!

That is simple business logic!

Posted by: kaimu

"Just to see--I look at 15 stocks in position and I have paid 160k for it
They are worth 110K now
If I hold them all until all reach their 52K high they will be worth 470K
And I will quite my JOB
And my friend it can happen"

"As far as I am concern we are moving higher for few weeks"

Posted by: vinod [TypeKey Profile Page] at October 17, 2008 1:05 PM

vinod- we all have to tune out the noise and think for ourselves...for what it's worth, when i read your post, i 'recognized' your sentiments immediately, and was happy to hear you arrived at those conclusions before i'd even had time to access my own thoughts along the same lines...

Thank you Bill for your kind words about my previous post.

This is actually the second time I have lived through a market crash here in Moscow. Ten years ago, the future seemed very much darker. There was a feeling that the country was literally coming apart at the seams, that a Communist revanche was in the making, and that you had to be crazy to be investing in any type of Russian security.

With little prospect of a job in the nuclear winter that was Moscow finance in early 1999, I moved back to the US - with my wife and daughter in tow - to look for work and live with my parents. Naively, I failed to realize that Russia had become a four-letter word on Wall Street by that time, and I couldn't land a job anywhere, as I was seen everywhere as a "Russia guy". Small wonder that I eventually gave up on the US and moved back to Moscow in late 1999 - only to land a job within one week of returning. I then stayed at the same Russian bank for more than eight and a half years before the next crash occurred - but this time, it had little to do with Russia, and everything to do with the US.

Russia's crash ten years ago did not occur in isolation -- anyone reading this who lived in Asia, Argentina or Brazil during those years knows exactly what I'm talking about. That said, the crash in Moscow ten years ago was in large measure Russia's fault and was undeniably stupendous - a triple whammy of debt default, currency devaluation and banking sector disintegration. What we have gone through this year is only a shadow of the past - the equity market has most definitely crashed...but the ruble has held its own, there is absolutely no question the government has enough money to pay its debt, and the damage to the banking sector is painful but so far relatively limited.

All of which leads me to shout - LOUDLY - that the bargains in Russian stocks right now are undeniably FANTASTIC. Best you will see for at least another ten years. I run out of superlatives to describe the opportunities right now...they are that compelling.

I had a potential client in 1998 pass up on buying Gazprom at 6 cents per share...in May 2008 it was trading at $15.45. Today's closing price was $3.70...you do the math.

And remember there are several Russian stocks in the Cara 100...look them up and set up your strategy.

dapoopa- thank you, that's the kind of post we need to see more often...

dapoopa: Just curious, why are russian (and asian?) markets always so stupidly volatile?

I mean, it took the US markets a year to finally recognize a 40% loss while Russia dropped 66% in a month...

Some cultural thing? :-P

[Bill Cara note:

Muzie,

I think most people here would say that the word "stupid" in the first sentence plus all of your last sentence was unnecessarily flame, and is not wanted here. From what I can see, you joined the Discourse a day or two ago and, until this, your contributions were for the most part important. But please think about what you are doing with language like this. People from all over the world come here for intelligent discourse. I intend to keep it that way. Thanks.]

Bill,

Your commentary today is something a born skeptic like me has always had doubts and question about. It is difficult to sell me anything. When I need a new car I always read and decide before I go into a showroom. I have a pretty good idea of what their cost is and am willing to let them have a fair profit, but will not be upgraded or sold an extended warranty. This goes for nearly every major purchase.

It is especially true of my investments — it's no longer a penny saved is a penny earned — that penny is often tax-paid and even m,ore precious!

In the past two weeks I was very surprised to hear from one relative and two good friends how they had trusted their "wealth managers" to deal with their retirement funds and are now down between 20 and 30 percent!

These are people I consider of above average intelligence. Go figure.

Muzie,

As an Asian, I find your "cultural" remark deeply offensive.

The world is now a global economy. Global economies, global markets, global flow of hot money.

Speak of volatile, isn't a Dow 10% down and up days also stupid...

Wow. Something like that is what you choose to get "deeply" offended over?

Dunno how you get through the day.

"isn't a Dow 10% down and up days also stupid"

Possibly... but sooo profitable :P

http://tinyurl.com/3alty2

If "what everybody knows ain't worth knowing," then what to make of this?

Vorlon: There was no negativity on my post. You seem to assume that volatility=bad people. High volatility poses no value judgment on my part.

I was merely reflecting on what I saw and wondering if there were cultural causes. Plus I was asking if it had cultural roots (hence the question mark), not stating it as a fact.

Not to mention my original post was mostly about the Russian market and the fact it got closed down 3-4 times now.

[Bill Cara note:

Muzie, please see my earlier comment.]

the White House - 8 years out .....

If McCain wins, the occupant 8 years out will likely be either an EIGHTY year old man, or a sassy young BIMBO.

First time that realization crossed my mind! Good luck, America ...

[Bill Cara note:

With respect my friend and associate, for all little I think of Gov. Palin's deportment in Washington in this campaign, I would not call her a BIMBO. What would you call Barney Frank or so many others? My take today is precisely what I wrote after listening to her convention speech, which was our introduction to her: I remarked that she spoke like a high school valedictorian. She's intelligent, hard working, but perhaps aspires to a position in life that at this point she is not yet prepared for. That is not her fault; it's the fault of her employer. Sen. McCain simply cannot expect the majority of Americans to accept the fact that if elected she would hold the second highest office in the land, and be a heartbeat away from the Presidency. There would be, in my view, a great many terrorists who would try to knock off McCain just to watch America go down the tubes under her leadership. There are probably BIMBOs out there who the public would rather want to hold the office of President than what they see so far of Gov. Palin. That speaks to their confidence in her to hold the office, not to any definition of BIMBO.]

"In the past two weeks I was very surprised to hear from one relative and two good friends how they had trusted their "wealth managers" to deal with their retirement funds and are now down between 20 and 30 percent!"

20, 30 percent down is actually better than average at this point. I would be curious to see distribution of earnings amongst market participants. I suspect you had to be in the top 10% tier to break above a positive return this year. So I would think it a bit harsh to say these people were unprepared or dumb as they dropped 20%.

Muzie,

To a considerable degree I lay the blame for this year's crash in the Russian market on the allowance of excessive leverage combined with a lack of oversight by the securities regulator. Sound familiar? BINGO! We have a WINNER!

Let this be a lesson to the Kremlin and the Ministry of Finance. As well as to the White House and the SEC/FED/Treasury Department!

Shark - Rhodium a bubble?

An ERSTWHILE bubble - price collapsed from >10K/oz to <1.7K !!!

Glad I didn't try to smuggle my (meager) wealth out of the country as rhodium !

Muzie,

I think that BRIC markets are another instance of bubbles. Realize that much of buying & promotion occurs on Wall St. and has nothing to do with the culture or wealth of the stock market's host country.

When you're shaving risk off a portfolio, the first thing to go would probably be these emerging markets stocks due to high betas, country risk and currency wars.

http://tinyurl.com/6kcjn5

http://tinyurl.com/6a42q5

The theory goes that you can make more rent in emerging stocks and apparently avoid correlation of stocks, so you could lose your shirt in the US and still have your pants in Asia.

http://tinyurl.com/68cl42

Though it doesn't seem to be that way anymore...

http://tinyurl.com/5ppuam

The BKF line looks like it was drawn with someone's feet due to lack of liquidity, but it seems to be tracking the major indexes ok.

So much for diworsification...

If you want to think like the banks (lot of good it did them) here is a list of risks.

http://tinyurl.com/5cmnmy

Note that emerging markets have more of these risk categories, as the US doesn't have political risk, country risk, forex risk, market risk, interest rate risk or credit/default risk.

Does it?

[Bill Cara note:

Muzie,

I think most people here would say that the word "stupid" in the first sentence plus all of your last sentence was unnecessarily flame, and is not wanted here. From what I can see, you joined the Discourse a day or two ago and, until this, your contributions were for the most part important. But please think about what you are doing with language like this. People from all over the world come here for intelligent discourse. I intend to keep it that way. Thanks.]

My apologies then, I meant no harm. I would replace "stupid" with "very high" if that were possible. Or retract the comment altogether.

[Bill Cara note:

Muzie, we all make mistakes. Yours is out there. But I'd like all the people who comment here to understand that there are people of most every country, culture, race, religion, sex/preference, age, and so forth. Many young people follow us, including home students. Today, in fact, I received a follow up letter from a teacher who I don't know but checked out via his email address as teaching at the 3rd highest rated private secondary co-educational school in Canada -- a very prestigious institution indeed. Think about what this teacher is commenting on:

Dear Bill,

It’s me again from Canada. I cannot thank you enough for providing such sound insights into the global economy at the moment. I send my students snippets of your commentary and we discuss them in class. The textbook has become a tertiary resource as we study Grade 12 macroeconomics. I enjoy your daily postings and wonderful resources that you provide. Your website should be a mandatory resource for all economics courses. If you ever in the Toronto area I would love to meet you. All the best!

Kind Regards,
/Anon

Muzie, we need to maintain a high standard of intellectual discourse here. We are in fact also teaching young people who very soon will be in decision-making positions in the world that will affect how we live out the balance of our lives.]

Ultimately, the fact that the Russian equity market has crashed so badly this year - and I mean really BADLY - has much to do with the lack of an institutional pension investment system.

In other words, there has been no long-term government money invested in the equity market, although billions of rubles will evidently be invested next week as part of an anti-crisis measure....

If I were the Russian government, I would also be buying stocks on the local market at this time...

Wavemash: I don't know if emerging markets are/were/will be in a bubble. It sure seems that the word "bubble" is bandied about a lot these days, in just about every asset class. Maybe we need a new stronger word for it, as it seem bubbles are now occurring every four years or so, or perhaps in general we are overusing the bubble word too often.

I would think the tech bubble was a genuine bubble - companies with no earnings getting valued up on pure hype.

Real estate also seems to fit that description very well.

I don't know if emerging markets are a bubble - I guess it depends on the official description. There seemed to be some genuine fundamentals that caused the rise. Things may have gotten out of hand - but even now it's not that clear to me the Chinese equities for instances need a 50% haircut. The P/E valuations were never really excessive as far as I know, even at the height.

I think you could make an argument we have a shorting "bubble" nowadays. I've never seen so many people talk so expertly about shorting, naked shorting, puts, double inverse ETFs and so forth. Shorting is in the news everywhere. People ask if they can short in their 401Ks and IRAs. There seems to be some who have made quite a bit of money in the downturn using the inverse ETFs and puts, and I am wondering if many are just not "piling on" at this point using leverage without regards to valuations - which seems to be the classic definition of a bubble.

With 10% swings in the indices every day, even I can feel the temptation to just bet it all on RED one day and hope that a single day in SDS would eliminate my losses. Of course that may probably not be the smartest thing to do :).

As a side note, I am concerned about still holding my gold investments as I can't see a way to properly value gold as a commodity. Theory is demand will increase as a safe haven but that is all based on psychology, which is very fickle.

Since I don't see a way to properly value gold numerically (why call for 1500, 2000, 3000$ gold? How do we know and on what basis?), I'm concerned gold is quite susceptible to developing a bubble - and one that could flash in an instant.

to all
If russian or any other market crashed?
lets find a way to make money of it
I got lots of MBT

I'm just glad that I don't own the Bulgaria index... sorry to those that do...

Plus Russia, wow...

And that Canada too... stay away from ... oh crap.

http://www.emerginvest.com/WorldStockMarkets/

How did we end up #3 YTD under Russia and Bulgaria? Estonia is beating us???

I would change Worst Countries to "Buying Opportunities" because I need to make 40% on my index fund to get me back to par from last month.

I was looking at RSX this week. Does sound like a good opportunity for long term holding.

If you get rid of hedging tools (CDS, shorts) then everything is correlated (downward) I guess... baby and bathwater. They're both in the same bucket.

"Without arguing about who is to blame for the banking crisis, the truth is that an extremely significant portion of foreign investment is being sucked out of these countries’ economies – many of whom have been relying on it to fuel growth. For the most part, their fundamentals are strong, and yet they are feeling the windfall just as much as those countries with large amounts of toxic debt like the US. While I don’t 100% agree with the spin that they are merely victims in this mess, they are more vulnerable than most of the developed markets and I can personally see where their public outcry originates from. Their protest is that they didn’t do anything wrong in the financial mess. However, even if that was 100% true, their plight is based on foreign investors’ perceptions of risk."

http://blog.emerginvest.com/

It's all about risk and it all comes down to a numbers game. It's about financial engineers building an upside down pyramid of $55 trillion of double/triple/quadruple-counted derivatives against the "strongest companies".

Taking off the media spin (98% rule), that leaves about 1.1 trillion of actual derivatives.

Still an awfully big pyramid for something as simple as hedging a bet.

Yes, I am sad as a fellow Canadian that Canada somehow ended up No. 3 on the worst return. All my investments are in the US, but it seems unfathomable that the Canadian index could go down so low.

How would have thought a year ago that the US, which many would argue was the genesis of the turmoil, would actually be the 2nd best performing market for the year? It just doesn't make sense.

Lots of stuff not making sense this year is why I had to take a step back and really reconsider how confident I was about anything I know about the stock markets.

Forget about stock market. I need help with my pain
I am schueld to have root canal on coming Tuesday
Doctor gave me antibiotics and Hydrocodone on Thursday.
I have been taking both of this medicine but there is no change in pain. Did spend time to find a clinic that may be open in weekend and get this root canal done but found none. In Boston area
I never had pain like this in my life.
Any suggestions. I will read your post until I get a sleep.

http://tinyurl.com/5t2hq6

this looks most promising. Find a 24-hour pharmacy & get some meds.

"heat up about a cup of water to boiling add 1/3 cup of vinegar and about 2 table spoons of salt mix it together to dissolve the salt let it cool then rinse with it but hold it in your mouth for about 1 minute while sloshing"

If you know a root canal specialist, they may have service on the weekend and be able to take care of it right away.

From last week, Hungarian Bond Market breaks down:

http://online.wsj.com/article/SB122358833298120607.html?mod=googlenews_wsj

I suppose this is what they mean when they say 'mortgage related' and 'money market intervention.' What they are referring to is intervention in the bond markets. The bond markets are being propped up. They served as the initial liquidity for creating CDO's, so if they collapse even a small percentage point, the amount of leverage, which could be anywhere between 100X to 1000X would collapse as well.

Vinod, for the pain put a whole clove near the tooth. If you have clove oil, a drop on a cotton swab and then brushed over the area will help (but most people don't have clove oil - it is strong stuff available at some pharmacies). Tooth pain is brutal no matter what you do. Good luck my friend.

Vinod,

Go to a hospital and have it done there this weekend. At least they can irrigate it and give you better dope.

wavesmash/ navid /shark_attack
Thanks

"I mean, it took the US markets a year to finally recognize a 40% loss while Russia dropped 66% in a month..."

I dunno, maybe I'm just a simpleton, but the russian market example just seems, uh... more efficient?

I can understand the US market's drawn out timeline. It takes time to fleece!

To Tbar and Number2son and all... I believe this will help: http://tinyurl.com/tk5td

This bank doesn't sell tulips.

http://tinyurl.com/6je6fp

Easy access to capital movement tools like the internet has made it quite dangerous for banks and lending companies, especially those without brick and mortar.

ING stock down 27% today, though a stock is not a company, just a piece of paper, and this is probably a good opportunity to pick up a big name on the cheap. (DYOD)

It's all about the appearance of risk and not necessarily the "fundamentals".

"The company said its bank's Tier 1 ratio, a key indicator of financial strength, was 8.5%. But capital ratios that previously would have been sufficient are now being seen as too low. Swiss banking giant Credit Suisse Group, for example, on Thursday boosted its Tier 1 ratio to 13.7%"
...
"In an interview after European markets closed, Koos Timmermans, ING's chief risk officer, acknowledged the company "will probably get some more capital." He added that its business remains strong and that it has adequate access to cash."

Why would you boost tier 1 ratios (reserve requirements) in the middle of a banking crisis? I think that the manager stated the obvious - you raise the ratio requirements you need more capital. You expect reserve requirements to double in a month and not have some downside? Credit markets are frozen so you go to the government.

Isn't that the new business model?

Changes to accounting methods, rewriting the laws of finance, stirring up controversy in the news, daily statuses from world leaders on the economy, reigning in margin, messing with the price of gold, commodities and the BDI....

Somebody is gaming the system here... for sure it doesn't make a lot of sense.

I got an automated telemarketing call from a credit card company today... what credit freeze?

More on ING Direct from an article in Time last year.

http://tinyurl.com/3xh2os

Some interesting facts on ING as of last year.

"In the U.S., where Kuhlmann is now CEO, ING Direct is the largest Internet bank, with more than half of the country's $90 billion in online deposits, according to market tracker SNL Financial. And without a single branch, ING Direct is the 28th largest bank of any kind in the U.S., as ranked by assets (and 24th by deposits), nipping at the heels of regional powerhouses such as Sovereign and KeyCorp. "

"Before it was a curiosity, but now banks look at the outflow of accounts to ING Direct, and they're reacting,"

Yup, seems like somebody is gaming the system and it isn't ING Direct...

The downturn in stock markets over the last month could also be explained by the fact that reserve requirements for lending institutions have almost doubled (in this case anyway), along with that magical risk calculator telling your traders to get out of stocks or face a decrease in their bonus pool.

Multiply by leverage and that could account for what we have seen so far.

ING's market cap is less than the cash they have in the bank. Isn't that telling us something? Does Buffett have to draw a picture?

http://weekly.inginvestment.com/

"With over $240 billion in total assets under management (as of 6/30/2008), our investment management and asset allocation services cover a broad range of investment classes — equities, multi-asset, fixed income and cash management. "

ING had a growth rate of 20% for the last 5 years according to Yahoo. They have revenue of
$831,852 per employee.

Their competition has $25,243,760 (!)

http://finance.google.com/finance?q=ing

Some ratios.
http://tinyurl.com/6oxm5s

Bill, any comments on this one?

The emerging markets website about worldwide stock market performance is misleading as the "Canada" index shown at -67% is the TSXventure, not the S&P/TSX index. If you click on Canada it will give you the FTSE RAFI Canada Index at -31.6%, close to what I show as the amount the XIU has dropped.

Though it hardly makes me feel better given the number of TSXV stocks I've been holding!

[Bill Cara note:

bobj, please send me your correct email address as the one I have bounced back when I tried to send you something on Friday. Thx.]

vinod- if one hydrocodone tablet isn't helping, try taking two...you might add 800 mg of ibuprofen (4 tablets of Advil) on top of that...if still ineffective, try topical benzocaine 20% (Orajel)...

Bill - Palin as bimbo; I was being facetious - to a point ...

A Friday night, after-a-bit-of-wine thought. 8 years out, either an 80 year-old or a bimbo in the White House. Ridiculous!

You're right, she's NOT a bimbo. HE's a HIMBO for picking a foxy, ambitious, but ignorant and unprepared running mate. Country first? - No, victory first!

Palin thinks New Hampshire is in the NorthWEST; that seeing Russia confers expertise in foreign policy; abused her power as governor. I feel insulted, even if Joe-the-plumber doesn't!

I believe they may well "win" - whether by Cheney's hand, by vote suppression and vote fraud (http://tinyurl.com/5ba9qo), or by the "bradley effect" (http://tinyurl.com/yu8g39).

It's clear that Osama opposes Obama (simpatico, reasonable, appealing in other countries)and may act - as he did in Spain - to influence the outcome.

All in all, despite the media's premature assumption of an Obama victory, there's a signicant chance that, 8 years out, the White House occupant will be either an Eighty year old cancer survivor, or by a foxy ambitious woman who failed to separate personal from official matters in her first real job ...

I had to say that. Sorry, I'll post no more on this subject - although it would, after all, directly affect capital markets and social equity.

[Bill Cara note:

Sounds to me that you are living in one of those parts of America that Gov. Palin is calling un-American, and it's driving you to drinking! Ok then -- maybe you do have a point.]

Muzie,

re: valuation of gold

If they were to back the US dollars currently in print and in demand deposits, that would give you $1,361,000,000,000 / 261,000,000 oz of gold, which is about $5000 per oz.

I'd suggest that if they were going to back the currency with gold, they'd need to pay off the $10,148,000,000,000 of debt as part of the process, or else they'd saddle the future government with having to pay it off, plus interest, with real money. I'd think they would see this too, and that would give a number in the neighborhood of $50,000 per oz.

Anyway, the way I see it is they can't PRINT gold at will, well, except the paper gold traded on the futures markets, that is.

As for at what point to sell, I think it more depends on the circumstances, as gold's price in dollars is just a reflection of the dollar's value at that moment.

Speaking of gold, is there anyone else here that thinks it will go back over $1000 in the next year two?

I figure the price can be manipulated short term, but eventually foreigners will want something besides yet more paper promises for their oil and other goods.

PS: the money supply number came from the Fed a few weeks ago, and the debt number was as of 10/2

Palin and Obama - ADDENDUM

Don't get me wrong. I'm not pleased with Obama either: 1 year of national political experience before running; ZERO executive experience until his admittedly impressive campaign organization.

You wouldn't turn your family business over to someone who didn't know all aspects of the business.

So, why does the US generate candidates with such narrow experience for the world's most challenging and important job?

At least, Obama is brilliant (editor of Harvard Law Review) worldly-wise and hard working. Is that sufficient?

Compare this to the broad and deep experience which Gordon Brown or Nicolas Sarkozy or Angela Merkel had before assuming the top job in their governments!

heres my take on all of this for what its worth. off the top of my head, after a couple of milwaukees best lights to cap this tumultous week.
this 45% s&p decline (from 11/07) is attributed to the collapse of the housing bubble. this housing bubble started after 9/11/01 when greenspan lowered the discount rate to 1% or whatever it was and failed to raise it when he should have, according to the theory. this caused the housing bubble, when it collapsed this caused the collapse of the stock market.
but according to zillow, the value of my house in 9/01 was 300k, it reached a high of 529k in late 06 and is now at 466k. i started investing in the stock market in 11/01 when the nasdaq was at 1977, its high was over 2800 in 11/07, now its at 1700 or whatever, plus or minus 10% on any given day in these last two crazy weeks.
so, my house has appreciated 50% during this housing bubble, my stocks are down 20% (from 11/01). i should have invested in another house.
this of course makes no sense. to be consistent house prices should be down 45% also, but they are not. all i can guess is that the stock market is reflecting the extreme leverage in the subprime derivitives which magnify the decline in actual house prices by about a factor of 4. if that is the case the dow's appreciation to 14000 in 11/07 (which was only about 15% above the 3/00 highs) didnt really have that much to do with this housing bubble, but the 45 percent decline since apparently does. that doesn't make any sense either. parenthetically, the p/e ratio of csco at the bottom in 10/02 was still 40, now its 16.
i'm going to have a couple more milwaukee's best lights ( i do not live beyond my means).

jock- Palin foxy? no...my nomination for foxiest woman born the same year ('64) would be marisa tomei...i can't see looking twice at Palin if not for the fact she's a 'celebrity.'

the debates were a joke, and usually are...we all know the american penchant for casting votes on the basis of casual impressions, peer pressure, or media analyses...

who gets elected will matter, but probably not to the extent of it making much practical difference to the lives of most americans...

bobj,

you took the words right out of my mouth. Watch for misleading stuff on the internet. The 98% rule is in effect.

If you compare xiu.to to US indexes we're doing pretty well. EWC though...

jock,

ditto.

abba1- we should all post after a couple of beers..your post makes perfect sense to me, which is to say, market prices 'make sense' only from the perspective of fear and greed...

abba1,

location, location, location.

Drinking some good Mill St. canuck microbrew stuff here. My first major hangover was off Old Milwaukee... on a boat. never again.
.

vinod- 2nd nailed it, you want to take the ibuprofen since it is an anti inflammatory

re market timing- i agree completely with bsi87 that the time to sell was DJIA 14000, with 'commentators' (which is all they were) targeting 15000..now it's at 8800, and we read 'comments' taking it under 5000? if you're going to trade successfully, you need to be looking at 9000 when it's at 14000, and vice versa...

harvard - nails on chalkboard...

this is interesting...

http://tinyurl.com/5nsysx

"Lahde Quits Hedge Funds, Thanks `Idiots' for Success (Update1)
By Katherine Burton

Oct. 17 (Bloomberg)"

TomT- i would also add that Tbar and number2son have the potential to leave us all in the dust when things turn around...

Number2son, Tbar, Aucourant - Thanks!

Thanks for having the courage to share your tales of woe. It will make me, for one, even more cautious and aware of the importance of position sizing and sticking to my loss-cutting rules.

Good luck to you in dealing with your losses and in recovering.

Thanks again.

[Bill Cara note:

Agreed. There are many lessons to be learned from the extreme volatility of the past two weeks. Let's start a thread to list and discuss them, so that I can follow up with a summary. It will be interesting to hear all that people have to say about this debacle.

Btw, I think HB&B staff has learned a few lessons from this episode as well. One of them is that their umbrella sometimes leaks, and sometimes even gets blown away by the storm, causing them to seek shelter elsewhere. It's not easy to move to another firm, but this fiasco has proven that it may be necessary in order to save one's career and/or self-respect.]

And now for something completely different!!! Well, maybe not so different, it's the Treasuries new commercial announcement.

http://tinyurl.com/5fa698

ThriftyBob,

re: valuation of gold

It just seems unclear to me why we need to go back to gold-back dollars. Dollars were backed by gold before, sure, but that doesn't mean it needs to happen again.

If world governments want to cooperate on this and solve the current problems, it's easy enough for them to stick gold prices wherever they'd like.

If more dollars are printed, then certainly a gold bar is worth more dollars, being equal. But that would the case for any commodity - and most other commodities are more useful than gold.

Gold's investment usage is only 20% (80% is jewelry), so gold isn't exactly recession-proof either.

Finally, the fact we still haven't made a new high on gold after the last month's debacle kinda kills the whole "safe haven" theory in my view. In fact, so far gold is such a bad "storage of value" that even after almost a year holding it we're suddenly pretty close to a new 52-week low. That is NOT safe haven behavior in my book.

I've held gold for a while and am starting to think I've been wasting my time and money, perhaps. So far, we have:
- Clear inflationary behavior from governments
- A market crash
- Seasonally strong period for gold

What else do we need for gold to rise? It just isn't working, so far.

its obvious why gold isnt going up, the competing forces are global deflation and depression and massive fed and central bank reflation, until a winner is declared gold will trend between $700 and $800. no more comments from me

abba1:

If that's the case, then gold will either spike upward or crash to the floor as one or the other side wins. That is NOT safe haven.

Maybe I should just take my chances with 40% beaten down stocks rather than gold which is still trying to cling 20% below its high. At least I don't need extensive inflation/deflation theories to know the odds are decent stocks will be up in ten years.

http://tinyurl.com/compare-Bear-Markets

Bill and Jock,

I am glad you feel it was healthy discussion,it has helped me for sure thankyou.

The one thing I learned the hard way(that every trader knows) is that price can fall much further than you would let yourself believe,so be prepared to act if it does.Unfortunately I have learned this over and over. I tried to buy a few good gold stocks after the Sept low in gold and even with higher lows in gold the stocks fell past their Sept lows.My hope for higher prices interfered with what little discipline I have. I would have never believed this? Eld.to from 5.97 to 3.79 low yesterday as an example. So I guess what I should have done is draw an uptrend from the Sept low on a 60 minute chart and sell the break and wait for it to bottom? I should have set clearer guidelines for myself for exit and entry. Maybe this is a clear enough system to keep me out of trouble?
Anyone is welcome to critique this.
http://tinyurl.com/6anegg

Muzie at October 18, 2008 2:40

being a general contractor most of my life I feel I had a pretty good handle on where we were in the economic cycle more often than not. In 2001 when I started investing for myself I felt that we were heading for what we are seeing now. I bought gold stocks and did well. Where I was wrong was not to buy the physical instead or a more balanced position at the least.(switching to gold in 2004 would have been astute)

In the past 7yrs gold has gone from 252.50 to 782 today so the smart money thst sought a safe haven then, have gotten exactly what one would expect with a safe haven.
Anyone panicking into gold recently would be down very little if at all.
Anyone buying when the subprime issue surfaced in Aug 2007 would be up 20% with gold but down nearly 45% with the dow.

The smart money were the ones that bought gold in 2001(my reasoning was correct but the reality is the physical is no one elses liability in such times as today)

That smart money seeking a safe haven in 2001 has a +300% gain in gold vs a 33% loss in the dow.

That is a pretty enviable record imho and it rewarded the smart ones the most whom saw it coming, not the last minute crowd, this only makes sense. Looking at the facts in this way helps me see the real picture at hand.

Buffett made the famous comment back in '74 that with all the equity opportunities available, he felt like an oversexed guy in a harem. This week, he wrote an op-ed in the Wall Street Journal urging folks to buy American stocks.

A rough calculation on my part shows that when the DOW was at 8400, that represented roughly the same percentage drop from the peak as occurred in '74.

http://tinyurl.com/62s2pm

Caveat emptor. Where we are, why, and what we can look for.

Warren Buffett is not giving away free advice. He is giving away cyanide laced coolaid. He has never shared good information in a timely fashion.

According to the charts they had on CNBC, his advice was as timely as anyone here.
Far be it from me to argue with the chart.

His bottom warnings didn't get all of the bottom but he called to drops, and his "unrealistic expectations" top warning didn't get 100% of the top, it ran a little more, but he hit the biggest part of those moves with safety.

Muzie - Why no rise in gold?

* US$ was the first "flight to quality" - aided by covering of US$ shorts held as hedges by foreign holders of US assets

* gold suffered as ALL commodities (sold in US$) slid

* Gov't and central bank actions against gold - permanent measures to suppress gold price and thus maintain faith in "fiat" currencies.

* Mechanisms explained by Kaimu whereby CB's loan gold to bullion banks, who short it, and hedge with long gold futures,almost never settled with physical delivery

As gov't bailouts reach into the trillions, I believe there MUST come a point when the countries accumulating wealth in the world (which have ALWAYS believed in gold) - mid east, China, India - lose faith in paper, and "go for the gold"

When they do, if Kaimu is right, and supply has been artificially inflated by "paper gold" - the price will zoom.

Still, timing is everything, and we're not there yet. FWIW, IMHO ...

Muzie - on the other hand ...

It's conceivable we DON'T see gold play its traditional role. Countries getting rich on oil and other resources are seeing less revenue. They have created sovereign wealth funds. Perhaps they focus (as China has to date) upon using (depreciating) dollars to buy productive assets = mines, oil companies, barter contracts of goods/services for long-term supply of resources.

In a sense, any "resources in the ground" are stores of value, if you believe their long-term price will appreciate. Companies which produce profits (by extracting resources) are even closer to this goal.

Still, when things go REALLY crazy - CDO's, swaps, private equity loan blow-ups, consumer loan washouts - i can't believe gold won't have a run. After all, its price, in real terms, is 60% below the peak of 1980!

Jock, The difference between spot and street price is telling us something....THAT is real supply/demand.

Vinod:

Sorry to read about your dental pain. Agree with suggestions for the use of an anti-inflammatory such as ibuprofen for additional pain control -- medical dosage is 6-800 mg (3-4 200 mg tablets) every 6 hours for 48 hours for "true" anti-inflammatory effect. 2-400 mg of ibuprofen has some analgesic but less antiinflammatory effect. Caveats: make sure you are not on "blood thinners" or have pre-existing kidney issues or history of peptic ulcer disease. It can be rough on your stomach -- suggest you take with food. If the pain is that intense, I'd suggest you call your dentist's on-call service. Many DMDs will make "special" trips in to the office off-hours for suffering patients. Going to the hospital ER is a crapshoot -- most do not staff on-call dentists -- NOT considered emergency care.

ALOHA !!

Why won't the US government allow an independent audit of WE THE PEOPLE gold reserves? I don't want JP MORGAN doing the audit ... some unbiased third party. Go to the GLD website or to GOLDMONEY website and they have BAR LISTS. Where is the US gold reserves BAR LIST?

I see news articles on the UK selling gold and Germany and Spain, but I never see news about the USA selling gold. So, that means all the gold must still be there ... at least 32,000 tons! Or has it all been leased out? When its gone ... its gone!

Where is the transparency?

It's that simple ...

I want to mention that it's probably a good idea to do 2 things if possible to try avoiding huge losses in the future.

As I said the other day, if you can pick the EXACT turn, the one all the other traders are waiting for before they buy, if you can get in just prior to them, then obviously, you can make a lot of money. I do this often on an intraday basis, it's much harder on a daily frame because it pretty much necessitates buying during fairly bearish times and then sleeping on a fairly frightening, fairly close to your buy price position. But there is a time, a day, when you will be able to buy and by the end of the day not only will you sleep like a baby, but you may be so happy it’s hard to get to sleep.

You see my friends, My Friends, it's not really precisely true that one should buy during scary times and sell during good ones, or "greedy" ones, or whatever. Why? Because "greedy", good bullish times/moves can last longer than just when the bullish mindset strikes. Also true is the fact that negativity can outlive one's financial ability to buy/add on the way down.

In plain point of fact, there are moments of clarity and hopefulness that appear at the very end of bearish times that provide you with the golden opportunity you're looking for. It is not true that you should buy during the scariest moments. Only suicidal types do that. You buy WHEN THE MOOD BEGINS TO LIGHTEN BUT PRIOR TO AN ENORMOUS UPMOVE. I guarantee you, it God himself repealed the laws of economics tomorrow and if they decided to bail out each and every living soul on planet earth and then privatize Social Security and begin putting all that money in the stock market, I guarantee you that the next morning you could find people willing to sell stocks to you way too cheaply.

There is no point for an investor picking the bottom. That's day-trader stuff. And for Heaven's sake can we please never mention Warren Buffett again? How come no one ever mentions the great traders of the world? Richard Dennis never gets a mention. Tom Baldwin. Paul Tudor Jones. These (and newer guys) are the people you should be emulating, not the "Oracle of Omaha", whom you ONLY EVEN HEAR ABOUT because he espouses a strategy (buy and hold) which is adaptive sociologically and economically to the very HB and B that you daily decry. You are attracted to buy and hold because it appeals to not only the same antiquated and nostalgic notions that attract you to Buffett himself, but also the now moribund concept of mindlessly sitting in "good" stocks and lazily reaping profits day after day without working or thinking. Remember this if you remember anything. This market does not reward buy and hold. The market we have been in or the past year rewards sell and hold, the opposite of your preferred strategy. Is the trend changing? Were prognosticators who called a bottom early "right" in the greater sense, and will they be vindicated in the fuzzy rear view mirror of hindsight which is more forgiving of a week or 2's error and a thousand or 2 points than is one's brokerage account total? Only time will tell. But I think until we get through some bad earnings we can’t really judge the market’s reaction and make a qualified decision.

Question to the board:

Trying to figure out how to hedge my PM miners position a bit. Seems like the drop in miners is way out of proportion to the drop in GLD ETF prices.

I still feel like there's further room on the downside in COMEX gold/GLD pricing in the short term (1-2 mo) versus the miners which seem way more beat up.

Thinking about buying some out of money Dec or Jan GLD puts for some insurance. Wasted money or prudent strategy. I welcome any thoughts.

ALOHA !!

A friend of mine who lives in Las Vegas is an avid bicyclist and is riding in a MS Fund raiser in November. I made a donation to his team.

While I was talking with him he mentioned a US Senator that rides bikes with him on the weekend. My friend knows a lot of powerful people in Las Vegas and used to date Steve Wynn's daughter way back. The FBI even questioned him when she was kidnapped! HA!! Well, he told me this Senator said that the current bank crisis will blow over soon and it isn't as bad as the S&L crisis in the 1980s. His reasoning was that back then 1,200 banks went under and so far only 13 have gone under in this crisis!

Anyone want to comment on that logic? I guarantee you that sort of thinking permeates much of our society! The "we've been through worse" syndrome! Remember this is a US Senator saying this who just handed Paulson $700bil in one day! What does the rest of CONgress think and based on that remark our entire elected body must be dumber than a doorknob on monetary issues!! And these guys own the largest PRINTING PRESS in global history!!

I about fell out of my seat when I heard that!

Any comments?

This should put a floor under commodities going forward...

OPEC oil producers are leaning towards cutting production by 1-1.5 million barrels per day (bpd) at their Oct. 24 meeting, UAE state news agency WAM said on Friday, citing an OPEC source.

http://tinyurl.com/5zfsh2

ALOHA !!

fireworks ... They should cut! They are selling a finite supply that their country owns and selling now at $70 a barrell will look like Gordon Brown the UK Ex-chequer(now PM)selling UK gold at $300 three years ago!

Look st the USA ... We used to be one of the biggest oil exporters in the World back before WW2 and now look at us! We pumped out and sold off a huge amount of our oil for under $10 a barrel!

No country ever really plans for the long term! I mean, if you're not going to be alive why bother? That's just the human condition of "get while the gettin's good!" and US politicians know babies and kids can't vote!! HA!! Every generation is stuck inheriting the sins of the prior generations ...

ALOHA !!

CP ... Okay, that YouTube commercial was seriously funny! Yet, on the other hand it reminds me of Slim Pickens riding a nucler bomb dropping out of a B52 in the movie DR STRANGELOVE!!! HA!! For the younger crowd here that is a "must see" movie with Peter Sellers!! The movie was very topical for the times then and NOW ...

A simple and straightforward analysis of the gold price chart from ino.com:

http://broadcast.ino.com/education/gold_game_changer/?campaignid=3

(via biiwii.com)

Note that the Yen/Euro chart has many gap-ups to fill. Yen strength along with dollar demand are affecting the gold price directly.

Wow..sharkster..where'd that come from...???:)

Assuming we have hit bottom now, and we are not moving into a depression. Keeping in mind the big banks are not falling like JPM and Citi-group. I am currently seeing the LIBOR rate decline, which might mean a market turn around is in order as bank start lending again. In this light what sectors do you think will lead the turn around?
I would think Commondities may have the biggest movement. With Oil, grains, potash leading the way followed by the metals. Any other thoughts.

fransix
re barrick in that presentation,abx.to was one of the first stocks I had ever bought just before 911 at 27$, I sold it at 35 a few months later gold was 300 then.

His po is 20 american or 22ish canadian.

So in 7yrs and with gold 480 $ higher it is worth less?

No wonder I have lost so much.

"Remember this if you remember anything. This market does not reward buy and hold."

shark- once the majority of investors give up on buy and hold, is it possible that would then be the time to buy and hold? i'm starting to hear too many prognostications about a lower low in 2009, which is reassuring from a contrarian perspective...(on the other hand, still waiting for Hulbert to report capitulation by market timers)...

Kaimu:

After having watched the various Congressional Finance committee meetings and the manner in which the majority of the members were way outclassed by the invitees, I am not at all surprised the Senator doesn't understand the difference between the brachia/ulnar/humerus junction and the lower end of the alimentary canal. I then (echoing Mencken) remember that voters more than likely follow some semblance of a bell curve in their intellectual distribution. Upon analysis of the various election campaigns and posturing (recalling Herr Goebbels) I understand that the depth of wisdom in the common populace (arguably of which I am a member in bad standing)is severely lacking...and these are the people who put people like that in office. HA....HA..HA..HA..HA..HA....Waaaa....Waaaa...Waaaa...it does want to make you cry sometimes.

Plu cest change, plu cest le meme chose.

shark,

I had no idea that Warren Buffett had a side business of peeing in people's corn flakes. From my simple vantage point, he's a guy that has a proven track record of deploying capital and watching it appreciate. That's what any trader does, except the techniques and time frames certainly differ across the spectrum.

Oh, and his call in '74 was spot on. Go back and look. Only time will tell about 2008, but that's the point of discussing it.

Bill, Jock,

McCain's pick for VP: I see Sara Palin as a metaphor for his whole campaign.

The last time he ran I was 100% in favor of him as President of the United States. He seemed refreshing in his willingness to speak his mind and, within limits, even his temper made him my choice.

In the last debate, even more than the others< he seemed senile and artificial. The pasted on smile along with his ever present physical pain and wooden gestures (from 5 years of hanging from his wrists which were tied behind his back) made a picture of incapability for the task.

Now, I believe he has succumbed to the "I want this job more than anything," syndrome. He looked and sounded his old self in the comedy clips exchanging good-natured barbs with Obama.

His willingness to go along with the "expert" advice of his political advisors has doomed his chances.

Unfortunately I think Obama is just as willing to say or do whatever it takes to be elected too.

Ag vrs. energy prices - destined to rise?

interesting charts from Trend and Value blog.

http://tinyurl.com/626baz

This would seemingly track Donald Coxe's views that ag prices will recover first. BTW, his audiocast this weekend is even better than usual:

http://tinyurl.com/2htvq3

to follow him, you'll need to google and understand the "ted spread".

re: Troubled Assets Relief Program (TARP)

What an appropriate acronym for this government "sellout operation". Just as the Chinese have a word which can mean either crisis or opportunity, we have TARP — an item which can be used to protect something, or... to cover up the dead bodies.

Not something I would have advised for any of my former clients, but it works just fine here :-)

"Remember this if you remember anything. This market does not reward buy and hold."

I for one am attracted to buy and hold but not due to laziness, simpleton behavior or otherwise. I'm not attracted to trading because, like Mr. Cara, I'm attracted to the "social equity" part of the markets, whereas I can invest and help companies grow that have a positive impact on society. If I wanted to just gamble I would bet on poker - at least there if I have an outstanding hand I can reasonably expect to win. :-P

I happen to have a dayjob and at this point investments are taking WAY too much of my time. We're taking 4-10 hours of most days here, for the past 4 months. I tried to the maximum of my human capacity to stay informed and on top of things in the past year. I did stay informed about the housing bubble all along and tried to buy investments unconnected to housing or credit to sidestep the issues (gold, gold miners, commodities, foreign companies). It didn't work. I estimate I spent up to 500-1000 hours this year reading blogs and investment articles. I don't consider myself particularily dumb, so I must now realize that no amount of information was sufficient to prevent my current losses. I did make some emotional choices which did magnify the losses.

Right now I'm down 22% year to date, or 63K$, vs. 36% for the index which would have been 108K$. So I saved 45K$ in losses.

Was this a good deal? Probably not. Stress was through the roof, and I lost things much more difficult to replace than the money, namely self-confidence and up to now a positive outlook on the world.And the jury is still out whether some crazy thing won't happen and next thing you know I might be straight neck and neck with the benchmark. Every blog I read that warns of the the Great Depression is like poison seeping in my mind. Nobody knows if this will a depression, but the more we believe in it, the more we ensure it will become a reality.

Right now, this minute, just buying and holding everything, closing the computer and never looking at this again for the next ten years isn't looking that dumb. For a zero time investment the odds are good that at the very worst you'll be flat in ten years.

Looking at your comments, it seems you are a daytrader. I don't know if that is your principal occupation, and you seem to make profits from it. But please keep in mind most people have other interests in life, and for most people buy and hold certainly is, and always will be, the only viable strategy. Looking at the monitor screen throughout the day simply isn't in the realm of possibility for most people.

ALOHA !!

"Keeping in mind the big banks are not falling like JPM and Citi-group."

How do you know that? Eight months ago nobody thought Bear Stearns and Lehmans would fall ... Without US TAXPAYERS propping them up and preferential treatment by the US FED under the Lehman bankruptcy($138bil)JP MORGAN would have fallen already! Bailouts are averaging $437bil per day! Unreal ... this is a monetary crisis!

Shark,

Thanks for citing other traders/investors besides Buffet. I must admit that I'm getting tired of seeing his mug and name everywhere. I've never been able to understand how I could practically use his approach. He has inside knowledge on all the companies he buys lock, stock, and barrel. Perhaps we should distinguish between "investing" as in trying to read balance sheets, etc. in a way that one is not fooled by all the accounting shenanigans--this process probably takes as long as watching the stock go up high enough that it no longer represents good value. Call that investing--fru (for the rest of us). Buying whole companies with would be investing--b. He can throw unlimited funds and people into doing his due diligence.

I like Buffet's marginally provocative folksy wisdom and the fact that despite his billions, he lives in a little bungolow like the rest of us--it's a great shtick.
Someone defined kitsch as Horowitz playing the piano--how about "The Sage of Omaha", now that Horowitz is rendered immobile. Granted, they are/were both extremely good at what they do; it's more how they are used and portrayed by the media that is annoying. Now the sage is performing a public service and doing his patriotic duty. Reminds me when I bought a Ford just after 9/11...

Muzie,

I would suggest a middle ground. I've invested my entire adult life, and lucky for me, I was wiped out in 87 when I didn't have much. It was especially good timing for me as I started a business and did not pay much attention to the market for the next 10 years.

I was financially rewarded for my efforts in my business in a way that I simply do not believe I could have ever gotten from trading in the markets. Building wealth thru one's own creative efforts is very rewarding indeed.

That said, I now must pay attention to the markets and while it brings me less satisfaction, it does force me into much more reading and observation about the world in general - which is a good thing.

I make significant allocation decisions when big changes start happening in the markets (last Oct and now) and don't get too involved in the time in between. Right now, this market has my undivided attention. But my hope is that in a few months I'll be back to reading my Barron's, and checking in here from time to time :-)

First time posting. I find this site very thought provoking. I have been taking Bill's advice of late to sell puts as a good way to take a long position in some beaten down compainies (MOS, TSL, PBR). It seems to me that if you sell a long term put way out of the money, not only are you effectively getting a cheaper stock price if the stock is ever put to you, but you are earning interest on the proceeds of the put sale while you wait for the share price to appreciate.

My broker is Schwab. Can anyone confirm that indeed the proceeds of a put sale go into your cash balance and indeed earn interest? If yes, doesn't it make sense to sell puts way out of the money to collect more interest? Thanks in advance for constructive thoughts. (Keep up the good work, Bill. I too think we're in for a positive market given the unbelievably low prices on some stocks.)

@Muzie - Gold does more of a store of value than do stocks... The problem is emotional trading or movement (not like stocks aren't traded on emotion). As someone mentioned that smart money was buying since 2k1..
why? Did the feds start cutting rates then? Was their a recession... was the printing press flown in from the moon?
all very valid questions...
Gold is down over 20% from their peak as the DJI is down almost 35% from the peak. Store of value??
Going forward we don't know what will be on top 1, 3, 5, years from now.. having a nice hedge with gold seems like a good thing. May or may not miss out on some returns.

Another example maybe a bad one as I know many thoughts here about mutual funds... I would ask anyone to check out the link and compare the first eagle gold a fund SGGDX compared to the .DJI
http://tinyurl.com/5jq7m6
add the .DJK to the chart and compare the 1, 5, and 10 year charts...
NO WAY ten years ago you could of told me that the a gold fund would beat out the .dji in a ten year chart. No way it would be out performing by 200% with 28% of it's holdings physical gold.
It is very volatile, this day and age what isn't volatile right?
I am not sure, what will happen going forward, but if a recession is going to lower worldwide commodity prices that is a good thing. If it can lower the price of gold - may present a great time to pick some up at cheaper prices. Just in case the anarchy trade actually happens (still want to hold your own stuff). Either way in the example above I WOULD OF NEVER GUESSED of that performance vs the markets 30 best biggest companies (wide example).... Just trying to prove an example..

Kaimu - "Slim Pickens riding a nuclear bomb" - An image etched in my mind for eternity.

@kaimu - I think 25 banks have went under as of now... More on watch list and there will be consolidation and a lot more to go bust.... Derivatives are way out of had compared to the Savings and Loans timeframe. A majority of those properties were commercial... Fewer people felt lost wealth, this time it is a consumer debt problem with the coveted more prized asset being their home is worth 1/4 to 1/3rd less than it was two years ago... that really hits the psychy and affects consumer confidence. Unemployment is going up, car lots are gong to be disappearing by the day, so our second biggest spendature in autos is going to take a massive numbers hit along with houses..
HELOCs next? Credit cards next? Pick a Payment resets in 2010 starting? What about commercial - commercial rents going down, vacancies increasing - have they overbuilt that one- that next?
We can't construct our way out of this mess for private investing (commercial, residential things) it will have to be out of infrastructure and public works investment...

Side note on the senator - these guys have no real idea or just drink kool-aid.
Last week - i heard a Senator who used to be the economic advisor of a presidential candidate but had to resign because of a comment he made a couple months ago about our economy and it's recession. He stated that our economy is fundamentally strong, how strong, fundamentally strong. Wow apparently, some polls are fundamentally inaccurate when over the majority of the population thinks we are in a recession... How can things be fundamentally strong when consumer confidence is LOW!! Consumers are the Fundamentals... (can't win a football game if you can't do the fundamentals of blocking and tackling)
I was totally amazed by the arrogance of the senator, either they are being advised that throwing money at the problem will fix it, by keeping the money supply high and prevent deflation.
I fear what the side effects of todays actions will be 5-7 years. from now.
These actions may or may not (most likely may) get us throw this challenge but what ever bubble is forming i am fearful of that. Each bubble only seems to affect us more and more... Tech - not much just wiped out people's retirement, housing - you betcha, commodity - $4 gas hurt many!, NEXT - ??

It seems the more money that is made/created the faster these bubbles pop up with speed!

Wait a minute.. Tech wiped out people's retirements, could we argue that many have seen their 401k values go down this time too? forced redemption's by mutual fund managers? Is that their fiduciary duty to sell low? hence more wealth transfered buy high, sell low... that seems like a problem to me?

Correction to Buffet post: Inside knowledge as in being able to go inside the company and see things for himself, not as in "insider" knowledge, which is illegal and immoral.

Buffett: These are his private monies/funds he's buying with, not BRK, so we don't know if it's entire co's or on-sale stock.

Lessons to be learned from the extreme volatility:

The question that comes to my mind is, do you really want to put 70% of your life savings in an animal (individual stocks) that are moving up or down 15%, 20%, or 25% on a daily basis?

On a million dollar portfolio (one you may be using for retirement living) at 20% your dropping $200,000 in a day. Get a string of bad days or weeks and you can find yourself down $500,000. Oops, I’m retired this is going affect my life for a long time.

How I try to avoid the above scenario.

First, on my trading portfolio I’m down -10.61% and -2.89% on total portfolio ytd as of yesterday. To some this may seem good to others to others very bad, that’s fine.

The point is that extreme volatility can (large losses will) kill your portfolio and usually take a long time to recover. So how can one protect one self from the perils? My solution is the following chart. I posted it before, but one must burn it into your brain and most important have the discipline to follow it. This comes from Welles Wilder Jr. in his book New Concepts in Technical Trading Systems.

% Loss of % Gain on Balance
Initial Capital Required to Recover
05 5.3
10 11.1
15 17.6
20 25.0
25 33.3
30 42.9
35 53.8
40 66.7
45 81.8
50 100.0
55 122.0
60 150.0
65 186.0
70 233.0
75 300.0
80 400.0
85 567.0
90 900.0

This chart brutally shows the daunting task needed to recover from large losses.

I hope this helps some people going forwarded and want to say that following the above has keep me from getting destroyed in the past 35 years. Good luck to all.

For discourse:

Many here, including Bill have made great points about being independent. That is the real dream, well mine anyways. Many are tied to things that don't matter, I for one am one of those people.

A quick read at Panzner's website... it is the complete letter from the hedge fund manager who recently wanted to thank everyone for his success and exit. Got to admit he went out on top and just blasted a bunch of people in high places. I wish stories like this would get more attention because he points at the very people who have caused us all this grief.

http://tinyurl.com/ytvt8q

Enjoy the read, i did.

James Grant, publisher of Grant's Interest Rate Observer, is a guy I have always respected, and one who is often challenging Wall Street orthodoxy. He has a freebie posted on his site that was originally published for subscribers on 9/19 titled "Gold 36,000."
TOG, enjoy

http://tinyurl.com/5ucqpj

Vinrod,
Unfortunatly I have been thru several of your current dental ordeal.
It takes about 24 hours for the antibiotics to start working. They only stay in your system for about 6 hours so keep a good schedule.
Tylenol and aspirin work well for me also.
If after 24 hours the antibiotics have not helped then maybe a different kind of antibiotics will need to be prescribed.
Hang in there.

ALOHA !!

Another CLUE ...

From the recent CMRE conference - Committeee for Monetary Reserch and Education ...

"It was a good crowd, about a hundred people, mostly from the financial industry, and it enjoyed the unscheduled attendance of Robert Mundell, the Nobel Prize-winning economist from Columbia University who is regarded as inventor of the euro (http://www.robertmundell.net/).

The CMRE always has been a gold-friendly group and the questions from the people in the audience suggested that they were more interested in gold's prospects right now than in anything else.

Mundell had a couple of notable things to say about gold. First, that China, with its huge dollar surplus, has a great interest in buying gold to hedge its dollar exposure but is unlikely to do anything disruptive to the world economic order. Second, that if the International Monetary Fund really does sell its gold, as is occasionally proposed (and you may recall that I doubt that the IMF has any gold at all, just a tenuous claim on the gold reserves of the United States; China should purchase all of it.

Since Mundell is officially an adviser to the Chinese government, presumably it already has heard this suggestion from him. If the IMF really does have any gold and China is prepared to buy it all, of course this would prevent that gold from depressing what passes for the gold "market."

A man in the audience who identified himself as a Comex gold trader asked how he could protect himself against U.S. government intervention to obstruct delivery of gold due on the December contract. I replied that unfortunately the only defense against such lawlessness by the government might be the Second Amendment."END

So, in a sense the US government is already confiscating gold if they are limiting COMEX gold deliveries to less than 1%. What does that say about supply and demand and the corruption of futures markets? What does that say about the "free markets" in the USA? Welcome to the USSA!

Muzie,

You sound like a thoughtful and reflective person. I hear you about the thing about not having the time to watch carefully but I think this needs to be included in your strategies.

Also, if you can glance at the market every hour or so and then spend ten or fifteen minutes with it then you could probably use your job as an advantage. With technology what it is today I can't imagine that's not possible unless you work digging tunnels hundreds of feet underground or flying airplanes maybe.

Don't misunderstand my major points. As you yourself suggest the market's been a disaster for the past year or so. The wise thing to do would have been to short the bejabbers out of Countrywide as soon as you heard it's name and gone back to your full time job, right? It was hard to do, I know, I was there. It's always "hard" trading, deploying capital, whatever. At least these days. I am saying above that...and this is the key thing,

Has capitulation happened yet? Does this market have enough trouble behind it so it can get through earnings without a major crisis of confidence? (unsettled question in my estimation)

And there's more to be considered...We know that in real life, on the ground, housing sucks and will continue to suck and nobody can really do anything about that, can they? To many players in, too high prices paid, recipe for disaster, and there are the issues above and beyond the availability of credit.

What about the jobs picture? Do you really seee Johnny 401-k continuing to fuel this stock market, or are the great salad days of the Boomer retirement runup behind us? Largely behind us?

What does it mean to fight a trend? To defy the laws of market thermodynamics and turn around a ship as large as the Q.E.2. and just as much in motion? What does it take to change a trend and what are the fundamentals behind that change in trend? Is now really the time? What about Obama's tax policies in the face of an apparant win?

I'm just saying, there's a lot to be considered here, primary among which is DO STOCKS GO UP? How will they react to crappy earnings coming up? Or good earnings surprises if that's what we get?

The virtuous thing is to wait for the right moment to strike, whether you have a day job, a trading job, or no job and trade from an internet cafe, a blackberry, or whatever. There's nothing stopping you.

does that mean that the "players" are fighting for 1% of the deliver?

so both supply and demand are "fixed".

why bother fighting if the other 99% goes elsewhere...

There are a lot of lessons to be derived from the recent market events. In this post I want to focus on two that have to do with identifying turning points. At the risk of making post too long, I'll put them together since they are very interconnected.

Turning points are in effect change of the trend. Thus, it's important to look into what maintains trends and what causes them to end.

Lesson 1. What causes trends to end, or pendulum effect.
System when pushed hard and far enough, pushes back. The harder and farther has it been pushed, the harder and farther does it push back.
This concept is well described and explained in a brilliant book "Fifth Dimension". We all witnessed how, during oil stunning rally, all kinds of higher and higher targets were assigned - 150, 200, 300. Part of those predictions that is related to what we discuss is this: here were explanations to those targets and to continuing rise of the price, that cited all kinds of equations, how much oil is out there and can be extracted per day, and how much oil per day is consumpted and needed. Projection of the growth in both parts of equation led to a conclusion that supply and demand ratio will inevitably cause price rise. Were those equations correct? Sure - if you accept the fact that system will not push back. But it will (and it did) - in a form of slowed down consumption (caused in no small part by the very cause of imbalance in the system, fast and hard oil price rise), in a form of developing other energy sources (yet to materialize to really meaningful degree). Similar predictions put food prices above the clouds, and failed in a similar fashion. Similarly, rapid increase of predators in a certain area eliminates their very food base and leads to banace restoration when predators start dying of starvation. Similarly, explosive expansion of a particular company often undermines its growth perspectives and requires contraction to regroup and find the way to evolve in a more mature fashion. Similarly, overheating of a certain area covered with water leadsto increased evaporation and forming of clouds that cool the area off. Finally, to return to the markets, similarly excess of buying leads to exhaustion of buyers and eventual trend reversal. Similiarly, abundance of short positions leads to short squeezes. This phenomenon is known as "becoming a victim of own success". It's also known as reversion to the mean. Paraphrasing Bill, "Nothing exists in vacuum" - everything is a part of the bigger system, and when a certain element of the system gets out of balance, there will be parts of the system that push for balance restoration. Thus trends are being born when a certain element upsets the system, and trends reverse when system pushes back.

Lesson 2. What maintains trends, or inertia effect.
Markets tend to overshoot any reasonable targets on both sides.
This phenomenon is well known as well, but somehow rarely taken into account at the time. When oil started showing signs of cooling off and reversal, very few people called for such seemingly far away (at the time) targets as 80 and below. When NASDAQ started running in 1998, no one could even think of such heights as 5000 - and similarly, when it reversed in the spring of 2000, no one could imagine that it could drop as low as it did. "Market can stay insane longer than you can stay solvent" - sounds familiar in light of recent events even to those who never heard this sentence, doesn't it? If you want to see the most recent example of this, look no futher than at intraday chart of UAUA for ther last two days, Oct 16 and 17. It would reach all reasonable targets, and still continued to go to unreasonable, and then some more, and then a lot more. This phenomenon takes care (which in market terms means deprives of profits or causes losses - cynical, I know) of those who trade on "obvious" as they see the obvious - which is usually how the majority sees it. "Deprives of profits" part is materialized when profits are being taken where reasonable targets are reached - and market advances well beyond reasonable, leaving those who took their profits in the dust. "Causes losses" part is materialized when countertrend position is being initiated at reasonable targets (shorting oil at 80? 90? 110?), and market overshoots those targets and stays "insane" long enough to cause desperation or margin calls.

Failure to take into account and to balance against each other both of these principles leads to severe misreading of the market. Try to analyse what caused billion-sized losses in Picken's energy fund, and you will see how this works. Having made immense amounts of money in oil, where such mis-calculations came from? From misreading the system as a whole first, thus believing in endless price rise? From underestimating the inertia on the downside move, thus multiple calls (and according actions or luck of such) of "oil will never lose $100" kind? You will see numerous examples of miscalculations of this kind in analysis and trades of many around you, and possibly in your own. Hopefully, this overview will help you recognize the fallacies in thinking and balance these counteracting principles in the future.

There are a lot more of lessons coming from the two above, and from particularities of market actions over last two weeks... but this post is way too long already as it is.

Globe and Mail fans rumours of potential ING Canada sale

"Markets analysts [Westfall and Hardy] noted that the Canadian insurer does not face the same funding, capital and credit issues as banks and life insurers, as "the company has zero debt, $1.4 billion in excess capital (including debt capacity) and a conservative bond portfolio," Willis writes."

http://tinyurl.com/55qltv

Expect we will see a bounce in ING on Monday to correct 27% decline on Friday?

http://tinyurl.com/6lwjat

Know your Fed Board members. A trading card series should be coming soon. A critical review of a few examples of Vice Chairman Donald Kohn's observations. The Kohn-heads must be out there somewhere.

Risk...

Seeing all the recent misery that has been heaped on the community recently, I thought I would add a few things about risk that I use in my trading. Believe me that they have been expensive lessons, but they need to be learned.

This concerns your portfolio and how to prevent bad things from happening to it. I believe that I first found these ideas in one of Tharpe's books.

You can have your portfolio blown out in two different, yet equally devastating ways. The first is by having a huge loss (e.g. you owned a bunch of Bear or WaMu). The second is by many smaller losses (you bought and stopped out at every 52w low in banking).

The first rule is that each position should risk no more than x% of your portfolio. 3% MAX. I use 2%, many use 1% or less. That means that my size is determined by my stop distance. This also means that if I want a large position in a stock, I HAVE to layer in (average up only). This keeps any one (or set) of positions from destroying your portfolio. Too much risk in a given individual position is very bad.

The second rule is that if you loose more than Y% in a month (I use 6%) that you close all open positions and stop trading for a month. This keeps your portfolio from dying from 1000 paper cuts. If you're not in sync with the market, don't try. Take a break and find out why not.

Obviously this will limit your upside in some cases, but will keep you in the game in the worst of cases.

Just my plan to stay solvent.

Are Comex deliveries limited to 1%, or is that just the historical norm of traders wanting delivery? I got the impression it was the latter, but I'm not knowledgeable on the subject.

I also read last night that Platinum and Palladium have defaulted in the past. If that was possible, it means that they didn't require those who are short to have actual metal warehoused with them sufficient to cover.

muzie, I don't know if we will end up back on a gold backed currency or not, or when. As I see it we are living in a very small slice of time, and its been the exception, rather than the rule, that anything but gold or silver was trusted as money for very long, because those with the ability to print currency always do. It occurs to me that this has been happening since the gold was taken away, and at a wilder and wilder rate as time has gone by.

All I expect from the gold in my portfolio is that it will hold its value on the average, longer term because it gets more difficult to find and extract as time goes by. I'm also one of those who believes that Central Banks have intentionally conspired to hold down gold's price by dumping holding and leasing out their holdings in order to increase supply, an make the public believe that paper currency is "THE" safe haven. I think when the Central Banks get to where they would rather have more gold than more dollar promises, the pendulum will swing back with a vengeance, and gold's price will rise significantly. As I see it, its just a question of how high the deficits and debt have to get on that wall of worry before the dollar does a swan dive. After all, who really believes that for the next 100 or 150 years, Americans will be willing to for go consumption to repay it?

Shark:

I understand that looking at the market every hour doesn't sound like much. But, let's not kid ourselves, if I'm going to check the markets every single hour I will not be focused on my job. I LOVE my job. At least I used to, until my productivity fell so badly as I started focusing on the markets all the time, trying to control the uncontrollable. And I want to give the best I have on my job. Not to mention it pays very well, and at this rate it's not inconceivable I can lose just as much money in forfeited bonuses due to poor performance than I will in the stock market.

I used to love investing, taking risks. Of course, when you lose money things are different. If you invest in something of no value, then it's fair to be punished with losses. But we're way past that now - we've fallen off the edge of the map. I'm sure many of us are having a "I didn't sign up for THIS" moment, lol.

From Shark:
"And there's more to be considered...We know that in real life, on the ground, housing sucks and will continue to suck and nobody can really do anything about that, can they? To many players in, too high prices paid, recipe for disaster, and there are the issues above and beyond the availability of credit.

What about the jobs picture? Do you really seee Johnny 401-k continuing to fuel this stock market, or are the great salad days of the Boomer retirement runup behind us? Largely behind us?
"

I know all about the housing bubble - heck everybody knows.

I don't know if "capitulation" has happened. Everybody's looking for it. Some are looking for a 1929-1932 type of slide; they will either look like genuises or we will never hear about them again. Win-win for them I suppose.

I know stocks accross the board are down 40%. Are you saying every single US company will lose 50-60, or even 70% of its profits due to this recession? Yes, there's some losses due to the "wealth effect" of housing prices - but at these price levels it's now looking like people believe our entire economy is based on housing. It isn't, not all of it.

I don't know if it'll go down further and I'm tired of guessing. Nobody knows there are too many moving parts.

People say now the consumer will cutback. Well, let me tell you something - I, after saving half of my income for years and losing 20% of net worth in 3 months certainly am not going to put more savings in the stock market - at least not now. I will be SPENDING that money, as never before. I'm not saying this is something many other people will do, just showing that with 300 million moving parts, you always have so many parts that act totally opposite of what you would think.

Latest outlook of European Think Tank...

In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US. The process will result from the following five factors studied in detail further in this GEAB:

• The recent upward trend of the US Dollar is a direct and temporary consequence of the collapse of stock markets

• Thanks to its recent « political baptism », the Euro becomes a credible « safe haven » value and therefore provides a « crisis » alternative to the US dollar

• The US public debt is now swelling uncontrollably

• The ongoing collapse of US real economy prevents from finding an alternative solution to the country's defaulting

• « Strong inflation or hyper-inflation in the US in 2009? », that is the only question.

http://tinyurl.com/6juujd

Hi,

Looking at several price series, it is now getting more apparent that the broad cycle is turning right here, thereby generating all this volatility.

The election is of course the elephant in the room, but regardless of the outcome, the market is gradually turning.

You do not turn a huge market overnight, like you do not turn an oil tanker in a second. It takes time, and generates turbulent waters.

That is what is happening.

Yes, Monday can be bloody, but the turn is now already quite apparent if you look at price series and then start looking at some charts.

The world has not ended, and in a few weeks the picture will be clearer.

Enjoy your weekend.

Cheers!

Just before the distressed hedge funds started their massive sell-off of commodity stocks, I bought a few gold and silver companies at support levels. When they continued below support, I bought more – recklessly: I kept picturing gold rocketing up the next day and I was afraid of missing the train. As they continued down, my position got bigger and bigger and so did my fear, until one day in a great big blind panic I sold everything.

And then I felt such an immense relief. I realized that I had “known” all along that more hedge funds would liquidate. Bill had been pointing out gold’s weakness for weeks. But I couldn’t hear it because of the fear: I could only pay attention to what allayed my fear.

An hour after I sold, I realized the obvious trade was the opposite one, so I shorted gold and made back at least some of my losses. The lesson is that when we’re afraid because our risk is too high, we filter out critical information.

Re: Banker's Strike

Is Switzerland the next Iceland?

UK Independant

http://tinyurl.com/66yc4o

SLW

I am trying to understand the maximum potential risk associated with an investment in silver wheaton. In today’s world where paper assets such as precious metal stocks are seemingly at great risk I am wondering about my assumption that slw represents a non expiring call option on silver. To me, the business model of the company which I believe most are aware of, represents the lowest risk method to invest in silver other than bullion. 10 to 20 employees, no direct mine ownership with all the associated risks, and no counterparty risks like an investment in a silver ETF such as slv. It is the silver vehicle of choice in my opinion, and I would add I am glad it made the big 100 team.

So my question is, what could go wrong? Are they in some way exposed to debt that the current liquidity crisis could cause them to fail? Have they leveraged themselves in any way that I don’t know about or understand? Any input is greatly appreciated.

(Disclosure: overweight slw but under no pressure to sell anytime soon)

[Bill cara note:

I previously asked senior management if they would explain this risk in an e-mail. I was surprised they said they would. But they never did. I will try to read through the Wall St research for an answer to this question. I believe Silver Wheaton is an excellent business model. They run the company with about nine people on staff and have no debt, no obligations to run the various mines, and so forth. I suppose the mines could stop if silver drops below a certain price, but when I initially looked at SLW, the price of $SILVER was high and rising. Today, it's down to $9.34/oz.]

Vad - on your 3:55pm post -

Always enjoyed your post. Thank your for the refresher.

Silver isn't doing as well as gold holding up to the deleveraging, and SLW's earnings are going to be based on the price of silver and the output of the mines they have royalties on.

Scary chart from London Banker who writes for RGE Monitor:

http://tinyurl.com/5j29my

Just read Kamu's story about the Nevada senator...Ignorance is a highly valued commodity in our congresspeople; lemmings, with no higher brain topography on which to depend. They disturb me. Sigh.

This is the stuff from which ascetic budhists are born. Anyone have a list of monasteries handy?

BTW... found this article interesting:
http://tinyurl.com/63vqns

ALOHA!!

MtnGtx ... Thanks for the Michael Hudson article. What he describes is a monetary collapse and I am surprised he did not come out and say so! What else is it when a country defaults on its debt obligations? In such an event does he actually believe the USDX will stay where it is much less still be considered a World Reserve Currency?

Bush had no intention of representing the America people's interests when he brought Hank Paulson into the US Treasury. In fact the former Tres Sec. O'Neill who disputed Bush that the Iraq War would only cost US TAXPAYERS $1.78bil and was fired for saying so, has called the $700bil Paulson BANK BAILOUT plan ... "crazy"! We have a US government with no checks and balances, where we have blatant TAXATION WITHOUT REPRESENTATION where "accountability" is laughable! It is no surprise to me that this is all happening on the baby-boomer watch!

In America DEBT = WEALTH and that is the mentality the AMERICAN DREAM was built on! It is no surprise we now have fallen on our own sword!

I'm not sure why I see so much interest in the miners here, when there are (seemingly) better fish to fry.

In 1979-80, we had double-digit inflation in back-to-back years. Interest rates, some of you will remember, were also in double digits (there are probably some 30yr Treasury bonds floating around from 1981 that still pay 16%).

If you'd got in early in the Driefontein and Campbell Red Lake issues, you made a killing, but if you'd bought and held at the highs back then, you were screwed for a very long time.

We're not seeing anything close to hyper-inflation and high interest rates - in fact, its just the opposite. So why gold at this point?

Personally, I do own about 5% total net worth physical gold and silver as insurance only, kind of a mini-hoard to backup what dollars I hold.

But as a trader in current environment, I don't see much opportunity (at the moment) in miners.

I'm sure that there are many contrary opinions.

http://tinyurl.com/6jwjqf

Sunday Morning Coffee

Mmmmmhhhh...on the question of gold:

There seems to be a disconnect, as noted by many in these threads, between the physical gold market, and the paper (futures) gold market.

Whereas the paper gold market is floundering, the physical market is thriving-in shortage even. Why is that?
I realize, in the best tradition of the long late Howard Cosell, that’s a statement of the obvious
There seem to be two intertwining themes/theories to explain this paradox. The first is interventions-to which Bill subscribes (as a partial effect; Kaimu-most definitely). The second, is market dynamics (exchange rate relationships, interest rates/bond yields, market perceptions) which is the other to which Bill partially subscribes. Now, please, the terms I use are merely headlines which can be drilled down a logic tree to many other parameters, but for brevity's sake...

Kaimu presented some damning evidence in favor of ham-handed interventionism recently:

"ALOHA !!

LOOK ... A CLUE!!

Physical market versus paper market ...

"The above seems like compelling evidence to me that something is seriously amiss in the futures markets for gold (notably paper markets, easily manipulated because physical delivery of gold to settle these contracts happens less than 1 percent of the time); and that rampant manipulation for profits by just a few players is occurring in an unchecked fashion. According to data recently released by the Office of the Comptroller of the Currency, a division of the U.S. Treasury Department, of the $135 billion of gold derivatives contracts (including futures and options) controlled by financial institutions, JP Morgan controls $96 billion (71.11 percent) of these contracts and HSBC Bank USA controls $34.4 billion (25.48 percent). In other words, just two players control almost all gold derivatives contracts in the entire United States."

What a shock to see JP MORGAN mentioned!!"

97% of the futures market is in the hands of two players. The Bass Brothers must be apoplectic with envy. Anyway...two players, the largest of whom we know is incestuously entwined with the FED and the government. With governments "coordinating" responses to the fiat crisis (and it would seem credit=fiat), which is the source of their power, this suppression of gold prices makes perfect sense. Gold is, perhaps, the marquee commodity (for lack of a better word) threat to the global fiat system. Whereas Kaimu's analysis focuses on the US market, which it is reasonable to assume is a large influence in the world market, it would also be reasonable to assume there are other interventions in other markets.

Now, Bill believes the gold futures market will eventually be overwhelmed by changes in other market relationships, which brings us back to his mantra (paraphrased: the market is prices, not product). So, again it's reasonable to assume, unless one thinks this time is different (like the tulips, internet, real estate was different-hurts don't it!) that gold and gold miners will again ascend.

Question: If gold ascends vigorously, what threat will that signal to the global fiat regime? Can governments allow such a thing to happen?

Which then makes me think of the system of exchange, for which gold is not particularly convenient in an integrated world economy, nor does it give governments the ability to exploit and extend its power. With such an integrated economic system, further entwined by computers and networks, hasn’t money become an electronic media? Looking at the system further, the government system and the financial system (unified by central banks) have a symbiotic, if not a co-dependent relationship.

Now, I’m sure other philosophies say the same thing, but the macro-studies inherent in Taoist thought state that the system will always defend itself. The system is not about the individual, it’s about the system, and unfortunately, the system feeds on the individual.
One may argue that a part of that system (The U.S.) will fall, but other parts of the system (in the tradition of Ecclesiastes, Vadym’s pendulum swing post (Reversion to the mean (which is also a Taoist principle most simply represented by Yin/Yang)) will rise.

One thought that comes to mind (considering my lack of intellectual horsepower-one thought a day is momentous), is another widely seen tactic and one I had referenced regarding the use of the housing legislation here in the US as a Trojan horse to wreak havoc on the financial system. Wrapping oneself in the banner of some popular idyll with a mantle of nobility, allows for exploitation.

So, it might be that some form of peg to gold happens, but I wouldn’t bet on it lasting too long. Governements, and bankers would be giving up too much power.

Sign of the times:

Government Sachs

Analysts wonder why Mr. Paulson hasn’t hired more individuals from other banks to limit the appearance that the Treasury Department has become a de facto Goldman division.

Paulson group think

“These people were trained by Paulson, evaluated by Paulson so their mind-set is not just shaped in generalized group think — it’s specific Paulson group think.”

http://tinyurl.com/5jkj4z

Recent volatility:

I find it very difficult to think in terms of trading now since I don't trust the rules (or know them to be reliable at present).

For now I'll stay with my long time experience and select longer term buys — averaging into ones like XOM, JNJ.

My GG is down 22% in less than a month, but....

I bought only a one quarter position. Believe it is an even better value for the next purchase. Own it in a taxable account and may use it to offset gains taken earlier in the year (and buy back in 31 days).

Will continue watching CNBC for entertainment value. (There are so few really good comedy programs these days.)

I've seen bad market stretches before — they do come to an end.

My real concern is the larger picture: The TARP solution addresses, IMO, the wrong target and protects the wrong people. If our economy is 70% consumer dependent, we need to restore consumer trust (by placing the blame and punishing — rather than rewarding the culprits), stop their fears, creating good jobs (instead of dishing out short term rebates) and do it NOW!

Most people are not totally stupid and insulting them is likely to lead to violence. They are being ignored and left out of the process.

"Those who make peaceful revolution impossible will make violent revolution inevitable." JFK

Reference 8:44 a.m. post on (Government) Sachs:

If you ever had any doubt, it definitely brings new insight to who’s “in the room” when the financial boat is steered.

********
Vinod—sorry to hear about your condition. Hope you’re feeling better this morning.

FWIW:

The business section of my local Sunday paper has published this list from Barrons Insight:

25 Bear Market Bargains:

Big Cash Rich Companies:

XOM MSFT AAPL INTC DELL EBAY MOT YHOO ERTS L

Smaller Cash Rich Companies:

NVDA BRCM NOVL IACI KBR RNWK NTE

Industrial Stocks On Sale:

CAT CMI DE HON ITW PCAR TEX UTX

Japanese Bond Markets Defaulting:

http://www.ft.com/cms/s/0/fb5b069e-9cab-11dd-a42e-000077b07658.html

Gold
nemo - your 8:31am post.

The divergences between increasing public demand for gold bullion with the continuing limited supply (of smaller weights and of coins), compared against the steady lowered “paper” price for gold comes as a surprise for many observers including myself. Then, after reading an article about the similarities of Gov actions that Pres Hoover/Roosevelt tried to do to reduce the effects of the Depression with actions that the Treasury and Fed are trying now, I noticed that one of the most memorable items from the Depression time seems to be missing -

“ ... the issuance of Executive Order 6102 in 1933. With Roosevelt’s signature, gold as legal money disappeared in the United States, paving the way for the government to engage in near-unconstrained debasement of the currency. Historians generally pass by EO 6102, but without it Roosevelt’s economic programs never would have gained traction. ...”
http://tinyurl.com/5kbd7t

That act of Roosevelt to remove Gold from currency, plus the later setting of a price fix on gold was VERY unpopular with a lasting memory of it - anathema for politicians. So, what would have the same effect as Executive Order 6192 and a price fix without all the fanfare?

One act would be to eliminate any public knowledge of “unconstrained debasement of the currency” by ceasing publication of Gov data on the subject (that’s been done). Another act would be to stop the use of gold as a currency (no coin blanks, no availability of new coins, restricting delivery on Futures contracts, and hoarding of existing coins/bullion effectively accomplishes this requirement). Price “fix” on paper gold seems apparent by the symbiosis of the Fed with the two principal owners of all gold derivatives who thus can control the price of paper gold with ease especially with the cooperation of other Central Banks.

Voila! We have, thus, Executive Order 6102 (Bernanke version) of 2008. Can this be true? If it smells like a duck, ....

Why is this importent? Well, if true, then perhaps the “black market” for gold will be the only viable market, and if that happens, then the next step will be the seizure of gold by the Gov as an action to thwart those nasty “black marketeers”. Invest in gold? Don’t fight the Fed. Jmho.

Re: Large Cash Positions

I would be leery at this point of any company that makes a point of publicly announcing the size of the cash position. This is because the probability is very high that this 'cash position' has magically increased with their stock decline because it represents the credit derivative swaps held against the declines.

Wall Street banks in $70bn staff payout

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

http://tinyurl.com/6kp3vw

A Crisis of Conscience

The global financial crisis has galvanised world leaders into finding unimaginable sums of money almost overnight to prevent banks collapsing, shore up failing systems and reassure nervous punters. 30,000 children die every day from poverty -- a child every 5 seconds. If that isn’t a crisis, it’s hard to imagine what is.

http://tinyurl.com/5r4ulu

"Sprott Asset Management Inc.'s initial public offering this week will make a billionaire of the hedge fund company's founder, spurring speculation Canada's decade-old commodities boom is ending, investors say."

http://tinyurl.com/5ck533

...
"Much of the IPO activity in 2006 sprang from the launch of new income trusts. But in October 2006, the Canadian government announced new tax measures for income trusts, halting private companies' plans to go public using the tax-sheltered trust structure and halting planned public-company conversions into trusts.

One of the most high-profile IPOs this year, the May launch of money manager Sprott Inc (SII.TO: Quote, Profile, Research, Stock Buzz), has had a rough ride. Sprott shares have tumbled since June as commodity prices and resource stocks -- the firm's specialty -- plunged, and volatile financial markets have prompted a retreat from asset management stocks generally."
...
""It won't be until some point in 2009 before we see anything like the necessary conditions" that would draw back willing buyers and sellers, Sinclair said.

In the first nine months of 2008, 53 IPOs were launched on all of Canada's exchanges with a combined value of C$680 million, according to PwC.

That is down from 63 IPOs that were introduced in the same 2007 period, with total proceeds of C$1.2 billion.

Even those figures pale in comparison to the first nine months of 2006, when 95 IPOs with a value of C$4.7 billion came to market, PwC noted"

http://tinyurl.com/5txe32

Look at the SLW chart from April 15 onwards... curious downward spiral.

http://tinyurl.com/6qsuk7

Could be that it is the big picture that is causing the downward spiral (baskets of Canadian securities (fund, index?) vs. just silver wheaton). The Income Trust debacle was a big Black Swan (or Buffett Snowball, since we're in Canada) for Canadian markets.

SLW vs. SII (Sprott)
http://tinyurl.com/54qm8k

Where are all the IPOs going? Same way as investment banks?

http://tinyurl.com/6ko93n

Surprising how that translated so well. Look at its habitat of Maritius.

http://tinyurl.com/56xzny

"PORT LOUIS, Feb 12 (Reuters) - Mauritius' key stock exchange index, SEMDEX .MDEX, hit an all-time high of 2,010.75 points on Tuesday, up 8.56 percent from the start of the year, official data showed."
...
"Mauritian analysts were divided on the bourse's mid-term outlook.

"They are all expected to do very well. Market sentiment is quite positive," said Vikash Tulsidas, general manager of CAC stockbrokers said of blue chip companies he said would show good results in March. "

http://tinyurl.com/5pkvjh

I guess the other guy got paid his $1 bet.

http://www.imdb.com/title/tt0086465/

Re: Gold Price Fixing

I believe the gold price fixing occurring is due to the notional amounts of secondary lien financings held against bullion in Central Banks. I mean, why not? Wall St. has exclusive access and priviledge when it comes to doing the same against any government issue of government bonds the world over, and governments are performing like trained seals bailing out any bank involved in the scheme.

I think this should be the departure point. You have to wonder just how much gold held in Central Banks is actually obligated to commercial banking interests and no longer represents any actual holding on the part of any Central Bank.

Wall St. doesn't want to see any price rises, since they will invariably be holding Credit Derivative Swaps against bullion and leases. But then again, they form both counterparties within the same institution, so the notional declines against one will result in notional increases in the other, so they even out. The goal would be to write as much credit as possible against this gold and use it as an asset base to lever up as they plunge into another market. Nobody will ever claim these ounces, so you can just imagine the level of leverage held against any amount of ounces.

You can also just imagine who stands to lose when JP Morgan goes insolvent and its ETFs holding massive amounts of gold are claimed against Credit Derivative Swaps.

The fly in the ointment comes in when the sum total of mine supply is taken up by investment demand and held by individual investors, since there wouldn't be any ounces left to write secondary lien type financings against. That gold isn't your gold, its THEIR gold.

Mine Web always has a cogent write up of the bullion market:

http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=70932&sn=Detail

Dennis Gartman reports in his latest letter ....
"the public is too long of gold and must be liquidated." Gold heads lower in the short term.

Nemo - just one response to your post - you said "the physical market is thriving", to which can be interpreted thusly: there is a lot of buying//selling in PMs.

Yet, we've seen a peak (this year at least) at right above $1K per ounce (I'm not sure, maybe it was $1033).

But gold is now down from that peak by about 24%. Silver I would say is down some 55%.

If we agree that demand is up (or at least even) why is price lower? An aberration? Manipulation? Hmmm...

I'm also not a big fan of some of the mature miners - ABX, NEM - these guys maintained huge hedge books whilst gold was rising from around $300 in 2003 to its peak earlier this year. They only started unwinding the hedges late in 2007 - so I could scarcely say they were working for the shareholders.

Just my opinion, and I'm not even sure I said anything here...

visualizing the effects of time:

it helps to try visualizing changes in the environment (physical, mental, financial) when trading or investing, but it can be difficult to do...

when i'm driving/walking down the (dark and deserted) streets of san francisco at 5am, i know the sidewalks will be sun-baked and crowded at 2pm...when shopping for dinner, whether i do it before or after eating lunch can make a big difference...we all try to be smart and buy umbrellas and snow skis in summer, and shorts/sunscreen in winter...and we all try to buy on weakness and sell on strength...maybe all the people calling a turn in the markets are inexperienced and clueless traders, and maybe they're not...try looking out a few weeks, a few months...

Bill,

While I'm sure your experience and knowledge of the inside activities on Wall St. and past market events (1987, etc.) give you an edge, I believe you are perhaps overly optimistic in thinking...

"Will the US Treasury, Fed, FDIC and HB&B step up to the plate and catch the ball. I think they will..."

I would say the world has already come apart.

I can't see how the combined wisdom of individual ignorance — largely by the same who allowed or caused this crisis — can be expected to fix it.

While I have little to offer of the world differences this time, I see a lot which do make it "different this time" in the U.S.

•In 1929 people were used to taking personal responsibilty — now they look to the government.
•In 1970s we actually made real things to sell — now we buy most abroad.
•We have never been this deeply in debt, individually, at every level of government.
•We have a huge burden of unfunded, but social programs.

No matter how much Monopoly money is tossed into the marketplace it is still just paper promises worth less than my own IOU.

Until we (the world?) get back to producing something of value in exchange for something else of value, there will be no real solution.Bill,

While I'm sure your experience and knowledge of the inside activities on Wall St. and past market events (1987, etc.) give you an edge, I believe you are perhaps overly optimistic in thinking...

"Will the US Treasury, Fed, FDIC and HB&B step up to the plate and catch the ball. I think they will..."

I would say the world has already come apart.

I can't see how the combined wisdom of individual ignorance — largely by the same who allowed or caused this crisis — can be expected to fix it.

While I have little to offer of the world differences this time, I see a lot which do make it "different this time" in the U.S.

•In 1929 people were used to taking personal responsibilty — now they look to the government.
•In 1970s we actually made real things to sell — now we buy most abroad.
•We have never been this deeply in debt, individually, at every level of government.
•We have a huge burden of unfunded, but social programs.

No matter how much Monopoly money is tossed into the marketplace it is still just paper promises worth less than my own IOU.

Until we (the world?) get back to producing something of value in exchange for something else of value, there will be no real solution.

Markets may fluctuate, but whole economies (globalization in extremus) are in real trouble this time.

[Bill Cara note:

You quoted me, but you missed the next paragraph where I opined: "My bet is that the Interventionists get to save the financial system at this point anyway, but the cost will be humungous." Elsewhere too I have opined that the system is broke and this save is just a patch for a couple years, possibly 2011-2012, then the next tsunami will look like the Himalayas. That's why I listed the talking points for a complete overhaul that I stated is absolutely necessary, and then go on to say that I don't think it will happen because the special interests who control the lawmakers will fight that degree of change tooth and nail.

Just for the record since you quoted me in the context that made your point! Take shots, but please be fair.]

Gold

I bought the last of my local dealer's coins yesterday. He says they come in and go out in less than 24 hours — 10 coins last week, only 3 this week.

Another dealer has been out for some time now. People are looking for real, tangible things. We may be reaching a bottom here — that of "trust and verify" (Thank you R. Reagan.) only what you both can see and hold.

[Bill Cara note:

Yes, trust in paper money and paper securities doesn't last when the system fails.]

As expected, Colin Powell endorses Obama:

http://tinyurl.com/6d7ayg

Interesting comments about Gov. Sarah Palin. I haven't seen where she shows intellectual curiosity and that's a deal breaker for me. We've had 8 yrs of that already.

It seems in America we've put down high intellectual ability in our candidates, calling them "effete" like it's a dirty word. But, in the global community we live in that trait seems extremely valuable as long as the candidate also has the ability to get along with or relate to others. Without the latter personality trait, the former could have little value.

Thanks to all—Navid/2nd/wavesmash/Casey/Seamus
First I used glove and it has immediate effect.
After that I use Ibuprofen with my pain killer and every thing went away. Waiting for Tuesday for root canal to be done

Bill
This site is like a family now. Can not live without it.
Half of my pain went away when I show all post about my pain, they all care and have feeling for others
And there is always Casey for spiritual healing

"If we agree that demand is up (or at least even) why is price lower? An aberration? Manipulation?"

why were Global Crossing, Planet Rx, and WCOM up so much in 2000? do you recall the reverse logic that was in play for awhile-> the bigger the losses when earnings were reported, the more positive the reaction?

also recall discussing AMAT with a colleague in the late nineties when it sold off into the teens...neither one of us could come up with a good reason not to buy it, so we did-> it must have quadrupled over the next 12-18 months...

sometimes the only 'logic' is fear and greed-> think for yourself, trade against the crowd, and you might make a little money...

I enjoyed this relatively "frank" interview on Bloomberg video.

Hard to argue with the logic behind higher commodities, or "hard asset", prices in the intermediate term 3-5 years out.

Even if Bill's scenario of aggressive worldwide reflation providing at least an ephemeral boost to almost all asset classes doesn't quite pan out, the take-home is that lack of investment in new exploration in the event of deflation/severe recession -- whether it's oil or precious or industrial metals -- will likely lead to higher commodities prices sooner rather than later.

Just have to focus on strong companies which can survive...

http://tinyurl.com/5wma88

2nd, I dont know. Comparing dot-com era issues from Y2K when there was a lot of froth in nasdaq tech darlings - doesn't seem to compare well with what I see in the PMs and miners in today's environment?
(to me anyway)

You did mention AMAT, a good company thats struggled past few years. (I made my own fortune with NVLS from 92-00, so I am partial to them). A lot of competition in this particular node of semi's these days though - NVLS, AMAT, LRCX, and KLA have not only divvied up the playing field, a lot of these issues have split and re-split over the years - so when you do see NVLS trading at $15 today - you're really paying over $60 for it.

Also of course, I don't know everything - far from it.

As for trading against the crowd - I'm trying.
These past three weeks - nothing to write home about, that's for sure, but holding my own, and happy with where I am at this point.

I guess the whole point of my initial post - I see an over-discussion of GG, SLW, AUY, a few other companies - vice many other Cara 100 issues. It sometimes seems as if a majority of traders here expect the PMs to be their savior (at the possible expense of missing better opportunities? Perhaps ?).

Honestly, I hope you guys make pots of cash. But I'm not hot on PMs//miners for trades anymore...

www.billcara.com is a good place to be.

gb58- my point was simply that getting these kinds of oversold levels on the miners may have nothing to do with 'fundamentals,' as was the case with dot.com valuations...

Bill

Thanks so much for all that you do. Please remember that there are thousands of us out here that are immensely grateful for all of your efforts and would never imply that you have any responsibility for any decision we may have made. It is a rare person in this community who is unwilling to assume responsibility for their own actions. You generously provide wisdom and knowledge, the rest is up to us.

To the community: Thank you all as well, this place is a beacon of light in a sometimes dark world. I appreciate everyone sharing their stories, ideas and knowledge. I have always believed that quality attracts quality, and Bill is a huge magnet that has brought together a special group of people.

TomT - Thanks for the Katie Byron video link. Whoa, talk about seeing yourself in another human being. If that guy didn’t have so much hair on his head I would have thought that was me. :)

Have a great day on the beach Bill, you deserve it!

I do agree with you that things will look much better in a few months - maybe even next month.

"Elsewhere too I have opined that the system is broke and this save is just a patch for a couple years, possibly 2011-2012, then the next tsunami will look like the Himalayas. That's why I listed the talking points for a complete overhaul that I stated is absolutely necessary, and then go on to say that I don't think it will happen because the special interests who control the lawmakers will fight that degree of change tooth and nail."

colin twiggs seems to share that viewpoint:

http://tinyurl.com/54qccl

"Global leaders face a tough choice in the year ahead. Do they continue on the same road as before and attempt further monetary stimulation and credit expansion to soften the landing? Or do they allow the market to find its own equilibrium interest rate and allow the necessary fall in prices (economists refer to this as deflation) in order to restore market stability? The first option may soften the landing; but will also raise inflation, prevent the restoration of market stability, and condemn us to a lengthy period of stagflation (low growth accompanied by high inflation) that could last for decades. Allowing the market to find its own equilibrium, on the other hand, would be accompanied by a short, sharp period of readjustment, with falling prices and more bank bailouts — but would be over within two to three years.

"The second option is more desirable in my eyes, because it would herald the return to responsible fiscal policy — and a relatively stable business cycle, without the exaggerated boom-bust of recent years. It does not garner votes, however, and is therefore unlikely to be attempted. Expect a lengthy period of stagflation — if we succeed in avoiding a depression, that is."

Colin Powell: a MOST thoughtful endorsement of Obama

This 7 minute clip is REALLY worth listening to, IMO.

http://tinyurl.com/5plfh2

I hope I am wrong regarding the tactics I believe the Republicans will resort to in the run-up to the election.

A beach temp of 86 degrees with a lite breeze sounds like a well-earned paradisaical sentence for ones eternal confinement.

I'm imagining an inexpensive kite with a string stretched across forming a nice bow, and an old piece of linen tied on the tail end. A consistent ocean breeze transforms such instruments into carefree banners of delight. Bury the kite string along with concern, deep into the sand.

ALOHA !!

As is typical we tend to look at gold and silver in only one dimension ... the US Peso!! Gartman makes the same mistake ...

Please go to Kitco or GoldMoney and see where gold is when it is denominated in an Australian dollar or a UK pound, or a Canadian dollar, or a Indian Rupee, or a South African rand or even a Euro! All new weekly highs!

Gartman is full of crap!!! His only point of reference is the COMEX that is 71% controlled by JP Morgan gold derivatives. Why doesn't he point out golds record highs in all the other currencies? Why hasn't anyone here pointed that out? So 300mil Americans think gold is going down and not worth holding and some 6bil other humans think its going up and are fleeing their own paper money! Hummmm???? WOW ... so who's screwed up in their thinking?

Then look at the T-Bill issues the past few weeks(more appropriately Toilet-Bills). Oh yea of little faith!! HA!!

Bill's view is correct from the aspect of monetary "reflate". A long term view of the DOW is essentially some 90% inflation based. Which is why when I first met my Morgan Stanley broker and he pointed to the DOW CHART on his wall showing the DOW from 1900 to 1995 uptrend. I told him it looked like an inverse chart of the USDX purchasing power! That totally went over his head ... Okay-y-y!!!

Plain and simple ... To perform the function of money paper must be a "store of value" ... period!! It must be obvious that the elite bankers in control of Washington DC will do anything they can to perpetuate the US Peso myth, even if they have to rig the COMEX! They have never stopped inflating ... INFLATE OR DIE! How can "unlimited" printing ever be a "store of value"? Imagine if you owned stock in GE and Immelt came on TV and said he planned to print "unlimited" amounts of stock certificates diluting the hell out of GE stock! Who would then not SELL, except management? HA!!! Its the same with the stock certificate of America ... the US Dollar! Here it is ...

"That word - "unlimited" - is getting used frequently in the media these days. Bloomberg reported on October 13th that "policy makers offered banks unlimited dollar funding." The Wall Street Journal reported on October 14th that "The U.S. Federal Reserve agreed to provide unlimited dollars to three major European central banks." Then on October 15th Japan jumped into this dollar creation frenzy too, and according to Bloomberg: "The Bank of Japan said it will offer lenders as many dollars as they want." Bloomberg went on to say that dollars will be provided at fixed interest rates for an "unlimited amount", quoting from the actual BoJ announcement."

NOW WHAT?

I have been betting on this happening really since 1979, but I have antied up my bet drastically back in 2001! Mark Twain had it right! Essentially, you can count on politicians and banks to fail!

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

NVLS, AMAT, LRCX, and KLA - Only a partial list, excluding #2 TEL - Although these are so likely to lift with device manufacturing, I would first want to see signs of expansion or re-tooling on behalf of device manufacturers.

Technology advancement - All I see in the cards is architectural shrinkage, but there have got to be some other tangible technological breakthroughs for equipment manufacturers advancing to the next level. Moving manufacturing to cheap labor is of little help. I think they may be dreaming about self-assembly device manufacturing technology.

Look closely at metrology (such as in-situ), as this is also an area that supports architecture optimization.

ALOHA !!

Don't forget to take into account that when the DOW and other markets soar it will be on the backs of the entire human race who place their faith in "paper"! Once these inflationary tsunamis hit(kind of reminds me of the movie Perfect Storm)you'll make tons in the DOW but have to spend tons just to maintain a Third World lifestyle for not only yourself, but all your other family and friends. I have not even touched on the limits to your freedom, which obviously does have a price tag on it! During our Founding Fathers time it was "Give Me Liberty Or Give Me Death"! Now it is "Give Me A Free Ride Or Give Me Death"! Like Gordon Gecko said, "Its a zero sum gain, Sport!" Someone has to lose! If you study the stock mania in Germany during the 1920s you would see whats at stake. Really stock certificates were worth more than a Mark! Perhaps that is why we have all become day traders? Ever think further out and think past your day trade perspective? To do that you need a broader outlook, one that can only come from studying money and "Planned Chaos"!

I have been seeing the quality of life erode not improve. If our money was a true "store of value" then we would not have to BAILOUT the entire banking system and we would NOT have a US FED and none of us would have to day trade! Imsagine what you could do if you did not have to pay taxes? You might even have a shot at actually retiring!

Be careful what you wish for! Its never as simple as "heads I win ... tails you lose"! HA!! Who looses ... in the end ... who looses ... really???

Define "attrition" ...

Fortunes will be lost trading the markets successfully ...

QUESTION AUTHORITY !!!!

NVMI had a nice day last Friday...

I've read the WIR twice now. In light of Bill's review, I'd be interested in discussing what we might do next week.

As a Canadian, I'm going to watch the exchange rate as the dollar may continue to fall. This might run until Oct 29 when the FOMC reports. This will positively impact my holdings of TBT and XOM. TBT looks like a keeper.

I might exchange XOM for RDS.B. It hasn't been nearly the performer, and wonder what catalysts might turn that round.

I purchased POT and AGU last week, and would like to get most favorable pricing on ECA and or CNQ now they are on sale 2:1. I'm wondering how I might go about finding the best pricing. Monday or Tuesday?

I'm not sure whether to hold or trade Goldcorp av cost $25.6 Cdn.

I'm thinking of taking a short term position for a day or two in SKF as CDS' have to be dealt with, and these financials have been behaving too well.

What are others thinking?

Vinod, I had to endure your situation once. Took in food with a straw. Codine was better than cloves. Tylenol 3. No pain quite like it.

"Just have to focus on strong companies which can survive..."

or weak companies with good balance sheets that can be bought out by these strong companies to improve on their metrics.

Contrarian view (aka Confucius?) says man who buy strong company get squeezed hard by bear.

Focusing on a "strong" company had me purchasing GE @ $32. Depending on my entry point (Mid Jan or Mid March "got gold?" crisis periods maybe), I would have been better buying Hot Topic than Microsoft this year. Plus HOTT is doing better than S&P YTD (down only 24%)

http://tinyurl.com/6kelow

Think of any "names" on current credit swaps for large entities used to hedge risk and look at some prices.

List of S&P 500
http://tinyurl.com/5bp6x6

Note that Dillards isn't there any more. It was replaced by Nasdaq. Maybe DDS was too close to CDS? :)

http://tinyurl.com/63xpxj

Wamu auction is next Thursday. I am curious to know if restructuring of GM/Chrysler constitutes a credit event?

"Making matters worse, between October 2007 and Oct. 9, 2008, 237 ABS CDOs with a total aggregate issuance of $253 billion tripped their event-of-default triggers, according to data from Standard & Poor's cited in a Wachovia Securities report. ABS CDOs in default represent 33% by count and 40% by volume of total ABS CDO issuance since 2002. These defaults equal 13% by count and 21% by volume of total CDO issuance. "

http://tinyurl.com/5s6jqy

That's a lot of acronyms in default.

It's beyond me why anyone would think PM's aren't going to follow historical patterns congruent with fiat performance. The HB&B just gave us a classic text-book example of what happens when public trust in fiat comes without question. To trust only in fiat is to trust in your government and your financial system. My confidence of late wains in the face of the trillions being paraded and purposeful misleading of the stock holding public. Markets are made on a wall of worry, and that includes precious metals. Look at today's platinum prices... Unbelievable PM sale going on here folks!!

Kaimu - many nice points, and here are some question(s): is it even possible to calculate the "real" value of gold in terms of dollars?
(I think we dont have enough data - for example the total $USD count and besides how much gold does the US really own? When was the last time Ft Knox was audited? 1958? Why did they stop reporting M3? Who owns the gold stored at the NY Federal Reserve bank?)

Chick - yes, I forgot TEL, and yes agree that the "nano" -technology or whatever its down to now has been a tiring recurrent theme.

SUNW had always had good forward-thinking technology ideas before they ran into trouble and many smart people bailed on them.

TXN is not bad either.

Correction, sorry its not SUNW anymore its JAVA.
I'm getting old...

Why no one is talking about coming Tuesday, the day when final cash settlement of Lehman's credit-derivatives auction set. This process may Blow up
And may have big impact on market?

[Bill Cara note:

vinod, you mean nobody but me. I have made several references to it.]

"ING Groep NV, the biggest Dutch financial-services firm, will get 10 billion euros ($13.4 billion) from the Netherlands after the company said last week it expects to post its first quarterly loss"

"is the first to draw on the 20 billion euros that the Dutch government made available to financial firms on Oct. 10"

http://tinyurl.com/5ts2lw

Maybe Friday was a better day to get into ING.

vinod- based on Bill's comments about the auction, short of placing bets (ie, taking positions off or putting positions on), there's not much to discuss?

Re Lehman's credit-derivatives, couldn't last weeks action be a clue? as the people who can profit the most prob already know?

Vinod,

This is an exerpt I got from an article published by either Marketwatch, WSJ, Fortune, Bloomberg, or Barrons (sorry I can't remember):

Investors who bought protection against a Lehman Brothers default in the credit default swaps market have little to worry about getting paid on Tuesday, when an estimated $8 billion in cash payments on Lehman CDS come due.

While these payments may push a few fragile hedge funds over the edge, analysts say, stringent collateral requirements mean most protection buyers will not be out of pocket.

Comment has circulated in the markets and in the media that CDS counterparties may not be able to come up with the cash.

Analysts at Citigroup and Barclays Capital said market fears about the October 21 date have been overstated.

"This is more of a slow process, and people will have had to come up with the money long before the settlement date," said Michael Hampden-Turner, a Citigroup credit strategist.

[Bill Cara note:

If Citi doesn't know, then Bo don't know!]

ALOHA !!

Worthy of contemplation ... Which Ivy League idiot are you voting for?

READ ON:
Lahde Quits Hedge Funds, Thanks `Idiots' for Success (Update1)

By Katherine Burton

Oct. 17 (Bloomberg) -- Andrew Lahde, the hedge-fund manager who quit after posting an 870 percent gain last year, said farewell to clients in a letter that thanks stupid traders for making him rich and ends with a plea to legalize marijuana.

Lahde, head of Santa Monica, California-based Lahde Capital Management LLC, told investors last month he was returning their cash because the risk of using credit derivatives -- his means of betting on the falling value of bonds and loans, including subprime mortgages -- was too risky given the weakness of the banks he was trading with.

``I was in this game for money,'' Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. ``The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.

``All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.''

Lahde, who managed about $80 million, told clients he'll be content to invest his own money, rather than taking cash from wealthy individuals and institutions and trying to amass a fortune worth hundreds of millions or even billions of dollars.

``I do not understand the legacy thing,'' he wrote. ``Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.''

Request for Soros

He said he'd spend his time repairing his health ``as well as my entire life -- where I had to compete for spaces at universities, and graduate schools, jobs and assets under management -- with those who had all the advantages (rich parents) that I did not.''

He also suggested that billionaire George Soros sponsor a forum in which ``great minds'' would come together to create a new system of government, as the current system ``is clearly broken.''

Lahde ended his letter with a plea for the increased use of hemp as an alternative source of food and energy that segued into a call for the legalization of marijuana.

``Hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products,'' he wrote. ``Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term.''

`Innocuous Plant'

He added, ``The evil female plant -- marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country.''

Lahde said the only reason marijuana remains illegal is because ``Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers.''

Lahde graduated from Michigan State University with a degree in finance and holds an MBA from the University of California, Los Angeles. He worked at Los Angeles-based hedge fund Dalton Investments LLC before founding his own firm two years ago with about $10 million.

Lahde wasn't available for comment. A woman at his firm, who asked not to be identified, confirmed the authenticity of the letter.END

Central banks will resort to selling gold to help fortify their broken balance sheets. If equity markets rebound gold is going lower. Colin Twiggs suggests 700 and 550. Gold bugs be careful you may be in for a beating!

bullseye, the opposite appears to be happening.

http://www.marketoracle.co.uk/Article6586.html

http://www.freemarketnews.com/WorldNews.asp?nid=59398

http://goldnews.bullionvault.com/central_bank_gold_sales_100420081

ALOHA !!

Is this subversive and anti-American propaganda or is it just the plain old honest truth?

Recall the two basic points of the Common Law?
- Do all that you agree to do.
- Do not impede, meddle of intervene into the affairs of others.

What country has consistently broken Common Law on a global scale? Is it really our birth right to dictate to the entire World that it should exist in the image of America? Given the utter failures of US Foreign Policy overt the many decades, even under Biden and Kissinger why do we bother at all? Bush and the ivy league neocons surrounding him have done America no lasting service with regards to our global image. I can think of no more disastrous Presidential regime that could have been worse, not even LBJ or Nixon were this bad!

So which Ivy League idiot will you vote for in November? Whoever it is they don't have a very huge challenge to do better than the last two draft-dodgers did!!! Bush and Cheney set the bar so low an ant could step over it! Don't get too cocky US CONgress you have set the bar just as low! WOW ... I'd be really proud of a 12% rating. The lot of ya need to be fired ASAP!!! I will do my best to make my Hawaiian reps move out of Washington DC ... All these career politicians with their vast knowledge and experience are just killing us! Who can afford these idiots for another term?

READ ON:
The New American Century; Cut short by 92 years

by Mike Whitney
Global Research, October 3, 2008

The era of Superpower America is coming to an end.

The financial crisis was the last straw.

Whatever good faith was left after the invasion of Iraq and the shrugging off of international treaties, is now gone. The United States has polluted the global economic system with worthless mortgage-backed securities and, by doing so, has pushed 6 billion people closer to a long and painful recession. That's not something that's easy to forgive.

The anger at the US seems to be surfacing everywhere at once.

It was particularly noticeable at the recent opening of the UN General Assembly. Typically, this is a tedious event full of empty political blabbering and pretentious ceremonies.

But not this time. With the world sliding towards a US-created recession; foreign leaders have started lashing out at the United States more vehemently. The speeches have been blunt and acrimonious; no one is "pulling their punches" any more. Venezuela's Hugo Chavez summed up the mood of the meetings like this:

"I think that, sooner rather than later, this empire will fall - to the benefit of the whole world, enabling a balance in the world to be created: polycentric and multi-polar. That will guarantee peace in the world. To the creation of this multi-polar world we are making our small contribution."

What Chavez objects to is Bush's "unipolar" model of global governance whereby all the world's crucial decisions--on everything from global warming to nuclear proliferation--are made by Washington. No one likes being told what to do, just as no one likes the US constantly meddling in their affairs. That's why none of the UN attendees seemed particularly bothered by the fact that the US financial markets are in freefall. It's called schadenfreude, taking pleasure in someone elses misfortune, and it was on full display at the United Nations last week.

Many of the dignitaries seem to believe that America's sudden economic downturn presents an opportunity for change. And that's what everyone wants; real change. No one wants another 8 years like the last. That's why the central theme in Chavez's speech was repeated over and over again by other leaders. They reject the present system and want a bigger role in shaping the future.

That doesn't mean that the world hates America. It just means that everyone wants a breather from the torture, the abductions, the bombing of civilians, and now, the financial contagion that has spread throughout the global system. The US's lack of regulation and monetary policies have driven up inflation, triggered food riots, and sent oil prices skyrocketing. Enough is enough. The United States is like the dinner guest who doesn't know when it's time to go home. Perhaps, a touch of recession will help to rebalance Washington's approach and make its leaders more responsive to the needs of the rest of the world.

Journalist John Gray summed it up like this in his article in The Observer, "A Shattering Moment in America's fall from Power":

"The control of events is no longer in American hands.....Having created the conditions that produced history's biggest bubble, America's political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape."

The US is about to join the family of nations and learn how to get along with its neighbors whether it wants to or not. There's simply no other choice; the dollar is falling, the deficits are soaring, and the financial markets are in a shambles. America will either learn to cooperate or become isolated in a world that is rapidly integrating. It's "get along or go it alone"; a message that Washington needs to learn quickly so it can adapt to the new power-paradigm.

Yes; plenty of money will still flow into covert operations and CIA-sponsored dirty tricks just to keep alive the hope that Superpowerdom will be restored. That is to be expected. The well-heeled rogues in the British royal family still dream of rebuilding the Empire, too. But realists know that it's just a harmless fantasy. Nothing will come of it. Empire's have a short shelf-life and they're impossible to stitch-back together. They usually end on a corpse strewn battlefield or in a towering financial bonfire which leaves nothing behind but a pile of ashes and shards of broken glass. We can only hope that the yawning economic chasm ahead of us all, will involve less hardship than we anticipate. But when a nation sows dragon's teeth, it shouldn't expect a harvest of sweet plums.

Journalist Steve Watson reports on Infowars:

"A Council on Foreign Relations member and former policy planner under prominent Bilderberger Henry Kissinger has penned a piece in the Financial Times of London calling for a “new global monetary authority” that would have the power to monitor all national financial authorities and all large global financial companies.

“Even if the US’s massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets that have become borderless." writes Jeffrey Garten also a former managing director of Lehman Brothers. (Infowar.com)

The dream of "one world" government does not die easily, but it is dead all the same. The center of the present global financial system is the Federal Reserve. Its offspring includes the Council on Foreign Relations, the IMF, The World Bank, the G-7 banking cartel and thousands of predatory NGOs which have expanded the grip of the Washington banking cabal and the dollarized system across the planet. But neoliberalism is collapsing and what we are seeing now is the erratic spasms of a terminal heart patient entering the final stages of cardiac arrest. There is no drug or medical procedure that will restore the victim to good health.

No one is looking to the US or its "supply side" hirelings to chart a course for their country's economic future. Those day's are over. The US will have to pull itself from the rubble and start over without the massive infusions of low interest capital from China, Japan and the Gulf States. The money spigots have been turned off. It's thin gruel and hard times ahead. That's the price one pays for swindling the world with worthless mortgage-backed snake oil and other "illiquid" garbage.

Russian President Vladimir Putin summed up recent events in the financial markets like this:

“Everything that is happening in the economic and financial sphere has started in the United States. This is a real crisis that all of us are facing, and what is really sad is that we see an inability to take appropriate decisions. This is no longer irresponsibility on the part of some individuals, but irresponsibility of the whole system, which as you know had pretensions to (global) leadership.”
Back at the United Nations, Germany's Finance Minister Peer Steinbuck echoed similar sentiments when he said:

“The United States is solely to be blamed for the financial crisis. They are the cause for the crisis and it is not Europe and it is not the Federal Republic of Germany. The Anglo-Saxon drive for double-digit profits and massive bonuses for bankers and company executives that were responsible for the financial crisis.”

He added,"The long term consequences of the crisis are not clear. but one thing seems likely to me; the USA will lose its superpower status in the global financial system. The world financial system is becoming multipolar."

Steinbuck was merely reiterating the feelings of Chancellor Angela Merkel who used more diplomatic language in her critique:

“The current crisis shows us you can do some things on the national level, but the overwhelming majority must be agreed to on the international level. We must push for clearer regulations so that a crisis like the current one cannot be repeated.”

Merkel knows that Europe was blindsided by America's deregulated system which allows fraudsters and scam-artists to rule the roost. Even now--in the middle of the biggest financial scandal in history--not one CEO or CFO from a major investment bank has been indicted or dragged off to prison. US markets are a lawless "free for all" where no one is held accountable no matter how large the crime or how many people are hurt. But there's a price to be paid for fleecing investors, and the US will pay that price. Already, the purchase of US Treasurys has slowed to a crawl. In the coming months, America's life-support system will be disconnected altogether and the oxygen tent removed. Kissinger's protege is not worried about that; but working class American's should be. There's a train wreck just ahead and many people will suffer needlessly.

This is how Spiegel Online puts it:

"The banking crisis is upending American dominance of the financial markets and world politics. The industrialized countries are sliding into recession, the era of turbo-capitalism is coming to an end and US military might is ebbing....This is no longer the muscular and arrogant United States the world knows, the superpower that sets the rules for everyone else and that considers its way of thinking and doing business to be the only road to success.

A new America is on display, a country that no longer trusts its old values and its elites even less: the politicians, who failed to see the problems on the horizon, and the economic leaders, who tried to sell a fictitious world of prosperity to Americans....Also on display is the end of arrogance. The Americans are now paying the price for their pride." (Spiegel Online, "America loses its Dominant Economic Role")

Both presidential candidates have vowed to continue the unilateralist Bush Doctrine. Obama is just as eager as McCain to violate sovereign borders, invade countries that pose no imminent national security threat to the US, and carry out the many flagrant violations of international law as long as they serve the interests of western mandarins. But it's not up to the politicians anymore. Change is coming; the unipolar moment has passed. As the financial crisis deepens, America's ability to wage war will steadily erode as capital and resources dry up. Its only a matter of time before the war machine sputters to a halt and the troops return home. When the killing stops, a truly new world order will begin.

Mike Whitney is a frequent contributor to Global Research.

Consequences of the economic mess - a mind-bender

Interesting big-picture WAPO article by Bill Emmott, former editor of the Economist:

http://tinyurl.com/68tbm9

After taking the reader on a wild ride, he refers to the regime change in Indonesia after the Asian Crisis, and concludes:

"If we look for the Suharto of this crisis, for a place where economic stress could produce a political explosion, we're unlikely to find it in the United States or Western Europe. It's more likely to be found in poorer countries such as Pakistan or, likelier still, in countries whose economies and regimes have become dependent on high commodity prices: Russia, Venezuela, some African nations, perhaps even Iran. In those places, if prices collapse, all political bets are off. All told, the consequences of economic and financial turmoil are far less predictable, and far less pat, than the current consensus seems to hold."

I understand from Colin Twiggs' charts that participation in the COMEX has dwindled off, and the money is flowing out of that sector of the market, and thus we'll see a decline. But to say that this is a determining factor in gold sales is leap of the imagination.

Central Banks are far more likely to sell quantities of foreign currency reserves this time around in order to bolster their own currencies. If the U.S. sells billions of € in a gambit to temporarily prop up the dollar, then nobody bats an eye. Or for instance the Japanese Yen may require that the JCB sell its dollar holdings. Now THAT would be an interesting outcome sure to affect the price of bullion.

Its easy to say when they're going to cut rates, because they want key interest rates to match the 2 yr note. Its far more difficult to determine whether they are going to break the gold sales agreement. Central Banks in EU have already stated they have filled out their requirement for this year which is far less than the stated limit of 500t.

re usd, fwiw about 2 yrs ago I did a fib ext off the 1992 low that suggested 70.70ish for a new low, the current fib res if that idea is correct would be 83.25ish slightly higher. The daily usd looks to have neg div in the macd and rsi so maybe this is corresponding with a usd top here? It looks like strong res coming up for the usd but I surely never thought it would run as it has.

http://tinyurl.com/6dwbov

goldbug: Can only speak for myself, but my focus on PM/miners is because this sector contains my most painful positions and I'm trying to figure out what to do. Cut my losses and move on to "greener" pastures, average down now, make no changes but buy puts on the GLD ETF for some downside position, wait to buy more PMs IF gold drops further to 650-700. Maybe it's the wrong thing to do but I can't focus so much on new, and perhaps, better opportunities to deploy my capital until I figure out what to do with my current PM positions.

wavesmash: agree that small cos with good balance sheets may represent better opportunities but I'm not comfortable in my ability to discern which smaller co will not lose more value before getting scooped up by the big sharks. i would imagine the big sharks will wait to buy when the price is right (i.e. cheap) if we have a prolonged economic downturn. Besides, the "sharks" are at such a huge discount now. I'm sorry about your GE position at $32 but GE currently at $19 and change and yielding 6% seems pretty tempting. That's the point -- even the "sharks" have been pummelled here -- BHP at $35 with a 3.5% yield, NUE could have been had at $27 earlier this week. Seems too good to be true (unless they drop further that is :-)

bullseye: It does seem that the charts are pointing to lower gold prices for the short-term. However, personally I'm trying to focus on a 1-3+ year timeframe. In such a timeframe, if Bill's and others predictions hold, gold will be a lot higher and any "short-term" dip in gold will prove to be a good buying opportunity. My principal concern with chartists who seem to rely primarily on technical analysis (including Twiggs and Gartman) is how quickly they can change their tune. Don't know about Twiggs, but Gartman has changed his tune on gold multiple times since the year began! In Jan, it was bullish, then in March in was bearish, then in april or May it was bullish again, bearish this summer, bullish again after the lehman debacle, and now bearish again! Maybe if one only focuses on timeframes of a few weeks to a few months it makes sense but I'm trying for a longer-term timeframe to make my trading decisions. That said, my main concerns remains: (a) what if I'm wrong about my assumptions about the intermediate and long-term bullish prospects for gold? (b) maybe I've chosen the wrong companies to hold...

goldbug - Tokyo Electron is eyeing 32nm technology in their lithographic equipment line. Like you, I'm increasingly skeptical of Moore's Law from a production feasibility perspective.

http://www.tel.com/eng/product/ct/ctlithius.htm

More on semiconductor equipment manufacturers... TEL was #2, behind AMAT last time I checked a few years ago...

http://tinyurl.com/5duyoc

Bonus of the CEO and like on CNN.

Apparently, GS have 16 Billion dollars as bonus.

Richard Fuld ( not sure whether I got the correct name ) made close to 1/2 a billion since 2004.When he was asked questions by the reporters, he did not answer any.

On oath, he has nothing to say. He did say, that the pain will remain with him.

'Pain' ? ha . Living in pain with 1/2 a billion amassed in his bank accounts.

I just cannot be believe it. Makes me puke.

How can these guys live when they see so much misery and pain around them ? These guys are worse than than Taliban.

Last month, I read about a news report. A man shot himself and his family.

These kinds of killings are usually as a result of anti-depressants, Sandy.

Well,
Not able to support your family is a very difficult feeling. Even the strongest among us can succumb to this.

My point is on the compensation of these Wall street elite.

1bullseye,

Gartman was long of gold as of a few weeks ago....now he's short...so maybe he will be wrong again???
If gold goes to 700 or 550...I see the TOG. Jst can't see it going that low unless the mkt goes to 6-7,000.

Goldbugs avoiding the herding wishful thoughts and stand aside from the gold trade. There is pain ahead I believe in the short term ...perhaps days, weeks or months of it! Trade the trade that IS rather than the trade you WANT!

Lower prices ahead I believe. Look out below!

Suggestion ons stocks to buy on market watch

http://tinyurl.com/6dpsdw

Here are a few suggested by the article:

Free CashFlow

SYK,ABT,PG
Low debt

Tech: MSFT,ORCL,CSCO
Healthcare: GSK,MRK,AET,HUM

Strong marketshare:AAPL,CAG,JNJ,KMB,NOV
Valuation: KFT,HNJ,JNJ,GE,UTX,IBM

Not suggesting that this should be bought. But putting it up for discussion. Notice that almost all the comments are very negative.

1Bullseye,

You could be right.....if its months, then our mkts will have some serious problems, don't you think?

Ray

Gold - From whom/where is all this bad news coming from? Is it from the same folks telling us to sell stocks right now? Aren't they the same one telling us to buy six months ago?

Where are all the guru's coming from, GS? I still remember their $300 oil call...

When EVERYONE thinks gold is going down just because it is, not because there is any valid reason, that's when the boat is overloaded, and imagine that, just as oddly it goes the other way.

Sorry to say it, but those massive debts and deficits just are not good for the dollar long term.

Grym - I know you were looking for muni info a week or so ago and ran across this article on the subject... It may or may not be spin, I have no way of knowing.

http://tinyurl.com/6lx4nv

more milwaukees best lights. asian markets are up today, could they be predicting the future now instead of reacting to the us market? i dont know. all i know is i have about 5 chinese stocks with annual growth rates over 30% who have p/e ratios under 5. and it seems that earnings, at least ex financials and consumer discretionary, have been pretty good so far. i dont know about gold. i shorted oil at 135 predicting that it would go to $85 which it has so im out of that. the rest of my stocks have generally sucked but on valuation alone there is no reason that the market should be at 10/02 levels, which it was a week ago. this sell off is bogus and probably reflects forced capital raising due in part to the mismanagement of this crisis by henry paulsen and the hedge funds and other entitles that were impacted by the lehman failure. i agree with bil caras thesis that this massive reflation by the us and the other central banks will result in a bull market, and i also agree that you should focus on debt free stocks in the nn financial and noin consumer discretionary sectors. gold i dont know about, the dollar may remain strong for awhile, espially if the stock market quickly improves which i think it will. maybe the industrial metals are better considering that thesis, if thats the case my risky play of tjs.v (molybdenum) might actually pay off. anyway, you can't go wrong with milwaukees best light, it only has 96 calories a beer and is cheap.

ALOHA !!

Anybody here know what happened to John Hill at Citigroup? I read this today:

"Just to let you know, John Hill and team who did not understand why gold was not at $2,000 etc. and predicted a great future in both inflationary and deflationary environments have been axed from the Citigroup research website, including all past research notes. I have no info about what occurred but the guy is/was a managing director at Citigroup, and has been with them for more than 12 years (I was reading his and louis's research from the Citi website).

I used to work for THE leading US Bank (guess who) and know that when you are erased from web, it means you are banned and they will not comment.
The fact is he has been erased with his colleague Wark, and all their research work since last week. I just entered the site now and can confirm they are not there anymore."END

So much for your your life's work at Wall Street! I wonder if he got $20mil for 3 weeks work?

ALOHA !!

An update from the Senator from Nevada ...

My friend and he rode bikes this weekend and he discussed my points with the Senator regarding the differences between today's banking fiasco, which I say will end in a monetary crisis versus the S&L crisis. The Senator told my friend that I must be a MARXIST subversive! HA!! Please-e-e ... so if you believe in honest money and SMALL government you're a MARXIST! If you believe the US FED should be abolished you're a MARXIST! WOW ... unreal! Okay Senator, when I'm in Las Vegas in January I'll show you what a real MARXIST looks like ... here's a mirror!

Black is White and White is Black and the Sun rises in the West now! Its a MAD HOUSE!!!

ALL OUR BEST THINKING GOT US HERE !!!

Looking at my 60 minute charts from last week. Almost everyone shows a bullish divergence between MACD and price on the mornig of the 16th...

Congrats to the traders that played this, because I think this will end up having been THE MOMENT to buy. There will be other good times, but I think these may well turn out to be excellent entry points.

Good Morning.

Here are your Cara 100 Ratings Changes:

Oppenheimer Upgrades the Oil Patch:

CVX - to Outperform
XOM - to Outperform

(They also Upgraded 18 other oil majors)

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Have a great day.

LOL! Kaimu!

Don't you love it...the Senate and cohorts NATIONALIZE the banks and those that suggest an entirely private banking system and getting rid of the Fed are Marxists?

They will say, do or try ANYTHING, won't they?

Gold looks to have broken out of a falling wedge from the 930 high?

http://img65.imageshack.us/my.php?image=kkkkkmy0.jpg

CP,

Thanks for the muni link. I'll check it out. I'm looking for capital preservation more than ever. Long term benefits from the bottom of this pit are mostly for the young.

My habit of looking long term is firmly implanted and I see a much worse picture than is being spun by so many.

Doesn't really matter if they are doing a CYA bit for the benefit of those who have been badly burned by following their previous advice, or if they truly believe this global mess is fixable any time soon. IMO, whatever prefix we give the label — de or in — the U.S. economy will be especially hard hit and our freedoms will greatly diminish.

I've mentioned reading Hard Times, by Studs Terkel. Several rememberances of the Great Depression dealt with the violence it brought about during farm foreclosures in Iowa. Farmers (then anyway and I suspect still true) were an independent lot who embodied much of the spirit of the original revolutionaries.

These are stories of hundreds of farmers threatening to lynch a judge (he only was tarred and featured) and road blocks to stop he marketing of milk, eggs anything going to market for low prices. When sixteen deputies ordered a single farmer to move off the road, he said, "Go ahead and shoot, ain't none of you leaving here alive if you do." There were several dozen armed farmers in the woods along side the road.

We could very well see similar action if the low end of the mortgage fraud is not relieved soon by angry home buyers and those who are caught in this innocently.

Regardless of whether you care for his politics or not, the people of the State of New York are so lucky to have Paterson as Governor.

He is on CNBC and is one smart cookie. Obvious why experience and perspective are important.

Bill,

"Just for the record since you quoted me in the context that made your point! Take shots, but please be fair."
I didn't miss the next part...
"My bet is that the Interventionists get to save the financial system at this point anyway, but the cost will be humungous."
I am simply disagreeing with your idea that the Interventionists will be able to save the financial system — at any cost.
Perhaps we have a different definition of "save" and/or "cost."
Sure, life will go on. People will buy, sell or barter to get along. My view is just much more bleak.
I see the real "cost" in terms of lives ruined (several are my friends and relatives) and hopes for the future diminished. I see the "saving" being that of those around the world who saw an opportunity to set up a perfect scam and others who participated in order to gather immense wealth for themselves.
I think my comments were indeed fair.

The 'financial system' and 'the economy' are not the same thing.

I think Bill is talking about reconnecting the credit ring and banks doing business for a few years as is until they pay off the preferred shares. The CEO of BAC said as much last night on 60mins.

The real economy of course will look like it's doing about as well as the late 70's, but homes will have deflated and currency will be hemorraging like a water main....... but the 'financial system' will be intact.

[Bill Cara note:

Agreed. However, I am not too much concerned about deflation in home prices much beyond what has already happened in the past couple years. A bit more maybe, but at the end of the day the reflation program will put people back to work and money in their hands. A prudent housing expenditure percentage of income level will be worked out. That level will have a lot to do with the economic return on investment that investors in houses will expect. Today, as long as rates of return (on alternative investments) stay low, and property taxes stop flying, the owners of properties will rent them out at a price that workers can afford. A balance will be struck. The glut of homes on the market today will be worked down as the homebuilders have pulled in their at-risk building programs. A lot of the buildings that house people today or are lying empty are being destroyed by municipalities because they are hazardous structures. Immigration -- legal and otherwise -- is still bringing in people who need housing. So, I don't see the housing market going that much further down. ]